<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Form S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
<TABLE>
<S> <C> <C>
COLTEC INDUSTRIES INC PENNSYLVANIA 13-846375
COLTEC CAPITAL TRUST DELAWARE
(exact name of Registrant as specified in its (state or jurisdiction of incorporation or (I.R.S. Employer
charter) organization) Identification No.)
</TABLE>
3 COLISEUM CENTRE
2550 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA 28217
(704) 423-7000
(Address, including area code, of registrant's principal executive offices)
<TABLE>
<S> <C>
ROBERT J. TUBBS, ESQ. Copy to:
3 COLISEUM CENTRE GEORGE W. BILICIC, JR., ESQ.
2550 WEST TYVOLA ROAD CRAVATH, SWAINE & MOORE
CHARLOTTE, NORTH CAROLINA 28217 WORLDWIDE PLAZA
(704) 423-7000 825 8TH AVENUE
(Name, address, including zip code, and telephone number, NEW YORK, NEW YORK 10019
including area code, of agent for service) (212) 474-1892
</TABLE>
------------------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this From are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration number for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED (1) REGISTERED PER UNIT(1)(2) OFFERING PRICE(1)(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Securities of
Coltec Capital Trust.................. 3,000,000 $50.00 $150,000,000 $44,250
- ---------------------------------------------------------------------------------------------------------------------------
5 1/4 Convertible Junior Subordinated
Deferrable Interest Debentures Due
2028 of Coltec Industries Inc........ (3) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock of Coltec Industries
Inc.................................. (4) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Trust Securities Guarantee(5).......... (6) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Total.............................. 3,000,000 100% $150,000,000 $44,250
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purpose of computing the registration fee in accordance
with Rule 457(c) of the Securities Act.
(2) Exclusive of accrued interest and distributions, if any.
(3) $150,000,000 in aggregate principal amount of 5 1/4% Convertible
Subordinated Deferrable Interest Debentures Due 2028 (the "Convertible
Junior Subordinated Debentures") of Coltec Industries Inc (the "Company")
were issued and sold to Coltec Capital Trust (the "Trust") in connection
with the issuance by the trust of 3,000,000 of its 5 1/4% Convertible
Preferred Securities (the "Convertible Preferred Securities"). The
Convertible Junior Subordinated Debentures may be distributed, under certain
circumstances, to holders of Convertible Preferred Securities for no
additional consideration.
(4) Such indeterminate number of shares of the Company's Common Stock as may be
issuable upon conversion of the Convertible Preferred Securities, including
such shares as may be issuable pursuant to anti-dilution adjustments.
(5) Includes the rights of holders of the Convertible Preferred Securities under
the Guarantee and certain back-up undertakings as described in the
Registration Statement, including the obligations of the Company under the
Guarantee, the Declaration of Trust of the Trust and the Indenture pursuant
to which the Convertible Junior Subordinated Debentures were issued. The
Guarantee is a guaranty by the Company of payments and distributions on the
Convertible Preferred Securities, to the extent the Trust has funds
available therefor. However, together with the Convertible Junior
Subordinated Debentures, the Indenture pursuant to which such debentures
were issued and the Declaration of trust of the Trust, the Company has
fully, irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Convertible Preferred Securities.
(6) No separate consideration will be received for the Guarantee and the back-up
undertakings.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 18, 1998
PROSPECTUS
3,000,000 TIDES(SM*)
COLTEC CAPITAL TRUST
5 1/4% Convertible Preferred Securities
Term Income Deferrable Equity Securities (TIDES)(SM*)
(liquidation amount $50 per Convertible Preferred Security)
fully and unconditionally guaranteed on a subordinated basis by,
and convertible into Common Stock of,
COLTEC INDUSTRIES INC
Distributions payable January 15, April 15, July 15 and October 15.
------------------
This Prospectus relates to the 5 1/4% Convertible Preferred Securities, Term
Income Deferrable Equity Securities (TIDES)(SM*) (liquidation amount $50 per
Convertible Preferred Security) (the "Convertible Preferred Securities"), which
represent preferred undivided beneficial ownership interests in the assets of
Coltec Capital Trust, a statutory business trust formed under the laws of the
State of Delaware (the "Trust" or the "Issuer"). The Convertible Preferred
Securities were issued and sold (the "Original Offering") on April 14 1998 (the
"Original Offering Date") to the Initial Purchasers (as defined herein, see
"Selling Holders") and were simultaneously sold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A") under the Securities Act. Coltec Industries
Inc, a Pennsylvania corporation ("Coltec" or the "Company"), directly or
indirectly owns all the common securities issued by the Trust (the "Common
Securities" and, together with the Convertible Preferred Securities, the "Trust
Securities"). The Issuer exists for the sole purpose of issuing the Trust
Securities and using the proceeds thereof to purchase from Coltec its 5 1/4%
Convertible Subordinated Deferrable Interest Debentures Due 2028 (the
"Convertible Junior Subordinated Debentures") having the terms described herein.
The holders of the Convertible Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable
upon liquidation, redemption or otherwise over the holders of the Common
Securities.
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE CONVERTIBLE PREFERRED SECURITIES, SEE "RISK FACTORS"
BEGINNING ON PAGE 1.
------------------
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 TERMS TERM INCOME DEFERRABLE EQUITY SECURITIES (TIDES)(SM) AND
TIDES(SM) ARE REGISTERED SERVICEMARKS OF CREDIT SUISSE FIRST BOSTON CORPORATION.
The date of this Prospectus is , 1998
<PAGE> 3
(continued from front cover)
The Trust Securities may be offered and sold from time to time by the
holders named herein or by their transferees, pledgees, donees or their
successors (collectively, the "Selling Holders") pursuant to this Prospectus.
The Trust Securities may be sold by the Selling Holders from time to time
directly to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders". If required, the names of any such agents
or underwriters involved in the sale of the Trust Securities and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in an accompanying supplement to this Prospectus (the
"Prospectus Supplement"). The Selling Holders will receive all of the net
proceeds from the sale of the Trust Securities and will pay all underwriting
discounts and selling commissions, if any, applicable to any such sale. The
Company is responsible for payment of all other expenses incident to the offer
and sale of the Trust Securities. The Selling Holders and any broker/dealers,
agents or underwriters which participate in the distribution of the Trust
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the resale
of the Trust Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
Holders of the Convertible Preferred Securities will be entitled to receive
cumulative cash distributions ("Distributions") at an annual rate of 5 1/4% of
the liquidation preference of $50 per Convertible Preferred Security, accruing
from the date of original issuance and payable quarterly in arrears on each
January 15, April 15, July 15 and October 15, commencing July 15, 1998. See
"Description of the Convertible Preferred Securities -- Distributions". Pursuant
to a guarantee (the "Guarantee") by Coltec, the payment of Distributions and
payments on liquidation of the Issuer or the redemption of Convertible Preferred
Securities, as described below, are fully and unconditionally guaranteed by
Coltec. Coltec's obligations under the Guarantee are subordinate and junior in
right of payment to all Senior Debt (as defined herein) of Coltec. See
"Description of the Guarantee". If Coltec fails to make interest payments on the
Convertible Junior Subordinated Debentures, the Issuer will have insufficient
funds to pay Distributions on the Convertible Preferred Securities. The
Guarantee does not cover payment of Distributions when the Issuer does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of Convertible Preferred Securities is to enforce the rights of the
Property Trustee under the Convertible Junior Subordinated Debentures held by
the Property Trustee. Effectively, however, Coltec has, through the Guarantee,
the Convertible Junior Subordinated Debentures, the Indenture and the
Declaration (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer's obligations under the Convertible
Preferred Securities. The obligations of Coltec under the Convertible Junior
Subordinated Debentures are subordinate and junior in right of payment of Senior
Debt of Coltec. As of December 31, 1997, Senior Debt of Coltec aggregated
approximately $759.4 million (or $623.9 million after giving pro forma effect to
the Offerings (as defined herein) and the use of the estimated net proceeds
therefrom to reduce indebtedness under the Amended Credit Agreement (as defined
herein). See "Use of Proceeds" and "Capitalization". Neither the terms of the
Convertible Junior Subordinated Debentures nor the Guarantee place any
limitation on the amount of Senior Debt that may be incurred by Coltec.
Coltec has the right under the Indenture (as defined herein) to defer the
interest payments due from time to time on the Convertible Junior Subordinated
Debentures for successive periods not exceeding 20 consecutive quarters for each
such period, and, as a consequence, quarterly Distributions on the Convertible
Preferred Securities would be deferred by the Issuer (but would continue to
accumulate quarterly and accrue interest, to the extent permitted by law) until
the end of any such interest deferral period. See "Risk Factors -- Option to
Extend Interest Payment Period; Tax Consequences", "Description of the
Convertible Preferred Securities -- Distributions" and "Description of the
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Period".
Each Convertible Preferred Security is convertible in the manner described
herein at the option of the holder into shares of Common Stock, par value $.01
per share ("Common Stock"), of Coltec at the rate of 1.7058 shares of Common
Stock for each Convertible Preferred Security (equivalent to a conversion price
of $29 5/16 per share of Common Stock), subject to adjustment in certain
circumstances. See "Description of the Convertible Preferred
Securities -- Conversion Rights".
i
<PAGE> 4
The Convertible Preferred Securities are redeemable at the option of the
Company, in whole or in part, from time to time, after April 20, 2001, at the
prices set forth herein, plus accrued and unpaid Distributions thereon to the
date of payment on the date fixed for redemption. See "Description of the
Convertible Preferred Securities -- Optional Redemption". Upon the repayment of
the Convertible Junior Subordinated Debentures at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds from such repayment
will be applied to redeem the Convertible Preferred Securities and Common
Securities on a pro rata basis. In addition, upon the occurrence of certain
events arising from a change in law or a change in legal interpretation, Coltec
will dissolve the Trust and after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, cause to be distributed to the holders
of the Convertible Preferred Securities, on a pro rata basis, Convertible Junior
Subordinated Debentures or, in certain limited circumstances, will cause the
redemption of the Convertible Preferred Securities in whole at the liquidation
preference of $50 per Convertible Preferred Security plus accrued and unpaid
Distributions. See "Description of the Convertible Preferred Securities -- Tax
Event Redemption or Distribution; Investment Company Event Distribution" and
"Description of the Convertible Junior Subordinated Debentures".
In the event of the liquidation of the Trust, the holders of the
Convertible Preferred Securities will be entitled to receive for each
Convertible Preferred Security a liquidation preference of $50 plus accrued and
unpaid Distributions thereon to the date of payment, unless, in connection with
such liquidation, Convertible Junior Subordinated Debentures are distributed to
the holders of the Convertible Preferred Securities. See "Description of the
Convertible Preferred Securities -- Liquidation of the Trust".
------------------
As used herein, (i) the "Indenture" means the Convertible Preferred Junior
Subordinated Debentures Indenture, between the Company and The Bank of New York,
as trustee (the "Debenture Trustee"), and (ii) the "Declaration" means the
Amended and Restated Declaration of Trust relating to the Issuer among the
Company, as Depositor (the "Depositor"), The Bank of New York, as Property
Trustee ("Property Trustee"), The Bank of New York (Delaware), as Delaware
Trustee (the "Delaware Trustee"), and the individuals named as Administrative
Trustees therein (the "Administrative Trustees") (collectively with the Property
Trustee and the Delaware Trustee, the "Issuer Trustees") and the holders from
time to time of undivided beneficial interests in the assets of the Trust.
------------------
AVAILABLE INFORMATION
Coltec is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). 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 at Room 1024,
Judiciary Plaza, 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. Such material may also be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov.
Such reports and other information may also be inspected at the offices of the
New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York
10005 and the Pacific Exchange Incorporated (the "PSE"), 301 Pine Street, Suite
1104, San Francisco, California 94104.
Coltec has filed with the Commission a Registration Statement on Form S-3
(herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to Coltec and the securities
offered by this Prospectus, reference is made to the Registration Statement and
the exhibits filed or incorporated as a part thereof, which are on file at the
offices of the Commission and may be obtained upon payment of the fee prescribed
by the Commission, or may be examined without charge at the offices of the
Commission. Statements contained in this Prospectus as to the contents of any
documents referred to are necessarily summaries thereof, and, in each such
instance, are qualified in all respects by reference to the applicable documents
filed with the Commission.
ii
<PAGE> 5
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be material
to holders of the Convertible Preferred Securities because (i) all of the voting
securities of the Issuer will be owned, directly or indirectly, by the Company,
a reporting company under the Exchange Act, (ii) the Issuer has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Issuer and investing the
proceeds thereof in Convertible Junior Subordinated Debentures issued by the
Company and (iii) the obligations of the Issuer under the Trust Securities are
fully and unconditionally guaranteed by the Company as is described herein. See
"Description of the Convertible Junior Subordinated Debentures" and "Description
of the Guarantee".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Coltec pursuant to the Exchange Act are
incorporated in this Prospectus by reference:
(i) Annual Report on Form 10-K for the year ended December 31, 1997;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 29,
1998;
(iii) Current Report on Form 8-K, dated March 30, 1998;
(iv) Current Report on Form 8-K dated April 8, 1998;
(v) Current Report on Form 8-K, dated April 14, 1998; and
(vi) Current Report on Form 8-K, dated May 15, 1998
All documents filed by the Company with the SEC 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 this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part of this Prospectus from the
date of filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
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 be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates) and any other information requested thereby as
described above under "Available Information". Written or oral requests should
be directed to the Company's principal executive office at: Coltec Industries
Inc, 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina 28217,
Attention: Corporate Secretary (telephone (704) 423-7000).
iii
<PAGE> 6
RISK FACTORS
Prospective purchasers of the securities offered hereby should carefully
review the information contained elsewhere in this Prospectus and should
particularly consider the following factors. In addition because holders of
Convertible Preferred Securities may receive Convertible Junior Subordinated
Debentures upon liquidation of the Trust, prospective purchasers of Convertible
Preferred Securities are also making an investment decision with regard to the
Convertible Junior Subordinated Debentures and should carefully review all the
information regarding the Convertible Junior Subordinated Debentures contained
herein. See "Description of the Convertible Junior Subordinated Debentures".
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact included in this Prospectus,
including, without limitation, the statements under, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
and located elsewhere in this Prospectus regarding industry prospects, the
Company's prospects and the Company's financial position are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, there can be no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations (the
"Cautionary Statements") are disclosed in this Prospectus, including, without
limitation, those factors described below. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
FACTORS RELATING TO THE COMPANY AND ITS BUSINESS
SUBSTANTIAL LEVERAGE; SHAREHOLDERS' DEFICIT
As of December 31, 1997, Coltec's total indebtedness was $759.4 million. At
such date, Coltec had total assets of $933.0 million and a shareholders' deficit
of $359.2 million. As of December 31, 1997, after giving effect to the Offerings
(as defined herein) and the use of the estimated net proceeds therefrom to
reduce indebtedness under the Amended Credit Agreement, Coltec's indebtedness
would have been $623.9 million.
The degree to which Coltec is leveraged could have important consequences
to the holders of the Convertible Preferred Securities offered hereby. Coltec's
substantial indebtedness could materially adversely limit its capacity 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 the securities offered hereby. Furthermore, the ability of Coltec to
satisfy its obligations and to service, repay or refinance its debt and of the
Trust to satisfy its obligations 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, affecting the business and operations of Coltec.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Amended 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. These
restrictions, in combination with the highly leveraged nature of Coltec, could
limit the ability of Coltec to effect future financings and otherwise limit
future business activities, which, in each case could have a material adverse
effect on Coltec. See "Description of Other Indebtedness".
CYCLICAL BUSINESS; FIXED PRICE CONTRACTS
The Aerospace, Industrial and other business sectors to which Coltec sells
its products are, to varying degrees, cyclical and have historically experienced
periodic downturns, which often have had a negative effect on demand for
Coltec's products. Prior downturns have resulted in negative effects on Coltec's
net sales, gross margin and net income. Although Coltec believes that, by
concentrating on products with strong aftermarket demand, it has reduced its
exposure to such business downturns, any future material weakness in demand in
any of these industries could have a material adverse effect on the financial
condition and results of operations of Coltec. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Additionally, many
of Coltec's competitors have substantially greater financial resources than
Coltec and may be better able to withstand the effects of such periodic
downturns.
1
<PAGE> 7
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. See "Business -- Contract
Risks".
ASBESTOS LITIGATION
The historical business operations of Coltec have resulted in a substantial
volume of asbestos litigation, in which plaintiffs have alleged personal injury
or death as a result of exposure to asbestos fibers in a number of products
which were manufactured or distributed by two of the Company's subsidiaries.
While the Company believes that several factors, including agreed-upon funding
agreements with its insurance carriers will provide resources sufficient to meet
the vast majority of the currently anticipated costs and expenses associated
with this litigation, the large volume of current and potential future asbestos
claims, the depletion of insurance coverage of a small non-operating subsidiary,
the payment of some non-insured litigation costs and the unavailability of
insurance for claims alleging first exposure to asbestos after July 1, 1984 may
result in liabilities to the Company in the future that could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Potential Exposure to Environmental Liabilities" below and
"Business -- Legal Proceedings Asbestos Litigation".
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
Coltec is subject to various federal, state and local environmental laws,
ordinances and regulations, including those governing discharges of pollutants
into the air and water, the storage, handling and disposal of solid wastes,
hazardous wastes and hazardous substances and the health and safety of employees
("Environmental Laws"). Violations of Environmental Laws could result in
liability for government penalties, claims by third parties for personal injury
and property damage, costs of investigation and remediation of contamination and
the cost of natural resource damage. Agencies responsible for enforcing
Environmental Laws have authority to impose significant civil or criminal
penalties for non-compliance. Coltec believes it is currently in material
compliance with all applicable requirements of Environmental Laws, but there can
be no assurance that some future non-compliance will not result in the
imposition of significant liabilities.
Future events, such as new information concerning past releases of
hazardous substances, changes in existing Environmental Laws or their
interpretation, and more rigorous enforcement by regulatory authorities, may
give rise to additional expenditures, compliance requirements or liabilities
that could have a material adverse effect on the business, financial condition
and results of the operations of Coltec. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations -- Environmental
Matters" and "Business -- Environmental Matters".
FACTORS RELATING TO THE CONVERTIBLE PREFERRED SECURITIES
RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND THE CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES
The obligations of Coltec under the Guarantee issued by Coltec for the
benefit of the holders of Convertible Preferred Securities and under the
Convertible Junior Subordinated Debentures are general unsecured obligations of
Coltec which are subordinate and junior in right of payment, to the extent and
in the manner set forth in the Guarantee and the Indenture, to all Senior Debt
of Coltec. At December 31, 1997, the aggregate outstanding Senior Debt of Coltec
was $759.4 million ($623.9 million of Senior Debt after giving pro forma effect
to the Offerings and the use of the estimated net proceeds therefrom to reduce
indebtedness under the Amended Credit Agreement). There are no terms of the
Convertible Preferred Securities, the Convertible Junior Subordinated Debentures
or the Guarantee that limit Coltec's ability to incur additional unsecured or
secured indebtedness or liabilities, including indebtedness or liabilities that
would rank senior to the Convertible Junior Subordinated Debentures and the
Guarantee. See "Description of the Guarantee -- Status of the Guarantee;
Subordination" and "Description of the Convertible Junior Subordinated
Debentures -- Subordination".
The ability of the Issuer to pay amounts due on the Convertible Preferred
Securities is wholly dependent upon the Company's making payments on the
Convertible Junior Subordinated Debentures as and when required.
2
<PAGE> 8
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
Provided that no "Event of Default" (as defined in the Indenture) has
occurred and is continuing with respect to the Convertible Junior Subordinated
Debentures (a "Debenture Event of Default"), the Company has the right under the
Indenture to defer the payment of interest on the Convertible Junior
Subordinated Debentures accruing at any time or from time to time for a period
not exceeding 20 consecutive quarters with respect to each Deferral Period;
provided that no Deferral Period may extend beyond the stated maturity date of
the Convertible Junior Subordinated Debentures. See "Description of the
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Period". As a consequence of any such deferral, quarterly Distributions on the
Convertible Preferred Securities by the Issuer would be deferred (and the amount
of Distributions to which holders of the Convertible Preferred Securities are
entitled would accumulate additional Distributions thereon, compounded quarterly
from the relevant payment date for such Distributions to the date of payment)
during any such Deferral Period. During any such Deferral Period, the Company
may not, with certain exceptions, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common stock
and preferred stock) other than stock dividends paid by the Company which
consist of stock of the same class as that on which the dividend is being paid,
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that then rank
pari passu in all respects with or junior in interest to the Convertible Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Convertible
Junior Subordinated Debentures. See "Description of the Convertible Preferred
Securities -- Distributions". A Deferral Period will terminate upon the payment
by the Company of all amounts then accrued and unpaid on the Convertible Junior
Subordinated Debentures (together with interest thereon compounded quarterly, to
the extent permitted by applicable law). Prior to the termination of any such
Deferral Period, the Company may further defer the payment of interest;
provided, that no Deferral Period may exceed 20 consecutive quarters or extend
beyond the stated maturity date of the Convertible Junior Subordinated
Debentures. Upon the termination of any Deferral Period, and subject to the
foregoing limitations, the Company may elect to begin a new Deferral Period
subject to the above conditions. There is no limitation on the number of times
that the Company may elect to begin a Deferral Period. See "Description of the
Convertible Preferred Securities -- Distributions" and "Description of the
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Period".
Because the Company believes that the likelihood of its exercising its
option to defer payments of interest is remote, it will treat the Convertible
Junior Subordinated Debentures as issued without "original issue discount"
("OID") for United States Federal income tax purposes in accordance with
applicable Treasury regulations. As a result, holders of Convertible Preferred
Securities generally will include their allocable share of the interest on the
Convertible Junior Subordinated Debentures in taxable income under their own
methods of tax accounting (i.e., cash or accrual). Under applicable Treasury
regulations, however, if the Company were to exercise its right to defer
payments of interest, the Convertible Junior Subordinated Debentures would be
treated as reissued for OID purposes with OID in an amount equal to the
remaining interest payments thereon and would remain OID instruments for as long
as the Convertible Junior Subordinated Debentures remained outstanding.
Consequently, for United States Federal income tax purposes, holders of the
related Convertible Preferred Securities would be required to include their pro
rata share of OID in gross income as it accrues in advance of the receipt of
cash attributable to such interest income. Such holders would not receive the
cash related to such income if they dispose of the Convertible Preferred
Securities prior to the record date for payment of distributions thereafter. See
"United States Taxation -- Interest and Original Issue Discount" and "-- Sales
of Convertible Preferred Securities".
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Convertible
Junior Subordinated Debentures. However, should the Company elect to exercise
such right in the future, the market price of the Convertible Preferred
Securities is likely to be adversely affected. A holder that disposes of its
Convertible Preferred Securities during a Deferral Period, therefore, might not
receive the same return on its investment as a holder that continues to hold its
Convertible Preferred Securities until the end of such Deferral Period. In
addition, as a result of the existence of the Company's right to defer interest
payments on the Convertible Junior Subordinated Debentures, the market price of
the Convertible Preferred Securities (which represent preferred undivided
beneficial interests in the assets of
3
<PAGE> 9
the Issuer) may be more volatile than the market prices of other securities on
which original issue discount accrues, that are not subject to such deferrals.
TAX EVENT REDEMPTION OR DISTRIBUTION OR INVESTMENT COMPANY EVENT DISTRIBUTION
Upon the occurrence of a Tax Event (except in certain limited
circumstances) or Investment Company Event, the Company will cause the Issuer
Trustees to liquidate the Issuer and cause Convertible Junior Subordinated
Debentures to be distributed pro rata to the holders of the Convertible
Preferred Securities. In certain limited circumstances upon the occurrence of a
Tax Event, the Company will have the right to redeem the Convertible Junior
Subordinated Debentures, in whole, but not in part, for the principal amount
thereof plus accrued and unpaid interest thereon, in lieu of a distribution of
the Convertible Junior Subordinated Debentures, in which event the Convertible
Preferred Securities will be redeemed in whole at the liquidation preference of
$50 per Convertible Preferred Security plus accrued and unpaid Distributions. In
the case of a Tax Event, the Company may also elect to cause the Convertible
Preferred Securities to remain outstanding and pay Additional Sums on the
Convertible Junior Subordinated Debentures. See "Description of the Convertible
Preferred Securities -- Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Junior Subordinated
Debentures -- Additional Sums".
Under current United States Federal income tax law, a distribution of the
Convertible Junior Subordinated Debentures would not be a taxable event to
holders of the Convertible Preferred Securities. However, if a Tax Event results
in the Issuer being treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to holders of the
Convertible Preferred Securities. See "United States Taxation -- Receipt of
Convertible Junior Subordinated Debentures or Cash Upon Liquidation of the
Issuer".
EXCHANGE OF CONVERTIBLE PREFERRED SECURITIES FOR CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES
The holders of all of the outstanding Common Securities have the right at
any time to liquidate the Issuer and, after satisfaction of liabilities to
creditors of the Issuer in accordance with applicable law, to cause the
Convertible Junior Subordinated Debentures to be distributed to the holders of
the Convertible Preferred Securities and Common Securities in liquidation of the
Issuer.
Under current United States Federal income tax law and interpretations and
assuming, as expected, that the Issuer will not be classified as an association
taxable as a corporation, a distribution of Convertible Junior Subordinated
Debentures upon a liquidation of the Issuer would not be a taxable event to
holders of Convertible Preferred Securities. However, if a Tax Event were to
occur that would cause the Issuer to be subject to United States Federal income
tax with respect to income received or accrued on the Convertible Junior
Subordinated Debentures, a distribution of Convertible Junior Subordinated
Debentures by the Issuer could be a taxable event to the Issuer and the holders
of Convertible Preferred Securities. See "United States Taxation -- Receipt of
Convertible Junior Subordinated Debentures or Cash Upon Liquidation of the
Issuer".
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Trust Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Trust Securities, to the
extent that the Issuer has funds on hand available therefor at such time; (ii)
the Redemption Price with respect to any Trust Securities called for redemption,
to the extent that the Issuer has funds on hand available therefor at such time;
and (iii) upon a voluntary or involuntary termination, dissolution or
liquidation of the Issuer (unless the Convertible Junior Subordinated Debentures
are distributed to holders of the Trust Securities), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid Distributions
to the date of payment, to the extent that the Issuer has funds on hand
available therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to holders of the Trust Securities on
liquidation of the Issuer. The Company's obligations arising or accruing under
the Guarantee will be general unsecured obligations and will be subordinated as
described under "-- Ranking of Obligations Under the Guarantee and the
Convertible Junior Subordinated Debentures".
The holders of at least a majority in aggregate liquidation amount of the
outstanding Trust 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 power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Trust Securities may institute a legal proceeding directly against the Company
to enforce its rights under the Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person or
entity. If the Company were to default on its obligation to pay amounts payable
under the Convertible Junior Subordinated Debentures, the Issuer will lack
4
<PAGE> 10
funds for the payment of Distributions or amounts payable on redemption of the
Convertible Preferred Securities or otherwise, and, in such event, holders of
the Convertible Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, if a Debenture Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay any amounts payable in respect of the Convertible Junior
Subordinated Debentures on the payment date on which such payment is due, then a
holder of Convertible Preferred Securities may institute a legal proceeding
directly against the Company for enforcement of payment to such holder of any
amounts payable in respect of such Convertible Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the
Convertible Preferred Securities of such holder (a "Direct Action"). In
connection with such Direct Action, the Company will have a right of set-off
under the Indenture to the extent of any payment made by the Company to such
holder of Convertible Preferred Securities in the Direct Action. Except as
described herein, holders of Convertible Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the
Convertible Junior Subordinated Debentures or assert directly any other rights
in respect of the Convertible Junior Subordinated Debentures. See "Description
of the Convertible Junior Subordinated Debentures -- Debenture Events of
Default" and "-- Enforcement of Certain Rights by Holders of Convertible
Preferred Securities" and "Description of Guarantee".
LIMITED VOTING RIGHTS
Holders of Convertible Preferred Securities will have limited voting rights
relating generally to the modification of the Convertible Preferred Securities
and the Guarantee and the exercise of the Issuer's rights as holder of
Convertible Junior Subordinated Debentures. Holders of Convertible Preferred
Securities will not be entitled to appoint, remove or replace the Property
Trustee or the Delaware Trustee except upon the occurrence of certain events
described herein. The Property Trustee and the holders of all of the Common
Securities may, subject to certain conditions, amend the Declaration without the
consent of any holders of Convertible Preferred Securities, to cure any
ambiguity or to make other provisions not inconsistent with existing provisions
of the Declaration or to ensure that the Issuer will not be classified for
United States Federal income tax purposes as an association subject to taxation
as a corporation or will be classified as a grantor trust unless such action
adversely affects in any material respect the interests of such holders. See
"Description of the Convertible Preferred Securities -- Voting Rights; Amendment
of the Declaration" and "-- Removal of Issuer Trustees; Appointment of
Successors".
ABSENCE OF PUBLIC MARKET
There is no existing market for the Convertible Preferred Securities (or
the Convertible Junior Subordinated Debentures) and there can be no assurance as
to the liquidity of any markets that may develop for the Convertible Preferred
Securities (or the Convertible Junior Subordinated Debentures), the ability of
the holders to sell their Convertible Preferred Securities (or Convertible
Junior Subordinated Debentures) or at what price holders of the Convertible
Preferred Securities (or the Convertible Junior Subordinated Debentures) will be
able to sell such securities. Future trading prices of the Convertible Preferred
Securities (and the Convertible Junior Subordinated Debentures) will depend on
many factors including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The initial
purchasers of the Convertible Preferred Securities currently make a market in
the Convertible Preferred Securities; however, the initial purchasers are not
obligated to do so and any such market making activity will be subject to the
limits imposed by applicable laws and may be discontinued at any time without
notice. The Company does not intend to apply for listing or quotation of the
Convertible Preferred Securities on any exchange or stock market; however, the
Convertible Preferred Securities are eligible for trading in PORTAL.
VOLATILITY OF SHARE PRICE
The trading price of the Company's shares may be affected by the factors
noted above as well as prevailing economic and financial trends and conditions
in the public securities markets. Shortfalls in revenues or earnings from the
levels anticipated by the public markets could have an immediate and significant
effect on the trading price of the Company's shares in any given period. Such
shortfalls may result from events that are beyond the Company's immediate
control and can be unpredictable. Further, factors such as announcements by the
Company of quarterly variations in its financial results and changes in general
market conditions, among other things, could cause the market price of the
Common Stock to fluctuate significantly. In recent years, the stock market has
experienced significant price and volume fluctuations.
5
<PAGE> 11
COLTEC CAPITAL TRUST
Coltec Capital Trust is a statutory business trust that was created under
the Delaware Business Trust Act on April 8, 1998. The Trust's original
declaration of trust was amended and restated in its entirety by Coltec, as
Depositor, and the Administrative Trustees (as defined herein) (as so amended
and restated, the "Declaration"), as of or prior to the date the Trust issues
the Trust Securities representing undivided beneficial interests in the assets
of the Trust and invests the gross proceeds of the Trust Securities in the
Convertible Junior Subordinated Debentures. Coltec directly or indirectly owns
Common Securities in an aggregate liquidation amount equal to at least 3% of the
total capital of the Issuer. The Common Securities rank pari passu, and payment
will be made thereon pro rata, with the Convertible Preferred Securities, except
that, upon the occurrence and during the continuance of a Debenture Event of
Default, the rights of the holders of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Convertible Preferred
Securities. The assets of the Trust consist principally of the Convertible
Junior Subordinated Debentures, and payments under the Convertible Junior
Subordinated Debentures will be the sole revenue of the Issuer. The Issuer
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Convertible Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees initially is
five. Three of the Issuer Trustees (the "Administrative Trustees") are
individuals who are employees or officers of or who are affiliated with Coltec.
The fourth trustee is a financial institution that is unaffiliated with Coltec
(the "Property Trustee"). The fifth trustee is an entity which maintains its
principal place of business in the State of Delaware (the "Delaware Trustee").
Initially, The Bank of New York will act as Property Trustee and its affiliate,
The Bank of New York (Delaware), will act as Delaware Trustee until, in each
case, removed or replaced by the holder of the Common Securities. The Bank of
New York will also act as trustee under the Guarantee (the "Guarantee Trustee")
and under the Indenture (the "Debenture Trustee") (the Administrative Trustees
collectively with the Property Trustee and the Delaware Trustee, the "Issuer
Trustees"). In certain circumstances, the holders of a majority of the
Convertible Preferred Securities will be entitled to appoint one additional
trustee (a "Special Trustee"), who need not be an officer or employee of or
otherwise affiliated with Coltec. The Special Trustee will have the same rights,
powers and privileges as the Administrative Trustees. See "Description of the
Convertible Preferred Securities -- Voting Rights".
The Property Trustee will hold title to the Convertible Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture as the holder of the Convertible Junior
Subordinated Debentures. In addition, the Property 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 Convertible
Junior Subordinated Debentures for the benefit of the holders of the Trust
Securities. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Trust Securities. Coltec will pay all fees and expenses related
to the Trust and this offering. See "Description of the Convertible Junior
Subordinated Debentures".
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration and the Delaware Business Trust Act, as amended (the
"Trust Act"). See "Description of the Convertible Preferred Securities". The
Declaration, the Indenture and the Guarantee also incorporate by reference the
terms of the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Declaration, the Indenture and the Guarantee each will be qualified
under the Trust Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of Coltec. See "Business".
6
<PAGE> 12
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Securities. Neither Coltec nor the Trust will receive any proceeds from the sale
of the Securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the NYSE under the symbol "COT". The
following table sets forth the high and low sales price per share of the Common
Stock of the Company, as reported on the NYSE Composite Tape for the periods
indicated:
<TABLE>
<CAPTION>
PRICE RANGE
------------------
HIGH LOW
------- -------
<S> <C> <C>
1996
First Quarter............................................... $14.250 $10.875
Second Quarter.............................................. 14.375 12.125
Third Quarter............................................... 16.125 12.875
Fourth Quarter.............................................. 19.250 15.500
1997
First Quarter............................................... $20.875 $18.125
Second Quarter.............................................. 23.000 18.375
Third Quarter............................................... 23.938 19.500
Fourth Quarter.............................................. 23.938 20.000
1998
First Quarter............................................... $26.438 $21.750
Second Quarter (through May 15, 1998)....................... $25.188 $23.125
</TABLE>
Coltec paid no dividends on its Common Stock in 1997 or 1996 and no
dividends are expected to be paid in 1998. Payments of dividends by Coltec are
restricted by the terms of the Amended Credit Agreement. See "Description of
Other Indebtedness".
7
<PAGE> 13
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Coltec as of December 31, 1997 and as of March 29, 1998 on a historical basis,
and as adjusted to give effect to the Offerings and the use of the estimated net
proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, as
if such transactions had occurred on December 31, 1997 and on March 29, 1998,
respectively. The table should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Prospectus and
incorporated by reference herein. See "Selected Consolidated Financial and Other
Data".
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 29, 1998
------------------------ ------------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
--------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents................. $ 14,693 $ 14,693 $ 21,075 $ 21,075
========= ========= ========= =========
Current maturities of long-term debt...... $ 1,811 $ 1,811 $ 4,184 $ 4,184
Long-term debt (excluding current
maturities):
Amended Credit Agreement................ 697,500 262,000 808,000 372,500
Senior Notes due 2008................... -- 300,000 -- 300,000
Other debt due 1999-2010................ 60,078 60,078 47,854 47,854
--------- --------- --------- ---------
Total long-term debt................. 759,389 623,889 860,038 724,538
--------- --------- --------- ---------
Company-obligated mandatorily redeemable
convertible preferred securities of
Coltec Capital Trust.................... -- 150,000 -- 150,000
--------- --------- --------- ---------
Shareholders' equity:
Preferred Stock, $.01 par value,
2,500,000 shares authorized; no
shares outstanding................... -- -- -- --
Common Stock, $.01 par value,
100,000,000 shares authorized,
70,517,363 shares issued at March 29,
1998 and 70,501,948 shares issued at
December 31, 1997 (excluding
25,000,000 shares held by a wholly
owned subsidiary).................... 705 705 705 705
Capital surplus........................... 642,828 642,828 641,815 641,815
Retained deficit.......................... (912,029) (912,029) (886,808) (886,808)
Other equity.............................. (11,112) (11,112) (13,495) (13,495)
Less cost of 4,542,000 shares at March 31,
1998 and 4,666,406 shares at December
31, 1997 of Common Stock in treasury.... (79,553) (79,553) (77,445) (77,445)
--------- --------- --------- ---------
Total shareholders' equity.............. (359,161) (359,161) (335,228) (335,228)
--------- --------- --------- ---------
Total capitalization.................... $ 400,228 $ 414,728 $ 524,810 $ 539,310
========= ========= ========= =========
</TABLE>
8
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated financial and other
data of Coltec for the five years ended December 31, 1997 and for the three
months ended March 30, 1997 and March 29, 1998. The information should be read
in conjunction with Coltec's consolidated financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus and incorporated by reference
herein. The statement of earnings data and other financial data for 1993, 1994
and 1995 have been restated to reflect the sale of the Company's automotive
original equipment components business in 1996, which was accounted for as a
discontinued operation. The selected consolidated financial and other data, with
the exception of order backlog, at and for the years ended December 31, 1993
through 1997, were derived from the consolidated financial statements of Coltec
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated financial and other data, with the exception of order
backlog, at and for the three months ended March 30, 1997 and March 29, 1998
were derived from the unaudited consolidated financial statements of Coltec
which are incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ---------------------
---------------------------------------------------- MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales.......................................... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $1,314.9 $ 309.2 $ 374.4
Cost of goods sold................................. 703.9 648.3 744.2 811.1 898.3 211.7 260.1
-------- -------- -------- -------- -------- -------- --------
Gross profit....................................... 357.5 351.9 355.4 348.6 416.6 97.5 114.3
Selling and administrative......................... 183.8 186.7 186.4 191.0 218.8 52.6 61.0
Special charge(a).................................. 25.2 -- 27.0 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income(b)................................ 148.5 165.2 142.0 157.6 197.8 44.9 53.3
Interest expense and other, net.................... 110.2 89.5 89.9 74.9 54.0 12.4 15.1
Income taxes....................................... 13.7 27.2 17.6 28.1 48.9 11.0 13.0
-------- -------- -------- -------- -------- -------- --------
Earnings from continuing operations before
extraordinary item(b)............................ 24.6 48.5 34.5 54.6 94.9 21.5 25.2
Discontinued operations(c)......................... 40.6 45.5 36.7 57.1 -- -- --
Extraordinary item(d).............................. (17.8) (1.5) (.3) (30.6) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings....................................... $ 47.4 $ 92.5 $ 70.9 $ 81.1 $ 94.9 $ 21.5 $ 25.2
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share:(e)
Before extraordinary item........................ $ .35 $ .70 $ .49 $ .79 $ 1.42 $ .32 $ .38
Discontinued operations.......................... .59 .65 .53 .82 -- -- --
Extraordinary item............................... (.26) (.02) -- (.44) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings per share............................. $ .68 $ 1.33 $ 1.02 $ 1.17 $ 1.42 $ .32 $ .38
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................... $ 163.1 $ 189.6 $ 208.9 $ 215.6 $ 187.9 $ 217.2 $ 228.4
Total assets....................................... 796.5 847.5 894.5 849.5 933.0 851.9 1,076.1
Total debt......................................... 1,033.6 970.1 945.8 720.3 759.4 731.3 860.0
Shareholders' equity............................... (625.5) (525.6) (453.8) (417.0) (359.2) (413.7) (335.2)
OTHER FINANCIAL DATA:
EBITDA(f).......................................... $ 197.5 $ 207.3 $ 184.1 $ 193.6 $ 236.2 $ 53.4 $ 65.7
Capital expenditures............................... 38.6 38.2 42.5 44.6 81.2 13.6 15.0
Order backlog (at end of period)(g)................ 598.6 594.2 657.1 678.3 875.6 805.9 968.2
Ratio of earnings to fixed charges(h).............. 1.3x 1.8x 1.6x 2.1x 3.5x 3.5x 3.4x
Ratio of EBITDA to interest expense(i)............. 1.8x 2.3x 2.0x 2.6x 4.4x 4.3x 4.4x
Ratio of total debt to EBITDA(j)................... 5.2x 4.7x 5.1x 3.7x 3.2x 13.7x 13.1x
</TABLE>
- ---------------
(a) In 1997, Coltec incurred a special charge of $10.0 million for the
restructuring of its Industrial segment. In 1997, the remaining $10.0 million
accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a
special charge of $27.0 million primarily to cover the costs of closing the
Walbar compressor blade facility in Canada. The charge also covered selected
workforce reductions throughout the Company. In 1993, Coltec incurred a
special charge of $25.2 million to cover the cost of consolidation and
rearrangement of certain manufacturing facilities and related workforce
reductions primarily in the Aerospace segment.
(b) Operating income for 1996 included a charge of $14.2 million related to the
bankruptcy of Fokker, a major aerospace customer of Coltec.
(c) See note 2 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus.
(d) See note 3 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus. Extraordinary charges relate to either early
retirement of debt or debt refinancings.
(e) Represents diluted earnings per common share. See note 5 to the consolidated
financial statements of Coltec included elsewhere in this Prospectus. The
Company's reported earnings per common share for 1996, 1995, 1994 and 1993
equaled diluted earnings per share as set forth in Statement of Financial
Accounting Standards No. 128.
(f) "EBITDA" as used herein means earnings from continuing operations before
extraordinary item plus interest expense, taxes, depreciation and
amortization. EBITDA is presented because the Company believes that it is a
widely accepted indicator of cash flow and a company's ability to incur and
service indebtedness. However, EBITDA should not be considered as a measure
of operating performance or as an alternative to, or more meaningful than,
operating income, net income or cash flows from operations (as measured by
U.S. generally accepted accounting principles). EBITDA for 1993 would have
been $222.7 million excluding the special charge of $25.2 million described
in note (a) above. EBITDA for 1995 would have been $211.1 million excluding
the $27.0 million special charge described in note (a) above.
(g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was
scheduled to be shipped after 1998.
(h) For purposes of calculating the ratio of earnings to fixed charges, earnings
are determined by adding fixed charges (excluding capitalized interest) and
income taxes to earnings from continuing operations before extraordinary
item. Fixed charges consist of interest expense, capitalized interest and
that portion of rental expense deemed to be representative of the interest
factor.
(i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA
of $222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 2.0x and 2.3x, respectively.
(j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of
$222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 4.6x and 4.5x, respectively.
9
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In conjunction with the divestitures of the Company's automotive OEM
components operations during 1996 (see note 2 to the Company's consolidated
financial statements included elsewhere in this Prospectus), the Company was
realigned into two operating segments. The following are the major products in
each industry segment:
Aerospace: Menasco landing gear and flight control actuation systems;
Walbar blades, vanes and discs for jet and other gas turbine engines; Chandler
Evans fuel pumps and control systems; Delavan gas turbine products; Lewis
Engineering cockpit instrumentation and sensors; AMI flight attendant seats.
Industrial: Garlock seals, gaskets, packings, bearings, valves and tape;
Quincy air compressors; Delavan spray nozzles; France compressor products; FM
Engine large diesel and dual-fuel engines; Haber and Sterling dies; Ortman Fluid
Power cylinders.
In January 1998, Coltec acquired Marine & Petroleum Mfg., Inc.'s ("M&P")
manufacturing facilities based in Texas for approximately $17.0 million and
Tex-o-Lon and Repro-Lon for approximately $25.0 million. The M&P facilities
produce flexible graphite and PTFE fluid sealing products used in the
petrochemical business. Tex-o-Lon manufactures, machines and distributes PTFE
products, primarily for the semiconductor industry. Repro-Lon reprocesses PTFE
compounds for the chemical and semiconductor industries. These acquisitions were
combined into one division, Coltec Specialty Products. See note 19 to the
Company's consolidated financial statements included elsewhere in this
Prospectus.
In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint
Etienne and Montbrison, France, produces seals, gaskets and packings, metal
o-rings and spiral-wound gaskets used in the chemical, power and refining
industries. Helicoflex, based in Columbia, South Carolina, produces metal
o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products
are specifically designed for equipment and processes exposed to high
temperatures, cryogenic temperatures, high pressures, vacuum conditions,
radioactive environments or corrosive applications. See note 19 to the Company's
consolidated financial statements included elsewhere in this Prospectus.
On May 15, 1998, the Company completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary ("Holley") to
Kohlberg & Co., L.L.C., a private merchant banking firm located in Mount Kisco,
New York, for $100 million in cash. The proceeds from this acquisition were
applied toward reducing debt. For 1997, Holley had gross revenues and operating
income of approximately $99.0 million and $8.0 million, respectively.
The financial review that follows is based on continuing operations,
excluding the impact of the 1996 discontinued operations discussed in note 2 to
the consolidated financial statements of Coltec included elsewhere in this
Prospectus, and Coltec's two operating segments, Aerospace and Industrial. The
1995 information has been restated to reflect the discontinued operations and
Coltec's two realigned operating segments. Earnings per share information
represents diluted earnings per common share (see note 5 to the Company's
consolidated financial statements included elsewhere in this Prospectus). The
following discussion of operating results has been structured to provide an
analysis from the perspective of Coltec as a whole, followed by a more detailed
analysis for each operating segment.
10
<PAGE> 16
INDUSTRY SEGMENT INFORMATION
The following table shows financial information by industry segment for the
five years ended December 31, 1997 and the three months ended March 30, 1997 and
March 29, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ----------------------
--------------------------------------------------------- MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Aerospace........... $ 356.9 $ 339.2 $ 378.3 $ 433.5 $ 558.3 $ 119.1 $ 166.2
Industrial.......... 705.4 662.7 722.6 726.9 757.6 190.1 209.2
Intersegment
elimination(a).... (.9) (1.7) (1.3) (.7) (1.0) -- (1.0)
-------- -------- -------- -------- --------- --------- --------
Total............. $1,061.4 $1,000.2 $1,099.6 $1,159.7 $ 1,314.9 $ 309.2 $ 374.4
======== ======== ======== ======== ========= ========= ========
Operating income:
Aerospace........... $ 44.5(c) $ 51.0 $ 32.4(d) $ 51.6(e) $ 87.7(f) $ 18.3 26.1
Industrial.......... 135.6(c) 145.4 146.6 147.1 149.8(f) 36.3 37.3
-------- -------- -------- -------- --------- --------- --------
Total segments...... 180.1 196.4 179.0 198.7 237.5 54.6 63.4
Corporate
unallocated(b).... (31.6) (31.2) (37.0)(d) (41.1) (39.7) (9.7) (10.1)
-------- -------- -------- -------- --------- --------- --------
Total............. $ 148.5(c) $ 165.2 $ 142.0(d) $ 157.6(e) $ 197.8(f) $ 44.9 $ 53.3
======== ======== ======== ======== ========= ========= ========
Operating margin:
Aerospace........... 12.5% 15.0% 8.6% 11.9% 15.7% 15.4% 15.7%
Industrial.......... 19.2 21.9 20.3 20.2 19.8 19.1 17.9
Total............. 14.0% 16.5% 12.9% 13.6% 15.0% 14.5% 14.2%
Return on total
assets:(g)
Aerospace........... 12.7% 14.3% 8.3% 12.4% 20.1% 17.2% 19.0%
Industrial.......... 49.8 53.3 49.1 51.2 48.2 46.7 32.6
Total............. 18.6% 19.5% 15.9% 18.5% 21.2% 21.1% 19.8%
Backlog:(h)
Aerospace........... $ 475.1 $ 445.7 $ 538.0 $ 560.7 $ 734.3 $ 674.2 $ 804.9
Industrial.......... 124.0 148.5 119.5 117.8 142.0 132.6 163.3
Intersegment
elimination....... (.5) -- (.4) (.2) (.7) (.9) --
-------- -------- -------- -------- --------- --------- --------
Total............. $ 598.6 $ 594.2 $ 657.1 $ 678.3 $ 875.6 $ 805.9 $ 968.2
======== ======== ======== ======== ========= ========= ========
</TABLE>
- ---------------
(a) Reflects elimination of intercompany sales between divisions in different
segments.
(b) Represents corporate selling and administrative expense, including other
income and expense, that is not allocable to individual industry segments.
(c) Operating income for 1993 included a special charge of $25.2 million as
follows: $17.2 million in the Aerospace Segment and $8.0 million in the
Industrial Segment. Excluding the special charge, operating income,
operating margin and return on total assets for 1993 would have been $61.7
million, 17.3% and 17.6%, respectively, for Aerospace, and $143.6 million,
20.4% and 52.7%, respectively, for Industrial.
(d) Operating income for 1995 included a special charge of $27.0 million as
follows: $23.4 million in the Aerospace Segment and $3.6 million in
Corporate Unallocated. Excluding the special charge, operating income,
operating margin and return on total assets for 1995 would have been $55.8
million, 14.7% and 13.4%, respectively, for Aerospace.
(e) Operating income for 1996 included a charge of $14.2 million related to the
bankruptcy of a major aerospace customer (Fokker). Excluding this charge,
operating income, operating margin and return on total assets for 1996 would
have been $65.8 million, 15.2% and 18.1%, respectively, for Aerospace and
$171.8 million, 15.9% and 22.0%, respectively, for the Company.
(f) Operating income for 1997 included a special charge of $10.0 million for
the restructuring of its Industrial Segment. In 1997 the remaining $10.0
million accrual for the 1995 special charge was reversed.
(g) Return on total assets is calculated for each segment by dividing annualized
segment operating income by segment total assets at end of applicable
period, and for total Company by dividing total Company annualized operating
income by total assets at end of applicable period.
(h) Of the $875.6 million backlog at December 31, 1997, $267.2 million was
scheduled to be shipped after 1998.
11
<PAGE> 17
RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
COMPANY REVIEW
Net sales for the first quarter of 1998 increased 21.1% to $374.4 million
from $309.2 million for the first quarter of 1997 primarily driven by increases
in the Aerospace Segment. Gross profit increased to $114.3 million for the first
quarter 1998 from $97.5 million in first quarter 1997. The gross profit margin
decreased slightly to 30.5% in the first quarter 1998 from 31.5% in the first
quarter 1997 as a result of slightly lower gross profit margins in the
Industrial Segment. Selling and administrative expenses totaled $61.0 million,
or 16.3% of sales, in first quarter 1998 compared to $52.6 million, or 17.0% of
sales in first quarter 1997.
Operating income increased to $53.3 million in first quarter 1998 from
$44.9 million in the first quarter of 1997. Operating margin for first quarter
1998 was 14.2% compared to 14.5% for the first quarter 1997. The margin decrease
related to a slight decrease in operating margin in the Industrial Segment.
Interest expense increased to $15.1 million in the first quarter 1998 from
$12.4 million for the first quarter 1997. This increase was a result of
increased outstanding amounts under the credit facility due to acquisitions
discussed under Liquidity and Capital Resources.
The effective tax rate was 34% in the first quarter of 1998 and 1997.
As a result of the foregoing, net earnings were $25.2 million in first
quarter 1998, or $0.38 per share, compared to net earnings of $21.5 million, or
$0.32 per share, in first quarter 1997.
SEGMENT REVIEW -- AEROSPACE
Sales in first quarter 1998 for the Aerospace Segment totaled $166.2
million increasing 39.5% from $119.1 million in the first quarter 1997. At
Menasco, sales increased significantly due to rising commercial aircraft
production as well as improved military sales. Menasco deliveries of main
landing gear systems for the Boeing 737 increased from 33 shipsets in first
quarter 1997 to 69 shipsets in first quarter 1998, while military sales
benefited primarily from higher shipset deliveries for the F-15 and F-16
programs. At Walbar, significantly higher sales were primarily due to increased
customer demand and expanding product lines. Aerospace Segment sales were also
favorably impacted by the acquisition of AMI Seating Systems in July 1997.
Operating income for the Aerospace Segment increased to $26.1 million in
first quarter 1998 from $18.3 million in first quarter of 1997. Operating margin
for the first quarter 1998 was 15.7% compared to 15.4% for the first quarter
1997. At Menasco's Aerospace Division, operating margin was impacted by a
favorable mix of landing gear systems for certain commercial airline programs as
well as improved manufacturing efficiencies due to higher production. Walbar
also yielded improved manufacturing efficiencies as a result of its higher
production levels. The increased margin was also driven by higher sales volumes
and improved margins for the Segment's other businesses.
SEGMENT REVIEW -- INDUSTRIAL
Industrial sales increased to $209.1 million in first quarter 1998 from
$190.1 million in first quarter 1997. The Stemco and Quincy Compressor Divisions
experienced solid sales volume increases. Sales for Garlock Sealing Technologies
increased primarily due to the acquisition of the sheet rubber and conveyor belt
business of Dana Corporation's Boston Weatherhead division. Holley sales
decreased due to curtailed orders by two major customers. Industrial sales
increased as a result of first quarter 1998 Industrial Segment acquisitions,
Tex-o-Lon, and Repro-Lon and the Sealing Division of Group Carbone Lorraine.
Operating income for the Industrial Segment increased slightly at $37.3
million in first quarter 1998 compared to $36.3 million in first quarter 1997.
Operating income increased for Garlock Sealing Technologies and Quincy
Compressor Divisions due to higher sales volumes. Operating results at Holley
Performance Products were lower due to decreased sales volumes. Excluding
Holley, operating income in the Industrial Segment increased 6% on a 14% sales
increase. On May 15, 1998 the Company completed its previously announced sale of
Hollies for $100 million. See "-- Overview".
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $10.1 million of operating cash flows in first
quarter 1998 compared with $12.7 million for the first quarter 1997. The lower
operating cash flows in 1998 were primarily due to negative cash
12
<PAGE> 18
flow generated by working capital requirements primarily from the increase in
accounts receivable. The change in assets and liabilities generated negative
cash flow of $28.8 million in first quarter 1998 compared to negative cash flow
of $1.7 million in first quarter 1997. This negative cash flow impact was offset
by increased net earnings and decreased payments related to liabilities of
discontinued operations and asbestos claims.
The current ratio of current assets to current liabilities at March 29,
1998 was 1.91, increasing from 1.78 at December 31, 1997. Cash and cash
equivalents increased to $21.1 million at March 29, 1998 from $14.7 million at
December 31, 1997.
In the first quarter of 1998 the Company invested $15.0 million in capital
expenditures compared to $13.6 million during the same prior year period. Debt
increased by $100.6 million at March 29, 1998 compared to December 31, 1997
through additional borrowings under the Company's revolving credit facility
primarily for first quarter 1998 acquisitions.
In January 1998, the Company acquired certain M&P manufacturing facilities
based in Texas for approximately $17.0 million. Combined annual sales for these
facilities are expected to approximate $18.0 million. The Company also acquired
Tex-o-Lon and Repro-Lon for approximately $25.0 million. These two Texas
businesses have combined annual sales of $15.0 million. The acquisitions were
accounted for as purchases; accordingly, the purchase prices, which were
financed through available cash resources, were allocated to the acquired assets
based upon their fair markets values. See "-- Overview".
In February 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45.6 million. Sales for this division in 1998 are expected
to approximate $38.0 million. This acquisition was accounted for as a purchase
and the purchase price, also financed through available cash resources, was
allocated to the acquired assets based upon their fair market values. See
"-- Overview".
RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996
COMPANY REVIEW
Net sales for 1997 increased 12.9% to $1.31 billion from $1.16 billion in
1996 primarily driven by increases in the Aerospace Segment. Gross profit
increased to $416.6 million in 1997 from $348.6 million in 1996. The gross
profit margin increase in 1997 to 31.7% from 30.1% in 1996 primarily resulted
from the 1996 bankruptcy of a major aerospace customer (Fokker). Selling and
administrative expenses totaled $218.8 million, or 16.6%, of sales in 1997
compared to $191.0 million, or 16.5%, of sales (15.9% excluding the Fokker
impact) in 1996. The increase resulted from costs associated with expanding
Coltec's businesses, both domestically and internationally.
Operating income amounted to $197.8 million in 1997 compared to $157.6
million for 1996. The 1996 amount includes the effect of the $14.2 million
charge related to the bankruptcy of Fokker. Operating margin for 1997 was 15.0%
and was 13.6% (14.8% excluding the effect of the charge related to Fokker) for
1996.
Interest expense decreased 27.8% from $74.9 million in 1996 to $54.0
million in 1997, a result of lower interest rates primarily from refinancing
high-cost, fixed-rate debt with lower-cost, variable-rate bank debt, and a full
year impact of applying a substantial portion of the proceeds from the 1996
second quarter sale of Coltec's automotive original equipment ("OE") components
operations to debt reduction.
The effective tax rate was 34.0% in 1997 and 1996.
The 1996 results of discontinued operations reflect the aforementioned 1996
second quarter sale of the automotive OE components operations as well as the
1996 fourth quarter sale of Farnam Sealing Systems. Note 2 to the Company's
consolidated financial statements describes these transactions.
The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In
January and December 1996, Coltec redeemed $605.8 million of such high-cost
debt.
Net earnings and earnings from continuing operations were $94.9 million, or
$1.42 per share, in 1997 while 1996 net earnings amounted to $81.1 million, or
$1.17 per share, with earnings from continuing operations for 1996 of $54.6
million, or $0.79 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share. The reduction in interest expense increased earnings by
$0.20 per share in 1997.
13
<PAGE> 19
SEGMENT REVIEW -- AEROSPACE
Sales in 1997 for the Aerospace Segment aggregated $558.3 million, a 28.8%
increase over 1996 sales of $433.5 million. At Menasco, sales increased
significantly due to rising commercial aircraft production as well as improved
military sales. Menasco deliveries of main landing gear systems for the Boeing
737 increased to 196 shipsets in 1997 from 72 shipsets in 1996, while military
sales benefited primarily from higher shipset deliveries for the F-15 and F-16
programs (151 shipsets in 1997 versus 83 shipsets in 1996). At Chandler Evans,
higher sales were primarily due to increased sales of spare parts while original
equipment sales also improved. Aerospace Segment sales were favorably impacted
by the acquisition of AMI Industries Inc. ("AMI") in July 1997 (see note 2 to
the Company's consolidated financial statements included elsewhere in this
Prospectus). Sales in 1997 for the other aerospace businesses increased due to
increased sales volumes resulting from the continued strengthening of the
commercial aircraft market and regional airlines.
Operating income for the Aerospace Segment increased 33.3% to $87.7 million
in 1997 from $65.8 million in 1996, excluding the 1996 charge for the Fokker
bankruptcy. The Segment's operating margin for 1997 was 15.7% versus 15.2% in
1996 excluding the Fokker bankruptcy charge. At the Menasco Aerospace division,
operating margin was impacted by improved manufacturing efficiencies due to
higher production. Chandler Evans realized higher margins due to higher
after-market sales and selling price increases for certain products. The
increase was also driven by higher sales volumes and improved margins for the
other engine components businesses.
SEGMENT REVIEW -- INDUSTRIAL
Industrial Segment sales increased to $757.6 million in 1997 from $726.9
million in 1996. During 1997, Quincy Compressor and Fairbanks Morse Engine (FM
Engine) divisions had significant sales volume increases. The FM Engine increase
was due to increased orders and the recovery from a ten-week strike in 1996.
Garlock Sealing Technologies (Garlock) also experienced sales increases in part
as a result of Coltec's acquisition of the sheet rubber and conveyor belt
business from Dana Corporation's Boston Weatherhead division (see note 2 to the
Company's consolidated financial statements included elsewhere in this
Prospectus). The above increases were partially offset by lower sales volumes at
Holley Performance Products (Holley).
Operating income for the Industrial Segment was $149.8 million in 1997
compared to $147.1 million in 1996. The Segment's operating margin for 1997 was
19.8% compared to 20.2% in 1996. Operating income increased for Quincy
Compressor and FM Engine due to the higher sales volumes as mentioned above
while Garlock was impacted by increased costs related to international
initiatives. Holley's operating income was lower as a result of decreased sales
volumes.
RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995
COMPANY REVIEW
Net sales for 1996 increased 5.5% to $1.16 billion from $1.10 billion in
1995 primarily due to increases in the Aerospace Segment. Gross profit decreased
to $348.6 million in 1996 from $355.4 million in 1995. The gross profit decline
in 1996 to 30.1% from 32.3% in 1995 stemmed from the impact of the bankruptcy of
a major aerospace customer (Fokker), increased spending related to asbestos (see
note 16 to the Company's consolidated financial statements included elsewhere in
this Prospectus) and higher other manufacturing costs. Selling and
administrative expenses totaled $191.0 million, or 16.5% of sales (15.9%
excluding the Fokker impact), in 1996 compared to $186.4 million, or 17.0% of
sales, in 1995.
Operating income amounted to $157.6 million in 1996 compared to $142.0
million for 1995. These amounts include the effect of the $14.2 million charge
in 1996 related to the bankruptcy of Fokker and the 1995 special charge of $27.0
million. Operating margin for 1996 was 13.6% (14.8% excluding the effect of the
charge related to Fokker) and 1995 was 12.9% (15.4% excluding the special
charge). The operating margin decrease to 14.8% from 15.4% related to the same
reasons as those explaining the decrease in overall gross profit margin
(excluding Fokker).
Interest expense decreased 16.7% from $89.9 million in 1995 to $74.9
million in 1996, a direct result of applying a substantial portion of the
proceeds from the second quarter sale of the Company's automotive OE components
operations to debt reduction. The Company also benefited from the January 1996
redemption of $46.4 million of 11 1/4% debentures which was funded with
lower-cost, variable-rate bank debt.
14
<PAGE> 20
The effective tax rate was 34.0% in 1996 and 33.8% in 1995.
The results of discontinued operations reflect the aforementioned second
quarter sale of the automotive OE components operations as well as the fourth
quarter sale of Farnam Sealing Systems. Note 2 to the Company's consolidated
financial statements included elsewhere in this Prospectus describes these
transactions.
The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In
January and December 1996, the Company redeemed $605.8 million of such high-cost
debt.
As a result of the foregoing, net earnings were $81.1 million, or $1.17 per
share, in 1996 while 1995 net earnings amounted to $70.9 million, or $1.02 per
share. Earnings from continuing operations in 1996 were $54.6 million, or $0.79
per share, compared to 1995 earnings from continuing operations of $34.5
million, or $0.49 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share while the 1995 special charge affected earnings by $0.25 per
share. The aforementioned reduction in interest expense increased earnings by
$0.14 per share in 1996.
SEGMENT REVIEW -- AEROSPACE
Sales in 1996 for the Aerospace Segment aggregated $433.5 million, a 14.6%
increase over 1995 sales of $378.3 million. At Menasco, deliveries doubled in
1996 (41 versus 20) for shipsets of landing gear systems for the Boeing 777
while shipset deliveries for the McDonnell Douglas MD-80 increased more than
50%. These increases more than offset the lost business for the F-70 and F-100
programs due to the bankruptcy of Fokker. Sales for Walbar increased
significantly due to a change in the billing practices for consigned inventory
at its Arizona facility although profitability levels were not affected. Sales
in 1996 for the other aerospace businesses increased due to higher sales volumes
resulting from the continued strength of the commercial and regional airline
markets, as well as higher selling prices for certain products and new product
sales.
Operating income for the Aerospace Segment increased 18.0% to $65.8 million
in 1996 from $55.8 million in 1995, excluding the 1996 charge for the Fokker
bankruptcy and the 1995 special charge. Excluding such charges, the Segment's
operating margin for 1996 was 15.2% versus 14.7% in 1995. Contributing to this
increase were the significant improvement in 1996 operating results of Walbar's
Canadian operations due to the closing of the compressor blade facility, as well
as higher margins which were achieved at its turbine blade business. The
increase was also driven by higher sales volumes and improved margins for the
other engine components businesses. At Menasco, operating results were flat
compared to 1995 with the improvement from the Boeing 777 and MD-80 programs
offsetting the loss of the Fokker business. Menasco was also impacted by a less
favorable mix of landing gear systems for certain commercial airline programs.
SEGMENT REVIEW -- INDUSTRIAL
Industrial Segment sales increased slightly to $726.9 million in 1996 from
$722.6 million in 1995. During 1996, Garlock realized the full year benefit of
its December 1995 acquisition of certain assets of Furon Company's metallic
gasket business. Garlock's sales were also favorably impacted by continued
volume increases for KLOZURE oil seals, cut gaskets and GYLON gasketing
products. Moderate sales increases were registered by the Holley and France
Compressor Products (France Compressor) divisions. FM Engine sales were
unfavorably affected by lower shipments of commercial, government and Alco
engines due to the effects of a ten week strike. The Stemco division also
experienced a downturn in sales due to lower trailer production levels.
Operating income for the Industrial Segment was essentially unchanged at
$147.1 million in 1996 compared to $146.6 million in 1995. The Segment's
operating margin for 1996 was 20.2% compared to 20.3% in 1995. Operating income
increased for Garlock, Holley and France Compressor primarily due to higher
sales volumes. The negative impact of the strike at FM Engine was offset by the
gain on the sale of Stemco's truck exhaust business (see note 2 to the Company's
consolidated financial statements included elsewhere in this Prospectus).
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The Company generated cash from operations of $61.4 million in 1997
compared to $49.5 million in 1996. The increase in operating cash flows stemmed
from the increase in net earnings. The increase in inventory in
15
<PAGE> 21
response to the ramp-up for certain aircraft was offset by the increase in
accounts payable. Working capital at December 31, 1997 of $187.9 million was
$27.7 million lower than year-end 1996 as a result of the sale of $82.5 million
of trade accounts receivable (see note 6 to the Company's consolidated financial
statements included elsewhere in this Prospectus) partially offset by a $12.5
million increase of accounts receivable prior to sale and a $52.5 million
increase of inventories. The 1997 ratio of current assets to current liabilities
was 1.78 compared to 1.95 in 1996. Cash and cash equivalents decreased to $14.7
million in 1997 from $15.0 million in 1996.
Net cash used in investing activities in 1997 included $81.2 million of
capital expenditures and $60.7 million for business acquisitions (see note 2 to
the Company's consolidated financial statements included elsewhere in this
Prospectus). Net cash provided by investing activities of $284.6 million in 1996
consisted of proceeds from divestitures amounting to $329.1 million (see note 2
to the Company's consolidated financial statements included elsewhere in this
Prospectus) with capital expenditures totaling $44.6 million in 1996.
Financing activities in 1997 generated $80.2 million primarily from the
$82.5 million proceeds from sale of accounts receivable (see note 6 to the
Company's consolidated financial statements included elsewhere in this
Prospectus). The purchase of $42.7 million of treasury stock was offset by a
$39.5 million net increase in the Company's revolving facility. Financing
activities in 1996 used cash of $323.0 million. A substantial portion of the
proceeds from the 1996 second quarter sale of the Company's automotive OE
components operations was applied to debt reduction. During 1996, Coltec
refinanced $617.0 million of high-cost, fixed-rate debt with lower-cost,
variable-rate bank debt. Coltec also purchased treasury stock with a cost of
$46.4 million in 1996.
CAPITAL EXPENDITURES
Capital expenditures increased to $81.2 million in 1997 from $44.6 million
in 1996 and $42.5 million in 1995, as Coltec continued to invest in capital
improvements to increase efficiency, reduce costs, pursue new opportunities,
expand production capacity and improve facilities. The level of capital
expenditures has and will vary from year to year, affected by the timing of
capital spending for production equipment for new products, periodic plant and
facility expansion, and cost reduction and labor efficiency programs. Capital
expenditures during 1997 included amounts for the construction of and equipment
purchases for significant production expansions at Menasco's original equipment
facilities. Coltec estimates capital expenditures for 1998 to approximate $60.0
million, including amounts for equipment purchases related to capacity
expansions and upgrades.
ENVIRONMENTAL MATTERS
Coltec's policy is to accrue environmental remediation costs when it is
both probable that a liability was incurred and the amount can be reasonably
estimated. Coltec currently estimates its future non-capital expenditures
related to environmental matters to range between $27.0 million and $50.0
million. In connection with these environmental expenditures, Coltec had accrued
$31.7 million at December 31, 1997 representing management's best estimate of
probable non-capital expenditures. These non-capital expenditures are estimated
to be incurred over the next 10 to 20 years. In addition, capital expenditures
aggregating $5.0 million may be required during the next two years related to
environmental matters. Although Coltec is pursuing insurance recovery in
connection with certain of these matters, no receivable has been recorded with
respect to any potential recovery of costs in connection with any environmental
matter. During 1997, costs associated with environmental remediation and ongoing
assessment were not significant. See "Risk Factors -- Potential Exposure to
Environmental Liabilities" and "Business -- Environmental Matters".
ASBESTOS LITIGATION
The Company and certain of its subsidiaries are defendants in various
lawsuits involving asbestos-containing products. See "Risk Factors -- Potential
Exposure to Environmental Liabilities", "Business -- Legal
Proceedings -- Asbestos Litigation" and note 16 to the Company's consolidated
financial statements included elsewhere in this Prospectus.
OTHER COMMITMENTS
Liabilities of discontinued operations at December 31, 1997 of $159.9
million relate to contingent contractual obligations, reserves for
postretirement benefits and other future estimated costs for various
16
<PAGE> 22
discontinued operations. The Company expects future cash payments will extend at
least over the next five to ten years.
As is the case with most other companies, the Company recognizes the need
to ensure its operations will not be adversely impacted by the Year 2000 date
transition and is faced with the task of addressing related issues. The Company
is evaluating whether the effect of the Year 2000 transition issues resulting
from relationships with customers, suppliers and other constituents will have an
impact on the Company's results of operations or financial condition. At
December 31, 1997, the Company estimates that expenditures over the next two
years for the cost of modifying its existing software for the Year 2000 date
transition will have an immaterial impact on consolidated operating results.
FINANCIAL RESOURCES
At December 31, 1997, total debt was $759.4 million compared with $720.3
million at year-end 1996. In December 1996, the Company amended the Amended
Credit Agreement increasing the total commitment to $850.0 million from $465.0
million and extending the maturity date to December 15, 2001. The additional
commitment was used to redeem substantially all of the Company's outstanding
high-cost, fixed-rate debt. The Amended Credit Agreement also provides for a
maximum issuance of $125.0 million for letters of credit and reductions in the
total commitment of $75.0 million and $100 million at December 15, 1999 and
2000, respectively. In December 1997, the Company amended the Amended Credit
Agreement to establish an $80.0 million sublimit for Canadian borrowings under
the existing facility. At December 31, 1997, $697.5 million of borrowings and
$40.1 million of letters of credit were outstanding under the Amended Credit
Agreement, leaving availability of $112.4 million. In February 1998, the Company
amended the Amended Credit Agreement to increase the commitment thereunder from
$850 million to $900 million.
Concurrently with the TIDES Offering, Coltec issued and sold (the "Senior
Notes Offering", and together with the TIDES Offering, the "Offerings") $300
million principal amount of senior notes due 2008 (the "Senior Notes"). The
Senior Notes are senior obligations of Coltec ranking pari passu in right of
payment with all existing and future Senior Debt (as defined in the indenture
relating to the Senior Notes) of Coltec and senior to the Convertible Junior
Subordinated Debentures and the Guarantee. The Senior Notes are guaranteed and
secured equally and ratably with loans by the lenders under the Company's
amended and restated credit agreement, as amended as of April 16, 1998 (the
"Amended Credit Agreement"). The indenture under which the Senior Notes were
issued contains covenants that restrict the Company's ability to incur certain
liens, engage in certain sale-leaseback transactions and merge, consolidate or
sell its assets as, or substantially as, an entirety.
In connection with the Offerings, the Amended Credit Agreement was further
amended, among other things, to permit the TIDES Offering and the Senior Notes
Offering, to provide that the Senior Notes would be secured equally and ratably
with the lenders under the Amended Credit Agreement and to provide that the
total commitment thereunder would be reduced by two-thirds of the gross proceeds
to the Company from the Offerings in lieu of the $75.0 million and $100.0
million reduction described above. On a pro forma basis after giving effect to
such amendment and the completion of the Offerings, as of December 31, 1997, the
Company would have had $262.0 million of borrowings and $40.1 million of letters
of credit outstanding and $297.9 million available for borrowing under the
Amended Credit Agreement. The Company believes that internally generated funds
and borrowings available under the Amended Credit will be sufficient to meet its
foreseeable working capital, capital expenditure and debt service requirements.
During 1997, Coltec entered into interest rate swaps to reduce (hedge) the
impact of interest rate changes for variable rate borrowings under its credit
facility. The agreements include an aggregate notional amount of $405.0 million,
fixed interest rates ranging from 5.78% to 6.40% and maturity dates ranging from
April 1998 to October 2002.
17
<PAGE> 23
BUSINESS
Coltec and its consolidated subsidiaries manufacture and sell a diversified
range of highly engineered aerospace and industrial products primarily in the
United States, Canada and Europe. Coltec's operations are conducted through its
two principal segments -- Aerospace and Industrial. Through its Aerospace
segment, which in 1997 accounted for approximately 42% of total Company sales
and approximately 37% of total Company operating profit, Coltec is a leading
manufacturer of landing gear systems, engine fuel controls, flight attendant and
cockpit seats, turbine blades, fuel injectors, nozzles and related components
for commercial and military aircraft. Through its Industrial segment, which in
1997 accounted for approximately 58% of total Company sales and approximately
63% of total Company operating profit, Coltec is a leading manufacturer of
industrial seals, gaskets, packing products, self-lubricating bearings and oil
seals and hubodometers for trucks and trailers and is a producer of
technologically advanced spray nozzles for agricultural, home heating and
industrial applications. Coltec also produces high-horsepower diesel engines for
naval ships and diesel, gas and dual-fuel engines for electric power plants and
produces air compressors and tooling for industrial applications.
The Company derived approximately 50% of sales in 1997 from its
aftermarket, or parts and services, business. Aftermarket sales tend to generate
significantly higher margins and tend to be less affected by general economic
cycles than the Company's sales of products to OEMs. In addition, management
believes the Company is benefiting from several other industry trends which will
help the Company achieve its growth and operating goals. These trends include
strong growth in world airline fleets, preference by OEMs to source complex
integrated systems rather than component parts, an increased preference to
consolidate purchasing of consumable products from a single full line supplier
and customer demand for integrated sales and service providers.
In 1997, Coltec had sales and EBITDA (as defined herein) of $1,314.9
million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from
1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3
million at year end 1996. Coltec's common stock is listed on the NYSE, and based
on the closing price of 23 1/2 per share on May 15, 1998, the Company had a
total equity market capitalization of approximately 1553.4 million.
Coltec is a Pennsylvania corporation with its principal executive offices
located at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina
28217. The telephone number of Coltec is (704) 423-7000.
BUSINESS STRATEGY
The Company's strategy is to develop and maintain market leading positions
and attractive margins for its products through technological innovation, cost
efficiencies, product differentiation and superior quality and service. The
Company emphasizes targeted development of highly engineered, value-added
products designed to meet specific customer requirements. This emphasis enables
the Company to maintain close, interactive relationships with major aircraft
manufacturers as well as the Company's principal industrial customers and to
develop new products in response to customer needs. Coltec views its superior
customer responsiveness as one of its key competitive strengths. Successful
introduction of new products, cost reductions, productivity improvements and
selected divestitures have helped the Company maintain operating margins
averaging more than 12.5% over the last five years.
Through "Coltec 2000", the Company's three-year growth and operating plan,
the Company has set specific growth and operating targets focused on achieving
annual revenues of $2 billion by the year 2000 while maintaining the quality of
earnings. The plan calls for substantial growth internally, complemented by
strategic acquisitions which extend product offerings of the Company's existing
businesses and leverage the Company's existing distribution network. The key
elements of the plan are as follows:
- Focus on Aftermarket -- For the year ended December 31, 1997,
approximately 50% of the Company's sales were derived from the
aftermarket. The Company's products sold in the aftermarket include
industrial seals, hub systems and a variety of aftermarket parts used in
the maintenance of engines, compressors, pumps and gas turbines. A broad
and fragmented buyer base coupled with the critical nature of replacement
parts generates sales with generally higher margins than sales to
original equipment manufacturers. In addition, because the products are
consumable in nature and are replaced over time, the aftermarket provides
a stable source of income.
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<PAGE> 24
- Develop New Products -- The Company believes that responsiveness to
customer demands is a critical success factor in both its Aerospace and
Industrial markets. As a result, the Company has undertaken a number of
initiatives to reduce the time and cost of bringing new products to
market and has established a long term objective of generating 50% of
sales from products introduced within the prior five years. Recent new
product and application introductions have included (i) landing gear
systems for the Boeing 777, (ii) Power$ync II computerized controls for
compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM)
industrial sealing products, (iv) the Raindrop Ultra agricultural spray
nozzle, (v) new versions of FADEC electronic fuel controls for aircraft,
(vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company
to enter the large jet engine market and (vii) the Company's Chandler
Evans Control Systems Division's agreement to develop and utilize its
advanced Variable Displacement Vane Pump technology in aircraft engine
applications.
- Focus on Globalization -- For the year ended December 31, 1997,
approximately 10% of the Company's revenues were generated from outside
of the United States and Canada. As part of its Coltec 2000 strategy, the
Company seeks to grow its international operations, through a mix of
internal growth and acquisitions. Given the global nature of many of the
markets in which the Company competes, management believes that an
increased global presence will lead to substantial operating
efficiencies, as fixed development and operating costs can be amortized
over a greater sales base. In terms of internal growth, the Company will
emphasize the development and expansion of its international customer
base, through the sale of products such as the fuel injectors to
Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has
established sales and distribution capabilities in Asian and South
American countries and will pursue international growth through
complementary acquisitions such as its recent acquisition of Groupe
Carbone Lorraine's sealing products business.
- Total Systems Sourcing -- Management believes that many of the Company's
largest customers, including Boeing, are placing increased emphasis on
suppliers which are capable of providing integrated systems rather than
component parts. The Company believes that its design and engineering
competencies and cellular manufacturing processes provide a competitive
advantage in the design and manufacture of integrated systems and are
areas in which the Company will continue to invest. For example, in 1995
the Company supplied Boeing with non-integrated landing gear systems.
However, in 1996 with the Boeing 737 and 757, Coltec began providing
fully integrated landing gear which includes the installation of wheels,
tires, brakes, hydraulics, electrical harnesses, lights and sensing
systems on the base landing gear. In 1997, the Company began providing
fully integrated landing gear for the Boeing 777 aircraft thereby
increasing revenue by more than 20% per unit. The Company will begin
providing fully integrated landing gear for the Boeing 767 in 1998.
- Productivity Initiatives -- A number of productivity initiatives have
been implemented which have been designed to reduce lead times, curtail
scrap and enhance throughput, which are expected among other things, to
improve inventory turns. Such initiatives have included the consolidation
of multiple product lines into common production facilities and the
relocation of the Company's Delavan Spray Technologies Division to new
state-of-the-art facilities near major transportation hubs. Cycle time
reductions have reduced required inventory levels while improving
customer responsiveness. For example, during 1997, Walbar Arizona reduced
cycle times on damper seal production by approximately 70%, while the
Company's Menasco Division reduced production time for Boeing 737 landing
gear main cylinders from 20 weeks to 12. The Company intends to continue
to enhance its production processes through optimization of workflow,
investment in upgraded manufacturing technologies and robotics, and
related initiatives. In addition, all of the Company's major divisions
are in the late stages of implementing new enterprise reporting systems.
The new systems are enhancing shop floor reporting, materials management,
order entry and cost evaluation and control. Management believes that
these programs are leading to productivity and efficiency improvements
and are having a positive impact on operating performance. The new
enterprise systems have the added benefit of addressing year 2000 systems
issues. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
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<PAGE> 25
AEROSPACE
Through its Aerospace segment, Coltec is a leading manufacturer of landing
gear systems, engine fuel controls, flight attendant and cockpit seats, turbine
blades, fuel injectors, nozzles and related components for commercial and
military aircraft. The operating units and principal products, markets and
competitors of the Aerospace segment are as follows:
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Menasco................ Aircraft landing gear and Commercial and military B.F. Goodrich,
flight control actuators, air craft manufacturers, Messier-Dowty
land ing gear parts, airlines, U.S. Government
repairs and overhaul
Walbar................. Aircraft and industrial Aircraft and stationary Chromalloy, Howmet
gas turbine engine and gas turbine engine
services, turbocharger manufacturers, diesel
rotating engine manufacturers
assemblies
Chandler Evans
Control.............. Aircraft fuel pump and Aircraft engine Argotech, Hamilton
control systems manufacturers, U.S. Standard, Sund-
Government strand, AlliedSignal
and aftermarket Controls and
Accessories
Delavan Gas Turbine
Products............. Aircraft engine fuel Aircraft engine Parker-Hannifin,
nozzles, valves and manufacturers, Textron
afterburner spray bars U.S. Government
and aftermarket
Lewis Engineering...... Aircraft instrumentation, Commercial and military Ametek, Rogerson,
temperature sensors, and air craft, engine Rosemont, Norwich
level control products manufacturers and process Aerospace
and industries
electrical harnesses
AMI Industries, Inc.... Aircraft flight attendant Commercial aircraft IPECO, Sicma
and cockpit seats manufacturers, and
airlines
</TABLE>
Menasco. Menasco is one of the leading suppliers of landing gear systems
for medium-to-heavy commercial and military aircraft. The design, manufacture
and test of aircraft landing gear and components, and related overhaul and
repair, comprise 90% of Menasco's sales volume. Landing gear and precision
components are highly engineered and manufactured to customer specifications and
sold to aircraft manufacturers, aircraft operators and to the United States
Government ("U.S. Government"), both as original equipment and as spare parts
for existing aircraft. Menasco's historical concentration of landing gear sales
among a limited number of companies reflects the relatively small number of
medium and heavy aircraft manufacturers. Landing gear systems generally account
for up to 2% of the total cost of an aircraft. Menasco also provides spare parts
for landing gear and landing gear overhaul services. Aftermarket business
represented 22% of Menasco's total sales in 1997. The remaining 10% of Menasco's
sales are primarily flight control actuators. Menasco produces large hydraulic
and mechanical actuators and has the capability to produce shock mitigation
equipment for both military and commercial applications.
Walbar. Walbar is an original equipment manufacturer and coating and
repair service center for aircraft and industrial gas turbine engine components.
Its product base ranges from complex precision machined turbine parts to
high-technology protective coatings. Its primary machined products are turbine
blades, vanes and other related turbine airfoil components. Walbar also
manufactures disks, integrally bladed rotors and complex impellers, as well as
complete rotating assemblies for flight and auxiliary power engines and
locomotive
20
<PAGE> 26
turbochargers. Following the reduction in U.S. Government appropriation for
military aircraft engines, Walbar has successfully increased its focus on
non-aerospace applications, and now enjoys significant market share in the
locomotive turbocharger market and the gas turbine power generation market.
Chandler Evans. Chandler Evans Control Systems Division ("CECO") produces
gas turbine engine fuel controls and pumps, and pneumatic and hydraulic
components for use in aircraft and helicopter engines and aircraft systems. CECO
has carved a niche market in the area of small engine fuel pumps and controls
for both commercial and military applications. CECO also supplies small turbine
engines with Full Authority Digital Electronic Control ("FADEC") systems.
Computerized electronics in a FADEC system make aircraft safer and less
expensive to operate. In 1997, a CECO FADEC was successfully operated in the
first flight test of the U.S. Army's Boeing/Sikorsky Rah-66 Comanche helicopter.
CECO continues to supply the military market with fuel pump technology. Its
combination main and afterburner centrifugal fuel pump for the Boeing F/A -- 18
E/F fighter was successfully flight tested in 1997. Additionally in 1997, CECO's
latest metering fuel pump, the Variable Displacement Vane Pump, was selected as
a fueldraulic pump to be used for multinational advanced vectoring exhaust
nozzle applications.
During 1997, CECO's aftermarket sector contributed 49% of its revenues
compared to 42% during 1996. This was due, in part, to increased Company focus
on this market coupled with the recovery in the worldwide airline and general
aviation market, and also an increase in U.S. Government contracts.
Delavan Gas Turbine Products. Delavan Gas Turbine Products Division
("Delavan") is a custom designer and manufacturer of fuel injectors, flow
control valves, fuel manifolds, afterburner spray bars and other accessories for
commercial and military gas turbine engines. Product applications in the
aerospace industry include products for engines powering large commercial and
regional airliners, business aircraft, military and commercial helicopters,
military fighters and transports and auxiliary power units. In the industrial
sector, Delavan fuel injectors and valves are utilized in large land-based gas
turbines found in electrical power generation plants and natural gas pipeline
installations.
Lewis Engineering. Lewis Engineering designs, develops and produces
electromechanical and electronic instrumentation for aircraft cockpits, landing
gear electrical harnesses and temperature sensors for aircraft and engine
systems. These products are used in commercial transport, general aviation and
military markets.
AMI Industries, Inc. AMI, a Colorado-based company, was acquired in the
third quarter of 1997. AMI is a leading designer and manufacturer of flight
attendant and cockpit seats and is recognized for supplying high comfort cabin
attendant seats.
One customer (Boeing) in the Aerospace segment represented approximately
14% of Coltec's 1997 total sales.
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<PAGE> 27
INDUSTRIAL
Through its Industrial segment, Coltec is a leading manufacturer of
industrial seals, gaskets, packing products, self-lubricating bearings and oil
seals and hubodometers for trucks and trailers. The Industrial segment also
produces spray nozzles for agricultural, home heating and industrial
applications, as well as high-horsepower diesel engines for naval ships and
diesel, gas and dual-fuel engines for electric power plants. Coltec also
produces air compressors and automotive products. The operating units and
principal products, markets and competitors of the Industrial segment are as
follows:
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Garlock Sealing
Technologies.......... Seals, gaskets, Chemical, pulp and Applied Industrial
packings and expansion paper, refining, Technologies, CR
joints, butterfly utilities, industrial Industries, A.W.
valves, PTFE sheet and and electronics Chesterton, Richard
film, OEM parts and Klinger, AMRI, Durco,
gaskets Neotecha, Dewal, W.
Gore, Durametallic,
John Crane
Fairbanks Morse
Engine................ Diesel, gas and U.S. Navy, marine, Caterpiller, Cooper
dual-fuel engines locomotive and Industries, General
stationary power Motors
markets
Quincy Compressor....... Air compressors and Manufacturing, climate Gardner-Denver,
vacuum pumps control, oil and gas Sullair,
industries Ingersoll-Rand,
Champion
Garlock Bearings........ Self-lubricated Automotive and Kolbenschmidt, Rexnord
bearings equipment
manufacturers
Stemco.................. Heavy duty wheel-end Fleet truck operators, CR Industries, Federal
systems, oil seals, truck parts Mogul, Nelson,
hubcaps and distributors and Donaldson
hubodometers, hubnuts vehicle assemblers
Delavan Spray
Technologies.......... Spray nozzles, Home heating, Spraying Systems,
accessories, pumps and industrial and Danfoss
systems agriculture
France Compressor
Products.............. Compressor valves and Compressor Hoerbiger, C. Lee Cook
seals manufacturers and end
users
Haber Tool.............. Cold-forming dies Fastener and Form Flow
automotive
manufacturers
Plastomer Products...... PTFE tape Industrial Fluoroglas, W. Gore
manufacturers
Sterling Die............ Thread-rolling dies Fastener manufacturers Reed Rico
Ortman Fluid Power...... Hydraulic and Fluid power market Parker-Hannifin,
pneumatic cylinders Miller Fluid Power
Garlock Rubber
Technologies.......... Sheet rubber products Steel mills, chemical B.F. Goodrich
processors, refineries
and paper mills
</TABLE>
22
<PAGE> 28
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Danti Tool.............. Details, jigs, Machinery builders, Uclid, Burdette
fixtures, precision automotive parts
machining manufacturers, other
production facilities
Coltec Specialty
Products(1)........... Engineered Semiconductor, Furon, EGC
polytetrafluoroethylene petrochemical refining
(PTFE)products plants
Cefilac(1).............. Seals, gaskets and Chemical, power, John Crane, Laddy
packing, metal o-rings petrochemical refining
and spiral wound plants
gaskets
Helicoflex(1)........... Metal o-rings; spring Power generation, Advanced Products
loaded seals petrochemical refining
plants
</TABLE>
- ---------------
(1) Purchased in early 1998.
The more significant operating units in the Industrial segment are
discussed below.
Garlock Sealing Technologies. Garlock Sealing Technologies ("Garlock")
produces and markets fluid sealing devices that prevent leakage and exclude
contaminants from rotating and reciprocating machinery. Garlock also produces
seal joints for high temperature and corrosive environment applications.
The newest Garlock products are positioned to meet current emission
standards for valves, pumps and flanges. To assist customers in complying with
more stringent global regulations for fugitive volatile organic compound
emissions, Garlock has developed a variety of products using traditional and
newly developed materials. Garlock products include compression packings,
gaskets and gasketing materials, hydraulic, oil and mechanical seals,
elastomeric expansion joints, industrial textiles, metallic gaskets and other
specialized industrial products.
Sophisticated Garlock products protect equipment in industry applications
where performance is vital to safety and environmental concerns. These
applications include natural resource recovery, petroleum refining, chemicals,
primary metals, food and pharmaceuticals, power generation, mining, pulp and
paper, water and waste treatment, construction and transportation.
In October 1997, Coltec acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead Division. This
division, now known as Garlock Rubber Technologies manufactures high-quality
rubber sheet products used for gasketing and other applications in steel mills,
chemical processing, refineries and paper production including conveyor belts.
All of Garlock Rubber Technologies' products are consumable. Although the
products are also purchased for use in original equipment, in 1997 the
maintenance and replacement aftermarket accounted for approximately 80% of
Garlock's total sales.
Quincy Compressor. The Quincy Compressor Division ("Quincy") is a
manufacturer of a wide range of helical screw and reciprocating air compressors
and vacuum pumps. Quincy products vary in size from one-third to 350 horsepower
and are used in a variety of industrial applications, including industrial base
load, pneumatic temperature and instrument control, diesel and gas engine
starting, paint spraying and emergency standby service. Much of Quincy's
business is in the highly competitive industrial and climate control compressor
markets.
Garlock Bearings. Garlock Bearings is a leading producer of specialized
self-lubricating bearings, which consist of either steel or reinforced epoxy
composite backings with non-metallic bearing surfaces of polytetrafluoroethylene
("PTFE") fibers or a mixture that includes PTFE. PTFE provides maintenance-free
performance and reduced friction. Garlock Bearings' products typically perform
as sleeve bearings or thrust washers under conditions of no lubrication, minimal
lubrication or pre-lubrication. Garlock Bearings has a major share of
23
<PAGE> 29
the self-lubricating bearing market in North America. In 1997, approximately 80%
of sales were to original equipment manufacturers, with major competition coming
from companies in Japan and Germany.
Fairbanks Morse. The Fairbanks Morse Engine Division ("Fairbanks Morse")
offers a broad range of heavy-duty diesel engines. Fairbanks Morse has the
capacity to provide diesel engines from 640 to 29,320 horsepower. In addition,
Fairbanks Morse manufactures dual-fuel, gas and diesel engines ranging in size
from four to 18 cylinders. Engines are offered in both conventional "V" and
in-line, four-cycle versions as well as in-line, two-cycle opposed-piston
configurations. They are used for marine propulsion and marine power generation
and in pump, compressor and electrical power generation applications. In
September 1997, Fairbanks Morse acquired the assets related to the Alco
locomotive business of General Electric Company ("GE"). The assets pertain to
the manufacture and sale of Alco locomotive engines and turbochargers and Alco
locomotive chassis components. Fairbanks Morse can now sell FM/ALCO locomotive
products throughout the world except India, where GE has retained rights to
manufacture and sell such products.
Stemco. The Stemco Division is a developer and producer of unitized hub
systems, hub oil seals, hubcaps, axle nuts and distance-measuring devices for
medium and heavy-duty trucks.
Delavan Spray Technologies. The Delavan Spray Technologies Division
(formerly Delavan Commercial Products Division) is a designer and producer of
atomizers for combustion and industrial applications and atomizers, pumps and
accessories for agricultural, industrial and oil burner metering applications.
Danti Tool. In September 1997, Coltec acquired DM&T, Inc., doing business
as Danti Tool, which makes many of the tooling products utilized by Haber Tool's
existing customer base.
SUBSEQUENT ACQUISITIONS
In January 1998, Coltec purchased Tex-o-Lon and Repro-Lon and certain
assets of Marine & Petroleum Mfg., Inc., Texas-based businesses. The
acquisitions were combined into one division, Coltec Specialty Products. Coltec
Specialty Products manufactures PTFE fluid sealing products for the
semiconductor industry and reprocesses PTFE compounds for the chemical and
semiconductor industry.
In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint
Etienne and Montbrison, France, produces seals, gaskets and packings, metal
o-rings and spiral-wound gaskets used in the chemical, power and refining
industries. Helicoflex, based in Columbia, South Carolina, produces metal
o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products
are specifically designed for equipment and processes exposed to high
temperatures, cryogenic temperatures, high pressures, vacuum conditions,
radioactive environments or corrosive applications. See note 19 to the Company's
consolidated financial statements included elsewhere in this Prospectus.
INTERNATIONAL OPERATIONS
Coltec's international operations, mainly in Canada and France, are
conducted through foreign-based manufacturing or sales subsidiaries, or both,
and include export sales of domestic divisions to unrelated foreign customers.
Export sales of diesel engines are made either directly or through foreign
representatives. Compressors are sold through foreign distributors. Certain
products of Coltec's Industrial segment are sold in foreign countries through
salesmen and sales representatives or sales agents.
Coltec's Canadian operations include the manufacture of landing gear
systems and aircraft flight controls, the provision of overhaul services for
these systems and controls for Canadian and other customers and the manufacture
of turbine components and turbine and compressor rotating parts primarily for
aircraft gas turbine engines. The Canadian operations also manufacture and
market seals, gasketing material, packings and truck products, and market parts
for Fairbanks Morse diesel engines and accessories and other products for use in
Canada and other countries.
Coltec operates 18 plants in Canada, Mexico, France, the United Kingdom,
Australia, Germany and Poland. In addition, Coltec occupies leased office and
warehouse space in various foreign countries.
Devaluations or fluctuations relative to the United States dollar in the
exchange rates of the currency of any country where Coltec has foreign
operations could adversely affect the profitability of such operations in the
future.
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<PAGE> 30
For financial information on operations by geographic segments, see note 17
to the Company's consolidated financial statements included elsewhere in this
Prospectus.
Coltec's contracts with foreign nations for delivery of military equipment,
including components, are subject to deferral or cancelation by U.S. Government
regulation or orders regulating sales of military equipment abroad. Any such
action on the part of the U.S. Government could have an adverse effect on
Coltec.
SALES BY CLASS OF PRODUCTS
During the last three fiscal years, landing gear systems was the only class
of similar products that accounted for at least 10% of total Coltec sales. In
1997, 1996 and 1995, sales of landing gear systems constituted 18%, 15% and 14%,
respectively, of Coltec's total sales.
BACKLOG
At December 31, 1997, Coltec's backlog of firm unfilled orders was $875.6
million compared with $678.3 million at December 31, 1996. Approximately $267.2
million of the 1997 year-end backlog is scheduled to be shipped after 1998.
CONTRACT RISKS
Coltec, through its various operating units, primarily Menasco, Chandler
Evans, Walbar and Delavan Gas Turbine Products produces products for
manufacturers of commercial aircraft pursuant to contracts that generally call
for deliveries at predetermined prices over varying periods of time and that
provide for termination payments intended to compensate for certain costs
incurred in the event of cancelation. In addition, certain commercial aviation
contracts contain provisions for termination for convenience similar to those
contained in U.S. Government contracts described below. Longer-term agreements
normally provide for price adjustments intended to compensate for deferral of
delivery depending upon market conditions.
A portion of the business of Coltec's Menasco, Chandler Evans, Walbar and
Delavan Gas Turbine Products divisions has been as a subcontractor and as a
prime contractor in supplying products in connection with military programs.
Substantially all of Coltec's U.S. Government contracts are firm fixed-price
contracts. Under firm fixed-price contracts, Coltec agrees to perform certain
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. Under U.S. Government regulations, certain costs,
including certain financing costs, portions of research and development costs,
and certain marketing expenses related to the preparation of competitive bids
and proposals, are not allowable. The U.S. Government also regulates the methods
under which costs are allocated to U.S. Government contracts. With respect to
U.S. Government contracts that are obtained pursuant to an open bid process and
therefore result in a firm fixed price, the U.S. Government has no right to
renegotiate any profits earned thereunder. In U.S. Government contracts where
the price is negotiated at a fixed price rather than on a cost-plus basis, as
long as the financial and pricing information supplied to the U.S. Government is
current, accurate and complete, the U.S. Government similarly has no right to
renegotiate any profits earned thereunder. If the U.S. Government later conducts
an audit of the contractor and determines that such data was inaccurate or
incomplete and that the contractor thereby made an excessive profit, the U.S.
Government may take action to recoup the amount of such excessive profit, plus
treble damages, and take other enforcement actions.
U.S. Government contracts are, by their terms, subject to termination by
the U.S. Government either for its convenience or for default of the contractor.
Fixed-price type contracts provide for payment upon termination for items
delivered to and accepted by the U.S. Government, and, if the termination is for
convenience, for payment of the contractor's costs incurred plus the costs of
settling and paying claims by terminated subcontractors, other settlement
expenses, and a reasonable profit on its costs incurred. However, if a contract
termination is for default by the contractor (a) the contractor is paid such
amount as may be agreed upon for completed and partially-completed products and
services accepted by the U.S. Government, (b) the U.S. Government is not liable
for the contractor's costs with respect to unaccepted items, and is entitled to
repayment of advance payments and
25
<PAGE> 31
progress payments, if any, related to the terminated portions of the contracts,
and (c) the contractor may be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source.
In addition to the right of the U.S. Government to terminate, U.S.
Government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds on a fiscal-
year basis even though contract performance may take many years. Consequently,
at the outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring agency
only as appropriations are made by Congress for future fiscal years.
See "Risk Factors -- Cyclical Business; Government Contracts".
RESEARCH AND PATENTS
Most divisions of Coltec maintain staffs of manufacturing and product
engineers whose activities are directed at improving the products and processes
of Coltec's operations. Manufactured and development products are subject to
extensive tests at various divisional plants. Total research and development
cost, including product development, was $46.5 million for 1997, $44.1 million
for 1996 and $45.1 million for 1995.
Coltec owns a number of United States and other patents and trademarks and
has granted licenses under some of such trademarks. Management does not consider
the business of Coltec as a whole to be materially dependent upon any patent,
patent right or trademark.
EMPLOYEE RELATIONS
As of December 31, 1997, Coltec had approximately 9,100 employees, of whom
approximately 3,700 were salaried. Approximately 41% of the hourly employees are
represented by unions for collective bargaining purposes. Union agreements
relate, among other things, to wages, hours and conditions of employment, and
the wages and benefits finished are generally comparable to industry and area
practices.
In 1997, three collective bargaining agreements covering approximately 350
hourly employees were renegotiated. Coltec considers the labor relations of
Coltec to be satisfactory, although it has experienced work stoppages from time
to time in the past. One collective bargaining agreement covering approximately
200 employees was due to expire in 1998 and has been renegotiated for a
five-year term.
Coltec is subject to extensive U.S. Government regulations with respect to
many aspects of its employee relations, including increasingly important
occupational health and safety and equal employment opportunity matters. Failure
to comply with certain of these requirements could result in ineligibility to
receive U.S. Government contracts. These conditions are common to the various
industries in which Coltec participates and entail risks of financial and other
exposure.
PROPERTIES
Coltec operates 62 manufacturing plants in 22 states in the U.S. and in
Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In
addition, Coltec has other facilities throughout the United States and in
various foreign countries, which include sales offices, repair and service
shops, light manufacturing and assembly facilities, administrative offices and
warehouses.
26
<PAGE> 32
Certain information with respect to Coltec's significant manufacturing
plants that are owned in fee, all of which (other than the Palmyra, New York and
Ontario Facilities) are encumbered pursuant to a certain credit agreement
between Coltec and certain banks and related security documents, is set forth
below:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER APPROXIMATE
SEGMENT LOCATION OF SQUARE FEET ACREAGE
------- -------- ------------------ -----------
<S> <C> <C> <C>
Aerospace...................... West Hartford, Connecticut(a) 538,000 71
Euless, Texas 442,000 42
Oakville, Ontario 280,000 14
Mississauga, Ontario 141,000 7
Industrial..................... Palmyra, New York 677,000 137
Beloit, Wisconsin 856,000 73
Longview, Texas 265,000 52
</TABLE>
- ---------------
(a) Approximately 239,000 square feet are utilized by the Aerospace Segment
with the balance leased to third parties.
In addition to the owned facilities, certain manufacturing activities of
some industry segments are conducted within leased premises, the largest of
which is in the Industrial segment, located in Quincy, Illinois, and covers
approximately 173,000 square feet. Some of these leases provide for options to
purchase or to renew the lease with respect to the leased premises.
Coltec's total manufacturing facilities presently being utilized aggregate
approximately 4,902,000 square feet of floor area of which approximately
4,230,000 square feet of area are owned in fee and the balance is leased from
third parties.
Coltec leases approximately 35,000 square feet at 3 Coliseum Centre, 2550
West Tyvola Road, Charlotte, North Carolina, for its executive offices, and has
renewal options under such lease through 2011.
In the opinion of management, Coltec's principal properties, whether owned
or leased, are suitable and adequate for the purposes for which they are used
and are suitably maintained for such purposes.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive Environmental Laws. The
Company takes a proactive approach in addressing the applicability of all
Environmental Laws as they relate to its manufacturing operations and in
proposing and implementing any remedial plans that may be necessary. The Company
believes it is either in material compliance with all currently applicable
regulations or is operating in accordance with the appropriate variances and
compliance schedules or similar arrangements. The Company has identified certain
situations that will require future capital and non-capital expenditures to
maintain or improve compliance with current Environmental Laws. The majority of
the identified situations relate to remediation projects at former operating
sites which have been sold or closed and primarily deal with soil and
groundwater remediation.
The Company has been notified that it is among the potentially responsible
parties under Environmental Laws, for the costs of investigating and, in some
cases, remediating contamination by hazardous materials at approximately 28
sites. Such laws can impose joint and several liability for the costs of
investigating and remediating properties contaminated by hazardous materials.
Liability for these costs can be imposed on present and former owners or
operators of the properties or on parties who generated the wastes that
contributed to the contamination. The Company's policy is to accrue
environmental remediation costs when both it is probable that a liability has
been incurred and the amount can be reasonably estimated. The measurement of
liability is based on an evaluation of currently available facts with respect to
each individual situation and takes into consideration factors such as existing
technology, presently enacted laws and regulations and prior experience in
remediation of contaminated sites. As assessments and remediation progress at
individual sites, these liabilities are reviewed periodically and adjusted to
reflect additional technical and legal information.
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<PAGE> 33
The Company currently estimates that its future non-capital expenditures
related to environmental matters will range between $27.0 million and $50.0
million, representing management's best estimate of probable non-capital
expenditures. At December 31, 1997, Coltec had accrued $31.7 million for
expenditures which will be incurred over the next 10 to 20 years. In addition,
capital expenditures aggregating $5.0 million related to environmental matters,
may be required during the next two years. Although the Company is pursuing
insurance recovery in connection with certain of the underlying matters, no
receivable has been recorded with respect to any potential recovery of costs in
connection with any environmental matter. During 1997, costs associated with
environmental remediation and ongoing assessment were not significant.
Actual costs to be incurred for identified situations in future periods may
vary from estimates given inherent uncertainties in evaluating environmental
exposures due to unknown conditions, changing government regulations and legal
standards regarding liability and evolving technologies. Subject to the
imprecision in estimating future environmental costs, the Company believes that
compliance with current Environmental Laws will not require significant capital
expenditures or have a material adverse effect on its consolidated results of
operations or financial position.
See "Risk Factors -- Potential Exposure to Environmental Liabilities".
LEGAL PROCEEDINGS
ASBESTOS LITIGATION
As of December 31, 1997 and 1996, two subsidiaries of Coltec were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700
actions, respectively (including approximately 2,400 and 5,100 actions,
respectively, in advanced stages of processing), filed in various states by
plaintiffs alleging injury or death as a result of exposure to asbestos fibers.
During 1997, 1996 and 1995, these two subsidiaries of Coltec were named
defendants in approximately 38,200, 39,900 and 44,000 new actions, respectively.
Through December 31, 1997, approximately 199,000 of the approximately 309,000
total actions brought have been settled or otherwise disposed of.
The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1 million or more in compensatory damages and $2
million or more in punitive damages. Although the law in each state differs to
some extent, it appears, based on advice of counsel, that liability for
compensatory damages would be shared among all responsible defendants, thus
limiting the potential monetary impact of such judgments on any individual
defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in which
neither Coltec nor any of its subsidiaries were parties, that held insurance
carriers are obligated to cover asbestos-related bodily injury actions if any
injury or disease process, from first exposure through manifestation, occurred
during a covered policy period (the "continuous trigger theory of coverage"),
Coltec settled litigation with its primary and most of its first-level excess
insurance carriers, substantially on the basis of the Pennsylvania Supreme
Court's ruling. Coltec has negotiated a final agreement with most of its excess
carriers that are in the layers of coverage immediately above its first layer.
Coltec is currently receiving payments pursuant to this agreement. Coltec
believes that, with respect to the remaining carriers, a final agreement can be
achieved without litigation and on substantially the same basis that it has
resolved the issues with its other carriers. Settlements are generally made on a
group basis with payments made to individual claimants over periods of one to
four years. Payments were made by the Company with respect to asbestos liability
and related costs aggregating $59.2 million in 1997, $71.3 million in 1996 and
$56.7 million in 1995, substantially all of which were covered by insurance.
Related to payments not covered by insurance, Coltec recorded charges to
operations amounting to $8.0 million in 1997, $8.0 million in 1996 and $5.0
million in 1995.
In accordance with Coltec's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where Coltec
can reasonably estimate the cost to dispose of these actions. As of December 31,
1997, Coltec estimates that the aggregate remaining cost of the disposition of
the settled actions for which payments remain to be made and
28
<PAGE> 34
actions in advanced stages of processing, including associated legal costs, is
approximately $47.3 million and Coltec expects that this cost will be
substantially covered by insurance.
With respect to the 107,600 outstanding actions as of December 31, 1997
which are in preliminary procedural stages, Coltec lacks sufficient information
upon which judgments can be made as to the validity or ultimate disposition of
such actions, thereby making it difficult to estimate with reasonable certainty
the potential liability or costs to Coltec. When asbestos actions are received
they are typically forwarded to local counsel to ensure that the appropriate
preliminary procedural response is taken. The complaints typically do not
contain sufficient information to permit a reasonable evaluation as to their
merits at the time of receipt, and in jurisdictions encompassing a majority of
the outstanding actions, the practice has been that little or no discovery or
other action is taken until several months prior to the date set for trial.
Accordingly, Coltec generally does not have the information necessary to analyze
the actions in sufficient detail to estimate the ultimate liability or costs to
Coltec, if any, until the actions appear on a trial calendar. A determination to
seek dismissal, to attempt to settle or to proceed to trial is typically not
made prior to the receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that
Coltec's subsidiaries will receive in the future. Coltec has noted that, with
respect to recently settled actions or actions in advanced stages of processing,
the mix of the injuries alleged and the mix of the occupations of the plaintiffs
have been changing from those traditionally associated with Coltec's
asbestos-related actions. Coltec is not able to determine with reasonable
certainty whether this trend will continue. Based upon the foregoing, and due to
the unique factors inherent in each of the actions, including the nature of the
disease, the occupation of the plaintiff, the presence or absence of other
possible causes of a plaintiff's illness, the availability of legal defenses,
such as the statute of limitations or state of the art, and whether the lawsuit
is an individual one or part of a group, management is unable to estimate with
reasonable certainty the cost of disposing of outstanding actions in preliminary
procedural stages or of actions that may be filed in the future. However, Coltec
believes that its subsidiaries are in a favorable position compared to many
other defendants because, among other things, the asbestos fibers in its
asbestos-containing products were encapsulated.
Insurance coverage of a small nonoperating subsidiary formerly distributing
asbestos-bearing products is nearly depleted. Considering the foregoing, as well
as the experience of Coltec's subsidiaries and other defendants, and given the
substantial amount of other insurance coverage that Coltec expects to be
available from its solvent carriers to cover the majority of its exposure,
Coltec believes that pending and reasonably anticipated future actions are not
likely to have a materially adverse effect on Coltec's results of operations and
financial condition. Although the insurance coverage which Coltec has is
substantial, it should be noted that insurance coverage for asbestos claims is
not available to cover exposures initially occurring on and after July 1, 1984.
Coltec's subsidiaries continue to be named as defendants in new cases, some of
which allege initial exposure after July 1, 1984.
In addition to claims for personal injury, Coltec's subsidiaries have been
involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and private
commercial buildings. Based upon the proceedings to date, the overwhelming
majority of these claims have been resolved without a material adverse impact on
Coltec. Likewise, the insignificant number of claims to be resolved are not
expected to have a materially adverse effect on Coltec's results of operations
and financial condition.
29
<PAGE> 35
Coltec has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled
actions and actions in advanced states of processing), and has separately
recorded an asset equal to the amount of such liabilities that is expected to be
recovered by insurance. In addition, Coltec has recorded a receivable for that
portion of payments previously made for asbestos product liability actions and
related litigation costs that is recoverable from its insurance carriers.
Liabilities for asbestos-related matters and the receivable from insurance
carriers included in the consolidated balance sheets of Coltec were as follows
at December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts and notes receivable............................... $56,039 $67,012
Other assets................................................ 16,249 18,728
Accrued expenses............................................ 50,688 60,659
Other liabilities........................................... 2,682 10,879
</TABLE>
See "Risk Factors -- Asbestos Litigation".
OTHER LITIGATION
In September 1983, the local employees' union at Menasco Canada Ltee. (now
Coltec Aerospace Canada Ltd.) ("Menasco Canada"), a federation of trade unions
and several member-employees filed a complaint in the Province of Quebec
Superior Court against Menasco Canada, alleging, among other things, an illegal
lock-out, failure to negotiate in good faith, interference with the affairs of
the union and various violations of local law. The plaintiffs are collectively
seeking approximately Cdn. $14.0 million in damages, and Menasco Canada has
filed a cross-claim for Cdn. $21.0 million and has closed its operations in
Quebec Province. Coltec does not believe that this action will have a material
effect on Coltec's consolidated results of operations and financial condition.
On September 24, 1986, approximately 150 former salaried employees of
Crucible Inc (a former subsidiary of Coltec) commenced an action claiming
benefits under a corporate employment policy that had been established in 1962
and was terminated in 1972 by the corporation's Board of Directors. (George W.
Henglein, et al. v. Colt Industries Operating Corporation Informal Plan for
Plant Shutdown Benefits for Salaried Employees, et al., U.S. District Court for
the Western District of Pennsylvania, 86-cv-2021). Plaintiffs alleged that the
policy continued after the Board of Directors' action by reason of the Company's
failure to notify them of elimination of the employment policy. As a result of
that failure to notify, the policy was converted into a welfare or pension
benefit plan upon the passage of the Employee Retirement Income Security Act in
1974. Based upon the occurrence of this conversion, the plaintiffs were entitled
to benefits in 1982 when Crucible Inc's Midland operations closed. Following a
non-jury trial in the U.S. District Court for the Western District of
Pennsylvania, defendant's motion to dismiss was granted and the plaintiffs
appealed. The Court of Appeals for the Third Circuit remanded the case to the
District Court directing it to make specific findings of fact and conclusions of
law and also found for the defendant on the jurisdiction of the District Court.
The defendant again moved for dismissal and again defendant's motion to dismiss
was granted by the District Court. This second decision of the District Court
was appealed to the Court of Appeals for the Third Circuit and the case was
again remanded to the District Court for additional findings as to the
application of the law. On February 10, 1994, the District Court for the third
time dismissed the plaintiffs' complaint and the plaintiffs appealed to the
Third Circuit Court of Appeals. On September 26, 1994, the Third Circuit Court
of Appeals for the third time remanded the case to the District Court. The
Circuit Court held the record established by plaintiffs in the District Court
was insufficient to allow the Court the ability to apply the appropriate legal
standard. On November 4, 1994 the Court of Appeals for the Third Circuit denied
the defendant's request for a rehearing. The defendant petitioned the U.S.
Supreme Court for a writ of Certiorari; its petition was denied in 1995. The
defendant again moved for dismissal before the District Court based upon the
holding of the Circuit Court that plaintiffs had failed to establish their case
at trial. The District Court denied the motion and sua sponte ordered a new
trial de novo. A trial was held during July 1996 with both parties introducing
evidence. A decision was rendered in 1997 finding the existence of an informal
plan. The District Court remanded to the administrator of Coltec's employee
benefit plans the duties of calculating the benefits due to those plaintiffs
entitled.
30
<PAGE> 36
The District Court held that all but six of the named plaintiffs' claims
were time barred. Both the defendants and plaintiffs filed timely notices of
appeal. Notwithstanding its filing of a notice of appeal, defendant has claimed
and so notified the Circuit Court that it was of the opinion that the District
Court's order was not final and thus not now appealable. As of December 1997,
plaintiffs have concurred in defendant's position. Coltec does not believe that
this action will have a material effect on Coltec's consolidated results of
operations and financial condition.
In addition to the litigation described above, there are various pending
legal proceedings involving Coltec which are routine in nature and incidental to
the business of Coltec. Coltec does not believe that these proceedings will have
a material effect on Coltec's consolidated results of operations and financial
condition.
The U.S. Government conducts investigations into procurement of defense
contracts as a part of a continuing process. Under current federal law, if such
investigations establish the existence of improper activities, among other
matters, debarment or suspension of a company from participating in the
procurement of defense contracts could result. These conditions are common to
the aerospace and government industries in which Coltec participates and entail
the risk of financial and other exposure. See "-- Contract Risks" above. Coltec
is not aware of any such investigation, nor is Coltec aware of any facts which,
if known to investigators, might prompt any investigation.
PRODUCT LIABILITY INSURANCE
Coltec has product liability insurance coverage for liabilities arising
from aircraft products which management believes to be adequate. In addition,
with respect to other products (exclusive of liability for exposure to asbestos
products), Coltec has product liability insurance in amounts exceeding $2.5
million per occurrence, which management believes to be adequate.
Coltec is self-insured (for claims arising after July 1984) with respect to
liability for exposure to asbestos products since third party insurance became
unavailable in July 1984.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
Inflation and foreign currency fluctuations have not had a material impact
on the operating results and financial position of Coltec during the past three
years. Coltec generally has been able to offset the effects of inflation with
price increases, cost-reduction programs and operating efficiencies. Coltec's
foreign operations, which are primarily located in Canada and France, do not
operate in hyper-inflationary economies, except for Mexico, which Coltec does
not believe will have a material effect on Coltec's consolidated results of
operations and financial condition.
31
<PAGE> 37
MANAGEMENT
The directors and executive officers of Coltec are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John W. Guffey, Jr................................... 60 Chairman, Chief Executive Officer and
Director.
Nishan Teshoian...................................... 56 President, Chief Operating Officer and
Director.
David D. Harrison.................................... 51 Executive Vice President, Chief
Financial Officer and Director.
Laurence H. Polsky................................... 54 Executive Vice President,
Administration.
Robert J. Tubbs...................................... 51 Executive Vice President, General
Counsel and Secretary.
Michael J. Burdulis.................................. 52 Senior Vice President, Group Operations.
Richard L. Dashnaw................................... 61 Senior Vice President, Group Operations
and President of the Fairbanks Morse
Engine Division.
Paul R. Kuhn......................................... 56 Senior Vice President, Group Operations.
Joseph F. Andolino................................... 45 Group President and Vice President,
Taxes.
John N. Maier........................................ 46 Vice President and Controller.
Joseph R. Coppola.................................... 67 Director.
William H. Grigg..................................... 65 Director.
David I. Margolis.................................... 68 Director.
Joel Moses........................................... 56 Director.
Richard A. Stuckey................................... 66 Director.
</TABLE>
Mr. Guffey has been Chairman of the Board and Chief Executive Officer of
Coltec since January 1998. Chairman of the Board, Chief Executive Officer and
President of Coltec from February 1995 to December 1997. Member of the Executive
Committee and member of the Nominating Committee of Coltec. President and Chief
Operating Officer of Coltec from prior to 1993 to January 1995. Director of
Gleason Corp., a manufacturer of machine tools.
Mr. Teshoian, President and Chief Operating Officer since January 1998.
Chairman of the Board and Chief Executive Officer of Keystone from August 1995
to December 1997. Executive Vice President of Operations of the Tools and
Hardware Division of Cooper Industries from June 1993 to July 1995. President of
the Belden Division of Cooper Industries from prior to 1993 to August 1993.
Mr. Harrison, Executive Vice President and Chief Financial Officer of
Coltec since January 1997. Executive Vice President, Chief Financial Officer and
Treasurer of Coltec from October 1996 to January 1997. Executive Vice President
and Chief Financial Officer of Pentair Inc., a diversified manufacturing
company, from February 1994 to August 1996. From prior to 1993 to February 1994
Vice President, Finance of General Electric Appliances Canada, a manufacturing
company, from February 1994 to August 1996. From prior to 1992 to February 1994
Vice President, Finance of General Electric Appliances Canada (CAMCO).
Mr. Polsky, Executive Vice President, Administration since January 1994.
Senior Vice President, Administration from April 1992 to December 1993.
Mr. Tubbs, Executive Vice President, General Counsel and Secretary since
January 1997. Senior Vice President, General Counsel and Secretary from November
1995 to January 1997. Senior Vice President and General Counsel from March 1995
to November 1995. General Counsel-Operations of Olin Corporation ("Olin"), a
chemical and metals manufacturing company, from May 1993 to February 1995.
Deputy General Counsel of Olin from prior to 1993 to May 1993.
32
<PAGE> 38
Mr. Burdulis, Senior Vice President, Group Operations since June 1996.
Group President from January 1995 to May 1996. President of the Garlock Sealing
Technologies Division from February 1994 to December 1994. President of the
Central Moloney Transformer Division from prior to 1993 to January 1994.
Mr. Dashnaw, Senior Vice President, Group Operations and President of the
Fairbanks Morse Engine Division since January 1994. Group President and
President of the Fairbanks Morse Engine Division from prior to 1993 to December
1993.
Mr. Kuhn, Senior Vice President, Group Operations since January 1998, Group
President and President of Chandler Evans Control Systems Division from January
1993 to December 1997.
Mr. Andolino, Group President and Vice President, Taxes since July 1997.
Vice President, Taxes from March 1997 to June 1997. Staff Vice President, Taxes
from June 1995 to March 1997. Senior Tax Counsel of AlliedSignal Inc., a
diversified manufacturing company, from prior to 1993 to May 1995.
Mr. Maier, Vice President and Controller since March 1997. Staff Vice
President and Controller from March 1995 to March 1997. Vice President and
Controller of Lukens, Inc., a speciality steel and industrial products company,
from prior to 1993 to February 1995.
Mr. Coppola, Member of the Audit Committee, member of the Stock Option and
Compensation Committee (the "Compensation Committee") and Chairman of the
Nominating and Corporate Governance Committee (the "Nominating Committee") of
Coltec. Chairman, Chief Executive Officer and President of Giddings & Lewis,
Inc. ("Giddings & Lewis"), a machine tool manufacturing company from July 1993
to retirement from Giddings & Lewis in July 1997. From prior to 1993 to July
1993 he was Senior Vice President, Manufacturing Services of Cooper Industries,
Inc. ("Cooper Industries"), a diversified manufacturing company. Director of
Belden Inc., a manufacturer of electrical wire and cable.
Mr. Grigg, Chairman of the Audit Committee and member of the Nominating
Committee of Coltec. Chairman and Chief Executive Officer of Duke Power Company,
now Duke Energy Corporation, ("Duke"), a public utility company, from April 1994
to June 1997. Mr. Grigg retired from Duke in December 1997. Vice Chairman of
Duke from prior to 1993 to April 1994. Director of Duke and the following mutual
funds: Hatteras Income Securities Inc., Nations Fund Inc., Nations Fund Trust,
Nations Fund Portfolios Inc., Nations LifeGoal Portfolios Inc., Nations
Institutional Reserves Inc., Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target
Maturity Inc. Director of Shaw Group, Inc. a designer, manufacturer and service
provider of complex piping systems.
Mr. Margolis, Chairman of the Executive Committee of Coltec since October
1994. Chairman of the Board and Chief Executive Officer of Coltec from prior to
1993 to retirement from Coltec in January 1995. Director of Burlington
Industries, Inc., a manufacturer of textiles.
Mr. Moses, Chairman of the Compensation Committee and member of the
Executive Committee of Coltec. Provost, Massachusetts Institute of Technology
("MIT"), since June 1995. D.C. Jackson Professor of Computer Science and
Engineering, MIT since June 1995. Dean, School of Engineering, MIT, from prior
to 1993 to June 1995. Director of Analog Devices, Inc., a manufacturer of
integrated circuits.
Mr. Stuckey, member of the Audit Committee and member of the Compensation
Committee of Coltec. Chief Economist, E.I. du Pont de Nemours and Company, Inc.,
a diversified chemical manufacturing company, from prior to 1993 to retirement
from du Pont in December 1994. Economic consultant since January 1995.
Certain of the Company's officers are participants in or parties to certain
employee benefit and compensation plans and agreements which provide for
accelerated or increased benefits upon a change of control of the Company. Such
plans and agreements are described in more detail in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders, the relevant part of
which is incorporated by reference into the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. See "Available Information".
33
<PAGE> 39
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
Pursuant to the terms of the Declaration, the Trust issued the Convertible
Preferred Securities and the Common Securities in fully registered form without
interest coupons. The Convertible Preferred Securities represent preferred
undivided beneficial ownership interests in the Trust and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust over the Common Securities, as well as other benefits
as described in the Declaration. See "-- Subordination of Common Securities".
The Declaration will not be qualified under the Trust Indenture Act, will
incorporate certain provisions of the Trust Indenture Act and will be subject to
and governed by the Trust Indenture Act. This summary of the material provisions
of the Convertible Preferred Securities, the Common Securities and the
Declaration does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Declaration,
including the definitions therein of certain terms.
GENERAL
The Convertible Preferred Securities rank pari passu, and payments will be
made thereon pro rata, with the Common Securities except as described under
"-- Subordination of Common Securities". Legal title to the Convertible Junior
Subordinated Debentures will be held by the Property Trustee on behalf of the
Trust in trust for the benefit of the holders of the Convertible Preferred
Securities and Common Securities. The Guarantee Agreement executed by the
Company for the benefit of the holders of the Trust Securities provides for the
Guarantee on a subordinated basis, but does not guarantee payment of
Distributions or amounts payable on redemption of the Trust Securities or
liquidation of the Trust when the Trust does not have funds on hand available to
make such payments. See "Description of the Guarantee".
Holders of the Convertible Preferred Securities have no preemptive or other
similar rights.
DISTRIBUTIONS
Distributions will accrue on the Convertible Preferred Securities from the
date of their original issuance at the annual rate of 5 1/4% of the stated
liquidation amount of $50 per Convertible Preferred Security, and be payable
quarterly in arrears on each January 15, April 15, July 15 and October 15 (each
a "Distribution Date"), commencing July 15, 1998, to the person in whose name
each Convertible Preferred Security is registered, subject to certain
exceptions, at the close of business on the next preceding January 1, April 1,
July 1 and October 1. The amount of Distributions payable for any period will be
computed on the number of days elapsed in a 360 day year of twelve 30-day
months. In the event that any Distribution Date is not a Business Day, payment
of the Distributions payable on such date will be made on the next succeeding
day that is a Business Day (and without any additional Distributions or other
payments in respect of any such delay), except that if such Business Day is in
the next succeeding calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on the applicable Distribution Date. Accrued Distributions that are not paid on
the applicable Distribution Date will accrue additional Distributions on the
amount thereof (to the extent permitted by law), compounded quarterly from the
relevant Distribution Date. "Distribution" as used herein shall include
quarterly distributions, additional distributions on quarterly distributions not
paid on the applicable Distribution Date, Special Interest and Additional Sums,
as applicable. See "Description of Convertible Junior Subordinated
Debentures -- Additional Sums" and "Registration Rights". 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 Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Convertible Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Deferral Period, provided, that no Deferral Period may extend beyond the stated
maturity date of the Convertible Junior Subordinated Debentures. See
"Description of the Convertible Junior Subordinated Debentures -- Option to
Extend Interest Payment Period". As a consequence of any such election,
Distributions on the Convertible
34
<PAGE> 40
Preferred Securities by the Trust will be deferred during any such Deferral
Period. Deferred Distributions to which holders of the Convertible Preferred
Securities are entitled will accumulate additional Distributions thereon,
compounded quarterly from the relevant payment date for such Distributions
during any such Deferral Period to the date of payment. During any such Deferral
Period, the Company may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock)
other than stock dividends paid by the Company which consist of stock of the
same class as that on which the dividend is being paid, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Convertible Junior Subordinated Debentures, or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or junior
in interest to the Convertible Junior Subordinated Debentures (other than (a)
dividends or distributions in Common Stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee, (d) purchases or acquisitions of shares of the Company's Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plan or any other contractual obligation of the
Company (other than a contractual obligation ranking pari passu with or junior
to the Convertible Junior Subordinated Debentures), (e) 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 or (f) the purchase of fractional interests in
shares of the Company's stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged). A Deferral
Period will terminate upon the payment by the Company of all amounts then
accrued and unpaid on the Convertible Junior Subordinated Debentures (together
with interest thereon compounded quarterly, to the extent permitted by
applicable law). Prior to the termination of any such Deferral Period, the
Company may further extend such Deferral Period, provided that such deferral
does not cause such Deferral Period to exceed 20 consecutive quarters or to
extend beyond the stated maturity date of the Convertible Junior Subordinated
Debentures. Upon the termination of any Deferral Period, and subject to the
foregoing limitations, the Company may elect to begin a new Deferral Period. No
interest or other amounts shall be due and payable during a Deferral Period,
except at the end thereof. There is no limitation on the number of times that
the Company may elect to begin a Deferral Period. See "Description of the
Convertible Junior Subordinated Debentures -- Option to Extend Interest Payment
Date" and "United States Taxation -- Potential Extension of Interest Payment
Period and Original Issue Discount".
The Company has no current intention of exercising its right to defer
payments of interest on the Convertible Junior Subordinated Debentures.
The revenue of the Trust available for distribution to holders of the
Convertible Preferred Securities will be limited to payments under the
Convertible Junior Subordinated Debentures in which the Trust has invested the
proceeds from the issuance and sale of the Trust Securities. See "Description of
the Convertible Junior Subordinated Debentures -- General". If the Company does
not make interest payments on the Convertible Junior Subordinated Debentures,
the Property Trustee will not have funds available to pay Distributions on the
Convertible 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".
CONVERSION RIGHTS
GENERAL
Convertible Preferred Securities are convertible at any time prior to 5:00
p.m., New York City time, on April 15, 2028 (except that Convertible Preferred
Securities called for redemption by the Company will be convertible at any time
prior to 5:00 p.m., New York City time, on any Optional Redemption Date), at the
option of the holder thereof and in the manner described below, into shares of
Common Stock. Each Convertible Preferred Security is convertible, at the option
of the holder, into 1.7058 shares of Common Stock for each Convertible Preferred
Security (equivalent to a conversion price (the "Initial Conversion Price") of
$29 5/16 per
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share of Common Stock). The conversion price and the equivalent conversion ratio
will be subject to adjustment as described under "-- Conversion Price
Adjustments" below, and the conversion price and equivalent conversion ratio in
effect at any time after giving effect to all such adjustments are hereinafter
referred to as the "Applicable Conversion Price" and the "Applicable Conversion
Ratio", respectively. The Issuer has covenanted in the Declaration not to
convert Convertible Junior Subordinated Debentures held by it except pursuant to
a notice of conversion delivered to the conversion agent, which initially will
be the Property Trustee (in the capacity as such conversion agent, the
"Conversion Agent"), by a holder of Convertible Preferred Securities. A holder
of a Convertible Preferred Security wishing to exercise its conversion right
shall deliver an irrevocable conversion notice, together, if the Convertible
Preferred Security is in certificated form with such certificated security, to
the Conversion Agent which shall, on behalf of such holder, exchange such
Convertible Preferred Security for a Like Amount of Convertible Junior
Subordinated Debentures and immediately convert such Convertible Junior
Subordinated Debentures into Common Stock. Holders may obtain copies of the
required form of the conversion notice from the Conversion Agent.
Holders of Convertible Preferred Securities at the close of business on a
Distribution record date will be entitled to receive the Distribution payable on
such Convertible Preferred Securities on the corresponding Distribution Date
notwithstanding the conversion of such Convertible Preferred Securities
following such Distribution record date but prior to such Distribution Date.
Except as provided in the immediately preceding sentence, neither the Issuer nor
the Company will make, or be required to make, any payment, allowance or
adjustment for accrued and unpaid Distributions, whether or not in arrears, on
converted Convertible Preferred Securities. The Company will make no payment or
allowance for distributions on the shares of Common Stock issued upon such
conversion, except to the extent that such shares of Common Stock are held of
record on the record date for any such distributions. Each conversion will be
deemed to have been effected immediately prior to the close of business on the
day on which the related conversion notice was received by the Issuer.
No fractional shares of Common Stock will be issued as a result of
conversion but in lieu thereof such fractional interest will be paid by the
Company in cash based on the current market value of the Common Stock.
CONVERSION PRICE ADJUSTMENTS -- GENERAL
The Applicable Conversion Ratio and Applicable Conversion Price will be
subject to adjustment in certain events including, without duplication: (i) the
payment of dividends (and other distributions) payable in Common Stock on the
Common Stock; (ii) the issuance to all holders of Common Stock of rights or
warrants; (iii) subdivisions and combinations of Common Stock; (iv) the payment
of dividends (and other distributions) to all holders of Common Stock consisting
of evidences of indebtedness of the Company, securities or capital stock, cash
or assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to in clauses (i) and (ii) and dividends and
distributions paid exclusively in cash); (v) the payment of dividends (and other
distributions) on Common Stock paid exclusively in cash, excluding (a) cash
dividends that do not exceed the per share amount of the smallest of the
immediately four preceding quarterly cash dividends (as adjusted to reflect any
of the events referred to in clauses (i) through (vi) of this sentence) and (b)
cash dividends if the per share amount of which, together with the aggregate per
share amount of any other cash dividends paid within 12 months preceding the
date of payment of such cash dividends, does not exceed 12% of the current
market price of Common Stock as of the trading day immediately preceding the
date of declaration of such dividend; and (vi) payment to holders of Common
Stock in respect of a tender or exchange offer (other than an odd-lot offer) by
the Company or any subsidiary of the Company for Common Stock at a price in
excess of 110% of the current market price of Common Stock as of the trading day
next succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer.
The Company may, at its option, make such reductions in the Applicable
Conversion Ratio and Applicable Conversion Price as the Company's Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Convertible Preferred Securities resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. See "United States Taxation -- Adjustment of Applicable Conversion
Price".
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No adjustment of the Applicable Conversion Ratio and Applicable Conversion
Price will be made upon the issuance of any shares of Common Stock pursuant to
any present or future plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan or the issuance
of any shares of Common Stock or options or rights to purchase such shares
pursuant to any present or future employee, director or consultant benefit plan
or program of the Company or pursuant to any option, warrant, right, or
exercisable, exchangeable or convertible security outstanding as of the date the
Convertible Preferred Securities were first issued. There shall also be no
adjustment of the Applicable Conversion Ratio and Applicable Conversion Price in
case of the issuance of any Common Stock (or securities convertible into or
exchangeable for Common Stock), except as specifically described above. If any
action would require adjustment of the Applicable Conversion Ratio and
Applicable Conversion Price pursuant to more than one of the anti-dilution
provisions, only one adjustment shall be made and such adjustment shall be the
amount of adjustment that has the highest absolute value to holders of the
Convertible Preferred Securities. No adjustment in the Applicable Conversion
Ratio and Applicable Conversion Price will be required unless such adjustment
would require an increase or decrease of at least 1% of the Applicable
Conversion Ratio and Applicable Conversion Price, but any adjustment that would
otherwise be required to be made shall be carried forward and taken into account
in any subsequent adjustment.
CONVERSION PRICE ADJUSTMENTS -- MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY
In the event that the Company is a party to any transaction (including,
without limitation, a merger, consolidation, sale of all or substantially all of
the assets of the Company, recapitalization or reclassification of Common Stock
or any compulsory share exchange (each of the foregoing being referred to as a
"Company Transaction")), in each case, as a result of which shares of Common
Stock shall be converted into the right to receive other securities, cash or
other property, then lawful provision shall be made as part of the terms of such
Company Transaction whereby the holder of each Convertible Preferred Security
then outstanding shall have the right thereafter to convert such Convertible
Preferred Security into the kind and amount of securities, cash and other
property receivable upon the consummation of such Company Transaction by a
holder of that number of shares of Common Stock into which a Convertible
Preferred Security was convertible immediately prior to such Company
Transaction. A Company Transaction could substantially lessen or eliminate the
value of the conversion privilege associated with the Convertible Preferred
Securities. For example, if the Company were acquired in a cash merger, each
Convertible Preferred Security would become convertible solely into cash and
would no longer be convertible into securities whose value would vary depending
on the future prospects of the Company and other factors. The holders of
Convertible Preferred Securities will have no voting rights with respect to any
Company Transaction.
MANDATORY REDEMPTION
Upon the repayment in full of the Convertible Junior Subordinated
Debentures at their stated maturity date or a redemption in whole or in part of
the Convertible Junior Subordinated Debentures (other than following any
distribution of the Convertible Junior Subordinated Debentures to the holders of
the Trust Securities), the proceeds from such repayment or redemption shall be
applied by the Property Trustee to redeem, on a pro rata basis, a Like Amount of
Trust Securities, on the Redemption Date, in an amount per Trust Security equal
to the applicable Redemption Price, which Redemption Price will be equal to (i)
in the case of the repayment of the Convertible Junior Subordinated Debentures
at their stated maturity date (the "Stated Maturity Price"), or in the case of
the redemption of the Convertible Junior Subordinated Debentures in certain
limited circumstances upon the occurrence of a Tax Event, the liquidation amount
of the Convertible Preferred Security plus any accrued and unpaid Distributions
thereon or (ii) in the case of an Optional Redemption on or after April 20,
2001, the Optional Redemption Price (as defined under "Description of the
Convertible Junior Subordinated Debentures -- Redemption -- Optional
Redemption"), plus accrued and unpaid Distributions thereon.
REDEMPTION PROCEDURES
Trust Securities shall be redeemed, if at all, at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or redemption of the
Convertible Junior Subordinated Debentures. Redemptions of
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the Trust Securities shall be made and the applicable 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 Convertible
Preferred Securities, then, by 12:00 noon, New York City time, on the date fixed
for redemption (the "Redemption Date"), with respect to the Convertible
Preferred Securities held in global form, the Property Trustee will deposit
irrevocably with DTC funds, to the extent funds are available, sufficient to pay
the applicable Redemption Price and will give DTC irrevocable instructions and
authority to pay the applicable Redemption Price to the holders of the
Convertible Preferred Securities. See "-- Form, Book-Entry Procedures and
Transfer". With respect to the Convertible Preferred Securities held in
certificated form, the Property Trustee will irrevocably deposit with the paying
agent for the Convertible Preferred Securities funds, to the extent funds are
available, 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
Convertible Preferred Securities. See "-- Payment and Paying Agency".
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of the Convertible Preferred
Securities on the relevant record dates for the related Distribution Dates. If
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 Convertible
Preferred Securities will cease, except the right of the holders of the
Convertible Preferred Securities to receive the applicable Redemption Price, but
without interest on such Redemption Price, and the Convertible Preferred
Securities will cease to be outstanding. In the event that any Redemption Date
is not a Business Day, then payment of the applicable 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
applicable Redemption Price 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 Convertible Preferred
Securities will continue to accrue from the Redemption Date originally
established by the Trust 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.
Notice of an Optional Redemption or a Tax Event Redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
holder of Convertible Preferred Securities. Notice of repayment at the stated
maturity date is not required.
TAX EVENT REDEMPTION OR DISTRIBUTION; INVESTMENT COMPANY EVENT DISTRIBUTION
If a Tax Event shall occur and be continuing, the Company shall cause the
Issuer Trustees to dissolve the Issuer and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause Convertible Junior
Subordinated Debentures to be distributed to the holders of the Convertible
Preferred Securities in liquidation of the Issuer within 90 days following the
occurrence of such Tax Event; provided, however, that such liquidation and
distribution shall be conditioned on (i) the Issuer Trustees' receipt of an
opinion of nationally recognized independent tax counsel (reasonably acceptable
to the Issuer Trustees) experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Convertible Preferred
Securities will not recognize any income, gain or loss for United States Federal
income tax purposes as a result of such liquidation and distribution of
Convertible Junior Subordinated Debentures, and (ii) the Company being unable to
avoid such Tax Event within such 90-day period by taking some ministerial action
or pursuing some other reasonable measure that, in the sole judgment of the
Company, will have no adverse effect on the Issuer, the Company or the holders
of the Convertible Preferred Securities and will involve no material cost.
Furthermore, if (i) the Company has received an opinion (a "Redemption Tax
Opinion") of a nationally recognized independent tax counsel (reasonably
acceptable to the Issuer Trustees) experienced in such matters that, as a result
of a Tax Event, there is more than an insubstantial risk that the Company would
be precluded from deducting the interest on the Convertible Junior Subordinated
Debentures for United States Federal income tax purposes, even after the
Convertible Junior Subordinated Debentures were distributed to the holders of
the Convertible Preferred
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Securities upon liquidation of the Issuer as described above, or (ii) the Issuer
Trustees shall have been informed by such tax counsel that it cannot deliver a
No Recognition Opinion, the Company shall have the right, upon not less than 30
nor more than 60 days' notice and within 90 days following the occurrence and
continuation of the Tax Event, to redeem the Convertible Junior Subordinated
Debentures, in whole, but not in part, for cash, for the principal amount
thereof plus accrued and unpaid interest thereon and, following such redemption,
all the Convertible Preferred Securities will be redeemed by the Issuer at the
aggregate liquidation amount thereof plus accrued and unpaid Distributions
thereon; provided, however, that, if at the time there is available to the
Company or the Issuer the opportunity to eliminate, within such 90-day period,
the Tax Event by taking some ministerial action or pursuing some other
reasonable measure that, in the sole judgment of the Company, will have no
adverse effect on the Issuer, the Company or the holders of the Convertible
Preferred Securities and will involve no material cost, the Issuer or the
Company will pursue such measure in lieu of redemption. See "-- Mandatory
Redemption". In lieu of the foregoing options, the Company will also have the
option of causing the Convertible Preferred Securities to remain outstanding and
pay Additional Sums on the Convertible Junior Subordinated Debentures. See
"Description of the Convertible Junior Subordinated Debentures -- Additional
Sums".
"Tax Event" means the receipt by the Property Trustee of an opinion of a
nationally recognized independent tax counsel to the Company experienced in such
matters (a "Dissolution Tax Opinion") to the effect that, as a result of (i) any
amendment to or change (including any announced prospective change (which shall
not include a proposed change), provided that a Tax Event shall not occur more
than 90 days before the effective date of any such prospective change) in the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (ii) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date of the date of
original issuance of the Convertible Junior Subordinated Debentures or the issue
date of the Convertible Preferred Securities issued by the Trust, there is more
than an insubstantial risk that (a) if the Convertible Junior Subordinated
Debentures are held by the Property Trustee, (x) the Trust is, or will be within
90 days of the date of such opinion, subject to United States Federal income tax
with respect to interest accrued or received on the Convertible Junior
Subordinated Debentures or subject to more than a de minimis amount of other
taxes, duties or other governmental charges as determined by such counsel, or
(y) interest payable by the Company to the Trust on the Convertible Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company in whole or in part for United States
Federal income tax purposes or (b) with respect to Convertible Junior
Subordinated Debentures which are no longer held by the Property Trustee,
interest payable by the Company on the Convertible Junior Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Company in whole or in part for United States Federal income
tax purposes.
If an Investment Company Event shall occur and be continuing, the Company
shall cause the Issuer Trustees to dissolve the Issuer and, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, cause
the Convertible Junior Subordinated Debentures to be distributed to the holders
of the Convertible Preferred Securities in liquidation of the Issuer within 90
days following the occurrence of such Investment Company Event.
"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 the Issuer is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Offering Circular.
The distribution by the Company of the Convertible Junior Subordinated
Debentures will effectively result in the cancelation of the Convertible
Preferred Securities. See "-- Liquidation of the Trust".
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LIQUIDATION OF THE TRUST
The Company, as the holder of the outstanding Common Securities, has the
right at any time (including, without limitation, upon the occurrence of a Tax
Event or Investment Company Event) to dissolve the Trust and, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, cause a
Like Amount of the Convertible Junior Subordinated Debentures to be distributed
to the holders of the Trust Securities upon liquidation of the Trust; provided
that, following such distribution of the Convertible Junior Subordinated
Debentures, the Company agrees to use its reasonable best efforts to maintain
any ratings of such Convertible Junior Subordinated Debentures by any nationally
recognized rating agency for so long as any such Convertible Junior Subordinated
Debentures are outstanding.
Upon liquidation of the Trust, the Convertible Junior Subordinated
Debentures may be distributed to holders of the Convertible Preferred Securities
in exchange therefor. Under current United States Federal income tax law, a
distribution of Convertible Junior Subordinated Debentures upon the dissolution
of the Trust would not be a taxable event to holders of the Convertible
Preferred Securities. If, however, the Trust is characterized for United States
Federal income tax purposes as an association taxable as a corporation at the
time of dissolution of the Trust, the distribution of the Convertible Junior
Subordinated Debentures may constitute a taxable event to holders of Convertible
Preferred Securities. Moreover, upon the occurrence of a Tax Event or Investment
Company Event, a dissolution of the Trust in which holders of the Convertible
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Taxation -- Receipt of Convertible Junior Subordinated Debentures
or Cash Upon Liquidation of the Issuer".
The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the Company, as Depositor, has given written direction to the Property Trustee
to dissolve the Trust; (iii) redemption of all the Trust Securities as described
under "-- Mandatory Redemption" above; (iv) expiration of the term of the Trust;
and (v) the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), (iv) or
(v) above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer 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 such Trust Securities a Like Amount of the Convertible
Junior Subordinated Debentures, unless such distribution would not be
practicable, 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 Convertible Preferred Securities, the
aggregate liquidation amount thereof 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
Convertible Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Convertible Preferred
Securities, except that if a Debenture Event of Default (or an event that, with
notice or passage of time, would become such a Debenture Event of Default) has
occurred and is continuing, the Convertible Preferred Securities shall have a
priority over the Common Securities with respect to any such distributions. See
"-- Subordination of Common Securities".
"Like Amount" means (i) with respect to a redemption of Convertible
Preferred Securities, having an aggregate liquidation amount equal to that
portion of the principal amount of Convertible Junior Subordinated Debentures to
be contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Convertible Preferred Securities based upon the
relative liquidation amounts of such classes and the proceeds of which will be
used to pay the applicable Redemption Price of the Convertible Preferred
Securities and (ii) with respect to a distribution of Convertible Junior
Subordinated Debentures to holders of Convertible Preferred Securities in
connection with a dissolution or liquidation of the Trust, Convertible Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Trust Securities of the holder to whom such
Convertible Junior Subordinated Debentures are distributed.
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If the Company does not redeem the Convertible Junior Subordinated
Debentures prior to maturity and the Trust is not liquidated and the Convertible
Junior Subordinated Debentures are not distributed to holders of the Trust
Securities, the Convertible Preferred Securities will remain outstanding until
the repayment of the Convertible Junior Subordinated Debentures at their stated
maturity and the distribution of the Liquidation Distribution to the holders of
the Convertible Preferred Securities.
On and after the liquidation date fixed for any distribution of Convertible
Junior Subordinated Debentures to holders of the Trust Securities, (i) the
Convertible Preferred Securities will no longer be deemed to be outstanding,
(ii) DTC or its nominee, as the record holder of the Convertible Preferred
Securities, will receive a registered global certificate or certificates
representing the Convertible Junior Subordinated Debentures to be delivered upon
such distribution with respect to Convertible Preferred Securities held by DTC
or its nominee and (iii) any certificates representing Convertible Preferred
Securities not held by DTC or its nominee will be deemed to represent
Convertible Junior Subordinated Debentures having a principal amount equal to
the liquidation amount of such Convertible Preferred Securities and bearing
accrued and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Convertible Preferred Securities until such certificates
are presented to the Administrative Trustees or their agent for cancelation,
whereupon the Company will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Convertible Junior Subordinated
Debentures.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Convertible
Preferred Securities and Common Securities, as applicable, shall be made pro
rata to the holders of Convertible Preferred Securities and Common Securities
based on the liquidation amount of the Trust Securities, provided that, if on
any Distribution Date or Redemption Date any Debenture Event of Default (or an
event that, with notice or passage of time, would become a Debenture Event of
Default) or an Event of Default under the Declaration shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the 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
on all of the outstanding Convertible Preferred Securities for all Distribution
periods terminating on or prior thereto, or, in the case of payment of the
applicable Redemption Price, the full amount of such Redemption Price on all of
the outstanding Convertible Preferred Securities, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or the
applicable Redemption Price of, the Convertible Preferred Securities then due
and payable.
In the case of any Event of Default under the Declaration resulting from a
Debenture Event of Default, the Company as holder of the 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
have been cured, waived or otherwise eliminated. Until all such Events of
Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Convertible Preferred Securities and not on behalf of the Company as holder
of the Common Securities, and only the holders of the Convertible Preferred
Securities will have the right to direct the Property Trustee to act on their
behalf.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Declaration (an "Event of Default") (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 a Debenture Event of Default (see "Description
of Convertible Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Issuer in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days (subject to the deferral of any due date in the case of a Deferral
Period); or
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(iii) default by the Issuer 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 Issuer Trustees in the Declaration
(other than a covenant or warranty, a default in the performance of which
or the breach of which is addressed in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Issuer Trustees by the holders of at least 25% in aggregate
liquidation amount of the outstanding Convertible Preferred Securities, a
written notice specifying such default or breach and requiring it to be
remedied and stating 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 Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within three Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Convertible Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrative Trustees are required to file annually with
the Property 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 a Debenture Event of Default (or an event that with notice or the
passage of time, would become a Debenture Event of Default) or an Event of
Default under the Declaration has occurred and is continuing, the Convertible
Preferred Securities shall have a preference over the Common Securities as
described above. See "-- Liquidation of the Trust" and "-- Subordination of
Common Securities".
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in liquidation amount of the outstanding Convertible
Preferred Securities. In no event will the holders of the Convertible Preferred
Securities 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. No resignation or removal of an
Issuer 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 PROPERTY TRUSTEE
Unless an Event of Default 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's property
may at the time be located, the Company, as the holder of the Common Securities,
and the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust's 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 Declaration. In case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall have power to make such
appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any person succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such person shall be otherwise qualified and eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the Declaration. The Trust may, at
the request of the Company, as Depositor, with the consent of the Administrative
Trustees but without the consent of the holders of the Convertible Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a trust organized as such
under the laws of any State; provided, however, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect to
the Convertible Preferred Securities or (b) substitutes for the Convertible
Preferred Securities other securities having substantially the same terms as the
Convertible Preferred Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Convertible Preferred Securities rank
in priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly appoints a trustee of such
successor entity possessing the same powers and duties as the Property Trustee
as the holder of the Convertible Junior Subordinated Debentures, (iii) the
Successor Securities are listed or traded, or any Successor Securities will be
listed or traded upon notification of issuance, on any national securities
exchange, national automated quotation system or other organization on which the
Convertible Preferred Securities are then listed or traded, if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Convertible Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Convertible Preferred Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose substantially identical and limited to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent counsel
to the Trust experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Convertible Preferred Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act and (viii) the Company or any permitted successor or
assignee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
aggregate liquidation amount of the Trust Securities, 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 other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it,
if such consolidation, amalgamation, merger, replacement, conveyance, transfer
or lease would cause the Trust or the successor entity to be classified as an
association taxable as a corporation (or to substantially increase the
likelihood that the Trust or the successor entity would be classified as other
than a grantor trust) for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of the
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the Convertible Preferred Securities will have no
voting rights.
In addition to the rights of the holders of Convertible Preferred
Securities with respect to the enforcement of payment to the Issuer of principal
of or interest on the Convertible Junior Subordinated Debentures as provided
under "Description of Convertible Junior Subordinated Debentures -- Debenture
Events of Default", if (i) a Debenture Event of Default occurs and is continuing
or (ii) the Company defaults under the Guarantee (each an "Appointment Event"),
then the holders of the Convertible Preferred Securities, acting as a single
class, will be entitled by the majority vote of such holders to appoint a
Special Trustee. Any holder of Convertible Preferred Securities (other than the
Company or any of its affiliates) shall be entitled to nominate any person to be
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appointed as Special Trustee. Not later than 30 days after such right to appoint
a Special Trustee arises, the Issuer Trustees shall convene a meeting of the
holders of Convertible Preferred Securities for the purpose of appointing a
Special Trustee. If the Issuer Trustee fails to convene such meeting within such
30-day period, the holders of not less than 10% of the aggregate stated
liquidation amount of the outstanding Convertible Preferred Securities will be
entitled to convene such meeting. The provisions of the Declaration relating to
the convening and conduct of the meetings of the holders will apply with respect
to any such meeting. Any Special Trustee so appointed shall cease to be a
Special Trustee if the Appointment Event pursuant to which the Special Trustee
was appointed and all other Appointment Events cease to be continuing.
Notwithstanding the appointment of any such Special Trustee, the Company shall
retain all rights under the Indenture, including the right to defer payments of
interest by extending the interest payment period as provided under "Description
of the Convertible Junior Subordinated Debentures -- Option to Extend Interest
Payment Date." If such an extension occurs, there will be no Debenture Event of
Default and, consequently, no Event of Default for failure to make any scheduled
interest payment during the Deferral Period on the date originally scheduled.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add to
any provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will not be taxable as a corporation or will be classified for
United States Federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clauses (i) and (ii), such action
shall not adversely affect in any material respect the interests of any holder
of Trust Securities, and any such amendments of the Declaration shall become
effective when notice thereof is given to the holders of the Trust Securities.
The Declaration may be amended by the Issuer Trustees and the Company with (i)
the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding Trust Securities and (ii) receipt by the
Issuer Trustees of an opinion of counsel experienced in such matters to the
effect that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States Federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act. In addition, without the consent of each holder of Trust Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Convertible Junior Subordinated Debentures are held by the
Trust, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Convertible Junior Subordinated Debentures, (ii) waive any past default that
is waivable under Section 5.13 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Convertible Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Convertible
Junior Subordinated Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the holders of a majority in
aggregate liquidation amount of all outstanding Convertible Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Convertible Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the Convertible Preferred Securities. The
Property Trustee shall not revoke any action previously authorized or approved
by a vote of the holders of the Convertible Preferred Securities except by
subsequent vote of such holders. The Property Trustee shall notify each holder
of Convertible Preferred Securities of any notice of default with respect to the
Convertible Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Convertible Preferred Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that such action
will not affect the Trust's status as a grantor trust for United States Federal
income tax purposes on account of such action.
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Any required approval of holders of Convertible Preferred Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Convertible 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 given to each holder of record of Convertible Preferred Securities in the
manner set forth in the Declaration.
No vote or consent of the holders of Convertible Preferred Securities will
be required for the Trust to redeem and cancel the Convertible Preferred
Securities in accordance with the Declaration.
Notwithstanding that holders of the Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned by the Company, the
Issuer Trustees or any affiliate of the Company or any Issuer Trustees, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to payments of Distributions, amounts
payable upon redemption and the liquidation amount of the Trust Securities) and
all costs and expenses of the Trust (including costs and expenses relating to
the organization of the Trust, the fees and expenses of the Issuer Trustees and
the costs and expenses relating to the operation of the Trust) and the offering
of the Convertible Preferred Securities, and to pay any and all taxes and all
costs and expenses with respect to the foregoing (other than United States
withholding taxes) to which the Trust might become subject.
FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
The Convertible Preferred Securities were issued in the form of one or more
fully registered Global Convertible Preferred Securities Certificates (the
"Global Convertible Preferred Securities"). The Global Convertible Preferred
Securities were deposited upon issuance with the Property Trustee as custodian
for DTC, in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Convertible Preferred Securities may
be transferred, in whole but not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Convertible
Preferred Securities may not be exchanged for Convertible Preferred Securities
in certificated form except in the limited circumstances described below. See
"-- Certificated Convertible Preferred Securities".
Transfer of beneficial interests in the Global Convertible Preferred
Securities will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants which may change from time to time.
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
to accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership
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interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, ownership of interests in the Global Convertible Preferred
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Convertible Preferred
Securities).
Investors in the Global Convertible Preferred Securities may hold their
interests therein directly through DTC, if they are Participants in DTC, or
indirectly through organizations which are Participants in such system. All
interests in a Global Convertible Preferred Security will be subject to the
procedures and requirements of DTC. The laws of some states require that certain
persons take physical delivery in certificated form of certain securities, such
as the Convertible Preferred Securities, that they own. Consequently, the
ability to transfer beneficial interests in a Global Convertible Preferred
Security to such persons will be limited to that extent. Because DTC can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having beneficial
interests in a Global Convertible Preferred Security to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Convertible Preferred Securities, see "-- Certificated
Convertible Preferred Securities".
EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
CONVERTIBLE PREFERRED SECURITIES WILL NOT BE ENTITLED TO HAVE CONVERTIBLE
PREFERRED SECURITIES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE OR BE ENTITLED
TO RECEIVE PHYSICAL DELIVERY OF CONVERTIBLE PREFERRED SECURITIES IN CERTIFICATED
FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER
THE DECLARATION FOR ANY PURPOSE.
Payments in respect of the Global Convertible Preferred Security registered
in the name of DTC or its nominee will be payable by the Property Trustee to DTC
or its nominee as the registered holder under the Declaration by wire transfer
in immediately available funds on each Distribution Date. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose names the
Convertible Preferred Securities, including the Global Convertible Preferred
Securities, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to, or payments made on
account of, beneficial ownership interests in the Global Convertible Preferred
Securities, or for maintaining, supervising or reviewing any of DTC's records or
any Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Convertible Preferred Securities, or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the Company
that its current practice, upon receipt of any payment in respect of securities
such as the Convertible Preferred Securities, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in liquidation amount of beneficial
interests in the Global Convertible Preferred Security, as shown on the records
of DTC, unless DTC has reason to believe it will not receive payment on such
payment date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Convertible Preferred Securities represented by Global
Convertible Preferred Securities held through such Participants will be governed
by standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Property Trustee or the Trust. Neither the Trust nor
the Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Convertible Preferred
Securities, and the Trust and the Property Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Convertible Preferred Securities
(including, without limitation, the presentation of Convertible Preferred
Securities for exchange as described below) only at the direction of one or more
Participants to whose account
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with DTC interests in the Global Convertible Preferred Securities are credited
and only in respect of such portion of the aggregate liquidation amount of the
Convertible Preferred Securities represented by the Global Convertible Preferred
Securities as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Declaration, DTC
reserves the right to exchange the Global Convertible Preferred Securities for
legended Convertible Preferred Securities in certificated form and to distribute
such Convertible Preferred Securities to its Participants.
So long as DTC or its nominee is the registered owner of the Global
Convertible Preferred Securities, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the Convertible Preferred Securities
represented by the Global Convertible Preferred Security for all purposes under
the Declaration.
Neither DTC nor its nominee will consent or vote with respect to the
Convertible Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy to the Trust as soon as possible after the record date. The
omnibus proxy assigns the consenting or voting rights of DTC or its nominee to
those Participants to whose accounts the Convertible Preferred Securities are
credited on the record date (identified in a listing attached to the omnibus
proxy).
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Convertible Preferred Securities among Participants
in DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trust nor the Property Trustee will have any responsibility for the performance
by DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities represented by the Global Convertible
Preferred Securities are exchangeable for Certificated Convertible Preferred
Securities in definitive form of like tenor as such Convertible Preferred
Securities ("Certificated Convertible Preferred Securities") in denominations of
$50 and integral multiples thereof if (i) DTC notifies the Company or the Issuer
that it is unwilling or unable to continue as depositary for the Global
Convertible Preferred Securities or if at any time DTC ceases to be a clearing
agency registered under the Exchange Act, (ii) the Company or the Issuer in its
discretion at any time determines not to have of the Convertible Preferred
Securities evidenced by the Global Convertible Preferred Securities or (iii) a
default entitling the holders of the Convertible Preferred Securities to
accelerate the maturity thereof has occurred and is continuing. Any of the
Convertible Preferred Securities that is exchangeable pursuant to the preceding
sentence is exchangeable for Certificated Convertible Preferred Securities
issuable in authorized denominations and registered in such names as DTC shall
direct. Subject to the foregoing, the Global Convertible Preferred Securities
are not exchangeable, except for Global Convertible Preferred Securities of the
same aggregate denomination to be registered in the name of DTC or its nominee.
PAYMENT AND PAYING AGENCY
Payments in respect of the Convertible Preferred Securities held in global
form shall be made to DTC, which shall credit the relevant accounts at DTC on
the applicable Distribution Dates. With respect to the Convertible Preferred
Securities that are not held by DTC, such payments shall be made by check mailed
to the address of the holder entitled thereto as such address shall appear on
the register. The paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee, the Administrative Trustees and the Company. In the event that
the Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and the Company) to act as Paying
Agent.
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REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar, conversion agent and transfer
agent for the Convertible Preferred Securities.
Registration of transfers of the Convertible Preferred Securities will be
effected without charge by or on behalf of the Trust, but only 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 or exchange of the Convertible Preferred Securities
after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property 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, during the existence of an 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 Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of Trust
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 Property Trustee is required to decide
between alternative courses 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 the Convertible Preferred
Securities or the Common Securities are entitled under the Declaration to vote,
then the Property 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 Administrative 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 classified as an association taxable as a corporation
for United States Federal income tax purposes (or in a way that would
substantially increase the risk that the Trust would be classified as other than
a grantor trust for United States Federal income tax purposes), and so that the
Convertible Junior Subordinated Debentures will be treated as indebtedness of
the Company for United States Federal income tax purposes. In this connection,
the Company and the Administrative 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 Administrative 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
Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures were issued under a Junior
Subordinated Indenture (the "Indenture"), between the Company and The Bank of
New York, as trustee (the "Debenture Trustee"). The Indenture will be qualified
under the Trust Indenture Act, will incorporate certain provisions of the Trust
Indenture Act and will be subject to and governed by the Trust Indenture Act.
This summary of the material terms and provisions of the Convertible Junior
Subordinated Debentures and the Indenture does not purport to be complete, and
where reference is made to particular provisions of the Indenture, such
provisions, including the definitions of certain terms, some of which are not
otherwise defined herein, are qualified in their entirety by reference to all of
the provisions of the Indenture and those terms made a part of the Indenture by
the Trust Indenture Act.
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GENERAL
Concurrently with the issuance of the Trust Securities, the Trust invested
the proceeds thereof in Convertible Junior Subordinated Debentures issued by the
Company. Interest will accrue on the Convertible Junior Subordinated Debentures
from the date of their original issuance at the annual rate of 5 1/4% of the
principal amount thereof and will be payable quarterly in arrears on January 15,
April 15, July 15 and October 30 (each an "Interest Payment Date"), commencing
July 15, 1998, to the person in whose name each Convertible Junior Subordinated
Debenture is registered, subject to certain exceptions, at the close of business
on the next preceding January 1, April 1, July 1 and October 1. It is
anticipated that, until the liquidation of the Trust, each Convertible Junior
Subordinated Debenture will be registered in the name of the Trust and held by
the Property Trustee for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of the
number of days elapsed in a 360-day year consisting of twelve 30-day months. In
the event that any Interest Payment Date is not a Business Day, then payment of
the interest 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, such payment will be made on the immediately preceding Business Day, in
each case, with the same force and effect as if made on the applicable Interest
Payment Date. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law), compounded quarterly from the relevant Interest Payment Date.
The term "interest" as used herein shall include quarterly payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date,
Special Interest and Additional Sums, as applicable. See "-- Additional Sums"
and "Registration Rights".
Unless previously redeemed or repurchased in accordance with the Indenture,
the Convertible Junior Subordinated Debentures will mature on April 15, 2028.
See "-- Redemption -- Repayment at Maturity; Redemption of Convertible Preferred
Securities".
The Convertible Junior Subordinated Debentures are unsecured and rank
junior and subordinate in right of payment to all Senior Debt. The Indenture
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, including Senior Debt. See "Risk Factors -- Ranking of Obligations
Under the Guarantee and the Convertible Preferred Securities Debentures" and "--
Subordination".
OPTION TO EXTEND INTEREST PAYMENT DATE
As long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Convertible Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Deferral Period, provided, that no Deferral Period may extend beyond the stated
maturity date of the Convertible Junior Subordinated Debentures. At the end of a
Deferral Period, the Company must pay all interest then accrued and unpaid on
the Convertible Junior Subordinated Debentures (together with interest accrued
thereon compounded quarterly from the relevant Interest Payment Date to the date
of payment, to the extent permitted by applicable law). During a Deferral Period
and for so long as the Convertible Junior Subordinated Debentures remain
outstanding, interest will continue to accrue and holders of Convertible Junior
Subordinated Debentures (and holders of the Convertible Junior Subordinated
Debentures while Convertible Preferred Securities are outstanding) will be
required to accrue interest income (in the form of OID) for United States
Federal income tax purposes. See "United States Taxation -- Potential Extension
of Interest Payment and Original Issue Discount".
During any Deferral Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends paid by the
Company which consist of stock of the same class as that on which the dividend
is being paid, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Convertible Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Convertible Junior
Subordinated Debentures (other than (a) dividends or distributions in Common
Stock, (b) any declaration of a dividend in connection with the
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<PAGE> 55
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) purchases or
acquisitions of shares of Common Stock in connection with the satisfaction by
the Company of its obligations under any employee benefit plan or any other
contractual obligation of the Company (other than a contractual obligation
ranking pari passu with or junior to the Convertible Junior Subordinated
Debentures), (e) 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 or (f)
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). A Deferral Period will terminate upon
the payment by the Company of all interest then accrued and unpaid on the
Convertible Junior Subordinated Debentures (together with interest accrued
thereon, compounded quarterly, to the extent permitted by applicable law). Prior
to the termination of any Deferral Period the Company may further extend such
Deferral Period, provided, however, that such deferral does not cause such
Deferral Period to exceed 20 consecutive quarters or to extend beyond the stated
maturity date of the Convertible Junior Subordinated Debentures. Upon the
termination of any Deferral Period, and subject to the foregoing limitations,
the Company may elect to begin a new Deferral Period. No interest shall be due
and payable during a Deferral Period, except at the end thereof. The Company
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of any Deferral Period (or an extension thereof)
at least three Business Days (or if the Property Trustee is not the sole holder
of the Convertible Junior Subordinated Debentures, ten Business Days) prior to
the earlier of (i) the date the Distributions on the Convertible Preferred
Securities would have been payable except for the election to begin or extend
such Deferral Period or (ii) the date the Administrative Trustees are required
to give notice to any national securities exchange or automated quotation system
or to holders of Convertible Preferred Securities of the record date or the date
such Distributions are payable, but in any event not less than three Business
Days prior to such record date (or if the Property Trustee is not the sole
holder of the Convertible Junior Subordinated Debentures, ten Business Days).
The Debenture Trustee shall give notice of the Company's election to begin or
extend a new Deferral Period to the holders of the Convertible Preferred
Securities. There is no limitation on the number of times that the Company may
elect to begin a Deferral Period.
REDEMPTION
REPAYMENT AT MATURITY; REDEMPTION OF CONVERTIBLE PREFERRED SECURITIES
The Convertible Junior Subordinated Debentures must be repaid at the stated
maturity on April 15, 2028 unless earlier redeemed. The circumstances in which
the Company may redeem the Convertible Junior Subordinated Debentures prior to
their stated maturity date are described below. Upon the repayment in full at
maturity or redemption, in whole or in part, of the Convertible Junior
Subordinated Debentures (other than following the distribution of the
Convertible Junior Subordinated Debentures to the holders of the Trust
Securities), the proceeds from such repayment or redemption shall concurrently
be applied to redeem, at the applicable Redemption Price, a Like Amount of Trust
Securities, upon the terms and conditions described under "Description of the
Convertible Preferred Securities -- Mandatory Redemption".
OPTIONAL REDEMPTION
The Company may redeem the Convertible Junior Subordinated Debentures (an
"Optional Redemption"), in whole or in part, at any time after April 20, 2001,
upon not less than 30 nor more than 60 days' notice, at a redemption price (the
"Optional Redemption Price") equal to the following prices per $50 principal
amount of Convertible Junior Subordinated Debentures, plus accrued and unpaid
interest thereon, if redeemed during the 12-month period ending April 20:
<TABLE>
<CAPTION>
PRICE PER
YEAR $50 PRINCIPAL AMOUNT
---- --------------------
<S> <C>
2002 $51.31
2003 $50.88
2004 $50.44
</TABLE>
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<PAGE> 56
and thereafter at $50 per $50 principal amount of Convertible Junior
Subordinated Debentures plus, in each case, accrued and unpaid interest,
including Additional Sums, if any, to the redemption date.
In the event of any redemption in part, the Company shall not be required
(i) to issue, register the transfer of or exchange any Convertible Junior
Subordinated Debenture during a period beginning at the opening of business 15
days before any selection for redemption of Convertible Junior Subordinated
Debentures and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all holders of
Convertible Junior Subordinated Debentures to be so redeemed and (ii) to
register the transfer of or exchange any Convertible Junior Subordinated
Debentures so selected for redemption, in whole or in part, except the
unredeemed portion of any Convertible Junior Subordinated Debenture being
redeemed in part.
TAX EVENT REDEMPTION
The Company may also, under certain limited circumstances within 90 days of
the occurrence and continuation of a Tax Event, redeem (a "Tax Event
Redemption") the Convertible Junior Subordinated Debentures in whole, but not in
part, at the aggregate principal amount thereof plus accrued and unpaid interest
thereon to the date of redemption (the "Tax Event Redemption Price"). See
"Description of the Convertible Preferred Securities -- Tax Event Redemption or
Distribution or Investment Company Event Distribution".
If the Company is permitted to consummate a Tax Event Redemption and it
desires to do so, it must mail a notice to each holder of Convertible Preferred
Securities at least 30 days but not more than 60 days before the Redemption
Date.
ADDITIONAL SUMS
If (i) the Property Trustee is the sole holder of all the Convertible
Junior Subordinated Debentures and (ii) the Trust is required to pay any
additional taxes, duties, assessments or other governmental charges as a result
of a Tax Event ("Additional Sums"), the Company may elect, in its sole and
absolute discretion, to pay as additional amounts on the Convertible Junior
Subordinated Debentures such amounts as shall be required so that the
Distributions payable by the Trust in respect of the Trust Securities shall not
be reduced as a result of any such additional taxes, duties, assessments or
other governmental charges instead of directly paying such additional taxes,
duties, assessments or other governmental charges as required under the
Indenture.
RESTRICTIONS ON CERTAIN PAYMENTS
If (i) there shall have occurred a Debenture Event of Default, (ii) the
Company shall be in default with respect to its payment of any obligations under
the Guarantee or (iii) the Company shall have given notice of its election of a
Deferral Period as provided in the Indenture and shall not have rescinded such
notice, or such Deferral Period, or any extension thereof, shall be continuing,
the Company will covenant that it will not (a) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) other than stock dividends paid by the Company which consist of
stock of the same class as that on which the dividend is being paid, (b) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in interest to the Convertible Junior Subordinated Debentures or (c) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Convertible Junior Subordinated Debentures
(other than (1) dividends or distributions in Common Stock of the Company, (2)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (3)
payments under the Guarantee, (4) purchases or acquisitions of shares of the
Company's Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plan or any other contractual obligation
of the Company (other than a contractual obligation ranking pari passu with or
junior in interest to the Convertible Junior Subordinated Debentures), (5) 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 or (6) the purchase of
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<PAGE> 57
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).
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Convertible Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of
Convertible Junior Subordinated Debentures or the holders of the Convertible
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act
and making other changes that do not materially adversely affect the interests
of the holders of Convertible Junior Subordinated Debentures or the holders of
the Convertible Preferred Securities so long as they remain outstanding. The
Indenture contains provisions permitting the Company and the Debenture Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of Convertible Junior Subordinated Debentures, to modify the
Indenture in a manner affecting the rights of the holders of Convertible Junior
Subordinated Debentures; provided, however, that no such modification may,
without the consent of the holder of each outstanding Convertible Junior
Subordinated Debenture so affected, change the stated maturity date, or reduce
the principal amount of the Convertible Junior Subordinated Debentures, or
reduce the rate or extend the time of payment of interest thereon or reduce the
percentage of principal amount of Convertible Junior Subordinated Debentures the
holders of which are required to consent to any modification of the Indenture,
or have certain other effects as set forth in the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Convertible Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay any interest on the Convertible Junior
Subordinated Debentures when due (subject to the deferral of any due date
in the case of a Deferral Period); or
(ii) failure to pay any principal or premium, if any, on the
Convertible Junior Subordinated Debentures when due, whether at maturity,
upon redemption, by declaration of acceleration or otherwise; or
(iii) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Company in the Indenture (other than a
covenant or warranty, a default in the performance of which or the breach
of which is addressed in clause (i) or (ii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Company by the holders of at least
25% in aggregate principal amount of the outstanding Convertible Junior
Subordinated Debentures, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Indenture; or
(iv) failure by the Company to issue and deliver shares of Common
Stock upon an election by a holder of Convertible Preferred Securities to
convert such Convertible Preferred Securities; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company; or
(vi) the voluntary or involuntary dissolution, winding-up or
termination of the Trust, except in connection with the distribution of the
Convertible Junior Subordinated Debentures to the holder of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of the
Convertible Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Convertible Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default and, should the Debenture Trustee or such holders
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<PAGE> 58
of Convertible Junior Subordinated Debentures fail to make such declaration, the
holders of at least 25% in aggregate liquidation amount of the Convertible
Preferred Securities shall have such right. The holders of a majority in
aggregate outstanding principal amount of the Convertible Junior Subordinated
Debentures may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the Convertible Junior
Subordinated Debentures 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
Debenture Trustee. Should the holders of Convertible Junior Subordinated
Debentures fail to annul such declaration and waive such default, the holders of
a majority in aggregate liquidation amount of the Convertible Preferred
Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Convertible Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Convertible Junior Subordinated Debentures, waive any
past default, except a default in the payment of principal of (or premium, if
any) or interest (unless such default 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 Debenture 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 Convertible
Junior Subordinated Debenture. Should the holders of such Convertible Junior
Subordinated Debentures fail to waive such past default, the holders of a
majority in aggregate liquidation amount of the Convertible Preferred Securities
shall have such right. The Company is required to file annually with the
Debenture 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 a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Convertible Junior Subordinated Debentures, 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 the Convertible Junior
Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Convertible Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Convertible Preferred Securities may
institute a Direct Action. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Convertible Preferred Securities. If the right to
bring a Direct Action is removed following the effectiveness of a shelf
registration statement in respect of the Convertible Junior Subordinated
Debentures, the Trust may become subject to the reporting obligations under the
Exchange Act. In connection with a Direct Action, the Company shall have a right
of set-off to the extent of any payments made by the Company to such holder in
any Direct Action.
The holders of the Convertible Preferred Securities will not be able to
exercise directly any remedies, other than those set forth in the preceding
paragraph, available to the holders of the Convertible Junior Subordinated
Debentures unless there shall have been an Event of Default under the
Declaration.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
with or into any other person or sell or lease its assets as, or substantially
as, an entirety to any person, unless (i) the successor person is organized
under the laws of the United States or any State of the United States or the
District of Columbia, and such successor person (if other than the Company)
expressly assumes the Company's obligations on the Convertible Junior
Subordinated Debentures issued under the Indenture and shall have provided for
conversion rights in accordance with Article XIII of the Indenture; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; (iii) if at the time
any Convertible Preferred Securities are outstanding, such transaction is
permitted under the Declaration and does not give rise to any Event of Default
under the Declaration; and (iv) certain other conditions as prescribed in the
Indenture are met.
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<PAGE> 59
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Convertible Junior Subordinated Debentures issued thereunder shall be
subordinate and junior in right of payment to all Obligations relating to Senior
Debt to the extent provided in the Indenture. Upon any payment or distribution
of assets to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Company, the
holders of Senior Debt will first be entitled to receive payment in full in cash
of all principal of (and premium, if any) and interest, if any, on, and all
other Obligations relating to, such Senior Debt before the holders of
Convertible Junior Subordinated Debentures, or the Property Trustee on behalf of
the holders, will be entitled to receive or retain any payment or distribution
in respect thereof.
In the event of the acceleration of the maturity of the Convertible Junior
Subordinated Debentures, the holders of all Senior Debt outstanding at the time
of such acceleration will first be entitled to receive payment in full in cash
of all amounts due thereon (including any amounts due upon acceleration and all
Obligations relating thereto) before the holders of the Convertible Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest, if any, on, or any other Obligations
relating to, the Convertible Junior Subordinated Debentures.
In the event that the Company shall default in the payment of any principal
of (or premium, if any), or interest, if any, on, or any other Obligations
relating to, any Senior Debt when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration of acceleration or
otherwise, then, unless and until such default shall have been cured or waived
or shall have ceased to exist or all Senior Debt and all Obligations relating
thereto shall have been paid in full in cash, no direct or indirect payment (in
cash, property, securities, by set-off or otherwise) shall be made or agreed to
be made for principal or interest, if any, on or any other Obligations relating
to, the Convertible Junior Subordinated Debentures, or in respect of any
redemption, repayment, retirement, purchase or other acquisition of any of the
Convertible Junior Subordinated Debentures.
In addition, during the continuance of any other event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, upon the occurrence of receipt by the Debenture
Trustee of written notice from the holders of a majority of the outstanding
principal amount of the Designated Senior Indebtedness or their representative,
no such payment may be made by the Company upon or in respect of the Convertible
Junior Subordinated Debentures or any Obligations relating thereto for a period
(each a "Payment Blockage Period") commencing on the date of receipt of such
notice and ending 179 days thereafter (unless such Payment Blockage Period shall
be terminated by written notice to the Debenture Trustee from the holders of a
majority of the outstanding principal amount of such Designated Senior
Indebtedness or their representative who delivered such notice). Notwithstanding
anything herein to the contrary, in no event will a Payment Blockage Period
extend beyond 179 days from the date on which such Payment Blockage Period was
commenced. Not more than one Payment Blockage Period may be commenced with
respect to the Convertible Junior Subordinated Debentures during any period of
360 consecutive days.
"Senior Debt" means any Debt of the Company, whether outstanding on the
date of execution of the Indenture or thereafter created, assumed or incurred,
except such Debt that is expressly stated to rank junior in right of payment to,
or pari passu in right of payment with, the Convertible Junior Subordinated
Debentures (or any guarantee thereof): provided, however, that Senior Debt shall
not be deemed to include (a) any Debt of the Company which, when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, was without recourse to the Company, (b) trade accounts
payable and accrued liabilities arising in the ordinary course of business, (c)
any Debt of the Company to any of its subsidiaries or (d) any Debt to any
employee of the Company.
"Debt" means (i) the principal of, premium, if any, unpaid interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company at the relevant
contracted rate specified in the documentation for the relevant Debt whether or
not such claim for post-petition interest is allowed in such proceeding) on, and
all other Obligation relating to, indebtedness for money borrowed (including any
guarantee relating to the foregoing obligations), (ii) purchase money and
similar obligations, (iii) obligations
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under capital lease, letters of credit and reimbursement obligations relating
thereto, (iv) guarantees, assumptions or purchase commitments relating to, or
other transactions as a result of which the Company is responsible for the
payment of such indebtedness of others, (v) renewals, extensions and refundings
of any such indebtedness, (vi) interest or obligations in respect of any such
indebtedness accruing after the commencement of any insolvency or bankruptcy
proceedings (at the relevant contractual rate specified in the documentation
therefor, whether or not such claim for post-petition interest is allowed in
such proceeding), (vii) all obligations to make payment pursuant to the terms of
financial instruments, such as (a) securities contracts and foreign currency
exchange contracts, (b) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts and (c) similar financial instruments and (viii) any
deferrals, renewals or extensions of any such Debt.
"Designated Senior Indebtedness" means (x) all Senior Debt of the Company
under, or as a result of its guarantee of, Debt pursuant to the Credit Agreement
and (y) at any time when no Debt described in the preceding clause (x) is
outstanding, any issue of Senior Debt with an aggregate principal amount in
excess of $15.0 million that is designated as "Designated Senior Indebtedness"
by written notice from the Company to the Debenture Trustee. As used herein,
"Credit Agreement" shall mean the Credit Agreement dated as of March 24, 1992,
and amended and restated as of January 11, 1994 and further amended and restated
as of December 18, 1996, and as further amended, among the Company, Bank of
America Illinois, as Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, and Bankers Trust Company, as Administrative Agent, and the
various lenders from time to time party thereto, together with the related
documents thereto (including, without limitation, the loans thereunder, any
guarantees and security documents), as amended, extended, renewed, restated,
supplemented or otherwise modified, in whole or in part, and without limitation
as to the amount, terms, conditions, covenants and other provisions from time to
time in effect, and any agreement (and related documents) governing Debt
incurred to refund or refinance, in whole, the borrowings and commitments then
outstanding under such Credit Agreement or any successor Credit Agreement,
whether by the same or any other lender or group of lenders.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under, or with respect to, the documentation governing any Debt.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt. At December 31, 1997, the
aggregate outstanding Senior Debt of the Company was approximately $759.4
million (or $623.9 million of Senior Debt after giving pro forma effect to the
Offerings and the use of the estimated net proceeds therefrom to reduce
indebtedness under the Amended Credit Agreement). The Indenture also places no
limitation on the Debt of the Company's subsidiaries, which rank senior in right
of payment to the Convertible Junior Subordinated Debentures.
REGISTRATION AND TRANSFER
The Convertible Junior Subordinated Debentures will be represented by one
or more global certificates registered in the name of Cede & Co. as the nominee
of DTC if, and only if, distributed to the holders of the Trust Securities.
Until such time, the Convertible Junior Subordinated Debentures will be
registered in the name of and held by the Property Trustee. Should the
Convertible Junior Subordinated Debentures be distributed to holders of the
Trust Securities, beneficial interests in the Convertible Junior Subordinated
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by Participants in DTC.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of the Convertible Preferred Securities --
Form, Book-Entry Procedures and Transfer". If the Convertible Junior
Subordinated Debentures are distributed to the holders of the Trust Securities
upon the termination of the Trust, the form, book-entry and transfer procedures
with respect to the Convertible Preferred Securities as described under
"Description of the Convertible Preferred Securities -- Form, Book-Entry
Procedures and Transfer," shall apply to the Convertible Junior Subordinated
Debentures mutatis mutandis.
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PAYMENT AND PAYING AGENTS
Payment of the principal of and interest on the Convertible Junior
Subordinated Debentures will be made at the office or agency of the Company
maintained for that purpose in New York, New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that, at the option of
the Company, payment of interest may be made (except in the case of Convertible
Junior Subordinated Debentures that are Global Convertible Junior Subordinated
Debentures) by check mailed to each registered holder. Payment of any interest
on any Convertible Junior Subordinated Debenture will be made to the person in
whose name such Convertible Junior Subordinated Debenture is registered at the
close of business on the record date for such interest, except in the case of
defaulted interest.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture 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 Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Convertible Junior Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture 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 Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF THE GUARANTEE
The Guarantee was executed and delivered by the Company concurrently with
the issuance by the Trust of the Convertible Preferred Securities for the
benefit of the holders from time to time of such Convertible Preferred
Securities. The Bank of New York will act as trustee (the "Guarantee Trustee")
under the definitive agreement relating to the Guarantee (the "Guarantee
Agreement"). The Guarantee Agreement will be qualified under the Trust Indenture
Act, will incorporate certain provisions of the Trust Indenture Act and will be
subject to and governed by the Trust Indenture Act. This summary of the material
provisions of the Guarantee does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Convertible Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company has irrevocably agreed to pay in
full on a subordinated basis the Guarantee Payments (as defined herein) to the
holders of the Trust Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert other than
the defense of payment. The following payments with respect to the Trust
Securities, to the extent not paid by or on behalf of the Trust (the "Guarantee
Payments"), will be subject to the Guarantee: (i) any accrued and unpaid
Distributions required to be paid on the Trust Securities, to the extent that
the Trust has funds on hand available therefor at such time, (ii) the applicable
Redemption Price with respect to Trust Securities called for redemption, to the
extent that the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Trust (other than in connection with the distribution of Convertible Junior
Subordinated Debentures to the holders of the Trust Securities or the redemption
of all of the Trust Securities) the lesser of (a) the Liquidation Distribution,
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 Trust
Securities upon liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as required by applicable law. The Company's obligation
to
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make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the Trust Securities or by causing the
Trust to pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the Convertible Preferred Securities, although it will
apply only to the extent that the Trust has funds sufficient to make such
payments, and is not a guarantee of collection. If the Company does not make
interest payments on the Convertible Preferred Securities Debentures held by the
Trust, the Trust will not be able to pay Distributions on the Convertible
Preferred Securities and will not have funds legally available therefor.
The Guarantee will rank subordinate and junior in right of payment to all
Senior Debt in the same manner as the Convertible Junior Subordinated
Debentures. See "-- Status of the Guarantee". The Guarantee does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Debt.
Taken together, the Company's obligations under the Guarantee, the
Declaration, the Convertible Junior Subordinated Debentures and the Indenture,
including the Company's obligation to pay the costs, expenses and other
liabilities of the Trust (other than the Trust's obligations to the holders of
the Trust Securities under the Trust Securities), provide, in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
under the Convertible Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all 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 Convertible Preferred Securities. See
"Relationship Among the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures and the Guarantee".
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and will
rank subordinate and junior in right of payment to all Senior Debt in the same
manner as Convertible Junior Subordinated Debentures.
The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee will be
held for the benefit of the holders of the Trust Securities. The Guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by the Trust or upon distribution to the holders of the Trust
Securities of the Convertible Junior Subordinated Debentures. The Guarantee does
not place a limitation on the amount of additional Senior Debt that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Convertible Preferred Securities (in which case no
vote will be required), the Guarantee may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Convertible Preferred Securities. The manner of
obtaining any such approval will be as set forth under "Description of the
Convertible Preferred Securities -- Voting Rights; Amendment of the
Declaration". 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 Trust Securities
then outstanding.
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; provided,
however, that except with respect to a default in payment of any Guarantee
Payment, the Company shall have received notice of default and shall not have
cured such default within 60 days after receipt of such notice. The holders of
not less than a majority in aggregate liquidation amount of the Trust Securities
have the right to direct the time, method and place of conducting any proceeding
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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.
Any holder of the Convertible Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Guarantee provides that the Company shall not consolidate with or merge
with or into any other person or sell or lease its assets as, or substantially
as, an entirety to any person, unless (i) the successor person is organized
under the laws of the United States or any state or the District of Columbia and
such successor person (if other than the Company) expressly assumes the
Company's obligations under the Guarantee; (ii) immediately after giving effect
thereto, no event of default under the Guarantee, and no event which, after
notice or lapse of time or both, would become an event of default under the
Guarantee, shall have happened and be continuing; and (iii) certain other
conditions as prescribed in the Guarantee Agreement are met.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, 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 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 the Convertible Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Convertible Preferred Securities,
upon full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Convertible Junior Subordinated Debentures to the holders of the
Convertible Preferred Securities. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the
Convertible Preferred Securities must restore payment of any sums paid under the
Convertible Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE CONVERTIBLE PREFERRED SECURITIES,
THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Convertible
Preferred Securities (to the extent the Trust has funds available for the
payment of such Distributions) are irrevocably guaranteed by the Company as set
forth under "Description of the Guarantee". Taken together, the Company's
obligations under the Convertible Junior Subordinated Debentures, the Indenture,
the Declaration and the Guarantee provide, in the aggregate, a full, irrevocable
and unconditional guarantee of payments of Distributions and other amounts due
on the Convertible 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
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has the effect of providing a full, irrevocable and unconditional guarantee of
the Trust's obligations under the Trust Securities. If and to the extent that
the Company does not make payments on the Convertible Junior Subordinated
Debentures, the Trust will not pay Distributions or other amounts due on the
Convertible Preferred Securities. The Guarantee does not cover payment of
Distributions when the Trust does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of Convertible Preferred
Securities is to institute a Direct Action.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Convertible Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Convertible Preferred
Securities, primarily because (i) the aggregate principal amount or applicable
Redemption Price of the Convertible Junior Subordinated Debentures will be equal
to the sum of the aggregate liquidation amount or applicable Redemption Price,
as applicable, of the Trust Securities, (ii) the interest rate payable on the
Convertible Junior Subordinated Debentures and interest and other payment dates
on the Convertible Junior Subordinated Debentures will match the Distribution
rate and Distribution and other payment dates for the Convertible Preferred
Securities, (iii) the Company shall pay for all costs, expenses and liabilities
of the Trust except the Trust's obligations to holders of Trust Securities under
such 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
thereof.
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 theretofore made, or is concurrently on
the date of such payment making, any payment under Guarantee to satisfy the
related payment of indebtedness under the Indenture.
ENFORCEMENT RIGHTS OF HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
A holder of any Trust 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.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default under the Declaration. In the event of defaults
under, or acceleration of, Senior Debt, the subordination provisions of the
Indenture provide that no payments may be made in respect of the Convertible
Junior Subordinated Debentures for a certain designated period or until such
Senior Debt has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Convertible Junior
Subordinated Debentures would constitute an Event of Default under the
Declaration.
LIMITED PURPOSE OF THE TRUST
The Convertible Preferred Securities evidence a beneficial interest in the
Trust, and the Trust exists for the sole purpose of issuing the Convertible
Preferred Securities and Common Securities and investing the proceeds of the
Trust Securities in Convertible Junior Subordinated Debentures and engaging in
other activities necessary or incidental thereto. A principal difference between
the rights of a holder of a Convertible Preferred Security and a holder of a
Convertible Junior Subordinated Debenture is that a holder of a Convertible
Junior Subordinated Debenture is entitled to receive from the Company the
principal amount of and interest accrued on such Convertible Junior Subordinated
Debentures, while a holder of Convertible Preferred Securities is entitled to
receive Distributions from the Trust (or from the Company under the Guarantee)
if and to the extent the Trust has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary dissolution, winding -- up or liquidation
of the Trust involving the liquidation of the Convertible Junior Subordinated
Debentures, after satisfaction of the liabilities of creditors of the Trust as
required by applicable law, the holders of the Trust Securities will be entitled
to receive, out of assets
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held by the Trust, the Liquidation Distribution in cash. See "Description of the
Convertible Preferred Securities -- Liquidation of the Trust". Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Convertible Junior Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt as set forth in the Indenture, but entitled to receive payment in
full of principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Convertible Preferred Securities and a
holder of Convertible Junior Subordinated Debentures relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
DESCRIPTION OF OTHER INDEBTEDNESS
The following summaries of certain indebtedness of the Company do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the definitive agreements governing such indebtedness, copies of
which are available upon request to the Company.
THE AMENDED CREDIT AGREEMENT
GENERAL
The Company and Coltec Aerospace Canada Limited, a Canadian subsidiary of
the Company (the "Canadian Borrower"), are parties to the Amended Credit
Agreement with various lenders (collectively, the "Lenders"), Bankers Trust
Company, as Administrative Agent, Bank of America National Trust and Savings
Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication
Agent, and Bank of Montreal, as Canadian Paying Agent. Capitalized terms used
but not defined in this summary have the meanings assigned thereto in the
Amended Credit Agreement.
The Amended Credit Agreement provides for revolving borrowings by the
Company and the Canadian Borrower of up to $900 million, which will be reduced
by 66 2/3% of the gross proceeds to the Company from the TIDES(SM) Offering and
the Senior Notes Offering (the "Total Commitment") and which expires on December
15, 2001. The Canadian Borrower may borrow up to $80 million under the Amended
Credit Agreement with the remainder of the Total Commitment available only to
the Company.
The Amended Credit Agreement also provides for the issuance of certain
standby letters of credit and trade letters of credit (collectively, the
"Letters of Credit") for the account of the Company; provided that the
outstanding amount of all Letters of Credit does not exceed, (x) when added to
the outstanding amount of letters of credit not issued under the Amended Credit
Agreement, $125 million or (y) when added to all loans outstanding under the
Amended Credit Agreement, the Total Commitment.
GUARANTEES
The obligations of the Company under the Amended Credit Agreement are
guaranteed by each existing domestic subsidiary of the Company and will be
guaranteed by each subsequently acquired domestic subsidiary (excluding the
Trust and certain other subsidiaries) of the Company (the "Credit Agreement
Subsidiary Guarantees"). The obligations of the Canadian Borrower under the
Amended Credit Agreement are guaranteed by the Company and by each existing
Canadian subsidiary of the Canadian Borrower and will be guaranteed by each
subsequently acquired subsidiary of the Canadian Borrower.
COLLATERAL
Pledged Securities. Pursuant to a pledge agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended
as of April 16, 1998, made by the Company to Bankers Trust Company, as
Collateral Agent (the "Company Pledge Agreement"), the obligations of the
Company under the Amended Credit Agreement and the Senior Notes are secured by
pledges of all the capital stock of the
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Company's direct domestic subsidiaries and 66% of the capital stock of the
Company's direct foreign subsidiaries and any promissory notes held by the
Company.
Pursuant to a pledge agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Pledge Agreement"), the obligations of each domestic
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiaries
Guarantees of the Senior Notes are secured by pledges of all the capital stock
of such subsidiary's direct domestic subsidiaries and 66% of all the capital
stock of such subsidiary's direct foreign subsidiaries and any promissory notes
held by such subsidiary. The securities pledged pursuant to the Company Pledge
Agreement and the Subsidiaries Pledge Agreement are referred to herein as the
"Pledged Securities".
Other Security. Pursuant to a security agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended
as of April 16, 1998, made by the Company to Bankers Trust Company, as
Collateral Agent (the "Company Security Agreement"), the obligations of the
Company and loans to the Canadian Borrower under the Amended Credit Agreement
and the Senior Notes are secured by a security interest in substantially all
inventory, accounts receivable, a cash collateral account, intellectual property
rights, computer programs, contracts, goods, general intangibles, chattel paper,
documents and instruments of the Company and all proceeds of the foregoing.
Pursuant to a security agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Security Agreement"), the obligations of each domestic
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary
Guarantees of the Senior Notes are secured by a security interest in
substantially all inventory, accounts receivable, a cash collateral account,
intellectual property rights, computer programs, contracts, goods, general
intangibles, chattel paper, documents and instruments of such subsidiary and all
proceeds of the foregoing.
Real Property. The obligations of the Company under the Amended Credit
Agreement and the Senior Notes are secured by first mortgages or deeds of trust
on certain of the manufacturing plants owned by the Company and its
subsidiaries, including the plants in West Hartford, Connecticut, Euless, Texas,
Beloit, Wisconsin and Longview, Texas (collectively, the "Mortgages"). See
"Business -- Properties".
The Company Pledge Agreement, the Subsidiaries Pledge Agreement, the
Company Security Agreement, the Subsidiaries Security Agreement and the
Mortgages are hereinafter referred to as the "Amended Collateral Documents".
The following is a summary of the material provisions of the Amended
Collateral Documents pertaining to the Collateral.
Collateral Agent. Bankers Trust Company will be the Collateral Agent under
each of the Amended Collateral Documents. Bankers Trust Company is also the
Administrative Agent under the Amended Credit Agreement. The Collateral Agent is
not a fiduciary to any of the secured creditors, including, without limitation,
the holders of the Senior Notes. However, any enforcement of the provisions of
the Amended Collateral Documents by the Collateral Agent will be made for the
benefit of all the secured creditors under the Amended Collateral Documents,
including for the benefit of the holders of the Senior Notes.
Obligations Secured by the Collateral. The obligations which are secured
by the Collateral include (i) payments of principal of and interest on the loans
under the Amended Credit Agreement, all reimbursement obligations and unpaid
drawings with respect to letters of credit under the Amended Credit Agreement
and all other obligations owing to the lenders in connection with the Amended
Credit Agreement and related documents, (ii) all liabilities in connection with
interest rate protection and other hedging agreements contemplated by the
Amended Credit Agreement and (iii) payments of principal of and interest on the
Senior Notes and the Exchange Notes and all other obligations of the Company
under the Indenture and the Senior Notes and the Exchange Notes (items (i), (ii)
and (iii) above, together with certain expenses of, and amounts paid by, the
Collateral Agent or any secured creditor, are hereinafter referred to as the
"Obligations").
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Enforcement of Collateral Provisions. The Amended Collateral Documents may
be enforced only by the Collateral Agent, in each case acting upon instructions
from the "Required Secured Creditors", which is defined to mean the "Required
Banks", which, in turn, is defined to mean the lenders holding a majority of the
obligations (or of all the obligations in certain cases) under the Amended
Credit Agreement. Because the holders of the Senior Notes are not included in
the definition of "Required Secured Creditors", neither the holders of the
Senior Notes nor the Trustee under the Indenture relating to the Senior Notes
will have the ability to enforce the provisions of any of the Amended Collateral
Documents.
Generally, upon an acceleration of the obligations under the Amended Credit
Agreement, an acceleration of indebtedness under third-party debt agreements in
excess of $10 million, a voluntary, involuntary or court-declared bankruptcy or
certain other events, in each case as set forth in the Amended Credit Agreement,
or upon an Event of Default under the Indenture, the Required Secured Creditors
may direct the Collateral Agent to enforce the provisions of the Amended
Collateral Documents. In such an event, the Collateral Agent may exercise any of
its rights as a secured creditor under the Uniform Commercial Code and the
Amended Collateral Documents (such as foreclosing upon and selling portions of
the Collateral and voting the Pledged Securities).
The occurrence of an Event of Default under the Indenture will not give the
holders of the Senior Notes or the Trustee under the Indenture relating to the
Senior Notes the right at any time to direct the Collateral Agent to exercise
any of its rights or to enforce any provisions under the Amended Collateral
Documents.
Notwithstanding the foregoing, in the event that (i) the principal of any
secured Obligations has been accelerated or the final maturity thereof has
occurred and there exists a payment Event of Default where the aggregate
principal amount of such Obligations is at least $100 million and where such
payment Event of Default has continued for 90 days and (ii) the Required Secured
Creditors have not directed the Collateral Agent to enforce the provisions of
any of the Amended Collateral Documents, then a majority of the "Secured
Creditors" (defined to mean a majority of all the secured Obligations, including
the Senior Notes) may cause the Collateral Agent to enforce such provisions. The
Required Secured Creditors, however, would continue to have the right to direct
the manner and method of such enforcement.
Upon the occurrence of an event of default under the Amended Credit
Agreement, the Administrative Agent may notify the Company and the Canadian
Borrower of its election to terminate the Amended Credit Agreement and, upon
such notice, the obligations of the Company and the Canadian Borrower will be
accelerated and be immediately due and payable except that, upon the occurrence
of certain bankruptcy-related events of default, such termination and
acceleration will be deemed to occur immediately without notice. Upon such
acceleration, in addition to such other rights as are permitted by the Amended
Credit Agreement or by law, the Collateral Agent has the right to enforce all of
the liens and security interests created pursuant to the Amended Credit
Agreement and the Amended Collateral Documents.
Application of Proceeds. All moneys collected by the Collateral Agent upon
any sale or other disposition of the Collateral shall be applied as follows:
(i) first, to the payment of all amounts owing to the Collateral Agent;
(ii) second, to the payment of the "Primary Obligations," which is defined
to include all of (i) the obligations under the Amended Credit Agreement,
(ii) the Senior Notes and (iii) the obligations in connection with interest
rate protection and other hedging agreements contemplated by the Amended
Credit Agreement;
(iii) third, to the payment of the "Secondary Obligations," which is
defined to mean all Obligations other than the Primary Obligations; and
(iv) fourth, to the Company or its subsidiaries, as the case may be.
All actions required or permitted to be taken by the Senior Noteholders
will be taken only by the Trustee as directed by the Senior Noteholders and all
payments required to be made with respect to the Senior Notes will be paid to
the Trustee on behalf of the Senior Noteholders.
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Amendments and Waivers. The Amended Collateral Documents may be amended or
waived by the Required Banks; provided that any change, waiver or modification
materially adversely affecting the rights and benefits of a single "Class" of
secured creditors (and not all secured creditors in a like or similar manner)
will require the written consent of the "Requisite Class Creditors" of such
Class, which is defined to mean a majority of such affected Class; provided
further that any Class will not be considered to be affected differently from
any other Class due to the Obligations of any such other Class being paid,
repaid, refinanced, renewed or extended and the Collateral being released, in
whole or in part (whether by action of such other Class or otherwise), as
security for such Class and such other Class. Each of the lenders under the
Amended Credit Agreement, the interest rate protection creditors and the holders
of the Senior Notes will constitute a separate Class.
Notwithstanding the foregoing, the Required Banks may at any time agree to
amendments to the Amended Collateral Documents in order to, among other things,
(i) secure additional extensions of credit or (ii) add additional Secured
Creditors to a specified Class, in each case, without the consent of the other
Secured Creditors.
Release of Collateral. Pursuant to the terms of the Amended Collateral
Documents, any Collateral representing less than all or substantially all of the
Collateral may be released upon the direction of the Required Banks, which in
this context means Lenders representing holders of a majority of the Obligations
under the Amended Credit Agreement. The approval of all the lenders under the
Amended Credit Agreement is required for releases of all or substantially all of
the Collateral, except as set forth in the preceding paragraph. Upon such
direction by the applicable Required Banks, the applicable Collateral will be
released whether or not the Senior Notes remain outstanding and without regard
to the ratings of the Company's Rated Indebtedness. Notwithstanding the
foregoing, in the event the Trustee notifies the Collateral Agent in writing
that the Senior Notes have been accelerated, the Collateral Agent will not
release any Collateral or terminate any Amended Collateral Documents, except
with the prior written consent of the holders of the Senior Notes holding a
majority of the then-outstanding Senior Notes.
In addition, all Collateral under the Amended Collateral Documents shall be
automatically released and all such Amended Collateral Documents shall be
terminated and of no further force or effect at such time as (x) no default or
event of default under the Amended Credit Agreement is in existence and (y) the
Company has then outstanding Rated Indebtedness which is at such time rated at
least BBB- by Standard & Poor's and Baa3 by Moody's; provided that the Rated
Indebtedness described above shall be required to be unsecured or, if secured,
both Standard & Poor's and Moody's shall have stated to the Company and the
Administrative Agent in writing that, assuming that neither the Amended Credit
Agreement nor the Senior Notes were secured, the long-term unsecured Debt
pursuant to the Amended Credit Agreement and the Senior Notes would be rated at
least BBB-by Standard & Poor's and Baa3 by Moody's at such time; provided
further that such release shall not be effected until the tenth Business Day
after the Company delivers to the Administrative Agent written notice of the
attainment of such rating and, if required, a copy of the written statements
specified above. Notwithstanding anything to the contrary contained in the
immediately preceding sentence or the proviso thereto, if the Company at any
time requests in writing that the Administrative Agent cause the release of all
Collateral under all the Amended Collateral Documents and establishes to the
satisfaction of the Administrative Agent that (x) no default or event of default
under the Amended Credit Agreement is in existence (and no default or event of
default shall be in existence after the release described below) and (y) at the
time of the release of all Collateral under all the Amended Collateral Documents
(and after giving effect thereto), the Company's Rated Indebtedness (which shall
be unsecured Debt after the release of Collateral contemplated by this
paragraph, and shall include the Debt under the Amended Credit Agreement and the
Senior Notes, to the extent then outstanding) shall be rated at least BBB-by
Standard & Poor's and Baa3 by Moody's (and the Company shall have furnished to
the Administrative Agent a written statement from each of Standard & Poor's and
Moody's to the effect that, if neither the Amended Credit Agreement nor the
Senior Notes were secured, the long term unsecured Debt pursuant to the Amended
Credit Agreement and the Senior Notes would be rated at least BBB- by Standard &
Poor's and Baa3 by Moody's at such time), then all Collateral under all the
Amended Collateral Documents shall be released and all such Amended Collateral
Documents shall be terminated and of no further force or effect.
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Upon the disposition of Holley, Holley was released as a guarantor under
the Amended Credit Agreement and the indenture relating to the Senior Notes and
its assets and its capital stock was released under the Amended Collateral
Documents as security for borrowings under the Amended Credit Agreement and the
Senior Notes.
Termination. Each of the Amended Collateral Documents will terminate on
the date on which all Obligations under the Amended Credit Agreement have been
paid. In addition, the Amended Collateral Documents may be terminated upon the
direction of the Required Banks, which in this context means Lenders
representing all the Obligations under the Amended Credit Agreement. Upon such
termination of the Amended Collateral Documents, the Collateral will be released
whether or not the Senior Notes remain outstanding.
COVENANTS
The Amended Credit Agreement includes certain financial covenants that
require the Company to maintain (i) a ratio of Consolidated Current Assets to
Consolidated Current Liabilities at all times of greater than 1.25 to 1.0, (ii)
an Interest Coverage Ratio for any period of four consecutive fiscal quarters of
greater than 3.0 to 1.0, (iii) a Leverage Ratio at all times prior to and
including June 30, 1998 of less than 4.25 to 1.0, from July 1, 1998 to and
including December 31, 1999 of less than 3.75 to 1.0, and thereafter of less
than 3.25 to 1.0. The Company has also agreed that the Company and its
subsidiaries will not make capital expenditures which in the aggregate exceed
$90 million for the fiscal year ending December 31, 1997, $75 million for the
fiscal year ending December 31, 1998, $65 million for each of the fiscal years
ending December 31, 1999 and December 31, 2000, and $70 million for the fiscal
year ending December 31, 2001.
The Amended Credit Agreement also includes covenants that prohibit the
Company and its subsidiaries from, among other things and subject to certain
exceptions, (i) incurring certain liens on the property and assets of the
Company and its subsidiaries, (ii) winding up, liquidating or dissolving its
affairs or entering into any transaction of merger or consolidation, or
conveying, selling, leasing or otherwise disposing of property or assets, (iii)
authorizing, declaring or paying any dividends (other than, among other things,
distributions on the Common Stock or Convertible Preferred Securities) or
repurchasing Common Stock or Convertible Preferred Securities, except, in any
fiscal year, subject to certain limitations, the Company may pay dividends or
repurchase Common Stock or Convertible Preferred Securities in an amount equal
to the greater of $7.5 million or 30% of Consolidated Net Income for the
preceding fiscal year, (iv) incurring Debt, other than Debt outstanding under
the Amended Credit Agreement and certain other existing Debt, accrued expenses,
the Senior Notes, the Convertible Subordinated Debentures, Debt incurred to pay
all or a portion of the purchase price of equipment or machinery secured by
liens placed upon equipment or machinery used in the ordinary course of the
business of the Company, Debt incurred with respect to certain lease
obligations, Debt under interest rate protection agreements, certain permitted
acquired Debt, Debt of foreign subsidiaries of the Company not to exceed $100
million, and other Debt not otherwise permitted under the Amended Credit
Agreement up to the aggregate amount of $100 million, (v) lending money or
extending credit or making advances to any person or purchasing or acquiring any
stock, obligations or securities of any person, (vi) entering into transactions
with affiliates, except in the ordinary course of business and on terms and
conditions substantially as favorable to the Company or such subsidiary as would
be obtainable in a comparable arm's-length transaction with an unaffiliated
entity, (vii) prepaying or redeeming the Senior Notes in an amount greater than
$100 million, (viii) restricting the ability of its subsidiaries to pay
dividends or other distributions on its capital stock, make loans or advances to
the Company or other subsidiaries or transfer assets to the Company, (ix) making
certain issuances of capital stock or securities convertible into or exercisable
for capital stock and (x) certain other restrictions.
CERTAIN DEFINITIONS
"Backstopped Letters of Credit" means certain existing Letters of Credit
described in the Amended Credit Agreement with respect to which standby Letters
of Credit serve as support for the reimbursement obligations of the Company and
its subsidiaries to the issuers of such Backstopped Letters of Credit.
"Capitalized Lease Obligations" of any person means all rental obligations
which, under generally accepted accounting principles, are or will be required
to be capitalized on the books of such person, in each case taken at the amount
thereof accounted for as indebtedness in accordance with such principles.
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"Consolidated Current Assets" means the consolidated current assets of the
Company and its subsidiaries plus the Total Unutilized Commitment less the
aggregate amount of Non-Facility Letter of Credit Outstandings at such time.
"Consolidated Current Liabilities" means the consolidated current
liabilities of the Company and its subsidiaries, but excluding the current
portion of any long-term Debt which would otherwise be included therein.
"Consolidated EBITDA" means for any period Consolidated EBIT, adjusted by
adding thereto the amount of all amortization of intangibles and depreciation
that were deducted in arriving at Consolidated EBIT for such period.
"Consolidated EBIT" means for any period the consolidated net income of the
Company and its subsidiaries before interest income, consolidated interest
expense and provision for taxes and without giving effect to any extraordinary
gains or gains from sales of assets other than inventory sold in the ordinary
course of business (determined after taking into account losses from sales of
such assets).
"Credit Documents" means the Amended Credit Agreement, and all documents
executed in connection therewith, including each of the promissory notes
required to be executed by the Company, any subsidiary of the Company or the
Canadian Borrower under the Amended Credit Agreement, the Credit Guarantees and
each Security Document.
"Debt" means, as to any person, without duplication, (i) all indebtedness
(including principal, interest, fees and charges) of such person for borrowed
money or for the deferred purchase price of property or services (other than
trade payables incurred in the ordinary course of business), (ii) the maximum
amount available to be drawn under all letters of credit (excluding Backstopped
Letters of Credit so long as (x) fully supported by one or more Letters of
Credit issued under the Amended Credit Agreement and (y) no unreimbursed drawing
has been made under the respective Backstopped Letter of Credit) issued for the
account of such person and with respect to which such person has a reimbursement
obligation and all unpaid drawings in respect of such letters of credit, (iii)
all Debt of the types described in clause (i) (other than certain trade
payables), (ii), (iv), (v), (vi) or (vii) secured by liens on property of such
person, (iv) all Capitalized Lease Obligations of such person, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all contingent obligations of such persons and (vii) all
obligations under any interest rate protection or other hedging agreement or
under any similar type of agreement entered into with a person not a Lender;
provided that the aggregate outstanding amount of any Debt described in clause
(iii) above shall equal the lesser of (x) the aggregate outstanding amount of
all Debt secured by such lien and (y) the fair market value of all property
subject to such lien; provided further that on and after the date on which any
other Debt for borrowed money (the "Defeased Debt") shall have been permanently
defeased or otherwise satisfied and discharged in the manner provided in the
documentation governing such Defeased Debt, and so long as the Company and its
subsidiaries are permanently relieved as a result thereof of all monetary
obligations, and obligations to comply with covenants, with respect thereto
(which defeasances, satisfactions and discharges are subject to the limitations
set forth in the Amended Credit Agreement), such Defeased Debt shall not be
considered outstanding Debt for purposes of this Amended Credit Agreement.
"Interest Coverage Ratio" means for any period the ratio of Consolidated
EBITDA for such period to consolidated interest expense for such period.
"Letter of Credit Outstandings" means, at any time, the sum of (i) the
aggregated stated amount of all then outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid drawings at such time.
"Leverage Ratio" means, at any date of determination, the ratio of (i)
consolidated indebtedness on such date to (ii) Consolidated EBITDA for the
period of four consecutive quarters most recently ended on or prior to such
date, in each case taken as one accounting period.
"Moody's" means Moody's Investors Service, Inc.
"Non-Facility Letters of Credit" means each letter of credit (other than
any Letter of Credit issued pursuant to the Amended Credit Agreement) issued for
the account of the Company and its subsidiaries.
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"Rated Indebtedness" means long-term unsecured Debt of the Company which is
rated by both Standard & Poor's and Moody's, or if no such Debt of the Company
shall be rated, Debt under the Amended Credit Agreement or Debt of the Company
which is equally and ratably secured with Debt under the Amended Credit
Agreement, to the extent such Debt shall be rated by either Standard & Poor's or
Moody's.
"Security Documents" means each pledge agreement, each security agreement,
each mortgage and each additional security document.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc.
"Total Unutilized Commitment" means, at any time, an amount equal to the
remainder of (x) the then Total Commitment, less (y) the sum of (I) the
aggregate principal amount of revolving borrowings then outstanding plus (II)
the then aggregate amount of Letter of Credit Outstandings.
OTHER INDEBTEDNESS
As of December 31, 1997, the Company had outstanding $7.5 million of 9 3/4%
senior notes due 1999, $7.4 million of 9 3/4% senior notes due 2000 and $48.8
million of other indebtedness due between 1998 and 2010. In 1996, the Company
conducted a tender offer and consent solicitation for the 9 3/4% senior notes
due 1999 and 9 3/4% senior notes due 2000, pursuant to which all restrictive
covenants were removed and all notes other than the amounts set forth in the
preceding sentence were repurchased.
DESCRIPTION OF COLTEC 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 Amended and Restated Articles of
Incorporation and By-laws, copies of which were filed by reference as an exhibit
to Coltec's Annual Report on Form 10-K for the year ended December 31, 1997. See
"Available Information".
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 shareholders, 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 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.
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.
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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 indemnification 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 Pennsylvania
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
The Pennsylvania Business Corporation Law (the "BCL") contains various
provisions that could have an anti-takeover effect. 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,
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(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 corporation 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
shareholders.
LABOR CONTRACTS (SUBCHAPTER 25-J)
Labor contracts are preserved after a control share acquisition approved by
shareholders.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of Coltec. The Convertible Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of Coltec entitled "Company-obligated mandatorily redeemable convertible
preferred securities of Coltec Capital Trust", and appropriate disclosures about
the Convertible Preferred Securities, the Guarantee and the Convertible Junior
Subordinated Debentures will be included in the notes to Coltec's consolidated
financial statements. For financial reporting purposes, Coltec will record
distributions payable on the Convertible Preferred Securities as a financing
charge to earnings in Coltec's consolidated statement of operations.
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UNITED STATES TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership, disposition and conversion
of Convertible Preferred Securities and the ownership and disposition of the
Common Stock that would be received upon a conversion of Convertible Preferred
Securities. Unless otherwise stated, this summary deals only with Convertible
Preferred Securities held as capital assets by holders who purchase the
Convertible Preferred Securities upon original issuance at their original issue
price. It does not deal with special classes of holders such as banks, thrifts,
real estate investment trusts, regulated investment companies, insurance
companies, dealers in securities or currencies, tax-exempt investors, or persons
that will hold the Convertible Preferred Securities as other than a capital
asset. This summary also does not address the tax consequences to persons that
have a functional currency other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Convertible Preferred
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Convertible Preferred
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Convertible Junior Subordinated
Debentures, Cravath, Swaine & Moore, special counsel to Coltec and the Trust
("Tax Counsel"), will render its opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the Convertible
Junior Subordinated Debenture Indenture (and certain other documents), and based
on certain facts and assumptions contained in such opinion, the Convertible
Junior Subordinated Debentures held by the Trust should be classified for United
States federal income tax purposes as indebtedness of Coltec. Except as
otherwise disclosed herein, the remainder of this summary assumes that the
Convertible Junior Subordinated Debentures will be classified as indebtedness of
Coltec for such purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Convertible Preferred Securities,
Tax Counsel, will render its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Declaration, and
based on certain facts and assumptions contained in such opinion, the Trust will
be classified for United States federal income tax purposes as a grantor trust
and not as an association or publicly traded partnership taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
beneficial owner (each a "holder") of Convertible Preferred Securities generally
will be considered the owner of an undivided interest in the Convertible Junior
Subordinated Debentures, and each holder will be required to include in its
gross income any original issue discount ("OID") accrued with respect to its
allocable share of those Convertible Junior Subordinated Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Unless the original issue discount ("OID") rules apply to the Convertible
Junior Subordinated Debentures, as discussed below, stated interest on the
Convertible Preferred Securities will generally be taxable to a holder as
ordinary income when paid or accrued in accordance with that holder's method of
accounting for income tax purposes. While an issuer's option to defer the
payment of interest on debt instruments generally results in the application of
the OID rules, debt instruments like the Convertible Junior Subordinated
Debentures are not considered issued with OID if there is only a "remote"
likelihood of deferral by the Company.
The Company intends to take the position, based upon the advice of Tax
Counsel, that, as of the date of this Offering Circular, the likelihood of
deferring payments of interest under the terms of the Convertible Junior
Subordinated Debentures is "remote" within the meaning of the applicable
Treasury Regulations. Therefore, the Convertible Junior Subordinated Debentures
should not be treated as issued with OID by reason of the Company's deferral
option. However, it is possible that the IRS could take the position that the
Convertible Junior
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Subordinated Debentures are issued with OID. In such case, OID would accrue over
the entire term of the Convertible Junior Subordinated Debentures in the manner
described in the following paragraph.
In the event the Company exercises its option to defer payments of
interest, the Convertible Junior Subordinated Debentures would be treated as
subject to the OID rules for their entire remaining term. Under these rules, OID
would accrue on an economic accrual basis and would be includible in income on
the accrual method, including during any interest deferral period, regardless of
the holder's method of accounting. Actual distributions of interest on the
Convertible Junior Subordinated Debentures generally would not be separately
taxable. A holder that disposes of its Convertible Preferred Securities prior to
the record date for payment of distributions on the Convertible Junior
Subordinated Debentures will be subject to tax on OID accrued through the date
of disposition (and not previously included in income), but will not receive
cash from the Trust with respect to such OID.
Corporate holders of Convertible Preferred Securities will not be entitled
to a dividends-received deduction with respect to any income recognized with
respect to the Convertible Preferred Securities.
If (i) a Tax Event occurs, (ii) the Trust is still considered to be a
pass-through entity for United States federal income tax purposes and (iii) the
Company elects to pay Additional Sums on the Convertible Junior Subordinated
Debentures, each holder will be required to recognize additional gross income
equal to the amount of such Additional Sums. Each Certificate holder that is a
United States person generally will be entitled to deduct, consistent with its
method of accounting, its pro rata share of the taxes, duties, assessments or
other governmental charges that gave rise to the payment of such Additional Sums
under Section 162 or 212 of the Code. If a holder that is a United States person
is an individual, estate or trust, the deduction or such holder's share of such
taxes, duties, assessments or other governmental charges will be allowed only to
the extent that all of such holder's miscellaneous itemized deduction, including
such holder's share of such taxes, duties, assessments or other governmental
charges, exceed 2% of such holder's adjusted gross income. In addition, such
itemized deductions may be subject to additional limitations under the Code.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Convertible Preferred Securities other than a holder who
purchased the Convertible Preferred Securities upon original issuance at their
original issue price may be considered to have acquired their undivided
interests in the Convertible Junior Subordinated Debentures with market discount
or acquisition premium as such phrases are defined for United States federal
income tax purposes. Such holders are advised to consult their tax advisors as
to the income tax consequences of the acquisition, ownership and disposition of
the Convertible Preferred Securities.
RECEIPT OF CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION
OF THE ISSUER
Under certain circumstances, as described under the caption "Description of
the Convertible Preferred Securities-Tax Event or Investment Company Event
Redemption or Distribution", Convertible Junior Subordinated Debentures may be
distributed to holders in exchange for the Convertible Preferred Securities and
in liquidation of the Trust. Under current law, such a distribution to holders,
for United States Federal income tax purposes, would be treated as a nontaxable
event to the Trust and to each holder, and each holder would receive an
aggregate tax basis in the Convertible Junior Subordinated Debentures equal to
such holder's aggregate tax basis in its Convertible Preferred Securities. A
holder's holding period in the Convertible Junior Subordinated Debentures so
received in liquidation of the Trust would include the period during which the
Convertible Preferred Securities were held by such holder. If, however, the
related Special Event is a Tax Event which results in the Trust being treated as
an association taxable as a corporation, the distribution would likely
constitute a taxable event to the Trust and to holders of the Convertible
Preferred Securities.
Under certain circumstances described herein (see "Description of the
Convertible Preferred Securities"), the Convertible Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Convertible Preferred Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Convertible Preferred
Securities, and a holder would recognize gain or loss as if it sold such
redeemed Convertible Preferred Securities for cash. See "-- Disposition of
Convertible Preferred Securities".
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DISPOSITION OF CONVERTIBLE PREFERRED SECURITIES
A holder that sells Convertible Preferred Securities will recognize gain or
loss equal to the difference between the amount realized on the sale of the
Convertible Preferred Securities and the holder's adjusted tax basis in such
Convertible Preferred Securities. A holder's adjusted tax basis in the
Convertible Preferred Securities generally will be its initial purchase price
increased by OID, if any, previously includible in such holder's gross income to
the date of disposition and decreased by payments received on the Convertible
Preferred Securities to the date of disposition. Such gain or loss will be a
capital gain or loss and will be a long-term capital gain or loss if the
Convertible Preferred Securities have been held for more than one year at the
time of sale.
The Convertible Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Junior Subordinated Debentures. To the extent the selling
price is less than the holder's adjusted tax basis (which basis will include
accrued, unpaid OID, if any), a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes.
EXCHANGE OF CONVERTIBLE PREFERRED SECURITIES FOR THE COMPANY'S COMMON STOCK
A Convertible Preferred Securityholder will not recognize gain or loss upon
the exchange, through the Conversion Agent, of Convertible Preferred Securities
for a proportionate share of the Convertible Junior Subordinated Debentures held
by the Issuer.
A Convertible Preferred Securityholder will not recognize income, gain or
loss upon the conversion, through the Conversion Agent, of Convertible Junior
Subordinated Debentures into Common Stock . A Convertible Preferred
Securityholder will, however, recognize gain upon the receipt of cash in lieu of
a fractional share of Common Stock equal to the amount of cash received less the
Convertible Preferred Securityholder's tax basis in such fractional share. A
Preferred Securityholder's tax basis in the Common Stock received upon exchange
and conversion should generally be equal to the Convertible Preferred
Securityholder's tax basis in the Convertible Preferred Securities delivered to
the Conversion Agent for exchange less the basis allocated to any fractional
share for which cash is received and a Convertible Preferred Securityholder's
holding period in the Common Stock received upon exchange and conversion should
generally begin on the date the Convertible Preferred Securityholder acquired
the Convertible Preferred Securities delivered to the Conversion Agent for
exchange.
ADJUSTMENT OF APPLICABLE CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from Coltec in the event the conversion ratio of the Convertible
Junior Subordinated Debentures were adjusted if (i) as a result of such
adjustment, the proportionate interest (measured by the quantum of Common Stock
into or for which the Convertible Junior Subordinated Debentures are convertible
or exchangeable) of the holders of the Convertible Preferred Securities in the
assets or earnings and profits of Coltec were increased, and (ii) the adjustment
was not made pursuant to a bona fide, reasonable antidilution formula. An
adjustment in the conversion ratio would not be considered made pursuant to such
a formula if the adjustment was made to compensate for certain taxable
distributions with respect to the Common Stock. Thus, under certain
circumstances, a reduction in the conversion price for the holders may result in
deemed dividend income to holders to the extent of the current or accumulated
earnings and profits of Coltec. Holders of the Convertible Preferred Securities
would be required to include their allocable share of such deemed dividend
income in gross income but will not receive any cash related thereto.
OWNERSHIP OF COMMON STOCK
Distributions received by holders of Common Stock ("Stockholders") in
respect of such Common Stock (other than certain distributions of additional
shares of Common Stock or rights to acquire additional shares of Common Stock)
will be treated as ordinary dividend income ("Dividends") to such Stockholders
to the extent such distributions are considered to be paid by Coltec out of its
current or accumulated earnings and profits ("E&P"), as determined under United
States federal income tax principles. Corporate Stockholders may be entitled to
a "dividends-received deduction" with respect to such Dividends.
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To the extent that any such distribution exceeds Coltec's earnings and
profit for a taxable year, such distribution will be treated, first, as a
tax-free return of capital to a Stockholder to the extent of such Stockholder's
adjusted tax basis in the Common Stock and, thereafter, as capital gain.
Distributions of additional shares of Common Stock, or rights to acquire
additional shares of Common Stock, that are received as part of a pro rata
distribution of such shares, or rights to acquire such shares, to all
Stockholders of the Company generally should not be subject to United States
federal income tax. The tax basis of such new shares or rights generally will be
determined by allocating the Stockholder's adjusted tax basis in the "old"
shares of Common Stock between such "old" shares and the new shares or rights
received by such Stockholder, based upon their relative fair market value on the
date of the distribution.
A Stockholder generally will recognize gain or loss on a sale or other
taxable disposition of Common Stock equal to the difference between the amount
realized by the Stockholder on such sale or disposition and the Stockholder's
adjusted tax basis in such Common Stock. Such gain or loss generally will be
capital gain or loss and generally will be considered long-term capital gain or
loss if the Stockholder had held such Common Stock for more than one year
immediately prior to such sale or disposition. In the case of a noncorporate
Stockholder, the maximum marginal U.S. federal income tax rate applicable to
such gain will be lower than the maximum marginal U.S. federal income tax rate
applicable to ordinary income if such Stockholder's holding period for such
Common Stock exceeds one year and will be further reduced if such Common Stock
was held for more than 18 months.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of a Convertible Preferred Security that is a corporation,
individual, partnership, estate or trust that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership, or
a nonresident fiduciary of a foreign estate or trust.
Under present United States federal income tax law, payments by the Trust
or any of its paying agents to any holder of a Convertible Preferred Security
who or which is a United States Alien Holder will not be subject to withholding
of United States federal income tax provided that (a) the beneficial owner of
the Convertible Preferred Security does not actually or constructively
(including by virtue of its interest in the underlying Convertible Junior
Subordinated Debentures) own 10% or more of the total combined voting power of
all classes of stock of Coltec entitled to vote, (b) the beneficial owner of the
Convertible Preferred Security is not a controlled foreign corporation that is
related to Coltec through stock ownership, and (c) either (A) the beneficial
owner of the Convertible Preferred Security certifies to the Trust or its agent,
under penalties of perjury, that it is not a United States holder and provides
its name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Convertible
Preferred Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and furnishes the Trust or its agent with a copy thereof.
If a United States Alien Holder is engaged in a trade or business in the
United States and interest paid with respect to the Convertible Preferred
Securities (or on the Convertible Junior Subordinated Debentures) is effectively
connected with the conduct of such trade or business, the United States Alien
Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest on a net income
basis in the same manner as if it were a United States person. In addition, if
such United States Alien Holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments.
Any gain realized by a United States Alien Holder on the sale or other
taxable disposition of Convertible Preferred Securities, Convertible Junior
Subordinated Debentures or Common Stock generally will not be subject to United
States federal income or withholding tax unless (i) such gain is effectively
connected with a trade or business carried on within the United States by such
United States Alien Holder, or (ii) in the case of a United States Alien Holder
who is an individual, such individual is present in the United States for 183
days or more during the taxable year in which such sale or disposition occurs
and certain other conditions are met.
If a United States Alien Holder receives a Dividend distribution with
respect to their Common Stock, or is treated as receiving a deemed dividend as a
result of an adjustment of the conversion price of the Convertible
72
<PAGE> 78
Junior Subordinated Debentures as described above under "-- Adjustment of
Applicable Conversion Price", the gross amount of such Dividend or deemed
dividend, will be subject to United States federal withholding tax at a 30% (or
lower treaty) rate. In addition, Distributions paid to United States Alien
Holders in respect of their Convertible Preferred Securities (or Convertible
Junior Subordinated Debentures) also will be subject to United States federal
withholding tax at a 30% (or lower treaty) rate, if, contrary to the opinion of
Tax Counsel, the Convertible Junior Subordinated Debentures are classified as
equity interests in, rather than indebtedness of, Coltec for United States
federal income tax purposes, in which case the interest paid thereon will be
treated as Dividends to the extent it is deemed to be paid out of Coltec's E&P.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Annual information reporting will apply to interest income on the
Convertible Preferred Securities, and payments made on, and proceeds from the
sale of, the Convertible Preferred Securities may be subject to a "backup"
withholding tax of 31% unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a credit against the
holder's United States Federal income tax, provided the required information is
provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan") should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Convertible Preferred Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) are
not subject to the requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the United
States Department of Labor (the "DOL"), the assets of the Issuer would be deemed
to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code
if "plan assets" of the Plan were used to acquire an equity interest in the
Issuer and no exception were applicable under the Plan Assets Regulation. An
"equity interest" is defined under the Plan Assets Regulation as any interest in
an entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Issuer would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in the
Issuer, less than 25% of the value of each class of equity interests in the
Issuer Trust were held by Plans, other employee benefit plans not subject to
ERISA or Section 4975 of the Code (such as governmental, church and foreign
plans), and entities holding assets deemed to be "plan assets" of any Plan
(collectively, "Benefit Plan Investors"). No assurance can be given that the
value of the Convertible Preferred Securities held
73
<PAGE> 79
by Benefit Plan Investors will be less than 25% of the total value of such
Convertible Preferred Securities at the completion of the initial offering or
otherwise. All of the Common Securities will be purchased and held by the
Company.
Certain transactions involving the Issuer could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Convertible Preferred Securities were
acquired with "plan assets" of such Plan and assets of the Issuer were deemed to
be "plan assets" of Plans investing in the Issuer. For example, if Coltec is a
Party in Interest with respect to an investing Plan (either directly or by
reason of its ownership of its subsidiaries), extensions of credit between
Coltec and the Issuer (as represented by the Convertible Junior Subordinated
Debentures and the Guarantee) would likely be prohibited by Section 406(a)(1)(B)
of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive relief were
available under an applicable administrative exemption (see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the Convertible Preferred Securities,
assuming that assets of the Issuer Trust were deemed to be "plan assets" of
Plans investing in the Issuer (see above). Those class exemptions are PTCE 96-23
(for certain transactions determined by in-house asset managers), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds),
PTCE 90-1 (for certain transactions involving insurance company separate
accounts) and PTCE 84-14 (for certain transactions determined by qualified
professional asset managers).
Because the Convertible Preferred Securities may be deemed to be equity
interests in the Issuer for purposes of applying ERISA and Section 4975 of Code,
the Convertible Preferred Securities may not be purchased or held by any Plan,
any entity whose underlying assets include "plan assets" by reason of any Plan's
investment in an entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any
purchaser or holder of the Convertible Preferred Securities or any interest
therein will be deemed to have represented by its purchase and holding thereof
that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing
such securities on behalf of or with "plan assets" of any Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14. See "Transfer Restrictions" herein.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the
Convertible Preferred Securities on behalf of or with "plan assets" of any Plan
consult with their counsel regarding the potential consequences if the assets of
the Issuer were deemed to be "plan assets" and the availability of exemptive
relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
74
<PAGE> 80
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust
and sold by Credit Suisse First Boston Corporation, Lehman Brothers Inc. and
CIBC Oppenheimer Corp. (the "Initial Purchasers"), in a transaction exempt from
the registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchasers to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act). The Selling Holders may from
time to time offer and sell pursuant to this Prospectus any or all of the
Convertible Preferred Securities, any Convertible Junior Subordinated Debentures
and Common Stock issued upon conversion of the Convertible Preferred Securities.
The following table sets forth information with respect to the record
holders of the Convertible Preferred Securities as of May 18, 1998. Such
information has been obtained from the Selling Holders and the Property Trustee.
The term Selling Holder includes the beneficial owners of the Convertible
Preferred Securities and their transferees, pledgees, donees or other
successors.
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
SELLING HOLDER PREFERRED SECURITIES
-------------- --------------------
<S> <C>
Deutsche Bank A.G. London................................... 160,000
Lord Abbett Bond Debenture Fund, Inc. ...................... 150,000
Oppenheimer Convertible Securities Fund..................... 120,000
J.P. Morgan & Co. Inc. ..................................... 120,000
Chrysler Corp. Master Retirement Trust...................... 120,000
Credit Suisse First Boston Corporation...................... 112,550
State of Oregon Equity...................................... 100,000
Argent Class Convertible Arbitrage Fund (Bermuda) L.P. ..... 98,000
Van Kampen American Capital Harbor Fund..................... 76,900
State of Oregon/SAIF Corporation............................ 75,000
OCM Convertible Trust....................................... 65,100
Mainstay Convertible Fund................................... 60,600
Aim Balanced Fund........................................... 60,600
IBM Retirement Fund......................................... 60,000
State of Connecticut Combined Investment Funds.............. 56,400
President & Fellows of Harvard College...................... 50,000
Chrysler Corporation Master Retirement Trust................ 45,300
Vanguard Convertible Securities Fund, Inc. ................. 40,800
BT Holdings (New York) Inc.................................. 40,000
MFS Series Trust V-MFS Total Return Fund.................... 39,900
New York Life Separate Account #7........................... 30,000
PRIM Board.................................................. 29,000
The Concordia Retirement Plan of the Lutheran
Church-Missouri Synod..................................... 28,000
Aftra Health Fund........................................... 26,000
McMahan Securities Company, L.P............................. 25,000
Raytheon Company Master Pension Trust....................... 23,100
The Class IC Company, Ltd. ................................. 22,500
Arkansas PERS............................................... 22,250
Castle Convertible Fund, Inc. .............................. 22,000
Security Insurance Company of Hartford...................... 20,000
Delta Air Lines Master Trust................................ 18,000
Carrigaholt Capital (Bermuda) L.P. ......................... 17,500
State Employees' Retirement Fund of the State of Delaware... 15,800
State of Delaware PERS...................................... 15,500
</TABLE>
75
<PAGE> 81
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
SELLING HOLDER PREFERRED SECURITIES
-------------- --------------------
<S> <C>
Starvest Discretionary Portfolio............................ 12,000
Combined Insurance Company of America....................... 10,500
The Gabelli Convertible Securities Fund, Inc................ 10,000
Hatchbeam & Co. ............................................ 9,200
Van Kampen American Capital Convertible Securities Fund..... 8,100
Mainstay Strategic Value Fund Series........................ 8,000
Phoenix Home Life General Account........................... 7,400
Cova Bond Debenture......................................... 7,000
ICI American Holdings Trust................................. 6,750
Zeneca Holdings Trust....................................... 6,750
Beneficial Standard Life Insurance Co. -- Covertible........ 6,000
Bankers Life & Casualty Insurance Co. -- Convertible........ 6,000
Great American Reserve Insurance Co. -- Convertible......... 6,000
Highbridge Capital Corporation.............................. 5,400
Kapiolani Medical Center.................................... 5,000
Nalco Chemical Company...................................... 3,500
Aloha Airlines Non-Pilots Pension Trust..................... 3,000
Hawaiian Airlines Pilots Retirement Plan.................... 3,000
ELF Aquitaine............................................... 3,000
Hawaiian Airlines Employees Pension Plan -- IAM............. 2,500
Capital American Life Insurance Co. -- Convertible.......... 2,500
American Travellers Insurance Co. -- Convertible............ 2,500
Aloha Airlines Pilots Retirement Trust...................... 2,300
The Connecticut Hospice, Inc. .............................. 2,000
National Pen & Associates Profit Sharing Plan............... 2,000
Echlin Inc. Convertible..................................... 2,000
D.S.U. Charitable Trust..................................... 1,400
Queen's Healthcare Plan..................................... 1,000
Children's Surgical Associates Inc Pen...................... 1,000
Children's Surgical Associates PSP.......................... 1,000
Eagle Asset Management...................................... 800
Ursuline Provincialate Eastern Province..................... 400
Hawaiian Airlines Pension Plan for Salaried Employees....... 400
Marian Residence Fund....................................... 200
MFS Series Trust I -- MFS Convertible Securities Fund....... 100
----------
Total............................................. 2,114,500
==========
</TABLE>
No Selling Holder has, or within the past three years has had, any
position, office or other material relationship with the Trust or the Company or
any of their predecessors or affiliates. Because the Selling Holders may,
pursuant to this Prospectus, offer all or some portion of the Convertible
Preferred Securities, the Convertible Junior Subordinated Debentures or the
Common Stock issuable upon conversion of the Convertible Preferred Securities,
no estimate can be given as to the amount of the Convertible Preferred
Securities, the Convertible Junior Subordinated Debentures or the Common Stock
issuable upon conversion of the Convertible Preferred Securities that will be
held by the Selling Holders upon termination of any such sales. In addition, the
Selling Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Convertible Preferred Securities since the
date on which they provided the information regarding their Convertible
Preferred Securities, in transactions exempt from the registration requirements
of the Securities Act.
76
<PAGE> 82
PLAN OF DISTRIBUTION
The Securities may be sold from time to time to purchasers directly by the
Selling Holders. Alternatively, the Selling Holders may from time to time offer
the Offered Securities to or through underwriters, broker/dealers or agents, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Holders or the purchasers of such securities for
whom they may act as agents. The Selling Holders and any underwriters,
broker/dealers or agents that participate in the distribution of Offered
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Securities may be sold from time to time in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. The sale of the
Securities may be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the Offered Securities may be listed or quoted at the time of sale, (ii)
in the over-the-counter market or (iii) in transactions otherwise than on such
exchanges or in the over-the-counter market. At the time a particular offering
of the Offered Securities is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Offered
Securities being offered and the terms of the offering, including the name or
names of any underwriters, broker/dealers or agents, any discounts, commissions
and other terms constituting compensation from the Selling Holders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Securities will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Securities may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Securities will be paid by the Company, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and severally,
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Convertible Preferred Securities, the Convertible
Junior Subordinated Debentures and the Guarantee was passed upon for the Company
and the Issuer by Cravath, Swaine & Moore and Robert J. Tubbs, Executive Vice
President, General Counsel and Secretary of the Company, the validity of the
Common Stock issuable upon conversion of such Convertible Junior Subordinated
Debentures was passed upon for the Company and the Issuer by Mr. Tubbs, and
certain matters of Delaware law relating to the Issuer and the validity of the
Convertible Preferred Securities were passed upon for the Issuer by Richards,
Layton & Finger, P.A. special Delaware counsel to the Issuer and the Company.
Certain matters relating to United States Federal income tax considerations were
passed upon for the Company by Cravath, Swaine & Moore, special tax counsel to
the Company and the Issuer.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and is included herein.
77
<PAGE> 83
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Earnings for Years Ended December
31, 1997, 1996 and 1995................................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1996... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.......................... F-5
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995.............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 84
COLTEC INDUSTRIES INC
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Coltec Industries Inc:
We have audited the accompanying consolidated balance sheets of Coltec
Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coltec Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
February 2, 1998 (except with respect to the information discussed in Note 20,
as to which the date
is April 16, 1998)
F-2
<PAGE> 85
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net sales............................................... $1,314,869 $1,159,691 $1,099,624
Cost of sales........................................... 898,269 811,123 744,201
---------- ---------- ----------
Gross profit............................................ 416,600 348,568 355,423
Selling and administrative.............................. 218,808 190,993 186,401
Special charges......................................... -- -- 27,000
---------- ---------- ----------
Operating income........................................ 197,792 157,575 142,022
Interest expense and other, net......................... 54,043 74,894 89,886
---------- ---------- ----------
Earnings from continuing operations before income taxes
and extraordinary item................................ 143,749 82,681 52,136
Income taxes............................................ 48,875 28,111 17,615
---------- ---------- ----------
Earnings from continuing operations before extraordinary
item.................................................. 94,874 54,570 34,521
---------- ---------- ----------
Discontinued operations (net of tax)
Income from operations................................ -- 19,252 36,639
Gain on sale.......................................... -- 37,931 --
---------- ---------- ----------
Total discontinued operations.................... -- 57,183 36,639
---------- ---------- ----------
Extraordinary item (net of tax)......................... -- (30,614) (254)
---------- ---------- ----------
Net earnings............................................ $ 94,874 $ 81,139 $ 70,906
========== ========== ==========
Basic earnings per common share
Before extraordinary item............................. $ 1.44 $ .79 $ .49
---------- ---------- ----------
Discontinued operations
Income from operations............................. -- .28 .53
Gain on sale....................................... -- .55 --
---------- ---------- ----------
Total discontinued operations.................... -- .83 .53
---------- ---------- ----------
Extraordinary item.................................... -- (.44) --
---------- ---------- ----------
Net earnings.......................................... $ 1.44 $ 1.18 $ 1.02
========== ========== ==========
Weighted-average common shares.......................... 65,896 69,091 69,839
========== ========== ==========
Diluted earnings per common share
Before extraordinary item............................. $ 1.42 $ .79 $ .49
---------- ---------- ----------
Discontinued operations
Income from operations............................. -- .28 .53
Gain on sale....................................... -- .54 --
---------- ---------- ----------
Total discontinued operations.................... -- .82 .53
---------- ---------- ----------
Extraordinary item.................................... -- (.44) --
---------- ---------- ----------
Net earnings.......................................... $ 1.42 $ 1.17 $ 1.02
========== ========== ==========
Diluted weighted-average common shares.................. 66,911 69,376 69,839
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE> 86
COLTEC INDUSTRIES INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 14,693 $ 15,029
Accounts and notes receivable, net of allowance of $2,894 in
1997 and $2,007 in 1996................................... 120,311 190,325
Inventory, net.............................................. 256,736 204,198
Deferred income taxes....................................... 15,195 10,524
Other current assets........................................ 20,508 22,895
---------- ----------
Total current assets................................... 427,443 442,971
Property, plant and equipment, net.......................... 287,619 214,790
Costs in excess of net assets acquired, net................. 157,751 132,872
Other assets................................................ 60,221 58,869
---------- ----------
$ 933,034 $ 849,502
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt........................... $ 1,811 $ 2,528
Accounts payable............................................ 93,799 55,410
Accrued expenses............................................ 138,969 155,229
Current portion of liabilities of discontinued operations... 4,999 14,229
---------- ----------
Total current liabilities.............................. 239,578 227,396
Long-term debt.............................................. 757,578 717,722
Deferred income taxes....................................... 79,229 50,646
Other liabilities........................................... 60,892 100,005
Liabilities of discontinued operations...................... 154,918 170,740
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock -- $.01 par value, 2,500,000 shares
authorized, issued and outstanding -- none
Common stock -- $.01 par value, 100,000,000 shares
authorized, 70,501,948 and 70,398,661 shares issued at
December 31, 1997 and 1996, respectively (excluding
25,000,000 shares held by a wholly owned subsidiary)...... 705 704
Capital surplus............................................. 642,828 643,221
Retained deficit............................................ (912,029) (1,006,903)
Unearned compensation....................................... (2,721) (2,136)
Minimum pension liability................................... (1,646) (3,200)
Foreign currency translation adjustments.................... (6,745) (1,151)
---------- ----------
(279,608) (369,465)
Less cost of 4,666,406 and 3,182,822 shares of common stock
in treasury at December 31, 1997 and 1996, respectively... (79,553) (47,542)
---------- ----------
(359,161) (417,007)
---------- ----------
$ 933,034 $ 849,502
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 87
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................... $ 94,874 $ 81,139 $ 70,906
Adjustments to reconcile net earnings to cash provided
by operating activities
Gain on divestitures................................. -- (66,791) --
Extraordinary item................................... -- 51,001 390
Special charge provision............................. -- -- 27,000
Depreciation and amortization........................ 38,415 36,014 42,086
Deferred income taxes................................ 24,791 39,146 5,665
Payments of liabilities of discontinued operations... (25,052) (19,563) (2,504)
Special charge payments.............................. (11,746) (6,309) (8,945)
Foreign currency translation adjustment.............. (5,594) 665 (1,135)
Other operating items................................ (6,951) (4,370) 19,791
Changes in assets and liabilities, net of effects
from acquisitions and divestitures:
Accounts and notes receivable..................... (4,263) (42,602) (6,632)
Inventories....................................... (42,508) 2,704 (32,373)
Other current assets.............................. 3,455 (617) 3,762
Accounts payable.................................. 35,963 (55) (4,283)
Accrued expenses.................................. (18,972) (21,302) (21,071)
Accrued pension liability......................... (20,993) 443 (1,649)
--------- --------- ---------
Cash provided by operating activities................ 61,419 49,503 91,008
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from divestitures............................. -- 329,113 --
Capital expenditures................................... (81,218) (44,550) (42,496)
Acquisition of businesses.............................. (60,711) -- (21,750)
Other.................................................. -- -- (2,512)
--------- --------- ---------
Cash provided by (used in) investing activities...... (141,929) 284,563 (66,758)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt refinancing......................... -- 542,000 --
Issuance of long-term debt............................. 813 -- 19,070
Repayment of long-term debt............................ (8,113) (622,582) (13,537)
Increase (decrease) in revolving facility, net......... 39,500 (196,000) (30,000)
Purchase of treasury stock............................. (42,695) (46,426) --
Proceeds from sale of accounts receivable.............. 82,500 -- --
Proceeds from exercise of stock options................ 8,169 -- --
--------- --------- ---------
Cash provided by (used in) financing activities...... 80,174 (323,008) (24,467)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents....... (336) 11,058 (217)
Cash and cash equivalents -- beginning of year......... 15,029 3,971 4,188
--------- --------- ---------
Cash and cash equivalents -- end of year............... $ 14,693 $ 15,029 $ 3,971
========= ========= =========
Supplemental cash flow data:
Cash paid for:
Interest.......................................... $ 50,207 $ 74,870 $ 92,292
Income taxes...................................... 19,327 27,667 41,685
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 88
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK MINIMUM CURRENCY
--------------- CAPITAL RETAINED UNEARNED PENSION TRANSLATION
SHARES AMOUNT SURPLUS DEFICIT COMPENSATION LIABILITY ADJUSTMENTS
------ ------ -------- ----------- ------------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994... 70,016 $700 $638,407 $(1,158,948) $(3,480) $ -- $ (681)
Net earnings................. 70,906
Issuance of restricted stock,
net........................ 61 1 1,006 1,072
Exercise of stock options.... (30)
Tax benefit from stock option
and incentive plan......... 36
Foreign currency translation
adjustments................ (1,135)
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1995... 70,077 701 639,419 (1,088,042) (2,408) -- (1,816)
Net earnings................. 81,139
Repurchase of common stock...
Issuance of restricted stock,
net........................ 322 3 3,941 272
Exercise of stock options....
Tax benefit from stock option
and incentive plan......... (139)
Minimum pension liability.... (3,200)
Foreign currency translation
adjustments................ 665
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1996... 70,399 704 643,221 (1,006,903) (2,136) (3,200) (1,151)
Net earnings................. 94,874
Repurchase of common stock...
Issuance of restricted stock,
net........................ 103 1 2,173 (585)
Exercise of stock options.... (2,566)
Minimum pension liability.... 1,554
Foreign currency translation
adjustments................ (5,594)
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1997... 70,502 $705 $642,828 $(912,029) $(2,721) $(1,646) $(6,745)
====== ==== ======== =========== ======= ======= =======
<CAPTION>
TREASURY STOCK
-----------------
SHARES AMOUNT TOTAL
------ -------- ---------
<S> <C> <C> <C>
Balance, December 31, 1994... (99) $ (1,599) $(525,601)
Net earnings................. 70,906
Issuance of restricted stock,
net........................ (26) (422) 1,657
Exercise of stock options.... 25 405 375
Tax benefit from stock option
and incentive plan......... 36
Foreign currency translation
adjustments................ (1,135)
------ -------- ---------
Balance, December 31, 1995... (100) (1,616) (453,762)
Net earnings................. 81,139
Repurchase of common stock... (3,129) (46,426) (46,426)
Issuance of restricted stock,
net........................ (10) (142) 4,074
Exercise of stock options.... 56 642 642
Tax benefit from stock option
and incentive plan......... (139)
Minimum pension liability.... (3,200)
Foreign currency translation
adjustments................ 665
------ -------- ---------
Balance, December 31, 1996... (3,183) (47,542) (417,007)
Net earnings................. 94,874
Repurchase of common stock... (2,160) (42,695) (42,695)
Issuance of restricted stock,
net........................ (4) (51) 1,538
Exercise of stock options.... 681 10,735 8,169
Minimum pension liability.... 1,554
Foreign currency translation
adjustments................ (5,594)
------ -------- ---------
Balance, December 31, 1997... (4,666) $(79,553) $(359,161)
====== ======== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 89
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF ACCOUNTING POLICIES
Organization:
Coltec Industries Inc (the Company) is a diversified manufacturing company
serving the aerospace and general industrial markets primarily in the United
States, Canada and Europe.
Basis of Presentation:
Investments in which the Company has ownership of 50% or more of the voting
common stock are consolidated in the financial statements. Intercompany accounts
and transactions are eliminated.
Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
presentation.
Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Revenue Recognition:
Revenue, including revenue under long-term commercial and government
contracts and programs, is recorded at the time deliveries or customer
acceptances are made and the Company has the contractual right to bill.
Inventories:
Inventories, including inventories under long-term commercial and
government contracts and programs, are valued at the lower of cost or market.
Cost elements included in inventory are material, labor and factory overhead,
primarily using standard cost, which approximates actual cost. Cost on
approximately 50% of the domestic inventory at December 31, 1997 and 1996 was
determined on the last-in first-out basis. Cost on the remainder of the
inventory is generally determined on the first-in first-out basis.
Property, Plant and Equipment:
Property, plant and equipment is carried at cost. Depreciation of plant and
equipment is provided generally by using the straight-line method, based on
estimated useful lives of the assets. The ranges of estimated useful lives used
in computing depreciation for financial reporting are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements........................................... 5-40
Buildings and equipment..................................... 10-45
Machinery and equipment..................................... 3-20
</TABLE>
For leasehold improvements, the estimated useful life is the lesser of the
asset life or the lease term.
Renewals and betterments are capitalized by additions to the related asset
accounts, while repair and maintenance costs are charged against earnings.
Costs in Excess of Net Assets Acquired:
It is the Company's policy to amortize the excess costs arising from
acquisitions on a straight-line basis over periods not to exceed 40 years. In
evaluating the value and future benefits of the excess costs arising from
acquisitions, the recoverability from operating income is measured. Under this
approach, the carrying value would be reduced if it is probable that
management's best estimate of future operating income from related
F-7
<PAGE> 90
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
operations before amortization will be less than the carrying amount of the
excess costs arising from acquisitions over the remaining amortization period.
At December 31, 1997 and 1996, accumulated amortization related to all completed
acquisitions was $74,013 and $68,045, respectively.
Income Taxes:
Income taxes are provided using the liability method. Under this method,
deferred tax assets and liabilities are recognized based on differences between
the financial statement and tax bases of assets and liabilities using presently
enacted tax rates.
Environmental Expenditures:
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are accrued when it is probable that an obligation has been incurred and the
amount can be reasonably estimated. Expenditures incurred for environmental
compliance with respect to pollution prevention and ongoing monitoring programs
are expensed as incurred. Expenditures that increase the value of the property
are capitalized.
Start-up Costs:
Start-up costs related to new operations and new product lines are expensed
as incurred.
Cash and Cash Equivalents:
The Company considers all short-term investments purchased with a maturity
of three months or less to be cash equivalents.
Foreign Currency Translation:
The financial statements of foreign subsidiaries were prepared in their
respective local currencies and were translated into U.S. dollars at year-end
rates for assets and liabilities and at monthly weighted-average rates for
income and expenses. Translation adjustments are included in shareholders'
equity in the Consolidated Balance Sheets. Foreign currency transaction gains
and losses are included in net earnings. For 1997, 1996 and 1995, such gains and
losses were not significant.
2. ACQUISITIONS AND DIVESTITURES
On June 30, 1997, the Company acquired the assets of AMI Industries Inc.
(AMI), a Colorado-based manufacturer of flight attendant and cockpit seats for
commercial aircraft, for approximately $25,000. The purchase agreement also
includes contingent payments based on earning levels for the years ended
December 31, 1997-2000. These contingent payments will be recorded as additional
purchase price and amortized over the remaining life of goodwill. For financial
statement purposes, the acquisition was accounted for as a purchase and,
accordingly, AMI's results are included in the Company's consolidated financial
statements since the date of acquisition. The purchase price, which was financed
through available cash resources, has been allocated to the acquired assets
based upon their fair market values. The $12,200 excess of the purchase price
over net assets is being amortized over 25 years. AMI expects annual sales to
approximate $40,000.
On October 7, 1997, the Company acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead division for
$28,000. Annualized sales are expected to approximate $35,000. The acquisition
was accounted for as a purchase and its results are included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price, which was also financed through available cash resources, has been
allocated to the acquired assets based upon their fair market values. The $6,900
excess of the purchase price over net assets is being amortized over 25 years.
The impact of these acquisitions was not material in relation to the
Company's results of operations. Consequently, pro forma information is not
presented. The Company also had several small acquisitions during 1997, which
were not material to the Company's financial position or results of operations.
F-8
<PAGE> 91
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In June 1996, the Company sold Holley Automotive, Coltec Automotive and
Performance Friction Products to Borg-Warner Automotive, Inc. for $296,522 in
cash. In December 1996, Coltec sold Farnam Sealing Systems division to Meillor
SA for $20,728 in cash and a note receivable for $3,000. The sale of these
automotive original equipment (OE) components businesses resulted in an
after-tax gain of $37,931 (net of income taxes of $25,332), net of liabilities
retained, transaction costs and obligations relating to the sales. The sale of
the automotive OE components businesses represented a disposal of the Company's
Automotive Segment. Accordingly, the 1996 and 1995 Consolidated Statements of
Earnings were restated to reflect the operations of the automotive OE components
businesses as a discontinued operation. Net sales of the discontinued automotive
OE components businesses were $182,599 and $302,260 in 1996 and 1995,
respectively.
In December 1996, the Company also sold the exhaust systems and components
business of its Stemco division for $11,863 resulting in a pre-tax gain of
$3,528. Such gain is reflected in the 1996 Consolidated Statement of Earnings in
continuing operations. Net sales of the exhaust systems and components business
were $18,085 and $20,503 in 1996 and 1995, respectively.
3. EXTRAORDINARY ITEM
In 1996, the Company redeemed all of its outstanding 11 1/4% debentures and
substantially all of its outstanding 9 3/4% and 10 1/4% senior notes at
redemption prices ranging from 105.125% to 106.987% of par. The redemption of
these notes including consent payments resulted in an extraordinary charge of
$30,614, net of income taxes of $20,387.
The Company incurred extraordinary charges of $254, net of income taxes of
$136, in 1995 in connection with early retirement of debt.
4. SPECIAL CHARGES
In the third quarter of 1995, the Company recorded a special charge of
$27,000, primarily to cover the costs of closing the Walbar compressor blade
facility in Canada. The facility was closed during 1996. The charge also covered
selected workforce reductions throughout the Company. The special charge
included costs to cover the cancellation of contractual obligations resulting
from the decision to close the Walbar facility, asset write-downs, severance and
employee-related costs and other costs necessary to implement the shutdown of
the Walbar facility and selected workforce reductions throughout the Company.
At December 31, 1997 all related costs had been charged and the remaining
accrual was reversed. The activity in the related reserve through December 31,
1997 was as follows:
<TABLE>
<CAPTION>
CONTRACTUAL ASSET
OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL
----------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
1995 charge........................ $ 9,065 $ 7,845 $ 5,084 $ 5,006 $ 27,000
1995 activity...................... (65) (4,549) (1,778) (2,553) (8,945)
------- ------- ------- ------- --------
December 31, 1995.................. 9,000 3,296 3,306 2,453 18,055
1996 activity...................... (961) (1,875) (1,876) (1,597) (6,309)
------- ------- ------- ------- --------
December 31, 1996.................. 8,039 1,421 1,430 856 11,746
1997 activity...................... (1,200) -- (517) (29) (1,746)
Reversal........................... (6,839) (1,421) (913) (827) (10,000)
------- ------- ------- ------- --------
December 31, 1997.................. $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ========
</TABLE>
In the third quarter of 1997, the Company recorded a special charge of
$10,000, to cover the restructuring of its Industrial Segment. This special
charge included the costs of closing its FMD Electronics operations in Roscoe,
Illinois and its Ortman Fluid Power operations in Hammond, Indiana. The special
charge also included
F-9
<PAGE> 92
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
the costs to restructure the Company's Industrial Segment businesses in Canada
and Germany and certain termination costs related to the relocation of the
Delavan Commercial divisional headquarters to North Carolina. The third quarter
1997 charge included costs resulting from cancellation of contractual
obligations, asset writedowns, severance and employee-related costs and other
costs to shut down these facilities that will not benefit future operations. The
related reserve activity for the year ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
CONTRACTUAL ASSET
OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL
----------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
1997 charge........................ $ 641 $ 1,049 $ 5,425 $ 2,885 $ 10,000
1997 activity...................... 641 1,049 5,425 2,885 10,000
------- ------- ------- ------- --------
December 31, 1997.................. $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ========
</TABLE>
5. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share, effective December 15, 1997. The Company's
reported earnings per common share for 1996 and 1995 equaled diluted earnings
per share as set forth in SFAS No. 128. As a result, the Company's reported
earnings per share for 1996 and 1995 were not restated.
Basic earnings per common share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the year.
Diluted earnings per common share is computed by using the treasury stock method
to determine shares related to stock options and restricted stock.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted-average common shares.............................. 65,896 69,091 69,839
Stock options and restricted stock issued................... 1,015 285 --
------ ------ ------
Diluted weighted-average common shares...................... 66,911 69,376 69,839
====== ====== ======
</TABLE>
6. SALE OF ACCOUNTS RECEIVABLE
In September 1997, the Company and certain of its subsidiaries sold their
U.S. and Canadian customer trade receivables to CNC Finance LLC (CNC Finance), a
wholly-owned bankruptcy remote subsidiary of the Company. CNC Finance entered
into a three-year agreement to sell without recourse, on a revolving basis, an
undivided fractional ownership interest in the receivables, based on the level
of eligible receivables, up to a maximum of $85,000 to a special purpose entity
of a financial institution. At December 31, 1997, $82,500 of the Company's
receivables were sold under this agreement and the sale was reflected as a
reduction of accounts receivable in the 1997 Consolidated Balance Sheet. The
undivided interests were sold at a discount which was included in Interest
expense and other, net in the 1997 Consolidated Statement of Earnings.
7. INVENTORY
Inventories consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Finished goods.............................................. $ 53,748 $ 48,813
Work in process and finished parts.......................... 158,937 122,817
Raw materials and supplies.................................. 44,051 32,568
-------- --------
Total.................................................. $256,736 $204,198
======== ========
</TABLE>
F-10
<PAGE> 93
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
At December 31, 1997 and 1996, $54,441 and $45,371, respectively, of
contract advances were offset against inventories under long-term commercial and
government contracts and programs in the Consolidated Balance Sheets. Losses on
commercial and government contracts and programs are recognized in full when
identified.
The excess of current cost over last-in, first-out cost at December 31,
1997 and 1996 was $22,022 and $20,152, respectively.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and improvements....................................... $ 14,517 $ 16,182
Buildings and equipment..................................... 135,173 121,515
Machinery and equipment..................................... 486,335 415,749
Leasehold improvements...................................... 12,209 11,239
Construction in progress.................................... 30,535 23,010
-------- --------
Total.................................................. 678,769 587,695
Less accumulated depreciation............................... 391,150 372,905
-------- --------
Total.................................................. $287,619 $214,790
======== ========
</TABLE>
9. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Salaries, wages and employee benefits....................... $ 34,603 $ 37,979
Taxes....................................................... 13,728 18,995
Interest.................................................... 7,115 3,032
Asbestos.................................................... 50,688 60,659
Other....................................................... 32,835 34,564
-------- --------
Total.................................................. $138,969 $155,229
======== ========
</TABLE>
10. INCOME TAXES
Domestic and foreign components of earnings from operations before income
taxes and extraordinary item were as follows for the years ended December 31,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Domestic................................................. $114,517 $ 68,199 $ 25,426
Foreign.................................................. 29,232 14,482 26,710
-------- -------- --------
Total............................................... $143,749 $ 82,681 $ 52,136
======== ======== ========
</TABLE>
F-11
<PAGE> 94
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Income taxes on earnings from continuing operations were as follows for the
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current
Domestic............................................... $ 18,094 $ (2,912) $ 4,717
Foreign................................................ 6,872 13,634 7,638
-------- -------- --------
24,966 10,722 12,355
-------- -------- --------
Deferred
Domestic............................................... 17,706 24,126 3,836
Foreign................................................ 6,203 (6,737) 1,424
-------- -------- --------
23,909 17,389 5,260
-------- -------- --------
Total............................................... $ 48,875 $ 28,111 $ 17,615
======== ======== ========
</TABLE>
As discussed in note 2 to consolidated financial statements, the Company
sold its original equipment components businesses in 1996 resulting in income
tax on the gain of the sale of $25,332. As discussed in note 3 to consolidated
financial statements, the Company incurred extraordinary charges related to
early retirement of debt resulting in income taxes of $20,387 in 1996 and $136
in 1995.
Reconciliation of tax at the U.S. statutory income tax rate of 35% for the
years ended December 31, 1997, 1996 and 1995 to income taxes on earnings from
continuing operations was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Tax at U.S. statutory rate.................................. $50,312 $28,938 $18,248
Repatriation of non-U.S. earnings......................... (1,195) 1,900 2,692
Non-U.S. rate differential................................ 2,844 1,828 (287)
Utilization of tax credits................................ (997) (1,104) (960)
Adjustment of reserves.................................... (2,736) (6,979) (6,172)
Other..................................................... 647 3,528 4,094
------- ------- -------
Income taxes.............................................. $48,875 $28,111 $17,615
------- ------- -------
Effective tax rate.......................................... 34.0% 34.0% 33.8%
======= ======= =======
</TABLE>
F-12
<PAGE> 95
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The significant components of deferred tax assets and liabilities at
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Excess tax over book depreciation............... $ -- $(21,828) $ -- $(26,754)
Book/tax differences on contract income......... -- (24,230) -- (27,154)
Employee benefit plans.......................... 7,747 -- 19,749 --
Accrued expenses and liabilities................ 5,375 -- 10,625 --
Foreign tax credit carryforwards................ 3,700 -- 6,600 --
Capital transactions, net....................... -- (27,901) -- (28,127)
Other........................................... -- (3,194) 11,538 --
------- -------- ------- --------
16,822 (77,153) 48,512 (82,035)
Less valuation allowance........................ (3,700) -- (6,600) --
------- -------- ------- --------
Total........................................... $13,122 $(77,153) $41,912 $(82,035)
======= ======== ======= ========
</TABLE>
The valuation allowance is attributable to foreign tax credit
carryforwards, which expire in 1998 through 2002.
11. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Credit Agreement 6.7%*(a)................................... $697,500 $658,000
9 3/4% senior notes due 1999(b)............................. 7,507 7,507
9 3/4% senior notes due 2000(c)............................. 7,405 7,405
10 1/4% senior subordinated notes due 2002(d)............... -- 3,909
Other due 1998-2010......................................... 46,977 43,429
-------- --------
759,389 720,250
Less current portion........................................ 1,811 2,528
-------- --------
$757,578 $717,722
======== ========
</TABLE>
- ---------------
* Indicates average interest rate for 1997 and 1996.
(a) In 1996, the reducing revolving credit facility (the Credit Agreement),
entered into with a syndicate of banks, was amended to expire December 15,
2001 with the total commitment increased to $850,000 from $465,000 (see note
3 to consolidated financial statements). The facility will be reduced by
$75,000 on December 15, 1999 and an additional $100,000 on December 15,
2000. The Credit Agreement provides up to $125,000 for the issuance of
letters of credit. At December 31, 1997, $40,089 of letters of credit had
been issued under the Credit Agreement. Obligations under the facility are
secured by substantially all of the Company's assets. Borrowings under the
facility bear interest, at the Company's option, at an annual rate equal to
the base rate or the Eurodollar rate plus 0.875%. The base rate is the
higher of 0.50% in excess of the Federal Reserve reported certificate of
deposit rate and the prime lending rate. Letter of credit fees of 0.875% are
payable on outstanding letters of credit and a commitment fee of 0.375% is
payable on the unutilized facility.
During 1997, the Company entered into interest rate swaps to reduce (hedge)
the impact of interest rate changes for variable rate borrowings under its
credit facility. The agreements include an aggregate notional amount of
$405,000, fixed interest rates ranging from 5.78% to 6.40% and maturity
dates ranging from April 1998 to October 2002.
(b) The 9 3/4% senior notes due 1999 are not redeemable prior to maturity on
November 1, 1999.
(c) The 9 3/4% senior notes due 2000 are not redeemable prior to maturity on
April 1, 2000.
(d) The 10 1/4% senior subordinated notes were redeemed on April 1, 1997 at
105.125% of par.
F-13
<PAGE> 96
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Minimum payments on long-term debt due within five years from December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 1,811
1999........................................................ 23,797
2000........................................................ 9,180
2001........................................................ 699,831
2002........................................................ 1,361
Thereafter.................................................. 23,409
--------
Total....................................................... $759,389
========
</TABLE>
12. PENSION PLANS
The Company and certain of its subsidiaries have in effect, for
substantially all U.S. employees, pension plans under which funds are deposited
with trustees. The benefits under these plans are based primarily on years of
service and either final average salary or fixed amounts for each year of
service. The Company's policy is to fund amounts which are actuarially
determined to provide the plans with sufficient assets to meet future benefit
payment requirements. Plan assets consist principally of publicly traded equity
and fixed-income securities. Pension coverage for employees of non-U.S.
subsidiaries is provided in accordance with local requirements and customary
practices.
For certain pension plans, the plan assets exceed the accumulated benefit
obligations (overfunded plans); and in the remainder of the plans, the
accumulated benefit obligations exceed the plan assets (underfunded plans).
During 1997, the Company merged several of its underfunded plans with its
overfunded plans.
As of December 31, 1997 and 1996, the funded status of the Company's
pension plans was as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
OVER-FUNDED UNDER-FUNDED OVER-FUNDED UNDER-FUNDED
PLANS PLANS PLANS PLANS
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations............... $396,189 $ 30,604 $259,200 $119,158
-------- -------- -------- --------
Accumulated benefit obligations.......... $406,385 $ 30,878 $265,396 $124,022
-------- -------- -------- --------
Projected benefit obligations............ $427,737 $ 34,039 $289,973 $127,234
Plan assets at fair value.................. 568,094 1,551 408,979 79,735
-------- -------- -------- --------
Funded status.............................. 140,357 (32,488) 119,006 (47,499)
Unrecognized net (gain) loss............... (120,839) 6,889 (89,702) (205)
Unrecognized transition (asset)
obligations.............................. (2,192) 1,525 (1,389) 628
Unrecognized prior service cost............ 15,255 2,571 2,837 15,033
Minimum liability adjustment............... -- (7,824) -- (12,200)
-------- -------- -------- --------
(Accrued) prepaid pension cost............. $ 32,581 $(29,327) $ 30,752 $(44,243)
======== ======== ======== ========
</TABLE>
Included in the underfunded plans are amounts for unfunded, non-qualified
defined benefit plans.
At December 31, 1997 and 1996, the Company recorded a minimum liability of
$7,824 and $12,200, respectively, for underfunded plans with a partial offset to
other assets of $5,292 and $7,300, respectively, and an after-tax charge to
shareholders' equity of $1,646 and $3,200, respectively.
F-14
<PAGE> 97
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Assumptions as of December 31 used to develop the net periodic pension cost
for U.S. plans were:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Discount rate for benefit obligations....................... 7.25% 7.75% 7.50%
Expected long-term rate of return on assets................. 9.00% 9.00% 9.00%
Rate of increase in compensation levels..................... 4.75% 5.00% 5.00%
</TABLE>
For non-U.S. plans, which were not material, similar economic assumptions
were used.
The components of net periodic pension cost for the years ended December
31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................. $ 8,404 $ 9,377 $ 7,618
Interest cost on projected benefit obligations........... 31,996 31,142 30,317
Actual return on assets.................................. (95,430) (52,049) (91,611)
Amortization and deferral, net........................... 47,782 11,443 52,953
-------- -------- --------
Net periodic pension cost................................ $ (7,248) $ (87) $ (723)
======== ======== ========
</TABLE>
For discontinued operations, the total projected benefit obligations at
December 31, 1997 and 1996 were $203,737 and $214,822, respectively, and are
fully funded. Interest cost on the projected benefit obligations for 1997, 1996
and 1995 was $16,097, $16,502 and $19,609, respectively, and was fully offset by
return on assets resulting in no net periodic pension cost.
13. POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits to its
eligible retired employees, principally in the United States, with some of these
retirees paying a portion of the related costs. The Company's accumulated
postretirement benefit obligations, none of which are funded, and the accrued
postretirement benefit cost at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligations:
Retirees.................................................. $ 16,980 $ 13,493
Fully eligible plan participants.......................... 1,925 2,416
Other plan participants................................... 3,113 3,053
-------- --------
Total..................................................... 22,018 18,962
Unrecognized transition obligations......................... (15,330) (16,614)
Unrecognized net loss....................................... (4,611) (561)
Unrecognized prior service cost............................. 1,964 2,495
-------- --------
Accrued postretirement benefit cost......................... $ 4,041 $ 4,282
======== ========
</TABLE>
F-15
<PAGE> 98
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The components of postretirement benefit cost for the years ended December
31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................. $ 187 $ 395 $ 198
Interest cost on accumulated postretirement benefit
obligations............................................ 1,433 1,951 1,927
Amortization of transition obligations................... 1,022 1,107 1,373
Amortization and deferral, net........................... (756) (124) (63)
-------- -------- --------
Postretirement benefit cost.............................. $ 1,886 $ 3,329 $ 3,435
======== ======== ========
</TABLE>
Discount rates of 7.25% and 7.75% were used in determining the accumulated
postretirement benefit obligations at December 31, 1997 and 1996, respectively.
The health care cost trend rates used in determining the accumulated
postretirement benefit obligations at December 31, 1997 were 8.7% in 1998
gradually declining to 5.0% by 2005. The effect of a 1% increase in the health
care cost trend rates in each year would increase the total service and interest
cost components of the postretirement benefit cost for 1997 by approximately
$142 and increase the accumulated postretirement benefit obligations at December
31, 1997 by approximately $1,400.
14. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments.
Cash and cash equivalents, accounts and notes receivable and accounts payable:
The carrying amount approximates fair value due to the short-term nature of
these items.
Long-term receivables and investments:
The fair value is based on quoted market prices for similar publicly-traded
securities or on the present value of estimated future cash flows.
Long-term debt:
The fair value of variable-rate long-term debt approximates carrying value.
Forward exchange contracts and interest rate hedges:
The fair value is based on quoted market prices of similar contracts.
The estimated fair value of the Company's financial instruments at December
31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Long-term receivables and investments......... $ 35,017 $ 42,737 $ 32,427 $ 39,817
Long-term debt................................ 759,389 760,609 720,250 720,824
Forward exchange contracts.................... -- (8,384) -- 87
Interest rate hedges.......................... -- (3,555) -- --
</TABLE>
F-16
<PAGE> 99
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company utilizes forward exchange contracts to hedge U.S.
dollar-denominated sales, under long-term contracts, of certain foreign
subsidiaries. The Company does not engage in speculation. The Company's forward
exchange contracts do not subject the Company to risk due to exchange rate
movements because gains and losses on these contracts offset gains and losses on
the sales and related receivables being hedged. At December 31, 1997 and 1996,
the Company had $162,000 and $216,000, respectively, of forward exchange
contracts, denominated in Canadian dollars, which had a fair value of $153,616
and $216,087, respectively. The contracts have varying maturities with none
exceeding five years. Gains and losses on forward exchange contracts are
deferred and recognized over the life of the underlying long-term contract being
hedged.
The Company has an outstanding contingent liability for guaranteed debt and
lease payments of $30,772, and for letters of credit $55,969. It was not
practical to obtain independent estimates of the fair values for the contingent
liability for guaranteed debt and lease payments and for letters of credit
without incurring excessive costs. In the opinion of management, non-performance
by the other parties to the contingent liabilities will not have a material
effect on the Company's results of operations and financial condition.
15. STOCK OPTION AND INCENTIVE PLANS
Pursuant to the Company's stock option plans, stock options and shares of
restricted stock have been granted to officers and key employees and stock
options to directors. Under the stock option plans, 7,468,000 shares of common
stock may be issued. Stock options outstanding under the stock option plans were
granted at a price equal to 100% of the market price on the date of grant and
are exercisable in annual installments of 20% or 33%, commencing one year from
date of grant and expiring ten years from date of grant.
The Company applies Accounting Principles Board Opinion #25, Accounting for
Stock Issued to Employees, in accounting for its stock option plans.
Accordingly, no compensation expense has been recognized for these plans. Had
compensation expense for the Company's stock option plans been determined based
on the fair value at the grant dates for awards under these plans consistent
with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's pro
forma net earnings would have been $92,137 for 1997, $79,425 for 1996 and
$69,487 for 1995 and earnings per share would have been $1.38 in 1997, $1.15 in
1996 and $1.00 in 1995.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.75% for 1997 and 7.0% for 1996 and
1995, no dividends paid, expected life of 3.7 years for 1997 and five years for
1996 and 1995, and volatility of 21% for 1997 and 23% for 1996 and 1995. The
weighted-average fair value of options granted was $5.75 for 1997, $4.76 for
1996 and $4.00 for 1995.
F-17
<PAGE> 100
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
A summary of the status of the Company's fixed stock option plans as of
December 31, 1997, 1996 and 1995 was follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OPTION AVERAGE
OF SHARES PRICE RANGE EXERCISE
(000S) PER SHARE PRICE
--------- ------------ ---------
<S> <C> <C> <C>
December 31, 1994....................................... 2,317 $15.00-21.25 N/A
Granted................................................. 2,960 10.75-18.08
Exercised............................................... (25) 15.00
Canceled................................................ (64) 15.00-18.25
------ ------------ ------
December 31, 1995....................................... 5,188 10.75-21.25 $13.16
Granted................................................. 516 11.00-15.75 13.43
Exercised............................................... (56) 10.75-11.63 11.37
Canceled................................................ (236) 10.75-21.25 12.82
------ ------------ ------
December 31, 1996....................................... 5,412 10.75-21.25 13.22
Granted................................................. 1,069 18.88-22.88 21.09
Exercised............................................... (1,004) 10.75-18.75 14.64
Canceled................................................ (217) 10.75-18.75 12.08
------ ------------ ------
December 31, 1997....................................... 5,260 $10.75-22.88 $14.59
------ ------------ ------
</TABLE>
Stock options exercisable were 2,156,000, 2,103,000 and 1,188,000 at
December 31, 1997, 1996 and 1995, respectively.
The following summarizes information about the Company's stock options
outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------
WEIGHTED- WEIGHTED-
NUMBER AVERAGE AVERAGE
OUTSTANDING REMAINING EXERCISE
(000S) LIFE PRICE
RANGE OF EXERCISE PRICES ----------- --------- ---------
<S> <C> <C> <C>
$10.75 to $15.75......................................... 3,559 7.1 years $12.05
$16.25 to $20.13......................................... 744 6.9 years 18.02
$21.19 to $22.88......................................... 957 9.6 years 21.35
----- --------- ------
$10.75 to $22.88......................................... 5,260 7.6 years $14.59
----- --------- ------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
------------------------
WEIGHTED-
NUMBER AVERAGE
OUTSTANDING EXERCISE
(000S) PRICE
RANGE OF EXERCISE PRICES ----------- ---------
<S> <C> <C>
$10.75 to $15.75............................................ 1,755 $12.79
$16.25 to $20.13............................................ 383 17.91
$21.19 to $22.88............................................ 18 21.25
----- ------
$10.75 to $22.88............................................ 2,156 $13.77
----- ------
</TABLE>
F-18
<PAGE> 101
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In addition to the granting of stock options, the Company has granted
shares of restricted stock. Restrictions on certain shares lapse 100% three
years from the date of grant. Restrictions on the remaining shares lapse in
annual installments of 33% commencing one year from date of grant. The unearned
compensation resulting from the grant of restricted shares is reported as a
reduction to shareholders' equity in the Consolidated Balance Sheets and is
being charged to earnings over the period the restricted shares vest.
Shares available for grant at December 31, 1997 under the stock option
plans were 138,569.
16. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are liable for lease payments
and are defendants in various lawsuits, including actions involving
asbestos-containing products and certain environmental proceedings.
With respect to asbestos product liability and related litigation costs, as
of December 31, 1997 and 1996, two subsidiaries of the Company were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700
actions, respectively (including approximately 2,400 and 5,100 actions,
respectively, in advanced stages of processing), filed in various states by
plaintiffs alleging injury or death as a result of exposure to asbestos fibers.
During 1997, 1996 and 1995, two subsidiaries of the Company received
approximately 38,200, 39,900 and 44,000 new actions, respectively. Through
December 31, 1997, approximately 199,000 of the approximately 309,000 total
actions brought have been settled or otherwise disposed of.
The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1,000 or more in compensatory damages and $2,000
or more in punitive damages. Although the law in each state differs to some
extent, it appears, based on advice of counsel, that liability for compensatory
damages would be shared among all responsible defendants, thus limiting the
potential monetary impact of such judgments on any individual defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in which
neither the Company nor any of its subsidiaries were parties, that held
insurance carriers are obligated to cover asbestos-related bodily injury actions
if any injury or disease process, from first exposure through manifestation,
occurred during a covered policy period (the "continuous trigger theory of
coverage"), the Company settled litigation with its primary and most of its
first-level excess insurance carriers, substantially on the basis of the Court's
ruling. The Company has negotiated a final agreement with most of its excess
carriers that are in the layers of coverage immediately above its first layer.
The Company is currently receiving payments pursuant to this agreement. The
Company believes that, with respect to the remaining carriers, a final agreement
can be achieved without litigation and on substantially the same basis that it
has resolved the issues with its other carriers. Settlements are generally made
on a group basis with payments made to individual claimants over periods of one
to four years. Payments were made with respect to asbestos liability and related
costs aggregating $59,247 in 1997, $71,354 in 1996 and $56,739 in 1995,
substantially all of which were covered by insurance. Related to payments not
covered by insurance, the Company recorded charges to operations amounting to
$8,000 in 1997, $8,000 in 1996 and $5,000 in 1995.
In accordance with the Company's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where the
Company can reasonably estimate the cost to dispose of these actions. As of
December 31, 1997, the Company estimates that the aggregate remaining cost of
the disposition of the settled actions for which payments remain to be made and
actions in advanced stages of processing, including associated legal costs, is
approximately $47,350, and the Company expects that this cost will be
substantially covered by insurance.
With respect to the 107,600 outstanding actions as of December 31, 1997,
which are in preliminary procedural stages, the Company lacks sufficient
information upon which judgments can be made as to the validity
F-19
<PAGE> 102
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
or ultimate disposition of such actions, thereby making it difficult to estimate
with reasonable certainty the potential liability or costs to the Company. When
asbestos actions are received they are typically forwarded to local counsel to
ensure that the appropriate preliminary procedural response is taken. The
complaints typically do not contain sufficient information to permit a
reasonable evaluation as to their merits at the time of receipt, and in
jurisdictions encompassing a majority of the outstanding actions, the practice
has been that little or no discovery or other action is taken until several
months prior to the date set for trial. Accordingly, the Company generally does
not have the information necessary to analyze the actions in sufficient detail
to estimate the ultimate liability or costs to the Company, if any, until the
actions appear on a trial calendar. A determination to seek dismissal, to
attempt to settle or to proceed to trial is typically not made prior to the
receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that the
Company's subsidiaries will receive in the future. The Company has noted that,
with respect to recently settled actions or actions in advanced stages of
processing, the mix of the injuries alleged and the mix of the occupations of
the plaintiffs have been changing from those traditionally associated with the
Company's asbestos-related actions. The Company is not able to determine with
reasonable certainty whether this trend will continue. Based upon the foregoing,
and due to the unique factors inherent in each of the actions, including the
nature of the disease, the occupation of the plaintiff, the presence or absence
of other possible causes of a plaintiff's illness, the availability of legal
defenses, such as the statute of limitations or state of the art, and whether
the lawsuit is an individual one or part of a group, management is unable to
estimate with reasonable certainty the cost of disposing of outstanding actions
in preliminary procedural stages or of actions that may be filed in the future.
However, the Company believes that its subsidiaries are in a favorable position
compared to many other defendants because, among other things, the asbestos
fibers in its asbestos-containing products were encapsulated. Considering the
foregoing, as well as the experience of the Company's subsidiaries and other
defendants in asbestos litigation, the likely sharing of judgments among
multiple responsible defendants, and the substantial amount of insurance
coverage that the Company expects to be available from its solvent carriers, the
Company believes that pending and reasonably anticipated future actions are not
likely to have a material effect on the Company's results of operations and
financial condition.
Although the insurance coverage which the Company has is substantial, it
should be noted that insurance coverage for asbestos claims is not available to
cover exposures initially occurring on and after July 1, 1984. The Company's
subsidiaries continue to be named as defendants in new cases, some of which
allege initial exposure after July 1, 1984.
In addition to claims for personal injury, the Company's subsidiaries have
been involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and private
commercial buildings. Based upon proceedings to date, the overwhelming majority
of these claims have been resolved without a material adverse impact on the
Company. Likewise, the insignificant number of claims remaining to be resolved
are not expected to have a material effect on the Company's results of
operations and financial condition.
F-20
<PAGE> 103
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company has recorded an accrual for its liabilities for
asbestos-related matters that are deemed probable and can be reasonably
estimated (settled actions and actions in advanced stages of processing), and
has separately recorded an asset equal to the amount of such liabilities that is
expected to be recovered by insurance. In addition, the Company has recorded a
receivable for that portion of payments previously made for asbestos product
liability actions and related litigation costs that is recoverable from its
insurance carriers. Liabilities for asbestos-related matters and the receivable
from insurance carriers included in the Consolidated Balance Sheets were as
follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts and notes receivable............................... $56,039 $67,012
Other assets................................................ 16,249 18,728
Accrued expenses............................................ 50,688 60,659
Other liabilities........................................... 2,682 10,879
</TABLE>
With respect to environmental proceedings, the Company has been notified
that it is among the Potentially Responsible Parties under federal environmental
laws, or similar state laws, relative to the costs of investigating and in some
cases remediating contamination by hazardous materials at several sites. Such
laws impose joint and several liability for the costs of investigating and
remediating properties contaminated by hazardous materials. Liability for these
costs can be imposed on present and former owners or operators of the properties
or on parties who generated the wastes that contributed to the contamination.
The Company's policy is to accrue environmental remediation costs when it is
both probable that a liability has been incurred and the amount can be
reasonably estimated. While it is often difficult to reasonably quantify future
environmental-related expenditures, the Company currently estimates its future
non-capital expenditures related to environmental matters to range between
$27,000 and $50,000. In connection with these expenditures, the Company has
accrued $31,716 at December 31, 1997 representing management's best estimate of
probable non-capital environmental expenditures. These non-capital expenditures
are estimated to be incurred over the next 10 to 20 years. In addition, capital
expenditures aggregating $5,000 may be required during the next two years
related to environmental matters. Although the Company is pursuing insurance
recovery in connection with certain of these matters, no receivable has been
recorded with respect to any potential recovery of costs in connection with any
environmental matters.
Under operating lease commitments, expiring on various dates after December
31, 1997, the Company and certain of its subsidiaries are obligated as of
December 31, 1997, to pay rentals totaling $30,658 as follows: $5,482 in 1998,
$4,970 in 1999, $3,573 in 2000, $2,673 in 2001, $1,973 in 2002 and $11,987 in
later years.
At December 31, 1997, the Company had committed to a minimum employer
contribution of $15,806 to the Company's 401K plans.
17. SEGMENT INFORMATION
As discussed in note 2 to consolidated financial statements, the Company
divested all of its automotive OE components businesses in 1996. As a result of
the divestitures, the Company is now reporting the results of its business units
in two operating segments, Aerospace and Industrial.
F-21
<PAGE> 104
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Information on total assets, depreciation of property, plant and equipment
and capital expenditures by industry segment was as follows for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Total assets:
Aerospace................................................. $437.3 $415.5 $391.3
Industrial................................................ 310.6 287.2 298.3
Corporate unallocated..................................... 185.1 146.8 134.3
------ ------ ------
Subtotal............................................... 933.0 849.5 823.9
Discontinued operations................................... -- -- 70.6
------ ------ ------
Total.................................................. $933.0 $849.5 $894.5
====== ====== ======
Depreciation of property, plant and equipment:
Aerospace................................................. $ 13.4 $ 12.2 $ 12.3
Industrial................................................ 14.0 12.9 12.9
Corporate unallocated..................................... 2.3 1.9 1.6
------ ------ ------
Subtotal............................................... 29.7 27.0 26.8
Discontinued operations................................... -- 3.5 5.7
------ ------ ------
Total.................................................. $ 29.7 $ 30.5 $ 32.5
====== ====== ======
Capital expenditures:
Aerospace................................................. $ 46.9 $ 26.9 $ 17.6
Industrial................................................ 31.4 13.7 13.7
Corporate unallocated..................................... 2.9 4.0 2.6
------ ------ ------
Subtotal............................................... 81.2 44.6 33.9
Discontinued operations................................... -- 5.4 8.6
------ ------ ------
Total.................................................. $ 81.2 $ 50.0 $ 42.5
====== ====== ======
</TABLE>
F-22
<PAGE> 105
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Information by geographic segment was as follows for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
OPERATING TOTAL
SALES INCOME ASSETS
-------- --------- ------
(IN MILLIONS)
<S> <C> <C> <C>
1997
Domestic operations......................................... $1,027.2 $198.4 $590.1
Foreign operations.......................................... 287.7 39.1 157.8
-------- ------ ------
Total segments.............................................. 1,314.9 237.5 747.9
Corporate unallocated....................................... -- (39.7) 185.1
-------- ------ ------
Total.................................................. $1,314.9 $197.8 $933.0
======== ====== ======
1996
Domestic operations......................................... $ 888.6 $182.5 $554.2
Foreign operations.......................................... 271.1 16.2 148.5
-------- ------ ------
Total segments.............................................. 1,159.7 198.7 702.7
Corporate unallocated....................................... -- (41.1) 146.8
-------- ------ ------
Total.................................................. $1,159.7 $157.6 $849.5
======== ====== ======
1995
Domestic operations*........................................ $ 854.0 $168.7 $554.8
Foreign operations.......................................... 245.6 10.3 205.4
-------- ------ ------
Total segments.............................................. 1,099.6 179.0 760.2
Corporate unallocated....................................... -- (37.0) 134.3
-------- ------ ------
Total.................................................. $1,099.6 $142.0 $894.5
======== ====== ======
</TABLE>
- ---------------
* Includes total assets from discontinued operations.
18. SUPPLEMENTARY EARNINGS INFORMATION
The following expenses were included in the Consolidated Statements of
Earnings for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Maintenance................................................. $24,000 $22,816 $22,633
Taxes, other than federal income taxes
Payroll................................................... 30,025 24,633 24,379
Property.................................................. 4,928 4,626 4,226
State and local........................................... 6,241 5,121 2,601
Rent........................................................ 8,950 9,965 8,604
Research and developments costs............................. 46,548 44,125 45,730
</TABLE>
19. SUBSEQUENT EVENTS
On January 30, 1998, the Company acquired Marine and Petroleum Mfg. Inc.'s
manufacturing facilities based in Texas for approximately $17,000. The plants
acquired produce flexible graphite and Teflon sealing products used in the
petrochemical industry. Combined annual sales for these facilities are expected
to approximate $18,000. The Company also acquired Tex-o-Lon and Repro-Lon for
approximately $25,000. These
F-23
<PAGE> 106
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
two Texas businesses have combined annual sales of $15,000. Tex-o-Lon
manufactures, machines and distributes Teflon products, primarily for the
semiconductor industry. Repro-Lon reprocesses Teflon compounds for the chemical
and semiconductor industries. The acquisitions were accounted for as purchases;
accordingly, the purchase price, which was financed through available cash
resources, was allocated to the acquired assets based upon their fair market
values.
On February 2, 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45,600. This division, with facilities in France and South
Carolina, produces high-technology metallic gaskets used in the nuclear,
petroleum and chemical industries. Sales for 1998 are expected to approximate
$38,000. This acquisition will be accounted for as a purchase and the purchase
price, also financed through available cash resources, will be allocated to the
acquired assets based upon their fair market values.
In February 1998, the Company amended its existing credit facility
increasing the total commitment to $900,000 from $850,000.
20. SUPPLEMENTAL GUARANTOR INFORMATION
Substantially all the Company's subsidiaries incorporated in the United
States (the "Subsidiary Guarantors") have fully and unconditionally guaranteed
the Company's obligations to pay principal and interest with respect to the
Company's 7 1/2% Senior Notes Due 2008. The subsidiaries of the Company that are
not Subsidiary Guarantors are referred to in this note as the "Non-Guarantor
Subsidiaries".
The following supplemental consolidating condensed financial statements
present balance sheets as of December 31, 1997 and 1996 and statements of
earnings and of cash flows for the years ended December 31, 1997, 1996 and 1995.
In the consolidating financial statements, Coltec Industries Inc ("Parent")
accounts for its investments in wholly-owned subsidiaries using the equity
method and the Subsidiary Guarantors account for their investments in
Non-Subsidiary Guarantors using the equity method. Interest expense related to
the indebtedness under the Company's credit agreement and its three series of
senior notes is allocated to United States subsidiaries based on net sales.
F-24
<PAGE> 107
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $430,206 $586,901 $340,833 $(43,071) $1,314,869
Cost of sales................... 295,466 394,948 250,926 (43,071) 898,269
-------- -------- -------- -------- ----------
Gross profit.................... 134,740 191,953 89,907 -- 416,600
Selling and administrative...... 49,854 122,251 46,703 -- 218,808
-------- -------- -------- -------- ----------
Operating income................ 84,886 69,702 43,204 -- 197,792
Equity earnings of
subsidiaries.................. 55,570 22,156 -- (77,726) --
Interest expense and other,
net........................... (30,505) (54,975) 31,437 -- (54,043)
-------- -------- -------- -------- ----------
Earnings before income taxes.... 109,951 36,883 74,641 (77,726) 143,749
Income taxes.................... 15,077 8,630 25,168 -- 48,875
-------- -------- -------- -------- ----------
Net earnings.................... $ 94,874 $ 28,253 $ 49,473 $(77,726) $ 94,874
======== ======== ======== ======== ==========
</TABLE>
F-25
<PAGE> 108
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $363,743 $530,876 $285,875 $(20,803) $1,159,691
Cost of sales................... 253,345 360,074 218,507 (20,803) 811,123
-------- -------- -------- -------- ----------
Gross profit.................... 110,398 170,802 67,368 -- 348,568
Selling and administrative...... 32,749 82,812 75,432 190,993
-------- -------- -------- -------- ----------
Operating income................ 77,649 87,990 (8,064) -- 157,575
Equity earnings of
subsidiaries.................. 43,755 12,820 -- (56,575) --
Interest expense and other,
net........................... (66,891) (16,676) 8,673 (74,894)
-------- -------- -------- -------- ----------
Earnings from continuing
operations before income taxes
and extraordinary item........ 54,513 84,134 609 (56,575) 82,681
Income taxes.................... (19,309) 24,672 22,748 28,111
-------- -------- -------- -------- ----------
Earnings from continuing
operations before
extraordinary item............ 73,822 59,462 (22,139) (56,575) 54,570
Discontinued operations (net of
tax).......................... 37,931 -- 19,252 57,183
Extraordinary item (net of
tax).......................... (30,614) -- -- (30,614)
-------- -------- -------- -------- ----------
Net earnings.................... $ 81,139 $ 59,462 $ (2,887) $(56,575) $ 81,139
======== ======== ======== ======== ==========
</TABLE>
F-26
<PAGE> 109
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales........................ $472,806 $379,419 $253,071 $ (5,672) $1,099,624
Cost of sales.................... 317,612 242,777 189,484 (5,672) 744,201
-------- -------- -------- -------- ----------
Gross profit..................... 155,194 136,642 63,587 -- 355,423
Selling and administrative....... 89,562 77,614 19,225 186,401
Special charges.................. 27,000 -- -- 27,000
-------- -------- -------- -------- ----------
Operating income................. 38,632 59,028 44,362 -- 142,022
Equity earnings in
subsidiaries................... 58,100 12,820 -- (70,920) --
Interest expense and other,
net............................ (79,910) (9,264) (712) (89,886)
-------- -------- -------- -------- ----------
Earnings from continuing
operations before income taxes
and extraordinary item......... 16,822 62,584 43,650 (70,920) 52,136
Income taxes..................... (18,850) 21,827 14,638 17,615
-------- -------- -------- -------- ----------
Earnings from continuing
operations before extraordinary
item........................... 35,672 40,757 29,012 (70,920) 34,521
Discontinued operations (net of
tax)........................... 35,488 1,151 -- 36,639
Extraordinary item (net of
tax)........................... (254) -- (254)
-------- -------- -------- -------- ----------
Net earnings..................... $ 70,906 $ 41,908 $ 29,012 $(70,920) $ 70,906
======== ======== ======== ======== ==========
</TABLE>
F-27
<PAGE> 110
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents..... $ 9,912 $ 722 $ 4,059 $ 14,693
Accounts and notes receivable,
net......................... -- 60,881 59,430 120,311
Inventory, net................ 99,100 71,958 85,678 256,736
Deferred income taxes......... 4,535 10,689 (29) 15,195
Other current assets.......... 4,540 10,406 5,562 20,508
---------- -------- -------- ----------- --------
Total current assets........ 118,087 154,656 154,700 -- 427,443
Intercompany, net............. (741,897) 10,933 730,964 --
Investments in affiliates..... 1,057,890 355,399 2,688 $(1,415,977) --
Property, plant and
equipment................... 89,488 118,405 79,726 287,619
Cost in excess of net assets
acquired, net............... 21,820 133,441 2,490 157,751
Other assets.................. 40,266 3,490 16,465 60,221
---------- -------- -------- ----------- --------
Total assets................ $ 585,654 $776,324 $987,033 $(1,415,977) $933,034
========== ======== ======== =========== ========
Total current liabilities..... $ 93,669 $ 49,494 $ 96,415 $239,578
Long term debt................ 689,302 1,611 66,665 757,578
Deferred income taxes......... (32,780) 101,871 10,138 79,229
Other liabilities............. 39,706 12,844 10,544 $ (2,202) 60,892
Liabilities of discontinued
operations.................. 154,918 -- -- 154,918
Shareholders' equity.......... (359,161) 610,504 803,271 (1,413,775) (359,161)
---------- -------- -------- ----------- --------
Total liabilities and
shareholders' equity..... $ 585,654 $776,324 $987,033 $(1,415,977) $933,034
========== ======== ======== =========== ========
</TABLE>
F-28
<PAGE> 111
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------------------------
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....... $ 5,475 $ 570 $ 8,984 $ 15,029
Accounts and notes receivable,
net........................... 38,773 49,556 101,996 190,325
Inventory, net.................. 77,816 54,269 72,113 204,198
Deferred income taxes........... 5,566 8,830 (3,872) 10,524
Other current assets............ 14,417 5,583 2,895 22,895
---------- -------- -------- ----------- ---------
Total current assets.......... 142,047 118,808 182,116 -- 442,971
Intercompany, net............... (955,038) 274,177 680,861 --
Investments in affiliates....... 1,159,429 97,481 -- $(1,256,910) --
Property, plant and equipment... 72,933 75,166 66,691 214,790
Cost in excess of net assets
acquired, net................. 14,728 115,525 2,619 132,872
Other assets.................... 39,025 954 18,890 58,869
---------- -------- -------- ----------- ---------
Total assets.................. $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502
========== ======== ======== =========== =========
Total current liabilities....... $ 11,341 $ 7,541 $208,514 $ 227,396
Long term debt.................. 689,116 -- 28,606 717,722
Deferred income taxes........... (49,402) 92,120 7,928 50,646
Other liabilities............... 68,337 6,989 24,679 100,005
Liabilities of discontinued
operations.................... 170,740 -- -- 170,740
Shareholders' equity............ (417,008) 575,461 681,450 $(1,256,910) (417,007)
---------- -------- -------- ----------- ---------
Total liabilities and
shareholders' equity....... $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502
========== ======== ======== =========== =========
</TABLE>
F-29
<PAGE> 112
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
NON-GUARANTOR
PARENT GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating activities... $ 66,192 $ 152 $ (4,925) -- $ 61,419
--------- -------- --------- -------- ---------
Cash flows from investing
activities:
Capital expenditures........... (28,720) (29,542) (22,956) (81,218)
Acquisition of businesses...... (32,716) (27,995) -- (60,711)
Cash from (to) Parent.......... (80,493) 57,537 22,956 --
--------- -------- --------- -------- ---------
Cash used in investing
activities................ (141,929) -- -- -- (141,929)
--------- -------- --------- -------- ---------
Cash flows from financing
activities:
Issuance of long-term debt..... 813 -- -- 813
Repayment of long-term debt.... (4,929) (133) (3,051) (8,113)
Increase (decrease) in
revolving facility, net..... (500) -- 40,000 39,500
Purchase of treasury stock..... (42,695) -- -- (42,695)
Proceeds from sale of accounts
receivable.................. -- -- 82,500 82,500
Proceeds from exercise of
stock options............... 8,169 -- -- 8,169
Cash from (to) Parent.......... 119,316 133 (119,449) --
--------- -------- --------- -------- ---------
Cash provided by financing
activities................ 80,174 -- -- -- 80,174
--------- -------- --------- -------- ---------
Increase (decrease) in cash and
cash equivalents............... 4,437 152 (4,925) (336)
Cash and cash equivalents --
beginning of period............ 5,475 570 8,984 15,029
--------- -------- --------- -------- ---------
Cash and cash equivalents --
end of period.................. $ 9,912 $ 722 $ 4,059 -- $ 14,693
========= ======== ========= ======== =========
</TABLE>
F-30
<PAGE> 113
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating
activities.................... $ 43,920 $ (179) $ 5,762 -- $ 49,503
--------- ------- -------- -------- ---------
Cash flows from investing
activities:
Capital expenditures.......... (20,799) (8,376) (15,375) (44,550)
Proceeds from divestitures.... 329,113 -- -- 329,113
Cash from (to) Parent......... (23,751) 8,376 15,375 --
--------- ------- -------- -------- ---------
Cash provided by investing
activities............... 284,563 -- -- -- 284,563
--------- ------- -------- -------- ---------
Cash flows from financing
activities:
Proceeds from debt
refinancing................ 542,000 -- -- 542,000
Repayment of long-term debt... (622,582) -- -- (622,582)
Decrease in revolving
facility, net.............. (196,000) -- -- (196,000)
Purchase of treasury stock.... (46,426) -- -- (46,426)
--------- ------- -------- -------- ---------
Cash used in financing
activities............... (323,008) -- -- -- (323,008)
--------- ------- -------- -------- ---------
Increase (decrease) in cash and
cash equivalents.............. 5,475 (179) 5,762 11,058
Cash and cash equivalents --
beginning of period........... -- 749 3,222 3,971
--------- ------- -------- -------- ---------
Cash and cash equivalents -- end
of period..................... $ 5,475 $ 570 $ 8,984 -- $ 15,029
========= ======= ======== ======== =========
</TABLE>
F-31
<PAGE> 114
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating
activities.................... $ 89,825 $ (485) $ 1,668 -- $ 91,008
-------- ------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures.......... (25,559) (8,900) (8,037) (42,496)
Acquisition of business....... (21,750) -- -- (21,750)
Other......................... (2,512) -- -- (2,512)
Cash from (to) Parent......... (16,937) 8,900 8,037 --
-------- ------- -------- -------- --------
Cash used in investing
activities............... (66,758) -- -- -- (66,758)
-------- ------- -------- -------- --------
Cash flows from financing
activities:
Issuance of long-term debt.... -- -- 19,070 19,070
Repayment of long-term debt... (11,084) -- (2,453) (13,537)
Decrease in revolving
facility, net.............. (30,000) -- -- (30,000)
Cash from (to) Parent......... 16,617 -- (16,617) --
-------- ------- -------- -------- --------
Cash used in financing
activities............... (24,467) -- -- -- (24,467)
-------- ------- -------- -------- --------
Increase (decrease) in cash
and cash equivalents....... (1,400) (485) 1,668 (217)
Cash and cash equivalents --
beginning of period........ 1,400 1,234 1,554 4,188
-------- ------- -------- -------- --------
Cash and cash equivalents --
end of period.............. -- $ 749 $ 3,222 -- $ 3,971
======== ======= ======== ======== ========
</TABLE>
F-32
<PAGE> 115
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE ISSUER OR ANY OF THEIR AGENTS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. 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 OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE ISSUER SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... ii
Incorporation of Certain Documents by
Reference.............................. iii
Prospectus Summary.......................
Risk Factors............................. 1
Coltec Capital Trust..................... 6
Use of Proceeds.......................... 7
Price Range of Common Stock and Dividend
Policy................................. 7
Capitalization........................... 8
Selected Consolidated Financial and Other
Data................................... 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 10
Business................................. 18
Management............................... 32
Description of the Convertible Preferred
Securities............................. 34
Description of the Convertible Junior
Subordinated Debentures................ 48
Description of the Guarantee............. 56
Relationship Among the Convertible
Preferred Securities, the Convertible
Junior Subordinated Debentures and the
Guarantee.............................. 58
Description of Other Indebtedness........ 60
Description of Coltec Capital Stock...... 66
Accounting Treatment..................... 68
United States Taxation................... 69
Certain ERISA Considerations............. 73
Selling Holders.......................... 75
Plan of Distribution..................... 77
Legal Matters............................ 77
Independent Public Accountants........... 77
Index to Consolidated Financial
Statements............................. F-1
</TABLE>
- ---------------------------------------------------------
---------------------------------------------------------
COLTEC CAPITAL TRUST
Term Income
Deferrable Equity Securities (TIDES)(SM)
5 1/4% Convertible Preferred Securities
3,000,000 TIDES(SM)
fully and unconditionally guaranteed
on a subordinated basis by, and
convertible into Common Stock of,
COLTEC INDUSTRIES INC
PROSPECTUS
---------------------------------------------------------
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the amounts of expenses attributed to the
issuance of the Securities offered pursuant to this Registration Statement which
shall be borne by the Company. All of the expenses listed below, except the
Securities and Exchange Commission Registration Fee, represent estimates only.
<TABLE>
<CAPTION>
ESTIMATED
-----------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 44,250
Printing and Engraving Expenses............................. 50,000
Accounting Fees and Expenses................................ 20,000
Legal Fees and Expenses..................................... 100,000
Miscellaneous Fees and Expenses............................. 10,750
-----------
Total............................................. $ 225,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE COMPANY
Reference is made to Sections 1741 and 1742 of the 1988 Business
Corporation Law of the Commonwealth of Pennsylvania, which provide for
indemnification of directors and officers in certain circumstances. In addition,
Article VIII of the By-laws of Coltec provides that, except as prohibited by
law, any director, officer or employee of Coltec is entitled to be indemnified
in any action or proceeding in which he or she may be involved by virtue of
holding such position.
In addition, Coltec maintains a directors' and officers' liability
insurance policy and has entered into indemnification agreements with each of
its executive officers and directors.
The indemnification referred to above will not limit the liability of any
director or officer of Coltec for violation of any of the federal securities
laws.
THE TRUST
The Amended and Restated Declaration of Trust provides that no Trustee,
affiliate of any Administrative Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agent of the
Trust, or any employee or agent of the trust or its affiliates (each an
"Indemnified Person") shall be liable, responsible or accountable in damages or
otherwise to the Trust or any employee or agent of the trust or its affiliates
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by the
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Trustee, negligence) or willful misconduct
with respect to such acts or omissions. The Amended and Restated Declaration of
Trust also provides that to the fullest extent permitted by applicable law,
Coltec shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage or claim incurred by such Indemnified Person by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith on behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of authority conferred on such Indemnified
Person by the Declaration, except that no Indemnified Person shall be entitled
to be indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
Trustee, negligence) or willful misconduct with respect to such acts or
omissions. The Amended and Restated Declaration of Trust further provides that,
to the fullest extent permitted by applicable law, expenses (including legal
fees) incurred by an Indemnified Person in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by Coltec prior to the
final disposition of such claim, demand, action, suit or
II-1
<PAGE> 117
proceeding upon receipt by or an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified for the underlying cause of action as
authorized by the Declaration. The directors and officers of Coltec and the
Administrative Trustees are covered by insurance policies indemnifying them
against certain liabilities, including certain liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), which might be
incurred by them in such capacities and against which they cannot be indemnified
by the Company or the Trust. The Selling Holders will be indemnified by the
Company and the Trust, jointly and severally, against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. The Company and the Trust will be
indemnified by the Selling Holders severally against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
*4.1 Certificate of Trust of Coltec Capital Trust.
*4.2 Amended and Restated Declaration of Trust of Coltec Capital
Trust dated as of April 14, 1998, among Coltec Industries
Inc, as sponsor, The Bank of New York, as Property Trustee,
and The Bank of New York (Delaware), as Delaware Trustee,
and the individuals named as Administrative Trusts therein.
*4.3 Indenture dated April 14, 1998, between Coltec Industries
Inc and The Bank of New York, as trustee, relating to the
5 1/4% Convertible Junior Subordinated Deferrable Interest
Debentures Subordinated Debentures.
*4.4 Form of 5 1/4% Convertible Preferred Security (included in
Exhibit 4.2 above).
*4.5 Form of 5 1/4% Convertible Junior Subordinated Deferrable
Interest Debenture Due 2028 (included in Exhibit 4.3 above).
*4.6 Guarantee Agreement, dated April 14, 1998, among Coltec
Industries Inc and The Bank of New York, as trustee.
*4.7 Registration Rights Agreement, dated as of April 14, 1998,
among Coltec Industries Inc, Coltec Capital Trust and the
Initial Purchasers named therein.
4.8 Fifth Amendment to the Credit Agreement, dated as of March
16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the
Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, the Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
(Incorporated by reference to Exhibit 4.4 to Coltec's
Registration Statement on Form S-4, filed May 18, 1998)
4.9 Consent and Agreement, dated as of March 31, 1998, with
respect to the Credit Agreement among Coltec, Coltec
Aerospace Canada Ltd., the Subsidiary Guarantors named
therein, the financial institutions party thereto from time
to time, Bank of America National Trust and Savings
Association, as Documentation Agent, The Chase Manhattan
Bank, as Syndication Agent, Bankers Trust Company, as
Administrative Agent, and Bank of Montreal, as Canadian
Paying Agent. (Incorporated by reference to Exhibit 4.5 to
Coltec's Registration Statement on Form S-4, filed May 18,
1998)
4.10 Modification to Fifth Amendment to Credit Agreement, dated
as of April 20, 1998, among Coltec, Coltec Aerospace Canada
Ltd., the Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
(Incorporated by reference to Exhibit 4.6 to Coltec's
Registration Statement on Form S-4, filed May 18, 1998)
4.11 The Amended and Restated Company Pledge Agreement, dated as
of March 24, 1998, made by Coltec in favor of Bankers Trust
Company as collateral agent. (Incorporated by reference to
Exhibit 4.7 to Coltec's Registration Statement on Form S-4,
filed May 18, 1998)
4.12 The Amended and Restated Company Security Agreement, dated
as of March 24, 1998, made by Coltec in favor of Bankers
Trust Company as collateral agent. (Incorporated by
reference to Exhibit 4.8 to Coltec's Registration Statement
on Form S-4, filed May 18, 1998)
</TABLE>
II-2
<PAGE> 118
<TABLE>
<C> <S>
4.13 The Amended and Restated Subsidiary Pledge Agreement, dated March 24, 1998, made by the Subsidiary
named therein in favor of Bankers Trust Company as collateral agent. (Incorporated by reference to
Exhibit 4.9 to Coltec's Registration Statement on Form S-4, filed May 18, 1998)
4.14 The Amended and Restated Subsidiary Security Agreement, dated March 24, 1998, made by the Subsidiary
named therein in favor of Bankers Trust Company as collateral agent. (Incorporated by reference to
Exhibit 4.10 to Coltec's Registration Statement on Form S-4, filed May 18, 1998)
4.15 Second Amendment to Receivables Transfer and Administration Agreement, dated January 26, 1998,
between Coltec and Coltec North Carolina Inc. (Incorporated by reference to Exhibit 4.11 to Coltec's
Registration Statement on Form S-4, filed May 18, 1998)
**5.1 Opinion of Robert J. Tubbs, Executive Vice President, General Counsel and Secretary of Coltec
Industries Inc, as to the validity of the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures and the Guarantee.
**5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware Counsel to Coltec Industries Inc and
Coltec Capital Trust, as to certain matters of Delaware law relating to the securities being offered
hereby.
**8.1 Opinion of Cravath, Swaine & Moore, as to certain tax matters relating to the securities being
registered hereby.
*12.1 Computation of Ratio of Earnings to Fixed Charges and other Ratios.
**23.1 Consent of Robert J. Tubbs (included in Item 5.1).
**23.2 Consent of Richards, Layton & Finger, P.A. (included in Item 5.2).
**23.3 Consent of Cravath, Swaine & Moore (included in Item 8.1).
*23.4 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney (contained on the signature page).
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York
on Form T-1 in its capacity as Trustee for the Junior Subordinated Debentures.
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York
on Form T-1 in its capacity as Property Trustee.
*25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York
on Form T-1 in its capacity as Guarantee Trustee.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
II-3
<PAGE> 119
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a) (1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraph is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(b) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court to appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina on the 14th day of May, 1998.
COLTEC INDUSTRIES INC
/s/ JOHN W. GUFFEY, JR.
By:
Name: John W. Guffey, Jr.
Title: Chairman and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ JOHN W. GUFFEY, JR. Chairman, Chief Executive
- --------------------------------------------- Officer and Director
John W. Guffey, Jr.
/s/ NISHAN TESHOIAN President, Chief Operating
- --------------------------------------------- Officer and Director
Nishan Teshoian
/s/ DAVID D. HARRISON Executive Vice President,
- --------------------------------------------- Chief
David D. Harrison Financial Officer and Director
/s/ JOHN N. MAIER Vice President and Controller
- ---------------------------------------------
John N. Maier
Director
- ---------------------------------------------
Joseph R. Coppola
/s/ WILLIAM H. GRIGG Director
- ---------------------------------------------
William H. Grigg
</TABLE>
II-5
<PAGE> 121
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ DAVID I. MARGOLIS Director
- ---------------------------------------------
David I. Margolis
/s/ JOEL MOSES Director
- ---------------------------------------------
Joel Moses
Director
- ---------------------------------------------
Richard A. Stuckey
</TABLE>
II-6
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Coltec Capital Trust has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina, on May 15, 1998.
COLTEC CAPITAL TRUST
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: Administrative Trustee
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
/s/ DAVID D. HARRISON Administrative Trustee
- ---------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Administrative Trustee
- ---------------------------------------------
Robert J. Tubbs
/s/ THOMAS B. JONES, JR. Administrative Trustee
- ---------------------------------------------
Thomas B. Jones, Jr.
</TABLE>
II-7
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
<C> <S> <C>
*4.1 Certificate of Trust of Coltec Capital Trust................
*4.2 Amended and Restated Declaration of Trust of Coltec Capital
Trust dated as of April 14, 1998, among Coltec Industries
Inc, as sponsor, The Bank of New York, as Property Trustee,
and The Bank of New York (Delaware), as Delaware Trustee,
and the individuals named as Administrative Trusts
therein.....................................................
*4.3 Indenture dated April 14, 1998, between Coltec Industries
Inc and The Bank of New York, as trustee, relating to the
5 1/4% Convertible Junior Subordinated Deferrable Interest
Debentures Subordinated Debentures..........................
*4.4 Form of 5 1/4% Convertible Preferred Security (included in
Exhibit 4.2 above)..........................................
*4.5 Form of 5 1/4% Convertible Junior Subordinated Deferrable
Interest Debenture Due 2028 (included in Exhibit 4.3
above)......................................................
*4.6 Guarantee Agreement, dated April 14, 1998, among Coltec
Industries Inc and The Bank of New York, as trustee.........
*4.7 Registration Rights Agreement, dated as of April 14, 1998,
among Coltec Industries Inc, Coltec Capital Trust and the
Initial Purchasers named therein............................
**5.1 Opinion of Robert J. Tubbs, Executive Vice President,
General Counsel and Secretary of Coltec Industries Inc, as
to the validity of the Convertible Preferred Securities, the
Convertible Junior Subordinated Debentures and the
Guarantee...................................................
**5.2 Opinion of Richards, Layton & Finger, P.A., special Delaware
Counsel to Coltec Industries Inc and Coltec Capital Trust,
as to certain matters of Delaware law relating to the
securities being offered hereby.............................
**8.1 Opinion of Cravath, Swaine & Moore, as to certain tax
matters relating to the securities being registered
hereby......................................................
*12.1 Computation of Ratio of Earnings to Fixed Charges and other
Ratios......................................................
**23.1 Consent of Robert J. Tubbs (included in Item 5.1)...........
**23.2 Consent of Richards, Layton & Finger, P.A. (included in Item
5.2)........................................................
**23.3 Consent of Cravath, Swaine & Moore (included in Item 8.1)...
*23.4 Consent of Arthur Andersen LLP..............................
*24.1 Power of Attorney (contained on the signature page).........
*25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York on Form T-1 in its
capacity as Trustee for the Junior Subordinated Debentures..
*25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York on Form T-1 in its
capacity as Property Trustee................................
*25.3 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York on Form T-1 in its
capacity as Guarantee Trustee...............................
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 4.1
CERTIFICATE OF TRUST
OF
COLTEC CAPITAL TRUST
THIS CERTIFICATE OF TRUST of Coltec Capital Trust (the "Trust"), dated as
of April 8, 1998, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del C [section] 3801, et seq.)
(i) Name. The name of the business trust being formed hereby is Coltec
Capital Trust.
(ii) Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are The Bank of New York (Delaware), White Clay
Center, Route 273, Newark, Delaware 19711.
(iii) Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first-above written.
THE BANK OF NEW YORK,
As Property Trustee
By: /s/ Mary Beth Lewicki
--------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
THE BANK OF NEW YORK (DELAWARE),
As Delaware Trustee
By: /s/ Mary Jane Morrissey
--------------------------------
Name: Mary Jane Morrissey
Title: Authorized Signatory
By: /s/ Thomas B. Jones, Jr.
--------------------------------
THOMAS B. JONES, JR.
as Administrative Trustee
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/08/1998
981134787 - 2881660
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
================================================================================
Amended and Restated Declaration of Trust
of Coltec Capital Trust
among
Coltec Industries Inc
(as Sponsor),
THE BANK OF NEW YORK
(as Property Trustee),
THE BANK OF NEW YORK (DELAWARE)
(as Delaware Trustee)
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of April 14, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Interpretation and Definitions
SECTION 1.01. Definitions...............................................................................1
ARTICLE II Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application.........................................................11
SECTION 2.02. Lists of Holders of Securities...........................................................12
SECTION 2.03. Reports by the Property Trustee..........................................................12
SECTION 2.04. Periodic Reports to Property Trustee.....................................................12
SECTION 2.05. Evidence of Compliance with Conditions
Precedent................................................................................13
SECTION 2.06. Events of Default; Waiver................................................................13
SECTION 2.07. Event of Default; Notice.................................................................15
ARTICLE III Organization
SECTION 3.01. Name.....................................................................................16
SECTION 3.02. Office...................................................................................16
SECTION 3.03. Purpose..................................................................................16
SECTION 3.04. Authority................................................................................16
SECTION 3.05. Title to Property of the Trust...........................................................16
SECTION 3.06. Powers and Duties of the Administrative
Trustees.................................................................................17
SECTION 3.07. Prohibition of Actions by the Trust and
the Trustees.............................................................................20
SECTION 3.08. Powers and Duties of the Property
Trustee..................................................................................21
SECTION 3.09. Certain Duties and Responsibilities of
the Property Trustee.....................................................................23
SECTION 3.10. Certain Rights of Property Trustee.......................................................25
SECTION 3.11. Delaware Trustee.........................................................................28
SECTION 3.12. Execution of Documents...................................................................28
SECTION 3.13. Not Responsible for Recitals or Issuance
of Securities............................................................................28
SECTION 3.14. Duration of Trust........................................................................29
SECTION 3.15. Mergers..................................................................................29
ARTICLE IV Sponsor
SECTION 4.01. Sponsor's Purchase of Common Securities..................................................31
SECTION 4.02. Responsibilities of the Sponsor..........................................................31
SECTION 4.03. Guarantee of Payment of Trust
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Obligations..............................................................................32
ARTICLE V Trustees
SECTION 5.01. Number of Trustees.......................................................................32
SECTION 5.02. Delaware Trustee.........................................................................33
SECTION 5.03. Property Trustee; Eligibility............................................................33
SECTION 5.04. Qualifications of Administrative
Trustees and Delaware Trustee Generally..................................................34
SECTION 5.05. Initial Trustees.........................................................................34
SECTION 5.06. Appointment, Removal and Resignation of
Trustees.................................................................................35
SECTION 5.07. Vacancies Among Trustees.................................................................38
SECTION 5.08. Effect of Vacancies......................................................................39
SECTION 5.09. Meetings.................................................................................39
SECTION 5.10. Delegation of Power......................................................................39
SECTION 5.11. Merger, Conversion, Consolidation or
Succession to Business...................................................................40
ARTICLE VI Distributions
SECTION 6.01. Distributions............................................................................40
ARTICLE VII Issuance of Securities
SECTION 7.01. General Provisions Regarding Securities..................................................41
SECTION 7.02. Execution and Authentication.............................................................41
SECTION 7.03. Form and Dating..........................................................................42
SECTION 7.04. Registrar, Paying Agent and Conversion
Agent....................................................................................45
SECTION 7.05. Paying Agent to Hold Money in Trust......................................................46
SECTION 7.06. Replacement Securities...................................................................47
SECTION 7.07. Outstanding Preferred Securities.........................................................47
SECTION 7.08. Preferred Securities in Treasury.........................................................48
SECTION 7.09. Temporary Securities.....................................................................48
SECTION 7.10. Cancelation..............................................................................49
ARTICLE VIII Dissolution of Trust
SECTION 8.01. Dissolution of Trust.....................................................................49
ARTICLE IX Transfer and Exchange
SECTION 9.01. General..................................................................................50
SECTION 9.02. Transfer Procedures and Restrictions.....................................................52
SECTION 9.03. Deemed Security Holders..................................................................58
SECTION 9.04. Notices to Clearing Agency...............................................................58
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9.05. Appointment of Successor Clearing
Agency...................................................................................58
ARTICLE X Limitation of Liability of Holders of Securities, Trustees or Others
SECTION 10.01. Liability...............................................................................59
SECTION 10.02. Exculpation.............................................................................59
SECTION 10.03. Fiduciary Duty..........................................................................60
SECTION 10.04. Indemnification.........................................................................61
SECTION 10.05. Outside Businesses......................................................................61
ARTICLE XI Accounting
SECTION 11.01. Fiscal Year.............................................................................62
SECTION 11.02. Certain Accounting Matters..............................................................62
SECTION 11.03. Banking.................................................................................63
SECTION 11.04. Withholding.............................................................................63
ARTICLE XII Amendments and Meetings
SECTION 12.01. Amendments..............................................................................64
SECTION 12.02. Meetings of the Holders of Securities;
Action by Written Consent...............................................................65
ARTICLE XIII Representations of Property Trustee and Delaware Trustee
SECTION 13.01. Representations and Warranties of
Property Trustee........................................................................67
SECTION 13.02. Representations and Warranties of
Delaware Trustee........................................................................68
ARTICLE XIV Registration Rights
SECTION 14.01. Registration Rights.....................................................................69
ARTICLE XV Miscellaneous
SECTION 15.01. Notices.................................................................................69
SECTION 15.02. Governing Law...........................................................................70
SECTION 15.03. Intention of the Parties................................................................71
SECTION 15.04. Headings................................................................................71
SECTION 15.05. Successors and Assigns..................................................................71
SECTION 15.06. Partial Enforceability..................................................................72
SECTION 15.07. Counterparts............................................................................72
</TABLE>
iii
<PAGE> 5
Coltec Capital Trust
Certain Sections of this Trust Agreement relating to Sections 310
through 318 of the Trust Indenture Act of 1939.
<TABLE>
<CAPTION>
Trust Indenture Act Section Trust Agreement Section
- --------------------------- -----------------------
<S> <C>
Sec. 310(a)(1)........................................................................................7.07
(a)(2).......................................................................................7.07
(a)(3).......................................................................................7.09
(a)(4)................................................................................2.07(a)(ii)
(b)..........................................................................................7.08
Sec. 311(a)...........................................................................................7.13
(b)..........................................................................................7.13
Sec. 312(a)...........................................................................................5.07
(b)..........................................................................................5.07
(c)..........................................................................................5.07
Sec. 313(a)...........................................................................................7.14
(b)..........................................................................................7.14
(c)..........................................................................................7.14
(d)..........................................................................................7.14
Sec. 314(a)...........................................................................................7.15
(b)................................................................................Not Applicable
(c)(1).................................................................................7.16, 7.17
(c)(2).................................................................................7.16, 7.17
(c)(3).............................................................................Not Applicable
(d)................................................................................Not Applicable
(e)..........................................................................................7.17
Sec. 315(a)...............................................................................7.01(a), 7.03(a)
(b)...................................................................................7.02, 10.08
(c).......................................................................................7.01(a)
(d)....................................................................................7.01, 7.03
(e)................................................................................Not Applicable
Sec. 316(a).................................................................................Not Applicable
(a)(1)(A)..........................................................................Not Applicable
(a)(1)(B)..........................................................................Not Applicable
(a)(2).............................................................................Not Applicable
(b)................................................................................Not Applicable
(c)................................................................................Not Applicable
Sec. 317(a)(1)..............................................................................Not Applicable
(a)(2).............................................................................Not Applicable
(b)..........................................................................................5.09
Sec. 318(a)..........................................................................................10.10
</TABLE>
iv
<PAGE> 6
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed
to be a part of the Trust Agreement.
v
<PAGE> 7
AMENDED AND RESTATED DECLARATION
OF TRUST ("Declaration") dated and effective
as of April 14, 1998, by the undersigned
trustees (together with all other Persons
from time to time duly appointed and serving
as trustees in accordance with the
provisions of this Declaration, the
"Trustees"), COLTEC INDUSTRIES INC, a
Pennsylvania corporation, as trust sponsor
(the "Sponsor"), and by the holders, from
time to time, of undivided beneficial
interests in the Trust (as defined below)
issued pursuant to this Declaration;
WHEREAS the Trustees and the Sponsor established Coltec
Capital Trust (the "Trust") under the Business Trust Act (as hereinafter
defined) pursuant to a Declaration of Trust dated as of April 8, 1998 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on April 14, 1998, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer (as hereinafter defined); and
WHEREAS all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 8
ARTICLE I
Interpretation and Definitions
SECTION 1.01. Definitions. Unless the context otherwise
requires:
(a) capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in
this Declaration, and any capitalized term not defined in this
Declaration shall have the meaning assigned thereto in the Indenture;
(b) a term defined anywhere in this Declaration or the
Indenture has the same meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time
to time;
(d) all references in this Declaration to Articles, Sections,
Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Administrative Action" has the meaning set forth in the
definition of "Tax Event".
"Administrative Trustee" means any Trustee other than the
Property Trustee and the Delaware Trustee.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when
<PAGE> 9
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Appointment Event" means an event defined in the terms of the
Preferred Securities, as set forth in Annex I, which entitles the Holders of a
Majority in liquidation amount of the Preferred Securities to appoint a Special
Trustee.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Beneficiaries" has the meaning set forth in Section 4.03(a).
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Depositary as described in Section 9.04.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in New York, New York are
authorized or required by law or executive order to close or a day on which the
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Closing Date" means the First Closing Date as defined in the
Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE> 10
4
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section
7.01(a).
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Event of Default" means an Event of Default (as
defined in the Indenture) that has occurred and is continuing in respect of the
Debentures.
"Debenture Issuer" means the Sponsor in its capacity as issuer
of the Debentures.
"Debenture Trustee" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by
the Debenture Issuer under the Indenture to be held by the Property Trustee, a
specimen certificate for such series of Debentures being attached to the
Indenture as Exhibit A.
"Deferral Period" has the meaning set forth in the Indenture.
"Definitive Preferred Securities" means the Regulation S
Definitive Preferred Securities, the IAI Definitive Preferred Securities and any
other Preferred Securities in definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in Section 5.02.
"Depositary" means The Depository Trust Company, the initial
clearing agency.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.01.
<PAGE> 11
5
"Event of Default" means (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) a Debenture Event of Default; 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 (subject to the deferral of any due date in the case of a
Deferral Period); or
(iii) default by the Trust in the payment of any Redemption Price of
any 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 Trustees in the Declaration (other than
a covenant or warranty, a default in the performance of which or the
breach of which is addressed in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the
defaulting Issuer Trustee or Issuer Trustees by the holders of at least
25% in aggregate liquidation amount of the outstanding Preferred
Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Declaration; or
(v) the failure of the Sponsor to appoint a successor Property Trustee
in the manner required by Section 5.06(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Global Preferred Securities" means Rule 144A Global Preferred
Securities and/or Unrestricted Global Preferred Securities, as the context
requires.
"Guarantee" means the guarantee agreement to be dated as of
April 14, 1998, of the sponsor in respect of the Securities.
<PAGE> 12
6
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b) any Affiliate
of any Trustee; (c) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or (d) any employee or
agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of April 14, 1998,
between the Debenture Issuer and The Bank of New York, as trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be
issued.
"IAI Definitive Preferred Security" has the meaning as set
forth in 7.03(c).
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Legal Action" has the meaning set forth in Section 3.06(g).
"Like Amount" means (i) with respect to a redemption of
Preferred Securities having an aggregate liquidation amount equal to that
portion of the principal amount of 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
and the proceeds of which will be used to pay the applicable Redemption Price of
the Preferred Securities and (ii) with respect to a distribution of Debentures
to holders of Preferred Securities in connection with a dissolution or
liquidation of the Trust, Debentures having a principal amount equal to the
aggregate liquidation amount of the Securities of the Holder to whom such
Debentures are distributed.
"List of Holders" has the meaning set forth in Section
2.02(a).
<PAGE> 13
7
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities and by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Ministerial Action" has the meaning set forth in the terms of
the Securities as set forth in Annex I.
"Obligations" means any costs, expenses or liabilities of the
Trust, other than obligations of the Trust to pay to Holders of any Securities
or other similar interests in the Trust the amounts due such Holders pursuant to
the terms of the Securities or such other similar interests, as the case may be.
"Offering Circular" means the confidential offering circular,
dated as of April 8, 1998, relating to the issuance by the Trust of Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
<PAGE> 14
8
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Participants" has the meaning set forth in Section 7.03(b).
"Paying Agent" has the meaning specified in Section 3.08(h).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning specified in Section
7.01(a).
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.03.
"Property Trustee Account" has the meaning set forth in
Section 3.08(c).
"Purchase Agreement" has the meaning set forth in Section
7.03(a).
"Quorum" means a majority of the Administrative Trustees or,
if there are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning set forth in Annex I.
"Registration Default" has the meaning set forth in Section
14.01.
<PAGE> 15
9
"Registration Rights Agreement" means the Registration Rights
Agreement, dated April 14, 1998, among the Sponsor, the Trust, and the Initial
Purchasers named in the Purchase Agreement.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under, or with respect to, the documentation governing any
Debt.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Restricted Preferred Securities" shall include the IAI
Definitive Preferred Securities and the Rule 144A Global Preferred Securities.
"Restricted Securities Legend" has the meaning specified in
Section 9.02(j).
"Rule 144A Global Preferred Security" has the meaning
specified in Section 7.03(a).
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the
Rule 144A Global Preferred Security and any other Preferred Security in global
form.
"Securities Guarantees" means the Preferred Securities
Guarantee and the Common Securities Guarantee.
<PAGE> 16
10
"66-2/3% in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities and by the Trust
Indenture Act, Holders of outstanding Securities voting together as a single
class or, as the context may require, Holders of Preferred Securities or
Holder(s) of outstanding Common Securities voting separately as a class,
representing at least 66-2/3% of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions, to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Special Trustee" means a Administrative Trustee appointed by
the Holders of a Majority in liquidation amount of the Preferred Securities in
accordance with Section 5.06(a)(ii)(B).
"Sponsor" means Coltec Industries Inc, a Pennsylvania
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section
2.06(a)(ii).
"Tax Event" means the Property Trustee shall have received an
opinion of nationally recognized independent tax counsel to the Sponsor
(reasonably acceptable to the Trustees) experienced in such matters to the
effect that, as a result of (i) any amendment to or change (including any
announced prospective change (which shall not include a proposed change),
provided that a Tax Event shall not occur more than 90 days before the effective
date of any such prospective change) in the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein, (ii) any judicial decision or official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (iii) any amendment to or change in the
administrative position or interpretation of any Administrative Action or
judicial decision that differs from the theretofore generally accepted position,
in each case, by any legislative body, court, governmental agency or regulatory
body, irrespective of the manner in which such amendment or change is made
known, which amendment or change is effective
<PAGE> 17
11
or such Administrative Action or decision is announced, in each case, on or
after the date of original issuance of the Debentures or the issue date of the
Preferred Securities issued by the Trust, there is more than an insubstantial
risk that (a) if the Debentures are held by the Property Trustee, (x) the Trust
is, or will be within 90 days of the date of such opinion, subject to United
States Federal income tax with respect to interest accrued or received on the
Debentures or subject to more than a de minimis amount of other taxes, duties or
other governmental charges as determined by such counsel, or (y) interest
payable by the Sponsor to the Trust on the Debentures is not, or within 90 days
of the date of such opinion will not be, deductible by the Sponsor in whole or
in part for United States Federal income tax purposes or (b) with respect to
Debentures which are no longer held by the Property Trustee, interest payable by
the Sponsor on the Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Sponsor in whole or in part for United
States Federal income tax purposes.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holders of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities, voting separately as a class, representing 10% of
the aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee
<PAGE> 18
12
or the Trustees shall refer to such Person or Persons solely in their capacity
as trustees hereunder.
"Unrestricted Definitive Preferred Security" has the meaning
set forth in Section 9.02(c).
"Unrestricted Global Security" has the meaning set forth in
Section 9.02(b).
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This
Declaration is subject to the provisions of the Trust Indenture Act that are
required to be part of this Declaration, which are incorporated by reference in
and made part of this Declaration and shall, to the extent applicable, be
governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Securities. (a) Each of the
Sponsor and the Administrative Trustees on behalf of the Trust shall provide the
Property Trustee (i) within 14 days after each record date for payment of
Distributions, a list, in such form as the Property Trustee may reasonably
require, of the names and addresses of the Holders of the Securities ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Sponsor and the
Administrative Trustees on behalf of the Trust, and (ii) at
<PAGE> 19
13
any other time, within 30 days of receipt by the Trust of a written request for
a List of Holders as of a date no more than 14 days before such List of Holders
is given to the Property Trustee. The Property Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in Lists
of Holders given to it or which it receives in its capacity as Paying Agent (if
acting in such capacity) provided that the Property Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days
after May 15 of each year, commencing May 15, 1999 the Property Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of
the Sponsor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such documents, reports and information as required by
Section 314 of the Trust Indenture Act (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions
Precedent. Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
<PAGE> 20
14
SECTION 2.06. Events of Default; Waiver. (a) The Holders of a
Majority in liquidation amount of Preferred Securities may, by vote, on behalf
of the Holders of all of the Preferred Securities, waive any past Event of
Default in respect of the Preferred Securities and its consequences, provided
that, if the Event of Default:
(i) is caused by a Debenture Event of Default that is not waivable
under the Indenture, the Event of Default under the Declaration shall
also not be waivable;
(ii) is caused by a Debenture Event of Default that requires the
consent or vote of greater than a majority in principal amount of the
holders of the Debentures (a "Super Majority") to be waived under the
Indenture, the Event of Default under the Declaration may only be
waived by the vote of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding;
(iii) is the result of a default by the Trust in the payment of any
Distribution when it becomes due and payable, which default has
continued for 30 days (subject to the deferral of any due date in the
case of a Default Period), the Event of Default shall not be waivable;
or
(iv) is the result of a default by the Trust in the payment of any
Redemption Price of any Preferred Security when it becomes due and
payable, the Event of Default shall not be waivable.
Upon such waiver, any such default shall cease to exist, and
any Event of Default with respect to the Preferred Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or an Event of
Default with respect to the Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred Securities of an Event of
Default with respect to the Preferred Securities shall also be deemed to
constitute a waiver by the Holders of the Common Securities of any such Event of
Default with respect to the Common Securities for all purposes of this
Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
<PAGE> 21
15
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the Event of Default is
caused by a Debenture Event of Default that:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section
2.06(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Declaration as provided
below in this Section 2(b), the Event of Default under the Declaration
may only be waived by the vote of the Holders of at least the
proportion in liquidation amount of the Preferred Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences until the effects of all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. Subject to the foregoing provisions
of this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
shall be deemed to have been cured for every purpose of this Declaration, but no
such waiver shall extend to any subsequent or other default or Event of Default
with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of
<PAGE> 22
16
the corresponding Event of Default under this Declaration. The foregoing
provisions of this Section 2.06(c) shall be in lieu of Section 316(a)(1)(B) of
the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act
is hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.
SECTION 2.07. Event of Default; Notice. (a) The Property
Trustee shall, within three Business Days after the occurrence of an Event of
Default actually known to the Property Trustee, (i) transmit by mail, first
class postage prepaid, to the Holders of the Securities, and (ii) transmit by
any means provided for in this Declaration to the Administrative Trustees and
the Sponsor, notices of all defaults actually known to a Responsible Officer of
the Property Trustee, unless such defaults have been cured or waived before the
giving of such notice (the term "defaults" for the purposes of this Section
2.07(a) being hereby defined to be an Event of Default, not including any
periods of grace and irrespective of the giving of any notice); provided that,
except for a default in the payment of principal of (or premium, if any) or
interest on any of the Debentures or in the payment of any sinking fund
installment established for the Debentures, the Property Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Property Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge
of any default except:
(i) a default under Sections 5.01(1) and 5.01(2) of the
Indenture; or
(ii) any default as to which the Property Trustee shall have
received written notice.
<PAGE> 23
17
ARTICLE III
Organization
SECTION 3.01. Name. The Trust is named "Coltec Capital Trust,"
as such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Securities. The Trust's activities
may be conducted under the name of the Trust or any other name deemed advisable
by the Administrative Trustees.
SECTION 3.02. Office. The address of the principal office of
the Trust is c/o Coltec Industries Inc, 3 Coliseum Center, 2550 West Tyvola
Road, Charlotte, North Carolina 28217, Attention: Chief Financial Officer. On
ten Business Days' written notice to the Holders of Securities, the
Administrative Trustees may designate another principal office.
SECTION 3.03. Purpose. The exclusive purposes and functions of
the Trust are (a) to issue and sell Securities and use the proceeds from such
sale to acquire the Debentures, and (b) except as otherwise limited herein, to
engage in only those other activities necessary or incidental thereto. The Trust
shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States Federal income tax purposes as a grantor trust.
SECTION 3.04. Authority. Subject to the limitations provided
in this Declaration and to the specific duties of the Property Trustee, the
Administrative Trustees shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by the Administrative Trustees in
accordance with their powers shall constitute the act of and serve to bind the
Trust and an action taken by the Property Trustee in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.05. Title to Property of the Trust. Except as
provided in Section 3.08 with respect to the Debentures and the Property Trustee
Account or as otherwise
<PAGE> 24
18
provided in this Declaration, legal title to all assets of the Trust shall be
vested in the Trust. The Holders shall not have legal title to any part of the
assets of the Trust, but shall have an undivided beneficial interest in the
assets of the Trust.
SECTION 3.06. Powers and Duties of the Administrative
Trustees. The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided further, that there shall be no
interests in the Trust other than the Securities, and the issuance of Securities
shall be limited to simultaneous issuances of both Preferred Securities and
Common Securities on the Closing Date and any Optional Closing Date;
(b) in connection with the issue and sale of the Preferred
Securities to:
(i) assist in the preparation of an offering circular (the "Offering
Circular") in preliminary and final form prepared by the Sponsor, in
relation to the offering and sale of Preferred Securities to qualified
institutional buyers in reliance on Rule 144A under the Securities Act
and a limited number of institutional "accredited investors", as such
term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act and to execute and file with the Commission, at such time as
determined by the Sponsor, a registration statement prepared by the
Sponsor, including any amendments thereto in relation to the Preferred
Securities;
(ii) execute and file any documents prepared by the Sponsor, or take
any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Preferred Securities in any
State or foreign jurisdiction in which the Sponsor has determined to
qualify or register such Preferred Securities for sale;
(iii) execute and file an application, prepared by the Sponsor, to the
Portal(SM) Market ("PORTAL"), a subsidiary of The Nasdaq Stock Market,
Inc. and, at such time as determined by the Sponsor, to the New York
Stock Exchange
<PAGE> 25
19
or any other national stock exchange or the Nasdaq National Market for
listing or quotation of the Preferred Securities;
(iv) to execute and deliver letters, documents, or instruments with The
Depository Trust Company relating the Preferred Securities;
(v) execute and file with the Commission, at such time as determined by
the Sponsor, a registration statement on Form 8-A, including any
amendments thereto, prepared by the Sponsor relating to the
registration of the Preferred Securities under Section 12 of the
Exchange Act; and
(vi) execute and enter into the Registration Rights Agreement, the
Purchase Agreement and other related agreements providing for the sale
of the Preferred Securities;
(c) to acquire the Debentures with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders or Common Securities;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Tax Event; provided that the
Administrative Trustees shall consult with the Sponsor and the Property Trustee
before taking or refraining from taking any Ministerial Action in relation to a
Tax Event;
(e) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of the Securities;
<PAGE> 26
20
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of
the Trust Indenture Act to the Property Trustee, which certificate may be
executed by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election (i)
to defer payments of interest on the Debentures by extending the interest
payment period under the Indenture or (ii) to extend the scheduled maturity date
on the Debentures;
(n) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such existence
is necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
<PAGE> 27
21
(p) to take any action, not inconsistent with this Declaration
or with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.06, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes;
provided that such action does not materially adversely affect the interests of
Holders; and
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Administrative Trustees, on
behalf of the Trust.
The Administrative Trustees must exercise the powers set forth
in this Section 3.06 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.03, and the Administrative Trustees
shall not take any action that is inconsistent with the purposes and functions
of the Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees
shall have none of the powers or the authority of the Property Trustee set forth
in Section 3.08.
<PAGE> 28
22
SECTION 3.07. Prohibition of Actions by the Trust and the
Trustees. (a) The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity other than as required or authorized
by this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Securities; or
(vii) other than as provided in the Declaration or Annex I hereto, (A)
direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under Section 5.13 of the
Indenture, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required unless
the Trust shall have received an opinion of counsel to the effect that
such modification will not cause more than an insubstantial risk that
for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.08. Powers and Duties of the Property Trustee. (a)
The legal title to the Debentures shall be owned by and held of record in the
name of the Property
<PAGE> 29
23
Trustee in trust for the benefit of the Holders of the Securities. The right,
title and interest of the Property Trustee to the Debentures shall vest
automatically in each Person who may hereafter be appointed as Property Trustee
in accordance with Section 5.06. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with regard to the Debentures
have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust
account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of
the Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Property Trustee, deposit such
funds into the Property Trustee Account and make payments to the
Holders of the Preferred Securities and Holders of the Common
Securities from the Property Trustee Account in accordance with Section
6.01. Funds in the Property Trustee Account shall be held uninvested
until disbursed in accordance with this Declaration.
(ii) engage in such ministerial activities as so directed and as shall
be necessary or appropriate to effect the redemption of the Preferred
Securities and the Common Securities to the extent the Debentures are
redeemed or mature; and
(iii) upon written notice of distribution issued by the Administrative
Trustees in accordance with the terms of the Securities, engage in such
ministerial activities as so directed as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain special events (as may be
defined in the terms of the Securities) arising from a change in law or
a change in legal interpretation or other specified circumstances
pursuant to the terms of the Securities.
<PAGE> 30
24
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or the Property
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act.
(f) The Property Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has accepted
that appointment in accordance with Section 5.06.
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default occurs and is continuing, the
Property Trustee shall, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of such Securities.
(h) The Property Trustee will act as Paying Agent and
Registrar in New York (each, a "Paying Agent") to pay Distributions, redemption
payments or liquidation payments on behalf of the Trust with respect to all
securities and any such Paying Agent shall comply with Section 317(b) of the
Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at
any time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Property Trustee.
(i) Subject to this Section 3.08, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 3.06.
The Property Trustee must exercise the powers set forth in
this Section 3.08 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.03, and the Property Trustee shall not take
any
<PAGE> 31
25
action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.03.
SECTION 3.09. Certain Duties and Responsibilities of the
Property Trustee. (a) The Property Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property
Trustee shall be determined solely by the express provisions
of this Declaration and the Property Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration,
and no implied covenants or obligations shall be read into
this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee
<PAGE> 32
26
shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Declaration
(but need not confirm or investigate the accuracy of any
mathematical calculations or other facts stated therein);
(ii) the Property Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in
liquidation amount of the Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers;
(v) the Property Trustee's sole duty with respect to the custody, safe
keeping and physical preservation of the Debentures and the Property
Trustee Account shall be to deal with such property in a similar manner
as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Declaration and the Trust
Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or with
respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or
in connection therewith;
(vii) the Property Trustee shall not be liable for any interest on any
money received by it except as it may otherwise agree with the Sponsor
in writing. Money held by the Property Trustee need not be segregated
from other
<PAGE> 33
27
funds held by it except in relation to the Property Trustee Account
maintained by the Property Trustee pursuant to Section 3.08(c)(i) and
except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Property
Trustee be liable for the default or misconduct of the Administrative
Trustees or the Sponsor.
SECTION 3.10. Certain Rights of Property Trustee. (a) Subject
to the provisions of Section 3.09:
(i) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document (whether in its original or
facsimile form) believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative Trustees
contemplated by this Declaration shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Sponsor or the Administrative
Trustees;
(iv) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or
any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of its choice or
other experts and the advice or opinion of such
<PAGE> 34
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counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request
or direction of any Holder, unless such Holder shall have provided to
the Property Trustee adequate security and indemnity, which would
satisfy a reasonable person in the position of the Property Trustee,
against the costs, expenses (including its attorneys' fees and
expenses) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as
may be requested in writing by the Property Trustee; provided, that
nothing contained in this Section 3.10(a)(vi) shall be taken to relieve
the Property Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, security, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney at the sole cost of the Company and
shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation;
(viii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Property Trustee shall not be
responsible for any
<PAGE> 35
29
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents hereunder
shall bind the Trust and the Holders of the Securities, and the
signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the
Property Trustee (i) may request instructions from the Holders of the
Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Securities as would be
entitled to direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other action until
such instructions are received, and (iii) shall be protected in acting
in accordance with such instructions;
(xi) except as otherwise expressly provided by this Declaration, the
Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
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permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 3.11. Delaware Trustee. Notwithstanding any other
provision of this Declaration other than Section 5.02, the Delaware Trustee
shall not be entitled to exercise any powers, nor shall the Delaware Trustee
have any of the duties and responsibilities of the Administrative Trustees or
the Property Trustee described in this Declaration. Except as set forth in
Section 5.02, the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of Section 3807 of the Business Trust
Act.
SECTION 3.12. Execution of Documents. Except as otherwise
required by the Business Trust Act, any Administrative Trustee is authorized to
execute on behalf of the Trust any documents that the Administrative Trustees
have the power and authority to execute pursuant to Section 3.06; provided that,
the registration statement referred to in Section 3.06(b)(i), including any
amendments thereto, shall be signed by all of the Administrative Trustees.
SECTION 3.13. Not Responsible for Recitals or Issuance of
Securities. The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14. Duration of Trust. The Trust, unless dissolved
pursuant to the provisions of Article VIII hereof, shall exist until April 15,
2028.
SECTION 3.15. Mergers. (a) 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 Person, except as
described in Section 3.15(b) and (c) of this Declaration or paragraph 3 of Annex
I.
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31
(b) The Trust may, at the request of the Sponsor, with the
consent of a majority of the Administrative Trustees and without the consent of
the Holders of the Securities, the Delaware Trustee or the Property Trustee,
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets substantially as an entirety to, a
trust organized as such under the laws of any State; provided that:
(i) if the Trust is not the surviving entity, the successor entity (the
"Successor Entity") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Preferred
Securities (the "Successor Securities") as long as the
Successor Securities rank, with respect to participation in
the profits and distributions or in the assets of the
Successor Entity at least as high as the Preferred Securities
rank with respect to participation in the profits and
dividends or in the assets of the Trust;
(ii) the Sponsor expressly appoints a trustee of such Successor Entity
possessing the same powers and duties as the Property Trustee as the
Holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities are listed
or traded, or any Successor Securities will be listed or traded upon
notification of issuance, on any national securities exchange, national
automated quotation system or with any other organization on which the
Preferred Securities are then listed or traded, if any;
(iv) such merger, consolidation, amalgamation or replacement,
conveyance, transfer or lease 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, conveyance, transfer or
lease or replacement does not adversely affect the powers, preferences
and other special rights
<PAGE> 38
32
of the Holders of the Preferred Securities (including any Successor
Securities) in any material respect;
(vi) such Successor Entity has a purpose substantially identical and
limited to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation or replacement,
conveyance, transfer or lease, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust experienced in
such matters to the effect that:
(A) following such merger, consolidation,
amalgamation or replacement, conveyance, transfer or lease,
neither the Trust nor the Successor Entity will be required to
register as an Investment Company; and
(B) such merger, consolidation, amalgamation or
replacement conveyance, transfer or lease, will not adversely
affect the rights, preferences and privileges of the Holders
of the Securities (including any Successor Securities) in any
material respect; and
(viii) the Sponsor or any permitted successor or assignee owns all of
the Common Securities of such Successor Entity and provides a guarantee
to the Holders of the Successor Securities with respect to the
Successor Entity having substantially the same terms as the Preferred
Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in aggregate liquidation amount of
the Securities, 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 other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or Successor Entity to be classified as an association taxable as a
corporation or to substantially increase the likelihood that the Trust or
Successor Entity would be classified as other than a grantor trust for United
States federal income tax purposes.
<PAGE> 39
33
ARTICLE IV
Sponsor
SECTION 4.01. Sponsor's Purchase of Common Securities. On the
Closing Date the Sponsor will purchase an amount of Common Securities issued by
the Trust such that the aggregate liquidation amount of such Common Securities
purchased by the Sponsor shall at such date equal to at least 3% of the total
capital of the Trust.
SECTION 4.02. Responsibilities of the Sponsor. In connection
with the issue and sale of the Preferred Securities, the Sponsor shall have the
exclusive right and responsibility to engage in the following activities:
(a) to prepare the Offering Circular and to prepare for filing
by the Trust with the Commission the Registration Statement, including any
amendments thereto;
(b) to determine the States and foreign jurisdictions in which
to take appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than actions which
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to
PORTAL and to the New York Stock Exchange or any other national stock exchange
or the Nasdaq National Market for listing or quotation of the Preferred
Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12 of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of and execute and deliver the
Purchase Agreement, and to negotiate the terms of Registration Rights Agreement
and other related agreements providing for the sale of the Preferred Securities.
SECTION 4.03. Guarantee of Payment of Trust Obligations. (a)
Subject to the terms and conditions of this Section 4.03, the Sponsor hereby
irrevocably and unconditionally guarantees to each Person to whom the Trust is
<PAGE> 40
34
now or hereafter becomes indebted or liable (the "Beneficiaries") the full
payment, when and as due, of any and all Obligations to such Beneficiaries.
(b) The agreement of the Sponsor in Section 4.03(a) is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
(c) The agreement of the Sponsor set forth in Section 4.03(a)
shall terminate and be of no further force and effect upon the later of (a) the
date on which full payment has been made of all amounts payable to all Holders
of all the Preferred Securities (whether upon redemption, liquidation, exchange
or otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that such agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any Holder of Preferred
Securities or any Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any Obligation, under the Preferred Securities
Guarantee or under this Agreement for any reason whatsoever. Such agreement is
continuing, irrevocable, unconditional and absolute.
ARTICLE V
Trustees
SECTION 5.01. Number of Trustees. The number of Trustees shall
initially be five (5), and:
(a) at any time before the issuance of any Securities, the
Sponsor may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities:
(i) and except as provided in Sections 5.01(b)(ii)
and 5.06(a)(ii)(B) with respect to the Special Trustee, the
number of Trustees may be increased or decreased by vote of
the Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders of
the Common Securities; and
(ii) the number of Trustees shall be increased
automatically by one (1) if an Appointment Event
<PAGE> 41
35
has occurred and is continuing and the Holders of a Majority in
liquidation amount of the Preferred Securities appoint a Special
Trustee in accordance with Section 5.06(a)(ii),
provided that, if the Property Trustee does not also act as Delaware Trustee,
the number of Trustees shall be at least five (5).
SECTION 5.02. Delaware Trustee. If required by the Business
Trust Act, one Trustee (the "Delaware Trustee") shall be an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law, provided that, if the Property Trustee has its
principal place of business in the State of Delaware and otherwise meets the
requirements of applicable law, then the Property Trustee shall also be the
Delaware Trustee and Section 3.11 shall have no application.
SECTION 5.03. Property Trustee; Eligibility. (a) There shall
at all times be one Trustee which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of
the District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least 50 million U.S.
dollars ($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority
referred to above, then for the purposes of this Section 5.03(a)(ii),
the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.03(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.06(d).
<PAGE> 42
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(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture Act)
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
SECTION 5.04. Qualifications of Administrative Trustees and
Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee
(unless the Property Trustee also acts as Delaware Trustee) shall be either a
natural person who is at least 21 years of age or a legal entity that shall act
through one or more Authorized Officers.
SECTION 5.05. Initial Trustees. The initial Administrative
Trustees shall be:
David D. Harrison
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Robert J. Tubbs
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Thomas B. Jones, Jr.
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
White Clay Center, Route 273
Newark, Delaware 19711
Attention: Corporate Trust Trustee Administration
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37
The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
SECTION 5.06. Appointment, Removal and Resignation of
Trustees. (a) Except as provided otherwise in Section 5.06(b), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of any Securities:
(x) other than in respect to a Special Trustee, by
vote of the Holders of a Majority in liquidation amount of the
Common Securities voting as a class at a meeting of the
Holders of the Common Securities, unless a Debenture Event of
Default shall have occurred and is continuing, in which event
the Property Trustee and the Delaware Trustee may only be
removed by the Holders of a Majority in liquidation amount of
the outstanding Preferred Securities, voting as a class at a
meeting of the Holders of the Preferred Securities; and
(y) if an Appointment Event has occurred and is
continuing, one (1) additional Administrative Trustee (the
"Special Trustee") may be appointed by vote of the Holders of
a Majority in liquidation amount of the Preferred Securities,
voting as a class at a meeting of the Holders of the Preferred
Securities, and such Special Trustee may only be removed
(otherwise than by the operation of Section 5.06(d)), by vote
of the Holders of a Majority in liquidation amount of the
Preferred Securities voting as a class at a meeting of the
Holders of the Preferred Securities.
(b) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.06(a) until a Successor Property Trustee
has been appointed and has accepted such appointment by written instrument
executed by
<PAGE> 44
38
such Successor Property Trustee and delivered to the Administrative Trustees and
the Sponsor.
(c) The Sponsor shall remove the Property Trustee by written
instrument upon:
(i) the entry or a decree or order by a court having
jurisdiction in the premises adjudging the Property Trustee as bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Property Trustee under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Property Trustee or of any substantial
part of its property or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(ii) the institution by the Property Trustee of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Property Trustee or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by the Property Trustee in furtherance
of any such action.
The Sponsor shall appoint a successor Property Trustee within 60 days of such an
event.
(d) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with this Section 5.06(d) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.02 and
5.04 (a "Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor
<PAGE> 45
39
Delaware Trustee and delivered to the Administrative Trustees and the Sponsor.
(e) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation,
provided that a Special Trustee shall only hold office while an Appointment
Event is continuing and shall cease to hold office immediately after the
Appointment Event pursuant to which the Special Trustee was appointed and all
other Appointment Events cease to be continuing. Any Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Property Trustee and delivered to
the Trust, the Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the holders of the Securities;
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee; and
(iii) no such resignation of a Special Trustee shall be
effective until the 60th day following delivery of the instrument of
resignation of the Special Trustee to the Sponsor and the Trust or such
later date specified in such instrument during which period the Holders
of the Preferred Securities shall have the right to appoint a successor
Special Trustee as provided in this Section 5.06.
(f) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property
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Trustee or Successor Delaware Trustee, as the case may be, if the Property
Trustee or the Delaware Trustee delivers an instrument of resignation in
accordance with this Section 5.06.
(g) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.06 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation or removal, the resigning Property Trustee or Delaware
Trustee, resigning or being removed as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper and prescribe, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
(h) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(i) Unless an Event of Default 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's property may at the time be located, the Sponsor, as the holder
of the Common Securities, and the Administrative Trustees shall have power to
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust's 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 Declaration. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone
shall have power to make such appointment.
SECTION 5.07. Vacancies Among Trustees. If a Trustee ceases to
hold office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01, or if the number of Trustees is increased pursuant to Section
5.01, a vacancy shall occur. A resolution certifying the existence of such
vacancy by a majority of the Administrative Trustees shall be conclusive
evidence of the existence of such vacancy.
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The vacancy shall be filled with a Trustee appointed in accordance with Section
5.06.
SECTION 5.08. Effect of Vacancies. The death, resignation,
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee shall not operate to annul,
dissolve or terminate the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of a Administrative Trustee in accordance with Section 5.06, the
Administrative Trustees in office, regardless of their number, shall have all
the powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Declaration.
SECTION 5.09. Meetings. Meetings of the Administrative
Trustees shall be held from time to time upon the call of any Administrative
Trustee. Regular meetings of the Administrative Trustees may be held at a time
and place fixed by resolution of the Administrative Trustees. Notice of any
in-person meetings of the Administrative Trustees shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Administrative Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Administrative Trustee attends a meeting
for the express purpose of objecting to the transaction of any activity on the
ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees.
SECTION 5.10. Delegation of Power. (a) Any Administrative
Trustee may, by power of attorney consistent with applicable law, delegate to
any other natural person over the age of 21 his or her power for the purpose of
executing
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any documents contemplated in Section 3.06, including any registration
statement or amendment thereto filed with the Commission, or making any other
governmental filing; and
(b) the Administrative Trustees shall have power to delegate
from time to time to such of their number or to officers of the Trust the doing
of such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of the Trust, as set
forth herein.
SECTION 5.11. Merger, Conversion, Consolidation or Succession
to Business. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person as the case may be, may
be merged or converted or with which either may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee, the Delaware Trustee or any Administrative Trustee, as the case may be,
shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of the Property Trustee, or the Delaware Trustee, as
the case may be, shall be the successor of the Property Trustee, the Delaware
Trustee or any Administrative Trustee, as the case may be, hereunder, provided
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
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ARTICLE VI
Distributions
SECTION 6.01. Distributions. Holders shall receive
Distributions (as defined herein) in accordance with the applicable terms of the
relevant Holder's Securities. Distributions shall be made on the Preferred
Securities and the Common Securities in accordance with the preferences set
forth in their respective terms. If and to the extent that the Debenture Issuer
makes a payment of interest (including Compounded Interest (as defined in the
Indenture) and additional interest (pursuant to Section 10.07 of the Indenture))
premium and principal on the Debentures held by the Property Trustee (the amount
of any such payment being a "Payment Amount"), the Property Trustee shall and is
directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders.
ARTICLE VII
Issuance of Securities
SECTION 7.01. General Provisions Regarding Securities. (a) The
Administrative Trustees shall on behalf of the Trust issue one class of
convertible preferred securities, designated as 5 1/4% Convertible Preferred
Securities, liquidation amount $50 per security, Term Income Deferrable Equity
Securities (TIDES)(SM), representing undivided beneficial interests in the
assets of the Trust (the "Preferred Securities"), having such terms as are set
forth in Annex I and one class of convertible common securities, liquidation
amount $50, representing undivided beneficial interests in the assets of the
Trust (the "Common Securities"), having such terms as are set forth in Annex I.
The Trust shall have no securities or other interests in the assets of the Trust
other than the Preferred Securities and the Common Securities. The Trust shall
issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
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(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable, subject to Section 10.01 with respect to the
Common Securities.
(d) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.02. Execution and Authentication. (a) The Securities
shall be signed on behalf of the Trust by one Administrative Trustee. In case
any Administrative Trustee of the Trust who shall have signed any of the
Securities shall cease to be such Administrative Trustee before the Securities
so signed shall be delivered by the Trust, such Securities nevertheless may be
delivered as though the person who signed such Securities had not ceased to be
such Administrative Trustee; and any Securities may be signed on behalf of the
Trust by such persons who, at the actual date of execution of such Security,
shall be the Administrative Trustees of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such a
Administrative Trustee.
(b) One Administrative Trustee shall sign the Preferred
Securities for the Trust by manual or facsimile signature. Unless otherwise
determined by the Trust, such signature shall, in the case of Common Securities,
be a manual signature.
A Preferred Security shall not be valid until authenticated by
the manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Preferred Securities for
original issue in paragraph 5 of the Securities. The aggregate number of
Preferred Securities outstanding at any time shall not exceed the number set
forth in the terms in Annex I hereto except as provided in Section 7.06.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Preferred
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Securities. An authenticating agent may authenticate Preferred Securities
whenever the Property Trustee may do so. Each reference in this Declaration to
authentication by the Property Trustee includes authentication by such agent. An
authenticating agent has the same rights as the Property Trustee to deal with
the Company or an Affiliate.
SECTION 7.03. Form and Dating. The Preferred Securities and
the Property Trustee's certificate of authentication shall be substantially in
the form of Exhibit A-1 and the Common Securities shall be substantially in the
form of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration. Certificates may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof. The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the Trust).
The Trust at the direction of the Sponsor shall furnish any such legend not
contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred
Security shall be dated the date of its authentication. The terms and provisions
of the Securities set forth in Annex I and the forms of Securities set forth in
Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent
applicable, the Property Trustee and the Sponsor, by their execution and
delivery of this Declaration, expressly agree to such terms and provisions and
to be bound thereby.
The Preferred Securities are being offered and sold by the
Trust pursuant to a Purchase Agreement relating to the Preferred Securities,
dated April 8, 1998, among the Trust, the Sponsor and the Purchasers named
therein (the "Purchase Agreement").
(a) Global Securities. Securities offered and sold to
Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the
Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be
issued in the form of one or more permanent global Securities in definitive,
fully registered form without distribution coupons with the appropriate global
legends and Restricted Securities Legend set forth in Exhibit A-1 hereto (each,
a "Rule 144A Global Preferred Security"), which shall be deposited on behalf of
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the purchasers of the Preferred Securities represented thereby with the Property
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or a nominee of the Depositary, duly executed by
the Trust and authenticated by the Property Trustee as hereinafter provided. The
number of Preferred Securities represented by the Rule 144A Global Preferred
Security may from time to time be increased or decreased by adjustments made on
the records of the Property Trustee and the Depositary or its nominee as
hereinafter provided.
(b) Book-Entry Provisions. This Section 7.03(b) shall apply
only to the Rule 144A Global Preferred Securities and such other Preferred
Securities in global form as may be authorized by the Trust to be deposited with
or on behalf of the Depositary.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.03, authenticate and deliver initially one or
more Rule 144A Global Preferred Securities that (a) shall be registered in the
name of Cede & Co. or other nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
written instructions or held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary
("Participants") shall have no rights under this Declaration with respect to any
Rule 144A Global Preferred Security held on their behalf by the Depositary or by
the Property Trustee as the custodian of the Depositary or under such Rule 144A
Global Preferred Security, and the Depositary may be treated by the Trust, the
Property Trustee and any agent of the Trust or the Property Trustee as the
absolute owner of such Rule 144A Global Preferred Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trust, the Property Trustee or any agent of the Trust or the Property Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its
Participants, the operation of customary practices of such Depositary governing
the exercise of the rights of a holder of a beneficial interest in any Rule 144A
Global Preferred Security.
(c) Certificated Securities. Except as provided in Section
7.09, owners of beneficial interests in the Rule 144A Global Preferred Security
will not be entitled to
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receive physical delivery of certificated Preferred Securities. Purchasers of
Preferred Securities who are institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and did not purchase
Preferred Securities in reliance on Rule 144A under the Securities Act will
receive Preferred Securities in the form of individual certificates in
definitive, fully registered form without distribution coupons and with the
Restricted Securities Legend set forth in Exhibit A-1 hereto ("IAI Definitive
Preferred Securities"); provided, however, that upon transfer of such IAI
Definitive Preferred Securities to a QIB, such IAI Definitive Preferred
Securities will, unless the Rule 144A Global Preferred Security has previously
been exchanged for a certificated Preferred Security pursuant to Section
7.03(d), be exchanged for an interest in a Rule 144A Global Security pursuant to
the provisions of Section 9.02. IAI Definitive Preferred Securities will bear
the Restricted Securities Legend set forth on Exhibit A-1 unless removed in
accordance with Section 9.02. IAI Definitive Preferred Securities shall be in
minimum denominations of $50 and integral multiples thereof.
(d) A Global Preferred Security deposited with the Depositary
or with the Property Trustee as custodian for the Depositary pursuant to this
Section 7.03 shall be transferred to the beneficial owners thereof in the form
of certificated Preferred Securities only if such transfer complies with Section
9.02 and (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Preferred Security or if at any time
such Depositary ceases to be a "clearing agency" registered under the Exchange
Act, at a time when the Depositary is required to be so registered to act as
such depositary, (ii) the Trust in its sole discretion determines that such
Global Preferred Security shall be so exchangeable, or (iii) an Event of Default
has occurred and is continuing.
(e) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.03 shall be surrendered by the Depositary to the
Property Trustee located in the Borough of Manhattan, City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Property Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Preferred Security, an equal aggregate liquidation amount
of Preferred Securities of authorized denominations in the form of certificated
Preferred
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Securities. Any portion of a Global Preferred Security transferred pursuant to
this Section shall be registered in such names as the Depositary shall direct.
Any Preferred Security in the form of certificated Preferred Securities
delivered in exchange for an interest in the Rule 144A Global Preferred Security
shall, except as otherwise provided by Section 9.01, bear the Restricted
Securities Legend set forth in Exhibit A hereto.
(f) Subject to the provisions of Section 7.03(e), the
registered holder of a Global Preferred Security may grant proxies and otherwise
authorize any person, including Participants and persons that may hold interests
through Participants, to take any action which a holder is entitled to take
under this Declaration or the Securities.
(g) In the event of the occurrence of any of the events
specified in Section 7.03(d), the Trust will promptly make available to the
Property Trustee a reasonable supply of certificated Securities in definitive,
fully registered form without distribution coupons.
SECTION 7.04. Registrar, Paying Agent and Conversion Agent.
The Trust shall maintain in the Borough of Manhattan, City of New York, State of
New York (i) an office or agency where Preferred Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) an office or agency
where Preferred Securities may be presented for payment ("Paying Agent") and
(iii) an office or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of the Preferred
Securities and of their transfer and exchange. The Trust may appoint the
Registrar, the Paying Agent and the Conversion Agent and may appoint one or more
co-registrars, one or more additional paying agents and one or more additional
conversion agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent and the term "Conversion
Agent" includes any additional conversion agent. The Trust may change any Paying
Agent, Registrar, co-registrar or Conversion Agent without prior notice to any
Holder. The Trust shall notify the Property Trustee of the name and address of
any Agent not a party to this Declaration. If the Trust fails to appoint or
maintain another entity as Registrar, Paying Agent or Conversion Agent, the
Property Trustee shall act as such. The Trust or any of its Affiliates may act
as Paying Agent, Registrar, or Conversion Agent. The Trust shall act as Paying
Agent, Registrar, co-registrar, and Conversion Agent for the
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Common Securities. Payments in respect of the Preferred Securities held in
global form shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable Distribution Dates. With respect to the Preferred
Securities that are not held by DTC, such payments shall be made by check mailed
to the address of the holder entitled thereto as such address shall appear on
the register. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Property Trustee, the Administrative Trustees and
the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
The Trust initially appoints the Property Trustee as
Registrar, Paying Agent, and Conversion Agent for the Preferred Securities.
SECTION 7.05. Paying Agent to Hold Money in Trust. The Trust
shall require each Paying Agent other than the Property Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of Holders or
the Property Trustee all money held by the Paying Agent for the payment of
principal or distribution on the Securities, and will notify the Property
Trustee if there are insufficient funds. While any such insufficiency continues,
the Property Trustee may require a Paying Agent to pay all money held by it to
the Property Trustee. The Trust at any time may require a Paying Agent to pay
all money held by it to the Property Trustee and to account for any money
disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if
other than the Trust or an Affiliate of the Trust) shall have no further
liability for the money. If the Trust or the Sponsor or an Affiliate of the
Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 7.06. Replacement Securities. If the holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken
or if such Security is mutilated and is surrendered to the Trust or in the case
of the Preferred Securities to the Property Trustee, the Trust shall issue and
the Property Trustee shall authenticate a replacement Security if the Property
Trustee's and the Trust's requirements, as the case may be, are met. If required
by the Property Trustee or the Trust, an indemnity bond must be sufficient in
the judgment of both to protect the Trustees,
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the Property Trustee, the Sponsor or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The Company may charge
for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, or is about to be purchased by
the Sponsor pursuant to Article III hereof, the Sponsor in its discretion may,
instead of issuing a new Security, pay or purchase such Security, as the case
may be.
Every replacement Security is an additional obligation of the
Trust.
SECTION 7.07. Outstanding Preferred Securities. The Preferred
Securities outstanding at any time are all the Preferred Securities
authenticated by the Property Trustee except for those canceled by it, those
delivered to it for cancelation, and those described in this Section as not
outstanding.
If a Preferred Security is replaced, paid or purchased
pursuant to Section 7.06 hereof, it ceases to be outstanding unless the Property
Trustee receives proof satisfactory to it that the replaced, paid or purchased
Preferred Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in accordance with
the terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because
one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.08. Preferred Securities in Treasury. In determining
whether the Holders of the required amount of Securities have concurred in any
direction, waiver or consent, Preferred Securities owned by the Trust, the
Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded
and deemed not to be outstanding, except that for the purposes of determining
whether the Property Trustee shall be fully protected in relying on any such
direction, waiver or consent, only Securities which a Responsible Officer of the
Property Trustee actually knows are so owned shall be so disregarded.
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SECTION 7.09. Temporary Securities. (a) Until definitive
Securities are ready for delivery, the Trust may prepare and, in the case of the
Preferred Securities, the Property Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Trust considers
appropriate for temporary Securities. Without unreasonable delay, the Trust
shall prepare and, in the case of the Preferred Securities, the Property Trustee
shall authenticate definitive Securities in exchange for temporary Securities.
(b) A Global Preferred Security deposited with the Depositary
or with the Property Trustee as custodian for the Depositary pursuant to Section
7.03 shall be transferred to the beneficial owners thereof in the form of
certificated Preferred Securities only if such transfer complies with Section
9.02 and (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Preferred Security or if at any time
such Depositary ceases to be a "clearing agency" registered under the Exchange
Act and a successor depositary is not appointed by the Sponsor within 90 days of
such notice or if the Trust at its sole option elects to terminate the
book-entry system through DTC, or (ii) an Event of Default has occurred and is
continuing.
(c) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.09 shall be surrendered by the Depositary to the
Property Trustee located in the Borough of Manhattan, City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Property Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Preferred Security, an equal aggregate liquidation amount
of Securities of authorized denominations in the form of certificated
Securities. Any portion of a Global Preferred Security transferred pursuant to
this Section shall be registered in such names as the Depositary shall direct.
Any Preferred Security in the form of certificated Preferred Securities
delivered in exchange for an interest in the Restricted Global Preferred
Security shall, except as otherwise provided by Sections 7.03 and 9.01, bear the
Restricted Securities Legend set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 7.09(c), the
registered holder of a Global Preferred Security may grant proxies and otherwise
authorize any person, including
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Participants and Persons that may hold interests through Participants, to take
any action which a holder is entitled to take under this Declaration or the
Securities.
(e) In the event of the occurrence of either of the events
specified in Section 7.09(b), the Trust will promptly make available to the
Property Trustee a reasonable supply of certificated Securities in definitive,
fully registered form without interest coupons.
SECTION 7.10. Cancelation. The Trust at any time may deliver
Preferred Securities to the Property Trustee for cancelation. The Registrar,
Paying Agent and Conversion Agent shall forward to the Property Trustee any
Preferred Securities surrendered to them for registration of transfer,
redemption, conversion, exchange or payment. The Property Trustee shall promptly
cancel all Preferred Securities, surrendered for registration of transfer,
redemption, conversion, exchange, payment, replacement or cancelation and shall
dispose of canceled Preferred Securities as the Trust directs. The Trust may not
issue new Preferred Securities to replace Preferred Securities that it has paid
or that have been delivered to the Property Trustee for cancelation or that any
holder has converted.
ARTICLE VIII
Dissolution of Trust
SECTION 8.01. Dissolution of Trust. (a) The Trust shall
automatically be dissolved upon the earliest to occur of the following:
(i) the bankruptcy of the Holder of the Common Securities or the
Sponsor;
(ii) the filing of a certificate of dissolution or its equivalent with
respect to the Holder of the Common Securities or the Sponsor; or the
revocation of the charter of the Holder of the Common Securities or the
Sponsor and the expiration of 90 days after the date of revocation
without a reinstatement thereof;
(iii) all of the Securities shall have been called for redemption and
the amounts necessary for redemption thereof shall have been paid to
the Holders in accordance with the terms of the Securities;
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(iv) the expiration of the term of the Trust on April 15, 2028; or
(v) the entry of a decree of judicial dissolution of the Holder of the
Common Securities, the Sponsor or the Trust.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.01(a), after the completion of the winding up of the
affairs of the Trust, the Trustees shall file a certificate of cancelation with
the Secretary of State of the State of Delaware and the Trust shall be
terminated.
(c) The provisions of Section 3.09 and Article X shall survive
the dissolution of the Trust.
ARTICLE IX
Transfer and Exchange
SECTION 9.01. General. (a) Where Preferred Securities are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal number of Preferred Securities
represented by different certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met. To
permit registrations of transfers and exchanges, the Trust shall issue and the
Property Trustee shall authenticate Preferred Securities at the Registrar's
request. Beneficial Interests in the Global Preferred Security may be exchanged
by or on behalf of the Depositary for certificate Preferred Securities upon
request by the Depositary, but only uon at least 20 dayss' prior written notice
given to the Property Trustee in accordance with the Depositary's customary
procedures.
(b) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
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Subject to this Article IX, the Sponsor and any Related Party
may only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor; provided that any such transfer is subject to the condition precedent
that the transferor obtain the written opinion of nationally recognized
independent counsel experienced in such matters that such transfer would not
cause more than an insubstantial risk that:
(i) the Trust would not be classified for United States
Federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(c) The Administrative Trustees shall provide for the
registration of Securities and of transfers of Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Administrative Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Securities, the Administrative Trustees shall cause one or
more new Securities to be issued in the name of the designated transferee or
transferees. Every Security surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Administrative Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Security surrendered for registration of
transfer shall be canceled by the Administrative Trustees. A transferee of a
Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.
(d) The Trust shall not be required (i) to issue, register the
transfer of, or exchange, Preferred Securities during a period beginning at the
opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms and ending at the close of
business on the day of selection, or (ii) to register the transfer or exchange
of any Preferred Security so selected for redemption in whole or in part, except
the unredeemed portion of any Preferred Security being redeemed in part.
(e) All Preferred Securities issued upon any transfer or
exchange pursuant to the terms of this Declaration
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shall evidence the same security and shall be entitled to the same benefits
under this Declaration as the Preferred Securities surrendered upon such
transfer or exchange.
SECTION 9.02. Transfer Procedures and Restrictions. (a)
General. Except in connection with a Shelf Registration Statement contemplated
by and in accordance with the terms of the Registration Rights Agreement, if
Preferred Securities are issued upon the transfer, exchange or replacement of
Preferred Securities bearing the Restricted Securities Legend set forth in
Exhibit A-1 hereto, or if a request is made to remove such Restricted Securities
Legend on Preferred Securities, the Preferred Securities so issued shall bear
the Restricted Securities Legend, or the Restricted Securities Legend shall not
be removed, as the case may be, unless there is delivered to the Trust and the
Property Trustee such satisfactory evidence, which may include an opinion of
counsel licensed to practice law in the State of New York, as may be reasonably
required by the Company, that neither the legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A or Rule 144 under the Securities Act or, with
respect to Restricted Securities, that such Securities are not "restricted"
within the meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Property Trustee, at the written direction of the
Trust, shall authenticate and deliver Preferred Securities that do not bear the
legend.
(b) Transfers After Effectiveness of Shelf Registration
Statement. After the effectiveness of a Shelf Registration Statement for any
Preferred Securities, all requirements pertaining to Restricted Securities
Legends on such Preferred Security will cease to apply, and beneficial interests
in a Preferred Security in global form without Restricted Securities Legends
will be available to transferees of such Preferred Securities, upon exchange of
the transferring holder's IAI Definitive Preferred Security or directions to
transfer such Holder's beneficial interest in the Rule 144A Global Preferred
Security, as the case may be. After the effectiveness of the Shelf Registration
Statement, the Trust shall issue and the Property Trustee shall authenticate a
Preferred Security in global form without the Restricted Securities Legend (the
"Unrestricted Global Preferred Security") to deposit with the Depositary to
evidence transfers of (i) beneficial interests from the Rule 144A Global
Preferred Security and (ii) IAI Definitive Preferred Securities.
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(c) Transfer and Exchange of Definitive Preferred Securities.
When Definitive Preferred Securities are presented to the Registrar or
co-registrar
(x) to register the transfer of such Definitive Preferred
Securities, or
(y) to exchange such Definitive Preferred Securities for an
equal number of Definitive Preferred Securities of another
denomination. The Registrar or co-registrar shall register the transfer
or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Definitive
Preferred Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory
to the Trust and the Registrar or co-registrar, duly executed
by the Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Definitive Preferred Securities
that are Restricted Definitive Preferred Securities, are being
transferred or exchanged pursuant to an effective registration
statement under the Securities Act or pursuant to clause (A)
or (B) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Preferred Securities
are being delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, such Holder shall deliver a certification
to that effect (in the form set forth on the reverse
of the Preferred Security); or
(B) if such Restricted Preferred Securities
are being transferred pursuant to an exemption from
registration in accordance with Rule 144A or Rule 144
under the Securities Act, such Holder shall deliver:
(i) a certification to that effect (in the form set
forth on the reverse of the Preferred Security) and
(ii) if the Trust or Registrar
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so requests, evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth
in the Restricted Securities Legend.
Definitive Preferred Securities that are transferred to QIBs
in accordance with Rule 144A under the Securities Act must take delivery of
their interests in the Preferred Securities in the form of a beneficial interest
in the Rule 144A Global Preferred Security in accordance with Section 9.02(e).
(d) Restrictions on Transfer of a Definitive Preferred
Security for a Beneficial Interest in a Global Preferred Security. A Definitive
Preferred Security may not be exchanged for a beneficial interest in a Global
Preferred Security except upon satisfaction of the requirements set forth below.
Upon receipt by the Property Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Preferred Security, that such Definitive Preferred Security is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act; and
(ii) written instructions directing the Property Trustee to
make, or to direct the Depositary to make, an adjustment on its books
and records with respect to such Global Preferred Security to reflect
an increase in the number of the Preferred Securities represented by
the Global Preferred Security,
then the Property Trustee shall cancel such Definitive Preferred Security and
cause, or direct the Depositary to cause, the aggregate number of Preferred
Securities represented by the Global Preferred Security to be increased
accordingly. If no Global Preferred Securities are then outstanding, the Trust
shall issue and the Property Trustee shall authenticate, upon written order of
any Administrative Trustee, an appropriate number of Preferred Securities in
global form.
(e) Transfer and Exchange of Global Preferred Securities. The
transfer and exchange of Global Preferred Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Declaration
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(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor.
(f) Transfer of a Beneficial Interest in a Global Preferred
Security for a Definitive Preferred Security. Definitive Preferred Securities
issued in exchange for a beneficial interest in a Global Preferred Security
pursuant to this Section 9.02(f) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
Participants or indirect participants or otherwise, shall instruct the Property
Trustee. The Property Trustee shall deliver such Preferred Securities to the
persons in whose names such Preferred Securities are so registered in accordance
with the instructions of the Depositary.
(g) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.02), a Global
Preferred Security may not be transferred as a whole except by the Depositary to
a nominee of the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(h) Legend.
(i) Except as permitted by the following paragraph (iii), each
Preferred Security certificate evidencing the Global Preferred
Securities and the Definitive Preferred Securities (and all Preferred
Securities issued in exchange therefor or substitution thereof) shall
bear a legend (together, in the case of Restricted Definitive Preferred
Securities, the legend set forth in the following paragraph (ii), the
"Restricted Securities Legend") in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
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THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY AND ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES ISSUABLE UPON EXCHANGE THEREFOR AND ANY COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (III)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE".
(ii) In addition to the legend set forth in paragraph (i)
above, Preferred Securities initially sold to non-QIBs shall bear a
legend in substantially the following form:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH REGISTRAR AND TRANSFER AGENT MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS."
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(iii) Upon any sale or transfer of a Restricted Preferred
Security (including any Restricted Preferred Security represented by a
Global Preferred Security) pursuant to Rule 144 under the Securities
Act or an effective registration statement under the Securities Act:
(A) in the case of any Restricted Preferred Security
that is a Definitive Preferred Security, the Registrar shall
permit the Holder thereof to exchange such Restricted
Preferred Security for a Definitive Preferred Security that
does not bear the Restricted Securities Legend and rescind any
restriction on the transfer of such Restricted Preferred
Security; and
(B) in the case of any Restricted Preferred Security
that is represented by a Global Preferred Security, the
Registrar shall permit the Holder thereof to exchange such
Restricted Preferred Security (in connection with the sale of
a Preferred Security pursuant to the Registration Rights
Agreement) for another Global Preferred Security that does not
bear the Restricted Securities Legend.
(i) Cancelation or Adjustment of Global Preferred Security. At
such time as all beneficial interests in a Global Preferred Security have either
been exchanged for Definitive Preferred Securities to the extent permitted by
this Declaration or redeemed, repurchased or canceled in accordance with the
terms of this Declaration, such Global Preferred Security shall be returned to
the Depositary for cancelation or retained and canceled by the Property Trustee.
At any time prior to such cancelation, if any beneficial interest in a Global
Preferred Security is exchanged for Definitive Preferred Securities, Preferred
Securities represented by such Global Preferred Security shall be reduced and an
adjustment shall be made on the books and records of the Property Trustee (if it
is then the Securities Custodian for such Global Preferred Security) with
respect to such Global Preferred Security, by the Property Trustee or the
Securities Custodian, to reflect such reduction.
(j) No Obligation of the Property Trustee.
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(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security, a
Participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Preferred Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Preferred
Securities. All notices and communications to be given to the Holders
and all payments to be made to Holders under the Preferred Securities
shall be given or made only to or upon the order of the registered
Holders (which shall be the Depositary or its nominee in the case of a
Global Preferred Security). The rights of beneficial owners in any
Global Preferred Security shall be exercised only through the
Depositary subject to the applicable rules and procedures of the
Depositary. The Property Trustee may conclusively rely and shall be
fully protected in relying upon information furnished by the Depositary
or agent thereof with respect to its Participants and any beneficial
owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Preferred Security (including any transfers between or among
Depositary Participants or beneficial owners in any Global Preferred
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
SECTION 9.03. Deemed Security Holders. The Trustees may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any
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Person, whether or not the Trust, the Property Trustee, the Registrar or a
co-registrar shall have actual or other notice thereof.
SECTION 9.04. Notices to Clearing Agency. Whenever a notice or
other communication to the Preferred Security Holders is required under this
Declaration, the Administrative Trustees shall, in the case of any Global
Preferred Security, give all such notices and communications specified herein to
be given to the Preferred Security Holders to the Depositary, and shall have no
notice obligations to the Preferred Security Beneficial Owners.
SECTION 9.05. Appointment of Successor Clearing Agency. If the
Depository elects to discontinue its services as securities depositary with
respect to the Preferred Securities, the Administrative Trustees may, in their
sole discretion, appoint a successor Clearing Agency with respect to such
Preferred Securities.
ARTICLE X
Limitation of Liability of
Holders of Securities, Trustees or Others
SECTION 10.01. Liability. (a) Except as expressly set forth in
this Declaration, the Securities Guarantees and the terms of the Securities the
Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for
all of the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation of
personal liability extended to
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stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
SECTION 10.03. Fiduciary Duty. (a) To the extent that, at law
or in equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of an Indemnified Person
otherwise existing at law or in equity (other than the duties imposed on the
Property Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.
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(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
an Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 10.04. Indemnification. (a) To the fullest extent
permitted by applicable law, the Sponsor shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage, liability, tax, penalty,
expense or claim of any kind or nature whatsoever incurred by such Indemnified
Person by reason of the creation, operation or
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termination of the Trust or any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, gross negligence) or
willful misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees and expenses) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Sponsor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking
by or on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.4(a). The indemnification shall survive the termination
of this Declaration.
SECTION 10.05. Outside Businesses. Any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee (subject to Section
5.03(c), may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Property Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee
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or body of holders of, securities or other obligations of the Sponsor or its
Affiliates.
ARTICLE XI
Accounting
SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of
the Trust shall be the calendar year, or such other year as is required by the
Code.
SECTION 11.02. Certain Accounting Matters. (a) At all times
during the existence of the Trust, the Administrative Trustees shall keep, or
cause to be kept, full books of account, records and supporting documents, which
shall reflect in reasonable detail each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting, in accordance
with generally accepted accounting principles, consistently applied. The Trust
shall use the accrual method of accounting for United States federal income tax
purposes. The books of account and the records of the Trust shall be examined by
and reported upon as of the end of each Fiscal Year by a firm of independent
certified public accountants selected by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss.
(c) The Administrative Trustees shall cause to be duly
prepared and delivered to each of the Holders of Securities, any annual United
States federal income tax information statement, required by the Code,
containing such information with regard to the Securities held by each Holder as
is required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Administrative
Trustees shall endeavor to deliver all such statements within 30 days after the
end of each Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual United
States federal income tax return, on a
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Form 1041 or such other form required by United States federal income tax law,
and any other annual income tax returns required to be filed by the
Administrative Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.03. Banking. The trust shall maintain one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Property Trustee shall be made directly to the Property Trustee Account and no
other funds of the Trust shall be deposited in the Property Trustee Account. The
sole signatories for such accounts shall be designated by the Administrative
Trustees; provided, however, that the Property Trustee shall designate the
signatories for the Property Trustee Account.
SECTION 11.04. Withholding. The Trust and the Administrative
Trustees shall comply with all withholding requirements under United States
federal, state and local law. The Trust shall request, and the Holders shall
provide to the Trust, such forms or certificates as are necessary to establish
an exemption from withholding with respect to each Holder, and any
representations and forms as shall reasonably be requested by the Trust to
assist it in determining the extent of, and in fulfilling, its withholding
obligations. The Administrative Trustee shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Trust is required to
withhold and pay over any amounts to any authority with respect to distributions
or allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. In the event of any
claimed over-withholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not withheld
from actual Distributions made, the Trust may reduce subsequent Distributions by
the amount of such withholding.
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ARTICLE XII
Amendments and Meetings
SECTION 12.01. Amendments. (a) This Declaration may be amended
from time to time by the Sponsor, the Property Trustee and the Administrative
Trustees, without the consent of the Holders of the Securities, (i) to cure any
ambiguity, correct or supplement any provision in the Declaration that may be
inconsistent with any other provision, (ii) to modify, eliminate or add to any
provisions of the Declaration and to take any necessary or desirable action, not
inconsistent with applicable law or the provisions of the Declaration, to such
extent as shall be necessary to ensure that the Trust will not be taxable as a
corporation or will be classified for United States Federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the 1940 Act; (iii) to evidence the succession of another Person
to the Company and the assumption by any such successor of the covenants of the
Company herein and in the Securities; (iv) to add to the covenants of the
Company for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; (v) to comply with the requirements of the
Commission in order to effect or maintain the qualification of this Indenture
under the Trust Indenture Act; (vi) to make provision for transfer procedures,
certification, book-entry provisions, the form of restricted securities legends,
if any, to be placed on Securities, and all other matters required pursuant to
Section 3.06(b) or otherwise necessary, desirable or appropriate in connection
with the issuance of Securities to holders of Preferred Securities in the event
of a distribution of Securities by the Trust if a Special Event occurs and is
continuing; (vii) to make any change that does not materially adversely affect
the interests of the Holders of the Securities or, so long as any of the
Preferred Securities shall remain outstanding, the holders of the Preferred
Securities; provided, however, that in the case of clauses (i) and (ii), such
action shall not adversely affect in any material respect the interests of any
Holder of Securities, and any such amendments of the Declaration shall become
effective when notice thereof is given to the Holders of the Securities.
(b) Except as provided in (c) below, this Declaration may be
amended by the Trustees and the Company with (i) the consent of Holders
representing not less than a
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majority in liquidation amount of the outstanding Preferred Securities, and (ii)
receipt by the Trustees of an opinion of counsel experienced in such matters to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States Federal income tax purposes or the Trust's
exemption from status as an "investment company" under the 1940 Act.
(c) Without the consent of each Holder of Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Securities of a specified
date or (ii) restrict the right of a Holder of Securities to institute suit for
the enforcement of any such payment on or after such date.
(d) Notwithstanding that Holders of the Preferred Securities
are entitled to vote or consent under any of the circumstances described in this
Declaration, any of the Preferred Securities that are owned by the Sponsor, the
Trustees or any affiliate of the Sponsor or any Trustees, shall, for the
purposes of such vote or consent, be treated as if they were not outstanding.
SECTION 12.02. Meetings of the Holders of Securities; Action
by Written Consent. (a) Meetings of the Holders of any class of Securities may
be called at any time by the Administrative Trustees (or as provided in the
terms of the Securities) to consider and act on any matter on which Holders of
such class of Securities are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange on
which the Preferred Securities are listed or admitted for trading. The
Administrative Trustees shall call a meeting of the Holders of such class if
directed to do so by the Holders of at least 10% in liquidation amount of such
class of Securities. Such direction shall be given by delivering to the
Administrative Trustees one or more requests in a writing stating that the
signing Holders of Securities wish to call a meeting and indicating the general
or specific purpose for which the meeting is to be called. Any Holders of
Securities calling a meeting shall specify in writing the Certificates held by
the Holders of Securities exercising the right to call a meeting and only those
Securities represented by the Certificates so specified shall be counted for
purposes of determining whether
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the required percentage set forth in the second sentence of this paragraph has
been met.
(b) Except to the extent otherwise provided in the terms of
the Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days
and not more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders of Securities is permitted or
required under this Declaration or the rules of any stock exchange on
which the Preferred Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the Holders of
Securities. Any action that may be taken at a meeting of the Holders of
Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of
Securities owning not less than the minimum aggregate liquidation
amount of Securities that would be necessary to authorize or take such
action at a meeting at which all Holders of Securities having a right
to vote thereon were present and voting. Prompt notice of the taking of
action without a meeting shall be given to the Holders of Securities
entitled to vote who have not consented in writing. The Administrative
Trustees may specify that any written ballot submitted to the Security
Holders for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Administrative
Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as otherwise provided herein,
all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation;
<PAGE> 77
71
(iii) each meeting of the Holders of the Securities shall be
conducted by the Administrative Trustees or by such other Person that
the Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules
of any stock exchange on which the Preferred Securities are then listed
or trading, provide otherwise, the Administrative Trustees, in their
sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
Representations of Property Trustee and Delaware Trustee
SECTION 13.01. Representations and Warranties of Property
Trustee. The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, at the
Closing Date and at each Optional Closing Date, if any, and each Successor
Property Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Property Trustee's acceptance of its appointment as
Property Trustee that:
(a) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(b) The execution, delivery and performance by the Property
Trustee of the Declaration have been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee, and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable
<PAGE> 78
72
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Property Trustee do not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Property Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any New York or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the Declaration.
SECTION 13.02. Representations and Warranties of Delaware
Trustee. The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, at the
Closing Date and at each Optional Closing Date, if any, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Property Trustee's acceptance of its appointment as
Delaware Trustee that:
(a) The Delaware Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration have been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. The Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Delaware Trustee do not conflict with or
<PAGE> 79
73
constitute a breach of the certificate of incorporation or By-laws of the
Delaware Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any New York or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the Declaration.
(e) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration. The Declaration
under Delaware law constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law).
ARTICLE XIV
Registration Rights
SECTION 14.01. Registration Rights. The holders of the
Preferred Securities, the Debentures and the Guarantee are entitled to the
benefits of the Registration Rights Agreement.
<PAGE> 80
74
ARTICLE XV
Miscellaneous
SECTION 15.01. Notices. All notices provided for in this
Declaration shall be in writing, duly signed by the party giving such notice,
and shall be delivered, telecopied or mailed by registered or certified mail, as
follows:
(a) if given to the Trust, in care of the Administrative
Trustees at the Trust's mailing address set forth below (or such other address
as the Trust may give notice of to the Holders of the Securities):
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Treasurer
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give notice
of to the Holders of the Securities):
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Department
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, DE 19711
Attention: Corporate Trust Department
<PAGE> 81
75
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Treasurer
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first-class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 15.02. Governing Law. This Declaration and the rights
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to principles of conflict of laws. Sections 3540 and
3561 of Title 12 of the Delaware Code shall not apply to the Trust.
SECTION 15.03. Intention of the Parties. It is the intention
of the parties hereto that the Trust be classified for United States federal
income tax purposes as a grantor trust. The provisions of this Declaration shall
be interpreted to further this intention of the parties.
SECTION 15.04. Headings. Headings contained in this
Declaration are inserted for convenience of reference only and do not affect the
interpretation of this Declaration or any provision hereof.
SECTION 15.05. Successors and Assigns. Whenever in this
Declaration any of the parties hereto is named or referred to, the successors
and assigns of such party shall be deemed to be included, and all covenants and
agreements in this Declaration by the Sponsor and the Trustees shall bind
<PAGE> 82
76
and inure to the benefit of their respective successors and assigns, whether so
expressed.
<PAGE> 83
77
SECTION 15.06. Partial Enforceability. If any provision of
this Declaration, or the application of such provision to any Person or
circumstance, shall be held invalid, the remainder of this Declaration, or the
application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.
SECTION 15.07. Counterparts. This Declaration may contain more
than one counterpart of the signature page and this Declaration may be executed
by the affixing of the signature of each of the Trustees to one of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
as Trustee
___________________________________
as Trustee
___________________________________
as Trustee
___________________________________
COLTEC INDUSTRIES INC,
as Sponsor
By: _______________________________
Name:
<PAGE> 84
78
Title:
THE BANK OF NEW YORK (DELAWARE), as
Delaware Trustee,
By: _______________________________
Name:
Title:
THE BANK OF NEW YORK, as Property
Trustee
By: _______________________________
Name:
Title:
<PAGE> 85
TERMS OF
5 1/4% CONVERTIBLE PREFERRED SECURITIES
Term Income Deferrable Equity Securities (TIDES(SM))
5 1/4% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of
Trust, dated as of April 8, 1998 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration or the Indenture (as defined in the
Declaration) or, if not defined in the Declaration or Indenture, as defined in
the Offering Circular (as defined in the Declaration)):
1. Designation and Number.
(a) "Preferred Securities." 3,000,000 Preferred Securities of the
Trust with an aggregate liquidation amount with respect to the
assets of the Trust of $150,000,000 dollars, and a liquidation
amount with respect to the assets of the Trust of $50 per
Preferred Security, are hereby designated for the purposes of
identification only as "5 1/4% Convertible Preferred
Securities (liquidation amount $50 per Convertible Preferred
Security), Term Income Deferrable Equity Securities
(TIDES(SM))" (the "Preferred Securities"). The Preferred
Security Certificates evidencing the Preferred Securities
shall be substantially in the form attached hereto as Exhibit
A-1, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or
practice or to conform to the rules of any stock exchange or
other organization on which the Preferred Securities are
listed.
(b) "Common Securities." 92,784 Common Securities of the Trust
with an aggregate liquidation amount with respect to the
assets of the Trust of 4,639,200, and a liquidation amount
with respect to the assets of the Trust of $50 per Common
Security, are hereby
<PAGE> 86
2
designated for the purposes of identification only as "5 1/4%
Convertible Common Securities (liquidation amount $50 per
Convertible Common Security)" (the "Common Securities"). The
Common Security Certificates evidencing the Common Securities
shall be substantially in the form attached hereto as Exhibit
A-2, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or
practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate
per annum of 5 1/4% (the "Coupon Rate") of the stated
liquidation amount of $50 per Security, such rate being the
rate of interest payable on the Debentures to be held by the
Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law),
subject to adjustment in the event of a Registration Default,
as described in the Declaration. The term "Distributions" as
used herein includes quarterly distributions, additional
distributions on quarterly distributions not paid on the
applicable distribution date, interest which accrues on the
Debentures upon a Registration Default and Additional Sums, as
applicable. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has
funds available therefor and cash sufficient to make such
payments. The amount of Distributions payable for any period
will be computed for any full quarterly Distribution period on
the basis of a 360-day year of twelve 30-day months, and for
any period shorter than a full quarterly Distribution period
for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per
30-day month.
(b) Distributions on the Securities will be cumulative, will
accrue from the date of original issuance and will be payable
quarterly in arrears, on the following dates, which dates
correspond to the interest payment dates on the Debentures:
January 15, April 15, July 15 and October 15 of
<PAGE> 87
3
each year, commencing on July 15, 1998, except as otherwise
described below. Accrued Distributions not paid on the
applicable distribution date will accrue additional
Distributions on the amount thereof (to the extent permitted
by law), compounded quarterly from the relevant distribution
date. So long as no Debenture Event of Default has occurred
and is continuing, the Debenture Issuer has the right under
the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures
for a period not exceeding 20 consecutive quarters (each a
"Deferral Period"); provided that no Deferral Period may
extend beyond April 15, 2028, and, as a consequence of such
deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will accumulate additional
Distributions thereon (to the extent permitted by applicable
law) at the Coupon Rate compounded quarterly during any such
Deferral Period to the date of payment. Prior to three
Business Days before a Regular Record Date fixed for a Payment
Resumption Date as defined in the Indenture, the Sponsor may
further extend such Deferral Period; provided that such
Deferral Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or
extend beyond the maturity (whether at the stated maturity or
by declaration of acceleration, call for redemption or
otherwise) of the Debentures under the Indenture. Payments of
accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the Regular
Record Date for the relevant Payment Resumption Date. A
Deferral Period will terminate upon the payment by the Sponsor
of all amounts then accrued and unpaid on the Debentures
(together with interest thereon compounded quarterly to the
extent permitted by applicable law). Upon the termination of
any Deferral Period and the payment of all amounts then due,
the Sponsor may commence a new Deferral Period, subject to the
above requirements. There is no limitation on the number of
times that the Sponsor may elect to begin a Deferral Period.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust
at the close of business on
<PAGE> 88
4
the relevant record dates. The relevant record dates shall be
on the next preceding January 1, April 1, July 1 and October
1, except as otherwise set forth in the Declaration or this
Annex I to the Declaration. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such
payment in respect of Preferred Securities being held in
book-entry form through The Depository Trust Company (the
"Depositary") will be made as described under the heading
"Description of the Convertible Preferred Securities -- Form,
Book-Entry Procedures and Transfer" in the Offering Circular.
The relevant record dates for the Common Securities shall be
the same record dates as for the Preferred Securities.
Distributions payable on any Securities that are not
punctually paid on any Distribution payment date, as a result
of the Debenture Issuer having failed to make a payment under
the Debentures, will cease to be payable to the Person in
whose name such Securities are registered on the relevant
record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are
registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on
which Distributions are payable on the Securities is not a
Business Day, then payment of the Distribution payable on such
date will be made on the next succeeding day that is a
Business Day (and without any additional Distributions or
other payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as
if made on such date.
(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into Common Stock
pursuant to the terms of the Securities as forth in this Annex
I to the Declaration, no payment, allowance or adjustment
shall be made with respect to accumulated and unpaid
Distributions whether or not its current on such Securities,
or be required to be made; provided that Holders of Securities
at the close of business on any record date for the payment of
<PAGE> 89
5
Distributions will be entitled to receive the Distributions
payable on such Securities on the corresponding payment date
notwithstanding the conversion of such Securities into Common
Stock following such record date.
(e) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein)
among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution of
the Trust other than redemption of Trust Securities, the Trust shall be
liquidated by the Trustees as expeditiously as the 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 Securities a Like
Amount of Debentures, unless such distribution would not 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 liquidation amount
thereof 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 in accordance with paragraph 9. The Holder of the Common
Securities will be entitled to receive distributions upon any such liquidation
Pro Rata with the holders of the Preferred Securities, except as provided in
paragraph 10.
4. Redemption and Distribution.
<PAGE> 90
6
(a) Upon the repayment or payment in full of the Debentures at
their stated maturity date or a redemption in whole or in part
of the Debentures (other than following any distribution of
the Debentures to the Holders of Securities), the proceeds
from such repayment or redemption shall be applied by the
Property Trustee to redeem, on a Pro Rata basis, a Like Amount
of Securities, on the redemption date, in an amount per
Security equal to the applicable redemption price, which
redemption price will be equal to (i) the liquidation amount
of each of the Securities plus any accrued and unpaid
Distributions thereon, in the case of the repayment of the
Debentures at stated maturity or in the case of the redemption
of the Debentures in certain limited circumstances upon the
occurrence of a Tax Event, or (ii) in the case of an Optional
Redemption on or after April 20, 2001, the Optional Redemption
Price (as defined in the Indenture) plus accrued and unpaid
Distributions thereon, payable in cash (as applicable, the
"Redemption Price"). Holders will be given not less than 30
nor more than 60 days' notice of such redemption. Upon the
repayment of the Debentures at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds
from such repayment will be applied to redeem the Securities,
in whole, upon not less than 30 nor more than 60 days' notice.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities
will be redeemed Pro Rata and the Preferred Securities to be
redeemed will be as described in Paragraph 4(g)(ii) below.
(c) The Sponsor, as the Holder of the outstanding Common
Securities, shall have the right at any time (including,
without limitation, upon the occurrence of a Tax Event or
Investment Company Act Event) to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as
required by applicable law, cause a Like Amount of the
Debentures to be distributed to the holders of the Securities
upon liquidation of the Trust, that, following such
distribution of the Debentures, the Company shall use its
reasonable best efforts to maintain any ratings of such
Debentures by any nationally recognized rating agency for so
long as
<PAGE> 91
7
any such Debentures are outstanding. If the Company does not
redeem the Debentures prior to maturity and the Trust is not
liquidated and the Debentures are not distributed to holders
of the Trust Securities, the Preferred Securities will remain
outstanding until the repayment of the Debentures at their
stated maturity and the distribution of the Liquidation
Distribution to the holders of the Preferred Securities.
(d) If, at any time, a Tax Event shall occur and be continuing the
Sponsor shall cause the Issuer Trustees to dissolve the Trust
and, after satisfaction of liabilities to creditors of the
Trust, cause Debentures to be distributed to the Holders of
the Securities in liquidation of the Trust within 90 days
following the occurrence of such Tax Event (the "90 Day
Period"); provided, however, that such liquidation and
distribution shall be conditioned on (i) the Issuer Trustees'
receipt of an opinion of a nationally recognized independent
tax counsel (reasonably acceptable to the Issuer Trustees)
experienced in such matters (a "No Recognition Opinion"),
which opinion may rely on published revenue rulings of the
Internal Revenue Service, to the effect that the Holders of
the Securities will not recognize any income, gain or loss for
United States Federal income tax purposes as a result of such
liquidation and distribution of Debentures, and (ii) the
Sponsor being unable to avoid such Tax Event within the 90 Day
Period by taking some ministerial action or pursuing some
other reasonable measure that, in the sole judgment of the
Sponsor, will have no adverse effect on the Trust, the Sponsor
or the Holders of the Securities and will involve no material
cost ("Ministerial Action").
If (i) the Sponsor has received an opinion (a "Redemption Tax
Opinion") of a nationally recognized independent tax counsel
(reasonably acceptable to the Trustees) experienced in such
matters that, as a result of a Tax Event, there is more than
an insubstantial risk that the Sponsor would be precluded from
deducting the interest on the Debentures for United States
Federal income tax purposes, even after the Debentures were
distributed to the Holders of Securities upon
<PAGE> 92
8
liquidation of the Trust as described in this paragraph 4(d),
or (ii) the Trustees shall have been informed by such tax
counsel that it cannot deliver a No Recognition Opinion, the
Sponsor shall have the right, upon not less than 30 nor more
than 60 days' notice, and within 90 days following the
occurrence of such Tax Event, to redeem the Debentures in
whole (but not in part) for cash, for the principal amount
plus accrued and unpaid interest thereon and, following such
redemption, all the Securities will be redeemed by the Trust
at the aggregate liquidation amount of $50 per Security plus
accrued and unpaid Distributions thereon; provided, however,
that, if at the time there is available to the Sponsor or the
Trust the opportunity to eliminate, within the 90 Day Period,
the Tax Event by taking some Ministerial Action, the Trust or
the Sponsor will pursue such Ministerial Action in lieu of
redemption.
In lieu of the foregoing options, the Company shall also have
the option of causing the Securities to remain outstanding and
pay Additional Sums on the Debentures.
"Tax Event" means that the Property Trustee shall have
received an opinion of a nationally recognized independent tax
counsel to the Sponsor (reasonably acceptable to the Trustees)
experienced in such matters (a "Dissolution Tax Opinion") to
the effect that, as a result of (a) any amendment to or change
(including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall
not occur more than 90 days before the effective date of any
such prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision
or taxing authority therefor or therein, (ii) any judicial
decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any
notice or announcement of intent to adopt such procedures or
regulations (an "Administrative Action") or (iii) any
amendment to or change in the administrative position or
interpretation of any Administrative Action or judicial
decision that differs from the theretofore generally accepted
position, in each case, by any legislative body,
<PAGE> 93
9
court, governmental agency or regulatory body, irrespective of
the manner in which such amendment or change is made known,
which amendment or change is effective or such Administrative
Action or decision is announced, in each case, on or after the
date of original issuance of the Debentures or the issue date
of the Preferred Securities issued by the Trust, there is more
than an insubstantial risk that (a) if the Debentures are held
by the Property Trustee, (I) the Trust is, or will be within
90 days of the date of such opinion, subject to United States
Federal income tax with respect to interest accrued or
received on the Debentures or subject to more than a de
minimis amount of other taxes, duties or other governmental
charges as determined by such counsel, or (II) interest
payable by the Sponsor to the Trust on the Debentures is not,
or within 90 days of the date of such opinion will not be,
deductible by the Sponsor in whole or in part for United
States Federal income tax purposes or (b) with respect to
Debentures which are no longer held by the Property Trustee,
interest payable by the Sponsor on the Debentures is not, or
within 90 days of the date of such opinion will not be,
deductible by the Sponsor in whole or in part for United
States Federal income tax purposes.
If an Investment Company Event (as hereinafter defined) shall
occur and be continuing, the Sponsor shall cause the Trustees
to dissolve the Trust and, after satisfaction of liabilities
to Creditors of the Trust as provided by applicable law, cause
the Debentures to be distributed to the Holders of the
Securities in liquidation of the Trust within 90 days
following the occurrence of such Investment Company Event.
"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 the Trust is or will be
considered an Investment Company which is required to be
registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of the
Offering Circular.
<PAGE> 94
10
On or after the liquidation date fixed for any distribution of
Debentures to Holders of the Securities: (i) the Securities
will no longer be deemed to be outstanding, (ii) the
Depositary or its nominee (or any successor Clearing Agency or
its nominee), as record Holder of Preferred Securities
represented by global certificates, will receive a registered
global certificate or certificates representing the Debentures
to be delivered upon such distribution and (iii) any
certificates representing Securities, except for certificates
representing Preferred Securities held by the Depositary or
its nominee (or any successor Clearing Agency or its nominee),
will be deemed to represent Debentures having an aggregate
principal amount equal to the aggregate stated liquidation
amount of such Securities, with accrued and unpaid interest
equal to accrued and unpaid Distributions on such Securities
until such certificates are presented to the Administrative
Trustees or their agent for cancelation, whereupon the Sponsor
will issue to such Holder, and the Debenture Trustee will
authenticate, a certificate representing such Debentures.
(e) The Securities will not be redeemed unless all accrued and
unpaid Distributions have been paid on all Securities for all
quarterly Distribution periods terminating on or before the
date of redemption.
<PAGE> 95
11
(f) "Redemption or Distribution Procedures."
(i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for the
Securities (a "Redemption/Distribution Notice") will
be given by the Trust by mail to each Holder of
Securities to be redeemed or exchanged not fewer than
30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of
a redemption, will be the date fixed for redemption
of the Debentures. For purposes of the calculation of
the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph
4(g)(i), a Redemption/Distribution Notice shall be
deemed to be given on the day such notice is first
mailed by first-class mail, postage prepaid, to
Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of
Securities at the address of each such Holder
appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any
Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be
redeemed shall be redeemed Pro Rata from each Holder
of Preferred Securities, it being understood that, in
respect of Preferred Securities registered in the
name of and held of record by the Depositary (or any
successor Clearing Agency) or any nominee, the
distribution of the proceeds of such redemption will
be made to each Clearing Agency Participant (or
Person on whose behalf such nominee holds such
securities) in accordance with the procedures applied
by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice, which notice may
only be issued if the Debentures
<PAGE> 96
12
are redeemed as set out in this paragraph 4 (which
notice will be irrevocable), then (A) by 12:00 noon,
New York City time, on the redemption date, with
respect to Preferred Securities held in global form,
the Property Trustee will deposit irrevocably with
the Depositary (or successor Clearing Agency) funds,
to the extent funds are available, sufficient to pay
the amount payable on redemption with respect to such
Preferred Securities and will give the Depositary
irrevocable instructions and authority to pay the
amount payable on redemption to the Holders of such
Preferred Securities, and (B) with respect to
Preferred Securities issued in certificated form and
Common Securities the Property Trustee will
irrevocably deposit with the Paying Agent funds, to
the extent funds are available, sufficient to pay the
amount payable on redemption to the Holders of such
Securities and will give the Paying Agent irrevocable
instructions and authority to pay the amount payable
on redemption to the Holders thereof upon surrender
of their certificates. Notwithstanding the foregoing,
Distributions payable on or prior to the date of
redemption, shall be payable to the holders of
Preferred Securities on the relevant record dates for
the related dates of Distribution. If a
Redemption/Distribution Notice shall have been given
and funds deposited as required, then on the date of
such deposit, all rights of Holders of such
Securities so called for redemption will cease,
except the right of the Holders of such Securities to
receive the redemption price, but without interest on
such redemption price, and such Securities will cease
to be outstanding. Neither the Administrative
Trustees nor the Trust shall be required to register
or cause to be registered the transfer of any
Securities that have been so called for redemption.
If any date fixed for redemption of Securities is not
a Business Day, then payment of the amount payable on
such date will be made on the next succeeding day
that is a Business Day (without any interest or other
payment in respect of any
<PAGE> 97
13
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 each
case with the same force and effect as if made on
such date fixed for redemption. If payment of the
redemption price in respect of any Securities is
improperly withheld or refused and not paid either by
the Trust or by the Sponsor as guarantor pursuant to
the relevant Securities Guarantee, Distributions on
such Securities will continue to accrue at the then
applicable rate, from the original redemption date to
the date of payment, in which case the actual payment
date will be considered the date fixed for redemption
for purposes of calculating the amount payable upon
redemption (other than for purposes of calculating
any premium).
(iv) Redemption/Distribution Notices shall be sent by the
Administrative Trustees on behalf of the Trust to (A)
in the case of Preferred Securities held in
book-entry form, the Depositary and, in the case of
Securities held in certificated form, the Holders of
such certificates and (B) in respect of the Common
Securities, the Holder thereof.
(v) Subject to the foregoing and applicable law
(including, without limitation, United States federal
securities laws), the Sponsor or any of 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.
<PAGE> 98
14
5. Conversion Rights.
The Holders of Securities shall have the right at any time
prior to 5:00 p.m., New York City time, on April 15, 2028
(except that Preferred Securities called for redemption by the
Sponsor will be convertible at any time prior to 5:00 p.m.,
New York City time, on any Redemption Date), at their option,
to cause the Conversion Agent to convert Securities, on behalf
of the converting Holders, into shares of Common Stock in the
manner described herein on and subject to the following terms
and conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of
Common Stock pursuant to the Holder's direction to the
Conversion Agent to exchange such Securities for a portion of
the Debentures theretofore held by the Trust on the basis of
one Security per $50 principal amount of Debentures, and
immediately convert such amount of Debentures into fully paid
and nonassessable shares of Common Stock at an initial rate of
1.7058 shares of Common Stock per $50 principal amount of
Debentures (which is equivalent to a conversion price of
$29-5/16 per share of Common Stock, subject to certain
adjustments set forth in the Indenture (as so adjusted,
"Conversion Price")).
(b) In order to convert Securities into Common Stock the Holder
shall submit to the Conversion Agent at the office referred to
above an irrevocable request to convert Securities on behalf
of such Holder (the "Conversion Request"), together, if the
Securities are in certificated form, with such certificates.
Holders may obtain copies of the required form of the
conversion request from the Conversion Agent. The Conversion
Request shall (i) set forth the number of Securities to be
converted and the name or names, if other than the Holder, in
which the shares of Common Stock should be issued and (ii)
direct the Conversion Agent (a) to exchange such Securities
for a portion of the Debentures held by the Trust (at the rate
of exchange specified in the preceding paragraph) and (b) to
convert such Debentures on behalf of such Holder, into Common
Stock (at the conversion rate specified
<PAGE> 99
15
in the preceding paragraph). The Conversion Agent shall notify
the Trust of the Holder's election to exchange Securities for
a portion of the Debentures held by the Trust and the Trust
shall, upon receipt of such notice, deliver to the Conversion
Agent the appropriate principal amount of Debentures for
exchange in accordance with this Section. The Conversion Agent
shall thereupon notify the Sponsor of the Holder's election to
convert such Debentures into shares of Common Stock. Holders
of Securities at the close of business on a Distribution
record date will be entitled to receive the Distribution
payable on such Securities on the corresponding Distribution
payment date notwithstanding the conversion of such Securities
following such record date but prior to such distribution
payment date. Except as provided above, neither the Trust nor
the Sponsor will make, or be required to make, any payment,
allowance or adjustment upon any conversion on account of any
accumulated and unpaid Distributions, whether or not in
arrears, accrued on the Securities (including any Additional
Amounts accrued thereon) surrendered for conversion, or on
account of any accumulated and unpaid dividends on the shares
of Common Stock issued upon such conversion, except to the
extent that such Shares of Common Stock are held of record on
the record date for any such distribution. Securities shall be
deemed to have been converted immediately prior to the close
of business on the day on which a Notice of Conversion
relating to such Securities is received by the Conversion
Agent in accordance with the foregoing provision (the
"Conversion Date"). The Person or Persons entitled to receive
the Common Stock issuable upon conversion of the Debentures
shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as
practicable on or after the Conversion Date, the Sponsor shall
issue and deliver at the office of the Conversion Agent a
certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to
the Person or Persons entitled to receive the same, unless
otherwise directed by the Holder in the notice of conversion
and the Conversion Agent shall
<PAGE> 100
16
distribute such certificate or certificates to such Person or
Persons.
(c) Each Holder of a Security by his acceptance thereof appoints
The Bank of New York "Conversion Agent" for the purpose of
effecting the conversion of Securities in accordance with this
Section. In effecting the conversion and transactions
described in this Section, the Conversion Agent shall be
acting as agent of the Holders of Securities directing it to
effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Securities from time to time
for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this Section
and (ii) to convert all or a portion of the Debentures into
Common Stock and thereupon to deliver such shares of Common
Stock in accordance with the provisions of this Section and to
deliver to the Trust a new Debenture or Debentures for any
resulting unconverted principal amount.
(d) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, such fractional
interest will be paid in cash based on the current market
value of the Common Stock, by the Sponsor to the Trust, which
in turn will make such payment to the Holder or Holders of
Securities so converted.
(e) The Sponsor shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for
issuance upon the conversion of the Debentures, free from any
preemptive or other similar rights, such number of shares of
Common Stock as shall from time to time be issuable upon the
conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Sponsor shall be entitled
to deliver upon conversion of Debentures, shares of Common
Stock reacquired and held in the treasury of the Sponsor (in
lieu of the issuance of authorized and unissued shares of
Common Stock), so long as any such treasury shares are free
and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock issued upon
conversion of the Debentures shall be duly authorized, validly
<PAGE> 101
17
issued and fully paid and nonassessable. The Trust shall
deliver the shares of Common Stock received upon conversion of
the Debentures to the converting Holder free and clear of all
liens, charges, security interests and encumbrances, except
for United States withholding taxes. Each of the Sponsor and
the Trust shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and
shall comply with all applicable requirements as to
registration or qualification of the Common Stock (and all
requirements to list the Common Stock issuable upon conversion
of Debentures that are at the time applicable), in order to
enable the Sponsor to lawfully issue Common Stock to the Trust
upon conversion of the Debentures and the Trust to lawfully
deliver the Common Stock to each Holder upon conversion of the
Securities.
(f) The Sponsor will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on
conversion of Debentures and the delivery of the shares of
Common Stock by the Trust upon conversion of the Securities.
The Sponsor shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock in a name
other than that in which the Securities so converted were
registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the
Trust the amount of any such tax, or has established to the
satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding paragraph (f) shall limit the
requirement of the Trust to withhold taxes pursuant to the
terms of the Securities or as set forth in this Annex I to the
Declaration or to the Declaration itself or otherwise require
the Property Trustee or the Trust to pay any amounts on
account of such withholdings.
6. VOTING RIGHTS - PREFERRED SECURITIES.
<PAGE> 102
18
(a) Except as provided under paragraphs 6(b) and 8, in the
Business Trust Act and as otherwise required by law, the
Declaration and the Indenture, the Holders of the Preferred
Securities will have no voting rights.
(b) In addition to the rights of the Holders of the Preferred
Securities with respect to the enforcement of payment of
principal and interest on the Debentures set forth herein, in
the Declaration or in the Indenture, if (i) an Event of
Default under the Indenture occurs and is continuing or (ii)
the Company defaults under the Guarantee (each of (i) and (ii)
being an "Appointment Event"), then the Holders of the
Preferred Securities, acting as a single class, will be
entitled by the vote of a Majority in liquidation amount of
the Preferred Securities to appoint a Special Trustee in
accordance with Section 5.06(a)(ii)(B) of the Declaration. Any
Holder of Preferred Securities (other than the Sponsor, or any
entity directly or indirectly controlling or controlled by or
under direct or indirect common control with the Sponsor) will
be entitled to nominate any Person to be appointed as Special
Trustee. Not later than 30 days after such right to appoint a
Special Trustee arises, the Trustees will convene a meeting of
the Holders of the Preferred Securities for the purpose of
appointing a Special Trustee. If the Trustees fail to convene
such meeting within such 30-day period, the Holders of not
less than 10% in aggregate liquidation amount of the Preferred
Securities will be entitled to convene such meeting in
accordance with Section 12.02 of the Declaration. The record
date for such meeting will be the close of business on the
Business Day that is one Business Day before the day on which
notice of the meeting is sent to the Holders. The provisions
of the Declaration relating to the convening and conduct of
the meetings of the Holders will apply with respect to any
such meeting.
Any Special Trustee so appointed shall cease to be a Special
Trustee if the Appointment Event pursuant to which the Special Trustee was
appointed and all other Appointment Events cease to be continuing. A Special
Trustee may be removed without cause at any time by vote of the Holders of a
<PAGE> 103
19
Majority in liquidation amount of the Preferred Securities at a meeting of the
Holders of the Preferred Securities in accordance with Section 5.06(a)(ii)(B) of
the Declaration. The Holders of 10% in liquidation amount of the Preferred
Securities will be entitled to convene such a meeting in accordance with Section
12.02 of the Declaration. The record date for such meeting will be the close of
business on the Business Day which is one Business Day before the day on which
the notice of meeting is sent to Holders. Notwithstanding the appointment of a
Special Trustee, the Sponsor shall retain all rights under the Indenture,
including the right to defer payments of interest by extending the interest
payment period on the Debentures.
Subject to the requirements set forth in this paragraph, the
Holders of a Majority in liquidation amount of the Preferred Securities, voting
separately as a class may, and the Trustees shall not, without obtaining the
prior approval of the Holders of a Majority in liquidation amount of all
outstanding Preferred Securities (i) direct the time, method, and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred upon the Property Trustee with respect to
the Debentures, (ii) waive any past default and its consequences that is
waivable under Section 5.13 of the Indenture or otherwise, (iii) exercise any
right to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or the Debentures, where such consent shall be
required, provided, however, that, where a consent under the Indenture would
require the consent or act of each holder of the Debentures affected thereby (a
"Super Majority"), the Property Trustee may not give such consent or take such
action without the prior consent of each Holder of the Preferred Securities. The
Property Trustee shall not, and none of the other Trustees shall in any event,
revoke any action previously authorized or approved by a vote of the Holders of
the Preferred Securities, except by a subsequent vote of the Holders of the
Preferred Securities. The Property Trustee shall notify each holder of Preferred
Securities of any notice of default with respect to the Debentures. Other than
with respect to directing the time, method and place of conducting any remedy
available to the Property Trustee or the Debenture Trustee as set forth above,
the Property Trustee shall not take any action in accordance with the directions
of the Holders of the Preferred Securities under this paragraph unless the
Property Trustee has been provided with an opinion of tax counsel to the effect
that, as a result of such action,
<PAGE> 104
20
the Trust will not fail to be classified as a grantor trust for United States
Federal income tax purposes.
If the Property Trustee is the sole holder of the Debentures,
any Holder of the Preferred Securities shall, to the fullest extent permitted by
law, have the right to institute suit on behalf of the Trust for the enforcement
of the right to receive payment of the principal of and interest on the
Debentures on or after the Stated Maturity (as defined in the Indenture) of such
Debentures or, in the case of redemption, on the Redemption Date (as defined in
the Indenture), and the right to convert the Debentures in accordance with the
Indenture. In addition, the Holders of at least 25% in aggregate liquidation
amount of Preferred Securities outstanding shall be entitled to institute any
other proceeding in the event the Debenture Trustee or the Property Trustee
fails to do so in accordance with the terms of the Indenture.
In addition to any other rights of the Holders provided herein
or in the Declaration, if the Property Trustee fails to enforce its rights, as
holder of the Debentures, under the Indenture, any Holder of Preferred
Securities may, after a period of 30 days has elapsed from such Holder's written
request to the Property Trustee to enforce such rights and to the fullest extent
permitted by law, institute a legal proceeding directly against the Sponsor, to
enforce the rights of the Property Trustee, as holder of the Debentures, under
the Indenture, without first instituting any legal proceeding against the
Property Trustee or any other Person.
Any 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 Securities in the Trust
or pursuant to written consent. The administrative 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.
<PAGE> 105
21
No vote or consent of the Holders of the Preferred Securities
will be required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
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 by the Sponsor or any Affiliate of
the Sponsor shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 7(b), (c) and 8, in the
Business Trust Act and as otherwise required by law and the
Declaration, the Holders of the Common Securities will have no
voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to
appoint, remove or replace any Trustee, subject to the
exclusive right of the Holders of the Preferred Securities to
appoint, remove or replace a Special Trustee.
(c) Subject to Section 2.06 of the Declaration and only after the
Event of Default with respect to the Preferred Securities has
been cured, waived, or otherwise eliminated and subject to the
requirements of the second to last sentence of this paragraph,
the Holders of a Majority in liquidation amount of the Common
Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the
Declaration, including (i) directing the time, method, place
of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred
on the Property Trustee with respect to the Debentures, (ii)
waive any past default and its consequences that is waivable
under Section 6.06 of the Indenture, or (iii) exercise any
right to
<PAGE> 106
22
rescind or annul a declaration that the principal of all the
Debentures shall be due and payable, provided that, where a
consent or action under the Indenture would require the
consent or act of the Holders of greater than a majority in
principal amount of Debentures affected thereby (a "Super
Majority"), the Property Trustee may only give such consent or
take such action at the direction of the Holders of at least
the proportion in liquidation amount of the Common Securities
which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Pursuant to
this paragraph 7(c), the Property Trustee shall not revoke any
action previously authorized or approved by a vote of the
Holders of the Common Securities, except by a subsequent vote
of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting
any remedy available to the Property Trustee or the Debenture
Trustee as set forth above, the Property Trustee shall not
take any action in accordance with the directions of the
Holders of the Common Securities under this paragraph unless
the Property Trustee has been provided with an opinion of tax
counsel 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. If the Property
Trustee fails to enforce its rights, as holder of the
Debentures, under the Indenture, any Holder of Common
Securities may, after a period of 30 days has elapsed from
such Holder's written request to the Property Trustee to
enforce such rights and to the fullest extent permitted by
law, institute a legal proceeding directly against the
Sponsor, to enforce the Property Trustee's rights, as holder
of the Debentures, under the Indenture, without first
instituting any legal proceeding against the Property Trustee
or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities
convened for such purpose, at a meeting of all of the Holders
of Securities in the Trust or pursuant to written consent. The
Administrative Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of
any matter
<PAGE> 107
23
upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of record of Common
Securities. Each such notice will include a statement setting
forth (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 the Common Securities
will be required for the Trust to redeem and cancel Common
Securities or to distribute the Debentures in accordance with
the Declaration and the terms of the Securities.
8. Amendments to Declaration and Indenture.
<PAGE> 108
24
(a) In addition to any requirements under Section 12.01 of the
Declaration, if any proposed amendment to the Declaration
provides for, or the Administrative Trustees otherwise propose
to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise,
or (ii) the dissolution, winding-up or termination of the
Trust, other than as described in Section 8.01 of the
Declaration, then the Holders of outstanding Securities as a
class, will be entitled to vote on such amendment or proposal
(but not on any other amendment or proposal) and such
amendment or proposal shall not be effective except with the
approval of the Holders of at least 66-2/3% in liquidation
amount of the Securities, voting together as a single class
provided, however, that, the rights of Holders of Preferred
Securities under Article V of the Declaration to appoint,
remove or replace a Special Trustee shall not be amended
without the consent of each Holder of Preferred Securities;
provided, however, if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred
Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective
except with the approval of 66-2/3% in liquidation amount of
such class of Securities.
(b) In the event the consent of the Property Trustee as the holder
of the Debentures is required under the Indenture with respect
to any amendment, modification or termination of the Indenture
or the Debentures, the Property Trustee shall request the
direction of the Holders of the Securities with respect to
such amendment, modification or termination and shall vote
with respect to such amendment, modification or termination as
directed by at least the same proportion in aggregate stated
liquidation amount of the Securities; provided, however, that
the Property Trustee shall not take any action in accordance
with the directions of the Holders of the Securities under
this paragraph 8(b) unless the Property Trustee has been
provided with an opinion of tax counsel to the effect that for
the purposes of United States Federal income tax
<PAGE> 109
25
the Trust will not be classified as other than a grantor trust
on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount of
all Securities outstanding unless, on any distribution date or redemption date
an Event of Default under the Declaration (or an event that, with notice or
passage of time, would become an Event of Default under the Indenture) has
occurred and is continuing, in which case no payment of any distribution on, or
amount payable upon redemption of, any Common Security, and no other payment on
account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all outstanding Preferred Securities for all
distribution periods terminating on or prior thereto, or in the case of payment
of the amount payable upon redemption of the Preferred Securities, the full
amount of such amount in respect of all outstanding Preferred Securities shall
have been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all distributions on,
or the amount payable upon redemption of Preferred Securities then due and
payable.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Preferred Securities.
<PAGE> 110
26
11. Acceptance of Securities Guarantees and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Declaration, the
Preferred Securities, the Common Securities, the Preferred Securities Guarantee
and the Common Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture which includes, among
other things, provisions relating to certain rights of the Holders of the
Preferred Securities all as set forth therein.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive or
other similar rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request to
the Sponsor at its principal place of business.
<PAGE> 111
EXHIBIT A-1
FORM OF
PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include the following Restricted Securities Legend on all
Restricted Preferred Securities, including Rule 144A Global Preferred
Securities, Regulation S Definitive Preferred Securities and institutional
"accredited investors" Definitive Preferred Securities unless otherwise
determined by the Sponsor in accordance with applicable law --THIS SECURITY (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY AND ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES ISSUABLE UPON EXCHANGE THEREFOR AND ANY COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, (II) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.]
[Include if Preferred Security is a Restricted Definitive
Preferred Security --IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
<PAGE> 112
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.]
[Include if Preferred Security is in global form and the
Depository Trust Company is the Depository -- UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[Include if Preferred Security is in global form -- TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO
BELOW. TRANSFER OF BENEFICIAL INTERESTS IN THE GLOBAL PREFERRED SECURITIES WILL
BE SUBJECT TO THE APPLICABLE RULES AND PROCEDURES OF THE DEPOSITARY AND ITS
DIRECT OR INDIRECT PARTICIPANTS WHICH MAY CHANGE FROM TIME TO TIME.]
<PAGE> 113
3
Certificate Number Number of Preferred Securities
[CUSIP NO. [ ]]
Preferred Securities
of
Coltec Capital Trust
5 1/4% Convertible Preferred Securities
Term Income Deferrable Equity Securities (TIDES)(SM)*
(liquidation amount $50 per Convertible Preferred Security)
Coltec Capital Trust, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
(the "Holder") is the registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the 5 1/4% Convertible Preferred Securities, Term Income Deferrable
Equity Securities (TIDES)(SM)*(liquidation amount $50 per Convertible Preferred
Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of April 14, 1998, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Preferred
Securities as set forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration. The
Holder is entitled to the benefits of the Preferred
- --------
*The terms Term Income Deferrable Equity Securities (TIDES)(SM) and TIDES(SM)
are registered servicemarks of Credit Suisse First Boston Corporation.
<PAGE> 114
4
Securities Guarantee to the extent provided therein. The Sponsor will provide a
copy of the Declaration, the Preferred Securities Guarantee and the Indenture to
a Holder without charge upon written request to the Trust at its principal place
of business.
Reference is hereby made to select provisions of the Preferred
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
Federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
<PAGE> 115
5
Unless the Property Trustee's Certificate of Authentication
hereon has been properly executed, these Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Trust has executed this certificate
this day of , .
Coltec Capital Trust
By: _____________________________________
Name:
Title:
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated: , .
THE BANK OF NEW YORK,
as Property Trustee
By: _________________________________
Authorized Signatory
<PAGE> 116
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed
at a rate per annum of 5 1/4% (the "Coupon Rate") of the stated liquidation
amount of $50 per Preferred Security, such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one quarter will bear interest thereon compounded
quarterly at the Coupon Rate (to the extent permitted by applicable law). The
term "Distributions" as used herein includes such cash distributions and any
such interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the
Preferred Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears, on January 15, April 15, July
15 and October 15 of each year, commencing on July 15, 1998, to Holders of
record one at the close of business on the next preceding January 1, April 1,
July 1 and October 1, which payment dates shall correspond to the interest
payment dates on the Debentures. Accrued Distributions not paid on the
applicable distribution date will accrue additional Distributions on the amount
thereof (to the extent permitted by law), compounded quarterly from the relevant
distribution date. So long as no Debenture Event of Default has occurred and is
continuing, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period from time to time
on the Debentures for a period not exceeding 20 consecutive quarters (each a
"Deferral Period"); provided that no Deferral Period may extend beyond April 15,
2028, and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at the Coupon
Rate compounded quarterly during any such
<PAGE> 117
2
Deferral Period to the date of payment. Prior to three Business Days before a
Regular Record Date fixed for a Payment Resumption Date as defined in the
Indenture, the Debenture Issuer may further extend such Deferral Period;
provided that such Deferral Period together with all such previous and further
deferrals thereof may not exceed 20 consecutive quarters or extend beyond the
maturity (whether at the stated maturity or by declaration of acceleration, call
for redemption or otherwise) of the Debentures under the Indenture. Payments of
accrued Distributions will be payable to Holders as they appear on the books and
records of the Trust on the Regular Record Date for the relevant Payment
Resumption Date. A Deferral Period will terminate upon the payment by the
Sponsor of all amounts then accrued and unpaid on the Debentures (together with
interest thereon compounded quarterly) to the extent permitted by applicable
law. Upon the termination of any Deferral Period and the payment of all amounts
then due, the Debenture Issuer may commence a new Deferral Period, subject to
the above requirements. There is no limitation on the number of times that the
Sponsor may elect to begin a Deferral Period.
The Preferred Securities shall be redeemable as provided in
the Declaration.
The Preferred Securities shall be convertible into shares of
Common Stock, through (i) the exchange of Preferred Securities for a portion of
the Debentures and (ii) the immediate conversion of such Debentures into Common
Stock, in the manner and according to the terms set forth in the Declaration.
<PAGE> 118
CONVERSION REQUEST
To: The Bank of New York,
as Property Trustee of
Coltec Capital Trust
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Preferred Securities, or the
portion below designated, into Common Stock of COLTEC INDUSTRIES INC (the
"Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (as amended from time to time, the "Declaration"), dated as
of April 14, 1998, by David D. Harrison, Robert J. Tubbs and Thomas B. Jones,
Jr. as Administrative Trustees, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Property Trustee, Coltec Industries Inc, as
Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to the
aforementioned exercise of the option to convert these Preferred Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Preferred Securities for a portion of the
Debentures (as that term is defined in the Declaration) held by the Trust (at
the rate of exchange specified in the terms of the Preferred Securities set
forth as Annex I to the Declaration) and (ii) immediately convert such
Debentures, on behalf of the undersigned, into Common Stock (at the conversion
rate specified in the terms of the Preferred Securities set forth as Annex I to
the Declaration).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
<PAGE> 119
2
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Declaration and the Preferred Securities,
agrees to be bound by the terms of the Registration Rights Agreement relating to
the Common Stock issuable upon conversion of the Preferred Securities.
Date: ____________, ____
in whole in part
Number of Preferred Securities
to be converted:
If a name or names other than
the undersigned, please
indicate in the spaces below
the name or names in which the
shares of Common Stock are to
be issued, along with the
address or addresses of such
person or persons
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
Signature (for conversion only)
Please Print or Type Name and
Address, Including Zip Code,
and Social Security or Other
Identifying Number
_____________________________________________
<PAGE> 120
3
_____________________________________________
_____________________________________________
Signature Guarantee:** _____________________
- ----------
** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
<PAGE> 121
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert assignee's social security or tax identification number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
agent to transfer this Preferred Security on the books of the Trust. The agent
may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee:***
- ----------
*** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
<PAGE> 122
2
_____________________
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF RESTRICTED
PREFERRED SECURITIES
This certificate relates to _____________ Preferred Securities held in (check
applicable space) ____ book-entry or ____ definitive form by the undersigned.
(A) The undersigned (check one box below):
/ / has requested the Property Trustee by written order to deliver in
exchange for its beneficial interest in the Rule 144A Global Preferred
Security held by the Depositary a Preferred Security or Preferred
Securities in definitive, registered form in such number equal to its
beneficial interest in such Rule 144A Global Preferred Security (or the
number thereof indicated above); or
/ / has requested the Property Trustee by written order to exchange its
Preferred Security in definitive registered form for an interest in the
Rule 144A Global Preferred Security held by the Depositary in such
number equal to number of Preferred Securities in definitive registered
form so held; or
/ / has requested the Property Trustee by written order to exchange or
register the transfer of a Preferred Security or Preferred Securities.
(B) The undersigned confirms that such Securities are being (check one box
below):
(1) / / acquired for the undersigned's own account, without
transfer (in satisfaction of Section 9.02(d)(ii)(A)
of the Declaration; or
(2) / / transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(3) / / transferred pursuant to Rule 144 of the Securities
Act of 1933; or
<PAGE> 123
3
(4) / / transferred pursuant to an effective registration
statement under the Securities Act.
Unless one of the boxes in (B) above is checked, the Property Trustee will
refuse to register any of the Preferred Securities evidenced by this certificate
in the name of any person other than the registered Holder thereof; provided,
however, that if box (3) is checked, the Property Trustee may require, prior to
registering any such transfer of the Preferred Securities such legal opinions,
certifications and other information as the Trust has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, such as the exemption provided by Rule 144 under such Act.
Signature
Signature Guarantee:****
- ----------
**** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
<PAGE> 124
4
Signature must be guaranteed Signature
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
these Preferred Securities for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such account
is a "qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Trust as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ___________________________ ___________________________________
NOTICE: To be executed by
an executive officer
<PAGE> 125
EXHIBIT A-2
FORM OF
COMMON SECURITY
[FORM OF FACE OF SECURITY]
[THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE
REGISTRATION STATEMENT.]
[OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF COLTEC INDUSTRIES INC]
Certificate Number Number of Common Securities
Common Securities
of
Coltec Capital Trust
[5 1/4]% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
Coltec Capital Trust, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
COLTEC INDUSTRIES INC
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the [5 1/4]% Convertible Common Securities (liquidation amount $50
per Convertible Common
<PAGE> 126
2
Security) (the "Common Securities"). The Common Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of April 14, 1998, as the
same may be amended from time to time (the "Declaration"), including the
designation of the terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Common Securities Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Common Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Sponsor at its
principal place of business.
Reference is hereby made to select provisions of the Common
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States
federal income tax purposes the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
<PAGE> 127
3
IN WITNESS WHEREOF, the Trust has executed this certificate
this _________ day of _________ , 199__ .
Coltec Capital Trust
By: _____________________________________
Name:
Title:
<PAGE> 128
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of [51/4]% (the "Coupon Rate") of the stated liquidation amount
of $50 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes such cash distributions and any such interest payable
unless otherwise stated. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Property Trustee and
to the extent the Property Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the
Preferred Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears, on January 15, April 15, July
15 and October 15 of each year, commencing on July 15, 1998, to Holders of
record one on the next preceding January 1, April 1, July 1 and October 1, which
payment dates shall correspond to the interest payment dates on the Debentures.
Accrued Distributions not paid on the applicable distribution date will accrue
additional Distributions on the amount thereof (to the extent permitted by law),
compounded quarterly from the relevant distribution date. So long as no
Debenture Event of Default has occurred and is continuing, the Debenture Issuer
has the right under the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures for a period not
exceeding 20 consecutive quarters (each a "Deferral Period"); provided that no
Deferral Period may extend beyond April 15, 2028, and, as a consequence of such
deferral, Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Deferral Period to the date of payment. Prior to three Business Days before
a Regular Record
<PAGE> 129
2
Date fixed for a Payment Resumption Date as defined in the Indenture, the
Debenture Issuer may further extend such Deferral Period; provided that such
Deferral Period together with all such previous and further deferrals thereof
may not exceed 20 consecutive quarters or extend beyond the maturity (whether at
the stated maturity or by declaration of acceleration, call for redemption or
otherwise) of the Debentures under the Indenture. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the Regular Record Date for the relevant Payment Resumption
Date. A Deferral Period will terminate upon the payment by the Sponsor of all
amounts then accrued and unpaid on the Debentures (together with interest
thereon compounded quarterly) to the extent permitted by applicable law. Upon
the termination of any Deferral Period and the payment of all amounts then due,
the Debenture Issuer may commence a new Deferral Period, subject to the above
requirements. There is no limitation on the number of times that the Sponsor may
elect to begin a Deferral Period.
The Common Securities shall be redeemable as provided in the
Declaration.
The Common Securities shall be convertible into shares of
Common Stock, through (i) the exchange of Common Securities for a portion of the
Debentures and (ii) the immediate conversion of such Debentures into Common
Stock, in the manner and according to the terms set forth in the Declaration.
<PAGE> 130
CONVERSION REQUEST
To: The Bank of New York,
as Property Trustee of
Coltec Capital Trust
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common Securities, or the
portion below designated, into Common Stock of COLTEC INDUSTRIES INC (the
"Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (as amended from time to time, the "Declaration"), dated as
of April 14, 1998, by David D. Harrison, Robert J. Tubbs and Thomas B. Jones, as
Administrative Trustees, The Bank of New York (Delaware), as Delaware Trustee,
The Bank of New York, as Property Trustee, Coltec Industries Inc, as Sponsor,
and by the Holders, from time to time, of individual beneficial interests in the
Trust to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Common Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
to (i) exchange such Common Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Common Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures on behalf of the
undersigned, into Common Stock (at the conversion rate specified in the terms of
the Common Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
<PAGE> 131
2
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Declaration and the Common Securities, agrees
to be bound by the terms of the Registration Rights Agreement relating to the
Common Stock issuable upon conversion of the Common Securities.
Date: ____________, ____
in whole __ in part __
Number of Common Securities to be
converted:
____________________________________
If a name or names other than
the undersigned, please indicate in
the spaces below the name or names
in which the shares of Common Stock
are to be issued, along with the
address or addresses of such person
or persons
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other Identifying
Number
_________________________________________
_________________________________________
_________________________________________
<PAGE> 132
3
Signature Guarantee:* _______________
- ----------
* (Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
<PAGE> 133
______________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert assignee's social security or tax identification number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints ______________________________________________________
_______________________________________________________________________________
agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date: _______________________
Signature: ____________________________________________________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee**: ________________________________________________________
- ----------
** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
INDENTURE
Between
COLTEC INDUSTRIES INC
and
THE BANK OF NEW YORK, Trustee
Dated as of April 14, 1998
<PAGE> 2
Table of Contents
Page
ARTICLE I
Definitions and Other Provisions of General Application
SECTION 1.01. Definitions.....................................3
SECTION 1.02. Compliance Certificates and
Opinions.........................................................14
SECTION 1.03. Form of Documents Delivered
to Trustee.......................................................15
SECTION 1.04. Acts of Holders; Record Dates. ................15
SECTION 1.05. Notices, Etc., to Trustee and the
Company..........................................................17
SECTION 1.06. Notice to Holders; Waiver......................18
SECTION 1.07. Conflict with Trust Indenture Act. ............18
SECTION 1.08. Effect of Headings and Table of
Contents.........................................................18
SECTION 1.09. Successors and Assigns.........................19
SECTION 1.10. Separability Clause............................19
SECTION 1.11. Benefits of Indenture..........................19
SECTION 1.12. Governing Law..................................19
SECTION 1.13. Legal Holidays.................................19
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally................................19
SECTION 2.02. Initial Issuance to Property
Trustee..........................................................20
SECTION 2.03. Additional Provisions Required
in Global Security...............................................21
SECTION 2.04. Issuance of Global Securities
to Holders.......................................................21
ARTICLE III
The Securities
SECTION 3.01. Title and Terms................................22
SECTION 3.02. Denominations..................................24
SECTION 3.03. Execution, Authentication,
Delivery and Dating..............................................24
i
<PAGE> 3
SECTION 3.04. Temporary Securities...........................24
SECTION 3.05. Global Securities..............................25
SECTION 3.06. Registration, Transfer and
Exchange Generally; Certain Transfers and
Exchanges........................................................26
SECTION 3.07. Mutilated, Destroyed, Lost
and Stolen Securities............................................30
SECTION 3.08. Payment of Interest; Interest
Rights Preserved.................................................31
SECTION 3.09. Persons Deemed Owners..........................32
SECTION 3.10. Cancelation....................................33
SECTION 3.11. Right of Set Off...............................33
SECTION 3.12. CUSIP Numbers..................................33
SECTION 3.13. Extension of Interest Payment
Period; Notice of Extension .....................................34
SECTION 3.14. Paying Agent, Security Registrar
and Conversion Agent.............................................35
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge
of Indenture.....................................................35
SECTION 4.02. Application of Trust Money.....................37
ARTICLE V
Remedies
SECTION 5.01. Events of Default..............................37
SECTION 5.02. Acceleration of Maturity;
Rescission and Annulment.........................................39
SECTION 5.03. Collection of Indebtedness
and Suits for Enforcement by Trustee.............................41
SECTION 5.04. Trustee May File Proofs of Claim...............41
SECTION 5.05. Trustee May Enforce Claims
Without Possession of Securities.................................42
SECTION 5.06. Application of Money Collected. ...............42
SECTION 5.07. Limitation on Suits............................43
SECTION 5.08. Unconditional Right of Holders
to Receive Principal and Interest and to
Convert..........................................................43
SECTION 5.09. Restoration of Rights and
Remedies.........................................................44
SECTION 5.10. Rights and Remedies Cumulative. ...............44
SECTION 5.11. Delay or Omission Not Waiver...............................44
SECTION 5.12. Control by Holders.............................45
ii
<PAGE> 4
SECTION 5.13. Waiver of Past Defaults........................45
SECTION 5.14. Undertaking for Costs..........................45
SECTION 5.15. Waiver of Stay or Extension Laws...............46
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and
Responsibilities.................................................46
SECTION 6.02. Notice of Defaults.............................47
SECTION 6.03. Certain Rights of Trustee......................47
SECTION 6.04. Not Responsible for Recitals
or Issuance of Securities........................................48
SECTION 6.05. May Hold Securities............................48
SECTION 6.06. Money Held in Trust............................49
SECTION 6.07. Compensation and Reimbursement.................49
SECTION 6.08. Disqualification; Conflicting
Interests........................................................49
SECTION 6.09. Corporate Trustee Required;
Eligibility......................................................49
SECTION 6.10. Resignation and Removal;
Appointment of Successor.........................................50
SECTION 6.11. Acceptance of Appointment by
Successor........................................................51
SECTION 6.12. Merger, Conversion, Consolidation
or Succession to Business........................................52
SECTION 6.13. Preferential Collection of Claims
Against Company..................................................52
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company To Furnish Trustee
Names and Addresses of Holders...................................52
SECTION 7.02. Preservation of Information;
Communications to Holders........................................53
SECTION 7.03. Reports by Trustee.............................53
SECTION 7.04. Reports by Company.............................53
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc.,
Only on Certain Terms............................................54
SECTION 8.02. Successor Substituted..........................55
iii
<PAGE> 5
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Holders...............................................55
SECTION 9.02. Supplemental Indentures with Consent
of Holders.......................................................56
SECTION 9.03. Execution of Supplemental
Indentures.......................................................58
SECTION 9.04. Effect of Supplemental Indentures..............58
SECTION 9.05. Conformity with Trust Indenture
Act..............................................................58
SECTION 9.06. Reference in Securities to
Supplemental Indentures..........................................58
ARTICLE X
Covenants; Representations and Warranties
SECTION 10.01. Payment of Principal and
Interest.........................................................59
SECTION 10.02. Maintenance of Office or Agency................59
SECTION 10.03. Money for Security Payments to
Be Held in Trust.................................................59
SECTION 10.04. Statement by Officers as to
Default..........................................................60
SECTION 10.05. Limitation on Dividends;
Transactions with Affiliates; Covenants as
to the Trust.....................................................61
SECTION 10.06. Payment of Expenses of the Trust...............62
SECTION 10.07. Registration Rights............................62
ARTICLE XI
Redemption of Securities
SECTION 11.01. Optional Redemption............................63
SECTION 11.02. Tax Event Redemption...........................64
SECTION 11.03. Repayment at Stated Maturity. .................65
SECTION 11.04. Selection by Trustee of
Securities To Be Redeemed........................................65
SECTION 11.05. Notice of Redemption...........................66
SECTION 11.06. Deposit of Redemption Price....................66
SECTION 11.07. Securities Payable on
Redemption Date..................................................67
SECTION 11.08. Securities Redeemed in Part....................67
iv
<PAGE> 6
ARTICLE XII
Subordination of Securities
SECTION 12.01. Agreement to Subordinate.......................68
SECTION 12.02. Default on Senior Debt.........................68
SECTION 12.03. Liquidation; Dissolution;
Bankruptcy.......................................................70
SECTION 12.04. Subrogation....................................71
SECTION 12.05. Trustee To Effectuate
Subordination....................................................72
SECTION 12.06. Notice by the Company..........................73
SECTION 12.07. Rights of the Trustee; Holders
of Senior Debt...................................................74
SECTION 12.08. Subordination May Not Be
Impaired.........................................................74
ARTICLE XIII
Conversion of Securities
SECTION 13.01. Conversion Rights..............................75
SECTION 13.02. Conversion Procedures..........................75
SECTION 13.03. Conversion Price Adjustments...................78
SECTION 13.04. Reclassification,
Consolidation, Merger or Sale of Assets...............84
SECTION 13.05. Notice of Adjustments of
Conversion Price.................................................85
SECTION 13.06. Prior Notice of Certain Events.................86
SECTION 13.07. Dividend or Interest Reinvestment
Plans............................................................87
SECTION 13.08. Certain Additional Rights......................87
SECTION 13.09. Restrictions on Common Stock
Issuable Upon Conversion.........................................87
SECTION 13.10. Trustee Not Responsible for
Determining Conversion Price or
Adjustments......................................................88
v
<PAGE> 7
INDENTURE, dated as of April 14, 1998,
between Coltec Industries Inc, a corporation duly
organized and existing under the laws of the State of
Pennsylvania (herein called the "Company"), and The
Bank of New York, a New York banking corporation, as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS Coltec Capital Trust, a Delaware business trust (the
"Trust"), formed under the Amended and Restated Declaration of Trust among the
Company, as Sponsor, The Bank of New York, as property trustee (the "Property
Trustee"), and The Bank of New York (Delaware), as Delaware trustee (the
"Delaware Trustee"), and David D. Harrison, Robert J. Tubbs and Thomas B. Jones,
Jr., as administrative trustees (the "Administrative Trustees") (together with
the Property Trustee and the Delaware Trustee, the "Issuer Trustees"), dated as
of April 14, 1998 (the "Declaration"), pursuant to the Purchase Agreement (the
"Purchase Agreement") dated April 8, 1998, among the Company, the Trust and the
Initial Purchasers named therein, will issue and sell up to 3,000,000 of its 5
1/4% Convertible Preferred Securities Term Income Deferrable Equity Securities
TIDES(sm) (the "Preferred Securities") with a liquidation preference of $50 per
Preferred Security, having an aggregate liquidation amount with respect to the
assets of the Trust of up to $150,000,000;
WHEREAS the trustees of the Trust, on behalf of the Trust,
will execute and deliver to the Company Common Securities evidencing an
ownership interest in the Trust, registered in the name of the Company, in an
aggregate amount at least equal to three percent of the capitalization of the
Trust, equivalent to up to 92,784 Common Securities, with a liquidation
preference of $50 per Common Security, having an aggregate liquidation amount
with respect to the assets of the Trust of up to $4,639,200 (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities");
WHEREAS the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase, from the Company,
Securities (as defined below) in an aggregate principal amount of $154,639,200;
<PAGE> 8
3
WHEREAS the Company is guaranteeing the payment of
distributions on the Trust Securities and payment of the Redemption Price (as
defined herein) and payments on liquidation with respect to the Trust
Securities, to the extent provided in the Guarantee Agreement (the "Guarantee")
between the Company and The Bank of New York, as the Guarantee Trustee, for the
benefit of the holders of the Trust Securities from time to time;
WHEREAS the Company has duly authorized the creation of an
issue of its 5 1/4% Convertible Junior Subordinated Deferrable Interest
Debentures Due 2028 (the "Securities") of substantially the tenor and amount
hereinafter set forth and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities and
any Preferred Securities are outstanding, the Declaration provides that the
holders of Preferred Securities may cause the Conversion Agent (as defined
herein) to (i) exchange such Preferred Securities for Securities held by the
Trust and (ii) immediately convert such Securities into Common Stock (as defined
herein); and
<PAGE> 9
4
WHEREAS all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders (as defined herein) thereof, it is mutually
agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I
Definitions and Other
Provisions of General Application
SECTION 1.01. Definitions. For all purposes of
this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the
meaning specified in Section 1.04.
<PAGE> 10
5
"Additional Payments" means Compounded Interest and
Additional Sums, if any.
"Additional Sums" has the meaning specified in
Section 3.01.
"Administrative Action" has the meaning specified in
the definition of Tax Event in this Section 1.01.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, Conver-
sion Agent or co-registrar.
"Agent Member" means any member of, or participant
in, the Depositary.
"Applicable Conversion Price" has the meaning
specified in Section 13.01.
"Applicable Rate" means the rate at which the Securities
accrue interest and the corresponding Trust Securities accrue distributions,
which in the absence of a Registration Default shall mean 5 1/4%. In the event
of a Registration Default, the Applicable Rate shall be increased in accordance
with the provisions of Section 10.07 hereof.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means 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
<PAGE> 11
6
executive order to remain closed, or a day on which the corporate trust office
of the Property Trustee or the Trustee is closed for business.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Securities" has the meaning specified in the
Second Recital to this instrument.
"Common Stock" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Article XIII, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable on conversion shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
President or any Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
<PAGE> 12
7
"Company Transaction" has the meaning specified in
Section 13.04.
"Compounded Interest" has the meaning specified in
Section 3.13.
"Conversion Agent" means the Person appointed to act on behalf
of the holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 13.02
hereof.
"Conversion Date" has the meaning specified in
Section 13.02.
"Corporate Trust Office" means the principal office of the
Trustee in New York, New York, at which at any particular time its corporate
trust business shall be administered and which at the date of this Indenture is
101 Barclay Street, Floor 21 West, New York, New York 10286.
"Credit Agreement" means the Credit Agreement dated as of
March 24, 1992, and amended and restated as of January 11, 1994 and further
amended and restated as of December 18, 1996, and as further amended, among the
Company, Coltec Aerospace Canada Limited, Bank of America National Trust and
Savings Association, as Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, and Bankers Trust Company, as Administrative Agent, and the
various lenders from time to time party thereto, and Bank of Montreal, as
Canadian Paying Agent, together with the related documents thereto (including,
without limitation, the loans thereunder, any guarantees and security documents)
as amended, extended, renewed, restated, supplemented or otherwise modified, in
whole or in part, and without limitation as to the amount, terms, conditions,
covenants and other provisions from time to time in effect, and any agreement
(and related documents) governing Debt incurred to refund or refinance, in whole
or in part, the borrowings and commitments then outstanding under such Credit
Agreement or any successor Credit Agreement, whether by the same or any other
lender or group of lenders.
"Declaration" has the meaning specified in the
Recitals to this instrument.
"Debt" means (i) the principal of, premium, if any, unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization
<PAGE> 13
8
relating to the Company at the relevant contracted rate specified in the
documentation for the relevant Debt whether or not such claim for post-petition
interest is allowed in such proceeding) on, and all other Obligations relating
to, indebtedness for money borrowed (including any guarantee relating to the
foregoing obligations), (ii) purchase money and similar obligations, (iii)
obligations under capital leases, letters of credit and reimbursement
obligations relating thereto, (iv) guarantees, assumptions or purchase
commitments relating to, or other transactions as a result of which the Company
is responsible for the payment of such indebtedness of others, (v) renewals,
extensions and refundings of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings (at the relevant contractual rate specified
in the documentation therefor, whether or not such claim for post-petition
interest is allowed in such proceeding), (vii) all obligations to make payment
pursuant to the terms of financial instruments, such as (a) securities contracts
and foreign currency exchange contracts, (b) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity futures contracts
and commodity option contracts and (c) similar financial instruments and (viii)
any deferrals, renewals or extensions of any such Debt.
"Defaulted Interest" has the meaning specified in
Section 3.08.
"Deferral Period" has the meaning specified in
Section 3.13.
"Delaware Trustee" has the meaning given it in the
first recital of this instrument.
"Depositary" means the Depository Trust Company, or
any successor thereto.
"Designated Senior Debt" means (x) all Senior Debt of the
Company under, or as a result of its guarantee of, Debt pursuant to the Credit
Agreement and (y) at any time when no Debt described in the preceding clause (x)
is outstanding, any issue of Senior Debt with an aggregate principal amount in
excess of $15.0 million that is designated as "Designated
<PAGE> 14
9
Senior Indebtedness" by written notice from the Company to the Debenture
Trustee.
"Dissolution Tax Opinion" has the meaning specified in the
definition of Tax Event in this Section 1.01.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934.
"Expiration Date" has the meaning specified in Section
1.04(d).
"Expiration Time" has the meaning specified in Section
13.03(vi).
"Global Security" means a Security issued in the form
prescribed in Section 2.03, issued to the Depositary or its nominee, and
registered in the name of the Depositary or its nominee.
"Guarantee" has the meaning specified in the Fourth Recital to
this instrument.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers", with respect to the Preferred
Securities, means Credit Suisse First Boston Corporation, CIBC Oppenheimer Co.,
and Lehman Brothers Inc.
"Interest Payment Date" has the meaning specified in Section
3.01.
"Issuer Trustees" has the meaning specified in the First
Recital of this Indenture.
<PAGE> 15
10
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"90 Day Period" has the meaning specified in Section 11.02.
"No Recognition Opinion" means an opinion of a nationally
recognized independent tax counsel (reasonably acceptable to the Issuer
Trustees) experienced in such matters, which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the Holders
of the Preferred Securities will not recognize any income, gain or loss for
United States Federal income tax purposes as a result of the liquidation of the
Trust and the distribution of the Securities to the holders of the Preferred
Securities.
"Notice of Conversion" means the notice to be given by a
Holder of Preferred Securities to the Conversion Agent directing the Conversion
Agent to exchange such Preferred Securities for Securities and to convert such
Securities into Common Stock on behalf of such holder.
"Notice of Default" has the meaning specified in Section 5.01.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under, or with respect to, the documentation governing any
Debt.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 10.04 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be internal counsel for the Company.
"Optional Redemption" has the meaning specified in Section
11.01.
<PAGE> 16
11
"Optional Redemption Price" has the meaning
specified in Section 11.01.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except: (i) Securities theretofore canceled by
the Trustee or delivered to the Trustee for cancelation; (ii) Securities for
whose payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and (iii) Securities which have been paid pursuant to Section 3.08,
converted into Common Stock pursuant to Section 13.01, or in exchange for or in
lieu of which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such Securities
are held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Payment Blockage Period" has the meaning set forth in Section
12.02.
"Payment Resumption Date" has the meaning set forth in Section
3.13.
"Person" means any individual, corporation, company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.07 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen
<PAGE> 17
12
Security shall be deemed to evidence the same debt as the mutilated, destroyed,
lost or stolen Security.
"Preferred Securities" has the meaning specified in the
Recitals to this instrument.
"Property Trustee" has the meaning specified in the Recitals
to this instrument.
"Purchase Agreement" has the meaning specified in the Recitals
to this instrument.
"Purchased Shares" has the meaning specified in Section
13.03(vi).
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Redemption Tax Opinion" means an opinion of a nationally
recognized independent tax counsel (reasonably acceptable to the Issuer
Trustees) experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that the Company would be precluded from
deducting the interest on the Securities for United States Federal income tax
purposes, even after the Trust was liquidated and the Securities were
distributed to the holders of the Preferred Securities.
"Registration Rights Agreement" has the meaning specified in
Section 10.07.
"Regular Record Date" has the meaning specified in Section
3.01.
"Responsible Officer", when used with respect to the Trustee,
means any vice president, any assistant vice president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other
<PAGE> 18
13
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Preferred Securities" means each Preferred
Security required to bear the restricted securities legend required by Section
9.02(h) of the Declaration.
"Restricted Securities" means each Security required to bear a
Restricted Securities Legend pursuant to Section 2.02 hereof.
"Restricted Securities Legend" has the meaning
specified in Section 2.02.
"Securities" has the meaning specified in the Third Recital to
this instrument.
"Securities Act" means the Securities Act of 1933.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 3.06.
"Senior Debt" means any Debt of the Company, whether
outstanding on the date hereof or thereafter created, assumed or incurred,
except such Debt that is expressly stated to rank junior in right of payment to,
or pari passu in right of payment with, the Securities (or any guarantee
thereof); provided, however, that Senior Debt shall not be deemed to include (a)
any Debt of the Company which, when incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code of 1978, was without
recourse to the Company, (b) trade accounts payable and accrued liabilities
arising in the ordinary course of business, (c) any Debt of the Company to any
of its subsidiaries or (d) any Debt to any employee of the Company.
"Shelf Registration Statement" has the meaning specified in
Section 10.07.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal, together
with any accrued and unpaid interest (including Additional Payments), of such
Security or such installment of interest is due and payable.
<PAGE> 19
14
"Stated Maturity Price" has the meaning specified in Section
11.03.
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tax Event" means the receipt by the Property Trustee of an
opinion of a nationally recognized independent tax counsel to the Company
experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as
a result of (a) any amendment to or change (including any announced prospective
change (which shall not include a proposed change), provided that a Tax Event
shall not occur more than 90 days before the effective date of any such
prospective change) in the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, (b)
any judicial decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (c) any amendment to or change in the administrative
position or interpretation of any Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case, by
any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made known,
which amendment or change is effective or such Administrative Action or decision
is announced, in each case, on or after the date of original issuance of the
Securities or the issue date of the Preferred Securities issued by the Trust,
there is more than an insubstantial risk that (x) if the Securities are held by
the Property Trustee, (i) the Trust is, or will be within 90 days of the date of
such opinion, subject to United States Federal income tax with respect to
interest accrued or received on the Securities or subject to more than a de
minimis amount of other taxes, duties or other governmental charges as
determined by such counsel, or (ii) interest payable by the Company to the Trust
on the Securities is not, or within 90 days of the date of
<PAGE> 20
15
such opinion will not be, deductible by the Company in whole or in part for
United States Federal income tax purposes or (y) with respect to Securities
which are no longer held by the Property Trustee, interest payable by the
Company on the Securities is not, or within 90 days of the date of such opinion
will not be, deductible by the Company in whole or in part for United States
Federal income tax purposes.
"Trust" has the meaning specified in the first recital to this
instrument.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this Indenture was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred
Securities.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means capital stock of such
Person which ordinarily has voting power for the election of directors (or
Persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
SECTION 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act or
reasonably requested by the Trustee in connection with such application or
request. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the
<PAGE> 21
16
Company, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the applicable requirements of the Trust Indenture Act and any other
applicable requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a statement that, in the opinion of each such individual,
he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(3) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE> 22
17
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.04. Acts of Holders; Record Dates. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given to or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments is or are delivered to the Trustee and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.01) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee or the Company, as the case may be, deems
sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders. If not set by the Company prior
<PAGE> 23
18
to the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 7.01)
prior to such first solicitation or vote, as the case may be. With regard to any
record date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The Trustee may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities entitled to join in
the giving or making of (i) any notice of default, (ii) any declaration of
acceleration referred to in Section 5.03, (iii) any request to institute
proceedings referred to in Section 5.07(2) or (iv) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the date set by
the Trustee by which any such determination shall be made (the "Expiration
Date") by Holders of the requisite principal amount of Outstanding Securities on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities of the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Company in writing and to
each Holder of Securities in the manner set forth in Section 1.06.
(e) The ownership of Securities shall be proved by the
Security Register.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration
<PAGE> 24
19
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(g) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action with regard to any particular Security
may do so with regard to all or any part of the principal amount of such
Security or by one or more duly appointed agents each of which who may do so
pursuant to such appointment with regard to all or any different part of such
principal amount.
SECTION 1.05. Notices, Etc., to Trustee and the Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 1.06. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at such
Holder's address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been
<PAGE> 25
20
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of regular mail service
or by reason of any other cause, it shall be impracticable to give such notice
by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such Act to be a part of and govern this
Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
SECTION 1.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, the holders of Senior Debt,
the holders of Preferred Securities (to the extent provided herein) and the
Holders of Securities, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
<PAGE> 26
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SECTION 1.12. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.13. Legal Holidays. In any case where any Interest
Payment Date, Redemption Date or Stated Maturity of any Security or the last
date on which a Holder has the right to convert his Securities shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Securities) payment of interest or principal or conversion of the Securities
need not be made on such date, but may be made on the next succeeding Business
Day (except that, if such Business Day is in the next succeeding calendar year,
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, shall be the immediately preceding Business Day) with the same force and
effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity or on such last day for conversion, provided that no interest
shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities and the
Trustee's certificates of authentication shall be substantially in the form of
Exhibit A-1 which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A-1 to the Trustee in writing. Each Security shall be dated
the date of its authentication. The terms and provisions of the Securities set
forth in Exhibit A-1 is a part of the terms of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
<PAGE> 27
22
The definitive Securities shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 2.02. Initial Issuance to Property Trustee. The
Securities initially issued to the Property Trustee of the Trust shall be in the
form of one or more individual certificates in definitive, fully registered form
without distribution coupons and shall bear the following legend (the
"Restricted Securities Legend") unless the Company determines otherwise in
accordance with applicable law:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY AND ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES ISSUABLE UPON EXCHANGE THEREFOR AND ANY COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, (II) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE".
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY
<PAGE> 28
23
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
SECTION 2.03. Additional Provisions Required in Global
Security. Any Global Security issued hereunder shall, in addition to the
provisions contained in Section 2.02, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO
COLTEC INDUSTRIES INC OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
SECTION 2.04. Issuance of Global Securities to Holders. The
Securities may be represented by one or more Global Securities registered in the
name of the Depositary or its nominee if, and only if, the Securities are
distributed to the Holders of the Trust Securities. Until such time, the
Securities shall be registered in the name of and held by the Property Trustee.
Securities distributed to Holders of book-entry Trust Securities shall be
distributed in the form of one or more Global Securities registered in the name
of the Depositary or its nominee, and deposited with the Security Registrar, as
custodian for such Depositary, or held by such Depositary for credit by the
Depositary to the respective accounts of the beneficial owners of the Securities
<PAGE> 29
24
represented thereby (or such other accounts as they may direct). Securities
distributed to Holders of Trust Securities other than book-entry Trust
Securities shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial interests in such
Securities. Securities issued to Holders of Preferred Securities who are
non-U.S. persons pursuant to Regulation S will be in fully registered
certificated form.
ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal amount
of Securities that may be authenticated and delivered under this Indenture is
limited to $154,639,200 except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 3.04, 3.05, 3.06, 3.07, 9.06, 11.09 or 13.01.
The Securities shall be known and designated as the "5 1/4%
Convertible Junior Subordinated Debentures Due 2028" of the Company. Their
Stated Maturity shall be April 15, 2028, and they shall bear interest at the
Applicable Rate, from April 14, 1998, or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided for, as
the case may be, payable quarterly (subject to deferral as set forth herein), in
arrears, on January 15, April 15, July 15, and October 15 (each an "Interest
Payment Date") of each year, commencing July 15, 1998 until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Security is registered at the close of business on the
regular record date for such interest installment, which shall be the close of
business on the next preceding January 1, April 1, July 1, and October 1 (the
"Regular Record Date"). Interest will compound quarterly and will accrue at the
Applicable Rate on any interest installment in arrears for more than one
quarter or during an extension of an interest payment period as set forth in
Section 3.13 hereof.
The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be
<PAGE> 30
25
computed on the basis of the actual number of days elapsed in such a 30-day
month. In the event that any date on which interest is payable on the Securities
is not a Business Day, then payment of interest 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 is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
If at any time (including upon the occurrence of a Tax Event)
while the Property Trustee is the sole Holder of all the Securities, the Trust
is required to pay any additional taxes, duties, assessments or governmental
charges of whatever nature (other than withholding taxes) imposed by the United
States, or any other taxing authority, then, in any case, the Company may elect,
in its sole and absolute discretion, to pay as additional interest ("Additional
Sums") on the Securities held by the Property Trustee, such additional amounts
as shall be required so that the net amounts received and retained by the Trust
and the Property Trustee after paying such taxes, duties, assessments or other
governmental charges will be equal to the amounts the Trust and the Property
Trustee would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
The principal of and interest on the Securities shall be
payable at the office or agency of the Company in New York, New York maintained
for such purpose and at any other office or agency maintained by the Company for
such purpose in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
The Securities shall be redeemable as provided in Article XI
hereof.
The Securities shall be subordinated in right of payment to
Senior Debt as provided in Article XII hereof.
The Securities shall be convertible as provided in Article
XIII hereof.
SECTION 3.02. Denominations. The Securities shall be issuable
only in registered form without coupons and only in denominations of $50 and
integral multiples thereof.
<PAGE> 31
26
SECTION 3.03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive
<PAGE> 32
27
Securities, the temporary Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities at any office or agency of
the Company designated pursuant to Section 10.02, without charge to the Holder.
Upon surrender for cancelation of any one or more temporary Securities, the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a like principal amount of definitive Securities
of authorized denominations. Until so exchanged the temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 3.05. Global Securities. (a) Each Global Security
issued under this Indenture shall be registered in the name of the Depositary
designated by the Company for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) such Depositary advises the Company in writing that
such Depositary is no longer willing or able to continue as a Depositary with
respect to such Global Security, and no successor depositary shall have been
appointed, or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, at a time when the Depositary is required to
be so registered to act as such depositary, (ii) the Company in its discretion
determines that such Global Security shall be so exchangeable, (iii) there shall
have occurred and be continuing an Event of Default or (iv) pursuant to the
following sentence. All of any portion of a Global Security may be exchanged for
a Security that has a like aggregate principal amount and is not a Global
Security upon 20 days' prior request made by the Depositary or its Agent Member
to the Security Registrar.
(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Security Registrar for exchange or cancelation
as provided in this Article III. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a
<PAGE> 33
28
beneficial interest in any Global Security, then either (i) such Global Security
shall be so surrendered for exchange or cancelation as provided in this Article
III or (ii) the principal amount thereof shall be reduced or increased by an
amount equal to the portion thereof to be so exchanged or canceled, or equal to
the principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment made
on the records of the Security Registrar, whereupon the Trustee shall instruct
the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Security by the Depositary, accompanied by registration instructions and, to the
extent required by Section 3.06, a Restricted Securities Certificate, the
Trustee shall, subject to Section 3.05(b) and as otherwise provided in this
Article III, authenticate and make available for delivery any Securities
issuable in exchange for such Global Security (or any portion thereof) in
accordance with the instructions of the Depositary. The Trustee shall not be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.
(d) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary. Accordingly, any such owner's beneficial interests in a Global
Security shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members. Neither the Trustee nor the Security Registrar shall have any
liability in respect of any transfers effected by the Depositary.
(e) The rights of the beneficial interests in a Global
Security shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its Agent Members.
SECTION 3.06. Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges. (a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency designated pursuant to Section
10.02 being herein sometimes collectively referred to
<PAGE> 34
29
as the "Security Register") in which, subject to such reasonable regulations as
it may prescribe, the Company shall provide for the registration of Securities
and of transfers of Securities. The Trustee is hereby appointed "Security
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 10.02 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount and bearing such restrictive legends as may be required by this
Indenture, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04, 3.05, 9.06, 11.09 or 13.01 not
involving any transfer.
Neither the Company nor the Trustee shall be required (i) in
the case of a partial redemption of the
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30
Securities, to issue, register the transfer of or exchange any Security during a
period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of Securities selected for redemption under
Section 11.05 and ending at the close of business on the day of such mailing or
(ii) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
(b) Transfer and Exchange Procedures and Restrictions. The
Securities may not be transferred except in compliance with the Restricted
Securities Legend unless otherwise determined by the Company in accordance with
applicable law. Upon any distribution of the Securities to the holders of the
Trust Securities in accordance with the Declaration, the Company and the Trustee
shall enter into a supplemental indenture pursuant to Section 9.01(6) to provide
for transfer procedures and restrictions with respect to the Securities
substantially similar to those contained in the Declaration to the extent
applicable in the circumstances existing at the time of such distribution.
Notwithstanding any other provision of the Indenture, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 3.06(b) shall be made only in accordance with this Section
3.06(b).
(1) Non-Global Security to Global Security. If the Holder of a
Security (other than a Global Security) wishes at any time to transfer
all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Global
Security, such transfer may be effected only in accordance with the
provisions of this clause (b)(1) and subject to the rules and
procedures of the Depositary. Upon receipt by the Security Registrar of
(A) such Security as provided in Section 3.06(a) and instructions
satisfactory to the Security Registrar directing that a beneficial
interest in the Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a
specified Agent Member's account and (B) a Securities Certificate duly
executed by such Holder or such Holder's attorney duly authorized in
writing, then the Security Registrar shall cancel such Security (and
issue a new Security in respect of the untransferred portion thereof)
as provided in Section 3.06(a) and increase the aggregate principal
amount of the Global Security by the specified principal amount as
provided in Section 3.05(c).
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(2) Non-Global Security to Non-Global Security. A Security
that is not a Global Security may be transferred, in whole or in part,
to a Person who takes delivery in the form of another Security that is
not a Global Security as provided in Section 3.06(a); provided, that if
such Security to be transferred in whole or in part is a Restricted
Security, the Security Registrar shall have received the assignment
form attached to the Security duly executed by the transferor Holder or
such Holder's attorney duly authorized in writing.
(3) Exchanges between Global Security and Non-Global
Security. A beneficial interest in a Global Security may be exchanged
for a Security that is not a Global Security as provided in Section
3.05.
(c) Restricted Securities Legend. (1) Except as set forth
below, all Securities shall bear the Restricted Securities Legend set forth in
Section 2.02.
(2) Subject to Section 3.06(d) and to the following clauses of
this Section 3.06(c), a Security (other than a Global Security) that
does not bear a Restricted Securities Legend may be issued in exchange
for or in lieu of a Restricted Security or any portion thereof that
bears such legend if, in the Company's judgment, placing such a legend
upon such new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at
the written direction of the Company in the form of an Officers'
Certificate, shall countersign and deliver such a new Security.
(3) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless
the Company has reasonable cause to believe that such successor
Security is a "restricted security" within the meaning of Rule 144
under the Securities Act, in which case the Trustee, at the written
direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver a new Security bearing a Restricted Securities
Legend in exchange for such successor Security.
(4) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented
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by a Global Security) pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144 under the Securities
Act after such registration ceases to be effective: (A) in the case of
any Restricted Security that is a definitive Security, the Security
Registrar shall permit the Holder thereof to exchange such Restricted
Security for a definitive Security that does not bear the Restricted
Securities Legend and shall rescind any restriction on the transfer of
such Restricted Security; and (B) in the case of any Restricted
Security that is represented by a Global Security, the Security
Registrar shall permit the Holder of such Global Security to exchange
such Global Security for another Global Security that does not bear the
Restricted Securities Legend.
(5) If Restricted Securities are being presented or
surrendered for transfer or exchange then there shall be (if so
required by the Trustee), (A) if such Restricted Securities are being
delivered to the Security Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from such Holder
to that effect; or (B) if such Restricted Securities are being
transferred, a certification from the transferor as to the compliance
with the restrictions set forth in the Restricted Securities Legend.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen
Securities. If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and
<PAGE> 38
33
payable, the Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.08. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forth with cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
<PAGE> 39
34
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date (as defined below) for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of
the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date (the "Special Record Date") for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close
of business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange (or by the
Trustee if the Securities are not listed), if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
<PAGE> 40
35
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue (including in each such case Compounded
Interest), which were carried by such other Security.
In the case of any Security which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company shall
not make nor be required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest (including Compounded Interest) on the
Securities being converted, which shall be deemed to be paid in full.
SECTION 3.09. Persons Deemed Owners. The Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
any Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary. No holder of any
beneficial interest in any Global Security held on its behalf by a Depositary
shall have any rights under this Indenture with respect to such Global Security,
and such Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Trustee from giving effect to any written certification, proxy,
or other authorization furnished by a Depositary or impair, as between the
Depositary and such holders of beneficial interests, the operation of customary
practices
<PAGE> 41
36
governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any Security.
SECTION 3.10. Cancelation. All Securities surrendered for
payment, redemption, registration of transfer or exchange or conversion shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancelation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of as directed by a
Company Order; provided, however, that the Trustee shall not be required to
destroy the certificates representing such canceled Securities.
SECTION 3.11. Right of Set Off. Notwithstanding anything to
the contrary in this Indenture, the Company shall have the right to set off any
payment it is otherwise required to make hereunder to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee or under Section 5.08 hereof.
SECTION 3.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
SECTION 3.13. Extension of Interest Payment Period; Notice of
Extension. (a) So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time during the term of this Security,
from time to time to defer payments of interest by extending for successive
periods not exceeding 20 consecutive quarters for each such period (a "Deferral
Period"); provided that no Deferral Period may extend beyond April 15, 2028. To
the extent permitted by applicable law, interest, the payment of
<PAGE> 42
37
which has been deferred because of the extension of the interest payment period
pursuant to this Section 3.13, will bear interest thereon at the Applicable Rate
compounded quarterly for each quarter of the Deferral Period ("Compounded
Interest"). On the applicable Payment Redemption Date, the Company shall pay all
interest then accrued and unpaid on the Securities, including any Compounded
Interest that shall be payable to the Holders of the Securities in whose names
the Securities are registered in the Security Register on the first Regular
Record Date. A Deferral Period shall terminate upon the payment by the Company
of all interest then accrued and unpaid on the Securities (together with
interest thereon accrued at an annual rate equal to the Applicable Rate,
compounded quarterly, to the extent permitted by applicable law). Before the
termination of any Deferral Period, the Company may further extend such period,
provided that such period together with all such further extensions thereof
shall not exceed 20 consecutive quarters or extend beyond the Maturity of the
Securities. Upon the termination of any Deferral Period, and subject to the
foregoing requirements, the Company may elect to begin a new Deferral Period. No
interest shall be due and payable during Deferral Period except at the end
thereof. There is no limitation on the number of times that the Company may
elect to begin a Deferral Period.
(b) The Company must give the Trustee notice of its selection
of any Deferral Period (or an extension thereof) at least three Business Days
(or if the Property Trustee is not the sole holder of the Securities, ten
Business Days) prior to the earlier of (i) the Interest Payment Date upon which
interest would have been payable except for the election to begin or extend such
Deferral Period or if the Preferred Securities are outstanding at such time,
(ii) the date the administrative trustees of the Trust are required to give
notice to any national securities exchange or automated quotation system or to
holders of Preferred Securities of the record date for a distribution on the
Preferred Securities or the date such Distributions are payable, but in any
event not less than three Business Days prior to such record date (or if the
Property Trustee is not the sole holder of the Convertible Junior Subordinated
Debentures, ten Business Days). On or prior to the Regular Record Date
immediately preceding the Interest Payment to Date on which the Company elects
to pay all interest then accrued and unpaid on the Securities, including
Compound Interest, (the "Payment Resumption Date") the Company shall give the
Holder of the Security and the Trustee written notice that the Deferral Period
will end on
<PAGE> 43
38
such Payment Resumption Date. Notwithstanding the provision of such notice, the
Company may elect to further extend the Deferral Period, subject to the
limitations set forth in Section 3.13(a), by providing the Holder of the
Security and the Trustee with a new Deferral Notice not less than three Business
Days prior to the earlier of (i) the date the distributions on the Trust
Securities would have been payable except for the election to begin or extend
such Deferral Period of (ii) the date the Administrative Trustees are required
to give notice to any national securities exchange or automated quotation system
or to holders of Trust Securities of the record date or the date such
distributions are payable, but in any event not less than three Business Days
prior to such record date (or if the Trustee is not the sole holder of the
Securities, ten Business Days). The Company may elect to pay all interest then
accrued and unpaid on the Securities, including Compound Interest, on an
Interest Payment Date prior to its most recently established Payment Resumption
Date; provided that the Company gives the Holder of the Security and the Trustee
a new Deferral Notice setting forth the revised Payment Resumption Date at least
three Business Days prior to the Regular Record Date for such revised Payment
Resumption Date.
(c) The quarter in which any notice is given pursuant to
paragraph (b) hereof shall be counted as one of the 20 quarters permitted in the
maximum Deferral Period permitted under paragraph (a) hereof.
SECTION 3.14. Paying Agent, Security Registrar and Conversion
Agent. The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of its
Affiliates may act in any such capacity.
ARTICLE IV
Satisfaction and Discharge
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39
SECTION 4.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion, registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 3.06 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 10.03) have been delivered to the Trustee
for cancelation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancelation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancelation, for
principal and interest (including Compounded Interest) to the
date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
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(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 4.02. Application of Trust Money. Subject to the
provisions of the last paragraph of Section 10.03, all money deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Trustee. All moneys deposited with the Trustee pursuant
to Section 4.01 (and held by it or any Paying Agent) for the payment of
Securities subsequently converted shall be returned to the Company upon Company
Request.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default," wherever
used herein, means any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and whether it shall
be occasioned by the provisions of Article XI or 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):
(1) default in the payment of any interest upon any Security,
including any Additional Payments, when it becomes due and payable, and
continuance of such default for a period of 30 days (subject to the
deferral of any due date in the case of a Deferral Period);
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(2) default in the payment of the principal or premium, if
any, of any Security when due, whether at its Maturity, upon
redemption, by declaration of acceleration or otherwise;
(3) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Company in this Indenture
(other than a covenant or warranty a default in the performance of
which or the breach of which is addressed in clause (1) or (2) above),
and continuation of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the
Company by the Holders of at least 25% in aggregate outstanding
principal amount of the Securities a written notice specifying such
default and requiring it to be remedied and stating that such notice is
a "Notice of Default" under this Indenture;
(4) failure by the Company to issue and deliver
Common Stock upon an election to convert the Securities
into Common Stock;
(5) the entry or a decree or order by a court having
jurisdiction in the premises adjudging the Company as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days;
(6) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or
<PAGE> 47
42
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by the Company in furtherance of any
such action; or
(7) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the
distribution of Securities to holders of Trust Securities in
liquidation or redemption of their interests in the Trust, (ii) the
redemption of all of the outstanding Trust Securities of the Trust or
(iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal of all the Outstanding
Securities and any other amounts payable hereunder (including any Additional
Payments) to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders); provided that, if the Property
Trustee is the sole Holder of the Securities and if upon an Event of Default,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities fail to declare the principal of all the Securities to be
immediately due and payable, the holders of at least 25% in aggregate
liquidation amount of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration such principal and all accrued interest shall become immediately due
and pay able. The Holders of a majority in aggregate principal amount of the
Outstanding Securities of a series may annul such declaration and waive the
default by written notice to the Property Trustee, the Company and the Trustee
if the default (other than the nonpayment of the principal of these 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 Trustee. Should the
Holders of the Securities of such a series fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount of
the Preferred Securities shall have such right. Upon any such declaration such
principal amount (or specified amount) of and the accrued
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interest (including any Additional Payments) on all the Securities of such
series shall then become immediately due and payable; provided that the payment
of principal and interest on such Securities (including Additional Payments)
shall remain subordinated to the extent provided in Article XII.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as provided in this Article hereinafter, the Holders of
a majority in aggregate principal amount of the Outstanding Securities, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest (including any Additional
Payments) on all Securities,
(B) the principal of any Securities which have become
due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 5.13.
The Company is required to file annually with the Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under this Indenture.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Upon receipt by the Trustee of written notice declaring such
an acceleration, or rescission and annulment
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44
thereof, with respect to Securities all or part of which are represented by a
Global Security, a record date shall be established for determining Holders of
such Outstanding Securities entitled to join in such notice, which record date
shall be at the close of business on the day the Trustee receives such notice.
The Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not such Holders
remain Holders after such record date; provided, however, that, unless such
declaration of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice which has
been canceled pursuant to the proviso to the preceding sentence, in which event
a new record date shall be established pursuant to the provisions of this
Section 5.02.
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(1) default is made in the payment of any interest (including
any Compounded Interest) on any Security when such interest becomes due
and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest (including any Additional Payments) and,
to the extent that payment thereof shall be legally enforceable, interest on any
overdue principal and on any overdue interest (including any Additional
Payments), at the rate borne by the Securities, and, in addition thereto, all
amounts owing to the Trustee under Section 6.07.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and
<PAGE> 50
45
enforce its rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of any
judicial proceeding relative to the Company (or any other obligor upon the
Securities), its property or its creditors, the Trustee shall be entitled and
empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it and any predecessor Trustee under Section 6.07.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 5.05. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing to the Trustee and any
predecessor Trustee under Section 6.07 and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
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SECTION 5.06. Application of Money Collected. Subject to
Article XII, any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or
interest (including any Additional Payments), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.07;
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including any Additional Payments) on the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
principal and interest (including any Compounded Interest),
respectively; and
THIRD: The balance, if any, to the Company.
SECTION 5.07. Limitation on Suits. Subject to Section 5.08, no
Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of
Default, in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
security and indemnity satisfactory to the Trustee against the costs,
expenses and liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
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(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders to Receive
Principal and Interest and to Convert. Notwithstanding any other provision in
this Indenture, the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal of and (subject
to Section 3.08) interest (including any Additional Payments) on such Security
on the respective Stated Maturities expressed in such Security (or, in the case
of redemption, on the Redemption Date) and to convert such Security in
accordance with Article XIII and to institute suit for the enforcement of any
such payment and right to convert, and such rights shall not be impaired without
the consent of such Holder. If the Property Trustee is the sole Holder of the
Securities, any holder of the Preferred Securities shall have the right to
institute suit on behalf of the Trust for the enforcement of any such payment
and right to convert. The Company may not amend the Indenture to remove the
foregoing right to institute a suit directly against the Company without the
prior written consent of the holders of all of the Preferred Securities. If the
right to institute a suit directly against the Company is removed following the
effectiveness of a shelf registration statement in respect of the Securities,
the Trust may become subject to the reporting obligations under the Exchange
Act. The Company shall have a right of set-off to the extent of any payments
made by the Company to such Holder in any such suit.
SECTION 5.09. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and
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the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in the last paragraph of Section 3.07, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise any right
or remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided, that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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SECTION 5.13. Waiver of Past Defaults. Subject to Section 9.02
hereof, the Holders of not less than a majority in aggregate outstanding
principal amount of the Outstanding Securities may on behalf of the Holders of
all the Securities waive any past default hereunder and its consequences, except
a default
(1) in the payment of the principal of, premium, if any, or
interest (including any Additional Payments) on any Security (unless
such default 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 Trustee); or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. Should the
Holders of the Debentures fail to waive such past default, the holders of a
majority in aggregate liquidation amount of the Preferred Securities shall have
such right.
SECTION 5.14. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, a court
may require any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party litigant, in the
manner and to the extent provided in the Trust Indenture Act; provided that
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company or the Trustee or in any suit for the enforcement
of the right to receive the principal of and interest (including any Additional
Payments) on any Security or to convert any Security in accordance with Article
XIII.
SECTION 5.15. Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage
<PAGE> 55
50
of, any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default, the Trustee undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(c) Notwithstanding the foregoing, (i) the duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act
and (ii) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.02. Notice of Defaults. The Trustee shall give the
Holders notice of any default hereunder as actually known to a Responsible
Officer of the Trustee; provided, however, that in the case of any default of
the character specified in Section 5.01(3), no such notice to
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51
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default.
SECTION 6.03. Certain Rights of Trustee. Subject to the
provisions of Section 6.01:
(a) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document (whether in its original or facsimile form)
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
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(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to reasonable
examination of the books, records and premises of the Company,
personally or by agent or attorney at the expense of the Company and
shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without
negligence or willful misconduct, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of the Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any Paying
Agent, any Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent, Security
Registrar, or such other agent.
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SECTION 6.06. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company
agrees:
(1) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree in writing
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
fees, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
SECTION 6.08. Disqualification; Conflicting Interests. If the
Trustee has or shall acquire a conflicting interest within the meaning of the
Trust Indenture Act, the Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to the provisions of,
the Trust Indenture Act and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000 and has its Corporate Trust
<PAGE> 59
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Office in New York, New York. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition at the
expense of the Company any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition at the expense of the Company any court of competent jurisdiction for
the appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months; or
(2) the Trustee shall cease to be eligible under Section 6.09
and shall fail to resign after written request therefor by the Company
or by any such Holder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver
<PAGE> 60
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of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation;
then, in any such case, (i) the Company may remove the Trustee, or (ii) subject
to Section 5.14, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give written notice of each resignation
and each removal of the Trustee and each appointment of a successor Trustee to
all Holders in the manner provided in Section 1.06. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; provided that on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its
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charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments required to more
fully and certainly vest in and confirm to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against
Company. If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
<PAGE> 62
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ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company To Furnish Trustee Names and Addresses
of Holders. At the request of the Trustee, the Company will furnish or cause to
be furnished to the Trustee
(a) semiannually, not later than April 1 and October 1 in each
year, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of a date not more than 15 days prior to the
delivery thereof; and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 7.02. Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee. (a) Not later than May 15 of
each year, commencing May 15, 1999, the Trustee
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shall transmit by first-class mail to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. Reports by Company. The Company shall file with
the Trustee and the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc., Only on Certain
Terms. The Company shall not consolidate with or merge with or into any other
Person or sell or lease its assets as, or substantially as, an entirety to any
Person, unless:
(1) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale or lease, the
assets of the Company as or substantially as an entirety, shall be
organized under the laws of the United States of America, any State
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thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, the due and punctual
payment of the principal of and interest (including any Additional
Payments) on all the Securities and the performance or observance of
every covenant of this Indenture on the part of the Company to be
performed or observed and shall have provided for conversion rights in
accordance with Article XIII;
(2) immediately after giving effect to such trans action, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing;
(3) if any Preferred Securities are outstanding, such
consolidation or merger or sale or lease of assets of the Company is
permitted under, and does not give rise to any event of default under,
the Declaration; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale or lease and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
SECTION 8.02. Successor Substituted. Upon any consolidation of
the Company with, or merger of the Company into, any other Person or any sale or
lease of the assets of the Company as, or substantially as, an entirety, in
accordance with Section 8.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such sale or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
<PAGE> 65
60
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XIII; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action
pursuant to this clause (4) shall not materially adversely affect the
interests of the Holders of the Securities or, so long as any of the
Preferred Securities shall remain outstanding, the holders of the
Preferred Securities;
(5) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act;
(6) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if
any, to be placed on Securities, and all other matters required
pursuant to Section 3.06(b) or otherwise necessary, desirable or
appropriate in connection with the issuance of Securities to holders of
Preferred Securities in the event of a distribution of Securities by
the Trust if a Special Event occurs and is continuing;
<PAGE> 66
61
(7) to comply with Article VIII; or
(8) to make any change that does not materially adversely
affect the interests of the Holders of the Securities or, so long as
any of the Preferred Securities shall remain outstanding, the holders
of the Preferred Securities.
SECTION 9.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal amount
of the Outstanding Securities, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) extend the Stated Maturity of the principal of, or any
installment of interest (including any Additional Payments) on, any
Security, or reduce the principal amount thereof, or reduce the rate or
extend the time for payment of interest thereon, or reduce any premium
payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
adversely affect the right to convert any Security as provided in
Article XIII (except as permitted by Section 9.01(3)), or modify the
provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
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62
(3) modify any of the provisions of this Section or Section
5.13, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected
thereby.
Notwithstanding anything to the contrary in this Indenture or
the Declaration, if the Property Trustee is the sole holder of the Securities,
so long as any of the Preferred Securities remains outstanding, (i) no amendment
shall be made that materially adversely affects the holders of such Preferred
Securities, and no termination of this Indenture shall occur, and no waiver of
any Event of Default or compliance with any covenant under this Indenture shall
be effective, without the prior consent of the holders of the percentage of the
aggregate liquidation preference of such Preferred Securities then outstanding
which is at least equal to the percentage of aggregate stated liquidation
preference of the Outstanding Securities as shall be required under this
Indenture to effect any such amendment, termination or waiver and (ii) no
amendment shall be made to Section 5.08 of this Indenture that would impair the
rights of the holders of Preferred Securities provided therein without the prior
consent of the holders of each Preferred Security.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture, whether or not such Holders
remain Holders after such record date; provided, that unless such consent shall
have become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
SECTION 9.03. Execution of Supplemental Indentures. In
executing or accepting the additional trusts created by any supplemental
indenture permitted by this
<PAGE> 68
63
Article or the modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby. No such supplemental indenture shall directly or indirectly modify the
provisions of Article XII in any manner which might terminate or impair the
rights of the Senior Debt pursuant to such subordination provisions.
SECTION 9.05. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.
SECTION 9.06. Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture, may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE X
Covenants; Representations and Warranties
SECTION 10.01. Payment of Principal and Interest. The Company
will duly and punctually pay the principal of and interest on the Securities in
accordance with the terms of the Securities and this Indenture.
<PAGE> 69
64
SECTION 10.02. Maintenance of Office or Agency. The Company
will maintain in the United States an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the United States for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 10.03. Money for Security Payments to Be Held in
Trust. If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
<PAGE> 70
65
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or
interest on any Security and remaining unclaimed for two years after such
principal or interest has become due and payable, shall be paid to the Company
on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of any such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 10.04. Statement by Officers as to Default. The
Company will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
<PAGE> 71
66
SECTION 10.05. Limitation on Dividends; Transactions with
Affiliates; Covenants as to the Trust. (a) If at such time (x) there shall have
occurred an Event of Default, (y) the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (z) the Company shall
have given notice of its election to begin a Deferral Period as provided herein
and shall not have rescinded such notice, or such Deferral Period shall be
continuing, the Company covenants that the Company shall not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends which consist of
stock of the same class as that on which the dividends are being paid, (ii) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in interest to the Securities or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Securities (in each case other than (A) dividends or distributions payable in
shares of Common Stock, (B) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (C) payments under the Guarantee, (D) purchases or
acquisitions of shares of the Common Stock in connection with the satisfaction
by the Company of its obligations under any employee benefit plan or any other
contractual obligation of the Company (other than a contractual obligation
ranking pari passu with or junior in interest to the Securities), (E) 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 or (F) 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).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common Securities of the
Trust; provided, however, that any permitted successor of the Company hereunder
may succeed to the Company's ownership of such Common Securities and (ii) that
it shall use its reasonable efforts, consistent with
<PAGE> 72
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the terms and provisions of the Declaration, to cause the Trust (x) to remain a
statutory business trust, except in connection with the distribution of the
Securities to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (y)
to otherwise continue to be classified as a grantor trust for United States
Federal income tax purposes.
SECTION 10.06. Payment of Expenses of the Trust. In connection
with the offering, sale and issuance of the Securities to the Property Trustee
in connection with the sale of the Trust Securities by the Trust, the Company
shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including commissions to
the Initial Purchasers payable pursuant to the Purchase Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.07 of the Indenture;
(b) be responsible for and pay for all debts and obligations
(other than with respect to the Trust Securities) of the Trust, pay
for all costs and expenses of the Trust (including, but not limited to,
costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including
commissions to the underwriters in connection therewith), the fees and
expenses of the Property Trustee and the Delaware Trustee, the costs
and expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical
or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of Trust
assets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the
Trust.
SECTION 10.07. Registration Rights. The holders of the
Preferred Securities, the Securities and the Guarantee
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68
are entitled to the benefits of a Registration Rights Agreement, dated as of
April 14, 1998, among the Company, the Trust and the Initial Purchasers (the
"Registration Rights Agreement"). Pursuant to, and subject to the terms of, the
Registration Rights Agreement the Company has agreed for the benefit of the
holders of the Preferred Securities, the Securities and the Guarantee that (i)
it will, at its cost, within 90 days after the date of original issuance of the
Securities, file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the Preferred
Securities, together with the Securities, the Guarantee and the related Common
Stock issuable upon conversion thereof, (ii) use its reasonable best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission within 150 days after the date of issuance of the Securities and
(iii) use its reasonable best efforts to maintain such Shelf Registration
Statement effective under the Securities Act of 1933 for such period as shall be
required under Rule 144(k) thereunder or any successor rule or regulation
thereto or such earlier date, and subject to such exceptions, as are provided in
the Registration Rights Agreement. If the Company fails to comply with its
obligations under the Registration Rights Agreement and a Registration Default
(as defined in the Registration Rights Agreement) occurs, then, at such time,
the Applicable Rate will increase by 50 basis points (.50%); provided, however,
that a Registration Default shall not be deemed to have occurred as a result of
certain events set forth in the Registration Rights Agreement until the
expiration of certain time periods as set forth therein. Such increase will
remain in effect from and including the date on which any such Registration
Default shall occur to but excluding the earlier of (x) the date on which all
Registration Defaults have been cured and (y) the date on which the Company is
no longer required to keep the Shelf Registration Statement effective in
accordance with the Registration Rights Agreement, on which date the interest
rate on the Securities will revert to the interest rate originally borne by the
Securities.
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ARTICLE XI
Redemption of Securities
SECTION 11.01. Optional Redemption. The Company shall have the
right to redeem the Securities (an "Optional Redemption") in whole or in part,
at any time or from time to time on or after April 20, 2001, upon not less than
30 nor more than 60 days' notice, at the prices per $50 principal amount of
Securities set forth in the following table, plus accrued and unpaid interest,
including Additional Payments, if any, to the Redemption Date, (the "Optional
Redemption Price") if redeemed during the 12-month period ending on April 20:
<TABLE>
<CAPTION>
Price Per $50
Principal
Year Amount
---- ------
<S> <C>
2002 $51.31
2003 $50.88
2004 $50.44
</TABLE>
and thereafter at $50 per $50 principal amount of the Securities plus, in each
case, any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date. In the event of any redemption in part, the Company shall
not be required (i) to issue, register the transfer of or exchange any
Securities during a period beginning at the opening of business 15 days before
any selection for redemption of Securities and ending at the close of business
on the earliest date on which the relevant notice of redemption is deemed to
have been given to all Holders of Securities to be so redeemed and (ii) to
register the transfer of or exchange any Securities so selected for redemption,
in whole or in part, except the unredeemed portion of any Securities redeemed in
part.
SECTION 11.02. Tax Event Redemption. (a) If a Tax Event has
occurred and is continuing and:
(1) the Company has received a Redemption Tax Opinion; or
(2) the Issuer Trustees shall have been informed by nationally
recognized independent tax counsel (reasonably
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70
acceptable to the Issuer Trustees) experienced in such matters that a
No Recognition Opinion cannot be delivered, then the Company shall have
the right upon not less than 30 days, nor more than 60 days, notice to
the Holders of the Securities to redeem the Securities in whole, but
not in part, for cash at $50 per $50 principal amount of the Securities
plus accrued and unpaid interest, including Additional Payments, if
any, to the Redemption Date, within 90 days following the occurrence of
such Tax Event (the "90 Day Period"); provided, however, that if, at
the time there is available to the Company or the Trust the opportunity
to eliminate, within the 90 Day Period, the Tax Event by taking some
ministerial action, including, but not limited to, filing a form or
making an election, or pursuing some other similar reasonable measure
which, in the sole judgment of the Company, will have no adverse effect
on the Company, the Trust or the Holders of the Preferred Securities
and will involve no material cost, then the Company or the Trust shall
pursue such ministerial action or other measure in lieu of redemption
and, provided further, that the Company shall have no right to redeem
the Securities while the Trust is pursuing any ministerial action or
other similar measure pursuant to its obligations under the
Declaration. The redemption payment of $50 per $50 principal amount of
the Securities plus accrued and unpaid interest, including Additional
Payments, if any, shall be made prior to 12:00 noon, New York time, on
the date of such redemption or such earlier time as the Company
determines provided that the Company shall deposit with the Trustee an
amount sufficient to make such redemption payment by 10:00 a.m. on the
date such redemption payment is to be made.
(b) If the Company opts not to redeem the Securities pursuant
to this Section 11.02, the Company shall be required to pay Additional Sums in
respect of the Securities pursuant to Section 3.01 for so long as (i) a Tax
Event has occurred and is continuing and (ii) the Property Trustee is the sole
Holder of the Securities.
SECTION 11.03. Repayment at Stated Maturity. The Company shall
repay all of the Outstanding Securities, if any, on April 15, 2028, at a price
equal to the principal amount thereof, plus any accrued and unpaid interest,
including Additional Payments, if any, to the Maturity Date (the "Stated
Maturity Price").
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71
SECTION 11.04. Selection by Trustee of Securities To Be
Redeemed. If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee pro rata, from the Outstanding Securities not previously called for
redemption. Such selection method may provide for the selection for redemption
of portions (equal to $50 or any integral multiple thereof) of the principal
amount of the Securities.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 11.05. Notice of Redemption. Notice of redemption
shall be given by first-class mail, postage prepaid, mailed not less than 30 nor
more than 60 days prior to the Redemption Date, to each Holder of Securities to
be redeemed, at such Holder's address appearing in the Security Register.
All notices of redemption given pursuant to this Article XI
shall identify the Securities to be redeemed (including, if relevant, CUSIP or
ISIN number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
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(3) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after said date,
(4) that the right of conversion with respect to such
Debentures shall terminate at 5:00 p.m. on the Redemption Date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 11.06. Deposit of Redemption Price. Prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 10.03) an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are to be redeemed
on that date.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.08) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.07. Securities Payable on Redemption Date. Notice
of redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest (including
Additional Payments, if any) to the Redemp-
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73
tion Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to the terms and
the provisions of Section 3.08.
In the event the Company defaults in the payment of the
Redemption Price, then any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borned by the Security.
SECTION 11.08. Securities Redeemed in Part. (a) In the event
of any redemption in part, the Company shall not be required to (i) issue,
register the transfer of or exchange any Security during a period beginning at
the opening of business 15 days before any selection for redemption of
Securities and ending at the close of business on the earliest date in which the
relevant notice of redemption is deemed to have been given to all holders of
Securities to be so redeemed and (ii) register the transfer of or exchange any
Securities so selected for redemption, in whole or in part, except for the
unredeemed portion of any Securities being redeemed in part.
(b) If a partial redemption of the Securities would result in
the delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
listed, the Company shall not be permitted to effect such partial redemption and
may only redeem the Securities in whole.
(c) Any Security which is to be redeemed only in part shall be
surrendered at a place of payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered. If a Global Security is surrendered, such new
Security will (subject to Section 3.06) also be a new Global Security.
<PAGE> 79
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ARTICLE XII
Subordination of Securities
SECTION 12.01. Agreement to Subordinate. The Company covenants
and agrees, and each Holder of Securities by such Holder's acceptance thereof
likewise covenants and agrees, that all Securities shall be issued subject to
the provisions of this Article XII; and each Holder of a Security, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions. The payment by the Company of the principal of,
premium, if any, and interest (including Additional Payments) on all Securities
issued hereunder shall, to the extent and in the manner hereinafter set forth,
be unsecured and subordinated and junior in right of payment to the prior
payment in full in cash of all amounts due on Senior Debt (including any amounts
due upon acceleration and all Obligations relating thereto), whether outstanding
at the date of this Indenture or thereafter incurred; provided, however, that no
provision of this Article XII shall prevent the occurrence of any default or
Event of Default hereunder.
SECTION 12.02. Default on Senior Debt. In the event and during
the continuation of any default by the Company in the payment of principal,
premium, if any, interest on or any other Obligation relating to, any Senior
Debt when same becomes due and payable, whether at maturity or at a date fixed
for prepayment or by declaration of acceleration or otherwise, then unless and
until such default shall have been cured or waived or shall have ceased to exist
or all Senior Debt and all Obligations relating thereto have been paid in full
in cash, and in the event that the maturity of any Senior Debt has been
accelerated because of a default, then no direct or indirect payment (in cash,
property, securities, by set-off or otherwise) shall be made or agreed to be
made with respect to the principal of (including redemption payments), premium,
if any, or interest on, or any other Obligation relating to, the Securities or
in respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the Securities.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraph of this Section 12.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the
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holders of Senior Debt or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Debt (or their representative or representatives
or a trustee) notify the Trustee in writing within 90 days of such payment of
the amounts then due and owing on the Senior Debt and only the amounts specified
in such notice to the Trustee shall be paid to the holders of Senior Debt.
In addition, during the continuance of any other event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, upon the occurrence of receipt by the
Trustee of written notice from the holders of a majority of the outstanding
principal amount of the Designated Senior Indebtedness or their representative,
no such payment may be made by the Company upon or in respect of the Securities
or any Obligations relating thereto for a period (each a "Payment Blockage
Period") commencing on the date of receipt of such notice and ending 179 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from the holders of a majority of the outstanding
principal amount of such Designated Senior Indebtedness or their representative
who delivered such notice). Notwithstanding anything herein to the contrary, in
no event will a Payment Blockage Period extend beyond 179 days from the date on
which such Payment Blockage Period was commenced. Not more than one Payment
Blockage Period may be commenced with respect to the Securities during any
period of 360 consecutive days.
SECTION 12.03. Liquidation; Dissolution; Bankruptcy. Upon any
payment by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal of, premium, if any, and interest on, and all
other Obligations relating to, all Senior Debt shall first be paid in full in
cash, or payment thereof provided for in money in accordance with its terms,
before any payment is made on account of the principal, premium, if any, and
interest on, and all other Obligations relating to the Securities; and upon any
such dissolution or winding up or liquidation or reorganization, any payment by
the Company, or distribution of
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assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee would be
entitled, except for the provisions of this Article XII, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution, or by the Holders of the
Securities or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Debt (pro rata to such holders on the basis of
the respective amounts of Senior Debt held by such holders, as calculated by the
Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to pay such Senior Debt in full, in cash, after giving
effect to any concurrent payment or distribution to or for the holders of such
Senior Debt, before any payment or distribution is made to the Holders of
Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing shall be received by
the Trustee or the Holders of the Securities before all Senior Debt is paid in
full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of Senior Debt or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Debt may have
been issued, and their respective interests may appear, as calculated by the
Company, for application to the payment of all Senior Debt remaining unpaid to
the extent necessary to pay such Senior Debt in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Debt.
In the event of the acceleration of the maturity of the
Securities, the Holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full in cash of all
amounts due thereon (including any amounts due upon acceleration and all
Obligations relating thereto) before the holders of the Securities will be
entitled to receive or retain any payment in respect of the principal or
interest, if any, on the Securities.
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For purposes of this Article XII, the words, "cash, property
or securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XII with respect
to the Securities to the payment of all Senior Debt which may at the time be
outstanding; provided that (i) such Senior Debt is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Debt are not, without the consent
of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company with or into,
another Person or the liquidation or dissolution of the Company following the
conveyance, transfer or lease of all or substantially all its properties and
assets on a consolidated basis to another Person upon the terms and conditions
provided for in Article VIII hereof shall not be deemed a dissolution, winding
up, liquidation or reorganization for the purposes of this Section 12.03 if
such other Person shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions stated in Article VIII hereof.
Nothing in Section 12.02 or in this Section 12.03 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.07 hereof.
SECTION 12.04. Subrogation. Subject to the payment in full of
all Senior Debt, the rights of the Holders of the Securities shall be subrogated
to the rights of the holders of such Senior Debt to receive payments or
distributions of cash, property or securities of the Company, as the case may
be, applicable to such Senior Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of such Senior
Debt of any cash, property or securities to which the Holders of the Securities
or the Trustee would be entitled except for the provisions of this Article XII,
and no payment pursuant to the provisions of this Article XII, to or for the
benefit of the holders of such Senior Debt by Holders of the Securities or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Debt, and the Holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Debt. It is understood that the
provisions of this Article XII are and are intended solely for the purposes of
defining the relative
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rights of the Holders of the Securities, on the one hand, and the holders of
such Senior Debt on the other hand.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Debt, and the Holders of
the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior Debt, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
XII of the holders of such Senior Debt in respect of cash, property or
securities of the Company, as the case may be, received upon the exercise of any
such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article XII, the Trustee, subject to the provisions of
Section 6.03, and the Holders of the Securities shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XII.
SECTION 12.05. Trustee To Effectuate Subordination. Each
Holder of Securities by such Holder's acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XII and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes.
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SECTION 12.06. Notice by the Company. The Company shall give
prompt written notice to a Responsible Officer of the Trustee of any fact known
to the Company which would prohibit the making of any payment of monies to or by
the Trustee in respect of the Securities pursuant to the provisions of this
Article XII. Notwithstanding the provisions of this Article XII or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
monies to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article XII unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
of the Trustee from the Company or a holder or holders of Senior Debt or from
any trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.03 hereof, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.06 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (and premium, if any) or interest on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which it was received, and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 6.03, shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of such
Senior Debt or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Debt to participate in
any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Debt held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the right of such Person under this Article XII, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person
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pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.07. Rights of the Trustee; Holders of Senior Debt.
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article XII in respect of any Senior Debt at any time held by it,
to the same extent as any other holder of Senior Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article XII, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Debt and, subject to the provisions
of Section 6.03, the Trustee shall not be liable to any holder of such Senior
Debt if it shall pay over or deliver to Holders of Securities, the Company or
any other Person money or assets to which any holder of such Senior Debt shall
be entitled by virtue of this Article XII or otherwise. With respect to the
holders of Senior Debt, the Trustee undertakes to perform or to observe only
such of its covenants or obligations as are specifically set forth in this
Article XII and no implied covenants or obligations with respect to holders of
Senior Debt shall be read into this Indenture against the Trustee.
SECTION 12.08. Subordination May Not Be Impaired. No right of
any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of the Holders
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of the Securities to the holders of Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, such Senior Debt, or otherwise amend or
supplement in any manner such Senior Debt or any instrument evidencing the same
or any agreement under which such Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Debt; (iii) release any Person liable in any
manner for the collection of such Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
ARTICLE XIII
Conversion of Securities
SECTION 13.01. Conversion Rights. Subject to and upon
compliance with the provisions of this Article, the Securities are convertible,
at the option of the Holder, at any time prior to 5:00 p.m., New York City time
on April 15, 2028 (except that Securities called for redemption by the Company
shall be convertible at any time prior to 5:00 p.m, New York City time, on any
Redemption Date) into fully paid and nonassessable shares of Common Stock of the
Company at an initial conversion rate of 1.7058 shares of Common Stock for each
$50 in aggregate principal amount of Securities (equal to a conversion price of
$295/16 per share of Common Stock (the "Initial Conversion Price")). The
conversion ratio and the equivalent conversion price, after giving effect to all
adjustments, are known as the "Applicable Conversion Ratio" and the "Applicable
Conversion Price", respectively, and are subject to adjustment as described in
this Article XIII. A Holder of Securities may convert any portion of the
principal amount of the Securities into that number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) obtained by dividing the principal amount of the
Securities to be converted by the Applicable Conversion Ratio. In case a
Security or portion thereof is called for redemption, such conversion right in
respect of the Security or portion so called shall expire at the close of the
Business Day on the corresponding Redemption Date, unless the Company defaults
in making the payment due upon redemption.
SECTION 13.02. Conversion Procedures. (a) In order to convert
all or a portion of the Securities, the
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Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion together, if the Security is in certificated form with such
certificated security, setting forth the principal amount of Securities to be
converted, together with the name or names, if other than the Holder, in which
the shares of Common Stock should be issued upon conversion and, if such
Securities are definitive Securities, surrender to the Conversion Agent the
Securities to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Preferred Securities may exercise its right
under the Declaration to convert such Preferred Securities into Common Stock by
delivering to the Conversion Agent an irrevocable Notice of Conversion setting
forth the information called for by the preceding sentence and directing the
Conversion Agent (i) to exchange such Preferred Security for a portion of the
Securities held by the Trust (at an exchange rate of $50 principal amount of
Securities for each Preferred Security) and (ii) to immediately convert such
Securities, on behalf of such holder, into Common Stock of the Company pursuant
to this Article XIII and, if such Preferred Securities are in definitive form,
surrendering such Preferred Securities, duly endorsed or assigned to the Company
or in blank. The Conversion Agent shall, upon receipt of the Notice of
Conversion, exchange such Securities for a Like Amount of Debentures and convert
such Debentures into Common Stock. So long as any Preferred Securities are
outstanding, the Trust shall not convert any Securities except pursuant to a
Notice of Conversion duly executed and delivered to the Conversion Agent by a
holder of Preferred Securities. Holders may obtain copies of the required form
of the Notice of Conversion from the Conversion Agent.
If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the corresponding Interest Payment Date, the Holder
will be entitled to receive the interest payable on the subsequent Interest
Payment Date on the portion of Securities to be converted notwithstanding the
conversion thereof prior to such Interest Payment Date. Except as otherwise
provided in the immediately preceding sentence, in the case of any Security
which is converted, interest whose Stated Maturity is after the date of
conversion of such Security shall not be payable, and the Company shall not make
nor be required to make any other payment, adjustment or allowance with respect
to accrued but unpaid interest on the Securities being converted, which shall be
deemed to be paid in full. The Company will make no payment or allowance for
distributions on the shares of Common Stock issued upon such conversion, except
to the extent that such shares of
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Common Stock are held of record on the record date for any such distributions.
Each conversion shall be deemed to have been effected immediately prior to the
close of business on the day on which the Notice of Conversion was received (the
"Conversion Date") by the Conversion Agent from the Holder or from a holder of
the Preferred Securities effecting a conversion thereof pursuant to its
conversion rights under the Declaration, as the case may be. The Person or
Persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
as of the Conversion Date. As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver at the office of the Conversion Agent,
unless otherwise directed by the Holder in the Notice of Conversion, a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if any, in lieu
of any fraction of any share to the Person or Persons entitled to receive the
same. The Conversion Agent shall deliver such certificate or certificates to
such Person or Persons.
(b) The Company's delivery upon conversion of the whole number
of shares of Common Stock into which the Securities are convertible (together
with the cash payment, if any, in lieu of fractional shares) shall be deemed to
satisfy the Company's obligation to pay the principal amount at Maturity of the
portion of Securities so converted and any unpaid interest (including Additional
Payments) accrued on such Securities at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the current market price of such fractional interest on the date on which the
Securities or Preferred Securities, as the case may be, were duly surrendered to
the Conversion Agent for conversion, or, if such day is not a Trading Day, on
the next Trading Day, and the Conversion Agent in turn will make such payment,
if any, to the Holder of the Securities or the holder of the Preferred
Securities so converted.
(d) In the event of the conversion of any Security in part
only, a new Security or Securities for the unconverted portion thereof will be
issued in the name of the Holder thereof upon the cancelation thereof in
accordance with Section 3.06.
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(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders of Preferred
Securities (in the exchange of Preferred Securities for Securities) and as agent
of the Holders of Securities (in the conversion of Securities into Common
Stock), as the case may be, directing it to effect such conversion transactions.
The Conversion Agent is hereby authorized (x) if the Trust exists, (i) to
exchange Securities held by or on behalf of the Trust from time to time for
Preferred Securities in connection with the conversion of such Preferred
Securities in accordance with this Article XIII and (ii) to convert all or a
portion of the Securities into Common Stock and thereupon to deliver such shares
of Common Stock in accordance with the provisions of this Article XIII and to
deliver to the Trust a new Security or Securities for any resulting unconverted
principal amount and (y) if the Trust no longer exists (i) to exchange
Securities held by the Holders in connection with the conversion of such
Securities in accordance with this Article XIII and (ii) to convert all or a
portion of the Securities into Common Stock and thereupon to deliver such shares
of Common Stock in accordance with the provisions of this Article XIII and to
deliver to such Holders a new Security or Securities for any resulting
unconverted principal amount.
(f) All shares of Common Stock delivered upon any conversion
of Restricted Securities shall bear a restrictive legend substantially in the
form of the legend required to be set forth on such Securities and shall be
subject to the restrictions on transfer provided in such legend and in Section
3.06(b) hereof. Neither the Trustee nor the Conversion Agent shall have any
responsibility for the inclusion or content of any such restrictive legend on
such Common Stock; provided, however, that the Trustee or the Conversion Agent
shall have provided to the Company or to the Company's transfer agent for such
Common Stock, prior to or concurrently with a request to the Company to deliver
to such Conversion Agent certificates for such Common Stock, written notice that
the Securities delivered for conversion are Restricted Securities.
SECTION 13.03. Conversion Price Adjustments. The Applicable
Conversion Price shall be subject to adjustment (without duplication) from time
to time as follows:
(i) In case the Company shall pay a dividend or make a
distribution on the Common Stock exclusively in Common Stock, the
Applicable Conversion Price in effect
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at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such Applicable
Conversion Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination and the denominator shall be
the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this subparagraph (i), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company. The Company shall not pay any dividend or make any
distribution exclusively in Common Stock on shares of any class or
series of capital stock of the Company held in the treasury of the
Company. In the event that such dividend or distribution is not so paid
or made, the Applicable Conversion Price shall again be adjusted to be
the Applicable Conversion Price which would then be in effect if such
dividend or distribution had not occurred.
(ii) In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants,
in each case entitling the holders thereof to subscribe for or purchase
shares of Common Stock at a price per share less than the current
market price per share (determined as provided in subparagraph (vii))
of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights or warrants (other than
rights issued in connection with a shareholders' rights plan), the
Applicable Conversion Price in effect at the opening of business on the
day following the date fixed for such determination shall be reduced by
multiplying such Applicable Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus
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the number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such current market
price and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. To the extent that shares of Common Stock
are not so delivered after the expiration of such rights or warrants,
the Applicable Conversion Price shall be readjusted to the Applicable
Conversion Price which would then be in effect if such date fixed for
the determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this subparagraph
(ii), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. In case
any rights or warrants referred to in this subparagraph (ii) in respect
of which an adjustment shall have been made shall expire unexercised,
the Applicable Conversion Price shall be readjusted at the time of such
expiration to the Applicable Conversion Price that would have been in
effect if no adjustment had been made on account of the distribution or
issuance of such expired rights or warrants.
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Applicable Conversion Price in effect at the opening of business on the
day following the day upon which such subdivision becomes effective
shall be proportionately reduced and, conversely, in case out standing
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Applicable Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph (iv),
in case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of
any class or series of capital stock, cash or assets (including
securities, but excluding any rights or warrants referred to in
subparagraph (ii) of this Section 13.03, any rights issued in
connection with a shareholders' rights plan, any dividend or
distribution paid exclusively in cash and
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any dividend or distribution referred to in subparagraph (i) of this
Section 13.03), the Applicable Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Applicable Conversion Price in effect immediately prior to the
effectiveness of the Applicable Conversion Price reduction contemplated
by this subparagraph (iv) by a fraction of which the numerator shall be
the current market price per share (determined as provided in
subparagraph (vii)) of the Common Stock on the date fixed for the
payment of such distribution (the "Reference Date") less the fair
market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution
of the Board of Directors), on the Reference Date, of the portion of
the evidences of indebtedness, shares of capital stock, cash and assets
so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common
Stock, such reduction to become effective immediately prior to the
opening of business on the day following the Reference Date. In the
event that such dividend or distribution is not so paid or made, the
Applicable Conversion Price shall again be adjusted to be the
Applicable Conversion Price which would then be in effect if such
dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of
this subparagraph (iv) by reference to the actual or when issued
trading market for any securities comprising such distribution, it must
in doing so consider the prices in such market over the same period
used in computing the current market price per share of Common Stock
(determined as provided in subparagraph (vii)). For purposes of this
subparagraph (iv), any dividend or distribution that includes shares of
Common Stock or rights or warrants to subscribe for or purchase shares
of Common Stock shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, shares of capital stock,
cash or assets other than such shares of Common Stock or such rights or
warrants (making any Applicable Conversion Price reduction required by
this subparagraph (iv)) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants
(making any further Applicable Conversion Price reduction required by
subparagraph (i) or (ii)), except (A) the Reference Date of such
dividend or distribution as defined in this subparagraph (iv) shall be
substituted as (a) "the date fixed for the
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determination of stockholders entitled to receive such dividend or
other distribution," (b) "the date fixed for the determination of
stockholders entitled to receive such rights or warrants" and (c) "the
date fixed for such determination" within the meaning of subparagraphs
(i) and (ii) and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the
meaning of subparagraph (i).
(v) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (x)
cash dividends that do not exceed the per share amount of the smallest
of the immediately four preceding quarterly cash dividends (as adjusted
to appropriately reflect any of the events referred to in subparagraphs
(i), (ii), (iii), (iv), (v) and (vi)), and (y) cash dividends if the
per share amount thereof, together with the aggregate per share amount
of any other cash dividends paid within 12 months preceding the date of
payment of such cash dividends, does not exceed 12% of the current
market price per share (determined as provided in subparagraph (vii))
of the Common Stock on the Trading Day next preceding the date of
declaration of such dividend, the Applicable Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Applicable Conversion Price in effect immediately prior
to the effectiveness of the Applicable Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (vii)) of the Common Stock on the date fixed
for the payment of such distribution less the amount of cash so
distributed applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of
business on the day following the date fixed for the payment of such
distribution; provided, however, that in the event the portion of the
cash so distributed applicable to one share of Common Stock is equal to
or greater than the current market price per share (as defined in
subparagraph (vii)) of the Common Stock on the record date mentioned
above, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder of Securities shall have the right to receive
upon
<PAGE> 94
89
conversion the amount of cash such Holder would have received had such
Holder converted each Security immediately prior to the record date for
the distribution of the cash. In the event that such dividend or
distribution is not so paid or made, the Applicable Conversion Price
shall again be adjusted to be the Applicable Conversion Price which
would then be in effect if such record date had not been fixed.
(vi) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or
any portion of the Company's Common Stock shall expire and such tender
or exchange offer shall involve the payment by the Company or such
Subsidiary of consideration per share of Common Stock having a fair
market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution
of the Board of Directors) at the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds 110% of the current
market price per share (determined as provided in subparagraph (vii))
of the Common Stock on the Trading Day next succeeding the Expiration
Time, the Applicable Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Applicable
Conversion Price in effect immediately prior to the effectiveness of
the Applicable Conversion Price reduction contemplated by this
subparagraph (vi) by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the current
market price per share (determined as provided in subparagraph (vii))
of the Common Stock on
<PAGE> 95
90
the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid)
of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time and actually accepted and paid for
(the shares so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the current market price per share (determined as provided in
subparagraph (vii)) of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time.
(vii) For the purpose of any computation under subparagraphs
(ii), (iv), (v) and (vi), the current market price per share of Common
Stock on any date in question shall be deemed to be the average of the
daily closing prices for the ten consecutive Trading Days prior to the
earlier of the day in question and, if applicable, the day before the
"ex" date with respect to the issuance or distribution requiring such
computation; provided, however, that if another event occurs that would
require an adjustment pursuant to subparagraph (i) through (vi),
inclusive, the Board of Directors may make such adjustments to the
Closing Prices during such five Trading Day period as it deems
appropriate to effectuate the intent of the adjustments in this Section
13.03, in which case any such determination by the Board of Directors
shall be set forth in a Board Resolution and shall be conclusive. For
purposes of this paragraph, the term "ex" date, (1) when used with
respect to any issuance or distribution, means the first date on which
the Common Stock is quoted regular way on the New York Stock Exchange
Composite Tape or on such successor securities exchange on which the
Common Stock may be quoted or listed or in the relevant market from
which the Closing Prices were obtained without the right to receive
such issuance or distribution, and (2) when used with respect to any
tender or exchange offer means the first date on which the Common Stock
is quoted regular way on such securities exchange or in such market
after the Expiration Time of such offer.
(viii) The Company may make such reductions in the Applicable
Conversion Price, in addition to those required by subparagraphs (i),
(ii), (iii), (iv), (v) and (vi), as it considers to be advisable to
avoid or diminish any income tax to holders of Preferred Securities
resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax
purposes.
(ix) If any action would require adjustment of the Applicable
Conversion Ratio and Applicable Conversion Price, pursuant to more than
one of the anti-dilution provisions set forth in this Article XIII,
only one
<PAGE> 96
91
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to Holders. Furthermore,
no adjustment in the Applicable Conversion Ratio and Applicable
Conversion Price shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Applicable Conversion
Ratio and Applicable Conversion Price, but any adjustments which by
reason of this subparagraph that would otherwise be required to be made
shall be carried forward and taken into account in determining whether
any subsequent adjustment shall be required.
SECTION 13.04. Reclassification, Consolidation, Merger or Sale
of Assets. In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancelation of outstanding shares of Common Stock of the
Company), (c) any sale of all or substantially all of the assets of the Company
or (d) any compulsory share exchange) (each of the events in the preceding
clauses (a) through (d) being referred to as a "Company Transaction"), in each
case, as a result of which shares of Common Stock shall be converted into the
right to receive other securities, cash or other property, then lawful provision
shall be made as part of the terms of such Company Transaction whereby the
Holder of each Security then outstanding shall have the right thereafter to
convert such Security into the kind and amount of securities, cash and other
property receivable upon the consummation of the Company Transaction by a holder
of that number of shares of Common Stock into which such Security was
convertible immediately prior to such Company Transaction. Holders of the
Securities shall have no voting rights with respect to any Company Transaction
described in this Section 13.04.
The Company or the Person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquires the
Company's shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constitutive document to establish such
right. Such certificate or articles of incorporation or other constitutive
document shall provide for adjustments which, for
<PAGE> 97
92
events subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article XIII. The
above provisions shall similarly apply to successive transactions of the
foregoing type.
SECTION 13.05. Notice of Adjustments of Conversion Price.
Whenever the Applicable Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Applicable
Conversion Price and shall prepare a certificate signed by the Chief
Financial Officer or the Treasurer of the Company setting forth the
adjusted Applicable Conversion Price and showing in reasonable detail
the facts upon which such adjustment is based, and such certificate
shall forthwith be filed with the Trustee, the Conversion Agent and the
transfer agent for the Preferred Securities and the Securities; and
(b) a notice stating the Applicable Conversion Price has been
adjusted and setting forth the adjusted Applicable Conversion Price
shall as soon as practicable be mailed by the Company to all record
holders of Preferred Securities and the Securities at their last
addresses as they appear upon the stock transfer books of the Company
and the books and records of the Trust, respectively.
SECTION 13.06. Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 13.03(iv) or (v) or (2)
authorize a tender or exchange offer that would require an adjustment
pursuant to Section 13.03(vi);
(ii) the Company shall authorize the granting to all holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or series or of any other rights or
warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding
<PAGE> 98
93
Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of
any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the books and records of the Trust, or (b)
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least fifteen days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 13.07. Dividend or Interest Reinvestment Plans. (a)
Notwithstanding the foregoing provisions, the issuance of any shares of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan, and the issuance
of any shares of Common Stock or options or rights to purchase such shares
pursuant to any employee benefit plan or program of the Company or pursuant to
any
<PAGE> 99
94
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Securities were first issued, shall not be deemed
to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies.
(b) There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any stock (or securities convertible
into or exchangeable for stock) of the Company except as specifically described
in this Article XIII.
SECTION 13.08. Certain Additional Rights. Notwithstanding any
other provision of this Article XIII to the contrary, rights, warrants,
evidences of indebtedness, other securities, cash or other assets (including,
without limitation, any rights distributed pursuant to any stockholder rights
plan) shall be deemed not to have been distributed for purposes of this Article
XIII if the Company makes proper provision so that each Holder who converts a
Security (or any portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock issuable upon
such conversion, the amount and kind of such distributions that such Holder
would have been entitled to receive if such Holder had, immediately prior to
such determination date, converted such Security into Common Stock.
SECTION 13.09. Restrictions on Common Stock Issuable Upon
Conversion. (a) Shares of Common Stock to be issued upon conversion of a
Security in respect of Restricted Preferred Securities (as defined in the
Declaration) shall bear such restrictive legends as the Company may provide in
accordance with applicable law.
(b) If shares of Common Stock to be issued upon conversion of
a Security in respect of Restricted Preferred Securities are to be registered in
a name other than that of the Holder of such Preferred Security, then the Person
in whose name such shares of Common Stock are to be registered must deliver to
the Conversion Agent a certificate satisfactory to the Company and signed by
such Person, as to compliance with the restrictions on transfer applicable to
such Preferred Security. Neither the Trustee nor any Conversion Agent or
Registrar shall be required to register in a name other
<PAGE> 100
95
than that of the Holder shares of Common Stock or such Preferred Securities
issued upon conversion of any such Security in respect of such Preferred
Securities not so accompanied by a properly completed certificate.
SECTION 13.10. Trustee Not Responsible for Determining
Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent
shall at any time be under any duty or responsibility to any Holder of any
Security to determine whether any facts exist which may require any adjustment
of the Applicable Conversion Price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, or herein
or in any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any Conversion Agent shall be accountable with respect
to the validity or value (or the kind or amount) of any shares of Common Stock
or of any securities or property which may at any time be issued or delivered
upon the conversion of any Security; and neither the Trustee nor any Conversion
Agent makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Security for the purpose of conversion, or, except as expressly herein provided,
to comply with any of the covenants of the Company contained in Article X or
this Article XIII.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE> 101
96
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
COLTEC INDUSTRIES INC,
by
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
by
---------------------------------------
Name:
Title:
<PAGE> 102
FACE OF SECURITY
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY AND ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES ISSUABLE UPON EXCHANGE THEREFOR AND ANY COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, (II) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE".
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS."
<PAGE> 103
2
COLTEC INDUSTRIES INC
Convertible Junior Subordinated
Debenture Due 2028
No. D-1 $154,639,200
CUSIP No.
COLTEC INDUSTRIES INC, a corporation duly organized and
existing under the laws of the State of Pennsylvania (herein called "the
Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The Bank
of New York, as Property Trustee of Coltec Capital Trust, pursuant to the
Amended and Restated Declaration of Trust naming the Company, as sponsor, The
Bank of New York as Property Trustee (the "Property Trustee"), and The Bank of
New York (Delaware), as Delaware Trustee and David D. Harrison, Robert J. Tubbs
and Thomas B. Jones, Jr. as the Administrative Trustees, dated April 14, 1998,
or registered assigns, the principal sum [of one hundred fifty-four million, six
hundred thirty-nine thousand, two hundred Dollars] ($154,639,200) on April 15,
2028.
Interest Payment Dates: January 15, April 15, July 15, and
October 15 commencing July 15, 1998
Regular Record Dates: the close of business on the next preceding
January 1, April 1, July 1 and October 1
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed manually or by facsimile by its duly
<PAGE> 104
3
authorized officers and a facsimile of its corporate seal to be affixed hereto
or imprinted hereon.
Dated: ,
COLTEC INDUSTRIES INC,
By:
------------------------------
Name:
Title:
[Seal]
Attest:
- ---------------
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: , THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
<PAGE> 105
REVERSE OF SECURITY
COLTEC INDUSTRIES INC
Convertible Junior Subordinated
Debenture Due 2028(1)
1. Interest. Coltec Industries Inc, a Pennsylvania corporation
(the "Company"), is the issuer of this Convertible Junior Subordinated Debenture
Due 2028 (the "Security") limited in aggregate principal amount to $154,639,200
issued under the Indenture hereinafter referred to. The Company promises to pay
interest on the Securities in cash from April 14, 1998 or from the most recent
interest payment date to which interest has been paid or duly provided for,
quarterly (subject to deferral for up to 20 consecutive quarters as described in
Section 3 hereof) in arrears January 15, April 15, July 15, and October 15 of
each year (each such date, an "Interest Payment Date"), commencing July 15,
1998, at the Applicable Rate, plus Additional Sums, if any, until the principal
hereof shall have become due and payable.
The amount of interest payable for any period will be computed
on the basis of twelve 30-day months and a 360-day year. To the extent lawful,
the Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the rate borne by the
Securities, compounded quarterly. Any interest paid on this Security shall be
increased to the extent necessary to pay Additional Sums as set forth in this
Security.
2. Additional Sums. The Company shall pay to Coltec Capital
Trust (and its permitted successors or assigns under the Declaration) (the
"Trust") such additional amounts as may be necessary in order that the amount of
dividends or other distributions then due and payable by the Trust on the
Preferred Securities that at any time remain outstanding in accordance with the
terms thereof shall not be reduced as a result of any additional taxes, duties
and other governmental
- --------
(1) All terms used in this Security which are defined in the Indenture or in
the Declaration referred to herein shall have the meanings assigned to them in
the Indenture or the Declaration, as the case may be.
<PAGE> 106
2
charges of whatever nature (other than withholding taxes) imposed by the United
States or any other taxing authority.
3. Extension of Interest Payment Period. So long as no Event
of Default has occurred and is continuing, the Company shall have the right, at
any time during the term of this Security, from time to time to defer payments
of interest by extending the interest payment period of such Security for up to
20 consecutive quarters (a "Deferral Period"). To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to Section 3.13 of the
Indenture, will bear interest thereon at the Applicable Rate compounded
quarterly for each quarter of the Deferral Period ("Compounded Interest"). At
the end of the Deferral Period, the Company shall pay all interest then accrued
and unpaid on the Securities, including any Compounded Interest that shall be
payable to the Holders of the Securities in whose names the Securities are
registered in the Security Register on the first Regular Record Date after the
end of the Deferral Period. Before the termination of any Deferral Period, the
Company may further extend such period, provided that such period together with
all such further extensions thereof shall not exceed 20 consecutive quarters or
extend beyond the Maturity of the Security. Upon the termination of any Deferral
Period and upon the payment of all Compounded Interest and Additional Sums
(together, "Additional Payments"), if any, then due, the Company may commence a
new Deferral Period, subject to the foregoing requirements. No interest shall be
due and payable during a Deferral Period except at the end thereof.
The Company shall give the Holder of the Security and the
Trustee notice of its selection of a Deferral Period at least ten days prior to
the record date for any distributions that would have been payable on the Trust
Securities except for the decision to begin or extend such Deferral Period.
The quarter in which any notice is given pursuant to the
second paragraph of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Deferral Period permitted under the first paragraph of
this Section 3.
4. Method of Payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the next preceding January 1, April 1, July 1 and October 1 (the "Regular
Record
<PAGE> 107
3
Date"). Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
ten days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
New York, New York, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
5. Paying Agent and Security Registrar. The Property Trustee
will act as Paying Agent, Security Registrar and Conversion Agent. The Company
may change any Paying Agent, Security Registrar, co-registrar or Conversion
Agent without prior notice. The Company or any of its Affiliates
may act in any such capacity.
6. Indenture. The Company issued the Securities under an
indenture, dated as of April 14, 1998 (the "Indenture"), between the Company and
The Bank of New York, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa- 77bbbb) ("TIA") as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms, certain of
which are summarized herein, and holders are referred to the Indenture and the
TIA for a statement of such
<PAGE> 108
4
terms. The Securities are unsecured general obligations of the Company limited
to $154,639,200 and subordinated in right of payment to all existing and future
Senior Debt of the Company. No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed, or to convert this Security as provided
in the Indenture.
7. Optional Redemption. The Securities are redeemable at the
Company's option (an "Optional Redemption") in whole or in part, at any time or
from time to time, at any time after April 20, 2001, upon not less than 30 nor
more than 60 days' notice, at a Redemption Price (the "Optional Redemption
Price") per $50 principal amount of Securities set forth in the table below,
plus any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date, if redeemed during the 12-month period ending on April 20:
<TABLE>
<CAPTION>
Price Per $50
Principal
Year Amount
---- ------
<S> <C>
2002 $51.31
2003 $50.88
2004 $50.44
</TABLE>
and thereafter at $50 per $50 principal amount of the Securities, plus, in each
case, any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date.
8. Optional Redemption Upon Tax Event. The Securities are
subject to redemption in whole, but not in part, at any time within 90 days, if
a Tax Event shall occur and be continuing, at a Redemption Price equal to $50
per $50 principal amount thereof, plus accrued but unpaid interest, including
Additional Payments, if any, to the Redemption Date.
9. Notice of Redemption. Notice of redemption will be mailed
by first-class mail, postage prepaid, at least
<PAGE> 109
5
30 days, but not more than 60 days before the Redemption Date to each Holder of
the Securities to be redeemed at such Holder's address appearing in the Security
Register.
10. Maturity. The Securities will mature, on April 15, 2028.
11. No Sinking Fund. There are no sinking fund payments with
respect to the Securities.
12. Payment to Registered Holders; Cessation of Interest
Accrual Upon Redemption. If this Security is redeemed subsequent to a Regular
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid to
the person in whose name this Security is registered at the close of business on
such record date. On or after the Redemption Date, interest will cease to accrue
on the Securities, or portion thereof, called for redemption.
13. Subordination. The payment of the principal of, interest
on or any other amounts due on the Securities is subordinated in right of
payment to all existing and future Senior Debt (as defined below) of the
Company, as described in the Indenture. Each Holder, by accepting a Security,
agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.
"Senior Debt" means any Debt of the Company, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred, except such Debt that is expressly stated to rank junior in
right of payment to, or pari passu in right of payment with, the Securities (or
any guarantee thereof); provided, however, that Senior Debt shall not be deemed
to include (a) any Debt of the Company which, when incurred and without respect
to any election under Section 1111(b) of the United States Bankruptcy Code of
1978, was without recourse to the Company, (b) trade accounts payable and
accrued liabilities arising in the ordinary course of business, (c) any Debt of
the company to any of its subsidiaries or (d) any Debt to any employee of the
Company.
14. Conversion. The Holder of any Security has the right,
exercisable at any time prior to the close of business New York City time, on
April 15, 2028 (except that Securities called for redemption by the Company will
be convertible at any time prior to the close of business,
<PAGE> 110
6
New York City time, on any Redemption Date) to convert the principal amount
thereof (or any portion thereof that is an integral multiple of $50) into shares
of Common Stock at the initial conversation rate of 1.7058 shares of Common
Stock for each $50 in aggregate principal amount of Securities (equivalent to a
conversion price of $295/16 per share of Common Stock of the Company). The
conversion ratio and equivalent conversion price, after giving effect to all
adjustments, are known as the "Applicable Conversion Price" and the "Applicable
Conversion Ratio," respectively, and are subject to adjustment under certain
circumstances. If a Security is called for redemption, the conversion right will
terminate the on corresponding Redemption Date, unless the Company defaults in
making the payment due upon redemption.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of
business on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date will be paid to
the registered Holder of such Security on such Regular Record Date. In such
event, such Security, when surrendered for conversion, need not be accompanied
by payment of an amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable upon conversion
of a Security is determined by dividing the principal amount of the Security
converted by the Applicable Conversion Price in effect on the Conversion Date.
No fractional shares will be issued upon conversion but a cash adjustment will
be made for any fractional interest. The outstanding principal amount of any
Security shall be reduced by the portion of the principal amount thereof
converted into shares of Common Stock.
15. Registration Rights. The holders of the Preferred
Securities, the Securities and the Guarantee are entitled to the benefits of a
Registration Rights Agreement, dated as of April 14, 1998, among the Company and
the Initial Purchasers (the "Registration Rights Agreement"). Pursuant to, and
subject to the terms of, the Registration Rights
<PAGE> 111
7
Agreement the Company has agreed for the benefit of the holders of the
Preferred Securities, the Securities and the Guarantee that (i) it will, at its
cost, within 90 days after the date of original issuance of the Securities, file
a shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Preferred Securities, together with
the Securities, the Guarantee and the related Common Stock issuable upon
conversion thereof, (ii) it will use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission and
(iii) to use its reasonable best efforts to maintain such Shelf Registration
Statement continuously effective under the Securities Act of 1933 for two years
or such other period required under Rule 144(k) thereunder or any successor rule
or regulation thereto or such earlier date as is provided in the Registration
Rights Agreement. If the Company fails to comply with its obligations under the
Registration Rights Agreement and a Registration Default (as defined in the
Registration Rights Agreement) occurs, then, at such time, the Applicable Rate
will increase by 50 basis points (0.50%); provided, however, that a Registration
Default shall not be deemed to have occurred as a result of certain events set
forth in the Registration Rights Agreement until the expiration of certain time
periods as set forth therein. Such increase will remain in effect from and
including the date on which any such Registration Default shall occur to but
excluding the earlier of (x) the date on which all Registration Defaults have
been cured, and (y) the date on which the Company is no longer required to keep
the Shelf Registration Statement effective in accordance with the Registration
Rights Agreement, on which date the interest rate on the Securities will revert
to the interest rate originally borne by the Securities.
16. Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
<PAGE> 112
8
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment of
this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this
Security is overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
17. Persons Deemed Owners. Except as provided in Section 3
hereof, the registered Holder of a Security may be treated as its owner for all
purposes.
18. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
19. Events of Default and Remedies. The Securities shall have
the Events of Default as set forth in Section 5.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the holders of at least 25%
in aggregate principal amount of the Outstanding Securities by notice to the
Company and the Trustee may declare all amounts payable on the Securities
(including any Additional Payments) to be due and payable immediately; provided
that, if the Property Trustee is the sole Holder of the Securities, and if upon
an Event of Default, the Trustee or the holder of not less than 25% in aggregate
principal amount of the then outstanding Securities fail to declare the
principal of all the Securities to be immediately due and payable, the holders
of at least 25% in aggregate liquidation amount of Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee, and upon any such declaration
<PAGE> 113
9
such principal and all accrued interest shall become immediately due and
payable; and; provided further that the payment of principal and interest on
such Securities shall remain subordinated to the extent provided in the
Indenture.
In the case of an Event of Default, the holders of a majority
in principal amount of the Outstanding Securities by written notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
Holders may not enforce the Indenture or the Securities
except as provided in the Indenture. Subject to certain limitations, holders of
a majority in principal amount of the then outstanding Securities issued under
the Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference to, and
subject in its entirety by, the more complete description thereof contained in
the Indenture.
20. Amendments, Supplements and Waivers. The Indenture
permits, subject to the rights of the holders of Preferred Securities set forth
therein and in the Declaration and with certain other exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company, and the rights of the Holders of the Securities
under the Indenture, at any time, by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, subject to the rights of the holders of the Preferred Securities set
forth therein and in the Declaration, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security. The above
description of
<PAGE> 114
10
amendments, supplements and waivers is qualified by reference to, and subject in
its entirety, by the more complete description thereof contained in, the
Indenture.
21. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not a Trustee, subject to certain
limitations provided for in the Indenture and in the TIA. Any Agent may do the
same with like rights.
22. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
23. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
24. Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
25. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
<PAGE> 115
11
The Company will furnish to any Holder of the Securities upon
written request and without charge a copy of the Indenture. Request may be made
to:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Attention of: Treasurer
<PAGE> 116
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Your Signature: -------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Date: ------------------------------
Signature Guarantee:(2)
----------------------------------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
- --------
(2) Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
<PAGE> 117
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account
without transfer; or
(2) / / transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(3) / / transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
Signature
Signature Guarantee:(3)
Signature must be guaranteed Signature
- --------
(3) Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
<PAGE> 118
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.]
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
-------------------- ------------------------------------------
NOTICE: [To be executed by an executive
officer]
<PAGE> 119
(TO BE ATTACHED TO GLOBAL SECURITIES)
SCHEDULE A
The initial principal amount of this Global Security shall be
$ . The following increases or decreases in the principal amount of this Global
Security have been made:
<TABLE>
<CAPTION>
Amount of in
crease in Princi-
pal Amount of Signature of
this Global Secu- Amount of de- Principal Amount authorized
rity including crease in Princi- of this Global signatory of
increase upon pal Amount of Security follow- Trustee or
exercise of over- this Global Secu- ing such decrease Securities
Date Made allotment option rity or increase Custodian
- --------- ---------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 120
ELECTION TO CONVERT
To: Coltec Industries Inc
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Common Stock of COLTEC CAPITAL TRUST in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Security, agrees to be bound
by the terms of the Registration Rights Agreement relating to the Common Stock
issuable upon conversion of the Securities.
Date: ,
Portions of Security to be
converted ($50 or integral
multiples thereof):
in whole $
--- ----------------------
-------------------------------------
Signature (for conversion only)
Please Print or Type Name and
Address, Including Zip Code,
and Social Security or Other
Identifying Number
------------------------------------
------------------------------------
------------------------------------
<PAGE> 121
------------------------------------
Signature Guarantee:(4)
- --------
(4) Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
GUARANTEE AGREEMENT
Between
COLTEC INDUSTRIES INC
and
THE BANK OF NEW YORK
Dated as of April 14, 1998
<PAGE> 2
CROSS-REFERENCE TABLE */
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
310(a).................................................... 4.01(a)
310(b).................................................... 4.01(c), 2.08
310(c).................................................... Inapplicable
311(a).................................................... 2.02(b)
311(b).................................................... 2.02(b)
311(c).................................................... Inapplicable
312(a).................................................... 2.02(a)
312(b).................................................... 2.02(b)
313 .................................................... 2.03
314(a).................................................... 2.04
314(b).................................................... Inapplicable
314(c).................................................... 2.05
314(d).................................................... Inapplicable
314(e).................................................... 1.01, 2.05, 3.02
314(f).................................................... 2.01, 3.02
315(a).................................................... 3.01(d)
315(b).................................................... 2.07
315(c).................................................... 3.01
315(d).................................................... 3.01(d)
316(a).................................................... 1.01, 2.06, 5.04
316(b).................................................... 5.03
316(c).................................................... 8.02
317(a).................................................... Inapplicable
317(b).................................................... Inapplicable
318(a).................................................... 2.01(b)
318(b).................................................... 2.01
318(c).................................................... 2.01(a)
- --------
*/ This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions....................................... 2
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application.................. 5
SECTION 2.02. Lists of Holders.................................. 6
SECTION 2.03. Reports by the Guarantee
Trustee......................................... 6
SECTION 2.04. Periodic Reports to the Guarantee
Trustee......................................... 7
SECTION 2.05. Evidence of Compliance with
Conditions Precedent............................ 7
SECTION 2.06. Events of Default; Waiver......................... 7
SECTION 2.07. Event of Default; Notice.......................... 7
SECTION 2.08. Conflicting Interests............................. 8
ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee
Trustee........................................... 8
SECTION 3.02. Certain Rights of Guarantee Trustee.............. 10
SECTION 3.03. Indemnity........................................ 12
SECTION 3.04. Expenses ........................................ 12
<PAGE> 4
Page
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee;
Eligibility.................................... 12
SECTION 4.02. Appointment, Removal and
Resignation of the Guarantee
Trustee........................................ 13
ARTICLE V
Guarantee
SECTION 5.01. Guarantee........................................ 13
SECTION 5.02. Waiver of Notice and Demand...................... 14
SECTION 5.03. Obligations Not Affected......................... 14
SECTION 5.04. Rights of Holders................................ 15
SECTION 5.05. Guarantee of Payment............................. 15
SECTION 5.06. Subrogation...................................... 15
SECTION 5.07. Independent Obligations.......................... 16
ARTICLE VI
Covenants and Subordination
SECTION 6.01. Subordination.................................... 16
SECTION 6.02. Pari Passu Guarantees............................ 16
ARTICLE VII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 7.01. Company May Consolidate, Etc., Only
on Certain Terms................................ 17
ARTICLE VIII
Termination
SECTION 8.01. Termination...................................... 17
ARTICLE IX
<PAGE> 5
Page
Miscellaneous
SECTION 9.01. Successors and Assigns............................ 18
SECTION 9.02. Amendments........................................ 18
SECTION 9.03. Notices........................................... 18
SECTION 9.04. Benefit........................................... 19
SECTION 9.05. Interpretation.................................... 19
SECTION 9.06. Governing Law..................................... 20
<PAGE> 6
GUARANTEE AGREEMENT, dated as of April 14,
1998, executed and delivered by COLTEC INDUSTRIES
INC, a Pennsylvania corporation (the "Guarantor") and
THE BANK OF NEW YORK, a New York banking corporation,
as trustee (the "Guarantee Trustee"), for the benefit
of the Holders (as defined herein) from time to time
of the Convertible Preferred Securities (as defined
herein) of COLTEC CAPITAL TRUST, a Delaware statutory
business trust (the "Issuer").
WHEREAS pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of April 14, 1998, executed by Coltec
Industries Inc, as Sponsor, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Property Trustee, and the Administrative
Trustees named therein, the Issuer is issuing $150,000,000 aggregate liquidation
amount of its 5 1/4% Convertible Preferred Securities, Term Income Deferrable
Equity Securities (TIDES(sm)), liquidation amount $50 per security, (the
"Convertible Preferred Securities") and $4,639,200 aggregate liquidation amount
of its Common Securities, liquidation amount $50 per security (the "Common
Securities" and, collectively with the Convertible Preferred Securities, the
"Trust Securities") representing undivided beneficial ownership interests in the
assets of the Issuer and having the terms set forth in the Declaration;
WHEREAS the Trust Securities will be issued by the Issuer and
the proceeds thereof will be used to purchase the 5 1/4% Convertible Junior
Subordinated Debentures due April 15, 2028 (as defined in the Declaration) (the
"Convertible Junior Subordinated Debentures") of the Guarantor which will be
deposited with the Property Trustee under the Declaration, as trust assets; and
<PAGE> 7
WHEREAS as incentive for the Holders to purchase Trust
Securities the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Trust Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Trust Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, intending to be legally bound hereby, the Guarantor
executes and delivers this Guarantee Agreement for the benefit of the Holders
from time to time of the Trust Securities.
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Guarantee
Agreement, the terms set forth below shall, unless the context otherwise
requires, have the following meanings. Capitalized or otherwise defined terms
used but not otherwise defined herein shall have the meanings assigned to such
terms in the Declaration as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person; provided, however, that the Issuer
shall be deemed not to be an Affiliate of the Guarantor. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; the terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Common Securities" shall have the meaning specified in the
first recital of this Guarantee Agreement.
"Convertible Preferred Securities" shall have the meaning
specified in the first recital of this Guarantee Agreement.
"Debt" means, (i) the principal of, premium, if any, unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company at the relevant
contracted rate specified in the documentation for the relevant Debt whether or
not such claim for post-petition interest is allowed in such proceeding) on, and
all other Obligations relating to, indebtedness for money borrowed (including
any guarantee relating to
<PAGE> 8
3
the foregoing obligations), (ii) purchase money and similar obligations, (iii)
obligations under capital lease, letters of credit and reimbursement obligations
relating thereto, (iv) guarantees, assumptions or purchase commitments relating
to, or other transactions as a result of which the Company is responsible for
the payment of such indebtedness of others, (v) renewals, extensions and
refundings of any such indebtedness, (vi) interest or obligations in respect of
any such indebtedness accruing after the commencement of any insolvency or
bankruptcy proceedings (at the relevant contractual rate specified in the
documentation therefor, whether or not such claim for post-petition interest is
allowed in such proceeding), (vii) all obligations to make payment pursuant to
the terms of financial instruments, such as (a) securities contracts and foreign
currency exchange contracts, (b) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts and (c) similar financial instruments and (viii) any
deferrals, renewals or extensions of any such Debt.
"Declaration" shall have the meaning specified in the first
recital to this Guarantee Agreement.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received notice of default and shall not have
cured such default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Convertible Preferred
Securities, to the extent not paid or made by or on behalf of the Issuer: (i)
any accrued and unpaid Distributions (as defined in the Declaration) required to
be paid on the Trust Securities, to the extent the Issuer shall have funds on
hand available therefor at such time, (ii) the redemption price, including all
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), with respect to the Trust Securities called for redemption by the
Issuer to the extent the Issuer shall have funds on hand available therefor at
such time and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Issuer, unless Convertible Junior
<PAGE> 9
4
Subordinated Debentures are distributed to the Holders of the Trust Securities
or all the Trust Securities are redeemed, the lesser of (a) the aggregate of the
liquidation amount of $50 per Trust Security plus accrued and unpaid
Distributions on the Trust Securities to the date of payment (the "Liquidation
Distribution") to the extent the Issuer shall have funds on hand available to
make such payment at such time and (b) the amount of assets of the Issuer
remaining available for distribution to Holders of the Trust Securities upon
liquidation of the Issuer after satisfaction of liabilities to creditors of the
Issuer as required by applicable law.
"Guarantee Trustee" means The Bank of New York, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Holder" means any holder, as registered on the books and
records of the Issuer, of any Trust Securities; provided, however, that in
determining whether the holders of the requisite percentage of Trust Securities
have given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
"Indenture" means the Indenture dated as of April 14, 1998, as
amended or supplemented, between the Guarantor and The Bank of New York, as
trustee, relating to the issuance of Convertible Junior Subordinated Debentures.
"Issuer" shall have the meaning specified in the first recital
of this Guarantee Agreement.
"List of Holders" has the meaning specified in Section
2.02(a).
"Majority in liquidation amount of the Trust Securities"
means, except as provided by the Trust Indenture Act, a vote by the Holders,
voting separately as a class, of more than 50% of the aggregate liquidation
amount of all then outstanding Trust Securities issued by the Issuer.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under, or with respect to, the documentation governing any
Debt.
<PAGE> 10
5
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, the President or
any Vice President, and by the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" when used with respect to the Guarantee
Trustee means any officer assigned to the Corporate Trust Office, including any
vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Guarantee Agreement,
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Senior Debt" means any Debt of the Company, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred, except such Debt that is expressly stated to rank junior in
right of payment to, or pari passu in right of payment with, the Convertible
Junior Subordinated Debentures (or any guarantee thereof); provided, however,
that Senior Debt shall not be deemed to
<PAGE> 11
6
include (a) any Debt of the Company which, when incurred and without respect to
any election under Section 1111(b) of the United States Bankruptcy Code of 1978,
was without recourse to the Company, (b) trade accounts payable and accrued
liabilities arising in the ordinary course of business, (c) any Debt of the
Company to any of its subsidiaries or (d) any Debt to any employee of the
Company.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb), as amended.
"Trust Securities" shall have the meaning specified in the
first recital of this Guarantee Agreement.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This
Guarantee Agreement will not be qualified under the Trust Indenture Act except
upon the effectiveness of a registration statement with respect to this
Guarantee Agreement pursuant to a registration rights agreement as contemplated
in Article X of the Indenture. However, this Guarantee Agreement does
incorporate certain provisions of the Trust Indenture Act.
(b) Upon qualification under the Trust Indenture Act as
contemplated in clause (a) above, if and to the extent that any provision of
this Guarantee Agreement limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.02. List of Holders. (a) At the request of the
Guarantee Trustee, the Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (i) semiannually, on or before February 1st and August 1st of
each year, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders ("List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (ii) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time
<PAGE> 12
7
such list is furnished, in each case to the extent such information is in the
possession or control of the Guarantor and is not identical to a previously
supplied list of Holders or has not otherwise been received by the Guarantee
Trustee in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.03. Reports by the Guarantee Trustee.
(a) The Guarantee Trustee shall transmit to Holders such
reports concerning the Guarantee Trustee and its actions under this Guarantee as
may be required pursuant to the Trust Indenture Act, at the times and in the
manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals
of not more than 12 months shall be transmitted no later than May 15th in each
calendar year, commencing with May 15, 1999.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Guarantee Trustee with each securities
exchange upon which the Convertible Preferred Securities are listed and also
with the Securities and Exchange Commission. The Guarantor will promptly notify
the Guarantee Trustee whenever the Convertible Preferred Securities are listed
on any securities exchange.
SECTION 2.04. Periodic Reports to the Guarantee Trustee. The
Guarantor shall provide to the Guarantee Trustee, and, if required by the Trust
Indenture Act, to the Securities and Exchange Commission and the Holders, such
documents, reports and information, if any, as required by Section 314 of the
Trust Indenture Act and the compliance certificate required by Section 314 of
the Trust Indenture Act, in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act. The Guarantor shall file annually with
the Guarantee Trustee a certificate as to whether or not the Guarantor is in
compliance with all the conditions and covenants applicable to it under this
Guarantee Agreement.
SECTION 2.05. Evidence of Compliance with Conditions
Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee
<PAGE> 13
8
Agreement that relate to any of the matters set forth in Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by any
officer pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a
Majority in liquidation amount of the Convertible Preferred Securities may, by
vote, on behalf of the Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee Agreement, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent therefrom.
SECTION 2.07. Event of Default; Notice. (a) The Guarantee
Trustee shall, within 90 days after the occurrence of an Event of Default,
transmit by mail, first class postage prepaid, to the Holders, notices of all
Events of Default known to a Responsible Officer of the Guarantee Trustee,
unless such Events of Default actually have been cured before the giving of such
notice; provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the Board of Directors, the executive committee or a
trust committee of directors and/or Responsible Officers in good faith determine
that the withholding of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless a Responsible Officer charged with the
administration of the Guarantee shall have received written notice of such Event
of Default.
SECTION 2.08. Conflicting Interests. The Declaration shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
<PAGE> 14
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ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a)
This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit
of the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
<PAGE> 15
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(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions
of this Guarantee Agreement, and the Guarantee Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee Agreement; but in the case
of any such certificates or opinions that by any provision
hereof or of the Trust Indenture Act are specifically required
to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Guarantee Agreement (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated
therein);
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Trust relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power
<PAGE> 16
11
conferred upon the Guarantee Trustee under this Guarantee Agreement;
and
(iv) no provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers.
SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject
to the provisions of Section 3.01:
(i) The Guarantee Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document (whether in
its original or facsimile form) reasonably believed by it to be genuine
and to have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
relating to compliance by the Guarantor with any of its obligations
contained in this Guarantee Agreement be proved or established before
taking, suffering or omitting to take any action hereunder, the
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate (with respect to the
Guarantor) which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel of
its selection, and the advice or written opinion of such legal counsel
with respect to legal matters shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted to
be taken by it hereunder in good faith and in accordance with such
advice or opinion. Such legal counsel may be legal counsel to the
Guarantor or any of its Affiliates and may be one of its employees. The
Guarantee Trustee shall have the right at any time to
<PAGE> 17
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seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such Holder
shall have provided to the Guarantee Trustee such security and
indemnity reasonably satisfactory to it, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested
in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Guarantor,
personally or by agent or attorney at the sole cost of the Company and
shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
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(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received and (C) shall be fully protected in acting in accordance with
such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Guarantee Trustee shall
be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify
each of the Guarantee Trustee, any predecessor Guarantee Trustee and its
directors, officers, agents and employees for, and to hold them harmless
against, any and all loss, damage, claim, liability or expense (including taxes
other than taxes based upon the income of the Guarantee Trustee) incurred
without negligence or bad faith on the part of the Guarantee Trustee, arising
out of or in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and reasonable expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Guarantee Trustee will not claim or
exact any lien or charge on any Guarantee Payments as a result of any amount due
to it under this Guarantee Agreement. This indemnity shall survive the
termination of this Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.
SECTION 3.04. Expenses. The Guarantor shall from time to time
reimburse the Guarantee Trustee for its expenses and costs incurred in
connection with the performance of its duties hereunder. This reimbursement
obligation shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
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ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee; Eligibility. (a) There shall
at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(c) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.10(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of the
Guarantee Trustee. (a) Subject to Section 4.02(b), in the absence of the
existence of an Event of Default, the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
by written instrument executed by such Successor Guarantee Trustee and delivered
to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The
<PAGE> 20
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Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Guarantee Trustee and
delivered to the Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 30
days after delivery to the Guarantor of an instrument of resignation, the
resigning Guarantee Trustee may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full on a subordinated basis to the Holders the
Guarantee Payments (without duplication of amounts theretofore paid by or on
behalf of the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert other than the
defense of payment. The Guarantor's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders. The
Guarantor shall give written notice to the Guarantee Trustee as promptly as
practicable in the event it makes any direct payment hereunder.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor
hereby waives notice of acceptance of the Guarantee Agreement and, with respect
to its obligations under Section 5.01, hereby waives presentment, demand for
payment, any right to require a proceeding first against the Guarantee Trustee,
Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
<PAGE> 21
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SECTION 5.03. Obligations Not Affected. The obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Trust
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions (other than any extension of time
for payment of Distributions that results from the extension of any
interest payment period on the Convertible Junior Subordinated
Debentures as so provided in the Indenture), Redemption Price,
Liquidation Distribution or any other sums payable under the terms of
the Trust Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the
Trust Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Trust Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Trust
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
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There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee
Trustee has the right to enforce this Guarantee Agreement on behalf of the
Holders; (iii) the Holders of a Majority in aggregate liquidation amount of the
Trust 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 this Guarantee Agreement or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder
may institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Issuer or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement
creates a guarantee of payment and not of collection. This Guarantee Agreement
will apply only to the extent that the Issuer has funds sufficient to make such
payments. If the Guarantor does not make interest payments on the Convertible
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Trust Securities and will not have funds legally
available therefor. This Guarantee Agreement will not be discharged except by
payment of the Guarantee Payments in full (without duplication of amounts
theretofore paid by the Issuer) or upon distribution of Convertible Junior
Subordinated Debentures to Holders as provided in the Declaration.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated
to all (if any) rights of the Holders against the Issuer in respect of any
amounts paid to the Holders by the Guarantor under this Guarantee Agreement and
shall have the right to waive payment by the Issuer pursuant to Section 5.01;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Guarantee
Agreement, if at the time of any such payment, any amounts are due and unpaid
under this Guarantee Agreement. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount
<PAGE> 23
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in trust for the Holders and to pay over such amount to the Holders. Any amounts
paid over to and not subsequently recovered from the Holders pursuant to any
insolvency law shall be deemed to have been applied by the Holders to the
Guarantee Payments.
SECTION 5.07. Independent Obligations. The Guarantor
acknowledges that its obligations hereunder are independent of the obligations
of the Issuer with respect to the Trust Securities and that the Guarantor shall
(without duplication of amounts paid by or on behalf of the Issuer) be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
Covenants and Subordination
SECTION 6.01. Subordination. This Guarantee Agreement will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt of the Guarantor to the same
extent as the Convertible Junior Subordinated Debentures rank subordinate and
junior in right of payment to all Senior Debt of the Company.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement
shall rank pari passu with any similar guarantee agreements issued by the
Guarantor on behalf of the holders of trust securities issued by a trust created
by the Guarantor similar to Coltec Capital Trust.
ARTICLE VII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 7.01. Company May Consolidate, Etc., Only on Certain
Terms. The Company shall not consolidate with or merge with or into any other
Person or sell or lease its assets as, or substantially as, an entirety to any
Person, unless:
(a) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale or lease, the
assets of the Company as, or
<PAGE> 24
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substantially as, an entirety, shall be a corporation, partnership or
trust, shall be organized under the laws of the United States of
America, any State thereof or the District of Columbia and (if other
than the Company) such successor Person shall expressly assume the
performance or observance of every covenant of this Guarantee on the
part of the Company to be performed or observed;
(b) Immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale or lease comply with this Article and that
all conditions precedent herein provided for relating to such
transaction have been complied with.
ARTICLE VIII
Termination
SECTION 8.01. Termination. This Guarantee Agreement shall
terminate and be of no further force and effect upon (i) full payment of the
Redemption Price of all Trust Securities, (ii) the distribution of Convertible
Junior Subordinated Debentures to the Holders in exchange for all of the Trust
Securities or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Guarantee Agreement will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must repay any sums paid with respect to
Trust Securities or this Guarantee Agreement.
<PAGE> 25
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ARTICLE IX
Miscellaneous
SECTION 9.01. Successors and Assigns. All guarantees and
agreements contained in this Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Trust Securities then outstanding.
Except in connection with a consolidation, merger or sale involving the
Guarantor that is permitted under Article VIII of the Indenture and pursuant to
which the assignee agrees in writing to perform the Guarantor's obligations
hereunder, the Guarantor shall not assign its obligations hereunder.
SECTION 9.02. Amendments. Except with respect to any changes
which do not materially adversely affect the rights of the Holders of
Convertible Preferred Securities (in which case no consent of the Holders will
be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less than a Majority of the aggregate liquidation
amount of the outstanding Convertible Preferred Securities. The provisions of
Article VI of the Declaration concerning meetings of the Holders shall apply to
the giving of such approval.
SECTION 9.03. Notices. Any notice, request or other
communication required or permitted to be given hereunder shall be in writing,
duly signed by the party giving such notice, and delivered, telecopied
(confirmed by delivery of the original) or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set forth below
or such other address, facsimile number or to the attention of such
other Person as the Guarantor may give notice to the Holders:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Facsimile No.: (704) 423-7011
Attention: Corporate Secretary
<PAGE> 26
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(b) if given to the Issuer, in care of the Guarantee Trustee,
at the Issuer's (and the Guarantee Trustee's) address set forth below
or such other address as the Guarantee Trustee on behalf of the Issuer
may, at the Issuer's direction, give notice to the Holders:
Coltec Capital Trust
c/o Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Facsimile No.: (704) 423-7011
Attention: Corporate Secretary
with a copy to:
The Bank of New York
101 Barclay Street
New York, NY 10286
Facsimile No.:
Attention: Corporate Trust Administration
(c) if given to the Guarantee Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Administration
(d) if given to any Holder, at the address set forth
on the books and records of the Issuer.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.04. Benefit. This Guarantee Agreement is solely for
the benefit of the Holders and is not separately transferable from the
Convertible Preferred Securities.
<PAGE> 27
22
SECTION 9.05. Interpretation. In this Guarantee Agreement,
unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to
them in Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 9.06 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE> 28
32
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
Coltec Industries Inc,
by
------------------------------------
Name:
Title:
The Bank of New York,
as Guarantee Trustee,
by
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.7
3,000,000 TIDES(SM)*
COLTEC CAPITAL TRUST
5.25% CONVERTIBLE PREFERRED SECURITIES
GUARANTEED BY COLTEC INDUSTRIES INC
REGISTRATION RIGHTS AGREEMENT
April 14, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
LEHMAN BROTHERS INC.
C/O CREDIT SUISSE FIRST BOSTON CORPORATION,
ELEVEN MADISON AVENUE
NEW YORK, N.Y. 10010-3629
Ladies and Gentlemen:
Coltec Capital Trust (the "Trust"), a statutory business trust created
under the laws of the State of Delaware by Coltec Industries Inc (the
"Company"), as sponsor, proposes to issue and sell to Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Lehman Brothers Inc. (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated April 8,
1998 (the "Purchase Agreement"), among the Initial Purchasers, the Company and
the Trust, 5.25% Convertible Preferred Securities, Term Income Deferrable Equity
Securities (TIDES), Liquidation Amount $50 per Convertible Preferred Security,
(the "Preferred Securities") (the "Initial Placement"). As an inducement to the
Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Initial Purchasers thereunder, the Trust and
the Company agree with you, (i) for the benefit of the Initial Purchasers and
(ii) for the benefit of the holders from time to time of the Preferred
Securities, the 5.25% Convertible Subordinated Deferrable Interest Debentures
Due 2028 (the "Debentures"), the shares of Common Stock issuable upon conversion
thereof (the "Common Stock") and the Guarantee of the Company of the Preferred
Securities (the "Guarantee" and together with the Common Stock, the Debentures
and the Preferred Securities, the "Securities"), including the Initial
Purchasers (each of the foregoing, a "Holder" and, together, the "Holders"), as
follows:
1. Definitions.
Capitalized terms used herein without definition shall have their
respective meanings set forth in or pursuant to the Purchase Agreement or the
Offering Circular dated April 8, 1998, in respect of the Preferred Securities,
as applicable.
2. Shelf Registration.
(a) The Company and the Trust shall, at their cost, as promptly as
practicable (but in no event more than 90 days following the date of original
issuance (the "Issue Date") of the Preferred Securities) file with the
Commission and thereafter shall use its reasonable best efforts to cause to be
declared effective within 150 days following the Issue Date a registration
statement (the "Shelf Registration Statement") on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the offer
and sale of the Securities by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf Registration
Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf
Registration"); provided, however, that no Holder (other than an Initial
Purchaser) shall be entitled to have the Securities held by
- ---------------
* The terms Term Income Deferrable Equity Security (TIDES)(SM) and TIDES(SM)
are registered servicemarks of Credit Suisse First Boston Corporation.
<PAGE> 2
it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to such
Holder.
(b) The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, for a period of two years (or for such longer period if extended
pursuant to this paragraph (b) or to Section 3(h) below) from the date of its
effectiveness or such shorter period that will terminate when (i) all the
Securities covered by the Shelf Registration Statement have been sold pursuant
thereto or (ii) in the written opinion of counsel to the Trust and the Company,
all outstanding Securities held by persons that are not affiliates of the Trust
or the Company may be resold without registration under the Act pursuant to Rule
144(k) under the Act or any successor provision thereto or any other applicable
law, rule or regulation, whether now in effect or hereinafter promulgated,
adopted or issued (the "Shelf Registration Period"); provided, however, the
Company shall not be obligated to keep the Shelf Registration Statement
continuously effective to the extent set forth above if (i) the Company
determines, in its reasonable judgment, upon advice of counsel, as authorized by
a resolution of its Board of Directors, that the continued effectiveness and
usability of the Shelf Registration Statement would (x) require the disclosure
of material information, which the Company has a bona fide business reason for
preserving as confidential, or (y) interfere with any financing, acquisition,
corporate reorganization or other material transaction or development involving
the Company or any of its subsidiaries or its parent or the contemplated timing
thereof, provided that the failure to keep the Shelf Registration Statement
effective and usable for offers and sales of Securities for such reason shall
last no longer than 45 days in any three-month period or three periods not to
exceed an aggregate of 90 days in any 12-month period (whereafter Additional
Interest (as defined in Section 6(a)) shall accrue and be payable), and (ii) the
Company and the Trust promptly thereafter complies with the requirements of
Section 3(h) hereof, if applicable; provided further that the number of days of
any actual Suspension Period shall be added on to the end of the two-year period
specified above. Any such period during which the Company is excused from
keeping the Shelf Registration Statement effective and usable for offers and
sales of Securities is referred to herein as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Company gives notice that
the Shelf Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of Securities and
shall end on the earlier to occur of (1) the date on which each seller of
Securities covered by the Shelf Registration Statement either receives the
copies of the supplemented or amended prospectus contemplated by Section 3(h)
hereof or is advised in writing by the Company that the use of the prospectus
may be resumed and (2) the expiration of 45 days in any three-month period or
three periods not to exceed an aggregate of 90 days in any 12-month period
during which one or more Suspension Periods has been in effect. Except as
provided above, the Company shall be deemed not to have used its reasonable best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the contrary,
the Company shall cause the Shelf Registration Statement and the related
prospectus and any amendment or supplement thereto, as of the effective date of
the Shelf Registration Statement, amendment or supplement, (i) to comply in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission (the
"Commission") and (ii) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration, the
following provisions shall apply:
(a) The Company and the Trust shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the Shelf
Registration Statement and each amendment thereof and each supplement, if any,
to the prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the Initial Placement)
is participating in the Shelf Registration, the Company shall use its reasonable
best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may propose and
(ii) include the names of the Holders, who propose to sell Securities pursuant
to the Shelf Registration Statement, as selling securityholders.
2
<PAGE> 3
(b) The Company and the Trust shall give written notice to the Initial
Purchasers when the Shelf Registration Statement or any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or any
post-effective amendment thereto has become effective. After the effectiveness
of the Shelf Registration Statement, the Company and the Trust shall give
written notice to the Initial Purchasers and the Holders of the Securities:
(i) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement or the prospectus included therein or for
additional information;
(ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(iii) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(iv) of the happening of any event (including, without limitation, of
any event resulting in a Suspension Period) that requires the Company to
make changes in the Shelf Registration Statement or the prospectus in order
that the Shelf Registration Statement or the prospectus do not contain an
untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements therein
(in the case of the prospectus, in light of the circumstances under which
they were made) not misleading.
(c) The Company and the Trust shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Shelf Registration Statement.
(d) The Company and the Trust shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge, at least
one copy of the Shelf Registration Statement and any posteffective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(e) The Company and the Trust shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(f) Prior to any public offering of the Securities, pursuant to any Shelf
Registration Statement, the Company and the Trust shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any Holder of the Securities reasonably requests
in writing and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Securities
covered by such Shelf Registration Statement; provided, however, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(g) The Company and the Trust shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of time
prior to sales of the Securities pursuant to such Shelf Registration Statement.
(h) Upon the occurrence of any event (other than an event resulting in a
Suspension Period) contemplated by paragraphs (i) through (iv) of Section 3(b)
above during the period for which the Company is required to maintain an
effective Shelf Registration Statement, the Company and the Trust shall promptly
prepare and file a post-effective amendment to the Shelf Registration Statement
or a supplement to the related prospectus and any
3
<PAGE> 4
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Company
notifies the Initial Purchasers and the Holders of the Securities in accordance
with paragraphs (i) through (iv) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made, then
the Initial Purchasers and the Holders of the Securities shall suspend use of
such prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 3(b) above shall each be extended by the
number of days from and including the date of the giving of such notice to and
including the date when the Initial Purchasers and the Holders of the Securities
shall have received such amended or supplemented prospectus pursuant to this
Section 3(h).
(i) Not later than the effective date of the Shelf Registration Statement,
the Company will provide a CUSIP number for the Securities and provide the
Property Trustee with printed certificates for the Securities in a form eligible
for deposit with The Depository Trust Company.
(j) The Company and the Trust will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the Shelf
Registration and the Company will make generally available to its security
holders (or otherwise provide in accordance with Section 11(a) of the Securities
Act) an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of four quarterly periods
(or 90 days, if such period is a fiscal year) beginning with the Company's first
fiscal quarter commencing after the effective date of the Shelf Registration
Statement, which statement shall cover such four quarterly periods.
(k) The Company and the Trust shall cause the Indenture, the Declaration
and the Guarantee Agreement to be qualified under the Trust Indenture Act of
1939, as amended, in a timely manner and containing such changes, if any, as
shall be necessary for such qualification. In the event that such qualification
would require the appointment of a new trustee under the Indenture, the
Declaration or the Guarantee Agreement, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture, the
Declaration or the Guarantee Agreement, as the case may be.
(l) The Company may require each Holder of Securities to be sold pursuant
to the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities as the Company may
from time to time reasonably require for inclusion in the Shelf Registration
Statement, and the Company may exclude from such registration the Securities of
any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(m) The Company and the Trust shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and take
all such other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant to any
Shelf Registration.
(n) The Company shall (i) make reasonably available for inspection by the
Holders of the Securities, any underwriter participating in any disposition
pursuant to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such underwriter
all relevant financial and other records, pertinent documents and properties of
the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors and the Trust's trustees to supply all relevant
information reasonably requested by the Holders of the Securities or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 4
hereof. Each Holder of Securities or any underwriter, attorney, accountant or
agent conducting an inspection under this Section 3(n) will be required, as a
condition to conducting such investigation, to agree that information obtained
by it as a result of such inspections shall be deemed confidential and shall not
be used by it as the basis for any market transactions in the securities of the
Company unless and until such information is generally available to the public.
4
<PAGE> 5
(o) The Company and the Trust, if requested by any Holder of Securities
covered thereby, shall cause (i) its counsel (which may include internal
counsel) to deliver an opinion and updates thereof relating to the Securities in
customary form and substance addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial opinion, the
effective date of such Shelf Registration Statement covering the matters
customarily covered in opinions requested in underwritten offerings; (ii) the
Company's officers and the Trust's trustees to execute and deliver all customary
documents and certificates and updates thereof requested by any underwriters of
the applicable Securities and (iii) its independent public accountants and the
independent public accountants with respect to any other entity for which
financial information is provided in the Shelf Registration Statement to provide
to the selling Holders of the applicable Securities and any underwriter therefor
a comfort letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with public underwritten offerings,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(p) The Company and the Trust will use its reasonable best efforts to (a)
if the Securities have been rated prior to the initial sale of such Securities,
confirm such ratings will apply to the Securities covered by a Shelf
Registration Statement, or (b) if the Securities were not previously rated,
cause the Securities covered by a Shelf Registration Statement to be rated with
the appropriate rating agencies, in each case, if so requested prior to the
effectiveness of the Shelf Registration Statement, by Holders of a majority in
aggregate liquidation amount of Preferred Securities covered by such Shelf
Registration Statement, or by the managing underwriters, if any.
(q) In the event that any broker-dealer registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), shall underwrite any
Securities or participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the Conduct Rules
(the "Rules") of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or otherwise,
the Company and the Trust will reasonably assist such broker-dealer in complying
with the requirements of such Rules, including, without limitation, by (i) if
such Rules, including Rule 2720, shall so require, engaging a "qualified
independent underwriter" (as defined in Rule 2720) to participate in the
preparation of the Shelf Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect thereto and, if any portion
of the offering contemplated by such Shelf Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof and (iii) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply with
the requirements of the Rules.
(r) The Company and the Trust shall use its reasonable best efforts to take
all other steps necessary to effect the registration of the Securities covered
by a Shelf Registration Statement contemplated hereby. The Initial Purchasers
agree to provide any reasonable assistance requested by the Company in complying
with its obligations pursuant to this Section 3.
4. Registration Expenses. The Company and the Trust shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 3 and 4 hereof, whether or not the Shelf Registration is filed or
becomes effective, and shall bear or reimburse the Holders of the Securities
covered thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in liquidation amount of the Preferred
Securities covered thereby to act as counsel for the Holders of the Securities
in connection therewith; provided that such Holders shall be responsible for any
and all underwriting discounts and commissions and all other costs and expenses
customarily borne by securityholders in similar circumstances.
5. Indemnification. (a) The Company and the Trust agree to indemnify and hold
harmless each Holder of the Securities and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Exchange Act (each
Holder, such controlling persons and their respective affiliates, directors,
officers, employees, representatives and agents are referred to collectively as
the "Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such
5
<PAGE> 6
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
a Shelf Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration, or
arise out of, or are based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and, subject to the limitation set forth in
the immediately preceding clause, shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) neither the
Company nor the Trust shall be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Shelf Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Holder to the extent
that a prospectus relating to such Securities was required to be delivered by
such Holder under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the final
prospectus if the Company had previously furnished copies thereof to such
Holder; provided further, however, that this indemnity agreement will be in
addition to any liability which the Company or the Trust may otherwise have to
such Indemnified Party. The Company and the Trust shall also indemnify
underwriters, their officers and directors and each person who controls such
underwriters within the meaning of the Securities Act or the Exchange Act to the
same extent as provided above with respect to the indemnification of the Holders
of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company, the Trust, their respective
subsidiaries, affiliates, directors, trustees, officers, employees,
representatives and agents and any such controlling person and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages or liabilities or any
actions in respect thereof, to which the Company, the Trust, their respective
subsidiaries, affiliates, directors, trustees, officers, employees,
representatives and agents and any such controlling person or any such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Shelf Registration Statement or prospectus or
in any amendment or supplement thereto or in any preliminary prospectus relating
to a Shelf Registration, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability which such Holder
may otherwise have to the Company, the Trust or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the
6
<PAGE> 7
indemnifying party to such indemnified party of its election so to assume the
defense thereof the indemnifying party will not be liable to such indemnified
party under this Section 5 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the sale of the Securities, pursuant to the
Shelf Registration, or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Trust on the one hand or such Holder or such
other indemnified party, as the case may be, on the other, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding any other provision of this Section 5(d), the
Holders of the Securities shall not be required to contribute any amount in
excess of the amount by which the net proceeds received by such Holders from the
sale of the Securities pursuant to a Shelf Registration Statement exceeds the
amount of damages which such Holders have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Company or the Trust within the meaning of the Securities Act or
the Exchange Act shall have the same rights to contribution as the Company or
the Trust.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Shelf Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional interest
(the "Additional Interest") with respect to the Securities shall be assessed as
follows if any of the following events occur (each such event in clauses (i)
through (iii) below a "Registration Default":
(i) If within 90 days of April 14, 1998, the Shelf Registration
Statement has not been filed with the Commission;
(ii) If within 150 days of April 14, 1998, the Shelf Registration
Statement is not declared effective by the Commission; or
(iii) If after the Shelf Registration Statement is declared effective
(A) the Shelf Registration Statement thereafter ceases to be effective; or
(B) except as permitted in paragraph (b) below, the Shelf Registration
Statement or the related prospectus ceases to be usable in connection with
resales of Transfer Restricted Securities during the periods specified
herein because either (1) any event occurs as a result of which the
7
<PAGE> 8
related prospectus forming part of such Shelf Registration Statement would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (2) it shall be
necessary to amend such Shelf Registration Statement or supplement the
related prospectus, to comply with the Securities Act or the Exchange Act
or the respective rules thereunder.
Subject to paragraph (b) below, Additional Interest shall accrue on the
Debentures over and above the interest set forth in the title of the Debentures
from and including the date on which any such Registration Default shall occur
to but excluding the earlier of (x) the date on which all such Registration
Defaults have been cured and (y) the date on which the Company is no longer
required to keep the Shelf Registration Statement effective in accordance with
Section 2 hereof, at a rate of 0.50% per annum, calculated on the principal
amount of the Debentures as of the day on which such interest is payable.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus, (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus or (z) a Suspension Period not to exceed 45
days in any three-month period or three periods not to exceed an aggregate of 90
days in any 12-month period pursuant to Section 2(b) and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
such events.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Debentures. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by the
principal amount of the Debentures, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve
30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the date
on which such Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (ii) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
7. Rules 144 and 144A. The Company shall use its reasonable best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Securities,
make publicly available other information so long as necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Company covenants that
it will take such further reasonable action as any Holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Securities identified to the Company by
the Initial Purchasers upon request. Upon the request of any Holder of
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted Securities
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
administer the offering ("Managing Underwriters") will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities to be included in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements
8
<PAGE> 9
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address given
by such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Vincent Pagano, Jr., Esq.
(3) if to the Company, at its address as follows:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: George W. Bilicic, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties and the
Holders, including, without the need for an express assignment or any consent by
the Trust or the Company thereto, subsequent Holders of Securities. The Trust
and
9
<PAGE> 10
the Company hereby agree to extend the benefits of this Agreement to any Holder
of Securities and any such Holder may specifically enforce the provisions of
this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of liquidation amount of Preferred Securities
is required hereunder, Preferred Securities held by the Trust, the Company or
its affiliates (other than subsequent Holders of Preferred Securities if such
subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
10
<PAGE> 11
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers, the Issuer and the Trust in accordance with its
terms.
Very truly yours,
COLTEC INDUSTRIES, INC
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: Executive Vice President
General Counsel and Secretary
COLTEC CAPITAL TRUST
By: /s/ THOMAS B. JONES, JR.
------------------------------------
Name: Thomas B. Jones, Jr.
Title: Administrative Trustee
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
LEHMAN BROTHERS INC.
ACTING ON BEHALF OF THEMSELVES
AND AS THE REPRESENTATIVES OF
THE SEVERAL PURCHASERS
BY CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ ROBERT G. MALKANI
-------------------------------
Name: Robert G. Malkani
Title: Associate
11
<PAGE> 1
Exhibit 12.1
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600
Add [(deduct):
Income taxes:
Federal and foreign ............... 12,993 11,072 48,875 28,111 17,616 27,251 13,684
State and local ................... 471 1,487 6,241 5,121 2,601 2,105 1,877
Portion of rents representative
of Interest factor (1) ............ 879 751 2,983 3,321 2,868 3,979 4,078
Interest Expense .................... 15,080 12,364 54,613 78,182 91,208 90,337 111,497
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings from continuing
operations before
extraordinary Item,
as adjusted ....................... $ 54,644 $ 47,166 $ 207,586 $ 167,305 $ 148,813 $ 172,118 $ 155,736
========== ========== ========== ========== ========== ========== ==========
Fixed charges:
Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497
Capitalized interest .............. 225 225 1,455 1,139 997 689 1,140
Portion of rents representative
of Interest factor(1) ............ 879 751 2,983 3,321 2,868 2,979 3,678
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fixed charges ....................... $ 16,184 $ 13,340 $ 59,051 $ 80,642 $ 95,073 $ 94,005 $ 116,315
========== ========== ========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges ...................... 3.4 3.5 3.5 2.1 1.6 1.8 1.3
========== ========== ========== ========== ========== ========== ==========
</TABLE>
Note:
(1) Estimated to be 1/3 of total rent expenses.
<PAGE> 2
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EBITDA TO INTEREST EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600
Interest expense .................... 15,080 12,364 54,043 78,182 89,886 89,472 110,190
Income taxes: ....................... 12,993 11,072 48,875 28,111 17,615 27,251 13,684
Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before interest,
taxes, depreciation and
authorization (EBITDA) ............ $ 65,710 $ 53,439 $ 236,207 $ 193,589 $ 164,108 $ 207,300 $ 197,496
========== ========== ========== ========== ========== ========== ==========
Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497
========== ========== ========== ========== ========== ========== ==========
Ratio of EBITDA to interest
Expense ............................ 4.4 4.3 4.3 2.5 2.0 2.3 1.8
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 3
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF TOTAL DEBT TO EBITDA
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 94,570 $ 34,521 $ 45,446 $ 24,600
Interest expense .................... 15,080 12,364 54,813 74,894 89,886 89,462 110,190
Income taxes ........................ 12,993 11,072 48,875 28,111 17,615 27,251 13,684
Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before interest,
taxes, depreciation and
amortization (EBITDA) ............. $ 65,710 $ 53,439 $ 239,207 $ 193,589 $ 184,108 $ 207,300 $ 197,486
========== ========== ========== ========== ========== ========== ==========
Ratio of EBITDA to
interest expense ................... 13.1 13.7 3.2 3.7 5.1 4.7 5.2
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23.4
As independent public accountants, we hereby consent to the use of our
report included in this Registration Statement File, and to the incorporation by
reference in this Registration Statement, of our report dated February 2, 1998
(except with respect to information discussed in note 20 as to which the date is
April 16, 1998) included in Coltec Industries Inc's Form 10-K for the year ended
December 31, 1997 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
May 15, 1998
2
<PAGE> 1
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
COLTEC INDUSTRIES INC
(Exact name of obligor as specified in its charter)
Pennsylvania 13-846375
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217
(Address of principal executive offices) (Zip code)
----------------------
5-1/2 Convertible Junior Subordinated Deferrable
Interest Debentures Due 2028
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of May, 1998.
THE BANK OF NEW YORK
By: /S/ Thomas B. Zakrezewski
---------------------------------
Name: Thomas B. Zakrzewski
Title: Assistant Vice President
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell .. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 35,019,608
LESS: Allowance for loan and
lease losses ..................... 627,350
LESS: Allocated transfer risk
reserve .......................... 0
Loans and leases, net of unearned
income, allowance, and reserve ... 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
------------
Total assets ......................... $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices ................ $ 27,031,362
Noninterest-bearing ................ 11,899,507
Interest-bearing ................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ................ 590,999
Interest-bearing ................... 13,203,450
Federal funds purchased and Securities
sold under agreements to
repurchase ......................... 2,338,881
Demand notes issued to the U.S. ......
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years ..... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
------------
Total liabilities .................... 51,192,576
------------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
------------
Total equity capital ................. 4,961,011
------------
Total liabilities and equity
capital ............................ $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
<PAGE> 1
EXHIBIT 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
COLTEC CAPITAL TRUST
(Exact name of obligor as specified in its charter)
Delaware [ ]
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217
(Address of principal executive offices) (Zip code)
----------------------
Convertible Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of May, 1998.
THE BANK OF NEW YORK
By: /s/ Thomas B. Zakrzewski
-------------------------------
Name: Thomas B. Zakrzewski
Title: Assistant Vice President
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell .. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 35,019,608
LESS: Allowance for loan and
lease losses ..................... 627,350
LESS: Allocated transfer risk
reserve .......................... 0
Loans and leases, net of unearned
income, allowance, and reserve ... 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
------------
Total assets ......................... $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices ................ $ 27,031,362
Noninterest-bearing ................ 11,899,507
Interest-bearing ................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ................ 590,999
Interest-bearing ................... 13,203,450
Federal funds purchased and Securities
sold under agreements to
repurchase ......................... 2,338,881
Demand notes issued to the U.S. ......
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years ..... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
------------
Total liabilities .................... 51,192,576
------------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
------------
Total equity capital ................. 4,961,011
------------
Total liabilities and equity
capital ............................ $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
<PAGE> 1
EXHIBIT 25.3
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
COLTEC INDUSTRIES INC
(Exact name of obligor as specified in its charter)
Pennsylvania 13-846375
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Convertible Preferred Securities
of Coltec Capital Trust
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of May, 1998.
THE BANK OF NEW YORK
By: /s/ Thomas B. Zakrzewski
--------------------------------
Name: Thomas B. Zakrzewski
Title: Assistant Vice President
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell .. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 35,019,608
LESS: Allowance for loan and
lease losses ..................... 627,350
LESS: Allocated transfer risk
reserve .......................... 0
Loans and leases, net of unearned
income, allowance, and reserve ... 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
------------
Total assets ......................... $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices ................ $ 27,031,362
Noninterest-bearing ................ 11,899,507
Interest-bearing ................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ................ 590,999
Interest-bearing ................... 13,203,450
Federal funds purchased and Securities
sold under agreements to
repurchase ......................... 2,338,881
Demand notes issued to the U.S. ......
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years ..... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
------------
Total liabilities .................... 51,192,576
------------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
------------
Total equity capital ................. 4,961,011
------------
Total liabilities and equity
capital ............................ $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
