<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE B.F.GOODRICH COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 3728 34-0252680
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4020 KINROSS LAKES PARKWAY
RICHFIELD, OHIO 44286-9368
(330) 659-7600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
NICHOLAS J. CALISE, SECRETARY
THE B.F.GOODRICH COMPANY
4020 KINROSS LAKES PARKWAY
RICHFIELD, OHIO 44286-9368
(330) 659-7600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
Gordon S. Kaiser George W. Bilicic, Jr.
Squire, Sanders & Dempsey L.L.P. Cravath, Swaine & Moore
127 Public Square 825 Eighth Avenue
Cleveland, Ohio 44114-1304 New York, New York 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
and all other conditions to the transactions described herein have been
satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $5.00 per
share, including the associated
preferred share purchase rights 52,432,091 $32.09 $1,682,939,937 $467,857
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the number of shares of common stock of The B.F.Goodrich Company
("BFGoodrich") to be issued in connection with the merger described in this
Joint Proxy Statement/Prospectus (the "Merger") in exchange for shares of
common stock of Coltec Industries Inc ("Coltec"), determined by multiplying
the exchange ratio applicable in the Merger (0.56 of a share of BFGoodrich
common stock for each share of Coltec common stock) by the sum of the number
of outstanding shares of Coltec common stock on March 4, 1999 (88,056,735)
plus the number of shares of Coltec common stock (i) subject to options
exercisable prior to the expected effective date of the Merger and (ii)
issuable under certain Coltec incentive, benefit and compensation plans
(5,572,000). BFGoodrich common stock is traded on the New York Stock
Exchange under the trading symbol "GR."
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based
on (a) the average of the high and low prices of Coltec common stock on
March 4, 1999 on the New York Stock Exchange, which was $17.97461 and (b)
the number of shares of Coltec common stock outstanding as of March 4, 1999,
plus the number of shares of Coltec common stock (i) subject to options
exercisable prior to the expected effective date of the Merger and (ii)
issuable under Coltec incentive, benefit and compensation plans. The
proposed maximum offering price per share is based upon the proposed maximum
aggregate offering price divided by the amount of shares to be registered.
(3) The registration fee of $467,857 for the securities registered hereby has
been calculated pursuant to Rule 457(f) under the Securities Act, as
$1,682,939,937 multiplied by .000278. In accordance with Rule 457(b),
$319,798.87 previously paid by BFGoodrich upon the filing of its preliminary
proxy materials on December 23, 1998 has been credited against the
registration fee payable in connection with this filing. The remaining
amount has been paid by BFGoodrich under the reference "The B.F.Goodrich
Company."
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, 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
Confidential, For Use of the Commission Only
[BFGoodrich Logo] [Coltec Logo]
MERGER PROPOSED
YOUR VOTE IS VERY IMPORTANT
As you may know, the boards of directors of The B.F.Goodrich Company and
Coltec Industries Inc have agreed on a merger intended to create a stronger
competitor with significant experience in the aerospace, performance materials
and industrial businesses. If the merger is completed, Coltec will become a
wholly owned subsidiary of BFGoodrich. Coltec shareholders will receive 0.56 of
a share of BFGoodrich common stock for each share of Coltec common stock they
own. BFGoodrich shareholders will continue to own their existing shares of
common stock after the merger. We estimate that Coltec shareholders will own
approximately 33% of the outstanding BFGoodrich common stock after the merger.
Based on market prices on November 20, 1998, the last full trading day before
BFGoodrich and Coltec announced the merger, that exchange of stock would give
Coltec shareholders $20.125 per share, which is a 12.2% premium over the price
of Coltec common stock. FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK
FACTORS" BEGINNING ON PAGE 14.
BFGoodrich's common stock is traded on the New York Stock Exchange under
the trading symbol "GR." On November 20, 1998, the last full trading day before
we announced the proposed merger, the closing price of BFGoodrich's common stock
was $35 15/16 per share and the closing price of Coltec's common stock was
$17 15/16 per share. On March 4, 1999, the most recent practicable date before
the printing of this joint proxy statement/ prospectus, the closing price of
BFGoodrich's common stock was $34 3/4 per share and the closing price of
Coltec's common stock was $17 123/128 per share.
The merger cannot be completed unless the shareholders of Coltec approve
and adopt the merger agreement and the shareholders of BFGoodrich approve the
issuance of shares of BFGoodrich common stock to Coltec shareholders in the
merger. We have each scheduled meetings for our shareholders to vote on this
matter. YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend your meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you are a
BFGoodrich shareholder needing assistance in voting your shares, please call
BFGoodrich's proxy solicitor, D.F. King & Co., Inc., toll-free at (800)
735-3591. If you are a Coltec shareholder needing assistance in voting your
shares, please call Coltec's proxy solicitor, ChaseMellon Shareholder Services,
L.L.C., toll-free at (877) 698-6867.
The dates, times and places of the meetings are:
FOR BFGOODRICH SHAREHOLDERS:
Wednesday, April 7, 1999
10:30 a.m.
The St. Regis Hotel
Two East 55th Street
New York, New York
FOR COLTEC SHAREHOLDERS:
Wednesday, April 7, 1999
10:30 a.m.
The Park Hotel
2200 Rexford Road
Charlotte, North Carolina
This joint proxy statement/prospectus provides detailed information about
these meetings and the proposed merger. We encourage you to read this entire
document carefully. In addition, you may obtain information about our companies
from documents that we have filed with the Securities and Exchange Commission.
We strongly support this combination of our companies and join with our
boards of directors in enthusiastically recommending that you vote in favor of
the merger.
<TABLE>
<S> <C>
/s/ David L. Burner /s/ John W. Guffey, Jr.
David L. Burner John W. Guffey, Jr.
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
The B.F.Goodrich Company Coltec Industries Inc
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated March 8, 1999 and is being
first mailed to shareholders on or about March 9, 1999.
<PAGE> 3
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about BFGoodrich and Coltec that is not included in or
delivered with this document. This information is available without charge to
shareholders upon written or oral request. Shareholders may obtain information
about BFGoodrich or Coltec by request to the appropriate party at the following
address or telephone number:
<TABLE>
<S> <C>
Nicholas J. Calise, Secretary Robert J. Tubbs, Secretary
The B.F.Goodrich Company Coltec Industries Inc
4020 Kinross Lakes Parkway 3 Coliseum Centre
Richfield, Ohio 44286-9368 2550 West Tyvola Road
(330) 659-7600 Charlotte, North Carolina 28217
(704) 423-7000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO BY APRIL 1,
1999 TO ENSURE TIMELY DELIVERY.
See "Where You Can Find More Information" on page 89.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
BFGOODRICH/COLTEC MERGER............ 1
SUMMARY............................... 3
The Companies....................... 3
Our Reasons for the Merger.......... 3
Board Recommendations to
Shareholders..................... 3
Special Shareholders' Meetings...... 3
The Merger.......................... 4
Summary Selected Historical
Condensed Financial
Information...................... 8
Unaudited Selected Pro Forma
Combined Financial Data.......... 11
Comparative Per Share Data.......... 12
Comparative Per Share Market Price
And Dividend Information......... 13
RISK FACTORS.......................... 14
THE SPECIAL SHAREHOLDERS' MEETINGS.... 18
The BFGoodrich Special Shareholders'
Meeting.......................... 18
Purpose of the BFGoodrich Special
Shareholders' Meeting.......... 18
Record Date; Voting Rights;
Proxies........................ 18
Solicitation of Proxies.......... 19
Quorum........................... 19
Required Vote.................... 19
The Coltec Special Shareholders'
Meeting.......................... 20
Purpose of the Coltec Special
Shareholders' Meeting.......... 20
Record Date; Voting Rights;
Proxies........................ 20
Solicitation of Proxies.......... 20
Quorum........................... 21
Required Vote.................... 21
THE MERGER............................ 22
Background of the Merger............ 22
The Crane Litigation................ 24
The AlliedSignal Litigation......... 28
BFGoodrich's Reasons for the Merger;
Recommendation of the BFGoodrich
Board............................ 28
Coltec's Reasons for the Merger;
Recommendation of the Coltec
Board............................ 30
Cautionary Statement Concerning
Forward-Looking Statements....... 32
Fairness Opinions of Financial
Advisors......................... 33
Board of Directors and Management of
BFGoodrich Following the
Merger........................... 45
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interests of Executive Officers and
Directors in the Merger --
BFGoodrich....................... 46
Interests of Executive Officers and
Directors in the
Merger -- Coltec................. 47
Material Federal Income Tax
Consequences..................... 50
Accounting Treatment................ 51
Effect of the Merger on Employee
Benefit Plans.................... 51
Regulatory Matters.................. 52
Resales of BFGoodrich Common Stock
Received in the Merger........... 52
Stock Exchange Listing.............. 53
Dividends........................... 53
Dissenters' Rights.................. 53
Coltec Credit Agreement............. 53
THE MERGER AGREEMENT.................. 54
The Merger.......................... 54
Effective Date...................... 54
Conversion of Coltec Common Stock... 54
Conversion of Coltec Stock Options;
Convertible Securities........... 55
Surrender and Payment............... 55
Conditions to Completion of the
Merger........................... 56
Representations and Warranties...... 57
Conduct of Business Pending the
Merger........................... 58
No Solicitation..................... 59
Termination; Fees and Expenses...... 60
Reciprocal Stock Option
Agreements....................... 62
Amendment; Waiver................... 65
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS................ 66
DESCRIPTION OF BFGOODRICH STOCK....... 74
General............................. 74
Common Stock........................ 74
Preferred Stock..................... 74
BFGoodrich Rights................... 74
MATERIAL DIFFERENCES IN THE RIGHTS OF
SHAREHOLDERS........................ 75
Size of the Board of Directors...... 75
Classification of the Board of
Directors........................ 76
Cumulative Voting................... 76
Vacancies on the Board.............. 76
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Removal of Directors................ 76
Special Meetings of Shareholders.... 77
Corporate Action without a
Shareholder Meeting.............. 77
Charter Amendments.................. 78
Bylaw Amendments.................... 79
Business Combinations............... 79
Antitakeover Protection............. 80
Interested Director Transactions.... 81
Shareholder Rights Plan............. 82
Indemnification of Directors,
Officers and Employees........... 82
Limitation of Personal Liability of
Directors........................ 84
Constituencies Statutes............. 84
Dividends........................... 85
Loans to Directors.................. 85
Shareholder Records................. 86
Issuance of Rights or Options to
Purchase Shares to Directors,
Officers and Employees........... 86
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dissenters' Rights.................. 86
OTHER MATTERS......................... 87
LEGAL MATTERS......................... 87
EXPERTS............................... 87
SHAREHOLDER PROPOSALS................. 88
WHERE YOU CAN FIND MORE INFORMATION... 89
INDEX OF DEFINED TERMS................ 91
ANNEX A -- Agreement and Plan of
Merger.............................. A-1
ANNEX B -- Parent Stock Option
Agreement........................... B-1
ANNEX C -- Company Stock Option
Agreement........................... C-1
ANNEX D -- Fairness Opinion of Morgan
Stanley & Co. Incorporated.......... D-1
ANNEX E -- Fairness Opinion of Credit
Suisse First Boston Corporation..... E-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE
BFGOODRICH/COLTEC MERGER
Q: WHY ARE BFGOODRICH AND COLTEC PROPOSING TO MERGE?
A: Together, our two companies will become a stronger competitor in an aerospace
industry that continues to become more highly focused. The merger will
enhance our capabilities to provide aerospace customers with complete product
systems and services, as opposed to only individual components, and allow us
to offer a broader range of products and services throughout the industry.
BFGoodrich's financial strength will enhance Coltec's attractiveness to
customers as a long-term supplier and will allow Coltec to fund its research
and development and internal growth more economically. We believe the
combined company will be a more attractive supplier to aircraft
manufacturers, jet engine manufacturers and airline operators.
Coltec also brings to BFGoodrich an industrial business which is a good
platform for additional profitable growth, both internally and through
acquisitions. In addition, Coltec's industrial business will provide a "third
leg" to balance BFGoodrich's aerospace and performance materials businesses.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed and dated proxy card in the enclosed return envelope as
soon as possible, so that your shares may be represented at the applicable
meeting to vote on the merger. Both shareholder meetings will take place on
April 7, 1999. The boards of directors of both BFGoodrich and Coltec
unanimously recommend the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. Just send in a later-dated, signed proxy card before your meeting or
attend your meeting in person and vote.
If you are a BFGoodrich shareholder, you may send a new proxy card to the
following address: The Bank of New York, New York, New York 10203-0029,
Attention: Proxy Department.
If you are a Coltec shareholder, you may send a new proxy card to the
following address: ChaseMellon Shareholder Services, L.L.C., 600 Willowtree
Road, Leonia, New Jersey 07605, Attention: Proxy Department.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker may vote your shares only if you provide instructions on how to
vote. Please tell your broker how you would like him or her to vote your
shares. If you do not tell your broker how to vote, your shares will not be
voted by your broker.
Q: SHOULD I SEND IN MY CERTIFICATES NOW?
A: No. After the merger is completed, we will send Coltec shareholders written
instructions for exchanging their share certificates.
BFGoodrich shareholders will keep their certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. We hope to
complete the merger as early as April 7, 1999. However, if all applicable
antitrust waiting periods have not expired by that date or if other
conditions to the merger are not satisfied, the merger may be completed
later.
QUESTIONS AND ANSWERS
<PAGE> 7
Q: WHAT IF I HAVE QUESTIONS?
A: If you are a BFGoodrich shareholder, please call D.F. King & Co., Inc.,
BFGoodrich's proxy solicitor, toll-free at (800) 735-3591 or the Investor
Relations Department at BFGoodrich at (330) 659-7788.
If you are a Coltec shareholder, please call ChaseMellon Shareholder
Services, L.L.C., Coltec's proxy solicitor, toll-free at (877) 698-6867, or
the Investor Relations Department at Coltec at (704) 423-7012.
2
QUESTIONS AND ANSWERS
<PAGE> 8
SUMMARY
Because this is a summary, it does not contain all the information that may
be important to you. You should carefully read this entire joint proxy
statement/prospectus and its annexes and the documents to which this document
refers before you decide how to vote. For a description of the documents to
which this document refers you should review "Where You Can Find More
Information" on page 89.
THE COMPANIES
THE B.F.GOODRICH COMPANY
4020 Kinross Lakes Parkway
Richfield, Ohio 44286-9368
(330) 659-7600
BFGoodrich provides aircraft systems and services and manufactures
performance materials. The BFGoodrich aerospace segment consists of four groups:
aerostructures, landing systems, sensors and integrated systems, and
maintenance, repair and overhaul. BFGoodrich performance materials, BFGoodrich's
other business segment, consists of three groups: textile and industrial
coatings, polymer additives and specialty plastics, and consumer specialties.
In fiscal 1998, BFGoodrich derived approximately 70% of its sales and 73%
of its segment operating income from BFGoodrich aerospace, and approximately 30%
of its sales and 27% of its segment operating income from BFGoodrich performance
materials.
COLTEC INDUSTRIES INC
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217
(704) 423-7000
Coltec manufactures and sells a diversified range of highly engineered
aerospace and industrial products, primarily in the United States, Canada and
Europe. Coltec conducts its operations through its two principal segments:
aerospace and industrial. Through its aerospace segment, Coltec is a
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, Coltec is
a 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.
In fiscal 1998, Coltec derived approximately 48% of its sales and 40% of
its operating income from its aerospace segment, and approximately 52% of its
sales and 60% of its operating income from its industrial segment.
OUR REASONS FOR THE MERGER
BFGoodrich and Coltec believe that the merger will benefit the shareholders
of each company by creating a new, stronger competitor with significant
experience and the capability to offer a broad array of products and services in
the aerospace, performance materials and industrial businesses. To review our
reasons for the merger in detail, as well as how we came to agree on the merger,
see pages 22 through 24 and 28 through 32.
BOARD RECOMMENDATIONS TO SHAREHOLDERS
TO BFGOODRICH SHAREHOLDERS:
THE BFGOODRICH BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN YOUR BEST
INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE ISSUANCE OF SHARES OF BFGOODRICH COMMON STOCK TO COLTEC SHAREHOLDERS IN THE
MERGER.
TO COLTEC SHAREHOLDERS:
THE COLTEC BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN YOUR BEST
INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
AND ADOPT THE MERGER AGREEMENT.
SPECIAL SHAREHOLDERS' MEETINGS
THE BFGOODRICH SPECIAL SHAREHOLDERS' MEETING (SEE PAGE 18)
If you are a BFGoodrich shareholder, you are entitled to vote at the
meeting if you owned BFGoodrich common stock as of the close of business on
February 18, 1999. As of that date, a total of 74,387,028 votes were eligible to
be cast at the BFGoodrich meeting. At the meeting, the
3
SUMMARY
<PAGE> 9
shareholders will consider and vote upon a proposal
to approve the issuance of BFGoodrich common stock to holders of Coltec common
stock in the merger.
THE COLTEC SPECIAL SHAREHOLDERS' MEETING (SEE PAGE 20)
If you are a Coltec shareholder, you are entitled to vote at the meeting if
you owned Coltec common stock as of the close of business on February 18, 1999.
As of that date, a total of 63,056,735 votes were eligible to be cast at the
Coltec meeting. At the meeting, the shareholders will consider and vote upon a
proposal to approve and adopt the merger agreement.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THIS AGREEMENT BECAUSE IT IS THE
LEGAL DOCUMENT THAT GOVERNS THE MERGER.
WHAT WILL HAPPEN TO BFGOODRICH AND COLTEC AT THE TIME OF THE MERGER (SEE PAGE
54)
At the time of the merger, BFGoodrich will issue BFGoodrich common stock to
existing Coltec shareholders in exchange for their shares of Coltec common
stock, and Coltec will become a wholly owned subsidiary of BFGoodrich.
OWNERSHIP OF BFGOODRICH FOLLOWING THE MERGER (SEE PAGE 54)
As a result of the merger, BFGoodrich will issue approximately 35,311,772
shares of BFGoodrich common stock to Coltec shareholders. We estimate that
Coltec shareholders will own approximately 33% of the outstanding BFGoodrich
common stock after the merger.
WHAT BFGOODRICH SHAREHOLDERS AND COLTEC SHAREHOLDERS WILL RECEIVE IN THE MERGER
(SEE PAGE 54)
Coltec shareholders will receive 0.56 of a share of BFGoodrich common stock
in exchange for each share of Coltec common stock they own. According to that
"exchange ratio," the total number of shares a Coltec shareholder will receive
will be equal to 0.56 times the number of shares of Coltec common stock that
shareholder owns. We will not issue fractional shares. Instead, Coltec
shareholders will receive a cash payment for any fractional shares based on the
market value of the BFGoodrich common stock at the time of the merger. Also,
each share of BFGoodrich common stock issued in the merger will be accompanied
by an associated preferred share purchase right under BFGoodrich's shareholder
rights plan.
BFGoodrich shareholders will continue to own their shares in BFGoodrich,
and Coltec will become a wholly owned subsidiary of BFGoodrich.
Example: If you currently own 101 shares of Coltec common stock, then after
the merger you will be entitled to receive 56 shares of BFGoodrich common stock
and a check for the market value of the 0.56 fractional share of BFGoodrich
common stock. If you currently own 100 shares of BFGoodrich common stock, then
you will continue to hold those 100 shares after the merger.
Of course, the market price of BFGoodrich will fluctuate before the merger,
while the exchange ratio is fixed. You should obtain current stock price
quotations for BFGoodrich common stock. These quotations are available from your
stock broker, in major newspapers such as The Wall Street Journal and on the
Internet.
CONVERSION OF COLTEC STOCK OPTIONS (SEE PAGE 55)
Stock options to purchase Coltec common stock will be automatically
converted into stock options to purchase BFGoodrich common stock. The number of
shares of BFGoodrich common stock subject to these converted options and the
exercise price of these converted options will give effect to the exchange ratio
of 0.56 of a share of BFGoodrich common stock for each share of Coltec common
stock.
BOARD OF DIRECTORS AND MANAGEMENT OF BFGOODRICH FOLLOWING THE MERGER (SEE PAGE
45)
If the merger is completed, we expect that the current BFGoodrich
management and Coltec operating management will, for the most part, remain in
place. We plan for Coltec's aerospace segment to become part of BFGoodrich
aerospace, and Coltec's industrial segment to operate as a new, separate
business segment of BFGoodrich. If the merger is completed, the size of the
BFGoodrich board will increase from 12 to 15 members and John W. Guffey, Jr.,
William R. Holland and David I. Margolis will become members of the BFGoodrich
board.
4
SUMMARY
<PAGE> 10
After the merger, BFGoodrich's principal executive offices will be
relocated to Charlotte, North Carolina.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 46)
BFGoodrich. When BFGoodrich shareholders approve the issuance of
BFGoodrich common stock in the merger, the change in control provisions of
BFGoodrich's employment agreements and benefit plans will be triggered. As a
result of these change in control provisions, BFGoodrich's executive officers
and directors have interests in the merger that are different from or in
addition to their interests as BFGoodrich shareholders. The BFGoodrich board was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the related transactions. When we complete the merger:
- one of BFGoodrich's executive officers will receive payments and benefits
under his management continuity agreement, including a termination
payment of $3,845,846 plus continuation of benefits for three years and
$477,567 representing the actuarial equivalent of an additional three
years of age and service under BFGoodrich's retirement program;
- the executive officers of BFGoodrich will receive an aggregate of
$533,063 and 22,473 shares of BFGoodrich common stock in partial payment
of current long term and annual incentive compensation plans and an
aggregate of $1,074,348 and 7,262 shares of BFGoodrich common stock in
payment of fully vested, previously earned and voluntarily deferred
benefits;
- two of BFGoodrich's non-employee directors will each become vested in 773
phantom shares of BFGoodrich common stock; and
- 1,950 unvested stock options held by one executive officer will become
fully vested and exercisable as a result of the approval of the stock
issuance proposal by the BFGoodrich shareholders.
Coltec. When Coltec shareholders approve and adopt the merger agreement
or, in the case of one plan, when we complete the merger, the change of control
provisions of Coltec's employment agreements and benefit plans will be
triggered. As a result of these change of control provisions, Coltec's executive
officers and directors have interests in the merger that are different from or
in addition to their interests as Coltec shareholders. The Coltec board was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the related transactions. When we complete the merger:
- Coltec's executive officers will receive payments and benefits under
their employment agreements having an aggregate estimated value of
$54,769,599;
- Coltec's non-employee directors will receive payments and benefits under
Coltec's benefit plans having an aggregate estimated value of $1,051,394;
and
- an aggregate of 1,534,667 unvested stock options and 107,429 shares of
restricted stock held by Coltec's executive officers and directors will
become fully vested and/or exercisable.
CONDITIONS TO THE MERGER (SEE PAGE 56)
The completion of the merger depends upon meeting a number of conditions,
including the following, any of which may be waived:
- accuracy of the representations and warranties made in the merger
agreement;
- approval and adoption of the merger agreement by Coltec shareholders;
- approval by BFGoodrich shareholders of the issuance of common stock by
BFGoodrich in the merger;
- expiration of waiting periods under certain applicable antitrust or
competition laws;
- absence of any injunction or other order by any court or other
governmental entity which would:
- prohibit or prevent the merger; or
- require BFGoodrich or Coltec to take any action that would have a
material adverse effect on BFGoodrich or Coltec; and
- receipt of governmental, regulatory, stock exchange and accounting
authorizations and approvals.
5
SUMMARY
<PAGE> 11
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 60)
We can agree to terminate the merger agreement without completing the
merger.
In addition, either of us acting alone can terminate the merger agreement
under the circumstances described on pages 60 and 61.
TERMINATION FEES (SEE PAGE 60)
The merger agreement provides for termination fees that could discourage
other companies from trying or proposing to combine with either of us before the
merger is completed. The merger agreement requires Coltec or BFGoodrich to pay
to the other a termination fee of $45 million and an expense reimbursement fee
of $5 million if the merger agreement is terminated under the circumstances
described on pages 61 and 62. The termination and expense reimbursement fee
provisions are customary for transactions like the merger. We agreed to the
amount of the fees and the circumstances under which they are payable after
extensive negotiation. Our financial advisors tell us that the amount of these
fees is within a customary range when compared to similar transactions.
RECIPROCAL STOCK OPTION AGREEMENTS (SEE PAGE 62)
When we signed the merger agreement, we also entered into two reciprocal
stock option agreements under which we each granted an option to the other party
to purchase approximately 19.9% of its outstanding common stock if the party
exercising the option has the right to receive a termination fee in connection
with the merger agreement. These options are customary for transactions like the
merger. We agreed to the terms of the options and the circumstances under which
they are exercisable after extensive negotiation. Our financial advisors tell us
that reciprocal stock options are within the customary range of actions
companies take to ensure completion of negotiated merger agreements.
The reciprocal stock option agreements, together with the termination and
expense reimbursement fees discussed above, could discourage other companies,
including Crane Co., from trying or proposing to combine with either of us in an
alternative transaction before we complete the merger. Such an alternative
transaction involving either of us may be more advantageous to that company's
shareholders than the merger.
REGULATORY MATTERS (SEE PAGE 52)
Under United States, Canadian and German antitrust law, we must submit
information to regulatory authorities about the merger and about Coltec and
BFGoodrich. Prior to completing the merger, the waiting periods required under
the laws of each country must have expired.
ACCOUNTING TREATMENT (SEE PAGE 51)
We expect the merger to qualify as a pooling of interests, which means that
we will treat our companies as if they had always been one company for
accounting and financial reporting purposes.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 33)
In deciding to approve the merger, our boards of directors considered the
opinions from our respective financial advisors as to the fairness from a
financial point of view of the exchange ratio under the merger agreement.
BFGoodrich received an opinion from its financial advisor, Morgan Stanley &
Co. Incorporated, that as of the date of that opinion the exchange ratio
contemplated by the merger agreement was fair from a financial point of view to
BFGoodrich.
Coltec received an opinion from its financial advisor, Credit Suisse First
Boston Corporation, that as of the date of that opinion the exchange ratio
contemplated by the merger agreement was fair from a financial point of view to
the Coltec shareholders.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 50)
We have structured the merger so that BFGoodrich, Coltec and our respective
shareholders will not recognize any gain or loss for federal income tax purposes
in the merger, except for tax payable because of cash received by Coltec
shareholders instead of fractional shares.
NO DISSENTERS' RIGHTS (SEE PAGE 53)
Under Pennsylvania law, Coltec shareholders do not have dissenters' rights
in connection with the merger.
6
SUMMARY
<PAGE> 12
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 13)
Shares of BFGoodrich and Coltec common stock are each listed on the New
York Stock Exchange.
The following table presents trading information for the BFGoodrich common
stock and the Coltec common stock on November 20, 1998 and March 4, 1999.
November 20, 1998 was the last full trading day prior to our announcement of the
signing of the merger agreement. March 4, 1999 was the last practicable trading
day for which information was available prior to the date of this joint proxy
statement/prospectus. You should read the information presented below in
conjunction with "Comparative Per Share Market Price and Dividend Information"
on page 13.
<TABLE>
<CAPTION>
BFGOODRICH COLTEC
COMMON STOCK COMMON STOCK
DOLLARS PER SHARE DOLLARS PER SHARE
----------------- ------------------
HIGH LOW HIGH LOW
-------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
November 20, 1998.... $36 3/16 $35 5/8 $18 $16 3/4
March 4, 1999........ $35 $34 $18 51/256 $17 3/4
</TABLE>
VOTES REQUIRED (SEE PAGES 19 AND 21)
A majority of the votes cast by shareholders at the BFGoodrich meeting must
vote to approve the issuance of BFGoodrich common stock in the merger. A
majority of the issued and outstanding shares of BFGoodrich common stock
entitled to vote must be present either in person or by proxy for any vote to be
valid.
A majority of the votes cast by the shareholders entitled to vote at the
Coltec meeting must vote to approve the merger agreement for it to be adopted. A
majority of the issued and outstanding shares of Coltec common stock must be
present either in person or by proxy for any vote to be valid.
LISTING OF BFGOODRICH SHARES (SEE PAGE 53)
BFGoodrich will list the shares of BFGoodrich common stock to be issued in
the merger on the New York Stock Exchange under the trading symbol "GR."
DIVIDENDS AFTER THE MERGER (SEE PAGE 53)
The current annual rate of dividends on BFGoodrich common stock is $1.10
per share. BFGoodrich expects that, after the merger, it will continue to pay
dividends at the current rate. The payment of dividends by BFGoodrich in the
future, however, is subject to approval and declaration by the BFGoodrich board
and will depend on a variety of factors, including business conditions and
BFGoodrich's financial condition and earnings.
Currently, Coltec does not pay dividends on its common stock.
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (SEE PAGES 75 THROUGH 87.)
The rights of holders of BFGoodrich common stock are currently governed by
New York law and BFGoodrich's certificate of incorporation and bylaws. The
rights of holders of Coltec common stock are currently governed by Pennsylvania
law and Coltec's articles of incorporation and bylaws. When the merger is
completed, holders of Coltec common stock will become holders of BFGoodrich
common stock.
See pages 75 through 87 to learn more about the material differences
between the rights of holders of BFGoodrich common stock and the rights of
holders of Coltec common stock.
7
SUMMARY
<PAGE> 13
SUMMARY SELECTED HISTORICAL CONDENSED FINANCIAL INFORMATION
We are providing the following historical financial information to help you
analyze certain financial aspects of the merger. We derived this information
from audited financial statements of each company for each of the five years
ended December 31, 1994 through 1998. The information is only a summary and you
should read it together with our historical financial statements and related
notes contained in the annual reports and other information that we have filed
with the Securities and Exchange Commission. See "Where You Can Find More
Information" on page 89.
BFGOODRICH -- SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Historical Consolidated
Statement of Income Data:
Sales....................... $2,601.4 $2,661.8 $2,845.8 $3,373.0 $3,950.8
Income (loss) from
continuing operations.... 66.4 94.8 115.5 113.2 228.1
Income (loss) from
continuing operations per
diluted common share..... 0.91 1.34 1.65 1.53 3.04
Cash dividends declared per
common share............. 1.10 1.10 1.10 1.10 1.10
Weighted average number of
common shares and assumed
conversions (on a fully
diluted basis)
(millions)............... 63.9 68.8 70.9 74.6 75.0
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Historical Consolidated
Balance
Sheet Data:
Total assets................ $3,435.4 $3,387.5 $3,579.8 $3,493.9 $4,192.6
Long-term debt and capital
lease obligations........ 1,001.1 963.0 881.4 564.3 995.2
Mandatorily redeemable
preferred securities of
trust.................... -- 122.2 122.6 123.1 123.6
Redeemable preferred
stock.................... -- -- -- -- --
Total shareholders'
equity................... 979.2 975.9 1,225.8 1,422.6 1,599.6
Book value per common
share.................... 13.54 14.97 17.66 19.56 21.51
</TABLE>
SIGNIFICANT EVENTS AFFECTING BFGOODRICH'S HISTORICAL EARNINGS TRENDS
Income from continuing operations for the year ended December 31, 1998
includes:
- a charge of $6.5 million ($0.09 per share) related to the closure of
three facilities and an asset impairment charge on a facility in
Hamburg, Germany.
Income from continuing operations for the year ended December 31, 1997
includes:
- merger costs of $69.3 million ($0.93 per share) in connection with
the merger with Rohr, Inc.;
- a net gain of $8.0 million ($0.10 per share) resulting from an
initial public offering of common stock by BFGoodrich's subsidiary,
DTM Corporation;
- a net gain of $16.4 million ($0.22 per share) from the sale of a
business;
- a charge of $21.0 million ($0.28 per share) related to the
aerostructures group's production contract with IAE International
Aero Engines AG to produce nacelles for McDonnell Douglas
Corporation's MD-90 aircraft; and
8
SUMMARY
<PAGE> 14
- a charge of $6.8 million ($0.09 per share) relating to the
bankruptcy of an airline customer.
Income from continuing operations for the year ended December 31, 1996
includes:
- a charge of $2.6 million ($0.04 per share) relating to a voluntary
early retirement program;
- a net gain of $1.0 million ($0.01 per share) from the sale of a
business;
- a loss of $3.1 million ($0.04 per share) on the sale of a wholly
owned aircraft leasing subsidiary;
- a charge of $4.3 million ($0.06 per share) for an impairment
write-down on a facility in Arkadelphia, Arkansas; and
- a charge of $3.2 million ($0.05 per share) for the exchange of
convertible notes.
Income from continuing operations for the year ended December 31, 1995
includes:
- a net gain of $12.5 million ($0.18 per share) from an insurance
settlement;
- a net gain of $2.2 million ($0.03 per share) from the sale of a
business; and
- a charge of $1.9 million ($0.03 per share) relating to a voluntary
early retirement program.
Income from continuing operations for the year ended December 31, 1994
includes:
- a charge of $6.4 million ($0.10 per share) attributable to
unamortized pension prior service costs related to the reduction of
employment levels; and
- a net gain of $1.6 million ($0.02 per share) on the sale of a
business.
9
SUMMARY
<PAGE> 15
COLTEC -- SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Historical Consolidated
Statement of Income Data:
Sales....................... $1,000.2 $1,099.6 $1,159.7 $1,314.9 $1,504.1
Income from continuing
operations............... 48.5 34.5 54.6 94.9 122.3
Income from continuing
operations per diluted
common share............. .70 .49 .79 1.42 1.81
Cash dividends declared per
common share............. -- -- -- -- --
Weighted average number of
common shares and assumed
conversions (on a fully
diluted basis)
(millions)............... 69.8 69.8 69.4 66.9 69.4
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Historical Consolidated
Balance Sheet Data:
Total assets................ $ 847.5 $ 894.5 $ 849.5 $ 933.0 $1,055.6
Long-term debt.............. 969.3 945.6 717.7 757.6 577.5
Mandatory redeemable
preferred securities of
trust.................... -- -- -- -- 145.3
Total shareholders' equity
(deficit)................ (525.6) (453.8) (417.0) (359.2) (300.3)
Book value per common
share.................... (7.52) (6.48) (6.20) (5.46) (4.76)
</TABLE>
SIGNIFICANT EVENTS AFFECTING COLTEC'S HISTORICAL EARNINGS TRENDS
Income from continuing operations for the year ended December 31, 1998
includes:
- a gain of $37.1 million ($0.52 per share) on the sale of Holley
Performance Products, a subsidiary of Coltec;
- a charge of $16.6 million ($0.24 per share) to recognize program
costs associated with the development of The Boeing Company
programs;
- a charge of $7.9 million ($0.11 per share) to record additional
warranty and legal reserves; and
- a charge of $3.3 million ($0.04 per share) related to training costs
and year 2000 compliance costs for new computer systems.
Income from continuing operations for the year ended December 31, 1996
includes a charge of $9.4 million ($0.13 per share) relating to the
bankruptcy of a major aerospace customer.
Income from continuing operations for the year ended December 31, 1995
includes a charge of $17.6 million ($0.25 per share) primarily to cover the
costs of closing a facility in Canada and selected workforce reductions
throughout Coltec.
10
SUMMARY
<PAGE> 16
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
We expect the merger will be accounted for as a pooling of interests, which
means that we will treat our companies as if they had always been one company
for accounting and financial reporting purposes. For a more detailed description
of pooling of interests accounting, see "The Merger -- Accounting Treatment" on
page 51.
We have presented below unaudited pro forma combined financial information
that reflects the pooling of interests method of accounting and is intended to
give you a better picture of what our businesses might have looked like had they
always been one company. We prepared the pro forma combined income statement and
balance sheet data by combining the historical amounts of each company. We then
made certain adjustments to the combined amounts. See "Notes to Unaudited Pro
Forma Condensed Combined Financial Statements" on page 72. The companies may
have performed differently if they had actually been combined. You should not
rely on the pro forma information as being indicative of the historical results
that we would have had if we were one company or the future results that we will
have after the merger. See "Unaudited Pro Forma Condensed Combined Financial
Statements" on page 66.
The unaudited pro forma combined financial data included in this joint
proxy statement/prospectus do not include any expenses which we expect to incur
in connection with completing the merger and integrating the operations of
BFGoodrich and Coltec. Although it will not be possible to determine the actual
amount of these costs and expenses until the related operational and
transitional plans are completed, we currently believe that the amount of these
costs and expenses will be material.
The pro forma combined dividends per common share does not necessarily
indicate what dividends will be paid in future periods to holders of BFGoodrich
common stock. BFGoodrich expects that, after completion of the merger, it will
continue the current annual dividend rate of $1.10 per share.
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Pro Forma Combined Statement of Income Data:
Sales.................................................... $4,005.5 $4,687.9 $5,454.9
Income from continuing operations........................ 170.1 208.1 350.4
Income from continuing operations per diluted common
share................................................. 1.57 1.86 3.08
Cash dividends declared per common share................. 1.10 1.10 1.10
Weighted average number of common shares and assumed
conversions (on a fully diluted basis) (millions)..... 109.8 112.1 113.9
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1998
---------------
<S> <C>
Pro Forma Combined Balance Sheet Data:
Total assets.............................................. $5,293.5
Long-term debt and capital lease obligations.............. 1,572.7
Mandatorily redeemable preferred securities of trusts..... 268.9
Total shareholders' equity................................ 1,299.3
Book value per common share............................... 11.84
</TABLE>
11
SUMMARY
<PAGE> 17
COMPARATIVE PER SHARE DATA
The following table presents historical and pro forma per share data of
BFGoodrich and Coltec. The information listed as "equivalent pro forma" was
obtained by multiplying the related pro forma combined amounts for BFGoodrich by
the exchange ratio of 0.56. You should read this information together with our
historical and pro forma financial statements incorporated by reference or
included in this document. The comparative per share data does not include any
expenses which we expect to incur in connection with completing the merger and
integrating the operations of BFGoodrich and Coltec. We also expect that the
merger will provide BFGoodrich with financial benefits that include reduced
operating expenses and the opportunity to earn more revenue. While the pro forma
information is helpful in showing the financial characteristics of BFGoodrich
after the merger under one set of assumptions, it does not attempt to predict or
suggest future results.
The information in the following table is based on the historical financial
information that we have presented in the reports and other information that we
have filed with the Securities and Exchange Commission. We have incorporated
this material into this document by reference. See "Where You Can Find More
Information" on page 89.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
BFGOODRICH
Historical Per Common Share:
Income from continuing operations per diluted common
share.................................................. $ 1.65 $ 1.53 $ 3.04
Cash dividends declared................................... 1.10 1.10 1.10
Book value................................................ 17.66 19.56 21.51
Pro Forma Combined -- Per BFGoodrich Common Share:
Income from continuing operations per diluted common
share.................................................. 1.57 1.86 3.08
Cash dividends declared................................... 1.10 1.10 1.10
Book value................................................ 11.84
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
COLTEC
Historical Per Common Share:
Income from continuing operations per diluted common
share.................................................. $ .79 $ 1.42 $ 1.81
Cash dividends declared................................... -- -- --
Book value................................................ (6.20) (5.46) (4.76)
Pro Forma Combined -- Per Coltec Equivalent Common Share:
Income from continuing operations per diluted common
share.................................................. 0.88 1.04 1.72
Cash dividends declared................................... 0.62 0.62 0.62
Book value................................................ 6.63
</TABLE>
12
SUMMARY
<PAGE> 18
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The shares of common stock of BFGoodrich and Coltec are each listed on the
New York Stock Exchange, and the shares of Coltec common stock are also listed
on the Pacific Exchange. BFGoodrich common stock is listed on the New York Stock
Exchange under the trading symbol "GR." Coltec common stock is listed on the New
York Stock Exchange under the trading symbol "COT." The number of holders of
record of BFGoodrich common stock was 11,225 as of February 18, 1999. The number
of holders of record of Coltec common stock was 568 as of February 18, 1999.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of BFGoodrich common stock and Coltec common
stock as reported on the New York Stock Exchange, based on published financial
sources, and the dividends declared on such stock.
<TABLE>
<CAPTION>
BFGOODRICH COMMON STOCK COLTEC COMMON STOCK
----------------------------- ----------------------------
MARKET PRICE CASH MARKET PRICE CASH
------------ DIVIDENDS ------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............................ $43 1/8 $36 1/2 $.275 $20 15/16 $17 3/4 --
Second Quarter........................... 48 1/4 35 1/8 .275 23 18 3/8 --
Third Quarter............................ 47 1/4 41 5/8 .275 24 20 --
Fourth Quarter........................... 46 40 3/4 .275 24 13/16 19 1/2 --
1998
First Quarter............................ $54 1/2 $38 3/8 $.275 $26 9/16 $21 5/8 --
Second Quarter........................... 56 44 11/16 .275 25 7/16 18 9/16 --
Third Quarter............................ 50 1/4 26 1/2 .275 21 5/8 14 1/8 --
Fourth Quarter........................... 40 1/2 28 13/16 .275 20 1/2 13 --
1999
First Quarter (through March 4, 1999).... $37 3/8 $31 3/8 -- $20 1/16 $16 11/16 --
</TABLE>
- ---------------
On November 20, 1998, the last full trading day on the New York Stock
Exchange before we announced the proposed merger, the closing price of
BFGoodrich common stock on the New York Stock Exchange was $35 15/16 per share,
with a high sale price on that day of $36 3/16 per share and a low sale price on
that day of $35 5/8 per share. On November 20, 1998, the closing price of Coltec
common stock on the New York Stock Exchange was $17 15/16 per share, with a high
sale price on that day of $18 per share and a low sale price on that day of
$16 3/4 per share. On March 4, 1999 the most recent practicable date before the
printing of this joint proxy statement/prospectus, the closing price on the New
York Stock Exchange was $34 3/4 per share of BFGoodrich common stock and
$17 123/128 per share of Coltec common stock. Shareholders are urged to obtain
current market quotations before making any decision with respect to the merger.
If BFGoodrich defers any interest payments on its 8.3% Junior Subordinated
Debentures, Series A, Due 2005, BFGoodrich may not, among other things, pay any
dividends on its capital stock until it pays all interest in arrears. In
addition, BFGoodrich's debt agreements contain various restrictive covenants
that, among other things, limit the payment of cash dividends. As of December
31, 1998, BFGoodrich had sufficient retained income and other capital to declare
up to $863.3 million in dividends without violating these restrictive covenants.
13
SUMMARY
<PAGE> 19
RISK FACTORS
In addition to the other information in this joint proxy
statement/prospectus or incorporated in this joint proxy statement/prospectus by
reference, you should consider carefully the following factors before making a
decision on the merger or the issuance of BFGoodrich common stock.
SINCE THE MARKET PRICE OF BFGOODRICH COMMON STOCK WILL VARY, COLTEC SHAREHOLDERS
CANNOT BE SURE OF THE MARKET VALUE OF THE BFGOODRICH COMMON STOCK THEY WILL
RECEIVE IN THE MERGER.
At the time the merger is completed, each share of Coltec common stock will
be converted into the right to receive 0.56 shares of BFGoodrich common stock.
This exchange ratio will not be adjusted in the event of any increase or
decrease in the price of the BFGoodrich common stock or the Coltec common stock.
As a result, the value of the BFGoodrich common stock received by Coltec
shareholders in the merger will vary with fluctuations in the value of the
BFGoodrich common stock.
THE TERMINATION FEES AND STOCK OPTION AGREEMENTS MAY DISCOURAGE OTHER COMPANIES
FROM TRYING TO COMBINE WITH EITHER OF US.
The merger agreement provides for termination and expense reimbursement
fees and reciprocal stock option agreements that could discourage other
companies, including Crane Co., from trying or proposing to combine with either
of us in an alternative transaction before we complete the merger. Such an
alternative transaction involving either of us may be more advantageous to that
company's shareholders than the merger.
If the termination and expense reimbursement fees were to be paid or
options exercised, the company responsible for paying the fee and satisfying the
option could, as a result, experience a material negative impact on its earnings
and financial condition. This may discourage other companies from trying to or
proposing to combine with either of us. If one of the options were to become
exercisable, the option also may, for a period of time, prevent a third party
from completing a pooling of interests transaction with the company that granted
the option. This also could discourage other companies from trying to combine
with either of us.
WE MAY NOT BE ABLE TO ACHIEVE THE EXPECTED INTEGRATION AND COST SAVINGS WHICH
COULD ADVERSELY AFFECT OUR EARNINGS AND FINANCIAL CONDITION.
BFGoodrich and Coltec expect to achieve cost savings following the merger.
By the year 2001, we believe the cost savings could be $60 million per year.
Difficulties may arise, however, in the integration of the business and
operation of the combined entity. As a result, we may not be able to achieve the
cost savings and synergies that we expect will result from the merger. Achieving
cost savings is dependent on consolidating the BFGoodrich corporate and
BFGoodrich aerospace staff with Coltec's corporate staff in Charlotte, North
Carolina and other synergies in combining the two organizations. Additional
operational savings are dependent upon the integration of the aerospace
businesses of BFGoodrich and Coltec and the elimination of duplicate facilities
and excess capacity. Actual savings in 1999 may be materially less than expected
if the merger is delayed beyond April 30, 1999, reorganization of both
companies' staff is delayed beyond what is anticipated or the reductions in
personnel are less than currently envisioned. We expect material cost savings
from the reduction in personnel.
WE MAY HAVE LIABILITIES RELATED TO ASBESTOS LITIGATION WHICH COULD ADVERSELY
AFFECT OUR EARNINGS AND FINANCIAL CONDITION.
The historical business operations of Coltec have resulted in a substantial
volume of asbestos litigation. Plaintiffs in these matters have alleged personal
injury or death as a result of exposure to asbestos contained in some products
that were manufactured or distributed by two of Coltec's subsidiaries. Coltec
believes that 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 known and pending litigation. It
is difficult to predict, however, the number of asbestos lawsuits that Coltec's
subsidiaries will be subject to in the future. These future claims and insurance
and other related costs may result in future liabilities that are
14
RISK FACTORS
<PAGE> 20
significant and may be material. For additional information regarding Coltec's
involvement in asbestos litigation, you should read Coltec's December 31, 1998
financial statements which are incorporated by reference into this joint proxy
statement/prospectus.
WE MAY HAVE LIABILITIES RELATED TO ENVIRONMENTAL LAWS AND REGULATIONS WHICH
COULD ADVERSELY AFFECT OUR EARNINGS AND FINANCIAL CONDITION.
BFGoodrich and Coltec are generators of both hazardous and non-hazardous
wastes. The treatment, storage, transportation and disposal of these hazardous
and non-hazardous wastes are subject to various environmental laws and
regulations. BFGoodrich and Coltec have been notified that they have been
designated as potentially responsible parties by the U.S. Environmental
Protection Agency for the costs of investigating and, in some cases, remediating
contamination by hazardous materials at several sites, most of which related to
businesses previously discontinued. Liability for these costs may be imposed on
present and former owners or operators of the properties or on parties who
generated the wastes that contributed to the contamination. For additional
information regarding potential environmental liability for both BFGoodrich and
Coltec, you should read BFGoodrich's December 31, 1998 financial statements and
Coltec's December 31, 1998 financial statements which are incorporated by
reference into this joint proxy statement/prospectus.
BFGOODRICH'S MARKET SEGMENTS HAD WEAK STOCK MARKET PERFORMANCE IN 1998.
Currently, BFGoodrich operates in two business segments -- aerospace and
performance materials. During 1998, total return to shareholders in these
segments has been less than broad based stock market indices. For example, the
Standard & Poor's 500 index had a total return to shareholders in 1998 of 28.58%
while the Standard & Poor's aerospace/defense index had a return of negative
23.34% and the Standard & Poor's specialty chemical index had a return of
negative 14.84%. BFGoodrich had a return of negative 11.06% during 1998. Total
return to shareholders consists of change in stock price and assumes dividends
are reinvested in additional shares of stock of the company paying the dividend.
THE MARKET PRICE OF BFGOODRICH'S COMMON STOCK IS VOLATILE AND THE VALUE OF THE
BFGOODRICH COMMON STOCK YOU OWN COULD DECREASE.
The market price of BFGoodrich's common stock has fluctuated widely over
the past twelve months and may continue to do so. Many factors could cause the
market price of BFGoodrich's common stock to rise and fall. Some of these
factors are:
- variations in BFGoodrich's quarterly operating results;
- announcements of technological innovations;
- introduction of new products or new pricing policies by BFGoodrich or
BFGoodrich's competitors;
- trends in the aerospace industry;
- acquisitions or strategic alliances by BFGoodrich or others in the
aerospace industry;
- the hiring or departure of key personnel;
- changes in accounting principles;
- changes in estimates of BFGoodrich's performance or recommendations by
financial analysts; and
- market conditions in the industry and the economy as a whole.
In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations have particularly affected the market
prices of the securities of many aerospace companies. These broad market
fluctuations could adversely affect the market price of BFGoodrich's common
stock. If the market price of BFGoodrich's common stock decreases, the value of
the BFGoodrich common stock you own would decrease.
15
RISK FACTORS
<PAGE> 21
THE CYCLICAL NATURE OF OUR BUSINESS COULD ADVERSELY AFFECT OUR EARNINGS AND
FINANCIAL CONDITION.
The business sectors to which we sell our products are, to varying degrees,
cyclical and have historically experienced periodic downturns. These downturns
have often had a negative effect on demand for our products resulting in lower
net sales, gross margin and net income. Any future material weakness in demand
in any of these business sectors could have a material adverse effect on our
earnings and financial condition. In addition, some of our competitors have
greater financial resources than we do and may be better able to withstand the
effects of such periodic downturns.
THE DOWNTURN IN ASIA COULD CONTINUE TO ADVERSELY AFFECT OUR EARNINGS AND
FINANCIAL CONDITION.
The current economic downturn in some Asian countries has adversely
affected and could continue to adversely affect the worldwide aerospace
industry. According to industry analysts, as a result of the recession in Japan,
as well as currency fluctuations and other problems in other Asian countries,
Asian airlines have slowed purchases of new aircraft. The reduction in demand
for new aircraft has led and could continue to lead aircraft manufacturers to
build fewer aircraft than they might otherwise have built. As a result, we have
experienced and could continue to experience delays or cancellations of orders
for our products for aircraft. Such delays or cancellations could seriously harm
our earnings and financial condition.
OUR DEPENDENCE UPON CURRENT CONDITIONS IN THE AIRLINE INDUSTRY COULD ADVERSELY
AFFECT OUR EARNINGS AND FINANCIAL CONDITION.
The airline industry is undergoing a process of consolidation and
significantly increased competition. This consolidation could result in a
reduction of future aircraft orders as overlapping routes are eliminated and
airlines seek greater economies through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
promoting greater price competition from aerospace suppliers, which could
adversely affect our earnings and financial condition.
THE FINANCIAL RESULTS OF THE PERFORMANCE MATERIALS SEGMENT COULD BE ADVERSELY
AFFECTED IF GROWTH IN DEMAND FOR PERFORMANCE MATERIALS DOES NOT OCCUR OR COST
REDUCTIONS ARE NOT ACHIEVED AS THE COMBINED COMPANY EXPECTS.
The financial results of the combined company could be adversely affected
if the expected growth in volume demand for performance materials does not occur
as the combined company expects. Recent turmoil in the financial markets in the
Far East and Latin America could adversely impact sales increases in those
regions. The financial results of the combined company could also be adversely
affected if the combined company does not achieve cost reduction benefits as it
integrates recent acquisitions and continues the realignment activities of
BFGoodrich and Coltec.
WE NEED TO RECEIVE GOVERNMENTAL APPROVALS BEFORE WE COMPLETE THE MERGER. WE MAY
NEED TO COMPLETE DIVESTITURES AND AGREE TO OPERATING RESTRICTIONS TO OBTAIN
THESE APPROVALS.
Hart-Scott-Rodino Antitrust Act of 1976 and Federal Trade Commission rules
provide that we may not complete the merger unless we submit certain filings to
the Antitrust Division of the Justice Department and the Federal Trade
Commission. In addition, waiting periods must expire. By December 22, 1998, each
of us filed the required forms with the Federal Trade Commission and the
Antitrust Division of the Justice Department. On January 22, 1999, the Federal
Trade Commission issued a request for additional information in connection with
the merger and, by doing so, extended the expiration date of the waiting period.
In addition, we require authorization and approval from other governmental
agencies, both domestic and foreign, with respect to the merger. Those
authorizations and approvals relate primarily to antitrust and securities laws
issues.
A court could delay or prevent the merger before or after you approve the
merger. To obtain the authorization and approvals we need or to keep
governmental authorities from seeking to prevent the merger, those governmental
authorities may require us to divest one or more of our product lines or to
agree to various operating restrictions before or after you approve the merger.
We cannot guarantee that we could
16
RISK FACTORS
<PAGE> 22
complete any required divestiture for a fair market price or that we could
reinvest the proceeds from the divestiture and achieve the same rate of return
on our investment. Any operating restrictions imposed could adversely affect the
value of the combined company. If we are required to divest assets, we may not
be able to achieve the anticipated operating synergies. We do not expect to need
or seek any additional shareholder approval for any decision by Coltec or
BFGoodrich after the applicable special shareholder meetings to agree to any
terms and conditions necessary to resolve objections to the merger. However, if
BFGoodrich and Coltec decide to agree to any such conditions after the special
shareholder meetings, either BFGoodrich or Coltec or both will seek your
approval if applicable law requires shareholder approval for that decision.
COMPUTER SYSTEM FAILURES OR MISCALCULATIONS RESULTING FROM AN INABILITY TO
INTERPRET DATES BEYOND 1999 COULD MATERIALLY AND ADVERSELY AFFECT OUR
OPERATIONS.
Any computer equipment that uses two digits instead of four to specify the
year will be unable to interpret dates beyond the year 1999. This "year 2000"
issue could result in system failures or miscalculations causing disruptions of
operations. The three major areas that could be affected critically are
financial and operating systems, manufacturing systems and equipment, and
third-party relationships with suppliers and customers. Each of us has developed
plans to address this exposure.
The three critical areas affected and our accomplishments to date are shown
below:
<TABLE>
<CAPTION>
AREA ACCOMPLISHED TO DATE
---- --------------------
<S> <C>
Financial and operating systems - Systems assessed
- Detailed plans have been or continue to be
developed
- Conversion commenced
Manufacturing systems and equipment - Systems assessed
- Detailed plans have been or continue to be
developed
- Conversion commenced
Third-party relationship with suppliers and customers - Communicating with critical suppliers and customers
to ascertain whether they are addressing potential
year 2000 issues
</TABLE>
Although we cannot give you any assurance, we believe that our internal
systems will be year 2000 compliant. The failure of major suppliers and
customers to achieve year 2000 compliance could materially and adversely affect
BFGoodrich's and Coltec's results of operations.
THE LAWSUIT FILED BY ALLIEDSIGNAL COULD RESULT IN A DELAY OR PREVENT THE MERGER
ALTOGETHER.
AlliedSignal has filed a lawsuit against BFGoodrich and Coltec alleging two
causes of action. The first is a contract claim for which AlliedSignal is
seeking to delay the merger between BFGoodrich and Coltec pending the outcome of
an arbitration proceeding. The second cause of action is an antitrust claim for
which AlliedSignal is asking the court to prevent BFGoodrich and Coltec from
merging. While BFGoodrich and Coltec intend to vigorously defend the lawsuit, it
could delay or prevent the merger.
17
RISK FACTORS
<PAGE> 23
THE SPECIAL SHAREHOLDERS' MEETINGS
THE BFGOODRICH SPECIAL SHAREHOLDERS' MEETING
PURPOSE OF THE BFGOODRICH SPECIAL SHAREHOLDERS' MEETING
At the special meeting of the BFGoodrich shareholders to be held at The St.
Regis Hotel, Two East 55th Street, New York, New York on April 7, 1999 at 10:30
a.m., local time, and at any adjournment or postponement of that meeting,
holders of common stock of BFGoodrich will consider and vote upon a proposal to
approve the issuance of BFGoodrich common stock in exchange for shares of Coltec
common stock in connection with the merger of Runway Acquisition Corporation, a
wholly owned subsidiary of BFGoodrich, into Coltec, pursuant to the Agreement
and Plan of Merger, dated as of November 22, 1998, among BFGoodrich, Runway
Acquisition Corporation and Coltec. An aggregate of approximately 35,311,772
shares of BFGoodrich common stock will be issued in the merger.
Along with each copy of this joint proxy statement/prospectus mailed to
holders of BFGoodrich common stock, we are sending a form of proxy for use at
the BFGoodrich meeting. BFGoodrich is also sending this joint proxy
statement/prospectus to holders of Coltec common stock as a prospectus in
connection with the issuance of shares of BFGoodrich common stock in exchange
for Coltec common stock in the merger.
THE BFGOODRICH BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED IN THE MERGER AGREEMENT, INCLUDING THE ISSUANCE OF BFGOODRICH
COMMON STOCK IN EXCHANGE FOR COLTEC COMMON STOCK IN THE MERGER, AND UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE OF BFGOODRICH COMMON STOCK IN
EXCHANGE FOR COLTEC COMMON STOCK IN THE MERGER.
RECORD DATE; VOTING RIGHTS; PROXIES
BFGoodrich has fixed the close of business on February 18, 1999 as the
record date for determining holders entitled to notice of and to vote at the
BFGoodrich meeting. Only holders of BFGoodrich common stock who are holders at
the close of business on the BFGoodrich record date will be entitled to notice
of and to vote at the BFGoodrich meeting.
As of February 18, 1999, there were 74,387,028 shares of BFGoodrich common
stock issued and outstanding, each of which entitles the holder thereof to one
vote. Shares of BFGoodrich common stock held in the treasury of BFGoodrich or
any of its subsidiaries do not have voting rights.
All shares of BFGoodrich common stock represented by properly executed
proxies will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated in such proxies. If your shares are
represented by more than one properly executed proxy, the proxy bearing the most
recent date will be voted at the BFGoodrich meeting. IF YOUR PROXY CARD DOES NOT
SHOW HOW YOU WANT TO VOTE, YOUR SHARES OF BFGOODRICH COMMON STOCK WILL BE VOTED
FOR APPROVAL OF THE ISSUANCE OF BFGOODRICH COMMON STOCK IN THE MERGER.
According to New York law, no business may be brought before the BFGoodrich
meeting other than the matters set forth in BFGoodrich's notice of meeting to
shareholders which is provided on the cover page of this joint proxy
statement/prospectus. If you give the proxy we are soliciting, you may revoke it
at any time before it is exercised by giving written notice to The Bank of New
York, New York, New York 10203-0029, Attention: Proxy Department, by signing and
returning a later-dated proxy or by voting in person at the BFGoodrich meeting.
You should note that just attending the BFGoodrich meeting without voting in
person will not revoke an otherwise valid proxy.
Inspectors of election appointed for the meeting will tabulate votes cast
by proxy or in person at the BFGoodrich meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares
18
THE SPECIAL SHAREHOLDERS' MEETINGS
<PAGE> 24
to vote on a particular matter, those shares will be considered as present but
not entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
BFGoodrich will bear its own cost of solicitation of proxies, except that
BFGoodrich and Coltec have agreed to share equally all printing, mailing and
delivery expenses in connection with this joint proxy statement/prospectus. In
addition to solicitation by mail, directors, officers and employees of
BFGoodrich may solicit proxies personally or by telephone, facsimile
transmission or otherwise. Such directors, officers and employees will not be
additionally compensated for their solicitation efforts but may be reimbursed
for out-of-pocket expenses incurred in connection with these efforts. BFGoodrich
will reimburse brokerage houses, fiduciaries, nominees and others for their
out-of-pocket expenses incurred in forwarding proxy materials to beneficial
owners of stock held in their names. In addition, BFGoodrich has engaged D.F.
King & Co., Inc. to act as its proxy solicitor and has agreed to pay it $8,500
plus expenses for such services.
QUORUM
To have a quorum at the BFGoodrich meeting, we must have the holders of a
majority of the issued and outstanding shares of BFGoodrich common stock
entitled to vote present either in person or by properly executed proxy. Shares
of BFGoodrich common stock that are marked "abstain" will be counted as shares
present for the purpose of determining the presence of a quorum.
REQUIRED VOTE
Under applicable rules of the New York Stock Exchange, a majority of the
votes cast by the shareholders entitled to vote at the BFGoodrich meeting must
vote for approval of the issuance of BFGoodrich common stock in the merger for
it to be approved. For any such vote to be valid, a quorum must be present at
the BFGoodrich meeting. If fewer shares of BFGoodrich common stock are present
in person or by proxy than necessary to constitute a quorum, we expect to
adjourn or postpone the BFGoodrich meeting to allow additional time for
obtaining additional proxies or votes. At any subsequent reconvening of the
BFGoodrich meeting, all proxies obtained before such adjournment or postponement
will be voted in the manner such proxies would have been voted at the original
convening of the BFGoodrich meeting (except for any proxies which have been
effectively revoked or withdrawn), even if they were voted on the same or any
other matter at a previous convening of the BFGoodrich meeting.
As of February 18, 1999, directors and executive officers of BFGoodrich and
their respective affiliates beneficially owned an aggregate of 240,143 shares of
BFGoodrich common stock. This number amounts to less than 1% of the shares of
BFGoodrich common stock outstanding on that date. The directors and executive
officers of BFGoodrich have indicated their intention to vote their shares of
BFGoodrich common stock in favor of the issuance of BFGoodrich common stock in
the merger. See "The Merger -- Interests of Executive Officers and Directors in
the Merger -- BFGoodrich."
Under New York Stock Exchange rules, brokers who hold shares in nominee or
"street name" for the beneficial owners of such shares are prohibited from
giving a proxy to vote the shares for the stock issuance proposal without
specific instructions from the beneficial owner. Shares represented by proxies
returned by a broker holding such shares in "street name" will be counted for
purposes of determining whether a quorum exists, even if such shares are not
voted in matters where discretionary voting by the broker is not allowed.
Because approval of the stock issuance proposal requires the affirmative
vote of a majority of the votes cast on such matter, abstentions or failure to
instruct your broker if your shares are held in "street name" will have no
effect in determining whether the issuance of BFGoodrich stock in the merger
will be approved, although they will count toward determining whether a quorum
is present.
THE ISSUANCE OF BFGOODRICH COMMON STOCK IN THE MERGER IS OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF BFGOODRICH. THEREFORE, IF YOU ARE A BFGOODRICH
SHAREHOLDER, WE URGE YOU TO READ AND
19
THE SPECIAL SHAREHOLDERS' MEETINGS
<PAGE> 25
CONSIDER CAREFULLY THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS. WE
ALSO URGE YOU TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE COLTEC SPECIAL SHAREHOLDERS' MEETING
PURPOSE OF THE COLTEC SPECIAL SHAREHOLDERS' MEETING
At the special meeting of the shareholders of Coltec to be held at The Park
Hotel, 2200 Rexford Road, Charlotte, North Carolina on April 7, 1999 at 10:30
a.m., local time, and at any adjournments or postponements of that meeting,
holders of Coltec common stock will consider and vote upon a proposal to approve
and adopt the merger agreement and such other matters as may properly come
before the Coltec meeting.
Along with each copy of this joint proxy statement/prospectus mailed to
holders of Coltec common stock, we are sending a form of proxy for use at the
Coltec meeting. BFGoodrich is also sending this joint proxy statement/prospectus
to holders of Coltec common stock as a prospectus in connection with the
issuance of shares of BFGoodrich common stock in exchange for Coltec common
stock in the merger.
THE COLTEC BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED IN THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
The Coltec board has fixed the close of business on February 18, 1999 as
the record date for determining holders entitled to notice of and to vote at the
Coltec meeting. Only holders of Coltec common stock who are holders at the close
of business on the Coltec record date will be entitled to notice of and to vote
at the Coltec meeting.
As of February 18, 1999, there were 63,056,735 shares of Coltec common
stock issued and outstanding and entitled to vote at the Coltec meeting, each of
which entitles the holder thereof to one vote. Shares of Coltec common stock
held in the treasury of Coltec or any of its subsidiaries do not have voting
rights.
All shares of Coltec common stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. If your shares are represented
by more than one properly executed proxy, the proxy bearing the most recent date
will be voted at the Coltec meeting. IF YOUR PROXY CARD DOES NOT SHOW HOW YOU
WANT TO VOTE, YOUR SHARES OF COLTEC COMMON STOCK WILL BE VOTED FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
If you give the proxy we are soliciting, you may revoke it at any time
before it is exercised by giving written notice to ChaseMellon Shareholder
Services, L.L.C., 600 Willowtree Road, Leonia, New Jersey 07605, Attention:
Proxy Department, by signing and returning a later-dated proxy or by voting in
person at the Coltec meeting. You should note that just attending the Coltec
meeting without voting in person will not revoke an otherwise valid proxy.
Judges of election appointed for the meeting will tabulate votes cast by
proxy or in person at the Coltec meeting and will determine whether or not a
quorum is present. The judges of election will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the shareholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will be considered as present but not entitled
to vote with respect to that matter.
SOLICITATION OF PROXIES
Coltec will bear its own cost of solicitation of proxies, except that
Coltec and BFGoodrich have agreed to share equally all printing, mailing and
delivery expenses in connection with this joint proxy statement/
20
THE SPECIAL SHAREHOLDERS' MEETINGS
<PAGE> 26
prospectus. In addition to solicitation by mail, directors, officers and
employees of Coltec may solicit proxies personally or by telephone, facsimile
transmission or otherwise. Such directors, officers and employees will not be
additionally compensated for such solicitation efforts but may be reimbursed for
out-of-pocket expenses incurred in connection with these efforts. Coltec will
reimburse brokerage houses, fiduciaries, nominees and others for their
out-of-pocket expenses incurred in forwarding proxy materials to beneficial
owners of stock held in their names. In addition, Coltec has engaged ChaseMellon
Shareholder Services, L.L.C. to act as its proxy solicitor and has agreed to pay
it $9,500 plus expenses for such services.
COLTEC SHAREHOLDERS SHOULD NOT SEND COLTEC COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
QUORUM
To have a quorum at the Coltec meeting, we must have the holders of a
majority of the issued and outstanding shares of Coltec common stock entitled to
vote present either in person or by properly executed proxy. Shares of Coltec
common stock that are marked "abstain" will be counted as shares present for the
purposes of determining the presence of a quorum.
REQUIRED VOTE
Under Pennsylvania law and Coltec's articles of incorporation, a majority
of the votes cast by the shareholders entitled to vote at the Coltec meeting
must vote for approval and adoption of the merger agreement for it to be
approved and adopted. For any such vote to be valid, a quorum must be present at
the Coltec meeting. If fewer shares of Coltec common stock are present in person
or by proxy than necessary to constitute a quorum, we expect to adjourn or
postpone the Coltec meeting to allow additional time for obtaining additional
proxies or votes. At any subsequent reconvening of the Coltec meeting, all
proxies obtained before such adjournment or postponement will be voted in the
manner such proxies would have been voted at the original convening of the
Coltec meeting except for any proxies which have been effectively revoked or
withdrawn, even if they were effectively voted on the same or any other matter
at a previous meeting.
As of February 18, 1999, directors and executive officers of Coltec and
their respective affiliates beneficially owned an aggregate of 551,044 shares of
Coltec common stock entitled to vote at the Coltec meeting. This number amounts
to less than 1% of the shares of Coltec common stock outstanding and entitled to
vote at the Coltec meeting on that date. The directors and executive officers of
Coltec have indicated their intention to vote their shares of Coltec common
stock in favor of approval and adoption of the merger agreement. See "The
Merger -- Interests of Executive Officers and Directors in the Merger --
Coltec."
A properly executed proxy marked "abstain" will not be voted on the
approval and adoption of the merger agreement but will count toward determining
whether a quorum is present. Under New York Stock Exchange rules, brokers who
hold Coltec common stock in "street name" for the beneficial owners of such
shares cannot vote these shares on the approval and adoption of the merger
agreement without specific instructions from their customers.
Because approval and adoption of the merger agreement requires the
affirmative vote of a majority of the votes cast on such matter, abstentions or,
if your shares are held in "street name," your failure to instruct your broker,
will have no effect in determining whether the merger agreement will be approved
and adopted.
THE MATTERS TO BE CONSIDERED AT THE COLTEC MEETING ARE OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF COLTEC. THEREFORE, IF YOU ARE A COLTEC SHAREHOLDER, WE
URGE YOU TO READ AND CONSIDER CAREFULLY THE INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. WE ALSO URGE YOU TO COMPLETE, DATE, SIGN AND RETURN
PROMPTLY THE ENCLOSED PROXY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
21
THE SPECIAL SHAREHOLDERS' MEETINGS
<PAGE> 27
THE MERGER
BACKGROUND OF THE MERGER
In the early 1990's, BFGoodrich's representatives had preliminary
conceptual discussions with representatives of Coltec about a possible
acquisition by BFGoodrich of Coltec's Menasco landing gear business and Coltec's
aerospace segment. These discussions did not lead to any agreement and were
terminated. In 1998, representatives of BFGoodrich and Coltec commenced
discussions about a possible joint venture involving BFGoodrich's and Coltec's
landing gear overhaul businesses. Discussions concerning this possible joint
venture continued from time to time thereafter between representatives of the
two companies. On October 12, 1998, John W. Guffey, Jr., chairman and chief
executive officer of Coltec, called David L. Burner, chairman and chief
executive officer of BFGoodrich, to express his doubts about the feasibility of
such a joint venture. Instead, Mr. Guffey proposed that Coltec purchase
BFGoodrich's landing gear overhaul and repair business in exchange for the
military landing gear business of Coltec's Menasco division. Mr. Burner agreed
to meet Mr. Guffey for further discussions.
At their meeting on October 14, 1998, in Youngstown, Ohio, Mr. Guffey again
proposed the idea of exchanging Coltec's military landing gear business for
BFGoodrich's landing gear overhaul and repair business. Mr. Burner stated that
BFGoodrich had been interested in Coltec for a long time and suggested that
BFGoodrich might be interested in acquiring all of Coltec. Mr. Burner and Mr.
Guffey agreed to bring a small management team from each company together to
meet in New York the following week.
On October 19, 1998, the BFGoodrich board discussed the possible
acquisition of Coltec. The business was discussed and possible synergies were
considered, but there was no discussion of the valuation of Coltec.
On October 21, 1998, a small group of BFGoodrich and Coltec officers met to
begin preliminary discussions. These discussions were general in nature and
based solely on publicly-available information. No offer was made by BFGoodrich
and no nonpublic information was exchanged. The parties discussed potential
areas of synergy between the two companies. The following day, representatives
of each company met again and entered into a customary agreement to facilitate
the exchange of information. During this meeting, BFGoodrich and Coltec
requested that Morgan Stanley & Co. Incorporated and Credit Suisse First Boston
Corporation ("CSFB"), the companies' respective financial advisors, begin to
evaluate the financial aspects of a potential transaction.
On October 26, 1998, a small group of officers from BFGoodrich and Coltec
met at Morgan Stanley's New York office. At this meeting, Morgan Stanley
reviewed potential financial synergies and the parties discussed opportunities
for growth by the combined company, as well as a process for moving forward to
perform further analyses of a potential transaction.
On October 28, 1998, key aerospace, operating and finance personnel for
each company met at the Coltec headquarters in Charlotte, North Carolina. These
individuals discussed potential synergies in the companies' aerospace businesses
and headquarters' personnel. At the same time, the companies' legal and
environmental experts met to discuss environmental and litigation issues
relating to Coltec's businesses.
During the period between October 29, 1998 and November 4, 1998, there
continued to be discussions and analyses of possible synergies, due diligence
and discussions of other matters.
During the course of the November 1998 negotiations, our representatives
reviewed financial data. That data showed the impact of several assumed future
factors on earnings per share of the combined company. Those factors included
amounts of merger savings for the combined company and the growth rate of each
of BFGoodrich and Coltec. Coltec indicated that for internal planning purposes
Coltec assumed an increase in base earnings per share, before growth initiatives
and acquisitions, of 9% per year through the year 2001. Based on Coltec's
preliminary budget showing estimated base earnings per share for 1999 of $1.85,
the 9% growth assumption would have produced estimated base earnings of $2.02 in
2000 and $2.20 in 2001. The assumed increase in base earnings per share data is
not a prediction of actual future results. Coltec provided this information to
BFGoodrich as a basis for estimating synergies of a combined entity. YOU SHOULD
NOT CONCLUDE THAT THE ASSUMED INCREASE IN BASE EARNINGS PER SHARE WILL OCCUR.
ACCORDINGLY, YOU SHOULD NOT USE OR RELY ON THIS INFORMATION AS AN INDICATION OF
ACTUAL FUTURE RESULTS. Coltec did not prepare full
22
THE MERGER
<PAGE> 28
financial projections for BFGoodrich for purposes of the merger. After agreement
was reached on the exchange ratio, as a part of due diligence, BFGoodrich
reviewed Coltec's 1998 3-year business plan which had been prepared by Coltec
earlier in 1998. That business plan was out of date by the time it was reviewed
by BFGoodrich and contained information which was inaccurate in some respects.
Accordingly, BFGoodrich did not rely upon it as a prediction of future results.
A small group of executives from each company met on November 5, 1998 in
Charlotte, North Carolina. During the meeting, Mr. Burner suggested a
transaction based upon a fixed exchange ratio of shares of BFGoodrich common
stock for shares of Coltec common stock. Mr. Burner proposed that the
transaction would be structured as a stock-for-stock, tax-free merger to be
accounted for as a pooling of interests. Possible headquarters locations for the
combined company were also discussed. In order to negotiate the fixed exchange
ratio, our representatives reviewed financial data. That data showed the impact
of several assumed future factors on earnings per share of the combined company.
Those factors included amounts of merger savings for the combined company and
the growth rate of each of BFGoodrich and Coltec. The parties met again the
following day and discussed the financial data described above. They also
developed a preliminary timetable for regulatory review, due diligence, document
negotiation, visits to key customers, board meetings and shareholder meetings.
The financial information discussed at those meetings is consistent with the
information included in the pro forma financial statements on pages 66 through
73. During the course of these two days, Messrs. Burner and Guffey held
discussions regarding a proposed exchange ratio, ultimately agreeing to
recommend to their respective boards a proposed exchange ratio of 0.56 shares of
BFGoodrich common stock for each share of Coltec common stock.
On November 9, 1998, a special meeting of the Coltec board was held to
discuss the status of the proposed transaction and the status of the
negotiations. At the meeting, Coltec's management and CSFB reviewed the proposed
transaction and the status of the negotiations. While no decision was made to
accept the transaction, it was the consensus of the Coltec board that Coltec's
management and legal and financial advisors should continue their due diligence
reviews and pursue negotiation of definitive documentation to determine whether
an acceptable transaction could be negotiated for subsequent consideration by
the Coltec board. The financial information discussed at that meeting is
consistent with the information included in the pro forma financial statements
on pages 66 through 73.
From November 11, 1998 through November 19, 1998, the companies and their
representatives conducted due diligence reviews, particularly with respect to
accounting, tax, legal, environmental and employee benefits issues. At the same
time, the companies and their legal advisors conducted negotiations of
definitive documentation for the transaction.
During these negotiations various issues were discussed, including the
termination fee and option agreements. After many discussions between the
parties in which the terms of the termination fee and option agreements were
modified, BFGoodrich informed Coltec that it would be unwilling to proceed with
the proposed merger without the termination fee and option arrangements being
granted by Coltec, but that BFGoodrich was willing to accept these arrangements
on a reciprocal basis.
On November 16, 1998, the BFGoodrich board had a special meeting to
consider the proposed transaction and the status of negotiations. BFGoodrich's
senior executives as well as BFGoodrich's financial and legal advisors
participated in the meeting. The BFGoodrich board authorized management to
continue negotiations but provided that any transaction would be subject to the
approval of the BFGoodrich board.
A special meeting of the Coltec board was held on November 20, 1998 to
review the terms of the merger agreement and the reciprocal stock option
agreements, certain discussions Coltec had held in the past with other potential
business combination partners, the results of Coltec's due diligence
investigations with respect to BFGoodrich, the impact of the merger on certain
employment contracts between Coltec and its employees and BFGoodrich and its
employees and the effect of the proposed transactions on Coltec, its
shareholders and other constituencies. Also, at this meeting, representatives
from CSFB made presentations to the Coltec board concerning the transaction. A
special meeting of the Coltec board was held on November 21, 1998 to consider
again the proposed transaction, and all but one of the members of the Coltec
board were present. At that meeting, CSFB rendered an oral opinion, which was
confirmed in writing, to the effect that, as of such date, the exchange ratio in
the merger was fair from a financial point of view to the Coltec shareholders.
At this special meeting, the Coltec board unanimously approved the merger and
all related transactions, the merger agreement and the reciprocal stock option
agreements in the merger. On December 17, 1998, the entire Coltec board
unanimously reaffirmed its approval of the merger agreement and
23
THE MERGER
<PAGE> 29
all related transactions and its determination that such transactions are in the
best interests of Coltec, its shareholders and other constituencies.
On November 22, 1998, a special meeting of the BFGoodrich board was held to
review the terms of the merger agreement and the reciprocal stock option
agreements, the results of BFGoodrich's due diligence investigation and the
impact of the merger on certain employment contracts between Coltec and its
employees and BFGoodrich and its employees. The BFGoodrich board reviewed the
effect of the merger on BFGoodrich and its shareholders and the synergies
created by the merger. The BFGoodrich board also discussed the proposed move of
the corporate headquarters of BFGoodrich to Charlotte, North Carolina. At this
meeting, representatives from Morgan Stanley made presentations to the
BFGoodrich board concerning the transaction. These Morgan Stanley
representatives advised the BFGoodrich board that, as of the date of the
meeting, the exchange ratio in the merger was fair from a financial point of
view to BFGoodrich. At this meeting, the BFGoodrich board unanimously approved
the merger and all related transactions, the merger agreement and the reciprocal
stock option agreements.
Following the approval of the transaction by the BFGoodrich board, late in
the evening on November 22, 1998, BFGoodrich, Runway Acquisition Corporation and
Coltec entered into the merger agreement and the related documents. The parties
issued a joint public announcement of the signing of the merger agreement early
on November 23, 1998.
Coltec has from time to time over the past several years discussed
potential business combinations with various third parties, including Crane Co.,
a Delaware corporation, as described in the Form 8-K filed by Coltec on December
21, 1998. In connection with these discussions, Coltec has entered into
agreements to facilitate the exchange of information with certain of the
companies with which it has held such discussions, including Crane. At the time
of the entering into the business combination with BFGoodrich, Coltec was not
actively seeking any proposals for another business combination and it was of
the belief that it was not required to do so under applicable law.
THE CRANE LITIGATION
DISCUSSIONS WITH CRANE
On October 20, 1995, R. S. Evans, the chairman and chief executive officer
of Crane, contacted Mr. Guffey to discuss pursuing a business combination
between Coltec and Crane. Mr. Evans met with Mr. Guffey at Coltec's offices on
October 27, 1995. They agreed that representatives of Coltec and Crane would
meet again after the signing of an appropriate confidentiality agreement. Mr.
Guffey briefed the Coltec board on the discussions with Crane on October 31,
1995. After they signed the Crane confidentiality agreement, representatives of
Coltec and Crane met on November 10, 1995 at the New York office of Morgan
Stanley, which was acting as financial advisor to Coltec in connection with its
discussions with Crane. Representatives of Morgan Stanley and Dillon Read & Co.
Inc., which was acting as financial advisor to Crane in connection with its
discussions with Coltec, were also present.
Mr. Evans began the meeting by stating that he was unwilling to proceed
with discussions unless Morgan Stanley and Dillon Read agreed to enter into an
advisors agreement because he was concerned that Morgan Stanley would be
retained by a third party to make an unwelcome bid for Crane. Morgan Stanley
initially refused to enter into an advisors agreement, but then agreed to do so.
Each of Coltec and Crane then presented an overview of its businesses to the
other party. Based on the Crane presentation and discussions between Mr. Guffey
and Mr. Evans, the Coltec representatives concluded at the end of the meeting
that it was unlikely that a transaction with Crane could be concluded.
On November 17, 1995, Coltec contacted Crane to request that all
information that Coltec had provided to Crane be returned to Coltec pursuant to
the terms of the Crane confidentiality agreement. By letter of November 21,
1995, Crane confirmed that it would return such information and requested that
Coltec return the information it had provided to Coltec.
Mr. Guffey did not hear from Crane again until August 26, 1998 when an
investment banker contacted Mr. Guffey on behalf of an undisclosed principal
whom he stated was interested in pursuing a business
24
THE MERGER
<PAGE> 30
combination transaction with Coltec. After some discussion, Mr. Guffey asked the
banker whether Mr. Evans was the principal in question and learned that he was.
The banker explained that Mr. Evans wished to deal through an intermediary
because he was embarrassed about how he had behaved when he met with Mr. Guffey
in 1995. Mr. Guffey told the banker that he was not willing to deal through an
intermediary, but that if Mr. Evans wished to contact him directly that he would
listen to what Mr. Evans had to say.
On September 21, 1998, Mr. Evans called Mr. Guffey. Mr. Guffey told Mr.
Evans that he would be reluctant to permit a competitor to review non-public
information with respect to Coltec, especially in light of the discussions that
had been held in 1995. Mr. Guffey also told Mr. Evans that, if Crane had any
serious interest in Coltec, it should deliver to Coltec a written outline
describing the value, structure and type of transaction it would be able to
offer and describing its position on the due diligence review it would propose.
On September 24, 1998, Mr. Guffey received by fax a letter from Mr. Evans
stating that "subject to [Crane's] further analysis of pertinent data . . . I
would be prepared to discuss with you . . . a merger of Coltec into Crane on the
basis of approximately 0.80 shares of Crane for each outstanding share of
Coltec . . . This presumes the transaction would be tax-free to both shareholder
groups and should qualify for pooling of interests accounting treatment." The
letter stated that this was "not a formal offer, but rather an outline of the
basis for further discussions" and noted that any offer would require the
approval of Crane's board of directors.
On September 28, 1998, Mr. Guffey called Mr. Evans to inform him that his
letter did not address Mr. Guffey's previous concerns. In particular, Mr. Guffey
reaffirmed his reluctance to permit any in-depth due diligence of non-public
information relating to Coltec in the absence of a better understanding as to
whether Coltec and Crane would be able to effect a mutually acceptable business
combination transaction. In addition, Mr. Guffey asked Mr. Evans to further
clarify what he meant by the phrase in his letter "subject to [Crane's] further
analysis of pertinent data." During that conversation, however, Mr. Guffey did
discuss various issues with Mr. Evans, including possible levels of synergies
resulting from a combination of Coltec and Crane. Mr. Evans responded that he
would get back to Mr. Guffey. Mr. Guffey reviewed his September contacts with
Mr. Evans with the Coltec board at a meeting held on October 8, 1998.
On November 24, 1998, Mr. Guffey received by first class certified mail a
letter from Crane dated November 20, 1998, indicating Crane's interest in
pursuing a business combination transaction with Coltec. In its letter of
November 20, 1998, Crane stated that " . . . we propose a share-for-share
exchange on the basis of 0.80 shares of Crane common stock for each outstanding
share of Coltec common stock in a merger which we believe would qualify for
pooling of interests accounting treatment and be tax-free to Coltec
shareholders." Based on market prices on November 20, 1998, the last full New
York Stock Exchange trading day before Coltec and BFGoodrich announced the
merger, the exchange ratio proposed by Crane would have provided Coltec
shareholders with a premium for the price of Coltec common stock that was
approximately $4.55 per share higher than the premium they would have received
pursuant to the merger agreement if the merger had been completed on that date.
THE CRANE COMPLAINT AND COLTEC'S RESPONSE
On December 14, 1998, Crane notified the Coltec board and the BFGoodrich
board that Crane had filed a lawsuit that day against Coltec and BFGoodrich in
the U.S. District Court for the Southern District of New York. In its complaint,
Crane alleged that when Coltec entered into the merger agreement and reciprocal
stock option agreements, Coltec breached its obligations to Crane under the
confidentiality agreement between Coltec and Crane dated as of October 31, 1995
and the letter agreement dated as of November 9, 1995 among Coltec, Crane,
Morgan Stanley and Dillon Read. The complaint also alleged that BFGoodrich
tortiously interfered with the confidentiality agreement and letter agreement.
In the complaint, Crane contended that Coltec had agreed for the three-year term
of the confidentiality agreement to notify Crane if a third party approached
Coltec regarding any business combination transaction involving Coltec. Crane
also
25
THE MERGER
<PAGE> 31
alleged that Morgan Stanley had agreed in the letter agreement not to represent
any party other than Coltec in any business combination involving Coltec for the
same three-year period. The complaint sought:
- an order requiring Coltec to put Crane in the position in which Crane
alleged it would have been if Coltec had notified Crane when BFGoodrich
first approached Coltec about a possible business combination between
Coltec and BFGoodrich;
- a declaration that the Coltec reciprocal stock option agreement and the
termination and expense reimbursement fees under the merger agreement are
not enforceable with respect to any competing offer for Coltec by Crane;
- an order preventing BFGoodrich and Coltec from taking any steps to comply
with or enforce the reciprocal stock option agreements or the termination
or expense reimbursement fees; and
- an order preventing BFGoodrich and Coltec from completing the merger
until Crane presents and the Coltec board considers a competing offer
from Crane.
In letters from Mr. Evans dated the same date, Crane notified the Coltec
board and BFGoodrich board that it had filed the lawsuit. In those letters of
December 14, 1998 to the Coltec board and to the BFGoodrich board, Mr. Evans
requested that we "disavow the lock-up option and termination fee" that we
entered into in connection with the merger agreement. He made this request so
that the Coltec board could consider the proposal set forth in Mr. Evans's
letter of November 20, 1998 "without giving effect to the BFGoodrich lock-up
options and other restrictions, which would limit Coltec's board from freely
considering Crane's proposal." Mr. Evans further stated that, "[a]s expressed in
our September 24 and November 20 letters. Crane is prepared to offer a
share-for-share exchange on the basis of 0.80 share of Crane common stock for
each outstanding share of Coltec common stock in a tax free merger that
qualifies for pooling of interests accounting treatment. Our offer is not
conditioned on due diligence. We would like, however, access to confirmatory due
diligence on Coltec equivalent to that provided to BFGoodrich." Mr. Evans's
letter did not make clear whether this "offer" had been approved or was even
supported by the Crane board of directors.
The Coltec board met by telephone on December 15, 1998 to review both the
December 14, 1998 letter from Mr. Evans and the lawsuit initiated by Crane. On
December 17, 1998, the Coltec board, after reviewing the lawsuit initiated by
Crane, Coltec's past contacts with Crane and the merger agreement, unanimously
reaffirmed its support for the merger with BFGoodrich and directed Mr. Guffey to
respond to Crane by sending to Mr. Evans a letter stating this position that had
been reviewed and approved by the Coltec board.
In his letter of December 17, 1998 to Mr. Evans, Mr. Guffey characterized
the Crane lawsuit as meritless. Mr. Guffey explained that, contrary to what
Crane contended in its complaint, the Crane confidentiality agreement did not
obligate Coltec to notify Crane if a third party approached it regarding a
business combination with Coltec. Mr. Guffey noted that the provision from the
Crane confidentiality agreement on which Crane relied in its complaint appears
at the end of a standard mutual provision and only required Coltec to notify
Crane if a third party contacted Coltec about participating in an attempt to
take over Crane, with Crane having a reciprocal obligation for a takeover of
Coltec. Mr. Guffey explained that Coltec and Crane had agreed not to raid each
other. They had not agreed to give each other a three-year right to participate
in a business combination with the other.
With regard to the portion of Crane's complaint alleging breaches of the
advisors agreement, Mr. Guffey noted in his letter of December 17, 1998 that the
advisors agreement was only entered into at Mr. Evans' personal insistence at
the November 10, 1995 meeting at Morgan Stanley's offices because of his
expressed fear that Morgan Stanley would be retained by a third party to make an
unwelcome bid for Crane. Mr. Guffey stated that the language on which Crane
relied in Crane's complaint to allege that Morgan Stanley had agreed not to
represent any party other than Coltec in connection with a business combination
transaction involving Coltec in fact prohibited Morgan Stanley from representing
a hostile bidder for Crane, not a friendly acquiror of Coltec.
In his letter of December 17, 1998, Mr. Guffey also reviewed his contacts
with Mr. Evans in September 1998 and Mr. Evans's failure to respond to Mr.
Guffey's concerns in September 1998. Mr. Guffey also
26
THE MERGER
<PAGE> 32
reviewed Mr. Evans' failure to contact Mr. Guffey at all during the period
between September 28, 1998 and the execution of the merger agreement despite Mr.
Evans' assurances that he would make such contact. In concluding his letter to
Mr. Evans, Mr. Guffey urged him to abandon his efforts to interfere with
Coltec's agreements with BFGoodrich, and indicated that Coltec would hold Crane
fully responsible for all damages and expenses incurred as a consequence of the
Crane lawsuit.
Consistent with this view, Coltec and BFGoodrich responded to the complaint
by asking the court to dismiss the lawsuit on the grounds that the claims in the
complaint were meritless and not supported by the terms of the confidentiality
agreement or the letter agreement.
STATUS OF THE CRANE LITIGATION
Following a hearing, on January 12, 1999, a U.S. District Court judge
dismissed the complaint in its entirety for failure to state a claim on which
relief can be granted. On January 20, 1999, the judge issued a written opinion
formalizing her order of January 12, 1999 dismissing the complaint. The court
concluded that, based on the clear meaning of the confidentiality agreement and
the letter agreement, neither Coltec nor Morgan Stanley had breached any of
their obligations under those agreements.
On January 25, 1999, Crane appealed this dismissal to the U.S. Court of
Appeals for the Second Circuit. On March 3, 1999, the Second Circuit denied the
appeal and affirmed the U.S. District Court decision.
ANALYSIS OF CRANE PROPOSAL
Coltec received the Crane proposal contained in Mr. Evans' November 20,
1998 letter after the Coltec board had approved the transaction with BFGoodrich.
Therefore, the Coltec board was not in a position to consider the Crane proposal
at the time it approved the transaction with BFGoodrich. In addition, as noted
above, after it received the Crane proposal, the Coltec board unanimously
reaffirmed its decision that the transaction with BFGoodrich was in the best
interests of Coltec, its shareholders and other constituencies. The Crane
proposal is subject to several conditions that cannot be satisfied, including
that the transaction qualify for pooling of interests accounting treatment. The
Coltec board believes that its conduct with respect to Crane and the merger
agreement complies with Pennsylvania law.
Crane's proposal could be deemed to be an "acquisition proposal" as defined
on page 60 with respect to Coltec. Under the merger agreement, each of us may
respond to an "acquisition proposal" made by another party if it determines that
such "acquisition proposal" is reasonably likely to result in a "superior
proposal" as defined on page 60. In addition, each of us acting alone has the
right to terminate the merger agreement to be able to accept a "superior
proposal," which would require the terminating party to pay the fees described
below. The Coltec board does not believe the Crane proposal is a "superior
proposal." Because of the history of negotiations with Crane, the Coltec board
has considerable doubts regarding the seriousness of Crane's proposal. In
addition, the Crane proposal is subject to certain conditions that cannot be
satisfied, including that the proposed transaction qualify for pooling of
interests accounting treatment. Therefore, the Crane proposal cannot be
completed and, accordingly, cannot, by definition, be a "superior proposal."
Because Crane's proposal could be deemed to be an "acquisition proposal" as
defined on page 60 with respect to Coltec, Coltec could be required to pay a $45
million termination fee and a $5 million expense reimbursement fee and the
option in respect of its shares could become exercisable for a period of time if
the following events occur:
- the Crane proposal is not withdrawn or terminated prior to the Coltec
meeting;
- Coltec's shareholders do not vote to approve the merger at the Coltec
meeting;
- the merger agreement is terminated by either Coltec or BFGoodrich after
the Coltec meeting;
- BFGoodrich was not in material breach of any of its representations or
warranties or any of its covenants at the time of the termination of the
merger agreement; and
27
THE MERGER
<PAGE> 33
- Coltec enters into an "acquisition proposal," as defined on page 60 with
respect to Coltec, with any party or such an acquisition proposal is
consummated within 12 months of the termination of the merger agreement.
THE ALLIEDSIGNAL LITIGATION
On February 26, 1999, AlliedSignal, Inc. notified Coltec and BFGoodrich
that AlliedSignal had that day filed a lawsuit in the U.S. District Court for
the Northern District of Indiana against BFGoodrich, Coltec and Menasco
Aerospace Ltd., a separately incorporated entity of Coltec conducting Coltec's
landing gear business in Ontario, Canada. In its complaint, AlliedSignal alleges
that the merger between BFGoodrich and Coltec would violate a long-term
strategic alliance agreement between AlliedSignal and Coltec dated June 30,
1995. AlliedSignal further alleges that the merger would violate U.S. antitrust
laws.
In its complaint, AlliedSignal contends that the strategic alliance
agreement requires Coltec/Menasco and AlliedSignal, for a period of ten years,
to notify the other party of any request for a bid or contract for an aircraft
landing gear system, to jointly develop proposals for any bid or contract
requests, and, if either party is named as a landing systems integrator, to
attempt to purchase components from the other party. Specifically, AlliedSignal
alleges that, by their actions in connection with the proposed merger with
BFGoodrich, Coltec and Menasco have breached and/or anticipatorily breached
provisions of the strategic alliance agreement relating to non-competition,
non-assignment and proprietary information. AlliedSignal has commenced an
arbitration proceeding to adjudicate its contract claim and, in this complaint,
seeks preliminary injunction of the merger pending the final resolution of the
arbitration.
In its antitrust claim, AlliedSignal alleges that the merger between
BFGoodrich and Coltec may violate antitrust laws by lessening competition in the
markets for landing gear structures, integrated landing gear systems and wheels
and brakes and by lessening competition in innovation. AlliedSignal requests
that the court permanently enjoin the merger between BFGoodrich and Coltec and
Menasco and permanently enjoin BFGoodrich from acquiring any direct or indirect
interest in either Coltec or Menasco. AlliedSignal's complaint also requests the
court to award AlliedSignal costs and reasonable attorneys fees in connection
with its complaint.
The companies intend to vigorously defend the lawsuit filed by
AlliedSignal.
BFGOODRICH'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BFGOODRICH BOARD
The board of directors and management of BFGoodrich believe that the merger
is fair and in the best interests of the BFGoodrich shareholders. At its
November 22, 1998 meeting, the BFGoodrich board approved the merger agreement.
We have set forth below all the material factors in favor of the merger that the
BFGoodrich board considered in reaching its decision to approve the merger
agreement and to recommend that BFGoodrich's shareholders vote to approve the
issuance of BFGoodrich common stock in the merger:
- financial strength of the combined company resulting from the merger is
expected to make BFGoodrich a more attractive long-term supplier to
original equipment manufacturers seeking to deal with fewer suppliers
that are more financially stable;
- prospects of each of BFGoodrich and Coltec indicate that the combined
company will have a stronger presence in the market than either company
standing alone;
- continued consolidation and increasing competition in the aerospace
industry and the prospects for further changes in the industry create the
need for a larger and more integrated supplier;
- advantages of a broader range of products and services and a more
diversified business base than presently being provided by BFGoodrich;
- ability of the combined company to make the financial investment in
research, development and internal growth that is required of a long-term
supplier to the aerospace industry;
28
THE MERGER
<PAGE> 34
- BFGoodrich board's assessment that the combined company would better
serve customers who are aircraft manufacturers, jet engine manufacturers
and airline operators and who are seeking to reduce the number of
suppliers with whom they do business to lower the costs of manufacturing
and operations;
- BFGoodrich board's assessment that BFGoodrich, as a larger and more
conservatively capitalized company, would be able to enhance the
financial stability of Coltec and give Coltec access to lower-cost
capital to fund its growth;
- while we cannot guarantee it, the BFGoodrich board's anticipation that,
as a result of the merger, BFGoodrich's 1999 earnings would increase by
$.03 to $.05 per share of BFGoodrich common stock, excluding the effect
of merger and consolidation expenses;
- potential cost savings from integration of certain operations and
consolidation of various headquarters functions that could be $60 million
per year by 2001;
- advice of BFGoodrich's counsel that the merger should be treated as a
tax-free reorganization;
- BFGoodrich board's belief, after consultation with its legal counsel,
that the competition approvals necessary to complete the merger could be
obtained;
- advice of BFGoodrich's independent auditors with respect to the ability
to account for the merger as a pooling of interests;
- opinion of Morgan Stanley that the exchange ratio in the merger was fair
from a financial point of view to BFGoodrich;
- principal terms and conditions of the merger agreement, in particular:
- obligation of Coltec to pay BFGoodrich a negotiated, reciprocal
termination fee of $45 million and an expense reimbursement fee of $5
million;
- extent to which Coltec's obligation to consummate the merger was
unconditional other than the Coltec shareholders approval and other
conditions that the BFGoodrich board believed were typical or likely
to be satisfied; and
- restrictions on certain transactions by Coltec during the period prior
to completion of the merger; and
- obligation of Coltec under certain circumstances to issue common stock to
BFGoodrich pursuant to the Coltec reciprocal stock option agreement which
would prevent Coltec from using pooling of interests accounting treatment
for an alternative transaction.
We have set forth below all the material factors against the merger that
the BFGoodrich board considered in reaching its decision to approve the merger
agreement and to recommend that BFGoodrich's shareholders vote to approve its
issuance of stock in the merger:
- obligation of BFGoodrich to pay Coltec a termination fee of $45 million
and an expense reimbursement fee of $5 million;
- restrictions on certain transactions by BFGoodrich during the period
before completion of the merger;
- obligation of BFGoodrich under certain circumstances to issue common
stock to Coltec pursuant to the BFGoodrich reciprocal stock option
agreement, which would prevent BFGoodrich from using pooling of interests
accounting treatment for an alternative transaction;
- merger would constitute a change in control under certain employment and
incentive agreements;
- combined entity will have more contingent liabilities, including those
related to environmental and asbestos, than BFGoodrich had before the
merger; and
- combined entity will have more debt than BFGoodrich had prior to the
merger.
29
THE MERGER
<PAGE> 35
Morgan Stanley advised the BFGoodrich board that the amount of the termination
fees described above is within a customary range when compared to similar
transactions and that the reciprocal stock options are within the customary
range of actions companies take to ensure completion of negotiated merger
agreements.
In considering these factors, the BFGoodrich board was aware of the
interests of BFGoodrich's executive officers in the merger as described in
"-- Interests of Executive Officers and Directors in the Merger -- BFGoodrich."
Because of the variety of factors considered in connection with its
evaluation of the merger, the BFGoodrich board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. Individual members of the
BFGoodrich board may have assigned different weights to different factors.
The BFGoodrich board weighed both the material factors in favor of and
against the merger agreement and determined that the material factors in favor
of the merger outweighed the material factors against the merger. Consequently,
it was the BFGoodrich board's judgment that the merger agreement and the
issuance of stock in the merger was in the best interest of BFGoodrich's
shareholders.
THE BFGOODRICH BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF BFGOODRICH
COMMON STOCK VOTE FOR APPROVAL OF THE ISSUANCE OF BFGOODRICH STOCK IN THE
MERGER.
COLTEC'S REASONS FOR THE MERGER; RECOMMENDATION OF THE COLTEC BOARD
The Coltec board believes that the merger is in the best interests of
Coltec, its shareholders and other constituencies. At its November 21, 1998
meeting, the Coltec board approved the merger agreement. We have set forth below
all the material factors in favor of the merger that the Coltec board considered
in reaching its decision to approve the merger agreement and to recommend that
Coltec's shareholders vote to approve and adopt the merger agreement:
- prospects of each of BFGoodrich and Coltec indicate that the combined
company will have a stronger presence in the market than either company
standing alone;
- nature and quality of BFGoodrich's business, including the reputation of
its management, the strength of its balance sheet and its business
culture, which the Coltec board viewed as being compatible with that of
Coltec;
- possible enhancement in Coltec's existing business as a result of
combining with BFGoodrich, including the combined company's
attractiveness as a long-term supplier and its ability to fund its
research and development and internal growth, attributable in part to the
greater size and financial strength of the combined company;
- financial and business prospects of the combined business, including the
potential for material cost savings and other synergies from
consolidating corporate staff, integrating the aerospace businesses and
eliminating duplicate facilities and excess capacity;
- potential value to Coltec and its shareholders that could be generated
from the other various strategic alternatives available to Coltec,
including the alternative of remaining independent;
- presentation by CSFB on November 20, 1998 with respect to the transaction
and the opinion of such firm, dated as of November 21, 1998, that as of
such date the exchange ratio in the merger was fair from a financial
point of view to the Coltec shareholders;
- advice of Coltec's counsel that the merger should be treated as a
tax-free reorganization;
- advice of Coltec's independent auditors with respect to the ability to
account for the merger as a pooling of interests;
- the Coltec board's belief, after consultation with legal counsel, that
the regulatory approvals necessary to complete the merger could be
obtained;
30
THE MERGER
<PAGE> 36
- potential beneficial effects of the merger on Coltec's various
constituencies, including its shareholders, employees, customers and
creditors, and on the communities in which Coltec's plants and offices
are located, particularly Charlotte, North Carolina;
- current and historical market prices of Coltec common stock and
BFGoodrich common stock and the premium that the exchange ratio in the
merger represented over recent trading prices of Coltec common stock and
over the average of trading prices for Coltec common stock over certain
periods of time;
- Coltec's discussions, from time to time over the last several years, of
potential business combinations with various third parties;
- dividend currently paid by BFGoodrich on shares of BFGoodrich common
stock, in contrast to Coltec, which does not currently pay dividends on
its common stock;
- principal terms and conditions of the merger agreement, in particular:
- ability of Coltec to respond to unsolicited alternative proposals to
acquire Coltec which the Coltec board determines, after consultation
with its financial advisors, may be reasonably likely to result in a
proposal that is more favorable to Coltec shareholders than the
merger, and to engage in any negotiations or provide confidential
information or otherwise facilitate such alternative proposal;
- obligations of BFGoodrich to pay Coltec a negotiated, reciprocal
termination fee of $45 million and an expense reimbursement fee of $5
million;
- restrictions on certain transactions by BFGoodrich during the period
prior to completion of the merger;
- continued representation for the current Coltec shareholders through
the three BFGoodrich board seats being provided for current members of
the Coltec board;
- obligation of BFGoodrich under certain circumstances to issue common
stock to Coltec pursuant to the BFGoodrich reciprocal stock option
agreement which would prevent Coltec and BFGoodrich from using pooling of
interests accounting treatment for an alternative transaction; and
- mutual nature of the reciprocal stock option agreements.
We have set forth below all the material factors against the merger that
the Coltec board considered in reaching its decision to approve the merger
agreement and to recommend that Coltec shareholders vote to approve and adopt
the merger agreement:
- possibility that the value of the BFGoodrich common stock that would be
received by shareholders of Coltec in the merger, as determined by a
fixed exchange ratio, may diminish prior to the effective date of the
merger if the market value of BFGoodrich common stock declines during the
period prior to the effective date of the merger;
- obligation of Coltec to pay BFGoodrich a termination fee of $45 million
and an expense reimbursement fee of $5 million;
- conditional nature of BFGoodrich's obligation to complete the merger;
- restrictions on certain transactions by Coltec during the period prior to
completion of the merger; and
- obligation of Coltec under certain circumstances to issue common stock to
BFGoodrich pursuant to the Coltec reciprocal stock option agreement,
which would prevent Coltec from using pooling of interest accounting
treatment for an alternative transaction.
CSFB advised the Coltec board that the amount of the termination fees described
above is within a customary range when compared to similar transactions and that
the reciprocal stock options are within the customary range of actions companies
take to ensure completion of negotiated merger agreements.
31
THE MERGER
<PAGE> 37
In considering these factors, the Coltec board was aware of the interests
of Coltec's executive officers and directors in the merger as described in
" -- Interests of Executive Officers and Directors in the Merger -- Coltec."
Because of the variety of factors considered in connection with its
evaluation of the merger, the Coltec board did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. Individual directors may have assigned
different weights to different factors.
The Coltec board weighed both the material factors in favor of and against
the merger agreement and determined that the material factors in favor of the
merger outweighed the material factors against the merger. Consequently, it was
the Coltec's board's judgment that the merger agreement was in the best interest
of Coltec's shareholders and its other constituencies.
THE COLTEC BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF COLTEC COMMON
STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document, and the documents that have been incorporated by reference,
includes statements with respect to the merger that reflect projections or
expectations of future financial condition, results of operations and business
of each of BFGoodrich and Coltec that are subject to risk and uncertainty. We
believe such statements to be "forward looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The projected additional earnings per share for BFGoodrich
attributable to the merger with Coltec is dependent upon achieving cost savings
by consolidating the BFGoodrich corporate and aerospace staff with Coltec's
corporate staff in Charlotte, North Carolina and other synergies in combining
the two organizations in 1999. Additional operational savings are dependent upon
the integration of the aerospace businesses of BFGoodrich and Coltec and the
elimination of duplicate facilities and excess capacity. Actual savings may be
materially less than projected in those forward-looking statements if the merger
is delayed beyond April 30, 1999, reorganization of both companies' staff is
delayed beyond what is anticipated or the reductions in personnel, which we
anticipated to be material, are less than currently envisioned. Additionally, we
cannot guarantee that we can achieve the anticipated operating efficiencies
because we have not yet developed detailed integration plans. Forward looking
statements also include other information concerning possible or assumed future
results of operations of BFGoodrich and Coltec set forth under "Questions and
Answers About the BFGoodrich/Coltec Merger," "Summary," "-- Background of the
Merger," "-- BFGoodrich's Reasons for the Merger; Recommendation of the
BFGoodrich Board," "-- Coltec's Reasons for the Merger; Recommendation of the
Coltec Board" and "Fairness Opinions of Financial Advisors," and those preceded
by, followed by or that include the words "believes," "expects," "anticipates"
or similar expressions. For those statements, BFGoodrich and Coltec claim the
protection of the safe harbor for forward-looking statements contained in The
Private Securities Reform Act of 1995.
We cannot guarantee that actual results or events will not differ
materially from those projected, estimated, assumed or anticipated in any of the
forward looking statements contained in this joint proxy statement/prospectus or
in the documents incorporated by reference into this joint proxy
statement/prospectus. In addition to those factors specifically noted in the
forward looking statements, other important factors that could result in such
differences include:
- general economic conditions in the applicable markets, including
inflation, recession, interest rates and other economic factors;
- casualty to or other disruption of BFGoodrich's or Coltec's facilities
and operations; and
- other factors that generally affect the business of aerospace and other
industrial companies.
32
THE MERGER
<PAGE> 38
We caution the shareholders of BFGoodrich and Coltec not to place undue
reliance on these statements, which speak only as of the date of this joint
proxy statement/prospectus or, in the case of any document incorporated by
reference, the date of that document.
Whenever you read or hear any subsequent written or oral forward looking
statements attributable to BFGoodrich or Coltec or any person acting on their
behalf, you should keep in mind the cautionary statements contained or referred
to in this section. Neither of us undertakes any obligation to release publicly
any revisions to these forward looking statements to reflect events or
circumstances after the date of this joint proxy statement/prospectus or to
reflect the occurrence of unanticipated events.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
MORGAN STANLEY & CO. INCORPORATED
BFGoodrich retained Morgan Stanley to render a financial opinion letter to
the BFGoodrich board in connection with the merger and related matters based
upon Morgan Stanley's qualifications, expertise and reputation. On November 22,
1998, Morgan Stanley rendered an oral opinion, which was confirmed in writing,
to the BFGoodrich board that, as of such date, and based upon and subject to the
considerations set forth in the written opinion, the exchange ratio in the
merger agreement was fair from a financial point of view to BFGoodrich.
WE HAVE ATTACHED THE FULL TEXT OF THE MORGAN STANLEY OPINION, DATED AS OF
NOVEMBER 22, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN AS ANNEX D TO THIS
JOINT PROXY STATEMENT/PROSPECTUS. THE MORGAN STANLEY OPINION IS DIRECTED TO THE
BFGOODRICH BOARD AND THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT
OF VIEW TO BFGOODRICH AS OF THE DATE OF SUCH OPINION AND DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER, NOR IS IT A RECOMMENDATION TO ANY BFGOODRICH
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE BFGOODRICH MEETING.
THE SUMMARY OF THE MORGAN STANLEY OPINION INCLUDED BELOW SHOULD NOT BE VIEWED AS
A SUBSTITUTE FOR THE FULL TEXT OF THE OPINION. WE URGE THE BFGOODRICH
SHAREHOLDERS TO, AND YOU SHOULD, READ THE MORGAN STANLEY OPINION IN ITS
ENTIRETY.
In arriving at the Morgan Stanley opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Coltec and BFGoodrich;
- reviewed certain internal financial statements and other financial and
operating data concerning Coltec and BFGoodrich;
- analyzed certain projections prepared by the managements of Coltec and
BFGoodrich;
- discussed the past and current operations and financial condition and
the prospects of BFGoodrich with senior executives of BFGoodrich;
- discussed the past and current operations and financial condition and
the prospects of Coltec with senior executives of Coltec;
- discussed with the senior managements of BFGoodrich and Coltec their
estimates of the synergies and costs savings expected from the merger;
- reviewed the pro forma impact of the merger on BFGoodrich's earnings
per share, consolidated capitalization and financial ratios;
- reviewed the reported prices and trading activity for the Coltec
common stock and the BFGoodrich common stock;
- compared the financial performance of Coltec and BFGoodrich and the
prices and trading activity of the Coltec common stock and the
BFGoodrich common stock with that of certain other comparable
publicly-traded companies and their securities;
33
THE MERGER
<PAGE> 39
- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
- participated in discussions and negotiations among representatives of
BFGoodrich and Coltec and their financial and legal advisors;
- reviewed the draft merger agreement and certain related documents; and
- performed such other analyses as Morgan Stanley deemed appropriate.
In arriving at its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including the estimates of the synergies and cost savings
expected to be derived from the merger, Morgan Stanley assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of BFGoodrich and Coltec. In
addition, Morgan Stanley assumed that the merger will be completed in accordance
with the terms set forth in the merger agreement, including, among other things,
that the merger will be accounted for as a "pooling-of-interests" business
combination in accordance with U.S. generally accepted accounting principles and
that the merger would be treated as a tax-free reorganization and/or exchange,
each pursuant to the Internal Revenue Code. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of BFGoodrich or
Coltec, nor was Morgan Stanley furnished with any such appraisals. The Morgan
Stanley opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to Morgan Stanley as of, the
date of the Morgan Stanley opinion.
The following is a summary of the material financial analyses Morgan
Stanley performed in connection with rendering the Morgan Stanley opinion to the
BFGoodrich board on November 22, 1998. Some of these summaries of financial
analyses include information presented in tabular format. In order to fully
understand the financial analyses Morgan Stanley used, you should read those
tables together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Historical and Comparative Common Stock Performance. Morgan Stanley's
analysis of Coltec common stock performance consisted of a historical analysis
of closing prices and trading volumes over the period from November 19, 1995 to
November 19, 1998. Morgan Stanley noted that Coltec common stock closed at a
price of $17.19 on November 19, 1998. Based on the closing prices of Coltec
common stock and BFGoodrich common stock on November 19, 1998 and the exchange
ratio, the implied consideration for a share of Coltec common stock was
approximately $20. Morgan Stanley performed a historical analysis of closing
prices from November 19, 1997 through November 19, 1998 of: BFGoodrich common
stock; Coltec common stock; the S&P 500 Index; an index of comparable aerospace
companies (the "Comparable Aerospace Index") consisting of BE Aerospace Inc.,
BFGoodrich, Moog Inc., Precision Castparts Corp., Sundstrand Corporation, Wyman
Gordon Co., Howmet International Inc., Hexcel Corp., Cordant Technologies Inc.
and Gulfstream Aerospace Corp.; and an index of comparable industrial companies
(the "Comparable Industrial Index") consisting of Cooper Industries, Crane Co.,
Dover Corp., Eaton Corporation, General Signal Corp., Illinois Tool Works Inc.,
Ingersoll-Rand Company and The Timken Company. Morgan Stanley observed that over
this period, both BFGoodrich common stock and Coltec common stock underperformed
the stated indices, with Coltec common stock underperforming BFGoodrich common
stock during this period.
Comparable Public Company Analysis. As part of its analysis, Morgan Stanley
compared certain publicly available financial information of certain comparable
aerospace companies and certain comparable industrial companies as listed below.
34
THE MERGER
<PAGE> 40
<TABLE>
<S> <C>
COMPARABLE AEROSPACE COMPANIES COMPARABLE INDUSTRIAL COMPANIES
- - BE Aerospace Inc. - Crane Co.
- - Moog Inc. - Dover Corp.
- - Precision Castparts Corp. - Eaton Corporation
- - Sundstrand Corporation - General Signal Corp.
- - Wyman Gordon Co. - Illinois Tool Works Inc.
- - Howmet International Inc. - Ingersoll-Rand Company
- - Hexcel Corp. - Parker-Hannifin Corporation
- - Cordant Technologies Inc. - Sundstrand Corporation
- - Gulfstream Aerospace Corp. - The Timken Company
</TABLE>
Morgan Stanley chose the comparable aerospace companies based on their
production of a broad line of aerospace components and generation of significant
revenues from the aerospace industry. Morgan Stanley chose the comparable
industrial companies based on the production of a broad range of general
industrial products targeted primarily at commercial end-users. Morgan Stanley
then compared the financial information of those comparable public companies in
each group to the financial performance of Coltec. Such financial information
included price to earnings multiples, the aggregate value to earnings before
interest, tax, depreciation and amortization ("EBITDA") multiple and the
aggregate value to earnings before interest and tax ("EBIT"), based on I/B/E/S
International ("I/B/E/S") median earnings per share ("EPS") forecasts and
research analysts' estimates of forward operating performances. The following
table presents the median multiples of the comparable aerospace companies and
comparable industrial companies as of November 19, 1998 and the trading
multiples of Coltec of each of price to estimated calendar 1999 EPS forecasts
and aggregate value compared to estimated calendar 1998 EBIT and EBITDA:
<TABLE>
<CAPTION>
PRICE/ AGGREGATE VALUE/ AGGREGATE VALUE/
1999 ESTIMATED 1998 ESTIMATED 1998 ESTIMATED
EPS EBIT EBITDA
-------------- ----------------- -----------------
<S> <C> <C> <C>
Comparable Aerospace Companies Median 10.0x 8.5x 6.4x
Comparable Industrial Companies
Median 13.1x 9.9x 7.9x
Coltec 9.3x 8.6x 7.1x
</TABLE>
Morgan Stanley observed that Coltec's implied trading multiples were consistent
with the median trading multiples of the comparable aerospace companies, but
below the median trading multiples of the comparable industrial companies. This
analysis suggested that Coltec may be relatively less costly than its public
market peers.
No company utilized in the comparable public company analysis or the
comparable stock price performance is identical to BFGoodrich or Coltec.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of BFGoodrich or Coltec and other factors that could
affect the public trading value of the companies to which Morgan Stanley
compared them. In evaluating the comparable companies, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of BFGoodrich or Coltec. Those matters and conditions include
the impact of competition on BFGoodrich or Coltec and the industry generally,
industry growth and/or technological change and the absence of any adverse
material change in the financial conditions and prospects of BFGoodrich or
Coltec or the industry or in the financial markets in general. Mathematical
analysis such as determining the mean or median is not, in itself, a meaningful
method of using comparable company data.
Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley reviewed the terms of certain announced, pending or
completed aerospace acquisition transactions and the terms of certain announced,
pending or completed industrial acquisition transactions as listed below:
35
THE MERGER
<PAGE> 41
<TABLE>
<CAPTION>
AEROSPACE TRANSACTIONS
ANNOUNCEMENT PERIOD ACQUIROR COMPANY TARGET COMPANY
- ------------------------------- ------------------------------------- ------------------------------------------
<S> <C> <C>
January 1996 - Parker Hannifin Corporation - Abex NWL Division of Pneumo Abex Corp.
June 1997 - AlliedSignal Inc. - Grimes Aerospace Co.
September 1997 - The B.F.Goodrich Company - Rohr Incorporated
December 1997 - Zodiac S.A. - MAG Aerospace Industries Inc.
January 1998 - AlliedSignal Inc. - Banner Aerospace Inc.'s Hardware Group
and PacAero Unit
April 1998 - BE Aerospace Inc. - Puritan-Bennett Corp.
July 1998 - DLJ Merchant Banking - DeCrane Aircraft Holdings Inc.
Partners, LP
</TABLE>
<TABLE>
<CAPTION>
INDUSTRIAL TRANSACTIONS
ANNOUNCEMENT PERIOD ACQUIROR COMPANY TARGET COMPANY
- ------------------------------- ------------------------------------- ------------------------------------------
<S> <C> <C>
March 1995 - Moorco International Inc. - Daniel Industries Inc.
April 1995 - FMC Corporation - Moorco International Inc.
September 1995 - The Duriron Company - Durametallic Corporation
April 1996 - Siebe plc - Unitech plc
August 1996 - Cypress Group LLC - Amtrol Inc.
January 1997 - Honeywell Inc. - Measurex Corp.
April 1997 - ITT Industries Inc. - Goulds Pumps, Incorporated
May 1997 - Siebe plc - APV U.K. plc
May 1997 - Tyco International Ltd. - Keystone International Inc.
December 1997 - Clayton, Dubilier & Rice Inc. - Dynatech Corporation
April 1998 - Siebe plc - Eurotherm plc
October 1998 - Asea Brown Boveri AG - Elsag Baily Process Automation NV
October 1998 - Newell Company - Rubbermaid Incorporated
October 1998 - Superior Telecom Inc. - Essex International, Inc.
</TABLE>
Morgan Stanley chose the aerospace transactions because they represent
recent acquisitions of similar manufacturers of a broad line of aerospace
components that, like Coltec, generate a significant portion of their revenues
from the aerospace industry. Likewise, Morgan Stanley chose the industrial
transactions because they represent recent acquisitions of companies that, like
Coltec, manufacture a broad range of general industrial products targeted
primarily at commercial end-users.
Morgan Stanley selected the EBITDA acquisition multiple as an appropriate
benchmark for comparing the relative value of transactions in these industries.
For the aerospace transactions, the median multiple of aggregate value to last
twelve months EBITDA was approximately 8.1 times. For industrial transactions,
the median multiple of aggregate value to last twelve months EBITDA was
approximately 10.7 times. Morgan Stanley noted that as of November 19, 1998, the
implied last twelve months EBITDA acquisition multiple for Coltec was
approximately 7.8 times. This analysis suggested that the acquisition price paid
for Coltec would be less than that paid for similar precedent transactions.
No transaction utilized as a comparison in the analysis of selected
precedent transactions is identical to the merger. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics and
other factors that would affect the acquisition value of the companies to which
Morgan Stanley compared it. In evaluating the precedent transactions, Morgan
Stanley made judgments and assumptions with regard to industry performance,
global business, economic, market and financial conditions and other matters,
many of which are beyond the control of Coltec. Those matters and conditions
include the impact of competition on Coltec and the industry generally, and the
absence of any adverse material change in the financial conditions and prospects
of Coltec or the industry or the financial markets in general. Mathematical
analysis such as determining the mean or median is not, in itself, a meaningful
method of using precedent transaction data.
Discounted Cash Flow Analysis. Morgan Stanley performed discounted cash
flow analysis of Coltec to determine a range of present values for Coltec based
on financial projections prepared by the management of Coltec. Morgan Stanley
calculated unlevered free cash flow as the after-tax operating earnings of
Coltec excluding any interest income and interest expense plus depreciation and
amortization, plus deferred taxes,
36
THE MERGER
<PAGE> 42
plus or minus net changes in non-cash working capital, minus capital
expenditures. Morgan Stanley calculated terminal values by applying a range of
multiples to EBITDA in fiscal 2003 from 7.0 times to 8.0 times. Morgan Stanley
then discounted the unlevered free cash flows and terminal values to present
values using a discount rate of 11.0%. Based on this analysis and the
assumptions set forth above, Morgan Stanley calculated per share equity value
estimates ranging from approximately $20 to $23, excluding any potential
operational benefits to be realized from the merger. Morgan Stanley noted that
the Coltec discounted cash flow equity value range per share was higher than the
November 19, 1998 implied offer price of $20 per share of Coltec common stock.
Exchange Ratio Analysis. Morgan Stanley analyzed the ratio of closing
prices per share of Coltec common stock and BFGoodrich common stock from
November 19, 1996 to November 19, 1998. Morgan Stanley observed the following
average implied exchange ratios over various periods ending on November 19, 1998
and as of November 19, 1998:
<TABLE>
<CAPTION>
AVERAGE IMPLIED
PERIOD ENDING NOVEMBER 19, 1998 EXCHANGE RATIO
------------------------------- ---------------
<S> <C>
Prior 2 years 0.48x
Prior 6 Months 0.45x
Prior 3 Months 0.47x
Prior 1 Month 0.46x
As of November 19, 1998 0.48x
</TABLE>
Morgan Stanley noted that the exchange ratio pursuant to the merger agreement
represented a premium of 17% over the average implied exchange ratio during the
two-year period ending on November 19, 1998.
Pro Forma Contribution Analysis. Morgan Stanley analyzed the pro forma
contribution of each of BFGoodrich and Coltec to the combined company. Such
analysis included relative contributions, adjusted for leverage, of net revenue,
EBITDA, EBIT and net income at various time periods. The following table
presents the implied equity ownership of BFGoodrich based on the last twelve
month ("LTM") relative contribution of revenues, EBITDA, EBIT and estimated
calendar 1998 net income of BFGoodrich and Coltec.
<TABLE>
<CAPTION>
IMPLIED EQUITY
OWNERSHIP
OF BFGOODRICH
---------------
<S> <C>
LTM Revenues 79%
LTM EBITDA 74%
LTM EBIT 71%
1998 estimated net income 67%
</TABLE>
These contribution percentages did not take into account any estimates by
the managements of BFGoodrich or Coltec of the synergies or cost savings
anticipated from the merger, nor did they take into account any accounting
adjustments or potential changes in capital structure as a result of the merger.
Morgan Stanley observed that the aforementioned contribution percentages for
BFGoodrich would compare to BFGoodrich's pro forma ownership of approximately
67% based upon the exchange ratio in the merger and without adjusting for any
anticipated synergies from the merger.
Pro Forma Analysis of the Merger. Morgan Stanley performed certain pro
forma analyses of the merger on the earnings per share of the combined company
in 1999, 2000 and 2001. The pro forma results were based on projected earnings
prepared by managements of BFGoodrich and Coltec. The pro forma analysis also
took into account the synergies and cost savings expected to be derived from the
merger as estimated by the managements of BFGoodrich and Coltec. Morgan Stanley
noted that the merger would be accretive to BFGoodrich's earnings per share in
1999, 2000 and 2001.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
37
THE MERGER
<PAGE> 43
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Coltec or BFGoodrich.
In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of BFGoodrich or Coltec. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by
these analyses. Morgan Stanley prepared these analyses solely as a part of
Morgan Stanley's analysis of the fairness of the exchange ratio in the merger
agreement from a financial point of view to BFGoodrich and provided these
analyses to the BFGoodrich board in connection with the delivery of the Morgan
Stanley opinion. The analyses do not purport to be appraisals or to reflect the
prices at which BFGoodrich or Coltec might actually be sold. In addition, as
described above, the Morgan Stanley opinion was one of many factors taken into
consideration by the BFGoodrich board in making its determination to approve the
merger. The exchange ratio was determined through arm's length negotiations
between BFGoodrich and Coltec and was approved by the BFGoodrich board.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate, estate and other purposes. In the
ordinary course of its trading, brokerage and financing activities, Morgan
Stanley and its affiliates may, at any time, have a long or short position in,
and buy and sell the debt or equity securities and senior loans of BFGoodrich or
Coltec for its account or the account of its customers. Morgan Stanley and its
affiliates have, in the past, provided financial advisory services to BFGoodrich
and Coltec and have received fees for the rendering of such services.
Pursuant to a letter agreement dated October 22, 1998, Morgan Stanley
provided financial advisory services and a financial opinion in connection with
the merger, and BFGoodrich has agreed to pay Morgan Stanley a fee for rendering
advisory services and the Morgan Stanley opinion. Pursuant to the terms of the
agreement between Morgan Stanley and BFGoodrich, Morgan Stanley received $2
million upon the signing of the merger agreement. Morgan Stanley will be
entitled to an additional $6.5 million upon consummation of the merger, or if
the merger is not consummated but BFGoodrich receives the termination fee from
Coltec under the merger agreement, upon payment of the termination fee. In
addition, BFGoodrich has agreed to reimburse Morgan Stanley for its expenses
related to the engagement and to indemnify Morgan Stanley and its affiliates,
their respective directors, officers, agents and employees and each person, if
any, controlling Morgan Stanley or any of its affiliates against certain
liabilities, including liabilities under federal securities laws, and expenses,
related to or arising out of Morgan Stanley's engagement and the transactions in
connection therewith.
CREDIT SUISSE FIRST BOSTON CORPORATION
CSFB has acted as financial advisor to Coltec in connection with the
merger. Coltec selected CSFB based on CSFB's experience, expertise and
familiarity with Coltec and its business. CSFB is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
At the meeting of the Coltec board on November 20, 1998, representatives of
CSFB made a presentation regarding the valuation analyses performed by it in
connection with the merger. On November 21, 1998, CSFB delivered its opinion
that, as of such date and based upon and subject to the matters set forth in
that
38
THE MERGER
<PAGE> 44
opinion, the exchange ratio was fair from a financial point of view to the
Coltec shareholders. CSFB has consented to the inclusion of the CSFB opinion as
Annex E to this joint proxy statement/prospectus.
WE HAVE ATTACHED THE FULL TEXT OF THE CSFB OPINION, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN AS ANNEX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS. THE CSFB
OPINION IS DIRECTED TO THE COLTEC BOARD AND RELATES ONLY TO THE FAIRNESS FROM A
FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO TO THE COLTEC SHAREHOLDERS, DOES
NOT ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY COLTEC SHAREHOLDER AS TO WHETHER SUCH COLTEC SHAREHOLDER
SHOULD APPROVE THE MERGER. THIS SECTION INCLUDES ONLY A SUMMARY OF THE CSFB
OPINION AND, AS A SUMMARY, IT IS NOT A SUBSTITUTE FOR THE FULL TEXT OF THE
OPINION. WE URGE THE COLTEC SHAREHOLDERS TO READ THE CSFB OPINION IN ITS
ENTIRETY.
In arriving at its opinion, CSFB reviewed certain publicly available
business and financial information relating to Coltec and BFGoodrich as well as
a November 20, 1998 draft of the merger agreement. CSFB also reviewed certain
other information, including financial forecasts and estimates of the cost
savings and related expenses and other potential synergies anticipated to result
from the merger, provided to it by Coltec and BFGoodrich, and met with the
managements of Coltec and BFGoodrich to discuss the business and prospects of
Coltec and BFGoodrich.
CSFB also considered certain financial and stock market data of Coltec and
BFGoodrich and compared that data with similar data for other publicly held
companies in businesses similar to that of Coltec and BFGoodrich. CSFB also
considered the financial terms of certain other business combinations and other
transactions that have recently been effected. CSFB also considered such other
information, financial studies, analyses, and investigations and financial,
economic, and market criteria as CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on such
information being complete and accurate in all material aspects. With respect to
the financial forecasts, CSFB assumed that they had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of Coltec and BFGoodrich as to the future financial performance of
their respective companies and as to the cost savings and related expenses and
other potential synergies anticipated to result from the merger. In addition,
CSFB was not requested to make and did not make an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of Coltec or
BFGoodrich, nor was CSFB furnished with any such evaluations or appraisals.
Furthermore, CSFB assumed that the merger will qualify for pooling of interests
accounting treatment and as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
CSFB necessarily based its opinion upon financial, economic, market, and
other conditions as they existed and could be evaluated on the date of the CSFB
opinion. CSFB did not express any opinion as to what the value of shares of
BFGoodrich common stock actually will be when issued to shareholders of Coltec
pursuant to the merger or the prices at which such shares of BFGoodrich common
stock will trade subsequent to the merger.
In preparing the CSFB opinion, CSFB performed a variety of financial and
comparative analyses. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. In arriving at its opinion, CSFB made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, CSFB believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and the CSFB opinion.
In its analyses, CSFB made numerous assumptions with respect to Coltec,
BFGoodrich, industry performance, regulatory, general business, economic, market
and financial conditions and other matters, many of which are beyond the control
of Coltec and BFGoodrich.
39
THE MERGER
<PAGE> 45
No company, transaction or business used in such analyses as a comparison
is identical to Coltec or BFGoodrich or the merger, nor is an evaluation of the
results of such analyses entirely mathematical. Rather, those analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments, or transactions
being analyzed. The estimates contained in such analyses and the ranges of
valuations and implied exchange ratios resulting from any particular analysis
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. CSFB's
financial analyses were only one of many factors the Coltec board considered in
its evaluation of the merger and should not be viewed as determinative of the
views of the Coltec board or management with respect to the exchange ratio or
the merger.
The following is a summary of the material analyses performed by CSFB in
connection with the CSFB opinion.
Discounted Cash Flow Analysis
Coltec Discounted Cash Flow Analysis. CSFB performed a discounted cash flow
("DCF") analysis of Coltec by calculating the present value of the sum of a
ten-year stream of unlevered free cash flows and a 2008 terminal value. In so
doing, it utilized three scenarios, which it referred to as the Coltec
Management Case, the Coltec Alternative Management Case and the Coltec 2000
Case, that CSFB derived from Coltec management's views of future operating and
financial performance. More specifically, CSFB based all three cases on Coltec
management's projections for the years 1998 through 2001 and an extension of
such forecasts through 2008 developed on the basis of discussions with Coltec
management. CSFB utilized a ten year forecast to perform the DCF analysis in
order to reflect the aerospace and general industrial business cycles. For all
three cases, CSFB applied multiples which were based on companies and
transactions in Coltec's industry segments of EBITDA that ranged from 6.0 times
to 8.5 times and discount rates, based on the weighted average cost of capital
for Coltec's industry segments, of 10.0% to 12.0%. CSFB did not consider cost
savings and related expenses and other potential synergies anticipated to result
from the merger.
Aggregating the resultant values from each analysis, CSFB derived an
implied per share equity reference range of $18.50 to $24.00.
BFGoodrich Discounted Cash Flow Analysis. CSFB performed a DCF analysis of
BFGoodrich by calculating the present value of the sum of a ten-year stream of
unlevered free cash flows and a 2008 terminal value. In so doing, it utilized
two scenarios, which it referred to as the BFGoodrich Management Case and the
BFGoodrich Alternative Case, that CSFB derived from the views of the managements
of BFGoodrich and Coltec of future operating and financial performance. More
specifically, CSFB based both cases on BFGoodrich management's projections for
the years 1998 through 2001 and an extension of such forecasts through 2008
developed on the basis of discussions with both BFGoodrich and Coltec
managements. For both cases, CSFB applied multiples, which were based on
companies and transactions in BFGoodrich's industry segments, of EBITDA that
ranged from 5.5 times to 8.0 times and discount rates of 9.5% to 12.0%, based on
the weighted average cost of capital for BFGoodrich's industry segments. CSFB
did not consider cost savings and related expenses and other potential synergies
anticipated to result from the merger.
Aggregating the resultant values from both analyses, CSFB derived an
implied per share equity reference range of $37.50 to $46.00.
Based on the foregoing, the DCF analysis for Coltec and BFGoodrich resulted
in an implied exchange ratio range of 0.40 times to 0.64 times.
40
THE MERGER
<PAGE> 46
Selected Companies Analysis
Coltec Selected Companies Analysis. CSFB compared certain financial
information for Coltec businesses to that of selected public companies
(collectively, the "Coltec Selected Companies") in the industrial and aerospace
segments, all of which CSFB considered to be reasonably comparable to the
respective Coltec business segments. CSFB considered the industrial companies
and aerospace companies set forth in the table below.
<TABLE>
<CAPTION>
INDUSTRIAL COMPANIES AEROSPACE COMPANIES
-------------------- -------------------
<S> <C>
Aeroquip-Vickers Inc. Aeroquip-Vickers Inc.
Coltec Industries Inc AlliedSignal Inc.
Cooper Industries Inc. Coltec Industries Inc
Eaton Corporation Crane Co.
Flowserve Corporation The B.F.Goodrich Company
Parker-Hannifin Corporation Sundstrand Corporation
TI Group plc
</TABLE>
CSFB selected the Coltec Selected Companies, among other reasons, because
each serves markets generally similar to markets Coltec serves and each had a
meaningful number of published earnings estimates. CSFB compared the enterprise
values, for purposes of this analysis, the sum of equity value and net debt, of
the Coltec Selected Companies as multiples of estimated fiscal 1999 EBITDA and
EBIT and equity values as multiples of estimated fiscal 1999 net income. The
table below sets forth the mean, high and low estimated fiscal 1999 EBITDA
multiples for the industrial companies and the aerospace companies.
1999E EBITDA MULTIPLE RANGES
<TABLE>
<CAPTION>
MULTIPLE INDUSTRIAL COMPANIES AEROSPACE COMPANIES
-------- -------------------- -------------------
<S> <C> <C>
High 9.2x 9.1x
Mean 6.3x 6.6x
Low 4.3x 4.3x
</TABLE>
CSFB based estimated financial data for the Coltec Selected Companies on
estimates of equity research analysts. CSFB then applied these multiples to
Coltec's 1999 management estimates for EBITDA, EBIT and net income, yielding
implied values for Coltec's common stock of approximately $13.36 to $17.34 per
share. These implied values for Coltec's common stock, when combined with the
implied values for BFGoodrich's common stock, resulted in an implied exchange
ratio range of 0.32 times to 0.51 times.
BFGoodrich Selected Companies Analysis. CSFB compared certain financial
information for BFGoodrich businesses to that of selected public companies
(collectively, the "BFGoodrich Selected Companies") in the performance materials
and aerospace segments, all of which CSFB considered to be reasonably
41
THE MERGER
<PAGE> 47
comparable to the respective BFGoodrich business segments. CSFB considered the
performance materials companies and aerospace companies set forth in the table
below.
<TABLE>
<CAPTION>
PERFORMANCE MATERIALS COMPANIES AEROSPACE COMPANIES
------------------------------- -------------------
<S> <C>
Albermarle Corp. Aeroquip-Vickers Inc.
Crompton & Knowles Corporation AlliedSignal Inc.
Cytec Industries Inc. Coltec Industries Inc
The B.F.Goodrich Company Crane Co.
H.B. Fuller Co. The B.F.Goodrich Company
International Specialty Products Sundstrand Corporation
Inc.
Morton International Inc.
Witco Corporation
</TABLE>
CSFB selected the BFGoodrich Selected Companies, among other reasons,
because each serves markets generally similar to markets BFGoodrich serves and
each had a meaningful number of published earnings estimates. CSFB compared the
enterprise values of the BFGoodrich Selected Companies as multiples of estimated
fiscal 1999 EBITDA and EBIT and equity values as multiples of estimated fiscal
1999 net income. The table below sets forth the mean, high and low estimated
fiscal 1999 EBITDA multiples for the performance materials companies and the
aerospace companies.
1999E EBITDA MULTIPLE RANGES
<TABLE>
<CAPTION>
MULTIPLE PERFORMANCE MATERIALS COMPANIES AEROSPACE COMPANIES
-------- ------------------------------- -------------------
<S> <C> <C>
High 7.4x 9.1x
Mean 6.2x 6.6x
Low 5.2x 4.3x
</TABLE>
CSFB based estimated financial data for the BFGoodrich Selected Companies
on estimates of equity research analysts. CSFB then applied these multiples to
the BFGoodrich Management Case 1999 management estimates for EBITDA, EBIT and
net income, yielding implied values for BFGoodrich's common stock of
approximately $33.87 to $42.17 per share.
In determining the implied exchange ratio resulting from the Selected
Companies Analysis, CSFB compared the high end of the range for the implied
value of Coltec's common stock to the low end of the range for the implied value
of BFGoodrich's common stock, and compared the low end of the range for the
implied value of Coltec's common stock to the high end of the range for the
implied value of BFGoodrich's common stock. Accordingly, the Selected Companies
Analysis for Coltec and BFGoodrich resulted in an implied exchange ratio range
of 0.32 times to 0.51 times.
Selected Transactions Analysis
Coltec Selected Transactions Analysis. CSFB analyzed the purchase prices
and implied transaction multiples paid or proposed to be paid in selected merger
and acquisition transactions (the "Coltec Selected Transactions") in the
industrial and aerospace segments, all of which CSFB considered to be reasonably
comparable to the respective Coltec business segments. CSFB selected the Coltec
Selected Transactions, among other reasons, because the target of each
transaction served markets generally similar to markets Coltec serves. CSFB
considered industrial transactions and aerospace transactions including those
transactions set forth in the table below.
42
THE MERGER
<PAGE> 48
<TABLE>
<CAPTION>
ACQUIROR COMPANY TARGET COMPANY
---------------- --------------
<S> <C> <C>
INDUSTRIAL Textron Inc.......................... David Brown Group plc
TRANSACTIONS Applied Power Inc.................... Zero Corp.
Donaldson, Lufkin & Jenrette Inc..... Thermadyne Holdings Corp.
MascoTech, Inc....................... TriMas Corporation
United Dominion Industries Limited... Core Industries Inc.
Thyssen AG........................... Giddings & Lewis Inc.
Durco Intl. Inc...................... BWIP Inc.
ITT Industries, Inc.................. Goulds Pumps, Incorporated
Intermet Corp........................ Sudbury Inc.
</TABLE>
<TABLE>
<CAPTION>
ACQUIROR COMPANY TARGET COMPANY
---------------- --------------
<S> <C> <C>
AEROSPACE BE Aerospace Inc..................... SMR Aerospace Inc.
TRANSACTIONS Donaldson, Lufkin & Jenrette Inc..... DeCrane Aircraft Holdings Inc.
BE Aerospace Inc..................... Aircraft Modular Products Inc.
The B.F.Goodrich Company............. Rohr, Inc.
Lockheed Martin Corp................. Northrop Grumman Corp.
General Electric Company............. Greenwich Air Services, Inc.
Greenwich Air Services, Inc.......... UNC Incorporated
The Boeing Company................... McDonnell Douglas Corp.
</TABLE>
CSFB compared enterprise values for the Coltec Selected Transactions as
multiples of EBITDA and EBIT and equity values as multiples of net income, in
each case for the latest 12 months. CSFB based all multiples on historical
financial information available at the time of the announcement of the Coltec
Selected Transactions. The table below sets forth the mean, high and low EBITDA
multiples for the industrial transactions and aerospace transactions.
LTM EBITDA MULTIPLE RANGES
<TABLE>
<CAPTION>
MULTIPLE INDUSTRIAL TRANSACTIONS AEROSPACE TRANSACTIONS
- -------- ----------------------- ----------------------
<S> <C> <C>
High 11.3x 11.3x
Mean 8.9x 9.5x
Low 5.9x 6.9x
</TABLE>
CSFB applied these multiples to Coltec's 1998 latest twelve months results
for EBITDA, EBIT and net income, yielding implied values for Coltec's common
stock of approximately $18.51 to $24.53 per share. These implied values for
Coltec's common stock, when combined with the implied values for BFGoodrich's
common stock, resulted in an implied exchange ratio range of 0.34 times to 0.59
times.
BFGoodrich Selected Transactions Analysis. CSFB analyzed the purchase
prices and implied transaction multiples paid or proposed to be paid in selected
merger and acquisition transactions (the "BFGoodrich Selected Transactions") in
the performance materials and aerospace segments, all of which CSFB considered
to be reasonably comparable to the respective BFGoodrich business segments. CSFB
selected the BFGoodrich Selected Transactions, among other reasons, because the
target of each transaction served markets generally
43
THE MERGER
<PAGE> 49
similar to markets BFGoodrich serves. CSFB considered performance materials
transactions and aerospace transactions including those transactions set forth
in the table below.
<TABLE>
<CAPTION>
ACQUIROR COMPANY TARGET COMPANY
---------------- --------------
<C> <S> <C>
PERFORMANCE Chemetall GmbH....................... Cyprus Foote's Lithium Business
MATERIALS Akzo Nobel N.V....................... Elementes-Akcros Polymer Additives
TRANSACTIONS Business
The B.F.Goodrich Company............. Freedom Chemical Company
Yule Catto........................... Holliday Chemical Holdings plc
Allied Colloids Group plc............ CPS Chemical Company Inc.
Crompton & Knowles Corporation....... Uniroyal Chemical Co., Inc.
Witco Corp........................... OSi Specialties Inc.
</TABLE>
<TABLE>
<CAPTION>
ACQUIROR COMPANY TARGET COMPANY
---------------- --------------
<S> <C> <C>
AEROSPACE BE Aerospace Inc..................... SMR Aerospace Inc.
TRANSACTIONS Donaldson, Lufkin & Jenrette Inc..... DeCrane Aircraft Holdings Inc.
BE Aerospace Inc..................... Aircraft Modular Products Inc.
The B.F.Goodrich Company............. Rohr, Inc.
Lockheed Martin Corp................. Northrop Grumman Corp.
General Electric Company............. Greenwich Air Services, Inc.
Greenwich Air Services, Inc. ........ UNC Incorporated
The Boeing Company................... McDonnell Douglas Corp.
</TABLE>
CSFB compared enterprise values for the BFGoodrich Selected Transactions as
multiples of EBITDA and EBIT and equity values as multiples of net income, in
each case for the latest 12 months. CSFB based all multiples on historical
financial information available at the time of the announcement of the
BFGoodrich Selected Transactions. The table below sets forth the mean, high and
low EBITDA multiples for the performance materials transactions and aerospace
transactions.
LTM EBITDA MULTIPLE RANGES
<TABLE>
<CAPTION>
MULTIPLE PERFORMANCE MATERIALS TRANSACTIONS AEROSPACE TRANSACTIONS
- -------- ---------------------------------- ----------------------
<S> <C> <C>
High 15.0x 11.3x
Mean 9.9x 9.5x
Low 6.2x 6.9x
</TABLE>
CSFB applied these multiples to BFGoodrich's latest twelve months results
for EBITDA, EBIT and net income, yielding implied values for BFGoodrich's common
stock of approximately $41.89 to $54.21 per share.
In determining the implied exchange ratio resulting from the Selected
Transactions Analysis, CSFB compared the high end of the range for the implied
value of Coltec's common stock to the low end of the range for the implied value
of BFGoodrich's common stock, and compared the low end of the range for the
implied value of Coltec's common stock to the high end of the range for the
implied value of BFGoodrich's common stock. Accordingly, the Selected
Transactions Analysis for Coltec and BFGoodrich resulted in an implied exchange
ratio range of 0.34 times to 0.59 times.
Pro Forma Transaction Analysis
CSFB analyzed the potential pro forma effect of the merger on BFGoodrich's
EPS for the fiscal years 1999 through 2001, using the Coltec Management Case and
the BFGoodrich Management Case, assuming
44
THE MERGER
<PAGE> 50
qualification of the merger for pooling accounting treatment and the achievement
of the per-year synergy levels estimated by Coltec and BFGoodrich managements.
This analysis suggested that the merger would be accretive to BFGoodrich's EPS
in fiscal years 1999, 2000 and 2001. The actual results that the combined
company achieves may, however, vary from projected results and such variations
may be material.
Relative Contribution Analysis
CSFB analyzed the relative contributions of Coltec and BFGoodrich to the
estimated fiscal 1998 and 1999 EBITDA, EBIT and net income of the pro forma
combined company. This analysis indicated that under the Coltec Management Case
and the BFGoodrich Management Case and without consideration of potential
synergies, Coltec would contribute:
- in fiscal 1998 approximately 30%, 32% and 33% of estimated combined
EBITDA, EBIT and net income, respectively; and
- in fiscal 1999 approximately 29%, 31% and 32% of estimated combined
EBITDA, EBIT and net income, respectively.
In summary, the Relative Contribution Analysis for Coltec and BFGoodrich
resulted in an implied exchange ratio range of 0.44x to 0.57x.
Miscellaneous
Pursuant to the terms of CSFB's engagement, Coltec agreed to pay CSFB a fee
in an amount equal to 0.50% of the aggregate consideration paid in the merger,
$2 million of which was payable upon delivery of the CSFB opinion and the
remainder of which will be payable upon consummation of the merger. Coltec will
also reimburse CSFB for certain out-of-pocket expenses incurred in connection
with its services to Coltec, including fees and expenses of legal counsel. For
purposes of CSFB's engagement, aggregate consideration paid in the merger is
defined as the total fair market value at closing of all consideration paid or
payable, or otherwise to be distributed directly or indirectly, to Coltec or
Coltec's shareholders in connection with the merger. All consideration includes
cash, securities, property, all debt, and convertible securities remaining on
Coltec's financial statements at closing and other indebtedness and obligations,
including factored accounts receivables assumed by BFGoodrich and any other form
of consideration. In addition, Coltec also agreed to indemnify CSFB, its
affiliates, the respective directors, officers, partners, agents and employees
of CSFB and its affiliates, and each person, if any, controlling CSFB or any of
its affiliates, against certain liabilities, including liabilities under the
Federal securities laws.
CSFB has in the past performed certain investment banking services for
Coltec, for which CSFB has received customary fees. In the ordinary course of
its business, CSFB and its affiliates may actively trade the debt and equity
securities of Coltec and BFGoodrich for their own accounts and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
BOARD OF DIRECTORS AND MANAGEMENT OF BFGOODRICH FOLLOWING THE MERGER
If the merger is completed, we expect that the current BFGoodrich
management and Coltec operating management will, for the most part, remain in
place. We plan for Coltec's aerospace segment to become part of BFGoodrich
aerospace, and Coltec's industrial segment to operate as a new, separate
business segment of BFGoodrich. If the merger is completed, the size of the
BFGoodrich board will increase from 12 to 15 members and John W. Guffey, Jr.,
William R. Holland and David I. Margolis will become members of the BFGoodrich
board. We expect that, after the merger, David L. Burner will continue as
chairman and chief executive officer of BFGoodrich, Marshall O. Larsen will
continue as president and chief operating officer of BFGoodrich's aerospace
segment and David B. Price, Jr. will continue as president and chief operating
officer of BFGoodrich's performance materials segment. We also expect that,
after the merger, Mr. Guffey will become an executive vice president of
BFGoodrich and president and chief operating officer of BFGoodrich's new
industrial segment, Laurence A. Chapman will continue as senior vice president
and chief financial officer of BFGoodrich and Terrence G. Linnert will continue
as senior vice president and general counsel of BFGoodrich.
45
THE MERGER
<PAGE> 51
Following the merger, BFGoodrich's principal executive offices will be
relocated to Charlotte, North Carolina.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER -- BFGOODRICH
Because Coltec shareholders will own approximately 33% of the outstanding
BFGoodrich common stock after the merger, the change in control provisions of
various BFGoodrich employment agreements and benefit plans will be triggered
upon approval of the issuance of BFGoodrich common stock in the merger. The
BFGoodrich board was aware of this result and considered it, among other
matters, in approving the merger agreement and related transactions. As a result
of the change in control provisions, BFGoodrich's executive officers and
directors have interests in the merger that are different from or in addition to
their interests as BFGoodrich shareholders.
Management Continuity Agreements. Six executive officers of BFGoodrich have
management continuity agreements which would become effective upon approval of
the stock issuance proposal by the BFGoodrich shareholders. Under these
agreements, each of these officers will have an employment agreement for up to
four years during which he is assured of continuation of salary and benefits. If
his employment is terminated during this period other than for cause, he is
entitled to a lump sum termination payment equal to three times base salary,
annual bonus and long-term incentive compensation as well as continuation of
benefits. Under these agreements, "cause" for termination includes the willful
and continued failure to substantially perform the person's duties that causes
material and demonstrable harm. Under the terms of these agreements, the covered
employee has the right to receive notice of the failure and at least 30 days to
correct the performance. "Cause" also includes willful engagement in gross
misconduct materially and demonstrably injurious to BFGoodrich. Covered
employees are also entitled to this payment if they voluntarily terminate their
employment within a 30-day period commencing one year following a change in
control. Under these agreements, "good reason" for termination includes
assignment of new or a change in duties or responsibilities within BFGoodrich
inconsistent with the positions, duties, responsibilities, reporting
relationships and status of the covered employee existing immediately before a
change in control. The agreements provide for a tax gross-up for any excise tax
due under the Internal Revenue Code for these types of agreements. Five of the
executive officers are expected to continue in the employment of BFGoodrich
after the merger and have agreed to waive rights under their management
continuity agreements such that the approval of the issuance of BFGoodrich
common stock in the merger will not constitute a change in control.
Consequently, these five executive officers will not have employment agreements
and will not receive termination payments under these agreements. The only
executive officer of BFGoodrich who will receive termination payments under the
agreements is Mr. Les C. Vinney. Mr. Vinney will receive approximately
$3,845,846 plus continuation of benefits for 3 years and $284,559 representing
the actuarial equivalent of an additional 3 years of age and service under
BFGoodrich's retirement program.
Outstanding Stock-Based Awards. One executive officer of BFGoodrich, Robert
D. Koney, Jr., vice president and controller, will have 1,950 of his outstanding
stock options become immediately exercisable upon approval of the stock issuance
proposal by the BFGoodrich shareholders. Also, interim payments will be made to
the executive officers by BFGoodrich under the BFGoodrich long term incentive
plan.
Benefit Plans. Employees with less than three years service under
BFGoodrich's 401(k) plan will become vested in the BFGoodrich matching
contributions allocated to their accounts under that plan upon approval of the
stock issuance proposal by BFGoodrich shareholders. Messrs. Price and Linnert
are the only executive officers of BFGoodrich who will benefit from this
provision.
Additional Information About Benefits to Executive Officers. As a result of
the approval by the BFGoodrich shareholders of the issuance of shares in the
merger, the following payments will be made to BFGoodrich's executive officers
under the listed plans assuming a vote on April 1, 1999.
46
THE MERGER
<PAGE> 52
<TABLE>
<CAPTION>
INTERIM
PAYMENT PERFORMANCE
INTERIM LONG TERM SHARE DEFERRED SAVINGS BENEFIT
VESTING OF PAYMENT INCENTIVE PLAN COMPENSATION PLAN RESTORATION PLAN
STOCK OPTIONS ANNUAL BONUS SHARES OF STOCK SHARES OF STOCK $ VALUE AS OF 12/31/98
------------- ------------ --------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
D.L. Burner.......... 0 $185,950 8,861 0 786,676
M.O. Larsen.......... 0 95,349 5,436 0 0
D.B. Price, Jr....... 0 76,225 5,051 0 102,656
L.A. Chapman......... 0 54,750 0 0 0
T.G. Linnert......... 0 45,539 1,541 0 30,594
L.C. Vinney.......... 0 54,750 1,583 7,262 154,422
R.D. Koney, Jr....... 1,950 20,500 0 0 0
</TABLE>
The interim payments under the annual bonus plan and the long term
incentive plan will be deducted from any award earned at the end of each plan
cycle. The performance share deferred compensation plan and savings benefit
restoration plan are fully vested and would have been payable to the individuals
in any event. The payments for the latter two plans represent compensation
previously earned and voluntarily deferred. The payments will be made from
existing rabbi trusts.
Other Benefits to BFGoodrich Non-employee Directors. Non-employee directors
of BFGoodrich under age 55 and with less than five years of service as directors
become vested in the director's phantom share plan upon approval of the stock
issuance proposal by BFGoodrich shareholders. The two non-employee directors of
BFGoodrich listed below meet these criteria and will become vested in the
director's phantom share plan.
The following table gives you information about the phantom shares of
BFGoodrich common stock held by BFGoodrich's two non-employee directors that
will become fully vested solely as a result of the approval of the stock
issuance proposal by the BFGoodrich shareholders. There will be no payment from
the plan as a result of the approval.
<TABLE>
<CAPTION>
PHANTOM SHARES
OF BFGOODRICH
NON-EMPLOYEE DIRECTOR THAT BECOME VESTED
- --------------------- ----------------------------
<S> <C>
Diane C. Creel................................... 773
Jodie K. Glore................................... 773
</TABLE>
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER -- COLTEC
When Coltec shareholders approve and adopt the merger agreement or, in the
case of one plan identified below, when we complete the merger, the change of
control provisions of the Coltec employment agreements and benefit plans will be
triggered. As a result of these change of control provisions, Coltec's executive
officers and directors have interests in the merger that are different from or
in addition to their interests as Coltec shareholders. The Coltec board was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the related transactions.
New Directors of BFGoodrich. BFGoodrich has agreed to elect John W. Guffey,
Jr., William R. Holland and David I. Margolis to the BFGoodrich board after the
merger. Messrs. Holland and Margolis will receive the same directors'
compensation paid by BFGoodrich to its other non-employee directors.
Outstanding Stock-Based Awards. Some currently outstanding agreements
granting stock options or restricted stock to Coltec's executive officers and
non-employee directors contain change of control provisions. In the case of
stock options, upon a change of control the options become fully exercisable. In
the case of restricted stock, upon a change of control all restrictions on
assignment, transfer or other disposition of the restricted stock lapse.
Coltec's executive officers also hold shares of restricted stock issued
under Coltec's long-term incentive plan. According to the terms of the
employment agreements discussed below, all restrictions on assignment, transfer
or other disposition of those shares will lapse when we complete the merger.
47
THE MERGER
<PAGE> 53
Employment Agreements. Coltec is a party to employment agreements with each
of its nine executive officers, each of which contains covenants prohibiting the
employee from competing with Coltec for a specified period of time following
termination of his employment. If during the term of any of these agreements a
change of control occurs, the executive may terminate employment upon the
happening of defined events, including termination of employment by the
executive for any reason during the 30-day period beginning on either, at the
option of the executive, the twelve month anniversary or the twenty-four month
anniversary of a change of control, and the executive is to be:
- paid a lump sum cash payment equal to the sum of such executive's current
salary and the highest annual bonus paid over the prior three years,
multiplied by a factor which is 4 in the case of Mr. Guffey, 3 in the
case of each of Messrs. Nishan Teshoian, David D. Harrison, Laurence H.
Polsky and Robert J. Tubbs, and 2 1/4 in the case of Mr. Michael J.
Burdulis and the other three executive officers;
- provided with continued participation as an active participant in all
Coltec perquisites and benefit plans and fringe benefit programs,
including stock-based plans, for a number of years from the date of
termination which is 4 years in the case of Mr. Guffey, 3 years in the
case of each of Messrs. Teshoian, Harrison, Polsky and Tubbs, and 2 1/4
years in the case of Mr. Burdulis and each of the other three executive
officers;
- provided with a fully paid up life insurance policy pursuant to the terms
of Coltec's family protection plan; and
- paid amounts under Coltec's long-term incentive plan and, at the
executive's option, under Coltec's supplemental retirement plan.
Coltec is obligated to pay a tax gross-up covering any excise tax that the
executive officers must pay on any payments made or benefits they receive under
these employment agreements. Based on advice received, Coltec believes that no
excise tax will be due, and no gross-up will be required, in respect of any
payments or benefits the executive officers receive as a result of the proposed
merger.
We anticipate that all of Coltec's executive officers will be terminated
within the meaning of the employment agreements and be given the payments and
benefits provided for under their employment agreements immediately following
the merger. Some, but not all, of Coltec's executive officers, including Messrs.
Guffey, Polsky, Burdulis, Kuhn, Andolino and Maier, will be offered employment
by BFGoodrich following completion of the merger in positions and with
responsibilities different than they held with Coltec. Compensation arrangements
for those former Coltec executive officers will be in accordance with
BFGoodrich's guidelines.
Additional Information About Employment Agreements and Stock-Based Awards
to Executive Officers. The following table gives you information about the
estimated value of the payments and benefits Coltec's nine executive officers
will receive under the employment agreements solely as a result of the merger.
The following table also gives you information about the unexercisable Coltec
stock options and shares of Coltec restricted stock that Coltec's nine executive
officers hold that will become fully vested and/or exercisable solely as a
result of the merger.
<TABLE>
<CAPTION>
UNEXERCISABLE COLTEC STOCK OPTIONS
ESTIMATED VALUE OF -------------------------------------
PAYMENTS AND NUMBER OF NUMBER OF
BENEFITS UNDER COMMON SHARES WEIGHTED AVERAGE SHARES OF
EMPLOYMENT UNDERLYING EXERCISE RESTRICTED
EXECUTIVE OFFICER AGREEMENTS OPTIONS PRICE(DOLLARS/SHARE) STOCK
- ----------------- ------------------ ------------- -------------------- ----------
<S> <C> <C> <C> <C>
John W. Guffey, Jr. ............ $20,118,666 709,667 18.45 46,680
Nishan Teshoian................. $ 6,687,387 160,000 22.56 19,071
David D. Harrison............... $ 6,083,242 150,000 14.88 27,323
Laurence H. Polsky.............. $ 6,026,732 100,000 10.75 6,948
Robert J. Tubbs................. $ 5,152,393 109,000 13.90 4,054
Michael J. Burdulis............. $ 3,407,724 79,000 12.53 1,490
</TABLE>
48
THE MERGER
<PAGE> 54
<TABLE>
<CAPTION>
UNEXERCISABLE COLTEC STOCK OPTIONS
ESTIMATED VALUE OF -------------------------------------
PAYMENTS AND NUMBER OF NUMBER OF
BENEFITS UNDER COMMON SHARES WEIGHTED AVERAGE SHARES OF
EMPLOYMENT UNDERLYING EXERCISE RESTRICTED
EXECUTIVE OFFICER AGREEMENTS OPTIONS PRICE(DOLLARS/SHARE) STOCK
- ----------------- ------------------ ------------- -------------------- ----------
<S> <C> <C> <C> <C>
Paul R. Kuhn.................... $ 2,772,865 94,000 17.90 0
Joseph F. Andolino.............. $ 2,245,565 52,000 12.43 0
John N. Maier................... $ 2,275,025 52,000 12.43 0
</TABLE>
Other Benefits to Coltec Non-employee Directors. Coltec previously agreed
in 1995 that, upon a change of control as defined below, each non-employee
director of Coltec who does not continue as a Coltec director shall be paid a
lump sum equal to five times the amount of the director's annual retainer.
Completion of the merger will constitute a change of control for such purposes.
All six non-employee directors will be entitled to these benefits.
In connection with the termination of Coltec's retirement plan for outside
directors in 1997, Coltec agreed to make annual grants of restricted stock to
Joseph R. Coppola, Joel Moses and Richard A. Stuckey to compensate them for the
loss of their former retirement benefits. If any of those directors cease to
serve as a director of Coltec following a change of control, any remaining
future grants will be made immediately free and clear of any restrictions. Each
of those directors will be entitled to these benefits.
The following table gives you information about the estimated value of the
payments and benefits Coltec's six non-employee directors will receive under
these arrangements solely as a result of the merger. The following table also
gives you information about the unexercisable Coltec stock options and shares of
Coltec restricted stock that Coltec's six non-employee directors hold that will
become fully vested and/or exercisable solely as a result of the merger.
<TABLE>
<CAPTION>
UNEXERCISABLE COLTEC STOCK OPTIONS
ESTIMATED VALUE OF --------------------------------------
PAYMENTS AND NUMBER OF NUMBER OF
BENEFITS SOLELY COMMON SHARES WEIGHTED AVERAGE SHARES OF
AS A RESULT OF UNDERLYING EXERCISE PRICE RESTRICTED
NON-EMPLOYEE DIRECTOR THE MERGER OPTIONS(#) (DOLLARS/SHARE) STOCK
- --------------------- ------------------ ------------- --------------------- ----------
<S> <C> <C> <C> <C>
Joseph R. Coppola.............. $237,484 8,000 20.04 0
William H. Grigg............... $150,000 11,000 20.81 745
William R. Holland............. $125,000 0 0 0
David I. Margolis.............. $150,000 0 0 0
Joel Moses..................... $170,152 5,000 21.32 1,118
Richard A. Stuckey............. $218,758 5,000 21.32 0
</TABLE>
Indemnification; Directors and Officers Insurance. BFGoodrich has agreed
that, from and after the effective date of the merger, BFGoodrich shall
indemnify, defend and hold harmless the officers, directors and employees of
Coltec and its subsidiaries against all losses, expenses, claims, damages or
liabilities arising before the effective date of the merger to the fullest
extent permitted or required under applicable law, indemnification agreements
between Coltec and any such person or Coltec's organizational documents.
BFGoodrich has also agreed to use its best efforts to cause the officers,
directors and employees of Coltec to be covered for a period of six years from
the effective date of the merger or the period of the applicable statute of
limitations, if longer, by the directors' and officers' liability insurance
policy maintained by Coltec with respect to acts or omissions occurring before
the effective date of the merger that were committed by those officers,
directors and employees in those capacities. BFGoodrich may substitute policies
of at least the same coverage and amounts with terms and conditions no less
advantageous than Coltec's policy. However, BFGoodrich is not required to expend
more than $730,000 annually to maintain or obtain that insurance coverage. If
BFGoodrich cannot maintain or obtain the required insurance coverage, it is
required to use its reasonable best efforts to obtain as much comparable
insurance as is available for that amount.
49
THE MERGER
<PAGE> 55
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material federal
income tax consequences of the merger to holders of Coltec common stock. This
summary is not a complete description of all of the consequences of the merger
and, in particular, may not address federal income tax considerations that may
affect the treatment of a shareholder subject to special tax rules such as a
non-U.S. person, a tax-exempt entity, an insurance company, a financial
institution, a dealer in securities or foreign currency, a person that holds
Coltec common stock as part of a straddle, hedging, constructive sale or
conversion transaction, a person with a functional currency other than the U.S.
dollar or an individual who acquired Coltec common stock pursuant to an employee
stock option or otherwise as compensation. Also, this summary does not address
the tax consequences to a holder of the convertible preferred securities issued
by the Coltec Capital Trust of the merger or the conversion or exercise of any
of such securities into or for Coltec common stock before the merger or
BFGoodrich common stock after the merger. In addition, no information is
provided herein with respect to the tax consequences of the merger under
applicable foreign, state or local laws. The following discussion is based on
the Internal Revenue Code as in effect on the date of this joint proxy
statement/prospectus without consideration of the particular facts or
circumstances of any holder of Coltec common stock. CONSEQUENTLY, IF YOU ARE A
COLTEC SHAREHOLDER, WE ENCOURAGE YOU TO CONSULT YOUR TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER.
The Merger. The obligation of Coltec to complete the merger is conditioned
on the receipt by Coltec of an opinion of Cravath, Swaine & Moore, dated the
effective date of the merger, to the effect that the merger will constitute a
"reorganization" for federal income tax purposes within the meaning of Section
368(a) of the Internal Revenue Code. The obligation of BFGoodrich to complete
the merger is conditioned on the receipt by BFGoodrich of an opinion of Squire,
Sanders & Dempsey L.L.P., dated the effective date of the merger, to the effect
that the merger will constitute a "reorganization" for federal income tax
purposes within the meaning of Section 368(a) of the Internal Revenue Code.
Those opinions will be based on certain representations and assumptions. Neither
Coltec nor BFGoodrich has requested a ruling from the Internal Revenue Service
about any of the federal income tax consequences of the merger, and the opinions
of counsel will not be binding on the Internal Revenue Service or a court.
Consequently, in considering whether the merger qualifies for federal income tax
purposes as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, the Internal Revenue Service or a court could reach a
conclusion contrary to that reached in counsels' opinions.
If, as concluded in the opinions of counsel, the merger qualifies as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, the material federal income tax consequences of the merger will be:
- neither BFGoodrich nor Coltec will recognize gain or loss as a result of
the merger;
- the Coltec shareholders will not recognize gain or loss upon their
exchange of Coltec common stock for BFGoodrich common stock pursuant to
the merger, except that a Coltec shareholder who receives cash proceeds
instead of a fractional share interest in BFGoodrich common stock will
recognize a gain or loss equal to the difference between the cash
received and the tax basis allocated to the fractional share interest.
Such gain or loss will be capital gain or loss if the shareholder's
shares of Coltec common stock are held as a capital asset at the
effective time of the merger, and will be long-term capital gain or loss
if such shares of Coltec common stock have been held for more than one
year at the effective time of the merger;
- Coltec shareholders will have the same tax basis in the BFGoodrich common
stock as they had in the Coltec common stock, reduced by any tax basis
allocable to a fractional share interest for which cash is received; and
- the holding period of the BFGoodrich common stock received by a Coltec
shareholder will include the period during which the Coltec common stock
surrendered in exchange therefor was held, provided such Coltec common
stock was held by such Coltec shareholder as a capital asset at the
effective date of the merger.
50
THE MERGER
<PAGE> 56
Information Reporting and Backup Withholding. Payments of cash for
fractional shares of BFGoodrich common stock may be subject to information
reporting to the Internal Revenue Service and to 31% backup withholding. Backup
withholding will not apply, however, to a payment to a Coltec shareholder or
other payee if such shareholder or payee completes and signs the substitute Form
W-9 that will be included as part of the transmittal letter to be sent to Coltec
shareholders after the merger or otherwise proves to the combined company and
the exchange agent that it is exempt from backup withholding.
ACCOUNTING TREATMENT
We expect that the merger will be accounted for as a pooling of interests
in accordance with generally accepted accounting principles. Under such method
of accounting, holders of Coltec common stock will be deemed to have combined
their existing Coltec common stock interest with that of holders of BFGoodrich
common stock by exchanging their shares of Coltec common stock for shares of
BFGoodrich common stock. Accordingly, the historical book value of the assets,
liabilities and shareholders' deficit of Coltec, as reported on its consolidated
balance sheet, will be carried over to the consolidated balance sheet of the
combined company and no additional goodwill will be recorded. The combined
company will be able to include in its consolidated income the consolidated
income of both companies for the entire fiscal year in which the merger occurs.
However, expenses incurred to effect the merger must be treated as current
charges against income rather than adjustments to the balance sheet.
We have prepared the unaudited pro forma financial information contained in
this joint proxy statement/ prospectus using the pooling of interests accounting
method to account for the merger. See "Summary -- Summary Selected Historical
Condensed Financial Information," " Summary -- Unaudited Selected Pro Forma
Combined Financial Data" and "Unaudited Pro Forma Condensed Combined Financial
Statements."
It is a condition to our respective obligations to complete the merger that
we receive letters dated as of the effective date of the merger from our
independent auditors, Ernst & Young LLP and Arthur Andersen LLP, regarding their
agreement with the conclusions of BFGoodrich management and Coltec management as
to the appropriateness of pooling of interests accounting for the merger under
Accounting Principles Board Opinion No. 16 and related interpretations if
completed in accordance with the merger agreement. Conditions to qualify for
pooling of interests accounting treatment limit, among other things,
BFGoodrich's ability to buy back shares of BFGoodrich common stock except for
specific purposes and to make significant divestitures of certain assets for a
period of up to two years following the merger.
EFFECT OF THE MERGER ON EMPLOYEE BENEFIT PLANS
Coltec maintains various qualified defined benefit plans and defined
contribution plans as well as various welfare benefit plans and compensation
programs in which eligible employees of Coltec and its subsidiaries participate.
BFGoodrich will honor the terms of all of Coltec's benefit plans, including all
employment, severance, consulting and other compensation contracts between
Coltec or any of its subsidiaries and any current or former director, officer of
employee, vested or unvested benefits or other vested or unvested amounts earned
or accrued through the effective date of the merger. The only changes that will
be made to Coltec's benefit plans will be changes that are otherwise permitted
by the merger agreement.
Adoption and approval of the merger agreement by Coltec shareholders will
constitute a "change in control" as defined in certain of Coltec's incentive and
retirement plans and programs. As a result, all outstanding options and some
restricted stock awards will vest and all outstanding performance cycles under
some of Coltec's incentive plans will terminate and awards under such plans will
be accelerated. In addition, participants in Coltec's non-qualified retirement
arrangements will be fully vested in benefits thereunder and may elect to
receive such benefits in a lump sum upon termination of employment. In addition,
employees at Coltec's corporate offices who are involuntarily terminated within
one year of approval and adoption of the merger agreement by Coltec shareholders
will be eligible for severance benefits of up to one year's base pay and annual
bonus and up to one year's continued participation in group life, health,
disability and accident insurance plans.
51
THE MERGER
<PAGE> 57
For a period of one year after the effective date of the merger, each
employee of Coltec and its subsidiaries will receive compensation and benefits
from the surviving corporation that are at least equal to the lesser of either:
- the compensation and benefits provided to similarly situated employees of
BFGoodrich or its subsidiaries; or
- the compensation and benefits provided to such employees as of the
effective date of the merger by Coltec and its subsidiaries.
For a description of the effect of the merger on the benefits of members of
Coltec's executive officers and directors see "-- Interests of Executive
Officers and Directors in the Merger -- Coltec."
REGULATORY MATTERS
As required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, on
December 22, 1998, each of us filed a Notification and Report Form for review
with the Federal Trade Commission and the Antitrust Division of the Justice
Department. On January 22, 1999, the Federal Trade Commission issued a request
for additional information in connection with the merger and, by doing so,
extended the expiration date of the waiting period.
Coltec has operating assets in Canada, and BFGoodrich has sales in Canada.
Therefore, as required by the Competition Act (Canada), we filed a pre-merger
notification with the Director of Investigation and Research of the Competition
Bureau on December 29, 1998. The Canadian authorities have made an additional
request for some information regarding the merger. BFGoodrich and Coltec have
responded to this request. The waiting period under Canadian law is due to
expire on or about April 5, 1999. The director may apply to the Competition
Tribunal, a special purpose tribunal, for an order that the merger not proceed
or that certain assets be divested although the applicable waiting period has
expired. By letter dated January 17, 1999, we therefore requested an advance
ruling certificate from the director confirming that the director does not
intend to make such an application to the Competition Tribunal. The fact that
our advance ruling certificate request is pending before the director does not
prevent us from completing the merger.
Because both BFGoodrich and Coltec have operating assets in Germany, we
filed a notification with the German Federal Cartel Office on December 30, 1998,
as required under the German Act Against Restraints of Competition. The German
Federal Cartel Office cleared the transaction by decision dated January 21,
1999.
We do not believe that any additional governmental filings, other than the
filing of articles of merger with the Department of State of the Commonwealth of
Pennsylvania, are required in order to complete the merger.
RESALES OF BFGOODRICH COMMON STOCK RECEIVED IN THE MERGER
The BFGoodrich common stock issued in the merger will be freely
transferable under the Securities Act of 1933, except for shares issued to any
Coltec shareholder who may be deemed to be an affiliate of either BFGoodrich or
Coltec. Affiliates will include persons, including directors, who control, are
controlled by, or are under common control with:
- BFGoodrich or Coltec at the time of the Coltec meeting, or
- BFGoodrich at or after the effective date of the merger.
The Securities Act of 1933 restricts the sale of BFGoodrich common stock
received in the merger by affiliates and certain of their family members and
related interests. Generally speaking, during the year following the effective
date of the merger, those persons who are affiliates of Coltec at the time of
the Coltec meeting and are not affiliates of BFGoodrich at or following the
effective date of the merger may resell any BFGoodrich common stock received by
them in the merger, subject to limitations as to, among other things, the amount
of BFGoodrich common stock sold by them in any three-month period and as to the
manner of sale. After the one-year period following the effective date of the
merger, such affiliates may resell their
52
THE MERGER
<PAGE> 58
shares without such restrictions provided there is adequate current public
information about BFGoodrich. Persons who become affiliates of BFGoodrich
before, at or after the effective date of the merger, may resell the BFGoodrich
common stock received by them in the merger subject to similar limitations and
subject to certain holding period and filing requirements.
The ability of affiliates to resell shares of BFGoodrich common stock
received in the merger will be subject to BFGoodrich having satisfied its
reporting requirements under the Securities Exchange Act of 1934 for specified
periods before the time of sale. Affiliates also would be permitted to resell
BFGoodrich common stock received in the merger pursuant to an effective
registration statement under the Securities Act of 1933 or another available
exemption from the Securities Act of 1933 registration requirements.
Securities and Exchange Commission guidelines regarding qualifying for the
pooling of interests method of accounting also limit sales of shares of the
acquiring and acquired company by affiliates of either company in a business
combination. These guidelines indicate further that the pooling of interests
method of accounting generally will not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if they do not dispose of any of
the shares of the corporation they own or shares of a corporation they receive
in connection with a merger during the period beginning 30 days before the
merger and ending when financial results covering at least 30 days of
post-merger operations of the combined entity have been published. BFGoodrich
and Coltec have both agreed to use their best efforts to cause each person who
is an affiliate to deliver to the other a written agreement intended to ensure
compliance with the Securities Act of 1933 and preserve the ability to treat the
merger as a pooling of interests.
BFGoodrich has agreed in the merger agreement to publish financial
information within 20 days following the end of the first fiscal quarter for
which there is at least 30 days of combined operations of BFGoodrich and Coltec.
STOCK EXCHANGE LISTING
It is a condition to the merger that the shares of BFGoodrich common stock
to be issued in connection with the merger be authorized for listing on the New
York Stock Exchange.
DIVIDENDS
BFGoodrich expects to continue to declare regularly scheduled dividends on
BFGoodrich common stock until the effective date of the merger. The current
annual rate of dividends on BFGoodrich common stock is $1.10 per share.
BFGoodrich expects that, after the merger, it will continue to pay dividends at
the current rate. The payment of dividends by BFGoodrich in the future, however,
is subject to approval and declaration by the BFGoodrich board and will depend
on a variety of factors, including business conditions and BFGoodrich's
financial condition and earnings. Currently, Coltec does not pay dividends on
its common stock.
DISSENTERS' RIGHTS
Under Pennsylvania law, Coltec shareholders have no dissenters' rights in
connection with the merger because the Coltec common stock is listed on a
national securities exchange.
COLTEC CREDIT AGREEMENT
Coltec is party to a credit agreement dated as of March 24, 1992, as
amended and restated as of December 18, 1996, among Coltec, certain of its
subsidiaries and various financial institutions. At the effective date of the
merger, BFGoodrich will terminate all commitments and letters of credit and
repay in full amounts owing under this credit agreement. BFGoodrich expects to
refinance amounts owed under this credit agreement.
53
THE MERGER
<PAGE> 59
THE MERGER AGREEMENT
The following is a description of the material terms of the merger
agreement and the reciprocal stock option agreements. Complete copies of the
merger agreement and the reciprocal stock option agreements are attached as
annexes to this joint proxy statement/prospectus and are incorporated into this
joint proxy statement/prospectus by reference. WE ENCOURAGE YOU TO READ ALL OF
THE MERGER AGREEMENT AND THE RECIPROCAL STOCK OPTION AGREEMENTS.
THE MERGER
Under the merger, Runway Acquisition Corporation, a wholly owned subsidiary
of BFGoodrich, will merge into Coltec and Coltec will be the surviving
corporation. At the effective time of the merger, BFGoodrich will issue
approximately 35,311,772 shares of BFGoodrich common stock to existing Coltec
shareholders in exchange for their shares of Coltec common stock and, as a
result, Coltec will become a wholly owned subsidiary of BFGoodrich. The shares
of BFGoodrich common stock issued to Coltec shareholders in the merger will
constitute approximately 33% of the outstanding BFGoodrich common stock after
the merger. Because Runway Acquisition Corporation and Coltec are corporations
that were formed under Pennsylvania law, the merger must be completed in
accordance with Pennsylvania law.
EFFECTIVE DATE
The merger will become effective on the date we file the articles of merger
with the Department of State of the Commonwealth of Pennsylvania. We plan to
file the articles of merger as soon as possible after all of the conditions
described in the merger agreement have been satisfied.
CONVERSION OF COLTEC COMMON STOCK
On the effective date of the merger, each outstanding share of Coltec
common stock will be converted into 0.56 of a share of BFGoodrich common stock.
If you are a holder of Coltec common stock and you would have been otherwise
entitled to a fraction of a share of BFGoodrich common stock when you
surrendered your certificate or certificates for exchange, BFGoodrich will pay
you in cash your proportion of the net proceeds that the exchange agent obtains
from the sales of the aggregate of all of the fractional shares of BFGoodrich
common stock that would otherwise be issued pursuant to the merger agreement.
The exchange agent will make those sales in the open market and will make them
on your behalf and on behalf of all other holders.
As soon as possible after the effective date of the merger, the exchange
agent will determine the difference between the number of shares of BFGoodrich
common stock it received from BFGoodrich and the aggregate number of whole
shares of BFGoodrich common stock that it will distribute to holders of Coltec
common stock. The exchange agent will then sell those shares at the then current
price on the New York Stock Exchange. The exchange agent will execute those
sales through one or more member firms of the New York Stock Exchange.
BFGoodrich will pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the exchange agent
incurred in connection with the sale of those excess BFGoodrich shares. Until
the exchange agent has distributed all of the proceeds of those sales to the
former holders of Coltec common stock, it will hold such proceeds in trust for
you and all of the other former holders of Coltec common stock. The exchange
agent will make the proceeds from those sales available to the former holders of
Coltec common stock as soon as it can after it determines the amount of cash it
received in those sales. All of your fractional BFGoodrich common stock
interests will be added together, and you will not receive cash in an amount
equal to or greater than the value of one whole share of BFGoodrich common
stock. We will not pay interest on any cash payable with respect to fractional
shares. The Bank of New York or such other person or persons selected by
BFGoodrich and reasonably satisfactory to Coltec will serve as exchange agent
and will be responsible for sending you any cash payment you have a right to
receive.
Also, if you are a holder of Coltec common stock that is converted to
BFGoodrich common stock as a part of the merger, we will also issue to you and
attach to each share of BFGoodrich common stock a
54
THE MERGER AGREEMENT
<PAGE> 60
preferred share purchase right under BFGoodrich's shareholder rights plan. On
the effective date of the merger, if you are a holder of Coltec common stock,
you will no longer have any rights as a holder of those shares, but you will,
upon proper surrender of your Coltec common stock certificates, have the rights
of a holder of BFGoodrich common stock. For a comparison of the material
differences between the rights you have as a holder of Coltec common stock to
the rights you will have as a holder of BFGoodrich common stock, read "Material
Differences in the Rights of Shareholders" beginning on page 75.
CONVERSION OF COLTEC STOCK OPTIONS; CONVERTIBLE SECURITIES
On the effective date of the merger, if you hold an option to purchase
Coltec common stock, that option will be converted into the right to purchase a
number of shares of BFGoodrich common stock equal to the number of shares of
Coltec common stock you had the option to purchase multiplied by 0.56. The
product of this formula will be rounded down to the nearest whole number to
determine the number of shares you will have a right to purchase. The exercise
price for the options for BFGoodrich common stock you receive for your Coltec
options will be equal to the exercise price of the Coltec options divided by
0.56. The product of this formula will rounded up to the nearest whole cent to
determine the exercise price. Accordingly, upon completion of the merger,
BFGoodrich would issue 3,120,320 shares of BFGoodrich common stock if all
outstanding Coltec stock options were exercised.
Coltec Capital Trust, which is a statutory business trust formed under the
laws of the State of Delaware, has issued to qualified institutional buyers
approximately 3,000,000 5 1/4% Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES)(SM)*. Coltec owns all of the outstanding
common securities of Coltec Capital Trust. Each convertible preferred security
is convertible, at the option of the holder, into 1.7058 shares of Coltec common
stock, subject to certain adjustments. BFGoodrich has agreed to take all actions
required to permit Coltec to give the holders of convertible preferred
securities the right to convert each of those securities into 0.955248 of a
share of BFGoodrich common stock, subject to certain adjustments. Accordingly,
upon completion of the merger, BFGoodrich would issue 2,865,744 shares of
BFGoodrich common stock if all outstanding convertible preferred securities were
converted. Holders of convertible preferred securities have no voting rights
with respect to the merger or the merger agreement.
SURRENDER AND PAYMENT
If you are a Coltec shareholder, promptly after the effective date of the
merger, the exchange agent will mail you a transmittal form that you should use
when you send your Coltec common stock certificates for surrender in exchange
for BFGoodrich common stock certificates and any cash that you will be entitled
to receive. After you receive that transmittal form you should send the
certificates for your Coltec common stock, along with a completed and signed
transmittal form, to the exchange agent. After you send that form and your old
certificates to the exchange agent, the exchange agent will send back to you new
certificates for the number of whole shares of BFGoodrich common stock into
which your Coltec common stock was converted plus a check for any cash payable
for any portion of shares. The transmittal form the exchange agent sends you
will include instructions explaining other details of the exchange of those
certificates.
If you are a holder of Coltec common stock that will be converted into
BFGoodrich common stock, you will not be able to receive any dividends or other
distributions that are declared or made on the BFGoodrich common stock until you
surrender your old Coltec common stock certificates. When you do surrender those
Coltec common stock certificates, we will pay to the person in whose name the
BFGoodrich common stock will be issued any dividends or other distributions that
have become payable on those shares of BFGoodrich common stock for any record
date after the effective date of the merger. We will not pay any interest on
dividends or distributions for the time between the record date and the date we
actually pay you those dividends or other distributions. In addition, we will
not pay any interest on any cash payable in place of fractional shares.
- ---------------
* The terms Term Income Deferrable Equity Securities (TIDES)(SM) and
TIDES(SM) are registered service marks of CSFB.
55
THE MERGER AGREEMENT
<PAGE> 61
If you request us to issue certificates for BFGoodrich common stock in a
name other than the name on the certificates for Coltec common stock that you
surrender in exchange, you will have to pay the exchange agent all transfer or
other taxes that may be required because of the issuance of shares of BFGoodrich
common stock in a name other than the name of the registered holder of the
certificate that you surrendered to us. If you can establish that any such tax
has already been paid or does not apply to you, then you will not have to pay
that transfer or other tax. If any of your certificates are lost, stolen or
destroyed, you must make an affidavit and, if required by BFGoodrich, post a
bond in an amount BFGoodrich determines is reasonably necessary. The exchange
agent will then issue, in exchange for your lost, stolen or destroyed
certificates, the appropriate number of shares of BFGoodrich common stock, any
cash in lieu of fractional shares and any dividends or other distributions. You
should be aware that the exchange agent, BFGoodrich, Coltec and Runway
Acquisition Corporation will not be liable to you if they deliver any dividends
or distributions on those shares to any public official in accordance with any
escheat laws.
From the effective date of the merger, all shares of Coltec common stock
converted into BFGoodrich common stock and cash will no longer be outstanding
and will automatically be canceled and retired and will cease to exist. You will
not have any rights with respect to those shares of Coltec common stock other
than your right to receive BFGoodrich common stock, dividends or other
distributions and cash as described above.
IF YOU ARE A COLTEC SHAREHOLDER, YOU SHOULD NOT SEND IN YOUR CERTIFICATES
UNTIL YOU RECEIVE A TRANSMITTAL FORM FROM THE EXCHANGE AGENT.
IF YOU ARE A BFGOODRICH SHAREHOLDER, YOU SHOULD NOT SEND IN YOUR
CERTIFICATES AT ALL.
Detailed instructions, including a transmittal form, as to the method of
exchanging certificates formerly representing shares of Coltec common stock for
certificates representing shares of BFGoodrich common stock will be mailed to
holders of Coltec common stock promptly following the effective date of the
merger. See "--Conversion of Coltec Common Stock."
CONDITIONS TO COMPLETION OF THE MERGER
Conditions to BFGoodrich's Obligation and Coltec's Obligation to Complete
the Merger. The obligation of BFGoodrich and Coltec to complete the merger are
subject to the satisfaction of certain conditions, including:
- approval and adoption by Coltec shareholders of the merger agreement;
- approval by BFGoodrich shareholders of the issuance of BFGoodrich
common stock in the merger;
- BFGoodrich common stock issuable in the merger must be authorized for
listing on the New York Stock Exchange;
- applicable waiting periods under antitrust and competition laws must
have expired or been terminated;
- all other consents required must have been obtained, unless the
failure to do so would not have a material adverse effect on Coltec or
BFGoodrich;
- the registration statement relating to the issuance of BFGoodrich
common stock in the merger must be effective;
- there may not be any injunction or other order by any court or
governmental entity prohibiting or preventing the merger or requiring
BFGoodrich or Coltec to hold separate or divest any business, product
lines or assets of BFGoodrich or Coltec or requiring BFGoodrich or
Coltec to take any other action as a condition to completing the
merger if that holding separate, divestiture or other action would
have a material adverse effect on BFGoodrich or Coltec; and
56
THE MERGER AGREEMENT
<PAGE> 62
- BFGoodrich and Coltec must have received letters from their
independent auditors confirming that they agree with management's
conclusion that the merger will qualify for "pooling of interests"
accounting treatment under generally accepted accounting principles.
Conditions to Coltec's Obligation to Complete the Merger. The obligation of
Coltec to complete the merger is further subject to the satisfaction of several
conditions, including:
- BFGoodrich and Runway Acquisition Corporation must perform their
obligations under the merger agreement in all material respects;
- representations and warranties of BFGoodrich and Runway Acquisition
Corporation contained in the merger agreement must be true and correct
when made and as if made on the effective date of the merger, except
where the failure of such representations and warranties to be true
and correct would not have a material adverse effect on BFGoodrich;
and
- Coltec must receive a legal opinion of Cravath, Swaine & Moore,
counsel to Coltec, that the merger will constitute a "reorganization"
for federal income tax purposes.
Conditions to Obligations of BFGoodrich and Runway Acquisition Corporation
to Complete the Merger. The obligations of BFGoodrich and Runway Acquisition
Corporation to complete the merger are further subject to the satisfaction of
several conditions, including:
- Coltec must perform its obligations under the merger agreement in all
material respects;
- representations and warranties of Coltec contained in the merger
agreement must be true and correct when made and as if made on the
effective date of the merger, except where the failure of such
representations and warranties to be true and correct would not have a
material adverse effect on Coltec; and
- BFGoodrich must receive a legal opinion from Squire, Sanders & Dempsey
L.L.P., counsel to BFGoodrich, that the merger will constitute a
"reorganization" for federal income tax purposes.
Each of us could, to the extent permitted by applicable law, decide to
waive certain of the conditions to our obligation to complete the merger even
though one or more of these conditions have not been met. In the case of mutual
conditions, however, both of us would have to decide to waive a condition to our
obligations to complete the merger. We cannot guarantee that the conditions to
the merger will be satisfied or waived, or that the merger will be completed at
all.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains some customary representations and warranties
made both by Coltec and by BFGoodrich, including representations and warranties
relating to:
- due organization and good standing;
- capitalization;
- corporate authorization to enter into the transactions contemplated by
the merger agreement;
- governmental reviews and approvals required in connection with the
transactions contemplated by the merger agreement;
- filings with the Securities and Exchange Commission;
- financial statements;
- absence of any breach of organizational documents or material
agreements;
- information included in this joint proxy statement/prospectus;
- absence of certain material changes or events;
- litigation;
57
THE MERGER AGREEMENT
<PAGE> 63
- certain laws regarding takeovers;
- compliance with laws;
- taxes;
- product liability and airworthiness;
- environment;
- accounting and tax matters; and
- determinations by the boards of directors.
In addition, Coltec made certain additional representations and warranties
to BFGoodrich relating to:
- employee benefit plans and plan compliance;
- certain contracts;
- patents and trademarks;
- insurance coverage; and
- year 2000 compliance.
Runway Acquisition Corporation has made some representations and warranties
as to organization, capitalization and authorization.
The representations and warranties in the merger agreement do not survive
the effective date of the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Conduct of Business by Coltec until the Merger Date. From November 22, 1998
until the effective date of the merger, unless BFGoodrich otherwise consents in
writing, Coltec and its subsidiaries must:
- conduct their business in the ordinary course consistent with past
practices;
- use their reasonable best efforts to preserve intact their present
business organizations;
- use their reasonable best efforts to keep available the services of
their present officers and employees; and
- use their reasonable best efforts to preserve their relationships with
customers, suppliers and others having business dealings with them.
In addition, except as otherwise provided in the merger agreement, during
this period Coltec and its subsidiaries may not:
- sell or pledge any of their capital stock;
- amend their organizational documents;
- declare dividends or make any other distribution with respect to their
capital stock;
- redeem, purchase or acquire any shares of their capital stock;
- issue or sell any of their equity securities convertible into or
exchangeable for any of their equity securities other than pursuant to
the exercise of Coltec stock options;
- acquire or sell or otherwise dispose of capital assets or any other
assets other than in the ordinary course of business;
- incur, assume or guarantee any indebtedness from third parties;
58
THE MERGER AGREEMENT
<PAGE> 64
- enter into any severance, termination pay, employment, deferred
compensation or similar agreements with directors, officers or
employees;
- increase employee compensation, severance or other benefits;
- invest in any non-investment grade debt securities except as required
in connection with the convertible preferred securities issued by
Coltec Capital Trust;
- take any action that would disqualify the merger as a "pooling of
interests" for accounting purposes; or
- take certain actions with respect to tax matters.
Conduct of Business by BFGoodrich and Runway Acquisition Corporation until
the Merger Date. From November 22, 1998 until the merger date, unless Coltec
otherwise consents in writing, BFGoodrich and its subsidiaries must:
- conduct their business in the ordinary course consistent with past
practices;
- use their reasonable best efforts to preserve their present business
organizations;
- use their reasonable best efforts to keep available the services of
their present officers and employees;
- use their reasonable best efforts to preserve their relationships with
customers, suppliers and others having business dealings with them;
and
- not take any action that would disqualify the merger as a "pooling of
interests" for accounting purposes.
The merger agreement does not prohibit BFGoodrich from acquiring a
substantial interest in the assets or business of another organization as
BFGoodrich deems appropriate from time to time. However, BFGoodrich or its
subsidiaries may not acquire any asset or other business interest, or sell 50%
or more of the outstanding BFGoodrich common stock to any person, in each case
if such transaction is reasonably likely to raise antitrust, competition law or
trade regulatory issues that are reasonably likely to materially delay, impede
or prohibit the merger.
NO SOLICITATION
Coltec. Coltec has agreed that, until the termination of the merger
agreement, it will not, with respect to Coltec:
- take any action to solicit, initiate or encourage any acquisition
proposal with respect to Coltec;
- enter into any agreement with respect to any acquisition proposal; or
- participate in discussions or negotiations or take any action that may
reasonably be expected to lead to an acquisition proposal with respect
to Coltec.
Coltec may, however, respond to an unsolicited communication regarding an
acquisition proposal if the Coltec board determines that such acquisition
proposal is reasonably likely to result in a superior proposal. Coltec must
notify BFGoodrich promptly if it receives any acquisition proposal.
BFGoodrich. BFGoodrich has agreed that, until termination of the merger
agreement, it will not, with respect to BFGoodrich:
- take any action to solicit, initiate or encourage any acquisition
proposal with respect to BFGoodrich;
- enter into any agreement with respect to any acquisition proposal; or
- participate in discussions or negotiations or take any action that may
reasonably be expected to lead to an acquisition proposal with respect
to BFGoodrich.
59
THE MERGER AGREEMENT
<PAGE> 65
BFGoodrich may, however, respond to an unsolicited communication regarding an
acquisition proposal if the BFGoodrich board determines that such acquisition
proposal is reasonably likely to result in a superior proposal or a transaction
that would not otherwise conflict with the merger agreement. BFGoodrich must
notify Coltec promptly if it receives any acquisition proposal.
When it relates to Coltec, the term "acquisition proposal" means any
proposed:
- merger, consolidation or similar transaction involving Coltec;
- sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of 15% or more, or 50% or
more when used in the context of the termination and expense
reimbursement fees described below, of the consolidated assets of
Coltec and its subsidiaries; or
- issue, sale, or other disposition of, or acquisition of, securities
representing 15% or more, or 50% or more when used in the context of
the termination and expense reimbursement fees described below, of the
voting power of Coltec.
When it relates to BFGoodrich, the term "acquisition proposal" means any
proposed:
- merger, consolidation or similar transaction involving BFGoodrich
pursuant to which the holders of BFGoodrich common stock will own less
than 50% of the BFGoodrich common stock or, if BFGoodrich is not the
surviving entity, less than 50% of the common stock of the combined
entity;
- sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of 50% or more of the
consolidated assets of BFGoodrich and its subsidiaries; or
- issue, sale, or other disposition of, or acquisition of, securities
representing 50% or more of the voting power of BFGoodrich.
When it relates to Coltec, the term "superior proposal" means any
acquisition proposal:
- that is more favorable to Coltec's shareholders than the merger taking
into account the nature of the acquisition proposal, the nature and
amount of the consideration, the likelihood of completion and any
other factors deemed appropriate by the Coltec board; and
- that involves 50% or more, rather than 15% or more, of the assets or
voting stock of Coltec.
When it relates to BFGoodrich, the term "superior proposal" means any
acquisition proposal:
- that is more favorable to BFGoodrich's shareholders than the merger
taking into account the nature of the acquisition proposal, the nature
and amount of the consideration, the likelihood of completion and any
other factors deemed appropriate by the BFGoodrich board.
Before furnishing nonpublic information to, or entering into discussions or
negotiations with, any other persons or entities relating to any acquisition
proposal, Coltec or BFGoodrich, as the case may be, must enter into a customary
confidentiality agreement with that third person, but the confidentiality
agreement may not include any provision calling for an exclusive right to
negotiate with such party.
The party entering into the confidentiality agreement must advise the other
of the nature of any nonpublic information delivered to a third person
reasonably promptly following its delivery to that third person.
TERMINATION; FEES AND EXPENSES
Termination. We can agree to terminate the merger agreement without
completing the merger, and either of us acting alone can terminate the merger
agreement if:
- the merger has not been completed on or before March 31, 2000;
- the BFGoodrich shareholders do not approve the issuance of BFGoodrich
common stock in the merger;
- the Coltec shareholders do not approve and adopt the merger agreement;
60
THE MERGER AGREEMENT
<PAGE> 66
- any of the conditions to our obligation to complete the merger can no
longer be satisfied; or
- any injunction or other order by any court or other governmental entity
has become final and non-appealable and:
- prohibits or prevents the merger; or
- requires BFGoodrich or Coltec to hold separate or divest any business,
product lines or assets of BFGoodrich or Coltec or requires BFGoodrich
or Coltec to take any other action if such holding separate,
divestiture or other action would have a material adverse effect on
BFGoodrich or Coltec.
BFGoodrich, acting alone, can terminate the merger agreement if the
BFGoodrich board has accepted or resolved to accept a superior proposal or if
the Coltec board either fails to reaffirm its support for the merger if
requested in writing by BFGoodrich to do so at any time when an acquisition
proposal with respect to Coltec is outstanding or accepts or resolves to accept
a superior proposal. Coltec, acting alone, can terminate the merger agreement if
the Coltec board has accepted or resolved to accept a superior proposal or if
the BFGoodrich board either fails to reaffirm its support for the merger if
requested in writing by Coltec to do so at any time when an acquisition proposal
with respect to BFGoodrich is outstanding or accepts or resolves to accept a
superior proposal.
Termination and Expense Reimbursement Fees; Termination and Expense
Reimbursement Fee Triggers. Pursuant to the merger agreement, Coltec must pay a
$45 million termination fee to BFGoodrich if the merger agreement is terminated:
- by BFGoodrich because the Coltec board has accepted or resolved to accept
a superior proposal or failed to reaffirm its recommendation concerning
the merger within 10 business days after receipt of any written request
from BFGoodrich to do so at any time when an acquisition proposal with
respect to Coltec has been made and not rejected by the Coltec board;
- by Coltec because the Coltec board has accepted or resolved to accept a
superior proposal; or
- by either BFGoodrich or Coltec where:
- the shareholders of Coltec did not approve and adopt the merger
agreement at the Coltec meeting;
- an acquisition proposal with respect to Coltec had been publicly
disclosed to the shareholders of Coltec and not withdrawn or
terminated prior to the Coltec meeting; and
- within 12 months after such termination of the merger agreement,
Coltec enters into an agreement providing for the completion of an
acquisition proposal with respect to Coltec or an acquisition proposal
with respect to Coltec is completed.
If such termination fee is payable, Coltec must also pay BFGoodrich an
expense reimbursement fee of $5 million for expenses BFGoodrich incurred in
connection with the merger. Coltec must also pay BFGoodrich such $5 million
expense reimbursement fee if BFGoodrich terminates the merger agreement because
one or more of the conditions to BFGoodrich's obligation to complete the merger
is no longer capable of satisfaction and at the time of such termination Coltec
is in material breach of any representation, warranty or material covenant of
Coltec contained in the merger agreement.
Pursuant to the merger agreement, BFGoodrich must pay a $45 million
termination fee to Coltec if the merger agreement is terminated:
- by Coltec because the BFGoodrich board has accepted or resolved to accept
a superior proposal contemplating the termination of the merger agreement
or failed to reaffirm its recommendation concerning the issuance of
BFGoodrich common stock in the merger within 10 business days after
receipt of any written request from Coltec to do so at any time when an
acquisition proposal with respect to BFGoodrich has been made and not
rejected by the BFGoodrich board; or
61
THE MERGER AGREEMENT
<PAGE> 67
- by BFGoodrich because the BFGoodrich board has accepted or resolved to
accept a superior proposal; or
- by either BFGoodrich or Coltec where:
- the shareholders of BFGoodrich did not approve the issuance of
BFGoodrich common stock in the merger at the BFGoodrich meeting;
- an acquisition proposal with respect to BFGoodrich had been publicly
disclosed to the shareholders of BFGoodrich and not withdrawn or
terminated prior to the BFGoodrich meeting; and
- within 12 months after the termination of the merger agreement,
BFGoodrich enters into an agreement providing for the completion of an
acquisition proposal with respect to BFGoodrich or an acquisition
proposal with respect to BFGoodrich is completed.
If such termination fee is payable, BFGoodrich must also pay Coltec an
expense reimbursement fee of $5 million for expenses Coltec incurred in
connection with the merger. BFGoodrich must also pay Coltec such $5 million
expense reimbursement fee if Coltec terminates the merger agreement because one
or more of the conditions to Coltec's obligation to complete the merger is no
longer capable of satisfaction and at the time of such termination BFGoodrich is
in material breach of any representation, warranty or material covenant of
BFGoodrich contained in the merger agreement. The termination and expense
reimbursement fee provisions are customary for transactions like the merger. We
agreed to the amount of the fees and the circumstances under which they are
payable after extensive negotiation.
After input and discussions with our financial advisors, we negotiated the
amount of the termination fee and the expense reimbursement fee based on the
values of our companies, the consideration being paid and estimated
out-of-pocket expenses in connection with the merger and an estimate of the
opportunities that could be lost if the merger agreement were signed, but then
terminated. In addition, our financial advisors advised us that the amount of
these fees is within a customary range when compared to similar transactions.
RECIPROCAL STOCK OPTION AGREEMENTS
When we entered into the merger agreement, we also entered into the
reciprocal stock option agreements, pursuant to which each of us granted the
other party an option to purchase 19.9% of the number of outstanding shares of
its common stock upon the occurrence of some specified events. These options are
customary for transactions like the merger. We agreed to the terms of the
options and the circumstances under which they are exercisable after extensive
negotiation.
The reciprocal stock option agreements are intended to increase the
likelihood that the merger will be completed in accordance with the terms of the
merger agreement. Therefore, some aspects of the reciprocal stock option
agreements may have the effect of discouraging persons who might now or at any
other time before the effective date of the merger be interested in acquiring
all of or a significant interest in BFGoodrich or Coltec from considering or
proposing such an acquisition. This would occur even if, in the case of Coltec,
such persons were prepared to offer to pay the Coltec shareholders more than the
current market value of the shares of BFGoodrich common stock to be received by
the Coltec shareholders pursuant to the merger agreement. The acquisition of
BFGoodrich or Coltec could cause the BFGoodrich option or the Coltec option, as
the case may be, to become exercisable. The existence of the options could
significantly increase the cost to a potential acquirer of acquiring either
BFGoodrich or Coltec compared to the cost if we had not entered into the
reciprocal stock option agreements. This increased cost might discourage a
potential acquirer from considering or proposing an acquisition or might result
in a potential acquirer proposing to pay a lower per share price to acquire
BFGoodrich or Coltec than it might otherwise have proposed to pay. Moreover,
following consultation with their own independent accountants, BFGoodrich and
Coltec believe that the exercise or repurchase of either of the options is
likely to prohibit any other acquirer of BFGoodrich or Coltec from accounting
for that acquisition using the "pooling of interests" accounting method for a
period of two years. Our financial advisors tell us that reciprocal stock
options are within the customary range of actions companies take to ensure
completion of negotiated merger agreements.
62
THE MERGER AGREEMENT
<PAGE> 68
Coltec Reciprocal Stock Option Agreement
Coltec granted to BFGoodrich an irrevocable option to purchase 19.9% of the
total number of issued and outstanding shares of Coltec common stock at a per
share price of $20 1/8 at any time after the merger agreement is terminated and
Coltec has become obligated to pay the termination fee described above. In no
event will the number of shares of Coltec common stock issuable upon exercise of
the option exceed 19.9% of the total number of issued and outstanding shares of
Coltec common stock.
The terms of the Coltec reciprocal stock option agreement also provide that
BFGoodrich may elect to receive cash from Coltec during the option's exercise
period if the market/offer price is determined to be greater than $20 1/8. The
market/offer price is defined, as of any date, as the higher of:
- the price per share offered as of that date pursuant to any tender or
exchange offer or other public offer with respect to the highest
acquisition proposal with respect to Coltec that was made before that
date and has not been terminated or withdrawn as of that date; and
- the fair market value of the Coltec common stock as of that date.
BFGoodrich may exercise the option in whole, but not in part, at any time
after the merger agreement is terminated and Coltec has become obligated to pay
the termination fee. As of the date of this joint proxy statement/prospectus,
BFGoodrich and Coltec do not believe that any event has occurred that would
trigger the payment of the termination fee.
Coltec's obligation to issue Coltec common stock to BFGoodrich upon
BFGoodrich's exercise of the option is subject to some conditions, including,
but not limited to:
- expiration of the applicable waiting periods under antitrust and
competition laws;
- receipt of all other consents relating to the Coltec reciprocal stock
option agreement required under the merger agreement, unless the failure
to do so would not have a material adverse effect on Coltec or
BFGoodrich;
- authorization for listing on the New York Stock Exchange of the Coltec
common stock to be issued pursuant to the option; and
- absence of any preliminary injunction or other order by any court or
other governmental entity prohibiting the issuance of the shares of
Coltec common stock pursuant to BFGoodrich's exercise of the option or
requiring BFGoodrich or Coltec to hold separate or divest any business,
product lines or assets of BFGoodrich or Coltec or requiring BFGoodrich
or Coltec to take any other action if that holding separate, divestiture
or other action would have a material adverse effect on BFGoodrich or
Coltec.
The option granted to BFGoodrich under the Coltec reciprocal stock option
agreement terminates upon the earliest to occur of any of the following events:
- on the effective date of the merger;
- if the merger agreement is terminated and in connection with such
termination Coltec is not obligated to pay the termination fee to
BFGoodrich and cannot as a result of such termination become so
obligated;
- 12 months after the date of termination of the merger agreement where:
- an acquisition proposal with respect to Coltec had been publicly
disclosed to the shareholders of Coltec and not withdrawn or
terminated before the Coltec meeting;
- the merger agreement has been terminated by either BFGoodrich or
Coltec because the shareholders of Coltec did not adopt and approve
the merger agreement at the Coltec meeting; and
- Coltec does not enter into any agreement providing for the completion
of an acquisition proposal with respect to Coltec or an acquisition
proposal with respect to Coltec is not completed, in each case, during
the 12-month period following such termination of the merger
agreement;
63
THE MERGER AGREEMENT
<PAGE> 69
- if BFGoodrich does not exercise the option within 30 days after
BFGoodrich is entitled to exercise this option unless there is a legal
barrier to BFGoodrich's exercise of the option at the expiration of this
30-day period in which case the period in which BFGoodrich may exercise
the option may be extended in up to 180 days from the first date
BFGoodrich could exercise this option;
- if the representations and warranties of BFGoodrich contained in either
the Coltec reciprocal stock option agreement or the merger agreement are
determined to be inaccurate in a material way when made, as of the date
of the termination of the merger agreement or as of the date of
BFGoodrich's purported exercise of the option;
- if BFGoodrich's representations and warranties in either the merger
agreement or the Coltec reciprocal stock option agreement are determined
to have been or to be inaccurate as of the date of the merger agreement,
the time of termination of the merger agreement which gave rise to the
exercisability of the option or the time of BFGoodrich's purported
exercise of the option; or
- if BFGoodrich is determined at either the time of the termination of the
merger agreement which gave rise to the exercisability of the option or
the time of BFGoodrich's purported exercise of the option to be in
material breach of any of its covenants contained in either the Coltec
reciprocal stock option agreement or the merger agreement.
Except as provided in the Coltec reciprocal stock option agreement, neither
the Coltec reciprocal stock option agreement nor the rights or obligations of
BFGoodrich or Coltec may be assigned without the written consent of the other
party.
BFGoodrich Reciprocal Stock Option Agreement
BFGoodrich granted to Coltec an irrevocable option to purchase 19.9% of the
total issued and outstanding shares of BFGoodrich common stock at a per share
price of $35 15/16 at any time the merger agreement is terminated and BFGoodrich
becomes obligated to pay the termination fee described above. In no event will
the number of shares of BFGoodrich common stock issuable upon exercise of the
option exceed 19.9% of the total number of issued and outstanding shares of
BFGoodrich common stock.
The terms of the BFGoodrich reciprocal stock option agreement also provide
that Coltec may elect to receive cash from BFGoodrich during the option's
exercise period if the market/offer price is determined to be greater than
$35 15/16. The market/offer price is defined, as of any date, as the higher of:
- the price per share offered as of that date pursuant to any tender or
exchange offer or other public offer with respect to the highest
acquisition proposal with respect to BFGoodrich that was made before that
date and not terminated or withdrawn as of that date; and
- the fair market value of the BFGoodrich common stock as of that date.
Coltec may exercise the option in whole, but not in part, at any time after
the merger agreement is terminated and BFGoodrich becomes obligated to pay the
termination fee. As of the date of this joint proxy statement/prospectus,
BFGoodrich and Coltec do not believe that any event has occurred that would
trigger the payment of the termination fee.
BFGoodrich's obligation to issue BFGoodrich common stock to Coltec upon
Coltec's exercise of the option is subject to some conditions, including, but
not limited to:
- expiration of the applicable waiting periods under antitrust and
competition laws;
- receipt of all other consents relating to the Coltec reciprocal stock
option agreement required under the merger agreement, unless the failure
to do so would not have a material adverse effect on Coltec or
BFGoodrich;
- authorization for listing on the New York Stock Exchange of the
BFGoodrich common stock to be issued pursuant to the option; and
- absence of any preliminary injunction or other order of any court or
governmental entity prohibiting the issuance of the shares of BFGoodrich
common stock pursuant to Coltec's exercise of the option or requiring
BFGoodrich or Coltec to hold separate or divest any business, product
lines or assets of
64
THE MERGER AGREEMENT
<PAGE> 70
BFGoodrich or Coltec or requiring BFGoodrich or Coltec to take any other
action if that holding separate, divestiture or other action would have a
material adverse effect on BFGoodrich or Coltec.
The option granted to Coltec under the BFGoodrich reciprocal stock option
agreement terminates upon the earliest to occur of any of the following events:
- on the effective date of the merger;
- if the merger agreement is terminated and in connection with such
termination BFGoodrich is not obligated to pay the termination fee to
Coltec and cannot as a result of such termination become so obligated;
- 12 months after the date of termination of the merger agreement where:
- an acquisition proposal with respect to BFGoodrich had been publicly
disclosed to the shareholders of BFGoodrich and not withdrawn or
terminated before the BFGoodrich meeting;
- the merger agreement has been terminated by either BFGoodrich or
Coltec because the shareholders of BFGoodrich did not approve the
issuance of BFGoodrich common stock in the merger at the BFGoodrich
meeting; and
- BFGoodrich does not enter into any agreement providing for the
completion of an acquisition proposal with respect to BFGoodrich or an
acquisition proposal with respect to BFGoodrich is not completed, in
each case, during the 12-month period following such termination of
the merger agreement;
- if Coltec does not exercise the option within 30 days after BFGoodrich is
entitled to exercise this option, unless there is a legal barrier to
Coltec's exercise of the option at the expiration of this 30-day period
in which case the period in which Coltec may exercise this option may be
extended up to 180 days from the first date Coltec could exercise this
option.
- if the representations and warranties of Coltec contained in the
BFGoodrich reciprocal stock option agreement or the merger agreement are
determined to be inaccurate in a material way when made, as of the date
of the termination of the merger agreement or as of the date of Coltec's
purported exercise of the option;
- if Coltec's representations and warranties in either the merger agreement
or the BFGoodrich reciprocal stock option agreement are determined to
have been or to be inaccurate as of the date of the merger agreement, the
time of the termination of the merger agreement which gave rise to the
exercisability of the option or the time of Coltec's purported exercise
of the option; or
- if Coltec is determined at either the time of the termination of the
merger agreement which gave rise to the exercisability of the option or
the time of Coltec's purported exercise of the option to be in material
breach of any of its covenants contained in either the BFGoodrich
reciprocal stock option agreement or the merger agreement.
Except as provided in the BFGoodrich reciprocal stock option agreement,
neither the BFGoodrich reciprocal stock option agreement nor the rights or
obligations of BFGoodrich or Coltec may be assigned without the written consent
of the other party.
AMENDMENT; WAIVER
The merger agreement may be amended in writing if signed by both BFGoodrich
and Coltec. BFGoodrich or Coltec may extend the time for performance, waive any
inaccuracies in the representations and warranties or waive compliance with any
agreements or conditions under the merger agreement by a writing signed by the
party against whom the waiver or extension is to be effective. We may amend the
merger agreement or give each other waivers at any time before or after the
Coltec shareholders approve the merger agreement and the BFGoodrich shareholders
approve the issuance of BFGoodrich common stock in the merger. However, after
the BFGoodrich meeting and the Coltec meeting, we cannot make any amendment or
give any waiver that by law requires further approval by the Coltec shareholders
or BFGoodrich shareholders unless we have obtained those approvals.
65
THE MERGER AGREEMENT
<PAGE> 71
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statements of income
for each of the three years ended December 31, 1996, 1997 and 1998 give effect
to the merger, accounted for as a "pooling of interests." The unaudited pro
forma condensed combined statements of income and the unaudited pro forma
condensed combined balance sheet at December 31, 1998 give effect to the merger
as though Coltec had always been a part of BFGoodrich.
The pro forma information is based on the historical consolidated financial
statements of BFGoodrich and of Coltec, under the assumptions and adjustments
set forth in the accompanying notes to the unaudited pro forma condensed
combined financial statements.
You should read the information shown below in conjunction with the
consolidated historical financial statements of BFGoodrich and of Coltec,
including the respective notes to those financial statements, which are
incorporated by reference in this joint proxy statement/prospectus. We have
presented the pro forma data for comparative purposes only. They are not
necessarily indicative of the results of operations or of the financial position
that would have occurred had the merger been completed during the periods or as
of the date for which the pro forma data are presented, and they are not
necessarily indicative of BFGoodrich's future results of operations or financial
position.
Pro forma per share amounts for the combined BFGoodrich and Coltec entity
are based on the exchange ratio of 0.56 of a share of BFGoodrich common stock
for each share of Coltec common stock.
66
FINANCIAL STATEMENTS
<PAGE> 72
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1998
(DOLLARS IN MILLIONS)
The following unaudited pro forma condensed combined balance sheet as of
December 31, 1998 is presented to show the impact of the proposed merger on
BFGoodrich's historical financial condition. The merger has been reflected under
the "pooling of interests" method of accounting.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BFGOODRICH COLTEC ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............ $ 31.7 $ 21.8 $ $ 53.5
Accounts and notes receivable, net... 629.0 148.2 777.2
Inventories.......................... 772.5 236.0 1,008.5
Deferred income taxes................ 142.1 20.5 162.6
Prepaid expenses and other assets.... 39.2 15.6 54.8
-------- -------- ------- --------
Total current assets......... 1,614.5 442.1 -- 2,056.6
-------- -------- ------- --------
Property............................... 1,255.9 306.6 -- 1,562.5
Deferred income taxes.................. 39.7 -- -- 39.7
Prepaid pensions....................... 148.0 -- 45.3 4(c) 193.3
Goodwill............................... 771.0 214.6 985.6
Identifiable intangible assets......... 112.4 -- 112.4
Other assets........................... 251.1 92.3 343.4
-------- -------- ------- --------
$4,192.6 $1,055.6 $ 45.3 $5,293.5
======== ======== ======= ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements on page
72.
67
FINANCIAL STATEMENTS
<PAGE> 73
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1998
(DOLLARS IN MILLIONS)
(CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BFGOODRICH COLTEC ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank debt................. $ 144.1 $ -- $ $ 144.1
Accounts payable..................... 364.4 96.6 461.0
Accrued expenses..................... 420.1 171.1 591.2
Income taxes payable................. 59.4 -- 59.4
Current maturities of long-term debt
and capital lease obligations..... 2.8 5.1 7.9
-------- -------- --------
Total current liabilities.... 990.8 272.8 -- 1,263.6
-------- -------- ------- --------
Long-term debt and capital lease
obligations.......................... 995.2 577.5 1,572.7
Pension obligations.................... 43.6 -- 33.0 4(c) 76.6
Postretirement benefits other than
pensions............................. 338.1 5.9 344.0
Other non-current liabilities.......... 101.7 214.5 12.3 4(c) 328.5
Deferred income taxes.................. -- 139.9 139.9
Mandatorily redeemable preferred
securities of trusts................. 123.6 145.3 268.9
Shareholders' Equity
Common stock......................... 381.1 0.7 175.9 4(a) 557.7
Additional capital................... 543.7 643.6 (303.8) 4(a)(b) 883.5
Income retained in the business...... 736.8 (795.3) (58.5)
Accumulated other comprehensive
income............................ 3.6 (18.7) (15.1)
Common stock held in treasury, at
cost.............................. (65.6) (127.9) 127.9 4(b) (65.6)
Unearned compensation................ -- (2.7) (2.7)
-------- -------- ------- --------
Total Shareholders' Equity... 1,599.6 (300.3) -- 1,299.3
-------- -------- ------- --------
$4,192.6 $1,055.6 $ 45.3 $5,293.5
======== ======== ======= ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements on page
72.
68
FINANCIAL STATEMENTS
<PAGE> 74
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following unaudited pro forma condensed combined statements of income
are presented to show the impact of the proposed merger on BFGoodrich's
historical results of operations. These statements assume that the companies had
been combined for each period presented.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BFGOODRICH COLTEC ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................ $3,950.8 $1,504.1 $ -- $5,454.9
Operating costs and expenses:
Cost of sales.............................. 2,853.1 1,080.8 3,933.9
Selling and administrative costs........... 610.4 235.2 -- 845.6
Restructuring costs and asset impairment... 10.5 -- -- 10.5
-------- -------- -------- --------
3,474.0 1,316.0 -- 4,790.0
-------- -------- -------- --------
Operating income............................. 476.8 188.1 -- 664.9
Interest expense............................. (79.0) (54.3) -- (133.3)
Interest income.............................. 5.2 0.9 -- 6.1
Other income (expense) -- net................ (18.1) 56.2 -- 38.1
-------- -------- -------- --------
Income from continuing operations before
income taxes and trust distributions....... 384.9 190.9 -- 575.8
Income tax expense........................... (146.3) (64.9) -- (211.2)
Distributions on trust preferred
securities................................. (10.5) (3.7) -- (14.2)
-------- -------- -------- --------
Income from continuing operations............ 228.1 122.3 -- 350.4
Income (loss) from discontinued
operations -- net of taxes................. (1.6) -- -- (1.6)
-------- -------- -------- --------
Income before extraordinary item............. 226.5 122.3 -- 348.8
Extraordinary item -- net of tax............. -- (4.3) -- (4.3)
-------- -------- -------- --------
Net income................................... $ 226.5 $ 118.0 $ -- $ 344.5
======== ======== ======== ========
Basic earnings per share:
Continuing operations...................... $ 3.09 $ 1.88 $ -- $ 3.18
Discontinued operations.................... (0.02) -- -- (0.01)
Extraordinary item......................... -- (0.07) -- (0.04)
-------- -------- -------- --------
Net income................................. $ 3.07 $ 1.81 $ -- $ 3.13
======== ======== ======== ========
Diluted earnings per share:
Continuing operations...................... $ 3.04 $ 1.81 $ -- $ 3.08
Discontinued operations.................... (0.02) -- -- (0.01)
Extraordinary item......................... -- (0.06) -- (0.04)
-------- -------- -------- --------
Net income................................. $ 3.02 $ 1.75 $ -- $ 3.03
======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding -- in
millions
Basic................................... 73.7 65.1 -- 110.2
Diluted................................. 75.0 69.4 -- 113.9
</TABLE>
See notes to unaudited pro forma condensed combined financial statements on page
72.
69
FINANCIAL STATEMENTS
<PAGE> 75
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BFGOODRICH COLTEC ADJUSTMENTS COMBINED
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................ $3,373.0 $1,314.9 $ -- $4,687.9
Operating costs and expenses:
Cost of sales.............................. 2,454.7 898.3 -- 3,353.0
Charge for MD-90 contract.................. 35.2 -- -- 35.2
Selling and administrative costs........... 556.0 218.8 -- 774.8
Merger-related costs....................... 77.0 -- -- 77.0
-------- -------- -------- --------
3,122.9 1,117.1 -- 4,240.0
-------- -------- -------- --------
Operating income............................. 250.1 197.8 -- 447.9
Interest expense............................. (73.0) (54.6) -- (127.6)
Interest income.............................. 12.0 .6 -- 12.6
Gain on issuance of subsidiary stock......... 13.7 -- -- 13.7
Other income (expense) -- net................ 15.0 -- -- 15.0
-------- -------- -------- --------
Income from continuing operations before
income taxes and trust distributions....... 217.8 143.8 -- 361.6
Income tax expense........................... (94.1) (48.9) -- (143.0)
Distributions on trust preferred
securities................................. (10.5) -- -- (10.5)
-------- -------- -------- --------
Income from continuing operations............ 113.2 94.9 -- 208.1
Income from discontinued operations -- net of
taxes...................................... 84.3 -- -- 84.3
-------- -------- -------- --------
Income before extraordinary item............. 197.5 94.9 -- 292.4
Extraordinary item -- net of tax............. (19.3) -- -- (19.3)
-------- -------- -------- --------
Net income................................... $ 178.2 $ 94.9 $ -- $ 273.1
======== ======== ======== ========
Basic earnings per share:
Continuing operations...................... $ 1.59 $ 1.44 $ -- $ 1.93
Discontinued operations.................... 1.19 -- -- 0.78
Extraordinary item......................... (0.27) -- -- (0.18)
-------- -------- -------- --------
Net income................................. $ 2.51 $ 1.44 $ -- $ 2.53
======== ======== ======== ========
Diluted earnings per share:
Continuing operations...................... $ 1.53 $ 1.42 $ -- $ 1.86
Discontinued operations.................... 1.13 -- -- 0.75
Extraordinary item......................... (0.25) $ -- -- (0.17)
-------- -------- -------- --------
Net income................................. $ 2.41 $ 1.42 $ -- $ 2.44
======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding -- in
millions
Basic................................... 71.0 65.9 -- 107.9
Diluted................................. 74.6 66.9 -- 112.1
</TABLE>
See notes to unaudited pro forma condensed combined financial statements on page
72.
70
FINANCIAL STATEMENTS
<PAGE> 76
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BFGOODRICH COLTEC ADJUSTMENTS COMBINED
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................ $2,845.8 $1,159.7 $ -- $4,005.5
Operating costs and expenses:
Cost of sales.............................. 2,042.5 811.1 -- 2,853.6
Selling and administrative costs........... 481.8 191.0 -- 672.8
costs and asset impairment....... 11.2 -- -- 11.2
-------- -------- -------- --------
2,535.5 1,002.1 -- 3,537.6
-------- -------- -------- --------
Operating income............................. 310.3 157.6 -- 467.9
Interest expense............................. (89.3) (76.2) -- (165.5)
Interest income.............................. 4.2 1.3 -- 5.5
Other income (expense) -- net................ (30.8) -- -- (30.8)
-------- -------- -------- --------
Income from continuing operations before
income taxes and trust distributions....... 194.4 82.7 -- 277.1
Income tax expense........................... (68.4) (28.1) -- (96.5)
Distributions on trust preferred
securities................................. (10.5) -- -- (10.5)
-------- -------- -------- --------
Income from continuing operations............ 115.5 54.6 -- 170.1
Income from discontinued operations -- net of
taxes...................................... 58.4 57.1 -- 115.5
-------- -------- -------- --------
Income before extraordinary item............. 173.9 111.7 -- 285.6
Extraordinary item -- net of tax............. -- (30.6) -- (30.6)
-------- -------- -------- --------
Net income................................... $ 173.9 $ 81.1 $ -- $ 255.0
======== ======== ======== ========
Basic earnings per share:
Continuing operations...................... $ 1.74 $ 0.79 $ -- $ 1.62
Discontinued operations.................... 0.87 0.83 -- 1.09
Extraordinary item......................... -- (0.44) -- (0.29)
-------- -------- -------- --------
Net income................................. $ 2.61 $ 1.18 $ -- $ 2.42
======== ======== ======== ========
Diluted earnings per share:
Continuing operations...................... $ 1.65 $ 0.79 $ -- $ 1.57
Discontinued operations.................... 0.83 0.82 -- 1.05
Extraordinary item......................... -- (0.44) -- (0.28)
-------- -------- -------- --------
Net income................................. $ 2.48 $ 1.17 $ -- $ 2.34
======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding -- in
millions
Basic................................... 66.6 69.1 -- 105.3
Diluted................................. 70.9 69.4 -- 109.8
</TABLE>
See notes to unaudited pro forma condensed combined financial statements on page
72.
71
FINANCIAL STATEMENTS
<PAGE> 77
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined statements of income for each of
the three years in the period ended December 31, 1998 and the unaudited pro
forma condensed combined balance sheet at December 31, 1998 give effect to the
merger as though Coltec had always been a part of BFGoodrich.
We have presented the unaudited pro forma condensed combined financial
statements for comparative purposes only. They are not necessarily indicative of
the results of operations or of the financial position that would have occurred
had the merger been completed during the periods or as of the date for which the
pro forma data are presented. They are also not necessarily indicative of
BFGoodrich's future results of operations or financial position.
We have included certain reclassifications in the unaudited pro forma
condensed combined balance sheet and statements of income to conform statement
presentations to those expected to be used by BFGoodrich after the merger.
2. CONFORMITY OF ACCOUNTING POLICIES
We are still in the process of reviewing our respective accounting policies
to determine if they are consistent or if they need to be conformed. As a result
of this review, we might need to restate either Coltec's or BFGoodrich's
financial statements to conform to those accounting policies that are most
appropriate. We have not included any restatements of prior periods in the
unaudited pro forma condensed combined financial statements. At this time, we do
not expect that conforming such accounting policies will have a material impact
on the unaudited pro forma condensed combined financial statements. We will make
any restatements, if appropriate, upon completion of this review process.
3. MERGER-RELATED AND CONSOLIDATION EXPENSES
The unaudited pro forma condensed combined financial statements do not
include any merger-related and consolidation expenses which we expect to incur
in connection with completing the merger and integrating the operations of
BFGoodrich and Coltec. It is not possible to determine the actual amount of
these costs and expenses until the related operational and transitional plans
are complete. These costs and expenses relate to professional and registration
fees; employee benefit-related costs such as severance, relocation and retention
incentives; facility consolidations; and satisfaction of contractual
obligations. Most of these costs and expenses will be incurred to eliminate
duplicate facilities and excess capacity in the combined BFGoodrich operations.
We cannot determine the exact timing of these charges at this time. They are
dependent on the completion of the necessary plans.
In connection with the merger, the managements of BFGoodrich and Coltec
estimate that BFGoodrich will incur a one-time charge for merger-related and
consolidation expenses at the effective date of the merger that is expected to
be material. Other merger-related transaction costs include investment banking
fees, registration and listing fees, and various accounting, legal and other
related costs.
4. PRO FORMA ADJUSTMENTS
Pro forma adjustments to reflect the effect of the merger on the unaudited
pro forma condensed combined balance sheet at December 31, 1998 are as follows:
a. Common stock increased by $175.9 million to record the BFGoodrich
common stock issued in the merger. That increase is calculated by
multiplying the 63.1 million shares of Coltec common stock
outstanding by the exchange ratio of 0.56 and the par value of
BFGoodrich common stock of $5 per share, reduced by $0.7 million to
record the retirement of Coltec common stock.
b. Combined additional capital is adjusted for the effects of pro
forma adjustment a. above, and for the retirement of Coltec
treasury shares.
72
FINANCIAL STATEMENTS
<PAGE> 78
c. Coltec's pension obligations are reclassified in accordance with
BFGoodrich's presentation.
d. For purposes of the pro forma information and references to the
shares to be issued by BFGoodrich in the merger, we have not
included the 14,000,000 shares of BFGoodrich common stock to be
issued in the merger in exchange for the 25,000,000 shares of
Coltec common stock currently owned by a subsidiary of Coltec.
73
FINANCIAL STATEMENTS
<PAGE> 79
DESCRIPTION OF BFGOODRICH STOCK
GENERAL
The authorized capital stock of BFGoodrich as of the date of this joint
proxy statement/prospectus consists of 200,000,000 shares of BFGoodrich common
stock, $5.00 par value, and 10,000,000 shares of series preferred stock, $1.00
par value. Currently, no shares of BFGoodrich series preferred stock are
outstanding. BFGoodrich does not have outstanding, and the BFGoodrich
certificate of incorporation does not authorize, any other classes of capital
stock. As of February 18, 1999, there were 74,387,028 shares of BFGoodrich
common stock outstanding. The following includes a complete description of the
material terms of BFGoodrich common stock.
The following is a summary of the material provisions of the BFGoodrich
certificate of incorporation, the bylaws of BFGoodrich and New York law. If you
would like to review copies of the BFGoodrich certificate of incorporation and
bylaws, these documents are on file with the Securities and Exchange Commission.
For further information on the rights of holders of BFGoodrich common stock, see
"Material Differences in the Rights of Shareholders" on page 75.
COMMON STOCK
Dividends. Subject to all the rights of the BFGoodrich series preferred
stock, the BFGoodrich board may declare and pay dividends on the BFGoodrich
common stock at various times out of the surplus of BFGoodrich legally available
for the payment of dividends.
Voting. Except as otherwise expressly provided with respect to the
BFGoodrich series preferred stock, holders of BFGoodrich common stock have the
exclusive right to vote for the election of directors and for all other
purposes, each holder being entitled to one vote for each share.
Liquidation. Upon any liquidation, dissolution or winding up of BFGoodrich,
whether voluntary or involuntary, and after the holders of the BFGoodrich series
preferred stock have been paid in full the amounts to which they are entitled,
the remaining net assets of BFGoodrich shall be distributed pro rata to the
holders of BFGoodrich common stock in accordance with their rights and
interests.
Other Provisions. Holders of BFGoodrich common stock have no preemptive
rights to subscribe for any additional securities BFGoodrich may issue. There
are no redemption or sinking fund provisions applicable to BFGoodrich common
stock, nor is it subject to calls or assessments by BFGoodrich. All outstanding
shares of BFGoodrich common stock are legally issued, fully paid and
nonassessable. Holders of BFGoodrich common stock do not have preference,
conversion or exchange rights.
PREFERRED STOCK
The BFGoodrich board may issue BFGoodrich series preferred stock at various
times in one or more series and fix the number of shares in each series and all
designations, relative rights, including the right to convert into shares of any
class or into shares of any series of any class, preferences and limitations of
the shares in each series. Currently, no shares of BFGoodrich series preferred
stock are outstanding.
BFGOODRICH RIGHTS
Pursuant to a shareholder rights agreement between BFGoodrich and The Bank
of New York, as rights agent, dated as of June 2, 1997, each share of BFGoodrich
common stock outstanding as of such date also evidences one preferred share
purchase right. Each preferred share purchase right entitles shareholders of
record to purchase from BFGoodrich, one one-thousandth of a share of BFGoodrich
Junior Participating Preferred Stock, Series F, par value $1.00 per share, at an
exercise price of $200. If any person, entity or group acquires a 20% or greater
position in BFGoodrich, each preferred share purchase right then outstanding
becomes the right to buy that number of shares of BFGoodrich common stock which
at the time of the 20% acquisition has a market value of twice the exercise
price. The acquirer who triggers the preferred share purchase rights is excluded
from exercising or transferring his or her preferred share purchase rights. If
74
DESCRIPTION OF BFGOODRICH STOCK
<PAGE> 80
another company merges or otherwise combines with BFGoodrich, or BFGoodrich
sells 50% or more of its assets or earning power, each preferred share purchase
right then outstanding will become a right to buy that number of shares of
common stock of such other company which at the time of such transaction has a
market value of two times the exercise price of the preferred share purchase
rights. The preferred share purchase rights are not exercisable or transferable
apart from the related share of BFGoodrich common stock until the earlier of 10
days following the public announcement of a 20% acquisition, or 10 days
following the commencement or announcement of an intention to make a 20%
acquisition. The preferred share purchase rights remain outstanding until the
earlier of August 2, 2007 or the redemption of the rights plan created by the
shareholder rights agreement. The BFGoodrich board may redeem the preferred
share purchase rights at a price of $0.01 per preferred share purchase right at
any time before a 20% acquisition.
The preferred share purchase rights have certain anti-takeover effects.
They will cause substantial dilution to a person or group that attempts to
acquire BFGoodrich on terms not approved by the BFGoodrich board, except
pursuant to an offer conditioned on a substantial number of preferred share
purchase rights being acquired. The preferred share purchase rights should not
interfere with any merger or other business combination approved by the
BFGoodrich board because the preferred share purchase rights may be redeemed, or
the rights plan may be amended, before a person or group acquires beneficial
ownership of 20% or more of the BFGoodrich common stock.
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
On the effective date of the merger, each share of Coltec common stock will
be converted into BFGoodrich common stock. As a result, shareholders of Coltec,
a Pennsylvania corporation, will become shareholders of BFGoodrich, a New York
corporation, and the BFGoodrich certificate of incorporation, the BFGoodrich
bylaws and New York law will govern the rights of those new BFGoodrich
shareholders. The following is a summary of the material differences between the
rights of Coltec shareholders and BFGoodrich shareholders. These differences
arise from differences between various provisions of New York and Pennsylvania
law, as well as differences between the Coltec articles of incorporation and
bylaws and the BFGoodrich certificate of incorporation and bylaws. Although it
is impractical to compare all of the aspects in which New York and Pennsylvania
law and the companies' governing instruments differ with respect to
shareholders' rights, the following discussion summarizes the material
significant differences between them.
This is a summary of the material provisions of New York and Pennsylvania
law and the BFGoodrich and Coltec charter documents as they affect the rights of
BFGoodrich and Coltec shareholders. We encourage you to read the relevant
provisions of New York and Pennsylvania law, the BFGoodrich certificate of
incorporation and bylaws and the Coltec articles of incorporation and bylaws.
The BFGoodrich certificate of incorporation and bylaws are exhibits to the
registration statement of which this joint proxy statement/ prospectus is a part
or to documents that are incorporated in the registration statement by reference
and are further incorporated by reference in this joint proxy
statement/prospectus.
SIZE OF THE BOARD OF DIRECTORS
Under New York law, a corporation may have one or more directors on its
board. The bylaws or the shareholders may fix the number of directors. The board
of directors may determine the number of directors if specifically permitted by
a shareholder-adopted bylaw. The BFGoodrich bylaws grant the BFGoodrich board
the power to determine the number of directors on the BFGoodrich board.
Like New York, Pennsylvania law allows a corporation to have one or more
directors on its board. Under Pennsylvania law, the bylaws or articles of
incorporation govern the size of the board. If neither the articles of
incorporation nor the bylaws provide for the size of the board, Pennsylvania law
fixes the number of directors on the board at three. Under the Coltec bylaws,
the Coltec board determines the number of directors on the Coltec board, but the
number may be no less than three and no more than fifteen.
75
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 81
CLASSIFICATION OF THE BOARD OF DIRECTORS
New York law provides that a corporation's certificate of incorporation or
a shareholder-adopted bylaw may provide that the directors be divided into two,
three or four classes. All classes must be as nearly equal in number as
possible. Neither the BFGoodrich certificate of incorporation nor the BFGoodrich
bylaws establish classes of directors. Therefore all directors serve one-year
terms.
Pennsylvania law provides that, unless otherwise specified in the articles
of incorporation, a corporation's board of directors may be divided into various
classes with staggered terms of office. All classes must be nearly equal in
number as possible, the term of office of at least one class must expire in each
year and the members of a class may not be elected for a period longer than four
years. If the directors, are to be otherwise classified, the classification must
be done in the articles of incorporation. Neither the Coltec articles of
incorporation nor the Coltec bylaws contain provisions for classification of the
Coltec board, and therefore, all directors serve one-year terms.
CUMULATIVE VOTING
Under New York law, shareholders do not have cumulative voting rights
unless the certificate of incorporation provides for it. In contrast, under
Pennsylvania law, cumulative voting exists unless a corporation's articles of
incorporation provide otherwise. Coltec's articles of incorporation provide that
Coltec shareholders do not have cumulative voting rights. Similarly, because the
BFGoodrich certificate of incorporation does not provide for cumulative voting
rights, BFGoodrich shareholders do not have such rights.
VACANCIES ON THE BOARD
Under New York law, subject to certain exceptions, the board of directors
may fill newly created directorships and vacancies occurring on the board. The
board of directors may fill these seats by a vote of the majority of the
directors in office, even if less than a quorum. However, the certificate of
incorporation or bylaws may provide that such newly created directorships or
vacancies are to be filled by vote of the shareholders and the certificate of
incorporation may impose greater requirements relating to the quorum and vote of
directors needed to fill such vacancies. Vacancies occurring on the board of
directors by reason of the removal of directors without cause may be filled only
by vote of the shareholders unless the certificate of incorporation or a
shareholder-adopted bylaw provides otherwise. A director elected to fill a
vacancy, unless elected by the shareholders, will hold office until his or her
successor has been elected or appointed and qualified at the next
regularly-scheduled election.
Pennsylvania law provides that a majority of the directors then in office,
even if less than a quorum, may fill newly created directorships and all
vacancies, including vacancies resulting from an increase in the size of the
board. In addition, when one or more directors resign from the board effective
at a future date, the directors then in office, including those who have so
resigned, may fill the vacancy or vacancies by a majority vote. Unless the
bylaws specify otherwise, directors selected to fill newly created directorship
and all vacancies serve only the balance of the unexpired term.
Both the BFGoodrich bylaws and the Coltec bylaws provide that a majority of
directors in office may fill all vacancies and newly created directorships.
REMOVAL OF DIRECTORS
New York law permits shareholders to remove any or all directors for cause
and, if the certificate of incorporation or bylaws so provide, without cause, as
long as the following two conditions are met:
- if the corporation has cumulative voting, no director may be removed when
the votes cast against removal would be sufficient to elect him if voted
cumulatively at an election at which the same total number of votes were
cast and the entire board of directors, or the entire class of directors
of which the director for which removal is sought is a member, were then
being elected; and
76
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 82
- when the certificate of incorporation provides that a class or series, or
holders of bonds, voting as a class, is entitled to elect one or more
directors, any director so elected may be removed only by the applicable
vote of the holders of the shares of that class or series or the holders
of such bonds, voting as a class.
In addition, if provided for in the certificate of incorporation or
specific provisions of a shareholder-adopted bylaw, the board of directors may
remove any director with cause, except in the case of a director elected by
cumulative voting or by any class or series, or holders of bonds, voting as a
separate class. Finally, under New York law, the New York State attorney general
or the holders of 10% of the outstanding shares, whether or not such holders are
entitled to vote, may bring an action to procure a judgment to remove a director
for cause. The effect of the BFGoodrich certificate of incorporation and the
BFGoodrich bylaws on these rights is to limit removal of directors to removal
for cause by the shareholders.
With two exceptions under Pennsylvania law, the holders of a majority of
the shares entitled to vote at an election of directors may remove any director,
with or without cause. Those two exceptions are as follows:
- if the corporation has a classified board, shareholders may remove a
director only for cause; and
- if the corporation has cumulative voting, and less than the entire board
of directors is to be removed, then no director may be removed without
cause if the votes cast against his removal would be sufficient to elect
him if cumulatively voted at an election of the entire board of
directors, or if there are classes of directors, at an election of the
class of directors of which he or she is a part.
The Coltec bylaws correspond to Pennsylvania law; therefore a majority of
the shareholders may remove a director, with or without cause.
SPECIAL MEETINGS OF SHAREHOLDERS
Under New York law, the board of directors or any other person authorized
by the certificate of incorporation or the bylaws may call a special meeting of
shareholders. At a special meeting, only business related to the purposes set
forth in the notice of meetings to shareholders may be transacted. In addition,
if an annual shareholder meeting has not been held for a certain period of time
and a sufficient number of directors were not elected to conduct the business of
the corporation, the board of directors must call a special meeting for the
election of directors. If the board of directors fails to do so within a certain
period, or if sufficient directors are not elected within a certain period,
holders of 10% of the shares entitled to vote in an election of directors may
call a special meeting for such an election.
Similarly, Pennsylvania law provides that special meetings of the
shareholders may be called by:
- the board of directors;
- shareholders entitled to cast at least 20% of the vote entitled to be
cast at that meeting; or
- such person or persons as may be authorized by the bylaws.
In addition, under Pennsylvania law, if the annual meeting for election of
directors is not called and held within six months after the designated time,
any shareholder may call the meeting at any time thereafter.
The BFGoodrich bylaws provide that special meetings of the shareholders may
be called at any time by the BFGoodrich board. The Coltec bylaws provide that
special meetings of the shareholders may be called by the chairman of the Coltec
board or by a majority of the members of the Coltec board.
CORPORATE ACTION WITHOUT A SHAREHOLDER MEETING
Under New York law, shareholders may act without a meeting on any action
requiring a vote of shareholders, provided they have the written consent of the
holders of all outstanding shares entitled to vote thereon. A company's
certificate of incorporation may provide for written consent by less than all
the holders, but the BFGoodrich certificate of incorporation does not contain
such a provision.
Under Pennsylvania law, unless otherwise provided in the bylaws,
shareholders may act without a meeting on any action requiring a shareholder
vote, provided they have the written consent of the holders of all outstanding
shares entitled to vote thereon. The Coltec bylaws provide that shareholder
action may not be
77
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 83
taken by written consent of the shareholders. Rather, any shareholder action
must be taken at an annual or special meeting duly noticed and called.
CHARTER AMENDMENTS
Under New York law, a corporation may amend its certificate of
incorporation, if the amendment contains only provisions that could be lawfully
contained in a certificate of incorporation. An amendment or change of the
certificate of incorporation may be authorized by a vote of the board, followed
by a vote of the holders of a majority of all outstanding shares entitled to
vote thereon at a meeting of shareholders.
Under New York law, a proposed amendment must also be authorized by a vote
of the holders of a majority of all outstanding shares of the affected class or
series when it would:
- exclude or limit their right to vote on any matter;
- reduce par value, change the number of authorized shares or fix, change
or abolish, the designation of such class or series, or any of the
relative rights, preferences, limitations or the conversion rights of
such class or series; or
- subordinate their rights by authorizing shares having preferences which
would be superior to their rights.
Under New York law, where any proposed amendment would adversely affect or
subordinate the rights of holders of shares of a series of any class, but not
the entire class, then only the holders of the series whose rights would be
adversely affected or subordinated would be considered a separate class for
purposes of voting on the authorization of the proposed amendment.
Also, New York law provides that when a provision of the certificate of
incorporation requires action by a vote of a greater proportion than is required
by New York law, that provision may only be altered, amended or modified by such
greater vote.
Under New York law, an amendment to the certificate of incorporation does
not require the approval of the shareholders if shares have not been issued or
if the amendment only:
- changes the location of the corporation's office;
- changes the address of the corporation's designated office for service of
process; or
- makes, revokes or changes the designation of the corporation's registered
agent, or specifies or changes the address of the corporation's
registered agent.
The BFGoodrich certificate of incorporation requires the approval of 80% of
the vote entitled to be cast to amend the provisions of the BFGoodrich
certificate of incorporation governing certain transactions between BFGoodrich
and any beneficial holder of 3% or more of the voting power of BFGoodrich's
voting stock, unless such amendment has been approved by directors who are not
affiliated with such holder and who were members of the BFGoodrich board before
such holder's acquisition of 3% or more of the voting power of BFGoodrich.
Generally, under Pennsylvania law, unless the articles of incorporation
require a greater vote, a proposed amendment will be adopted upon receiving the
affirmative vote of a majority of the votes cast by all shareholders entitled to
vote thereon and, if any class or series of shares is entitled to vote thereon
as a class, the affirmative vote of a majority of the votes cast in such class
vote. Also, a proposed amendment of the articles of incorporation will not be
deemed to have been adopted by a corporation unless the board of directors has
also approved the amendment, regardless of the fact that the board submitted the
amendment to the shareholders for action.
78
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 84
Under Pennsylvania law, unless otherwise restricted in the articles of
incorporation, an amendment of the articles of incorporation does not require
the approval of the shareholders if shares have not been issued or if the
amendment only:
- changes the corporate name;
- provides for perpetual existence;
- reduces authorized shares pursuant to acquisition by the corporation of
its own shares; or
- adds or deletes an article providing for a class to be represented by
uncertificated shares.
Also, shareholder approval is not necessary if the corporation has only one
class of shares outstanding and the amendment is solely to increase the number
of authorized shares to effectuate a stock dividend or a stock split and, in
case of a stock split, may also change the par value of the shares.
Under Pennsylvania law, the holders of shares of a class or series are
entitled to vote as a class with respect to an amendment if the amendment would:
- authorize the board of directors to fix and determine the relative rights
and preferences of any preferred or special class;
- make any change in the preferences, limitations or special rights of the
shares of a class or series adverse to the class or series other than
preemptive rights or the right to vote cumulative;
- authorize a new class or series having a preference as to dividends or
assets which is senior to the shares of a class or series; or
- increase the number of authorized shares of any class or series having a
preference as to dividends or assets which is senior in any respect to
the shares of a class or series.
The Coltec articles of incorporation provide that amendments to the Coltec
articles of incorporation may be made in accordance with Pennsylvania law.
BYLAW AMENDMENTS
Under New York law, the shareholders may by majority vote amend, repeal or
adopt bylaws, except as otherwise provided in the certificate of incorporation.
The board may also amend, repeal or adopt bylaws when permitted by the
certificate of incorporation or a shareholder-adopted bylaw. The BFGoodrich
certificate of incorporation authorizes the BFGoodrich board to make, alter,
amend or repeal the BFGoodrich bylaws by the affirmative vote of the majority of
directors, but any bylaws made by the board may be altered, amended or repealed
by the shareholders.
Under Pennsylvania law, after a corporation receives payment for any of its
stock, the power to adopt, amend or repeal bylaws resides exclusively in the
shareholders unless the bylaws confer a concurrent power on the board of
directors. However, even if the shareholders confer concurrent power on the
board of directors, the directors have no authority to adopt or change a bylaw
on any subject that is committed expressly to the shareholders by Pennsylvania
law. The Coltec bylaws confer concurrent power on the board of directors.
BUSINESS COMBINATIONS
Under New York law, a merger, consolidation, disposition of substantially
all the assets of a corporation or share exchange requires the approval of
holders of a majority of the outstanding shares entitled to vote, unless, as is
the case with BFGoodrich, the corporation was in existence on February 23, 1998
and the corporation has not expressly amended its certificate of incorporation
to provide for the approval of such transactions by a majority vote, in which
case such transactions must be approved by holders of two-thirds of the
outstanding shares entitled to vote. The BFGoodrich certificate of incorporation
contains an additional requirement applicable to a merger, consolidation or
other business combination with an entity that is, or is
79
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 85
affiliated with, a beneficial owner of 20% or more of the voting power of
BFGoodrich's voting stock. Such a transaction requires the approval of holders
of 80% of the voting power of BFGoodrich's voting stock unless:
- the business combination is recommended by a majority of BFGoodrich
directors who are unaffiliated with the 20% shareholder and who were
members of the BFGoodrich board before the time that the 20% shareholder
became a 20% shareholder; or
- certain pricing and procedural requirements are met.
In general, the pricing and procedural requirements are designed to insure
that:
- shareholders whose BFGoodrich shares are being acquired in the business
combination receive the most favorable amount and form of consideration
paid by the 20% shareholder for previously acquired shares of BFGoodrich;
- the 20% shareholder did not receive economic benefits from BFGoodrich
greater than those received by all shareholders; and
- there is not a decrease in the rate of dividends paid by BFGoodrich or
other change in the business or equity capital structure during the
period in which the 20% shareholder is a 20% shareholder.
Under Pennsylvania law, a merger or consolidation requires approval of the
corporation's board of directors and the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote.
Under Pennsylvania law, unless a corporation has opted out of certain
statutory provisions, shares of a corporation whose shares are registered under
the Securities Exchange Act of 1934 acquired in a "control share acquisition" do
not have voting rights unless restored by a resolution approved by a vote of the
disinterested shareholders. The acquisition of Coltec shares is subject to this
provision. Under Pennsylvania law a "control share acquisition" means an
acquisition by any person of voting power of a corporation that would, when
added to all other voting power of such person, entitle such person to cast for
the first time, the amount of voting power in any of the following ranges:
- at least 20% but less than 33 1/3%;
- at least 33 1/3% but less than 50%; or
- 50% or more.
ANTITAKEOVER PROTECTION
Interested Shareholder Transactions. Both New York and Pennsylvania law
prohibit a corporation from engaging in a business combination with the
beneficial owner of 20% or more of the corporation's stock for 5 years from the
time the shareholder acquired the stock, unless certain conditions are met.
Under New York law, a corporation may engage in a business combination with
a 20% shareholder within the five-year period if:
- the 20% shareholder's stock purchase was approved by the corporation's
board of directors before the purchase; or
- the business combination was approved by the corporation's board of
directors before the 20% shareholder's stock acquisition date.
After the expiration of the five-year period, the business combination will
be permitted if:
- the combination was approved by the affirmative vote of the holders of a
majority of the outstanding voting stock beneficially owned by
disinterested shareholders at a meeting called no earlier than five years
after the 20% shareholder's stock acquisition date; or
- the price paid to all the shareholders meets statutory criteria
establishing a formula price.
80
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 86
The formula price is the higher of the price paid by the 20% shareholder or
the market value of the stock, computed as the higher of the value when acquired
or when the announcement of the business combination was made, plus interest on
United States Treasury securities, less dividends paid on the stock.
Under Pennsylvania law, a corporation whose shares are registered under the
Securities Exchange Act of 1934 that has not opted out of certain statutory
provisions may engage in a business combination with a 20% shareholder within
the five-year period if:
- the 20% shareholder's stock purchase was approved by the corporation's
board of directors before the share acquisition date;
- the business combination itself was approved by the corporation's board
of directors before the share acquisition date;
- the business combination is approved by the affirmative vote of all of
the holders of all of the outstanding common shares; or
- the business combination is approved by the affirmative vote of the
majority of disinterested shareholders no earlier than three months after
the share acquisition date, provided the 20% shareholder is the
beneficial owner of 80% of the voting shares of the corporation and
provided the price paid to all shareholders meets statutory criteria
establishing a formula price.
After the expiration of the five-year period, the business combination will
be permitted if:
- approved by a majority of disinterested shareholders; or
- approved by the affirmative vote of the shareholders provided the price
to be paid meets the formula price.
The formula price is the higher of the price paid by the 20% shareholder
any time within five years before the announcement date of the combination or
the share acquisition date, whichever is higher or the market value of the stock
as of the announcement date or the share acquisition date, whichever is higher,
plus interest on United States Treasury securities, less dividends paid on the
stock. Coltec has not opted out of the Pennsylvania law provisions regarding a
business combination with a 20% shareholder.
Anti-Greenmail Provisions. New York law provides that no domestic
corporation may purchase more than 10% of its stock from a shareholder who has
held the shares for less than two years at any price which is higher than the
market price, unless such transaction is approved by both the corporation's
board of directors and a majority of the shares entitled to vote or the
corporation offers to purchase shares from all shareholders on the same terms.
In addition, the BFGoodrich certificate of incorporation contains a similar
requirement applicable to any purchase by BFGoodrich of its shares from a
beneficial owner of 3% or more of the class of securities being acquired.
Pennsylvania law provides that, unless a corporation has opted out, any
profit realized by any person or group that acquires voting control over at
least 20% of a corporation whose shares are registered under the Securities
Exchange Act of 1934 pursuant to the disposition of equity securities of the
registered corporation within two years before or 18 months after becoming a 20%
shareholder is recoverable by the corporation. Coltec has opted out of this
provision of Pennsylvania law.
INTERESTED DIRECTOR TRANSACTIONS
Both New York and Pennsylvania law provide similar rules for transactions
between a corporation and one or more of its directors or between a corporation
and another entity in which the corporation's director is also a director or in
which the director has a financial interest. Under the laws of both states, such
a transaction is not void or voidable solely because:
- of the director's interest;
- the interested director was present at or participated in the meeting at
which the transaction was authorized; or
81
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 87
- the interested director's vote counted in the authorization of the
transaction.
Such a transaction is not void or voidable provided:
- the board of directors knows or learns of the material facts regarding
the director's interest and the board authorizes the transaction by the
affirmative vote of a majority of disinterested directors;
- the shareholders entitled to vote on the transaction know or are told in
good faith the material facts regarding the director's interest, and the
shareholders approve the transaction; or
- the transaction is fair to the corporation as of the time it is
authorized by the board of directors or shareholders.
Neither the BFGoodrich charter documents nor the Coltec charter documents
alter the statutory rules regarding interested director transactions.
SHAREHOLDER RIGHTS PLAN
BFGoodrich has adopted a preferred share purchase rights plan. See
"Description of BFGoodrich Stock -- BFGoodrich Rights." Coltec does not have a
preferred share purchase rights plan or any other comparable stock plan.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Under New York law, a corporation may indemnify any person made, or
threatened to be made, a party to any action or proceeding, except for
shareholder derivative suits, by reason of the fact that he or she was a
director or officer of the corporation, provided such director or officer acted
in good faith for a purpose which he or she reasonably believed to be in the
best interests of the corporation and, in criminal proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Indemnification may
be provided against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred as a
result of such action, proceeding or appeal. New York law also provides that
expenses incurred in defending a civil or criminal action or proceeding may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay the amount if it is ultimately determined that such person was
not entitled to such indemnification. Under New York law, the termination of any
civil or criminal action or proceeding by judgment, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, will not in itself create a
presumption that any director or officer did not act in good faith for a purpose
which he reasonably believed to be in the best interest of the corporation or
that he had reasonable cause to believe that his conduct was unlawful.
In the case of shareholder derivative suits, the corporation may indemnify
any person by reason of the fact that he or she was a director or officer of the
corporation if he or she acted in good faith for a purpose which he or she
reasonably believed to be in the best interests of the corporation, except that
no indemnification may be made in respect of:
- a threatened action, or a pending action which is settled or otherwise
disposed of; or
- any claim, issue or matter as to which such person has been adjudged to
be liable to the corporation, unless and only to the extent that the
court in which the action was brought, or, if no action was brought, any
court of competent jurisdiction, determines upon application that the
person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The indemnification and advancement of expenses under New York law is not
exclusive of other indemnification rights to which a director or officer may be
entitled, provided that no indemnification may be made to or on behalf of any
director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his or her acts were committed in bad faith
or were the result of active and
82
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 88
deliberate dishonesty and were material to the cause of action or that he or she
personally gained a financial profit or other advantage to which he or she was
not legally entitled.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered by
a court pursuant to New York law, any indemnification under New York law may be
made only if authorized in the specific case and after a finding that the
director or officer met the requisite standard of conduct:
- by the disinterested directors if a quorum is available; or
- if a quorum of disinterested directors is not available, by either the
board of directors upon the written opinion of independent legal counsel,
or the shareholders.
Pursuant to Pennsylvania law, except as otherwise provided in the
corporation's bylaws, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation. Such person may be indemnified against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
action, suit or proceeding if:
- he or she acted in good faith;
- in a manner which he or she reasonably believed to be in or not opposed
to the best interest of the corporation; and
- with respect to any criminal action or proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.
In the case of shareholder derivative suits, a corporation may indemnify
any person who is or was a representative of the corporation, or is or was
serving at the request of the corporation as a representative of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including attorneys' fees, actually and reasonably incurred in
connection with the defense or settlement of such action or suit if:
- he or she acted in good faith; and
- in an manner which he or she reasonably believed to be in or not opposed
to the best interests of the corporation.
However, indemnification may not be made for any claim, issue or matter as
to which such person has been adjudged by a court of competent jurisdiction, to
be liable to the corporation, unless and only to the extent a proper court
determines upon that the person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper.
Any such person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding is entitled to
indemnification against expenses, including attorneys' fees actually and
reasonably incurred by such person in connection with the defense.
Unless ordered by a court, any indemnification must be made by the
corporation only as authorized:
- by the shareholders;
- by majority vote of a quorum the directors who were not parties to the
action, suit or proceeding; or
- if such a quorum is not obtainable, or if such directors so direct, by
independent legal counsel in written opinion.
The indemnification and advancement of expenses authorized by Pennsylvania
law does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise.
83
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 89
Expenses, including attorneys' fees, incurred by an officer or director
defending any civil, criminal administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
the action, suit or proceeding if the director or officer agrees to repay the
amount if it is ultimately determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid on such terms and conditions as the board of directors
deems appropriate.
Both the BFGoodrich certificate of incorporation and bylaws and the Coltec
articles provide that the corporation shall indemnify officers and directors,
and certain other persons, to the fullest extent permitted under the applicable
statute. In addition, the Coltec articles of incorporation extend
indemnification to include payment of damages including punitive damages. The
Coltec articles of incorporation also broaden the standard for indemnification
to provide indemnification unless a court has found recklessness or willful
misconduct.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
New York provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of directors
to the corporation or its shareholders for damages for any breach of duty in
such capacity. However, no such provision can eliminate or limit:
- the liability of any director if a judgment or other final adjudication
adverse to such director establishes that:
- such director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law,
- the director personally gained a financial profit or other advantage
to which such director was not legally entitled or
- the director's acts violated certain provisions of New York law; or
- the liability of any director for any act or omission prior to the
adoption of such a provision in the certificate of incorporation.
Pennsylvania law provides that a corporation's articles may contain a
provision eliminating or limiting the personal liability of directors to the
corporation or its shareholders for damages for any breach of duty in such
capacity. However, no such provision can eliminate or limit:
- the liability of any director if a judgment or other final adjudication
establishes that:
- such director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, or
- the director personally gained a financial profit or other advantage
to which such director was not legally entitled; or
- the liability of any director for any act or omission before the adoption
of such provision in the articles of incorporation.
Both the BFGoodrich certificate of incorporation and the Coltec articles of
incorporation include a provision eliminating, to the fullest extent permitted
by law, the personal liability of directors.
CONSTITUENCIES STATUTES
New York law provides that in taking action, including any action which may
involve or relate to a change or potential change in the control of the
corporation, directors shall be entitled to consider a number of factors,
including:
- both the short-term and the long-term interests of the corporation and
its shareholders, and the effects that the corporation's actions may have
in the short-term or in the long-term upon:
- the prospects for potential growth, development, productivity and
profitability of the corporation ;
- current employees;
84
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 90
- retired employees and other beneficiaries receiving or entitled to
receive retirement, welfare or similar benefits under any plan
sponsored by, or any agreement entered into by, the corporation;
- customers and creditors; and
- the ability of the corporation to provide, as a going concern, goods,
services, employment opportunities and employment benefits and
otherwise to contribute to the communities in which it does business.
Pennsylvania law provides that the board of directors, committees of the
board and individual directors of a business corporation may, in considering the
best interests of the corporation, consider to the extent they deem appropriate:
- the effects of any action on any or all groups affected by such action,
including shareholders, employees, suppliers, customers and creditors of
the corporation, and upon communities in which offices or other
establishments of the corporation are located;
- the short-term and long-term interests of the corporation, including
benefits that the corporation may enjoy from its long-term plans and the
possibility that these interests may be best served by the continued
independence of the corporation;
- the resources, intent and conduct, past, stated and potential, of any
person seeking to acquire control of the corporation; and
- all other pertinent factors.
Pennsylvania law also provides that, in considering the best interests of
the corporation, the board of directors, committees of the board of directors
and individual directors are not required to regard any corporate or other
interest as dominant or controlling.
DIVIDENDS
Under New York law, a corporation may declare and pay dividends in cash,
bonds of the corporation or property of the corporation only out of surplus, but
no dividend may be declared and paid when:
- the corporation is insolvent;
- the corporation would be made insolvent by such payment; or
- the certificate of incorporation restricts such payment.
Under Pennsylvania law, the board of directors of a corporation may, except
as otherwise provided in its bylaws, declare and pay distributions to
shareholders in cash, property or shares, provided that a distribution may not
be made if, after giving effect thereto:
- the corporation would be unable to pay its debts as they become due in
the usual course of its business or
- the total assets of the corporation would be less than the sum of its
total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time the distribution is
approved, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving
the distribution. Total assets and liabilities for this purpose are to be
determined by the board of directors, which may base its determination on
such factors as it considers relevant, including the book value of the
corporation's assets and liabilities and unrealized appreciation and
depreciation of the corporation's assets.
LOANS TO DIRECTORS
Under New York law, a corporation may make a loan to or guarantee an
obligation of a director in the following situations:
- when the loan or guarantee is approved by the shareholders, provided that
shares held of record or beneficially owned by directors who benefit by
such loan or guarantee may not vote and are not included in the
determination of a quorum; or
85
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 91
- for a corporation in existence on February 23, 1998, if its certificate
of incorporation expressly provides that the corporation may make such
loans or issue such guarantees; or
- for a corporation incorporated after February 23, 1998, when the board
determines that the loan or guarantee benefits the corporation and
approves either the specific transaction or a general plan authorizing
such transactions.
Pennsylvania law permits loans, guarantees of obligations or similar
undertakings by a corporation to its directors, officers or employees.
SHAREHOLDER RECORDS
New York law allows any shareholder to examine the shareholder minutes and
record book during usual business hours, upon at least five days' written
demand. A corporation may deny such a request upon the refusal of the individual
demanding inspection to provide an affidavit that the inspection is not for
purposes other than those in the interest of the business of the corporation and
that such person has not been involved in the sale of any shareholder lists
within the past five years. If a corporation denies a shareholder request, the
person seeking inspection may apply to the appropriate court for an order
directing the corporation to show cause why an order permitting inspection
should not be granted.
Under Pennsylvania law, every shareholder has a statutory right to inspect
the stock list or books and records of a corporation for a proper purpose during
the usual hours for business upon submitting a written verified demand stating
his or her purpose. If a corporation does not grant inspection to a shareholder
within five business days of a demand, the shareholder may apply to the court
for an order to enforce his or her demand. A proper purpose is any purpose
reasonably related to such person's status as a shareholder in a corporation.
ISSUANCE OF RIGHTS OR OPTIONS TO PURCHASE SHARES TO DIRECTORS, OFFICERS AND
EMPLOYEES
New York law requires approval of a majority of the votes cast at a meeting
of shareholders to issue options or rights to purchase shares of a corporation
to directors, officers and employees of the corporation or its subsidiaries or
affiliates. Pennsylvania law provides that the issuance of options or rights to
such persons may be authorized by the board of directors, unless the articles of
incorporation provides otherwise. There is no such provision in the Coltec
articles of incorporation; therefore, the Coltec board may authorize such
issuance without shareholder approval.
DISSENTERS' RIGHTS
New York law provides that, upon compliance with certain requirements and
procedures, a dissenting shareholder has the right to receive the fair value for
his or her shares if such shareholder objects to certain:
- mergers or consolidations;
- dispositions of assets requiring shareholder approval;
- share exchanges; or
- amendments or changes to the certificate of incorporation adversely
affecting his or her shares.
Dissenters' rights are also available to any shareholder not entitled to
vote with respect to a plan of merger or consolidation, whose shares will be
cancelled or exchanged in the merger or consolidation for cash or consideration
other than shares of the surviving or consolidating corporation or another
corporation. However, no dissenters' rights are available with respect to shares
that, at the applicable record date, were listed on a national securities
exchange or were designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
Under Pennsylvania law, a shareholder may dissent from, and receive payment
of the fair value of its shares in the event of certain mergers, consolidations,
share exchanges, asset transfers and corporate divisions. However, no
dissenters' rights are available with respect to shares which, at the applicable
record date, were either listed on a national securities exchange or held of
record by more than 2,000 shareholders, unless the
86
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
<PAGE> 92
holders of such shares are required by the terms of the merger or consolidation
to accept any consideration other than shares of the surviving corporation,
shares of stock of another corporation or such shares and cash in lieu of
fractional shares. Because Coltec's shares are listed on a national securities
exchange, and because the enumerated exceptions do not apply, no dissenters'
rights are available to Coltec's shareholders with respect to the merger.
OTHER MATTERS
We do not expect that any matters other than those described in this joint
proxy statement/prospectus will be brought before the BFGoodrich meeting or the
Coltec meeting. If any other matters are presented, however, we intend to vote
your proxy in accordance with our discretion.
LEGAL MATTERS
The validity of the shares of BFGoodrich common stock to be issued in the
merger is being passed upon for BFGoodrich by Nicholas J. Calise, esquire, vice
president, associate general counsel and secretary of BFGoodrich. As of February
18, 1999, Mr. Calise owned 13,617 shares of BFGoodrich common stock; has
deferred receipt of 6,079 shares of BFGoodrich common stock under BFGoodrich's
1995-1997 Long Term Incentive Plan; has contingently credited to his account
2,671 phantom shares under the 1998-2000 Long Term Incentive Plan, all of which
are subject to forfeiture; held options to purchase 87,100 shares of BFGoodrich
common stock; and had credited to his account in BFGoodrich's retirement plus
savings plan approximately 5,324 shares of BFGoodrich common stock. In addition,
Mr. Calise's wife owns 1,000 shares, although Mr. Calise disclaims beneficial
ownership of these shares. The federal income tax consequences of the merger
will be passed upon for BFGoodrich by Squire, Sanders & Dempsey L.L.P.
The federal income tax consequences of the merger will be passed upon for
Coltec by Cravath, Swaine & Moore.
EXPERTS
Ernst & Young LLP, independent auditors, have audited BFGoodrich's
consolidated financial statements included in its Annual Report on Form 10-K for
the year ended December 31, 1998 as set forth in their report, which as to 1996
is based in part on the report of Deloitte & Touche LLP, independent auditors,
and which is incorporated in this joint proxy statement/prospectus by reference.
BFGoodrich's consolidated financial statements are incorporated by reference in
reliance on their reports, given on their authority as experts in accounting and
auditing.
Arthur Andersen LLP, independent auditors, have audited Coltec's
consolidated financial statements and schedules included in its Annual Report on
Form 10-K for the year ended December 31, 1997 and Coltec's consolidated
financial statements included in Coltec's Current Report on Form 8-K filed March
4, 1999, as set forth in their reports which are incorporated in this joint
proxy statement/prospectus by reference. Coltec's consolidated financial
statements are incorporated by reference in reliance on their reports, given on
their authority as experts in accounting and auditing.
87
EXPERTS
<PAGE> 93
SHAREHOLDER PROPOSALS
The Coltec board has not yet scheduled the next Coltec annual meeting of
shareholders and, under Coltec's bylaws and Pennsylvania law, the date of the
next Coltec annual meeting of shareholders may be set by the Coltec board for
any date during the calendar year 1999. Coltec will not have any shareholder
meetings following the merger. Shareholder proposals may, under the rules of the
Securities and Exchange Commission, be submitted for inclusion in Coltec's proxy
materials for its next annual meeting of shareholders. If the next Coltec annual
meeting of shareholders were to be held on or before June 6, 1999, shareholder
proposals would have had to have been received by Coltec not later than November
20, 1998. If the next Coltec annual meeting of shareholders is scheduled for a
later date, the deadline for submitting shareholder proposals will be a
reasonable time before Coltec begins to print and mail its proxy materials.
To be considered for inclusion in BFGoodrich's proxy materials for its 1999
annual meeting of shareholders, shareholder proposals must have been submitted
to the secretary of BFGoodrich no later than November 13, 1998.
88
SHAREHOLDER PROPOSALS
<PAGE> 94
WHERE YOU CAN FIND MORE INFORMATION
BFGoodrich filed a registration statement on Form S-4 to register with the
Securities and Exchange Commission the BFGoodrich common stock to be issued to
Coltec shareholders in the merger. This joint proxy statement/prospectus is a
part of that registration statement and constitutes a prospectus of BFGoodrich
in addition to being a proxy statement of BFGoodrich for the BFGoodrich meeting
and Coltec for the Coltec meeting. The registration statement, including the
attached exhibits and schedules, contains additional relevant information. As
allowed by Securities and Exchange Commission rules, this joint proxy
statement/prospectus does not contain all the information contained in the
registration statement or in the exhibits and schedules to the registration
statement.
Each of us files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information we file at the Securities
and Exchange Commission's public reference rooms at the following locations:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, DC 20549
New York Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Chicago Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661-2511
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov."
In addition, our filings can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this joint proxy statement/prospectus, which means
that we can disclose important information to you by referring you to other
information we have filed with the Securities and Exchange Commission. The
information incorporated by reference is deemed to be part of this joint proxy
statement/prospectus, except for any information superseded by information in
this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the
documents set forth below that each of us has previously filed with the
Securities and Exchange Commission. These documents contain important
information about our companies.
<TABLE>
<CAPTION>
BFGOODRICH SEC FILINGS (FILE NO. 1-892) PERIOD OR DATE FILED
- --------------------------------------- --------------------
<S> <C> <C> <C>
Annual Report on Form 10-K Year ended: - December 31, 1998
Registration Statement on Form 8-A Filed on: - July 27, 1987
(description of BFGoodrich common
stock)
Registration Statement on Form 8-A Filed on: - June 19, 1997
(description of BFGoodrich preferred
share purchase rights)
</TABLE>
89
MORE INFORMATION
<PAGE> 95
<TABLE>
<CAPTION>
COLTEC SEC FILINGS (FILE NO. 1-7568) PERIOD OR DATE FILED
- ------------------------------------ --------------------
<S> <C> <C> <C>
Annual Report on Form 10-K Year ended: - December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended: - March 29, 1998;
- June 28, 1998; and
- September 27, 1998
Current Reports on Form 8-K Filed on: - April 3, 1998;
- April 9, 1998;
- April 16, 1998;
- May 15, 1998;
- November 24, 1998;
- December 21, 1998;
- December 23, 1998;
- January 25, 1999;
- March 1, 1999; and
- March 4, 1999
Coltec's consolidated financial Filed on: - March 4, 1999
statements included in the Current
Report on Form 8-K
Registration Statement on Form 8-A Filed on: - March 9, 1992
(description of Coltec common
stock)
</TABLE>
We are also incorporating by reference additional documents that we file
with the Securities and Exchange Commission between the date of this joint proxy
statement/prospectus and the date of the BFGoodrich meeting and the Coltec
meeting. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
You can request a free copy of any or all of these documents, other than
the exhibits to these documents unless those exhibits are specifically
incorporated by reference into these documents, by writing to or calling the
appropriate party at the following address or telephone number:
<TABLE>
<S> <C>
Nicholas J. Calise, Secretary Robert J. Tubbs, Secretary
The B.F.Goodrich Company Coltec Industries Inc
4020 Kinross Lakes Parkway 3 Coliseum Centre
Richfield, Ohio 44286-9368 2550 West Tyvola Road
(330) 659-7600 Charlotte, North Carolina 28217
(704) 423-7000
</TABLE>
If you would like to request documents from us, please do so by April 1,
1999 to receive these before the BFGoodrich meeting and the Coltec meeting.
BFGoodrich has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to BFGoodrich, and
Coltec has supplied all such information relating to Coltec.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO DECIDE HOW TO VOTE ON THE
MERGER. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM OR IN ADDITION TO WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION OF THIS
SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A JURISDICTION WHERE IT IS
UNLAWFUL TO OFFER TO EXCHANGE OR SELL OR TO ASK FOR OFFERS TO EXCHANGE OR BUY
THE SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS OR TO ASK FOR
PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THOSE
ACTIVITIES, THEN THE OFFER PRESENTED IN THIS JOINT PROXY STATEMENT/PROSPECTUS
DOES NOT EXTEND TO YOU. THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS SPEAKS ONLY AS OF ITS DATE UNLESS THE INFORMATION
SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
90
MORE INFORMATION
<PAGE> 96
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
BFGoodrich Selected Companies..... 41
BFGoodrich Selected
Transactions.................... 43
Coltec Selected Companies......... 41
Coltec Selected Transactions...... 42
Comparable Aerospace Index........ 34
Comparable Industrial Index....... 34
CSFB.............................. 22
</TABLE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
DCF............................... 40
EBIT.............................. 35
EBITDA............................ 35
EPS............................... 35
I/B/E/S........................... 35
LTM............................... 37
</TABLE>
INDEX OF DEFINED TERMS
91
<PAGE> 97
ANNEX A
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
NOVEMBER 22, 1998
AMONG
THE B.F.GOODRICH COMPANY,
RUNWAY ACQUISITION CORPORATION
AND
COLTEC INDUSTRIES INC
<PAGE> 98
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1 The Merger.................................................. A-1
Section 1.2 Effective Date of the Merger................................ A-1
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation and By-Laws....................... A-1
Section 2.2 Board of Directors; Officers................................ A-1
Section 2.3 Effects of Merger........................................... A-2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio.............................................. A-2
Section 3.2 Stock Options............................................... A-2
Section 3.3 Parent to Make Certificates Available....................... A-3
Section 3.4 Dividends; Transfer Taxes................................... A-3
Section 3.5 No Fractional Shares........................................ A-4
Section 3.6 Exchange Agent.............................................. A-4
Section 3.7 Shareholders' Meetings...................................... A-4
Section 3.8 Closing of the Company's Transfer Books..................... A-5
Section 3.9 Assistance in Consummation of the Merger.................... A-5
Section 3.10 Closing..................................................... A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization and Qualification.............................. A-5
Section 4.2 Capitalization.............................................. A-5
Section 4.3 Subsidiaries................................................ A-6
Section 4.4 Authority Relative to this Merger Agreement and the Cross A-6
Stock Option Agreements.....................................
Section 4.5 Reports and Financial Statements............................ A-7
Section 4.6 Absence of Certain Changes or Events........................ A-7
Section 4.7 Litigation.................................................. A-7
Section 4.8 Takeover Provisions Inapplicable............................ A-7
Section 4.9 Compliance with Applicable Laws............................. A-7
Section 4.10 Taxes....................................................... A-8
Section 4.11 Product Liability; Airworthiness............................ A-9
Section 4.12 Environment................................................. A-9
Section 4.13 Accounting; Tax Matters..................................... A-10
Section 4.14 Parent Action............................................... A-10
Section 4.15 Lack of Ownership of Company Common Stock................... A-10
Section 4.16 Financial Advisor........................................... A-10
Section 4.17 Fairness Opinion............................................ A-10
</TABLE>
A-i
<PAGE> 99
<TABLE>
<S> <C> <C>
ARTICLE IV -- A
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Section 4A.1 Organization................................................ A-10
Section 4A.2 Capitalization.............................................. A-10
Section 4A.3 Authority Relative to this Merger Agreement................. A-11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and Qualification.............................. A-11
Section 5.2 Capitalization.............................................. A-11
Section 5.3 Subsidiaries................................................ A-12
Section 5.4 Authority Relative to this Merger Agreement and the Cross A-12
Stock Option Agreements.....................................
Section 5.5 Reports and Financial Statements............................ A-13
Section 5.6 Absence of Certain Changes or Events........................ A-13
Section 5.7 Litigation.................................................. A-13
Section 5.8 Employee Benefit Plans...................................... A-13
Section 5.9 Plan Compliance............................................. A-14
Section 5.10 Takeover Provisions Inapplicable............................ A-14
Section 5.11 Compliance with Applicable Laws............................. A-14
Section 5.12 Taxes....................................................... A-15
Section 5.13 Certain Contracts........................................... A-16
Section 5.14 Patents, Trademark, Etc..................................... A-16
Section 5.15 Product Liability; Airworthiness............................ A-16
Section 5.16 Environment................................................. A-17
Section 5.17 Accounting; Tax Matters..................................... A-17
Section 5.18 Company Action.............................................. A-17
Section 5.19 Lack of Ownership of Parent Common Stock.................... A-17
Section 5.20 Insurance Coverage.......................................... A-17
Section 5.21 Year 2000................................................... A-17
Section 5.22 Financial Advisor........................................... A-17
Section 5.23 Fairness Opinion............................................ A-17
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger....... A-17
Section 6.2 Conduct of Business by Parent and Sub Pending the Merger.... A-19
Section 6.3 Notice of Breach............................................ A-20
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information...................................... A-20
Section 7.2 Registration Statement/Proxy Statement...................... A-20
Section 7.3 Affiliates, Publication of Combined Financial Results....... A-21
Section 7.4 Stock Exchange Listing...................................... A-21
</TABLE>
A-ii
<PAGE> 100
<TABLE>
<S> <C> <C>
Section 7.5 Employment Arrangements................................................................... A-22
Section 7.6 Indemnification........................................................................... A-22
Section 7.7 Consents.................................................................................. A-22
Section 7.8 Additional Agreements..................................................................... A-23
Section 7.9 No Solicitation........................................................................... A-23
Section 7.10 Accountants' Letters...................................................................... A-24
Section 7.11 Pooling of Interests...................................................................... A-24
Section 7.12 Trust Preferred Securities................................................................ A-25
Section 7.13 Parent Board of Directors................................................................. A-25
Section 7.14 Post-Merger Operations.................................................................... A-25
Section 7.15 Tax Representation Letters................................................................ A-25
Section 7.16 Transfer Taxes............................................................................ A-25
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger................................ A-25
Section 8.2 Conditions to Obligation of the Company to Effect the Merger.............................. A-26
Section 8.3 Conditions to Obligations of Parent and Sub to Effect the Merger.......................... A-26
Section 8.4 Frustration of Closing Conditions......................................................... A-26
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination............................................................................... A-27
Section 9.2 Effect of Termination..................................................................... A-28
Section 9.3 Amendment................................................................................. A-29
Section 9.4 Waiver.................................................................................... A-29
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices................................................................................... A-29
Section 10.2 Fees and Expenses......................................................................... A-30
Section 10.3 Publicity................................................................................. A-30
Section 10.4 Specific Performance...................................................................... A-30
Section 10.5 Interpretation............................................................................ A-31
Section 10.6 Parties in Interest; No Assignment; Third Party Beneficiaries............................. A-31
Section 10.7 Miscellaneous............................................................................. A-31
Section 10.8 Cure Period............................................................................... A-32
Section 10.9 Non-Survival of Representations and Warranties............................................ A-32
Section 10.10 Validity.................................................................................. A-32
</TABLE>
A-iii
<PAGE> 101
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated as of
November 22, 1998, is among The B.F.Goodrich Company, a New York corporation
("Parent"), Runway Acquisition Corporation, a Pennsylvania corporation and a
wholly owned subsidiary of Parent ("Sub"), and Coltec Industries Inc, a
Pennsylvania corporation (the "Company").
RECITALS:
The Boards of Directors of Parent, Sub and the Company have approved the
acquisition of the Company by Parent, to be accomplished by the merger of Sub
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth below and in accordance with the Business Corporation Law of the
Commonwealth of Pennsylvania ("PBCL"). It is intended for federal income tax
purposes that the Merger shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Merger Agreement shall be a plan of reorganization for purposes of
Section 368 of the Code and, for accounting purposes, the Merger shall be a
"pooling of interests".
As a condition and inducement to entering into this Merger Agreement,
Parent and the Company have entered into a stock option agreement dated as of
the date hereof pursuant to which Parent has granted the Company an option with
respect to certain shares of Parent Common Stock (as defined in Section 3.1(b)
below) (the "Parent Stock Option Agreement") and a stock option agreement dated
as of the date hereof pursuant to which the Company has granted Parent an option
with respect to certain shares of Company Common Stock (as defined in Section
3.1(b) below) (the "Company Stock Option Agreement" and, collectively with the
Parent Stock Option Agreement, the "Cross Stock Option Agreements") on the terms
and subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements set forth below, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, on the Effective Date (as defined below in Section 1.2), Sub shall be
merged into the Company, the separate corporate existence of Sub shall thereupon
cease, and the Company shall continue its corporate existence as the surviving
corporation in the Merger (the "Surviving Corporation").
Section 1.2 Effective Date of the Merger. The Merger shall become
effective when properly executed Articles of Merger are duly filed with the
Department of State of the Commonwealth of Pennsylvania, which filing shall be
made on the date on which the closing of the transactions contemplated by this
Merger Agreement takes place in accordance with Section 3.10. When used in this
Merger Agreement, the term "Effective Date" shall mean the date and time at
which such filing shall have been made.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation and By-Laws. The Articles of
Incorporation and the By-Laws of Sub in effect immediately prior to the
Effective Date shall be the Articles of Incorporation and the By-Laws of
the Surviving Corporation until amended in accordance with their terms and
as provided by law.
Section 2.2 Board of Directors; Officers. The directors of Sub
immediately prior to the Effective Date shall be the directors of the
Surviving Corporation and the officers of Sub immediately prior to the
A-1
<PAGE> 102
Effective Date shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected and qualified.
Section 2.3 Effects of Merger. The Merger shall have the effects set
forth in Section 1929 of the PBCL.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. As of the Effective Date, by virtue of
the Merger and without any action on the part of any holder of any capital
stock of the Company, Parent or Sub:
(a) All shares of capital stock of the Company which are held by the
Company, and any shares of capital stock of the Company owned by Parent,
Sub or any other subsidiary of Parent, shall be canceled.
(b) Subject to Section 3.5, each remaining outstanding share of common
stock, par value $.01 per share, of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Date shall be
converted into .56 of a share (the "Exchange Ratio") of common stock, par
value $5 per share, of Parent ("Parent Common Stock"). One preferred share
purchase right issuable pursuant to the Rights Agreement dated as of June
2, 1997 between Parent and The Bank of New York or any other purchase right
issued in substitution thereof (the "Parent Rights") shall be issued
together with and shall attach to each share of Parent Common Stock issued
pursuant to this Section 3.1(b).
(c) In the event of any change in Parent Common Stock by reason of
stock dividends, splitups, mergers, recapitalizations, combinations,
exchange of shares or the like after the date of this Merger Agreement and
prior to the Effective Date, the Exchange Ratio shall be adjusted
appropriately.
(d) Each issued and outstanding share of capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
Section 3.2 Stock Options. (a) As soon as practicable following the date
of this Merger Agreement, the Board of Directors of the Company (or, if
appropriate, any committee
administering the Company Common Stock Plans (as defined below)) shall adopt
such resolutions or take such other actions as may be required to effect the
following in accordance with the terms of the Company Common Stock Plans:
(i) adjust the terms of all outstanding options to purchase shares of
Company Common Stock (the "Company Stock Options") granted under any plan
or arrangement providing for the grant of options to purchase shares of
Company Common Stock to current or former directors, officers, employees or
consultants of the Company or its subsidiaries (the "Company Common Stock
Plans"), whether vested or unvested, as necessary to provide that, as of
the Effective Date, each Company Stock Option outstanding immediately prior
to the Effective Date shall be amended and converted into an option to
acquire, on the same terms and conditions as were applicable under the
Company Stock Option, the number of shares of Parent Common Stock (rounded
down to the nearest whole share) determined by multiplying the number of
shares of Company Common Stock subject to such Company Stock Option by the
Exchange Ratio, at a price per share of Parent Common Stock equal to (A)
the exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (B) the
Exchange Ratio (each, as so adjusted, an "Adjusted Option"); provided that
such exercise price shall be rounded up to the nearest whole cent; and
(ii) make such other changes to the Company Common Stock Plans as
Parent and the Company may agree are appropriate to give effect to the
Merger.
(b) The duration and other terms of each Adjusted Option shall be the same
as the original Company Stock Option from which it was converted except that all
references to the Company in such original Company Stock Option shall be deemed
to be references to Parent.
A-2
<PAGE> 103
(c) The adjustments provided herein with respect to any Company Stock
Options that are "incentive stock options" as defined in Section 422 of the Code
shall be and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code.
(d) No later than the Effective Date, Parent shall prepare and file with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-8 (or another appropriate form), which shall include a
re-offer prospectus, registering a number of shares of Parent Common Stock equal
to the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the initial
offering prospectus or prospectuses required thereby shall be maintained) at
least for so long as any Adjusted Options remain outstanding.
(e) As soon as practicable after the Effective Date, Parent shall deliver
to the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Common Stock Plans and the
agreements evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall be assumed by Parent and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 3.2 after giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to Parent, together with the consideration therefor and any
required federal withholding tax information and payment.
(g) Except as otherwise contemplated by this Section 3.2 and except to the
extent required under the respective terms of the Company Stock Options or other
applicable agreements, all restrictions or limitations on transfer and vesting
with respect to Company Stock Options awarded under the Company Common Stock
Plans or any other plan, program or arrangement of the Company, to the extent
that such restrictions or limitations shall not have lapsed, shall remain in
full force and effect with respect to such options after giving effect to the
Merger and the assumption by Parent as set forth above.
(h) Parent shall use all reasonable best efforts to implement the
provisions of this Section 3.2.
Section 3.3 Parent to Make Certificates Available. Prior to the Effective
Date, Parent shall select The Bank of New York or such other person or persons
reasonably satisfactory to the Company to act as Exchange Agent for the Merger
(the "Exchange Agent"). As soon as practicable after the Effective Date, Parent
shall deposit, or cause to be deposited, with the Exchange Agent, for the
benefit of the holders of certificates representing shares of Company Common
Stock (each, a "Certificate"), and each holder of Company Common Stock to be
converted pursuant to Section 3.1 (each, a "Company Holder") will be entitled to
receive, upon surrender to the Exchange Agent of one or more Certificates for
cancellation, certificates representing the number of shares of Parent Common
Stock and cash in lieu of fractional shares into which such Company Holder's
shares of Company Common Stock have been converted in the Merger, and any
dividends or other distributions with respect to such shares of Parent Common
Stock with a record date after the Effective Date. Such shares of Parent Common
Stock issued in the Merger shall each be deemed to have been issued at the
Effective Date.
Section 3.4 Dividends; Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock with a record
date after the Effective Date shall be paid to persons entitled to receive
certificates representing Parent Common Stock pursuant to this Merger Agreement
until such persons surrender their Certificates. Upon such surrender, there
shall be paid to the person in whose name the certificates representing such
Parent Common Stock shall be issued any dividends or other distributions which
shall have become payable with respect to such Parent Common Stock with a record
date after the Effective Date, and, at the appropriate payment date, there shall
be paid to such person the amount of any dividends or other distributions
payable with respect to such shares of Parent Common Stock with a record date
after the Effective Date and a payment date occurring after such surrender. In
no event shall the person entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. In the event that any certificates for any shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it shall be a
A-3
<PAGE> 104
condition of such exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such shares of Parent Common Stock in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to have been lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
shares of Parent Common Stock, any cash in lieu of fractional shares and any
dividends or other distributions deliverable in respect thereof pursuant to this
Article III. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a Company Holder for any shares of Parent Common
Stock or dividends thereon delivered to a public official pursuant to any
applicable escheat laws.
Section 3.5 No Fractional Shares. No certificates or scrip representing
less than one whole share of Parent Common Stock shall be issued pursuant to
this Merger Agreement. In lieu of any such fractional share, each Company Holder
who would otherwise have been entitled to a fraction of a share of Parent Common
Stock shall be paid cash (without interest) in an amount equal to such Company
Holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such Company Holders, of
the aggregate fractional shares of Parent Common Stock issued pursuant to this
Section 3.5. As soon as practicable following the Effective Date, the Exchange
Agent shall determine the excess of (i) the number of shares of Parent Common
Stock delivered to the Exchange Agent by Parent over (ii) the aggregate number
of whole shares of Parent Common Stock to be distributed to the Company Holders
(such excess being herein called the "Excess Shares"), and the Exchange Agent,
as agent for the Company Holders, shall sell the Excess Shares at the
then-prevailing prices on the New York Stock Exchange (the "NYSE"). The sale of
the Excess Shares by the Exchange Agent shall be executed on the NYSE through
one or more member firms of the NYSE and shall be executed in round lots to the
extent practicable. The Exchange Agent shall use its best efforts to complete
the sale of the Excess Shares as promptly following the Effective Date as, in
the Exchange Agent's sole judgment, is practicable consistent with obtaining the
best execution of such sales in light of prevailing market conditions. Parent
shall pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent, incurred
in connection with such sale of the Excess Shares. Until the net proceeds of
such sale have been distributed to the Company Holders, the Exchange Agent shall
hold such proceeds in trust for the Company Holders. As soon as practicable
after the determination of the amount of cash to be paid to the Company Holders
in lieu of any fractional share interests, the Exchange Agent shall make
available in accordance with this Merger Agreement such amounts to such Company
Holders. The fractional Parent Common Stock interests of each Company Holder
will be aggregated, and no Company Holder will receive cash in an amount equal
to or greater than the value of one whole share of Parent Common Stock.
Section 3.6 Exchange Agent. Parent shall use all reasonable best efforts
to cause the Exchange Agent to take all steps and perform all actions necessary
to fulfill the Exchange Agent's responsibilities as set forth in this Article
III.
Section 3.7 Shareholders' Meetings. (a) Subject to Sections 7.9(b),
7.9(c) and 9.1(j), the Company shall take all action necessary, in accordance
with applicable law and its Amended and Restated Articles of Incorporation and
Amended and Restated By-Laws, to convene a meeting of the holders of Company
Common Stock (the "Company Meeting") as promptly as practicable for the purpose
of considering and taking action upon this Merger Agreement. Subject to Sections
7.9(b), 7.9(c) and 9.1(j), the Board of Directors of the Company will recommend
that holders of Company Common Stock vote in favor of and approve the Merger and
the adoption of this Merger Agreement at the Company Meeting.
(b) Subject to Sections 7.9(b), 7.9(c) and 9.1(k), Parent shall take all
action necessary, in accordance with applicable law and its Restated Certificate
of Incorporation and By-Laws, to convene a meeting of the holders of Parent
Common Stock (the "Parent Meeting") as promptly as practicable for the purpose
of
A-4
<PAGE> 105
considering and acting upon a proposal (the "Stock Issuance Proposal") to
approve the issuance of shares of Parent Common Stock as provided by this Merger
Agreement. Subject to Sections 7.9(b), 7.9(c) and 9.1(k), the Board of Directors
of Parent will recommend that holders of Parent Common Stock vote in favor of
and approve the Stock Issuance Proposal at the Parent Meeting.
Section 3.8 Closing of the Company's Transfer Books. At the Effective
Date, the stock transfer books of the Company shall be closed and no transfer of
any shares of Company Common Stock shall be made thereafter. In the event that,
after the Effective Date, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the securities of Parent
and/or cash as provided in Sections 3.1(b) and 3.5.
Section 3.9 Assistance in Consummation of the Merger. Each of Parent, Sub
and the Company shall provide all reasonable assistance to, and shall cooperate
with, each other to bring about the consummation of the Merger as soon as
possible in accordance with the terms and conditions of this Merger Agreement.
Section 3.10 Closing. The closing of the transactions contemplated by
this Merger Agreement shall take place (i) at the offices of Squire, Sanders &
Dempsey L.L.P., 4900 Key Tower, 127 Public Square, Cleveland, Ohio 44114-1304,
at 9:00 A.M. local time on the second business day after the day on which the
last of the conditions set forth in Article VIII is fulfilled or waived or (ii)
at such other time and place as Parent and the Company shall agree in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, except as set forth in a
disclosure schedule delivered by Parent concurrently herewith (the "Parent
Disclosure Schedule"), as follows:
Section 4.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the corporate power to carry on its business as it is now being
conducted or currently proposed to be conducted. Parent is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined in Section 10.5(b) below) on Parent. Complete and correct copies of the
Restated Certificate of Incorporation and By-Laws of Parent as in effect on the
date hereof are included in the Parent SEC Reports (as defined in Section 4.5
below).
Section 4.2 Capitalization. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock and 10,000,000 shares of
Series Preferred Stock, par value $1 per share ("Parent Preferred Stock"). As of
November 18, 1998, 74,334,732 shares of Parent Common Stock were validly issued
and outstanding, fully paid and nonassessable and 1,845,919 shares of Parent
Common Stock were held in treasury. As of November 18, 1998, no shares of Parent
Preferred Stock were issued and outstanding. As of November 18, 1998, except for
employee stock options to acquire 4,098,764 shares of Parent Common Stock at a
weighted average exercise price of $33.68 per share and the Parent Rights, there
were no options, warrants, calls or other rights, agreements or commitments
outstanding obligating Parent to issue, deliver or sell shares of its capital
stock or debt securities, or obligating Parent to grant, extend or enter into
any such option, warrant, call or other such right, agreement or commitment.
Except for the issuance of shares of Parent Common Stock pursuant to employee
stock options to acquire Parent Common Stock and as provided in the Parent Stock
Option Agreement, during the period from November 18, 1998 through the date
hereof, no shares of Parent Common Stock or Parent Preferred Stock have been
issued and Parent has not entered into any options, warrants, calls or other
rights, agreements or commitments obligating Parent to issue, deliver or sell
shares of its capital stock or debt securities, or obligating Parent to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment. All of the shares of Parent Common Stock issuable in
accordance with this Merger Agreement in exchange for Company Common Stock as of
the Effective Date are duly authorized and will be, when so issued, validly
issued, fully paid and nonassessable.
A-5
<PAGE> 106
Section 4.3 Subsidiaries. Each "significant subsidiary" (as such term is
defined in Rule 1-02 of Regulation S-X of the Commission) ("Significant
Subsidiary") of Parent is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
corporate power to carry on its business as it is now being conducted or
currently proposed to be conducted. Each Significant Subsidiary of Parent is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where failure to be so qualified would not have a Material Adverse Effect on
Parent. All the outstanding shares of capital stock of each Significant
Subsidiary of Parent are validly issued, fully paid and nonassessable and those
owned by Parent or by a subsidiary of Parent are owned free and clear of any
liens, claims or encumbrances. There are no existing options, warrants, calls or
other rights, agreements or commitments of any character relating to the issued
or unissued capital stock or other securities of any of the Significant
Subsidiaries of Parent. Except as set forth in Parent's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, Parent does not directly or
indirectly own any interest in any other corporation, partnership, joint venture
or other business association or entity which is material to Parent and its
subsidiaries taken as a whole.
Section 4.4 Authority Relative to this Merger Agreement and the Cross
Stock Option Agreements. Parent has the corporate power to enter into this
Merger Agreement and the Cross Stock Option Agreements and to carry out its
obligations hereunder and thereunder. The execution and delivery of this Merger
Agreement and the Cross Stock Option Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
Parent's Board of Directors. This Merger Agreement and the Cross Stock Option
Agreements each constitute a valid and binding obligation of Parent enforceable
in accordance with its terms except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether enforceability is considered
in a proceeding in equity or at law) and by an implied covenant of good faith
and fair dealing. No other corporate proceedings on the part of Parent are
necessary to authorize this Merger Agreement or the Cross Stock Option
Agreements and the transactions contemplated hereby or thereby, other than the
approval of the Stock Issuance Proposal by the holders of Parent Common Stock,
which, under applicable rules and regulations of the NYSE currently in effect,
will require the Stock Issuance Proposal to receive the approval of a majority
of the votes cast thereon (provided that the total vote cast thereon represents
greater than 50% in interest of all Parent securities entitled to vote thereon).
Parent is not subject to or obligated under (i) any charter or by-law provision
or (ii) any provision of any indenture or other loan document or other contract,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to Parent or
any of its subsidiaries or their respective properties or assets, which would be
breached or violated, or under which there would be a default (with or without
notice or lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by its executing and carrying out this Merger Agreement or the
Cross Stock Option Agreements other than, in the case of clause (ii) only, (x)
the laws and regulations referred to in the next sentence and (y) such breaches,
violations, defaults, rights of termination, cancellations, accelerations or
losses of a material benefit which would not, individually or in the aggregate,
have a Material Adverse Effect on Parent. Except as referred to herein or in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Competition
Act (Canada), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other
governmental approvals required under the applicable laws of any foreign
jurisdiction and the applicable environmental, corporation, securities or blue
sky laws or regulations of the various states ("Applicable State Laws")
(collectively, the "Parent Required Consents"), no filing by Parent or
registration by Parent with any Governmental Entity (as defined in Section 4.9
below) is necessary for, nor is any authorization, consent or approval of any
Governmental Entity required to be obtained by Parent for, the consummation of
the Merger or the other transactions contemplated by this Merger Agreement or by
the Cross Stock Option Agreements except for such filings, registrations,
authorizations, consents or approvals, the failure of which to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent; provided that Parent makes no representation or
A-6
<PAGE> 107
warranty with respect to such of the foregoing as are required by rea son of the
regulatory status of the Company or any of its subsidiaries or facts
specifically pertaining to them.
Section 4.5 Reports and Financial Statements. Since December 31, 1996,
Parent has timely filed all registration statements, prospectuses, forms,
reports and documents that Parent was required to file with the Commission
(collectively, the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such Parent SEC Reports.
As of their respective dates, the Parent SEC Reports did not contain any untrue
statement of a material fact or omit to state a 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. The audited
consolidated financial statements and unaudited interim financial statements of
Parent included in the Parent SEC Reports comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, and the financial statements included in
the Parent SEC Reports have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated therein or in the notes thereto or, in the case of
unaudited financial statements, as permitted by Form 10-Q under the Exchange
Act) and fairly present the financial position of Parent and its subsidiaries as
at the dates thereof and the results of their operations and changes in
financial position for the periods then ended, subject, in the case of unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Reports filed prior to the date of this Merger Agreement
("Previously Filed Parent SEC Reports"), since September 30, 1998, there has not
been (i) any event, condition, transaction, commitment, dispute or other
circumstance (financial or otherwise) of any character (whether or not in the
ordinary course of business), which, individually or in the aggregate, has had a
Material Adverse Effect on Parent; (ii) any damage, destruction or loss, whether
or not covered by insurance, which, individually or in the aggregate, has had a
Material Adverse Effect on Parent; (iii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of Parent (except for regularly
scheduled cash dividends out of current earnings at a rate not greater than the
rate in effect on September 30, 1998); or (iv) any entry into any legally
binding commitment or transaction material to Parent and its subsidiaries taken
as a whole (including any material borrowing or material sale of assets), other
than this Merger Agreement, the Cross Stock Option Agreements and the
transactions contemplated hereby and thereby.
Section 4.7 Litigation. Except as disclosed in the Previously Filed
Parent SEC Reports, there is no suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of its
subsidiaries which would, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on Parent, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or any of its subsidiaries which would, individually
or in the aggregate, have a Material Adverse Effect on Parent.
Section 4.8 Takeover Provisions Inapplicable. As of the date hereof and
at all times thereafter, until and including the Effective Date, Section 912 of
the New York Business Corporation Law (the "NYBCL") and the Parent Rights are,
and shall be, inapplicable to the Merger and the transactions contemplated by
this Merger Agreement.
Section 4.9 Compliance with Applicable Laws. (i) Parent and its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals (the "Parent Permits") of all applicable courts, administrative
agencies or commissions or other governmental authorities or instrumentalities,
domestic or foreign (each, a "Governmental Entity"), necessary in all material
respects for the operation of the businesses of Parent and its subsidiaries;
(ii) Parent and its subsidiaries are in compliance with the terms of the Parent
Permits in all material respects; (iii) except as disclosed in the Previously
Filed Parent SEC Reports, the businesses of Parent and its subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except for such violations that would not, individually or
in the
A-7
<PAGE> 108
aggregate, have a Material Adverse Effect on Parent; and (iv) no investigation
or review by any Governmental Entity with respect to Parent or any of its
subsidiaries is pending, or, to the knowledge of Parent, threatened, nor has any
Governmental Entity indicated an intention to conduct the same except for such
investigations or reviews that would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on Parent. No
representation or warranty is made in this Section 4.9 with respect to Taxes (as
defined in Section 4.10 below), product liability and airworthiness or
Environmental Laws (as defined in Section 4.12 below), which matters are the
subject of Sections 4.10, 4.11 and 4.12, respectively.
Section 4.10 Taxes. (a) Parent and its subsidiaries have (i) filed or
caused to be filed all Tax Returns (as defined below) required to be filed by
any jurisdiction to which any of them is subject, (ii) paid in full on a timely
basis all Taxes due and claimed to be due by each such jurisdiction, and (iii)
duly collected or withheld and timely paid all Taxes required to be collected
from others or deducted and withheld from any amounts paid to employees or
others, except to the extent any failure to file, pay or withhold would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Such
Tax Returns are accurate and complete in all material respects and accurately
reflect the Tax liabilities for such periods, except to the extent any
inaccuracies in any such Tax Returns would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. No Tax deficiency or
penalty has been asserted or threatened by any such jurisdiction against Parent
or any of its subsidiaries, except to the extent any such deficiencies or
penalties, individually or in the aggregate, have not had and would not have a
Material Adverse Effect on Parent.
(b) To the knowledge of Parent, there is no audit of any material Tax
Return of Parent or any of its subsidiaries in progress, there is no threatened
action, suit, proceeding, investigation, audit, or claim for or relating to
material Taxes, there are no matters under discussion with any Governmental
Entities with respect to material Taxes that could result in an additional
amount of material Taxes being payable by Parent or any of its subsidiaries, and
no Governmental Entity has indicated that it intends to audit any material Tax
Return of Parent or any of its subsidiaries.
(c) Neither Parent nor any of its subsidiaries (i) has waived any statute
of limitations with respect to Tax obligations or agreed to any extension of
time with respect to a Tax assessment or deficiency, except to the extent any
such Tax obligation, assessment or deficiency would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (ii) is a party to any Tax
allocation or sharing agreement, (iii) has been a member of an affiliated group
(other than the affiliated group of which Parent is the common parent) filing a
consolidated federal income tax return, nor is liable for material Taxes of an
affiliated group (other than the affiliated group of which Parent is the common
parent) under Section 1.1502-6 of the Treasury Regulations (or any similar
provision of state, local or foreign law), including as a transferee or
successor, by contract or otherwise, or (iv) is currently the beneficiary of any
extensions of time within which to file any Tax Return.
(d) The earliest taxable period of Parent and its subsidiaries for which
the statute of limitations for federal, state, local and foreign Tax Returns
filed by Parent is still open is the calendar year 1986.
(e) Neither Parent nor any of its subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(f) Neither Parent nor any of its subsidiaries (i) has agreed or consented
at any time under Section 341(f) of the Code to have the provisions of Section
341(f)(2) of the Code apply to any disposition of any assets, (ii) has agreed,
or is required, to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise that will affect the
liability of the Company or its subsidiaries for Taxes, (iii) has made an
election, or is required, to treat any asset as owned by another person pursuant
to the provisions of Section 168(f) of the Code, (iv) has made any of the
foregoing elections or is required to apply any of the foregoing rules under any
comparable state or local tax provision, or (v) owns any material assets that
were financed directly or indirectly with, or that directly or indirectly
secure, debt the interest on which is tax-exempt under Section 103(a) of the
Code.
A-8
<PAGE> 109
(g) The transaction contemplated herein, either by itself or in conjunction
with any other transactions that Parent may have entered into or agreed to, will
not give rise to any federal income tax liability under section 355(e) of the
Code for which Parent may in any way be held liable.
(h) Parent is not a party to any "Gain Recognition Agreements" as such term
is used in the Treasury Regulations promulgated under Section 367 of the Code.
(i) Neither Parent nor any of its subsidiaries has made or become obligated
to make, nor will the Company, Parent, Sub, or any of Parent's other
subsidiaries, as a result of any event connected with any transaction
contemplated herein and/or any termination of employment related to any such
transaction, make or become obligated to make (with respect to any employee of
Parent or any of its subsidiaries), any "excess parachute payment", as defined
in Section 280G of the Code, to any employee of Parent or any of its
subsidiaries.
(j) There are no material liens for Taxes (other than for current Taxes
that are not yet due and payable or are being contested in good faith) upon the
assets of Parent or any of its subsidiaries.
(k) Parent has no excess loss account, as such term is used in Section
1.1502-19 of the Treasury Regulations, with respect to the stock of any
subsidiary.
(l) The unpaid Taxes of Parent and its subsidiaries did not, as of the most
recent fiscal month end prior to the date hereof, exceed the reserve for Tax
liability (not including any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
most recent balance sheet (other than in any notes thereto) that has been made
available to the Company.
(m) For purposes of this Merger Agreement, the term "Tax" shall include all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise and other taxes,
duties and assessments of any nature whatsoever together with all interest,
penalties and additions imposed with respect to such amounts.
(n) For purposes of this Merger Agreement, the term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment, and including
any amendment thereof.
Section 4.11 Product Liability; Airworthiness. (a) Parent has no
knowledge of any claim, or the basis for any claim, against Parent or any of its
subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
Parent or any of its subsidiaries, including claims arising out of the defective
or unsafe nature of its products or services, which claim would, individually or
in the aggregate, be reasonably expected to have a Material Adverse Effect on
Parent.
(b) To the knowledge of Parent, all goods and services designed,
manufactured or sold by Parent or any of its subsidiaries comply with all laws,
requirements, specifications, rules and regulations related to airworthiness of
all applicable Governmental Entities and none of such products or services
contain any defects in manufacturing, design or performance or other defect
which renders such products or services or any component thereof defective,
deficient, nonconforming or unsuitable for their intended use except to the
extent that such failures to comply or defects would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. There is no publicly and
formally announced rule or regulation by any Governmental Entity of the United
States or any state thereof that could reasonably be expected to affect the
various airworthiness approvals, licenses, permits or certifications applicable
to the goods, services, assets, facilities or operations of Parent and its
subsidiaries except to the extent that such rules or regulations would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 4.12 Environment. (a) As used herein, the term "Environmental
Laws" means all applicable federal, state, local or foreign laws and common law
relating to pollution or protection of health, safety, or the environment
(including pollution or protection of ambient air, surface water, groundwater,
land surface, subsurface strata, natural resources, humans and other life and
ecosystems), including laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
A-9
<PAGE> 110
hazardous substances or wastes into the environment, or otherwise relating to
the manufacture, import, processing, distribution, use, treatment, storage,
disposal, transport or handling of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (CERCLA), 42
U.S.C. Sec. 9601 et seq., the Resource Conservation and Recovery Act, as amended
(RCRA), 42 U.S.C. Sec. 6901 et seq., the Clean Air Act, as amended, 42 U.S.C.
Sec. 7401 et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. Sec. 1251 et seq., and the Toxic Substances Control Act, as amended
(TSCA), 15 U.S.C. Sec. 2601 et seq.), as well as all regulations, requirements,
authorizations, codes, standards, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, decrees, permits, or
plans issued, entered, promulgated or approved thereunder.
(b) To the knowledge of Parent, except as disclosed in the Previously Filed
Parent SEC Reports, there are, with respect to Parent or any of its
subsidiaries, no past or present violations of Environmental Laws, releases or
threatened releases of any material into the environment or contractual
obligations which may reasonably be expected to give rise to any liability under
any Environmental Laws and which would, individually or in the aggregate, have a
Material Adverse Effect on Parent.
Section 4.13 Accounting; Tax Matters. Neither Parent nor, to its
knowledge, any of its affiliates, has, through the date hereof, taken or agreed
to take any action nor do they have any knowledge of any fact or circumstance
that is reasonably likely to prevent (i) Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests" or (ii) the
Merger from qualifying for federal income tax purposes as a "reorganization"
within the meaning of Section 368 (a) of the Code.
Section 4.14 Parent Action. The Board of Directors of Parent (at a
meeting duly called and held) has by the requisite vote of directors determined
to recommend the approval of the Stock Issuance Proposal by the holders of
Parent Common Stock and directed that the Stock Issuance Proposal be submitted
for consideration by Parent's shareholders entitled to vote thereon at the
Parent Meeting.
Section 4.15 Lack of Ownership of Company Common Stock. Neither Parent
nor any of its subsidiaries owns any shares of Company Common Stock or other
securities convertible into shares of Company Common Stock (exclusive of any
shares owned by any Parent Benefit Plan).
Section 4.16 Financial Advisor. Except for Morgan Stanley & Co.
Incorporated, financial advisor to Parent, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Merger
Agreement based upon arrangements made by or on behalf of Parent, and the fees
and other amounts payable to Morgan Stanley & Co. Incorporated as contemplated
by this Section 4.16 will be as provided in that certain letter agreement, dated
October 22, 1998, from Morgan Stanley & Co. Incorporated to Parent.
Section 4.17 Fairness Opinion. Parent has received the opinion of Morgan
Stanley & Co. Incorporated, financial advisor to Parent, dated the date hereof,
to the effect that, as of the date hereof, the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to Parent.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES RELATING TO SUB
Parent and Sub, jointly and severally, represent and warrant to the Company
as follows:
Section 4A.1 Organization. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Sub has not engaged in any business (other than certain
organizational matters) since it was incorporated.
Section 4A.2 Capitalization. The authorized capital stock of Sub consists
of 1,000 shares of common stock, par value $1 per share, 1,000 shares of which
are validly issued and outstanding, fully paid and nonassessable and are owned
by Parent free and clear of all liens, claims and encumbrances.
A-10
<PAGE> 111
Section 4A.3 Authority Relative to this Merger Agreement. Sub has the
corporate power to enter into this Merger Agreement and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by Sub's Board of Directors and sole shareholder, and no other
corporate proceedings on the part of Sub are necessary to authorize this Merger
Agreement and the transactions contemplated hereby. Sub is not subject to or
obligated under (i) any charter or by-law provision or (ii) any provision of any
indenture or other loan document or other contract, license, franchise, permit,
order, decree, concession, lease, instrument, judgment, statute, law, ordinance,
rule or regulation applicable to Sub or its properties or assets, which would be
breached or violated, or under which there would arise a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit, by its executing and carrying out this Merger Agreement other than, in
the case of clause (ii) only, (x) the Parent Required Consents and (y) such
breaches, violations, defaults, rights of termination, cancellations,
accelerations or losses of a material benefit which would not, individually or
in the aggregate, have a Material Adverse Effect on Parent. Except for the
Parent Required Consents, no filing or registration with, or authorization,
consent or approval of, any Governmental Entity is necessary for, nor is any
authorization, consent, or approval of any Governmental Entity required to be
obtained by Sub for, the consummation by Sub of the Merger or the transactions
contemplated by this Merger Agreement, except for such filings, registrations,
authorizations, consents or approvals, the failure of which to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent; provided that neither Parent nor Sub make any representation or warranty
with respect to such of the foregoing as are required by reason of the
regulatory status of the Company or any of its subsidiaries or facts
specifically pertaining to them. This Merger Agreement constitutes a valid and
binding obligation of Sub enforceable in accordance with its terms except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and by an implied covenant of good faith and fair dealing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, except as set forth in a
disclosure schedule delivered by the Company concurrently herewith (the "Company
Disclosure Schedule"), as follows:
Section 5.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power to carry on its
business as it is now being conducted or currently proposed to be conducted. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where failure to be so qualified would not have a Material
Adverse Effect on the Company. Complete and correct copies of the Amended and
Restated Articles of Incorporation and Amended and Restated By-Laws of the
Company as in effect on the date hereof are included in the Company SEC Reports
(as defined in Section 5.5 below).
Section 5.2 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 2,500,000 shares of
Preferred Stock, par value $.01 per share ("Company Preferred Stock"). As of
November 20, 1998, 63,068,535 shares of Company Common Stock (excluding
25,000,000 shares of Company Common Stock held by a subsidiary of the Company)
were validly issued and outstanding, fully paid and nonassessable, 7,526,960
shares of Company Common Stock were held in treasury, no shares of Company
Preferred Stock have been issued, and there have been no material changes in
such numbers of shares through the date hereof. As of November 20, 1998, except
for (x) Company Stock Options granted under the Company Common Stock Plans to
acquire 5,502,000 shares of Company Common Stock, (y) pursuant to the conversion
terms of the 5 1/4% Convertible Preferred Securities, liquidation amount $50 per
security, Term Income Deferrable Equity Securities (TIDES)(SM) of Coltec Capital
Trust (the "Trust
A-11
<PAGE> 112
Preferred Securities") and of the Company's 5 1/4% Convertible Junior
Subordinated Deferrable Interest Debentures due 2028, there were no options,
warrants, calls or other rights, agreements or commitments outstanding
obligating the Company to issue, deliver or sell shares of its capital stock or
debt securities, or obligating the Company to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment. Except
for the issuance of shares of Company Common Stock pursuant to Company Stock
Options and as provided in the Company Stock Option Agreement, during the period
from November 20, 1998 through the date hereof, no shares of Company Common
Stock or Company Preferred Stock have been issued and the Company has not
entered into any options, warrants, calls or other rights, agreements or
commitments obligating the Company to issue, deliver or sell shares of its
capital stock or debt securities, or obligating the Company to grant, extend or
enter into any such option, warrant, call or other such right, agreement or
commitment.
Section 5.3 Subsidiaries. Each Significant Subsidiary of the Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or currently proposed to be conducted.
Each Significant Subsidiary of the Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where failure to be so
qualified would not have a Material Adverse Effect on the Company. All the
outstanding shares of capital stock of each Significant Subsidiary of the
Company are validly issued, fully paid and nonassessable and those owned by the
Company or by a subsidiary of the Company are owned free and clear of any liens,
claims or encumbrances. There are no existing options, warrants, calls or other
rights, agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any of the Significant
Subsidiaries of the Company. Except as set forth in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, the Company does not directly
or indirectly own any interest in any other corporation, partnership, joint
venture or other business association or entity which is material to the Company
and its subsidiaries taken as a whole.
Section 5.4 Authority Relative to this Merger Agreement and the Cross
Stock Option Agreements. The Company has the corporate power to enter into this
Merger Agreement and the Cross Stock Option Agreements and, subject to the
requisite approval of this Merger Agreement by the holders of Company Common
Stock, to carry out its obligations hereunder and thereunder. The execution and
delivery of this Merger Agreement and the Cross Stock Option Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors. This Merger Agreement and the
Cross Stock Option Agreements each constitute a valid and binding obligation of
the Company enforceable in accordance with its terms except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law) and by
an implied covenant of good faith and fair dealing. Except for the receipt of
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon in the case of this Merger Agreement, no other
corporate proceedings on the part of the Company are necessary to authorize this
Merger Agreement or the Cross Stock Option Agreements and the transactions
contemplated hereby or thereby. The Company is not subject to or obligated under
(i) any charter or by-law provision or (ii) any provision of any indenture or
other loan document or other contract, license, franchise, permit, order,
decree, concession, lease, instrument, judgment, statute, law, ordinance, rule
or regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets, which would be breached or violated, or under
which there would be a default (with or without notice or lapse of time, or
both), or under which there would arise a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit, by its
executing and carrying out this Merger Agreement or the Cross Stock Option
Agreements, other than, in the case of clause (ii) only, (x) the laws and
regulations referred to in the next sentence and (y) such breaches, violations,
defaults, rights of termination, cancellations, accelerations or losses of a
material benefit which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Except as referred to herein or in
connection, or in compliance,with the provisions of the HSR Act, the Competition
Act (Canada), the Securities Act, the Exchange Act, and other
A-12
<PAGE> 113
governmental approvals required under the applicable laws of any foreign
jurisdiction and Applicable State Laws (collectively, the "Company Required
Consents"), no filing by the Company or registration by the Company with any
Governmental Entity is necessary for, nor is any authorization, consent or
approval of any Governmental Entity required to be obtained by the Company for,
the consummation of the Merger or the other transactions contemplated by this
Merger Agreement or by the Cross Stock Option Agreements except for such
filings, registrations, authorizations, consents or approvals, the failure of
which to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; provided that the Company makes no
representation or warranty with respect to such of the foregoing as are required
by reason of the regulatory status of Parent or any of its subsidiaries or facts
specifically pertaining to them.
Section 5.5 Reports and Financial Statements. Since December 31, 1996,
the Company has timely filed all registration statements, prospectuses, forms,
reports and documents that the Company was required to file with the Commission
(collectively, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such Company SEC Reports.
As of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a 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. The audited
consolidated financial statements and unaudited interim financial statements of
the Company included in the Company SEC Reports comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, and the financial
statements included in the Company SEC Reports have been prepared in accordance
with GAAP applied on a consistent basis (except as may be indicated therein or
in the notes thereto or, in the case of unaudited financial statements, as
permitted by Form 10-Q under the Exchange Act) and fairly present the financial
position of the Company and its subsidiaries as at the dates thereof and the
results of their operations and changes in financial position for the periods
then ended, subject, in the case of unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date of this Merger Agreement
("Previously Filed Company SEC Reports"), since September 30, 1998, there has
not been (i) any event, condition, transaction, commitment, dispute or other
circumstance (financial or otherwise) of any character (whether or not in the
ordinary course of business), which, individually or in the aggregate, has had a
Material Adverse Effect on the Company; (ii) any damage, destruction or loss,
whether or not covered by insurance, which, individually or in the aggregate,
has had a Material Adverse Effect on the Company; (iii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the capital stock of the Company; or (iv) any entry
into any legally binding commitment or transaction material to the Company and
its subsidiaries taken as a whole (including any material borrowing or material
sale of assets), other than this Merger Agreement, the Cross Stock Option
Agreements and the transactions contemplated hereby and thereby.
Section 5.7 Litigation. Except as disclosed in the Previously Filed
Company SEC Reports, there is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries which would, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries which
would, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 5.8 Employee Benefit Plans. Section 5.8 of the Company Disclosure
Schedule lists (i) each employee pension benefit plan as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (a
"Company Pension Plan"); (ii) each material employee welfare benefit plan as
defined in Section 3(1) of ERISA (a "Company Welfare Plan"); (iii) each material
employment agreement and each material supplemental executive compensation plan
(a "Company Executive Benefit Arrangement"); and (iv) each multiemployer plan as
defined in Section 3(37) of ERISA which is maintained by the Company
A-13
<PAGE> 114
or any subsidiary, or trade or business that is part of the same controlled
group, or under common control with, or part of an affiliated service group that
includes the Company within the meaning of Sections 414(b), (c), (m), or (o) of
the Code (a "Company ERISA Affiliate") for directors, former directors,
employees or former employees, or to which the Company or any Company ERISA
Affiliate makes contributions with respect to directors, former directors,
employees, or former employees. The Company has made available to Parent correct
and complete copies of the plan documents and material employment agreements (or
in the case of any unwritten Company Executive Benefit Arrangement, a
description thereof), summary plan descriptions, participant informational
material, the most recent determination letter received from the Internal
Revenue Service, the two most recent Form 5500 annual reports (including all
schedules and attachments thereto), the two most recent audited financial
statements for any plan for which audited financial statements are required, the
two most recent actuarial reports for any plan for which actuarial reports have
been prepared, and all related trust agreements, insurance contracts and other
funding agreements relating to such Company Pension Plans, Company Welfare Plans
and Company Executive Benefit Arrangements (together, "Company Benefit Plans").
Section 5.9 Plan Compliance. Each Company Benefit Plan has been
administered in compliance with its terms and any applicable provision of ERISA,
the Code and any other applicable law except for any instances of noncompliance
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. Each Company Pension Plan which is intended to meet the
requirements of Section 401(a) of the Code has been determined within the
remedial amendment period under Section 401(b) of the Code by the Internal
Revenue Service to be qualified under said Section 401(a) and each trust
maintained in conjunction with any such Company Pension Plan has been determined
by the Internal Revenue Service to be exempt from taxation under Section 501(a)
of the Code and the Company has not amended any such Company Pension Plan or
related trust in a manner that would result in the disqualification thereof. No
Company Pension Plan which is subject to the provisions of Section 412 of the
Code has incurred an accumulated funding deficiency. Neither the Company nor any
Company ERISA Affiliate has any unsatisfied liability under Title IV of ERISA,
or knows of any fact which would give rise to liability under Title IV of ERISA,
in an amount that would, individually or in the aggregate, have a Material
Adverse Effect on the Company. No reportable event, within the meaning of
Section 4043(c) of ERISA for which the 30-day notice requirement of ERISA has
not been waived, has occurred with respect to any Company Pension Plan. Except
as set forth in the Previously Filed Company SEC Reports, there are no pending,
filed, or threatened disputes, lawsuits, claims (other than routine benefit
claims), investigations, or audits by any person or Governmental Entity with
respect to any Company Benefit Plan that would, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on the
Company and no condition exists which could reasonably be expected to subject
the Company or any Company ERISA Affiliate to any liability (other than for
routine benefit claims and other than pursuant to the current terms of any
Company Benefit Plan) with respect to any Company Benefit Plan in an amount that
would, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 5.10 Takeover Provisions Inapplicable. As of the date hereof and
at all times thereafter, until and including the Effective Date, Subchapters D
(Section 2538), E, F, G, H, I and J of Chapter 25 of the PBCL, are, and shall
be, inapplicable to the Merger and the transactions contemplated by this Merger
Agreement.
Section 5.11 Compliance with Applicable Laws. (i) The Company and its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals (the "Company Permits") of all Governmental Entities necessary in
all material respects for the operation of the businesses of the Company and its
subsidiaries; (ii) the Company and its subsidiaries are in compliance with the
terms of the Company Permits in all material respects; (iii) except as disclosed
in the Previously Filed Company SEC Reports, the businesses of the Company and
its subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity except for such violations that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
and (iv) no investigation or review by any Governmental Entity with respect to
the Company or any of its subsidiaries is pending, or, to the knowledge of the
Company, threatened, nor has any Governmental Entity indicated an intention to
conduct the same
A-14
<PAGE> 115
except for such investigations or reviews that would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on the
Company. No representation or warranty is made in this Section 5.11 with respect
to employee benefit plans, Taxes, product liability and airworthiness or
Environmental Laws, which matters are the subject of Sections 5.8 and 5.9, 5.12,
5.15 and 5.16, respectively.
Section 5.12 Taxes.
(a) The Company and its subsidiaries have (i) filed or caused to be filed
all Tax Returns required to be filed by any jurisdiction to which any of them is
subject, (ii) paid in full on a timely basis all Taxes due and claimed to be due
by each such jurisdiction, and (iii) duly collected or withheld and timely paid
all Taxes required to be collected from others or deducted and withheld from any
amounts paid to employees or others, except to the extent any failure to file,
pay or withhold would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Such Tax Returns are accurate and complete in all
material respects and accurately reflect the Tax liabilities for such periods,
except to the extent any inaccuracies in any such Tax Returns would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
No Tax deficiency or penalty has been asserted or threatened by any such
jurisdiction against the Company or any of its subsidiaries, except to the
extent any such deficiencies or penalties, individually or in the aggregate,
have not had and would not have a Material Adverse Effect on the Company.
(b) To the knowledge of the Company, there is no audit of any material Tax
Return of the Company or any of its subsidiaries in progress, there is no
threatened action, suit, proceeding, investigation, audit, or claim for or
relating to material Taxes, there are no matters under discussion with any
Governmental Entities with respect to material Taxes that could result in an
additional amount of material Taxes being payable by the Company or any of its
subsidiaries, and no Governmental Entity has indicated that it intends to audit
any material Tax Return of the Company or any of its subsidiaries.
(c) Neither the Company nor any of its subsidiaries (i) has waived any
statute of limitations with respect to Tax obligations or agreed to any
extension of time with respect to a Tax assessment or deficiency, except to the
extent any such Tax obligation, assessment or deficiency would not, individually
or in the aggregate, have a Material Adverse Effect on the Company, (ii) is a
party to any Tax allocation or sharing agreement, (iii) has been a member of an
affiliated group (other than the affiliated group of which the Company is the
common parent) filing a consolidated federal income tax return, nor is liable
for material Taxes of an affiliated group (other than the affiliated group of
which the Company is the common parent) under Section 1.1502-6 of the Treasury
Regulations (or any similar provision of state, local, or foreign law),
including as a transferee or successor, by contract, or otherwise, or (iv) is
currently the beneficiary of any extensions of time within which to file any Tax
Return.
(d) The earliest taxable period of the Company and its subsidiaries for
which the statute of limitations for federal, state, local and foreign Tax
Returns filed by the Company is still open is the calendar year 1987.
(e) Neither the Company nor any of its subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(f) Neither the Company nor any of its subsidiaries (i) has agreed or
consented at any time under Section 341(f) of the Code to have the provisions of
Section 341(f)(2) of the Code apply to any disposition of any assets, (ii) has
agreed, or is required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise that will affect the
liability of the Company or its subsidiaries for Taxes, (iii) has made an
election, or is required, to treat any asset as owned by another person pursuant
to the provisions of Section 168(f) of the Code or as tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of the
Code, (iv) has made any of the foregoing elections or is required to apply any
of the foregoing rules under any comparable state or local tax provision, or (v)
owns any material assets that were financed directly or indirectly with, or that
directly or indirectly secure, debt the interest on which is tax-exempt under
Section 103(a) of the Code.
A-15
<PAGE> 116
(g) The transaction contemplated herein, either by itself or in conjunction
with any other transaction that the Company may have entered into or agreed to,
will not give rise to any federal income tax liability under section 355(e) of
the Code for which the Company may in any way be held liable.
(h) The Company is not a party to any "Gain Recognition Agreements" as such
term is used in the Treasury Regulations promulgated under Section 367 of the
Code.
(i) Neither the Company nor any of its subsidiaries has made or become
obligated to make, nor will Parent, Sub, the Company, or any of its
subsidiaries, as a result of any event connected with any transaction
contemplated herein and/or any termination of employment related to any such
transaction, make or become obligated to make (with respect to any employee of
the Company or any of its subsidiaries), any "excess parachute payment", as
defined in Section 280G of the Code to any employee of the Company or any of its
subsidiaries.
(j) There are no material liens for Taxes (other than for current Taxes
that are not yet due and payable or are being contested in good faith) upon the
assets of the Company or any of the subsidiaries.
(k) The Company has no excess loss account, as such term is used in Section
1.1502-19 of the Treasury Regulations, with respect to the stock of any
subsidiary.
(l) The unpaid Taxes of the Company and its subsidiaries did not, as of the
most recent fiscal month end prior to the date hereof, exceed the reserve for
Tax Liability (not including any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the most recent balance sheet (other than in any notes thereto) that has been
made available to Parent.
Section 5.13 Certain Contracts. Except as filed as an exhibit to the
Company SEC Reports, neither the Company nor any of its subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding (whether
written or oral) (i) which, as of the date hereof, is a "material contract" (as
defined in Item 601(b)(10) of Regulation S-K of the Commission) or has been
filed with the Commission to be performed after the date of this Merger
Agreement or (ii) which materially restricts the conduct of any line of business
of the Company.
Section 5.14 Patents, Trademarks, Etc. The Company and its subsidiaries
have all patents, trademarks, trade names, service marks, trade secrets,
copyrights and licenses and other proprietary intellectual property rights and
licenses ("Company Intellectual Property") as are necessary in connection with
the businesses of the Company and its subsidiaries, and the Company does not
have any knowledge of any conflict between the rights of the Company and its
subsidiaries and the rights of others therein, except to the extent that the
failure of the Company to have, or any conflicts with respect to, the Company
Intellectual Property would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 5.15 Product Liability; Airworthiness. (a) The Company has no
knowledge of any claim, or the basis for any claim, against the Company or any
of its subsidiaries for injury to person or property of employees or any third
parties suffered as a result of the sale of any product or performance of any
service by the Company or any of its subsidiaries, including claims arising out
of the defective or unsafe nature of its products or services, which claim
would, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company.
(b) To the knowledge of the Company, all goods and services designed,
manufactured or sold by the Company or any of its subsidiaries comply with all
laws, requirements, specifications, rules and regulations related to
airworthiness of all applicable Governmental Entities and none of such products
or services contain any defects in manufacturing, design or performance or other
defect which renders such products or services or any component thereof
defective, deficient, nonconforming or unsuitable for their intended use, except
to the extent that such failure to comply or defects would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. There is no
publicly and formally announced rule or regulation by any Governmental Entity of
the United States or any state thereof that could reasonably be expected to
affect the various airworthiness approvals, licenses, permits or certifications
applicable to the goods, services, assets,
A-16
<PAGE> 117
facilities or operations of the Company and its subsidiaries, except to the
extent that such rules or regulations would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.16 Environment. To the knowledge of the Company, except as
disclosed in the Previously Filed Company SEC Reports, there are, with respect
to the Company or any of its subsidiaries, no past or present violations of
Environmental Laws, releases or threatened releases of any material into the
environment or contractual obligations which may reasonably be expected to give
rise to any liability under any Environmental Laws and which would, individually
or in the aggregate, have a Material Adverse Effect on the Company.
Section 5.17 Accounting; Tax Matters. Neither the Company nor, to its
knowledge, any of its affiliates, has, through the date hereof, taken or agreed
to take any action nor do they have knowledge of any fact or circumstance that
is reasonably likely to prevent (i) Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests," or (ii)
the Merger qualifying for federal income tax purposes as a "reorganization"
within the meaning of Section 368(a) of the Code.
Section 5.18 Company Action. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of directors (a)
determined that the Merger is in the best interests of the Company and its
shareholders, (b) approved this Merger Agreement in accordance with the
provisions of Section 1922 of the PBCL, and (c) determined to recommend the
approval of this Merger Agreement and the Merger by the holders of the Company
Common Stock.
Section 5.19 Lack of Ownership of Parent Common Stock. Neither the
Company nor any of its subsidiaries owns any shares of Parent Common Stock or
other securities convertible into shares of Parent Common Stock (exclusive of
any shares owned by any Company Benefit Plan).
Section 5.20 Insurance Coverage. The Company believes that as of the date
hereof it has adequate insurance coverage from solvent, viable insurance
carriers in accordance with current industry practices except where the failure
to have such insurance coverage would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
Section 5.21 Year 2000. Except as disclosed in the Previously Filed
Company SEC Reports, the Company's products and information systems are Year
2000 Compliant except to the extent that their failure to be Year 2000 Compliant
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. For purposes of this Merger Agreement, Year 2000 Compliant shall
mean that the Company's products and information systems accurately process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries, and
the years 1999 and 2000 and leap year calculations.
Section 5.22 Financial Advisor. Except for Credit Suisse First Boston
Corporation, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Merger Agreement based upon arrangements
made by or on behalf of the Company, and the fees and commissions payable to
Credit Suisse First Boston Corporation as contemplated by this Section 5.22 will
be the amount set forth in that certain letter, dated November 11, 1998, from
Credit Suisse First Boston Corporation to the Company.
Section 5.23 Fairness Opinion. The Company has received the opinion of
Credit Suisse First Boston Corporation, financial advisor to the Company, dated
the date hereof, to the effect that the Exchange Ratio is fair from a financial
point of view to the holders of shares of Company Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the
Merger. (a) Prior to the Effective Date, unless Parent shall otherwise consent
in writing (such consent not to be unreasonably withheld, delayed or
conditioned) and except as specifically provided herein (including Section
6.1(b)) or as set forth in the
A-17
<PAGE> 118
Company Disclosure Schedule, from and after the date hereof, the Company shall,
and shall cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in the same manner as heretofore conducted,
and shall, and shall cause its subsidiaries to, use their reasonable best
efforts to preserve intact their present business organizations, keep available
the services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Date. The Company shall, and shall cause its subsidiaries to,
in the ordinary course of business (A) maintain insurance coverages and its
books, accounts and records in the usual manner consistent with prior practices;
(B) comply with all material laws, ordinances and regulations of Governmental
Entities applicable to the Company and its subsidiaries; (C) maintain and keep
its properties and equipment in good repair, working order and condition,
ordinary wear and tear excepted; and (D) perform in all material respects its
obligations under all contracts and commitments to which it is a party or by
which it is bound.
(b) Without limiting the generality of Section 6.1(a), prior to the
Effective Date, unless Parent shall otherwise consent in writing (such consent
not to be unreasonably withheld, delayed or conditioned) and except as set forth
in the Company Disclosure Schedule, from and after the date hereof:
(i) the Company shall not and shall not propose to (A) except as
required pursuant to any indenture, loan documents or contract in effect as
of the date hereof, sell or pledge or agree to sell or pledge any capital
stock owned by it in any of its Significant Subsidiaries (unless already
pledged as of the date hereof), (B) amend its Amended and Restated Articles
of Incorporation or Amended and Restated By-Laws, (C) split, combine or
reclassify its outstanding capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of the Company, or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or (D) except as required pursuant to any Company Benefit Plan,
directly or indirectly redeem, purchase or otherwise acquire or agree to
redeem, purchase or otherwise acquire any shares of Company capital stock;
(ii) the Company shall not, nor shall it permit any of its
subsidiaries to, (A) other than pursuant to the exercise of Company Stock
Options outstanding on the date hereof or otherwise in accordance with the
present terms of any Company Benefit Plan and except as permitted by
Section 6.1(b)(iii) or by the Cross Stock Option Agreements, issue, deliver
or sell or agree to issue, deliver or sell any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any
class, or any option, rights or warrants to acquire, or securities
convertible into, shares of capital stock (other than, in each case, to the
Company or direct or indirect wholly-owned subsidiaries of the Company);
(B) acquire, lease or dispose or agree to acquire, lease or dispose of any
capital assets or any other assets other than in the ordinary course of
business, (C) incur additional indebtedness or encumber or grant a security
interest in any asset or enter into any other material transaction other
than in each case in the ordinary course of business; (D) acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof; or (E) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing which is binding;
(iii) the Company shall not, nor shall it permit any of its
subsidiaries to, except as required to comply with applicable law, and
except for (w) compensation payments and changes or benefit adjustments
made in the ordinary course of business (which shall include (1) normal
periodic performance reviews and related compensation and benefit increases
and (2) the provision of individual Company Benefit Plans consistent with
past practice for promoted or newly hired officers and employees) and which
do not involve the grant of any actual or phantom equity interests in the
Company, (x) awards under the Company's 1994 Long-Term Incentive Plan and
CAP Plus Plan, in each case in the ordinary course of business, (y) grants
of options with respect to Company Common Stock in the ordinary course of
business to newly-hired or promoted officers and employees and (z)
(following notice to Parent) grants of options with respect to no more than
200,000 shares of Company Common Stock in the aggregate in the ordinary
course of business, (A)(1) adopt, enter into, terminate or (2) in any way
that would materially increase the cost thereof to the Company or expand
the applicability of,
A-18
<PAGE> 119
or amend, any bonus, profit sharing, compensation, severance, termination,
stock option, pension, retirement, deferred compensation, employment or
other Company Benefit Plan, agreement, trust, fund or other arrangement for
the benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe benefit of
any director, officer or employee, (C) pay any benefit not provided under
any existing plan or arrangement, (D) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Company
Benefit Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any benefit
plans or agreements or awards made thereunder), (E) take any action to fund
or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Company Benefit
Plan other than in the ordinary course of business consistent with past
practice or as required under the present terms of any Company Benefit
Plan, or (F) adopt, enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing which is binding;
(iv) except as required by or in connection with the Trust Preferred
Securities, the Company shall not, nor shall it permit any of its
subsidiaries to, make any investments in non-investment grade debt
securities (other than non-investment grade debt securities issued by the
Company or any of its subsidiaries);
(v) the Company shall not, nor shall it permit any of its subsidiaries
to, take or cause to be taken any action, whether before or after the
Effective Date, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the
meaning of Section 368 (a) of the Code; and
(vi) neither the Company, nor any subsidiary of the Company, shall
make or amend any material Tax election, agree to waive or extend any
statute of limitations, or resolve or agree to resolve any audit or
proceeding relating to any material Tax liability other than in the
ordinary course of business consistent with past practice; provided,
however, that the Company and its subsidiaries shall be permitted to make
any Tax election and take any action in connection with the settling of its
and their federal tax liabilities for the 1992, 1993, 1994, 1995 and 1996
tax years so long as such elections or actions do not result in aggregate
additional Tax liabilities to the Company and its subsidiaries in excess of
the reserve established therefor on the most recent audited consolidated
financial statements of the Company, and provided that any settling of such
audit and liabilities shall require the consent of Parent, which consent
shall not unreasonably be withheld. The Company and its subsidiaries shall,
prior to the Closing Date, terminate all tax allocation agreements and tax
sharing agreements (if any) with respect to the Company and its
subsidiaries (other than the Tax Sharing Agreement dated September 13,
1996, by and between the Company, Garrison Litigation Management Group,
Ltd., and The Anchor Packing Company) and shall ensure that such agreements
are of no further force or effect as to the Company and its subsidiaries on
and after the Closing Date and there shall be no further liability of the
Company or its subsidiaries under any such agreements.
Section 6.2. Conduct of Business by Parent and Sub Pending the
Merger. (a) Parent. Prior to the Effective Date, unless the Company shall
otherwise consent in writing (such consent not to be unreasonably withheld,
delayed or conditioned) and except as specifically provided herein including as
set forth in the Parent Disclosure Schedule, from and after the date hereof
Parent shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in the same manner as
heretofore conducted, and shall, and shall cause its subsidiaries to, use their
reasonable best efforts to preserve intact their present business organizations,
keep available the services of their present officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Date. Subject to Section 6.2(b), the foregoing
shall not prevent Parent from acquiring or agreeing to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in, or by any
other manner, any assets, business or any corporation, partnership, association
or other business organization or division thereof, for
A-19
<PAGE> 120
such aggregate consideration in cash, Parent Common Stock or a combination
thereof, as Parent may deem appropriate from time to time.
(b) Prior to the Effective Date, neither Parent nor its subsidiaries shall,
unless the Company shall otherwise consent in writing (such consent not to be
unreasonably withheld, delayed or conditioned), acquire, merge or agree to
acquire or be acquired, by merging or consolidating with, or by purchasing a
substantial equity interest in or by selling 50% or more of the outstanding
Parent Common Stock (or securities convertible into Parent Common Stock) to, or
by any other manner, any business or any corporation, partnership, association,
or other business organization or division thereof, in each case participating
in a line of business or related business of the Company or any of its
subsidiaries, which transaction, either alone or in conjunction with the
transactions contemplated by this Merger Agreement, is reasonably likely to
raise antitrust, competition law or trade regulatory issues that are reasonably
likely to materially delay, impede or prohibit the consummation of the Merger.
(c) Without limiting the generality of Section 6.2(a), prior to the
Effective Date, unless the Company shall otherwise consent in writing (such
consent not to be unreasonably withheld, delayed or conditioned) and except as
set forth in the Parent Disclosure Schedule, from after the date hereof: (i)
Parent shall not, nor shall it permit any of its subsidiaries to, take or cause
to be taken any action, whether before or after the Effective Date, which would
disqualify or would be reasonably likely to disqualify the Merger as a "pooling
of interests" for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Code and (ii) Parent shall not enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing which is binding.
(d) Sub. During the period from the date of this Merger Agreement to the
Effective Date, Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Merger Agreement.
Section 6.3 Notice of Breach. Each party shall promptly give written
notice to the other party upon becoming aware of the occurrence or, to its
knowledge, impending or threatened occurrence, of any event which would cause or
constitute a breach of any of its covenants contained in this Merger Agreement,
or would cause any of its representations or warranties contained in this Merger
Agreement to be inaccurate, and shall use its best efforts to prevent or
promptly remedy the same. No such notification shall be deemed an amendment of
the Company Disclosure Schedule or the Parent Disclosure Schedule.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and Parent and
their respective subsidiaries shall afford to the other and to the other's
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Date to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
each shall furnish promptly to the other (i) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
or state securities laws, and (ii) subject to applicable law, all other
information concerning its business, properties and personnel as the other may
reasonably request. Each of the Company and Parent shall hold, and shall cause
their respective employees and agents to hold, in confidence all such
information in accordance with the terms of the Confidentiality Agreement dated
as of October 21, 1998 between Parent and the Company (the "Confidentiality
Agreement").
Section 7.2 Registration Statement/Proxy Statement. (a) As promptly as
practicable after the execution of this Merger Agreement, the Company and Parent
shall prepare and file with the Commission a joint proxy statement (the "Proxy
Statement") in preliminary form for use at the Company Meeting and the Parent
Meeting. As promptly as practicable after comments are received from the
Commission with respect to the preliminary form of the Proxy Statement and after
the furnishing by the Company and Parent of all information required to be
contained therein, the Company and Parent shall file with the Commission the
Proxy Statement in definitive form for use at their respective shareholder
meetings and Parent shall file with
A-20
<PAGE> 121
the Commission a registration statement on Form S-4 under the Securities Act for
the purpose of registering the shares of Parent Common Stock to be issued in the
Merger (the "Registration Statement"). Parent and the Company shall use all
reasonable best efforts to cause the Registration Statement to become effective
as soon thereafter as practicable. None of the information furnished by the
Company or its subsidiaries (in the case of the Company) or by Parent or its
subsidiaries (in the case of Parent) for inclusion or incorporation by reference
in (i) the Registration Statement or (ii) the Proxy Statement will, in the case
of the Proxy Statement or any amendments or supplements thereto, at the time of
the mailing of the Proxy Statement and any amendments or supplements thereto,
and at the time of the Company Meeting and Parent Meeting to be held in
connection with the Merger, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. No representation,
covenant or agreement is made by any party hereto with respect to information
supplied by any other party for inclusion in the Proxy Statement or the
Registration Statement. No filing of, or amendment or supplement to, the Proxy
Statement or Registration Statement shall be made by Parent or the Company
without providing the other with the opportunity to review and comment thereon.
If at any time prior to the Effective Date any information relating to Parent or
the Company, or any of their respective affiliates, directors or officers,
should be discovered by Parent or the Company which should be set forth in an
amendment or supplement to the Proxy Statement or Registration Statement so that
the Proxy Statement or Registration Statement would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the Commission and, to the extent
required by law, disseminated to the shareholders of Parent and the Company.
(b) The Company and Parent shall make all necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder, and under applicable blue sky or similar securities laws
and shall each use its reasonable best efforts to obtain required approvals and
clearances with respect thereto.
Section 7.3 Affiliates, Publication of Combined Financial Results. (a)
Not less than 45 days prior to the Effective Date, each of Parent and the
Company shall deliver to the other a list of names or addresses of each person
who, in its reasonable judgment, is an affiliate of Parent or the Company,
respectively, within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act or otherwise applicable Commission
accounting releases with respect to "pooling of interests" accounting treatment
(each such person, a "Pooling Affiliate") of Parent or the Company,
respectively. Each such party shall provide the other with such information and
documents as the other shall reasonably request for purposes of reviewing such
list.
(b) Each of the Company and Parent shall use its reasonable best efforts to
cause each of its respective Pooling Affiliates, as soon as practicable after
the date of this Merger Agreement, and no less than 30 days prior to the date of
the Company Meeting and the Parent Meeting, respectively, to deliver to the
other party an affiliate letter in customary form. Parent shall be entitled to
place legends as specified in such affiliate letters on the certificates
evidencing any of the Parent Common Stock to be received by such Pooling
Affiliates pursuant to the terms of this Merger Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of such letters.
(c) Parent shall publish combined sales and net income figures reflecting
at least 30 days of post-Merger combined operations as contemplated by and in
accordance with the terms of Commission Accounting Series Release No. 135, no
later than 20 days after the end of the first fiscal quarter of Parent ending
after the Effective Date in which there are at least 30 days of such post-Merger
combined operations.
Section 7.4 Stock Exchange Listing. Parent shall use its reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Parent Common Stock to be issued pursuant to the Merger.
A-21
<PAGE> 122
Section 7.5 Employment Arrangements. (a) After the Effective Date, Parent
shall, or shall cause the Surviving Corporation to, honor in accordance with
their terms, all Company Benefit Plans, including all employment, severance,
consulting and other compensation contracts between the Company or any of its
subsidiaries and any current or former director, officer or employee thereof,
and all provisions for vested or unvested benefits or other vested or unvested
amounts earned or accrued through the Effective Date and all provisions under
any Company Benefit Plan (as amended in compliance herewith or as modified by
Section 7.5 of the Company Disclosure Schedule) except for changes thereto which
are (i) set forth on Section 7.5 of the Company Disclosure Schedule, (ii)
required under the present terms of any Company Benefit Plan, or (iii) otherwise
agreed to by the parties hereto and, if applicable, the affected individual.
(b) From and after the Effective Date and for a period of one year
thereafter, employees of the Company and its subsidiaries shall receive
compensation and benefits from the Surviving Corporation (or any successor
thereto) that, in the aggregate, are no less favorable than either (i) the
compensation and benefits provided to similarly situated employees of Parent or
its subsidiaries or (ii) the compensation and benefits provided to such
employees as of the Effective Date by the Company and its subsidiaries.
(c) The Company and, if applicable, Parent agree (i) to take all actions
set forth on Section 7.5 of the Company Disclosure Schedule and (ii) that any
such action shall not be deemed to violate any other provision of this Merger
Agreement.
Section 7.6 Indemnification. (a) From and after the Effective Date,
Parent shall indemnify, defend and hold harmless the officers, directors and
employees of the Company and its subsidiaries (the "Indemnified Parties")
against all losses, expenses, claims, damages or liabilities arising prior to
the Effective Date to the fullest extent permitted or required under (A)
applicable law, (B) any indemnification agreements between the Company and any
such person or (C) the Company's Amended and Restated Articles of Incorporation
and Amended and Restated By-Laws.
(b) Parent shall use its best efforts to cause the Indemnified Parties to
be covered for a period of six (6) years from the Effective Date (or the period
of the applicable statute of limitations, if longer) by the directors' and
officers' liability insurance policy maintained by the Company (provided that
Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous to the
Indemnified Parties than such policy) with respect to acts or omissions
occurring prior to the Effective Date which were committed by such Indemnified
Parties in their capacity as such; provided, however, that in no event shall
Parent be required to expend on an annual basis more than $730,000 (the
"Insurance Amount") to maintain or procure insurance coverage pursuant hereto
and provided further that if Parent is unable to maintain or obtain the
insurance called for by this Section 7.6(b), Parent shall use its reasonable
best efforts to obtain as much comparable insurance as available for the
Insurance Amount.
(c) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Merger Agreement is
commenced, whether before or after the Effective Date, the parties hereto agree
to cooperate and use their respective reasonable best efforts to vigorously
defend against and respond thereto.
Section 7.7 Consents. (a) Each of the parties shall use its reasonable
best efforts to obtain as promptly as practicable all consents of any
Governmental Entity or any other person required in connection with, and waivers
of any violations or rights of termination that may be caused by, the
consummation of the transactions contemplated by this Merger Agreement.
(b) In furtherance and not in limitation of the foregoing, each of the
parties shall use its reasonable best efforts to resolve as promptly as
practicable such objections, if any, as may be asserted with respect to the
transactions contemplated by this Merger Agreement under any antitrust,
competition or trade regulatory laws, rules or regulations of any Governmental
Entity; provided however, that nothing in this Merger Agreement shall require
Parent to agree to hold separate or to divest any of the business, product lines
or assets of Parent or the Company or any of their respective subsidiaries or
take any other action, if such holding separate, divestiture or other action
would have a Material Adverse Effect on Parent or the Company.
A-22
<PAGE> 123
(c) Each of the parties shall promptly inform the others of any material
communication from any Governmental Entity regarding any of the transactions
contemplated by this Merger Agreement. If any party or any affiliate thereof
receives a request for additional information or documentary material from any
such Governmental Entity with respect to the transactions contemplated by this
Merger Agreement, then such party shall make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. Parent and the Company
shall consult and cooperate with one another with respect to (and prior to) any
understandings, undertakings or agreements (oral or written) which are proposed
to be made or entered into with any Governmental Entity in connection with the
transactions contemplated by this Merger Agreement and the Cross Stock Option
Agreements.
Section 7.8 Additional Agreements. (a) Subject to the terms and
conditions herein provided (including Section 7.7), each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Merger Agreement as promptly as
practicable, including using its reasonable best efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings (including, but not limited to, filings with all applicable Governmental
Entities) and defending any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Merger Agreement or the Merger,
including seeking to lift any injunction, temporary restraining order or,
subject to any required vote of the shareholders of the Company, other legal bar
to the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible) and the transactions contemplated hereby. Notwithstanding the
foregoing, but subject to Section 7.7, there shall be no action required to be
taken and no action will be taken in order to consummate and make effective the
transactions contemplated by this Merger Agreement if such action would,
individually or in the aggregate, have a Material Adverse Effect on Parent or
the Company.
(b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Merger Agreement, the
proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
Section 7.9 No Solicitation. (a) Neither the Company nor Parent shall,
directly or indirectly, take (nor shall the Company or Parent instruct its
subsidiaries, directors, officers, employees, representatives, investment
bankers, attorneys, accountants or other agents or affiliates, (collectively,
"Representatives")) to take any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal (as defined below) with respect to such
party, (ii) enter into any agreement with respect to any Acquisition Proposal
with respect to such party or (iii) participate in any way in discussions or
negotiations with, or furnish any information to, any person in connection with,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal with respect to such party. Each of the Company and Parent
will promptly communicate to the other that such a solicitation has been
received by it, or that any such information has been requested from it or that
such negotiations or discussions have been sought to be initiated with it or
that it has received a written communication with respect to an Acquisition
Proposal with respect to it. For purposes of this Merger Agreement, the term
"Acquisition Proposal" means, with respect to each of the Company and Parent,
any proposed (A) merger, consolidation or similar transaction involving the
Company (in the case of the Company) or merger, consolidation or similar
transaction involving Parent upon consummation of which the holders of Parent
Common Stock will not own at least 50% of the common stock of Parent or, if
Parent is not the surviving entity, the combined entity (in the case of Parent),
(B) sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of assets of the Company (in the case
of the Company) or Parent (in the case of Parent) or its subsidiaries
representing 15% or more of the consolidated assets of the Company and its
subsidiaries (in the case of the Company) or 50% or more of the consolidated
assets of Parent and its subsidiaries (in the case of Parent), (C) issue, sale,
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction), or acquisition of, securities (or options,
rights or warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the voting power of the Company (in the case of the
Company) or 50% or more of the voting power of Parent (in the case of Parent).
A-23
<PAGE> 124
(b) Notwithstanding anything in this Merger Agreement to the contrary
(including clause (a) of this Section 7.9), to the extent the Company or Parent
or its respective Representatives receive a communication with respect to an
Acquisition Proposal with respect to it, which its Board of Directors
determines, after consultation with its financial advisors, may be reasonably
likely to result in a Superior Proposal (as defined below) or, in the case of
Parent, a transaction that would not otherwise conflict with this Merger
Agreement, including Section 6.2(b), such party and its Representatives may
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement such Acquisition Proposal; provided, however, that upon engaging in
such negotiations or discussions, providing such information or otherwise
facilitating any effort or attempt to make or implement such Acquisition
Proposal, the Company or Parent (as the case may be) shall give notice to the
other of its engagement in such activities. For purposes of this Merger
Agreement, the term "Superior Proposal" means, with respect to each of Parent
and the Company, any Acquisition Proposal with respect to it (and for purposes
of this definition of the term "Superior Proposal", the term "Acquisition
Proposal" with respect to the Company shall have the meaning set forth in
Section 7.9(a) except that the references to "15%" in such Section 7.9(a) shall
be deemed references to "50%") that is more favorable to its shareholders than
the Merger (taking into account the nature of the Acquisition Proposal, the
nature and amount of the consideration, the likelihood of completion and any
other factors deemed appropriate by the Board of Directors). Prior to furnishing
nonpublic information to, or entering into discussions or negotiations with, any
other persons or entities, the Company or Parent (as the case may be) shall
enter into a customary confidentiality agreement with such person or entity, it
being understood that such confidentiality agreement (x) shall not include any
provision calling for an exclusive right to negotiate with such party, (y) need
not contain "standstill" or similar provisions and such party shall advise the
other of the nature of such nonpublic information delivered to such person
reasonably promptly following its delivery to the requesting party.
(c) Nothing contained herein, including this Section 7.9, shall prohibit
Parent or the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to its shareholders if in the good faith judgment of its Board of
Directors, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law; provided, however,
that neither Parent nor the Company, as the case may be, nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Merger
Agreement, or approve or recommend, or propose publicly to approve or recommend,
an Acquisition Proposal with respect to it. This Section 7.9(c) does not
prohibit the termination of this Merger Agreement as specified in Section 9.1(j)
in the case of the Company or Section 9.1(k) in the case of Parent.
Section 7.10 Accountants' Letters. (a) The Company shall use its
reasonable best efforts to cause to be delivered to Parent a letter from Arthur
Andersen LLP, dated within two business days before the date on which the
Registration Statement shall become effective and addressed to Parent, in form
and substance reasonably satisfactory to Parent and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
(b) Parent shall use its reasonable best efforts to cause to be delivered
to the Company a letter from Ernst & Young LLP, dated within two business days
before the date on which the Registration Statement shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 7.11 Pooling of Interests. Each of Parent and the Company shall
use its reasonable best efforts to cause the Merger to be accounted for as a
"pooling of interests", and such accounting treatment to be accepted by each of
the Company's and Parent's independent certified public accountants, and by the
Commission, respectively, and each of Parent and the Company agrees that it
shall voluntarily take no action that would cause such accounting treatment not
to be obtained.
A-24
<PAGE> 125
Section 7.12 Trust Preferred Securities. Parent shall take all actions
required in connection with the transactions contemplated by this Merger
Agreement to provide for the compliance by the Company with Section 13.04 of the
Indenture, dated as of April 14, 1998, between the Company and The Bank of New
York, as Trustee, governing the Trust Preferred Securities.
Section 7.13 Parent Board of Directors. The Board of Directors of Parent
shall take such action as may be necessary (including increasing the size of the
Board of Directors of Parent) to appoint to the Board of Directors of Parent as
of the Effective Date John W. Guffey, Jr. and two other directors of the Company
selected by the Board of Directors of Parent.
Section 7.14 Post-Merger Operations. Following the Effective Date, Parent
and the Surviving Corporation's principal executive offices shall be located in
Charlotte, North Carolina.
Section 7.15 Tax Representation Letters. For purposes of the tax opinions
described in Sections 8.2(b) and 8.3(b) of this Merger Agreement, each of Parent
and the Company shall provide representation letters, substantially in the form
of Exhibits E and F, each dated on or about the date that is two business days
prior to the date the Proxy Statement is mailed to the shareholders of the
Company and reissued as of the Effective Date.
Section 7.16 Transfer Taxes. All state, local, foreign or provincial
sales, use, real property transfer, stock transfer or similar taxes, including
any interest or penalties with respect thereto, attributable to the Merger shall
be paid by the Company.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver by each party at or prior to the Effective
Date of the following conditions:
(a) This Merger Agreement shall have been adopted by the requisite
vote of the holders of the Company Common Stock.
(b) The Stock Issuance Proposal shall have been approved by the
requisite vote of the holders of Parent Common Stock.
(c) The Parent Common Stock issuable in the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance.
(d) The waiting periods applicable to the consummation of the Merger
under the HSR Act and the Competition Act (Canada) shall have expired or
been terminated and all other Company Required Consents and Parent Required
Consents in each case required to be obtained prior to consummation of the
Merger shall have been obtained, except where the failure to obtain such
other Company Required Consents or Parent Required Consents would not have
a Material Adverse Effect on the Company or Parent, as the case may be.
(e) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
(f) No preliminary or permanent injunction or other order by any court
or other Governmental Entity of competent jurisdiction (collectively,
"Restraints") (i) prohibiting or preventing the consummation of the Merger
or (ii) requiring Parent or the Company to hold separate or to divest any
of the business, product lines or assets of Parent or the Company or any of
their respective subsidiaries or take any other action, if such holding
separate, divestiture or other action would have a Material Adverse Effect
on Parent or the Company, shall have been issued and remain in effect;
provided, however, that
A-25
<PAGE> 126
each of the parties shall have used its best efforts to prevent the entry
of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(g) Parent and the Company shall have received letters from Ernst &
Young LLP and Arthur Andersen LLP, respectively, dated as of the Effective
Date to the effect that such firm concurs with management's conclusion
that, as of the Effective Date, no conditions exist that would preclude
such party from being a party to a business combination for which "pooling
of interests" accounting treatment would be available if consummated in
accordance with this Merger Agreement.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by the Company:
(a)(i) Parent and Sub shall have performed in all material respects
their agreements contained in this Merger Agreement required to be
performed on or prior to the Effective Date and (ii) the representations
and warranties of Parent and Sub contained in this Merger Agreement shall
be true in all respects when made and on and as of the Effective Date as if
made on and as of such date, except for representations and warranties
which are by their express provisions made as of a specific date or dates,
which were or will be true in all respects at such time or times as stated
therein (provided that, in each case, the condition set forth in this
Section 8.2(a)(ii) shall be deemed satisfied so long as any failures of
such representations and warranties to be true and correct, taken together,
would not have a Material Adverse Effect on Parent), and the Company shall
have received a certificate of the President or Chief Executive Officer or
a Vice President of Parent and Sub, respectively, to that effect.
(b) The Company shall have received an opinion substantially in the
form of Exhibit C of Cravath, Swaine & Moore, counsel to the Company, dated
the Effective Date, to the effect that the Merger will constitute a
"reorganization" for federal income tax purposes within the meaning of
Section 368(a) of the Code. In rendering such opinion, such counsel shall
be entitled to rely upon representations provided by the parties hereto
substantially in the form of Exhibits E and F.
Section 8.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by Parent:
(a)(i) The Company shall have performed in all material respects its
agreements contained in this Merger Agreement required to be performed on
or prior to the Effective Date and (ii) the representations and warranties
of the Company contained in this Merger Agreement shall be true in all
respects when made and on and as of the Effective Date as if made on and as
of such date, except for representations and warranties which are by their
express provisions made as of a specific date or dates which were or will
be true in all respects at such date or dates (provided that, in each case,
the condition set forth in this Section 8.3(a)(ii) shall be deemed
satisfied so long as any failures of such representations and warranties to
be true and correct, taken together, would not have a Material Adverse
Effect on the Company), and Parent and Sub shall have received a
certificate of the President or Chief Executive Officer or a Vice President
of the Company to that effect.
(b) The Parent shall have received an opinion substantially in the
form of Exhibit D of Squire, Sanders & Dempsey L.L.P., counsel to Parent,
dated the Effective Date, to the effect that the Merger will constitute a
"reorganization" for federal income tax purposes within the meaning of
Section 368(a) of the Code. In rendering such opinion, such counsel shall
be entitled to rely upon representations provided by the parties hereto
substantially in the form of Exhibits E and F.
8.4 Frustration of Closing Conditions. No party may rely on the failure
of any condition set forth in Section 8.1, 8.2 or 8.3, as the case may be, to be
satisfied if such failure results from such party's breach of any provision of
this Merger Agreement or the failure of such party to use its reasonable best
efforts to cause the Merger to be consummated.
A-26
<PAGE> 127
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Merger Agreement may be terminated at any
time prior to the Effective Date, whether before or after approval by the
shareholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated on or before March 31, 2000; provided, that the terminating
party is not otherwise in material breach of its covenants hereunder and
none of such terminating party's representations and warranties contained
herein, which are qualified as to materiality, shall be inaccurate in any
respect, and none of such terminating party's representations and
warranties contained herein, which are not so qualified, shall be
inaccurate in any material respect, in each case, as if made as of the date
of such purported termination (except for representations and warranties
that by their express provisions are or shall have been made as of a
specific date or dates, which shall only be deemed inaccurate to the extent
that they were inaccurate at such times as stated therein);
(c) by either Parent or the Company if the adoption by the
shareholders of the Company of this Merger Agreement shall not have been
obtained at the Company Meeting or at any adjournment or postponement
thereof;
(d) by either Parent or the Company if the approval by the
shareholders of Parent of the Stock Issuance Proposal shall not have been
obtained at the Parent Meeting or at any adjournment or postponement
thereof;
(e) by the Company if any of the conditions specified in Sections 8.1
and 8.2 have not been met or waived by the Company at such time as such
condition is no longer capable of satisfaction;
(f) by Parent if any of the conditions specified in Sections 8.1 and
8.3 have not been met or waived by Parent at such time as such condition is
no longer capable of satisfaction;
(g) by Parent if the Company's Board of Directors shall have (i)
accepted or resolved to accept a Superior Proposal (provided that the
Company shall not accept or resolve to accept a Superior Proposal unless
(x) it provides Parent with notice of the material terms of such proposal
at least two days prior to such acceptance and (y) at the time of such
acceptance the Board of Directors of the Company determines in good faith
that such proposal continues to be a Superior Proposal after taking into
account any amendments Parent and Sub may have offered to make to this
Merger Agreement) or (ii) refused to affirm its recommendation concerning
the Merger referred to in Section 3.7(a) hereof within 10 business days
after receipt of any written request from Parent to do so at any time when
an Acquisition Proposal with respect to the Company shall have been made
and not rejected by the Company's Board of Directors;
(h) by Parent or the Company if any Restraint having any of the
effects set forth in Section 8.1(f) shall be in effect and shall have
become final and nonappealable; provided, however, that the party seeking
to terminate this Merger Agreement pursuant to this Section 9.1(h) shall
have used its reasonable best efforts to prevent the entry of and to remove
such Restraint;
(i) by the Company if Parent's Board of Directors shall have (i)
accepted or resolved to accept a Superior Proposal contemplating the
termination of this Merger Agreement (provided that Parent shall not accept
or resolve to accept a Superior Proposal unless (x) it provides the Company
with notice of the material terms of such proposal at least two days prior
to such acceptance and (y) at the time of such acceptance the Board of
Directors of Parent determines in good faith that such proposal continues
to be a Superior Proposal after taking into account any amendments the
Company may have offered to make to this Merger Agreement) or (ii) refused
to affirm its recommendation concerning the Stock Issuance Proposal
referred to in Section 3.7(b) hereof within 10 business days after receipt
of any written request
A-27
<PAGE> 128
from the Company to do so at any time when an Acquisition Proposal with
respect to Parent shall have been made and not rejected by Parent's Board
of Directors;
(j) by the Company if the Board of Directors of the Company has
accepted or resolved to accept a Superior Proposal; provided that the
Company shall not accept or resolve to accept a Superior Proposal unless
(i) it provides Parent with notice of the material terms of such proposal
at least two days prior to such acceptance and (ii) at the time of such
acceptance the Board of Directors of the Company determines in good faith
that such proposal continues to be a Superior Proposal after taking into
account any amendments Parent and Sub may have offered to make to this
Merger Agreement; or
(k) by Parent if the Board of Directors of Parent has accepted or
resolved to accept a Superior Proposal; provided that Parent shall not
accept or resolve to accept a Superior Proposal unless (i) it provides the
Company with notice of the material terms of such proposal at least two
days prior to such acceptance and (ii) at the time of such acceptance the
Board of Directors of Parent determines in good faith that such proposal
continues to be a Superior Proposal after taking into account any
amendments the Company may have offered to make to this Merger Agreement.
Section 9.2 Effect of Termination. (a) In the event of termination of
this Merger Agreement by either Parent or the Company, as provided above, this
Merger Agreement shall forthwith become void and (except (x) for the willful
breach of this Merger Agreement by, or fraud of, any party hereto and (y) as
provided in the proviso to Section 9.2(c) or 9.2(e), respectively) there shall
be no liability on the part of either the Company, Parent or Sub or their
respective directors or officers; provided that the last sentence of Section
7.1, and Sections 9.2 and 10.2 shall survive the termination.
(b) Unless (x) any of the representations and warranties of Parent
contained herein, which are qualified as to materiality, were or shall be
inaccurate in any respect, or any of the representations and warranties of
Parent contained herein, which are not so qualified, were or shall be inaccurate
in any material respect, in each case, when made and as of the date of any
termination of this Merger Agreement, as if made as of the date of such
termination (except for representations and warranties that by their express
provisions are made as of a specific date or dates, which shall only be deemed
inaccurate to the extent that they were or shall have been inaccurate at such
times as stated therein), respectively, or (y) at the time of such termination,
Parent is in material breach of any covenant contained herein, the Company shall
make a payment to Parent (by wire transfer or cashiers check) of a breakup fee
in the amount of $45 million (the "Termination Fee") (i) in the event this
Merger Agreement is terminated pursuant to Section 9.1(g) or Section 9.1(j) or
(ii) in the event this Merger Agreement is terminated following the Company
Meeting pursuant to Section 9.1(c) and an Acquisition Proposal with respect to
the Company shall have been publicly disclosed to the shareholders of the
Company (and not withdrawn or terminated) prior to the Company Meeting and,
within 12 months after such termination of this Merger Agreement, the Company
shall have entered into an agreement providing for the consummation of an
Acquisition Proposal with respect to the Company (it being understood that no
confidentiality agreement with respect to an Acquisition Proposal shall
constitute such an agreement) or an Acquisition Proposal with respect to the
Company shall have been consummated. For purposes of this Section 9.2(b), the
term Acquisition Proposal shall have the meaning set forth in Section 7.9(a)
except that the references to "15%" in such Section 7.9(a) shall be deemed
references to "50%".
(c) The Company shall make a payment to Parent (by wire transfer or
cashiers check) of an expense reimbursement fee in the amount of $5 million (i)
in the event the Termination Fee becomes due and payable pursuant to Section
9.2(b) or (ii) in the event this Merger Agreement is terminated pursuant to
Section 9.1(f) and at the time of such termination the Company is in material
breach of any representation, warranty or material covenant of the Company
contained herein; provided, that, in the event the expense reimbursement fee is
payable pursuant to the foregoing clause (ii) of this Section 9.2(c),
notwithstanding Section 9.2(a) or the termination of this Merger Agreement, the
Company shall remain liable for, and no payment pursuant to the foregoing clause
(ii) of this Section 9.2(c) shall release the Company from, any liability or
damage suffered or incurred by Parent to the extent any such liability or damage
exceeds the amount of such expense reimbursement fee.
A-28
<PAGE> 129
(d) Unless (x) any of the representations and warranties of the Company
contained herein, which are qualified as to materiality, were or shall be
inaccurate in any respect, or any of the representations and warranties of the
Company contained herein, which are not so qualified, were or shall be
inaccurate in any material respect, in each case, when made and as of the date
of any termination of this Merger Agreement, as if made as of the date of such
termination (except for representations and warranties that by their express
provisions are made as of a specific date or dates, which shall only be deemed
inaccurate to the extent that they were or shall have been inaccurate at such
times as stated therein), respectively, or (y) at the time of such termination,
the Company is in material breach of any covenant contained herein, Parent shall
make a payment to Company (by wire transfer or cashiers check) of the
Termination Fee (i) in the event this Merger Agreement is terminated pursuant to
Section 9.1(i) or Section 9.1(k) or (ii) in the event this Merger Agreement is
terminated following the Parent Meeting pursuant to Section 9.1(d) and an
Acquisition Proposal with respect to Parent shall have been publicly disclosed
to the shareholders of Parent (and not withdrawn or terminated) prior to the
Parent Meeting and, within 12 months after such termination of this Merger
Agreement, Parent shall have entered into an agreement providing for the
consummation of an Acquisition Proposal with respect to Parent (it being
understood that no confidentiality agreement with respect to an Acquisition
Proposal shall constitute such an agreement) or an Acquisition Proposal with
respect to Parent shall have been consummated.
(e) Parent shall make a payment to Company (by wire transfer or cashiers
check) of an expense reimbursement fee in the amount of $5 million (i) in the
event the Termination Fee becomes due and payable pursuant to Section 9.2(d) or
(ii) in the event this Merger Agreement is terminated pursuant to Section 9.1(e)
and at the time of such termination Parent is in material breach of any
representation, warranty or material covenant contained herein; provided, that,
in the event the expense reimbursement fee is payable pursuant to the foregoing
clause (ii) of this Section 9.2(e), notwithstanding Section 9.2(a) or the
termination of this Merger Agreement, Parent shall remain liable for, and no
payment pursuant to the foregoing clause (ii) of this Section 9.2(e) shall
release Parent from, any liability or damage suffered or incurred by the Company
to the extent any such liability or damage exceeds the amount of such expense
reimbursement fee.
Section 9.3 Amendment. This Merger Agreement may be amended by the
parties hereto at any time before or after approval hereof by the shareholders
of the Company or Parent, but, after such approval, no amendment shall be made
which by law requires further approval by the shareholders of the Company or
Parent without such further approval. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.4 Waiver. At any time prior to the Effective Date, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions contained herein; provided, however, that no such waiver shall be
given that by law requires further approval by the shareholders of the Company
or Parent without such further approval having been obtained. No agreement on
the part of a party hereto to any such extension or waiver shall be valid unless
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices or other communications under this
Merger Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person,
A-29
<PAGE> 130
by overnight courier, telecopy, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to the Company:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
With copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq. and Allen Finkelson, Esq.
Fax: (212) 474-3700
If to Parent or Sub:
The B.F.Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General Counsel
Fax: (330) 659-7737
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 10.2 Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Merger Agreement and the
transactions contemplated by this Merger Agreement shall be paid by the party
incurring such expenses, except that Parent and Company agree to each pay 50% of
all printing, mailing and delivery expenses incurred by the parties hereto in
connection with the Proxy Statement.
Section 10.3 Publicity. So long as this Merger Agreement is in effect,
Parent, Sub and the Company agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Merger Agreement, and none of them shall issue
any press release or make any public statement prior to such consultation,
except as may be required by law.
Section 10.4 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Merger Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this Merger
Agreement and to enforce specifically the
A-30
<PAGE> 131
terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
Section 10.5 Interpretation. (a) When a reference is made in this Merger
Agreement to subsidiaries of Parent or the Company, the word "subsidiaries"
means corporations more than 50% of whose outstanding voting securities are
directly or indirectly owned by Parent or the Company, as the case may be. The
table of contents and headings contained in this Merger Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Merger Agreement. When reference is made in this Merger
Agreement to Articles, Sections, Schedules or Exhibits, such reference shall be
to an Article, Section, Schedule or Exhibit of this Merger Agreement, as the
case may be, unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Merger Agreement and are not followed
by the words "without limitation", they shall be deemed to be followed by the
words "without limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Merger Agreement shall refer to this
Merger Agreement as a whole and not to any particular provision of this Merger
Agreement. Whenever "or" is used in this Merger Agreement it shall be construed
in the nonexclusive sense. The phrases "transactions contemplated by this Merger
Agreement" and "transactions contemplated hereby" shall include transactions
contemplated by the Cross Stock Option Agreements.
(b) As used in this Merger Agreement, any reference to any state of facts,
event, change or effect having a "Material Adverse Effect" on or with respect to
any party, as the case may be, shall mean such state of facts, event, change or
effect that has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, financial condition, or results of
operations of such party and its subsidiaries taken as a whole (excluding any
state of facts, event, change or effect relating to (i) the economy or
securities markets in general, (ii) this Merger Agreement or the transactions
contemplated hereby or the announcement thereof or (iii) the aerospace industry
in general).
(c) As used in this Merger Agreement, "knowledge" shall mean, with respect
to the matter in question, the actual knowledge of such matter by any executive
officer of Parent or the Company, as applicable.
(d) The inclusion of an item on any schedule to this Merger Agreement shall
not be deemed to be indicative of the materiality of such item.
Section 10.6 Parties in Interest; No Assignment; Third Party
Beneficiaries. (a) This Merger Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and their respective successors and
permitted assigns. Except as expressly provided for in this Merger Agreement,
neither this Merger Agreement nor the rights or obligations of any party hereto
are assignable, except by operation of law or with the written consent of the
other party. Except as expressly provided in Section 10.6(b), nothing in this
Merger Agreement, express or implied, is intended to confer upon any person
other than the parties hereto and their respective permitted assigns any rights
or remedies hereunder.
(b) The provisions of Sections 3.2, 7.5(a), 7.5(c) and 7.6 hereof and
Section 7.5 of the Company Disclosure Schedule (i) are intended to be for the
benefit of, and will be enforceable by, each individual benefitted thereunder,
his or her heirs and his or her representatives and (ii) are in addition to, and
not in substitution for, any other rights, including rights to indemnification
or contribution, that any such person may have by contract or otherwise.
Section 10.7 Miscellaneous. This Merger Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof (other than the Confidentiality Agreement, as the same may be
amended); and (b) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the Commonwealth of Pennsylvania
(without giving effect to the provisions thereof relating to conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby). This Merger Agreement may be executed in two or more
counterparts which together shall constitute a single agreement and each of
which shall only become effective when one or more counterparts have been signed
by each party and delivered to the other parties.
A-31
<PAGE> 132
Section 10.8 Cure Period. No party shall have any rights under this
Merger Agreement for any actual or threatened breach of a representation,
warranty, covenant or agreement contained herein, if such breach is capable of
being cured, until (i) the non-breaching party has notified the breaching party
of its determination of the existence (or threatened existence) of a basis for
termination, and (ii) the breaching party shall have a reasonable time
(considering the nature of the breach and the actions required for cure, but in
no event longer than 60 days) to cure such breach.
Section 10.9 Non-Survival of Representations and Warranties. No
representations or warranties in this Merger Agreement shall survive the
Effective Date.
Section 10.10 Validity. (a) The invalidity or unenforceability of any
provision of this Merger Agreement shall not affect the validity or
enforceability of the other provisions of this Merger Agreement, which shall
remain in full force and effect.
(b) In the event any court of competent jurisdiction holds any provision of
this Merger Agreement to be null, void or unenforceable, the parties hereto
shall negotiate in good faith the execution and delivery of an amendment to this
Merger Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) Each party agrees that, should any court of competent jurisdiction hold
any provision of this Merger Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith, or
not take any action required herein, the other party shall not be entitled to
specific performance of such provision or part hereof or to any other remedy,
including but not limited to money damages, for breach thereof or of any other
provision of this Merger Agreement or part hereof as the result of such holding
or order.
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be signed by their respective officers thereunder duly authorized all as of the
date first written above.
THE B.F. GOODRICH COMPANY
By: /s/ DAVID L. BURNER
------------------------------------
Name: David L. Burner
Title: Chairman and Chief
Executive Officer
RUNWAY ACQUISITION CORPORATION
By: /s/ TERRENCE G. LINNERT
------------------------------------
Name: Terrence G. Linnert
Title: Vice President
COLTEC INDUSTRIES INC
By: /s/ JOHN W. GUFFEY, JR.
------------------------------------
Name: John W. Guffey, Jr.
Title: Chairman and Chief
Executive Officer
A-32
<PAGE> 133
ANNEX B
PARENT STOCK OPTION AGREEMENT
This PARENT STOCK OPTION AGREEMENT, dated as of November 22, 1998 (the
"PARENT STOCK OPTION AGREEMENT") is between THE B.F.GOODRICH COMPANY, a
corporation formed under the laws of the State of New York ("PARENT") and COLTEC
INDUSTRIES INC, a corporation formed under the laws of the Commonwealth of
Pennsylvania (the "COMPANY").
RECITALS
Parent and the Company are entering into an Agreement and Plan of Merger
(the "MERGER Agreement"). As a condition and inducement to entering into the
Merger Agreement, the Company and Parent are entering into certain stock option
agreements dated as of the date hereof (of which this Parent Stock Option
Agreement is one) pursuant to which the parties grant each other an option with
respect to certain shares of each other's common stock on the terms and subject
to the conditions set forth therein (referred to collectively as the "CROSS
STOCK OPTION AGREEMENTS").
NOW, THEREFORE, to induce the Company to enter into the Merger Agreement,
and in consideration of the representations, warranties, covenants and
agreements set forth in the Merger Agreement and the Cross Stock Option
Agreements, the parties agree as follows:
1. Grant of Option.
(a) Subject to the terms and conditions set forth herein, Parent
hereby grants to the Company an irrevocable option (the "OPTION") to
purchase up to 14,792,612 shares, subject to adjustment as provided in
Section 11 (the "PARENT SHARES"), of common stock, $5 par value per share,
of Parent (the "PARENT COMMON STOCK") (being 19.9% of the number of shares
of Parent Common Stock outstanding as of November 18, 1998) in the manner
set forth below, at a price per Parent Share of $35.9375, subject to
adjustment as provided in Section 11 (the "EXERCISE PRICE"). The Exercise
Price shall be payable in cash in accordance with Section 4.
(b) Notwithstanding the foregoing, in no event shall the number of the
Parent Shares for which the Option is exercisable exceed 19.9% of the
number of issued and outstanding shares of Parent Common Stock.
(c) Capitalized terms used herein but not defined herein shall have
the meanings set forth in the Merger Agreement.
2. Exercise of Option.
(a) The Option may be exercised by the Company, in whole, but not in
part, at any time after the Merger Agreement is terminated and Parent has
become obligated to pay the Termination Fee ("TRIGGER EVENT").
(b)(i) Parent shall notify the Company promptly in writing of the
occurrence of any Trigger Event, it being understood that the giving of
such notice by Parent shall not be a condition to the right of the Company
to exercise the Option.
(ii) In the event the Company wishes to exercise the Option, the
Company shall deliver to Parent written notice thereof (the "EXERCISE
NOTICE").
(iii) Upon the giving by the Company to Parent of \ the Exercise
Notice and the tender of the aggregate Exercise Price, the Company,
provided that the conditions to Parent's obligation to issue the Parent
Shares to the Company hereunder set forth in Section 3 have been satisfied
or waived, shall be deemed to be the holder of record of the Parent Shares
issuable upon such exercise, notwithstanding that the stock transfer books
of Parent shall then be closed or that certificates representing the Parent
Shares shall not then be actually delivered to the Company.
B-1
<PAGE> 134
(iv) The closing of the purchase of Parent Shares (the "CLOSING")
shall occur at a place, on a date, and at a time designated by the Company
in the Exercise Notice delivered at least two business days prior to the
date of the Closing.
(c) The Option shall terminate upon the earliest to occur of:
(i) the Effective Date of the Merger;
(ii) the termination of the Merger Agreement pursuant to Section
9.1 thereof other than pursuant to (x) Section 9.1(i) thereof, (y)
9.1(k) thereof or (z) if an Acquisition Proposal with respect to Parent
has been publicly disclosed to the shareholders of Parent (and not
withdrawn or terminated) prior to the Parent Meeting, Section 9.1(d)
thereof;
(iii) to the extent that (x) an Acquisition Proposal with respect
to Parent has been publicly disclosed to the shareholders of Parent (and
not withdrawn or terminated) prior to the Parent Meeting, (y) the Merger
Agreement is terminated pursuant to Section 9.1(d) thereof and (z)
Parent does not enter into any agreement providing for the consummation
of an Acquisition Proposal with respect to Parent (it being understood
that no confidentiality agreement with respect to an Acquisition
Proposal shall constitute such an agreement) and no Acquisition Proposal
with respect to Parent shall have been consummated, in each case, during
the twelve month period following the termination of the Merger
Agreement, twelve months after the date of such termination; and
(iv) 30 days following a Trigger Event (or if, at the expiration of
such 30 day period, the Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days
after such impediment to exercise shall have been removed or shall have
become final and not subject to appeal, but in no event under this
clause (iv) later than 180 days following such Trigger Event).
(d) Notwithstanding the foregoing, the Option may not be exercised and
shall terminate if (x) any of the representations and warranties of the
Company contained in this Parent Stock Option Agreement or the Merger
Agreement, which are qualified as to materiality, were or shall be
inaccurate in any respect, or any of the representations and warranties of
the Company contained herein or therein, which are not so qualified, were
or shall be inaccurate in any material respect, in each case, (1) when
made, (2) as of the date of any termination of the Merger Agreement and (3)
as of the date of any purported exercise of the Option, in the case of
clauses (2) and (3), as if made as of the date of such termination or
purported exercise, respectively (except for representations and warranties
that by their express provisions are made as of a specific date or dates,
which shall only be deemed inaccurate to the extent that they were or shall
have been inaccurate at such times as stated therein), or (y) at the time
of termination of the Merger Agreement or any purported exercise of the
Option, the Company is in material breach of any of its covenants contained
in the Merger Agreement or in this Parent Stock Option Agreement.
3. Conditions to Closing. The obligation of Parent to issue the
Parent Shares to the Company hereunder is subject to the conditions that:
(a) the waiting periods, if any, applicable to the issuance of the
Parent Shares under the HSR Act and the Competition Act (Canada) shall
have expired or been terminated and all other Company Required Consents
and the Parent Required Consents in each case relating to this Parent
Stock Option Agreement and required to be obtained prior to issuance of
the Parent Shares shall have been obtained, except where the failure to
obtain such other Company Required Consents or the Parent Required
Consents would not have a Material Adverse Effect on the Company or
Parent, as the case may be;
(b) the Parent Shares shall have been authorized for listing on the
NYSE upon official notice of issuance; and
(c) no preliminary or permanent injunction or other order by any
court or other Governmental Entity of competent jurisdiction (i)
prohibiting or preventing such issuance or (ii) having any of the
B-2
<PAGE> 135
effects set forth in Section 8.1(f)(ii) of the Merger Agreement shall
have been issued and remain in effect.
The condition set forth in paragraph (b) above may be waived by the
Company in its sole discretion.
4. Closing. At the Closing,
(a) Parent shall deliver to the Company a single certificate in
definitive form representing the Parent Shares, such certificate to be
registered in the name of the Company and to bear the legend set forth in
Section 12; and
(b) The Company shall deliver to Parent the aggregate Exercise Price
for the Parent Shares by wire transfer of immediately available funds to an
account to be designated in writing by Parent.
(c) Parent shall pay all expenses that may be payable in respect of
the preparation, issuance and delivery of stock certificates under this
Section 4.
5. Representations and Warranties of Parent. Parent represents and
warrants to the Company that:
(a) Parent has taken all necessary corporate action to authorize
and reserve for issuance and (subject to the satisfaction of the
conditions set forth in Section 3) to permit it to issue, upon exercise
of the Option, and, at all times from the date hereof through the
expiration of the Option will have reserved, authorized and unissued
shares of Parent Common Stock sufficient for the exercise of the Option
and the Parent Shares, upon issuance pursuant hereto, will be duly and
validly issued, fully paid and nonassessable; and
(b) upon delivery of the Parent Shares to the Company upon the
exercise of the Option, the Company will acquire the Parent Shares free
and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever.
6. Representations and Warranties of the Company. The Company
represents and warrants to Parent that:
(a) any Parent Shares acquired by the Company upon exercise of the
Option will be acquired for the Company's own account, for investment
purposes only and will not be, and the Option is not being, acquired by
the Company with a view to the public distribution of the Parent Shares,
in violation of any applicable provision of the Securities Act; and
(b) any Parent Shares acquired by the Company upon exercise of the
Option will not be transferred or otherwise disposed of except in a
transaction registered, or exempt from registration, under the
Securities Act and otherwise in accordance with this Parent Stock Option
Agreement.
7. Certain Repurchases.
(a) At the request of the Company by written notice (the "CASH-OUT
NOTICE") at any time during which the Option is exercisable pursuant to
Section 2, Parent (or any successor entity thereof) shall, to the extent
permitted by applicable law and subject to the receipt by it of any consent
or waiver required by it under the terms of any indenture, loan document or
other contract, pay to the Company, in consideration of the redelivery and
cancellation without exercise of the Option (in whole and not in part), an
amount in cash (the "CASH-OUT AMOUNT") equal to the difference between the
"MARKET/OFFER PRICE" (as defined below) for shares of Parent Common Stock
as of the date the Company delivers the Cash-Out Notice and the Exercise
Price, multiplied by the total number of the Parent Shares, but only if the
Market/Offer Price is greater than the Exercise Price. For purposes of this
Section 7, the "MARKET/OFFER PRICE" shall mean, as of any date, the higher
of (x) the price per share offered as of such date pursuant to any tender
or exchange offer or other public offer with respect to the highest
Acquisition Proposal with respect to Parent which was made prior to such
date and not terminated or withdrawn as of such date (the "OFFER PRICE")
and (y) Fair Market Value (as defined
B-3
<PAGE> 136
below) as of such date. As used herein, "FAIR MARKET VALUE" shall be the
average of the daily closing sales price for a share of Parent Common Stock
on the NYSE during the ten NYSE trading days prior to the fifth NYSE
trading day immediately preceding the date such Fair Market Value is to be
determined. In the event that the consideration offered pursuant to any
Acquisition Proposal includes any consideration other than cash, such
consideration shall be valued as follows for purposes of calculating the
Offer Price: (i) any securities that are either listed on a national
securities exchange (as defined under the Securities Act) or on any
designated offshore securities market (as defined in Regulation S under the
Securities Act) or included in a national securities quotation system (as
defined in the Securities Act) (collectively, "LISTED SECURITIES") shall be
valued based on the average of the daily closing sale price of such Listed
Securities for the ten trading days on such national securities exchange,
designated offshore securities market or national securities quotation
system prior to the fifth trading day immediately preceding the date of
delivery of the Cash-Out Notice; and (ii) any consideration other than cash
or Listed Securities shall be valued based on the written opinion of an
investment banking firm of nationally recognized reputation selected by the
Company, which firm is reasonably acceptable to Parent. The costs and fees
of such investment banking firm in connection with such valuation shall be
borne equally by Parent and the Company.
(b) In the event the Company exercises its right under this Section 7,
Parent shall, within ten business days thereafter, pay the required amount
to the Company in immediately available funds and the Company shall
surrender to Parent the Option, and the Company shall warrant that it owns
the Option and that the Option is then free and clear of all liens, claims,
damages, charges and encumbrances of any kind or nature whatsoever.
8. Voting of Shares. Following the date hereof and prior to the
fifth anniversary of the date hereof (the "EXPIRATION DATE"), the Company
shall vote any shares of capital stock of Parent acquired by the Company
pursuant to this Parent Stock Option Agreement or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")), by the Company on
each matter submitted to a vote of shareholders of Parent for and against
such matter in the same proportion as the vote of all other shareholders of
Parent are voted (whether by proxy or otherwise) for and against such
matter.
9. Restrictions on Transfer.
(a) The Parent Shares shall not be directly or indirectly, by
operation of law or otherwise, sold, assigned, pledged, or otherwise
disposed of or transferred, other than in accordance with Section 9(b) or
Section 10.
(b) The Company shall be permitted to sell, assign, transfer or
dispose of any Parent Shares beneficially owned by it if such sale is made
(i) pursuant to a transaction that has been approved or recommended, or
otherwise determined to be fair to and in the best interests of the
shareholders of Parent, by a majority of the members of the Board of
Directors of Parent, which majority shall include a majority of directors
who were directors prior to the announcement of such transaction or (ii) to
any purchaser or transferee who would not, to the Company's knowledge after
reasonable inquiry, immediately following such sale, assignment, transfer
or disposal beneficially own more than 1% of Parent Common Stock on a fully
diluted basis.
10. Registration Rights.
(a) On or prior to the second anniversary of the exercise of the
Option, the Company may by written notice (the "REGISTRATION NOTICE") to
Parent request Parent to register under the Securities Act all or any part
of the Parent Shares beneficially owned by the Company (the "REGISTRABLE
SECURITIES") pursuant to a bona fide firm commitment underwritten public
offering, in which the Company and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable
and shall use their best efforts to prevent any person (including any group
(as used in Rule 13d-5 under the Exchange Act)) and its affiliates from
purchasing
B-4
<PAGE> 137
through such offering Parent Shares representing more than 1% of the
outstanding shares of Parent Common Stock on a fully diluted basis (a
"PERMITTED OFFERING").
(b) The Registration Notice shall include a certificate executed by
the Company and its proposed managing underwriter, which underwriter shall
be an investment banking firm of nationally recognized standing (the
"MANAGER"), stating that
(i) they have a good faith intention to commence promptly a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the
then-prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least 80% of the
then Fair Market Value of such shares.
(c) Parent (and/or any person designated by the Parent) shall
thereupon have the option exercisable by written notice delivered to the
Company within ten business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price (the "OPTION PRICE")
equal to the product of (i) the number of Registrable Securities to be so
purchased by Parent and (ii) the then Fair Market Value of such shares.
(d) Any purchase of Registrable Securities by Parent (or its designee)
under Section 10(c) shall take place at a closing to be held at the
principal executive offices of Parent or at the offices of its counsel at
any reasonable date and time designated by Parent and/or such designee in
such notice within twenty business days after delivery of such notice, and
any payment for the shares to be so purchased shall be made by delivery at
the time of such closing in immediately available funds.
(e) If Parent does not elect to exercise its option pursuant to this
Section 10 with respect to all Registrable Securities, it shall use its
reasonable efforts to effect, as promptly as reasonably practicable, the
registration under the Securities Act of the unpurchased Registrable
Securities proposed to be so sold; PROVIDED, HOWEVER, that
(i) The Company shall not be entitled to more than an aggregate of
two effective registration statements hereunder, and
(ii) Parent will not be required to file any such registration
statement during any period of time (not to exceed 180 days after such
request) when:
(A) Parent is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at
such time and, in the opinion of counsel to Parent, such information
would have to be disclosed if a registration statement were filed at
that time;
(B) Parent is required under the Securities Act to include
audited financial statements for any period in such registration
statement and such financial statements are not yet available for
inclusion in such registration statement; or
(C) Parent determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other
material transaction involving Parent or any of its affiliates.
(f) Parent shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be
qualified for sale under the securities or Blue Sky laws of such
jurisdictions as the Company may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; PROVIDED,
HOWEVER, that Parent shall not be required to qualify to do business in, or
consent to general service of process in, any jurisdiction by reason of
this provision.
(g) The registration rights set forth in this Section 10 are subject
to the condition that the Company shall provide Parent with such
information with respect to its Registrable Securities, the plans for the
distribution thereof, and such other information with respect to such
holder as, in the reasonable
B-5
<PAGE> 138
judgment of counsel for Parent, is necessary to enable Parent to include in
such registration statement all material facts required to be disclosed
with respect to a registration thereunder.
(h) A registration effected under this Section 10 shall be effected at
Parent's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Company, and Parent shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as is customary in connection
with underwritten public offerings as such underwriters may reasonably
require.
(i) In connection with any registration effected under this Section
10, the parties agree
(i) to indemnify each other and the underwriters in the customary
manner,
(ii) to enter into an underwriting agreement in form and substance
customary for transactions of such type with the Manager and the other
underwriters participating in such offering, and
(iii) to take further reasonable actions which are necessary to
effect such registration and sale.
(j) Parent shall be entitled to include (at its expense) additional
shares of its common stock in a registration effected pursuant to this
Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such
offering.
11. Adjustment upon Changes in Capitalization. Without limitation to
any restriction on Parent contained in this Parent Stock Option Agreement
or in the Merger Agreement, in the event of any change in Parent Common
Stock by reason of stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like,
the type and number of shares or securities subject to the Option and the
Exercise Price shall be adjusted appropriately and proper provision will be
made in the agreements governing such transaction, so that the Company will
receive upon exercise of the Option the number and class of shares or other
securities or property that the Company would have received in respect of
Parent Common Stock if the Option had been exercised immediately prior to
such event or the record date therefor, as applicable. Subject to Section
1, and without limiting the parties' relative rights and obligations under
the Merger Agreement, if any additional shares of Parent Common Stock are
issued after the date of this Parent Stock Option Agreement (other than
pursuant to an event described in the first sentence of this Section
11(a)), the number of Parent Shares will be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Parent Common Stock
then issued and outstanding, without giving effect to any shares subject to
the Option.
12. Restrictive Legends. Each certificate representing shares of
Parent Common Stock issued to the Company hereunder shall include a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
PARENT STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY OF
WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities Act
and state securities or Blue Sky laws in the above legend shall be
removed by delivery of substitute certificate(s) without such reference,
if the Company shall have delivered to Parent a copy of a letter from
the staff of the Commission, or an opinion of counsel, in form and
substance satisfactory to Parent, to the effect that such legend is not
required for purposes of the Securities Act or such laws;
(ii) the reference to the provisions to this Parent Stock Option
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the
B-6
<PAGE> 139
shares have been sold or transferred in compliance with the provisions
of this Parent Stock Option Agreement and under circumstances that do
not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions
in the preceding clauses (i) and (ii) are both satisfied.
In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered
public offering pursuant to Section 10 shall not be required to bear the
legend set forth in this Section 12.
13. Binding Effect: No Assignment: No Third Party Beneficiaries. (a)
This Parent Stock Option Agreement shall be binding upon and inure solely
to the benefit of each party hereto and their respective successors and
permitted assigns.
(b) Except as expressly provided for in this Parent Stock Option
Agreement, neither this Parent Stock Option Agreement nor the rights or
obligations of either party hereto are assignable except with the written
consent of the other party.
(c) Nothing contained in this Parent Stock Option Agreement, express
or implied, is intended to confer upon any person other than the parties
hereto and their respective permitted assigns any rights or remedies
hereunder.
(d) Any Parent Shares sold by the Company in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free of
the restrictions imposed with respect to such shares by this Parent Stock
Option Agreement,.
14. Specific Performance. The parties hereto agree that irreparable
harm would occur in the event that any of the provisions of this Parent
Stock Option Agreement were not performed in accordance with their
specified terms or were otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Parent Stock Option Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
15. Validity. (a) The invalidity or unenforceability of any
provision of this Parent Stock Option Agreement shall not affect the
validity or enforceability of the other provisions of this Parent Stock
Option Agreement, which shall remain in full force and effect.
(b) In the event any court or other competent authority holds any
provision of this Parent Stock Option Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Parent Stock Option
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) Each party agrees that, should any court or other competent
authority hold any provision of this Parent Stock Option Agreement or part
hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith, or not take any action required herein, the
other party shall not be entitled to specific performance of such provision
or part hereof or to any other remedy, including but not limited to money
damages, for breach hereof or of any other provision of this Parent Stock
Option Agreement or part hereof as the result of such holding or order.
16. Notices. All notices and other communications under this Parent
Stock Option Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by
B-7
<PAGE> 140
delivery in person, if (a) delivered personally, by overnight courier,
telecopy or by registered or certified mail, postage prepaid, return
receipt requested addressed as follows:
A. If to Parent, to:
The B.F. Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General Counsel
Fax: (330) 659-7737
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
B. If to the Company, to:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: George W. Bilicic, Jr., Esq. and
Allen Finkelson, Esq.
Fax: (212) 474-3700
or to such other address as either party may have furnished to the other
party in writing in accordance with this Section.
17. Governing Law: Choice of Forum. This Parent Stock Option
Agreement shall be governed in all respects, including validity,
interpretation and effect by and construed in accordance with the laws of
the Commonwealth of Pennsylvania without giving effect to the provisions
thereof relating to conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
18. Interpretation.
(a) When reference is made in this Parent Stock Option Agreement to
Articles, Sections, Schedules or Exhibits, such reference shall be to an
Article, Section, Schedule or Exhibit of this Parent Stock Option
Agreement, as the case may be, unless otherwise indicated.
(b) The headings contained in this Parent Stock Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of the Parent Stock Option Agreement.
(c) Whenever the words "include," "includes," or "including" are used
in this Parent Stock Option Agreement and are not followed by the words
"without limitation", they shall be deemed to be
B-8
<PAGE> 141
followed by the words "without limitation." The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Parent Stock
Option Agreement shall refer to this Parent Stock Option Agreement as a
whole and not to any particular provision of this Parent Stock Option
Agreement.
(d) Whenever "or" is used in this Parent Stock Option Agreement it
shall be construed in the nonexclusive sense.
19. Counterparts; Effect. This Parent Stock Option Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement
and each of which shall only become effective when one or more counterparts
have been signed by each party and delivered to the other party.
20. Amendments; Waiver. This Parent Stock Option Agreement may be
amended by the parties hereto and the terms and conditions hereof may be
waived but, in the case of an amendment, only by an instrument in writing
signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
21. Loss or Mutilation. Upon receipt by Parent of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Parent Stock Option Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Parent Stock Option Agreement, if mutilated,
Parent will execute and deliver a new Parent Stock Option Agreement of like
tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Parent Stock Option
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
THE B.F.GOODRICH COMPANY
By: /s/ DAVID L. BURNER
-------------------------------------
Name: David L. Burner
Title: Chairman and Chief Executive
Officer
COLTEC INDUSTRIES INC
By: /s/ JOHN W. GUFFEY, JR.
-------------------------------------
Name: John W. Guffey, Jr.
Title: Chairman and Chief Executive
Officer
B-9
<PAGE> 142
ANNEX C
COMPANY STOCK OPTION AGREEMENT
This COMPANY STOCK OPTION AGREEMENT, dated as of November 22, 1998 (the
"COMPANY STOCK OPTION AGREEMENT") is between THE B.F.GOODRICH COMPANY, a
corporation formed under the laws of the State of New York ("PARENT") and COLTEC
INDUSTRIES INC, a corporation formed under the laws of the Commonwealth of
Pennsylvania (the "COMPANY").
RECITALS
Parent and the Company are entering into an Agreement and Plan of Merger
(the "MERGER Agreement"). As a condition and inducement to entering into the
Merger Agreement, the Company and Parent are entering into certain stock option
agreements dated as of the date hereof (of which this Company Stock Option
Agreement is one) pursuant to which the parties grant each other an option with
respect to certain shares of each other's common stock on the terms and subject
to the conditions set forth therein (referred to collectively as the "CROSS
STOCK OPTION AGREEMENTS").
NOW, THEREFORE, to induce Parent to enter into the Merger Agreement, and in
consideration of the representations, warranties, covenants and agreements set
forth in the Merger Agreement and the Cross Stock Option Agreements, the parties
agree as follows:
1. Grant of Option.
(a) Subject to the terms and conditions set forth herein, the Company
hereby grants to Parent an irrevocable option (the "OPTION") to purchase up
to 12,550,638 shares, subject to adjustment as provided in Section 11 (the
"COMPANY SHARES"), of common stock, $.01 par value per share, of the
Company (the "COMPANY COMMON STOCK") (being 19.9% of the number of shares
of the Company Common Stock (excluding any shares of Company Common Stock
held by a subsidiary of the Company) outstanding as of November 20, 1998)
in the manner set forth below, at a price per Company Share of $20.125,
subject to adjustment as provided in Section 11 (the "EXERCISE PRICE"). The
Exercise Price shall be payable in cash in accordance with Section 4.
(b) Notwithstanding the foregoing, in no event shall the number of the
Company Shares for which the Option is exercisable exceed 19.9% of the
number of issued and outstanding shares of Company Common Stock (excluding
any shares of Company Common Stock held by a subsidiary of the Company).
(c) Capitalized terms used herein but not defined herein shall have
the meanings set forth in the Merger Agreement. "Acquisition Proposal"
shall have the meaning set forth in Section 9.2(b) of the Merger Agreement.
2. Exercise of Option.
(a) The Option may be exercised by Parent, in whole, but not in part,
at any time after the Merger Agreement is terminated and the Company has
become obligated to pay the Termination Fee ("TRIGGER Event").
(b) (i) The Company shall notify Parent promptly in writing of the
occurrence of any Trigger Event, it being understood that the giving of
such notice by the Company shall not be a condition to the right of Parent
to exercise the Option.
(ii) In the event Parent wishes to exercise the Option, Parent shall
deliver to the Company written notice thereof (the "EXERCISE NOTICE").
(iii) Upon the giving by Parent to the Company of the Exercise Notice
and the tender of the aggregate Exercise Price, Parent, provided that the
conditions to the Company's obligation to issue the Company Shares to
Parent hereunder set forth in Section 3 have been satisfied or waived,
shall be
C-1
<PAGE> 143
deemed to be the holder of record of the Company Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing the Company Shares
shall not then be actually delivered to Parent.
(iv) The closing of the purchase of Company Shares (the "CLOSING")
shall occur at a place, on a date, and at a time designated by Parent in
the Exercise Notice delivered at least two business days prior to the date
of the Closing.
(c) The Option shall terminate upon the earliest to occur of:
(i) the Effective Date of the Merger;
(ii) the termination of the Merger Agreement pursuant to Section
9.1 thereof other than pursuant to (x) Section 9.1(g) thereof, (y)
9.1(j) thereof or (z) if an Acquisition Proposal with respect to the
Company has been publicly disclosed to the shareholders of the Company
(and not withdrawn or terminated) prior to the Company Meeting, Section
9.1(c) thereof;
(iii) to the extent that (x) an Acquisition Proposal with respect
to the Company has been publicly disclosed to the shareholders of the
Company (and not withdrawn or terminated) prior to the Company Meeting,
(y) the Merger Agreement is terminated pursuant to Section 9.1(c)
thereof and (z) the Company does not enter into any agreement providing
for the consummation of an Acquisition Proposal with respect to the
Company (it being understood that no confidentiality agreement with
respect to an Acquisition Proposal shall constitute such an agreement)
and no Acquisition Proposal with respect to the Company shall have been
consummated, in each case, during the twelve month period following the
termination of the Merger Agreement, twelve months after the date of
such termination; and
(iv) 30 days following a Trigger Event (or if, at the expiration of
such 30 day period, the Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days
after such impediment to exercise shall have been removed or shall have
become final and not subject to appeal, but in no event under this
clause (iv) later than 180 days following such Trigger Event).
(d) Notwithstanding the foregoing, the Option may not be exercised and
shall terminate if (x) any of the representations and warranties of Parent
contained in this Company Stock Option Agreement or the Merger Agreement,
which are qualified as to materiality, were or shall be inaccurate in any
respect, or any of the representations and warranties of Parent contained
herein or therein, which are not so qualified, were or shall be inaccurate
in any material respect, in each case, (1) when made, (2) as of the date of
any termination of the Merger Agreement and (3) as of the date of any
purported exercise of the Option, in the case of clauses (2) and (3), as if
made as of the date of such termination or purported exercise, respectively
(except for representations and warranties that by their express provisions
are made as of a specific date or dates, which shall only be deemed
inaccurate to the extent that they were or shall have been inaccurate at
such times as stated therein), or (y) at the time of termination of the
Merger Agreement or any purported exercise of the Option, Parent is in
material breach of any of its covenants contained in the Merger Agreement
or in this Company Stock Option Agreement.
3. Conditions to Closing. The obligation of the Company to issue the
Company Shares to Parent hereunder is subject to the conditions that:
(a) the waiting periods, if any, applicable to the issuance of the
Company Shares under the HSR Act and the Competition Act (Canada) shall
have expired or been terminated and all other Company Required Consents
and Parent Required Consents in each case relating to this Company Stock
Option Agreement and required to be obtained prior to issuance of the
Company Shares shall have been obtained, except where the failure to
obtain such other Company Required Consents or Parent Required Consents
would not have a Material Adverse Effect on the Company or Parent, as
the case may be;
C-2
<PAGE> 144
(b) the Company Shares shall have been authorized for listing on
the NYSE upon official notice of issuance; and
(c) no preliminary or permanent injunction or other order by any
court or other Governmental Entity of competent jurisdiction (i)
prohibiting or preventing such issuance or (ii) having any of the
effects set forth in Section 8.1(f)(ii) of the Merger Agreement shall
have been issued and remain in effect.
The condition set forth in paragraph (b) above may be waived by Parent
in its sole discretion.
4. Closing. At the Closing,
(a) The Company shall deliver to Parent a single certificate in
definitive form representing the Company Shares, such certificate to be
registered in the name of Parent and to bear the legend set forth in
Section 12; and
(b) Parent shall deliver to the Company the aggregate Exercise Price
for the Company Shares by wire transfer of immediately available funds to
an account to be designated in writing by the Company.
(c) The Company shall pay all expenses that may be payable in respect
of the preparation, issuance and delivery of stock certificates under this
Section 4.
5. Representations and Warranties of the Company. The Company
represents and warrants to Parent that:
(a) the Company has taken all necessary corporate action to
authorize and reserve for issuance and (subject to the satisfaction of
the conditions set forth in Section 3) to permit it to issue, upon
exercise of the Option, and, at all times from the date hereof through
the expiration of the Option will have reserved, authorized and unissued
shares of Company Common Stock sufficient for the exercise of the Option
and the Company Shares, upon issuance pursuant hereto, will be duly and
validly issued, fully paid and nonassessable; and
(b) upon delivery of the Company Shares to Parent upon the exercise
of the Option, Parent will acquire the Company Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any
nature whatsoever.
6. Representations and Warranties of Parent. Parent represents and
warrants to the Company that:
(a) any Company Shares acquired by Parent upon exercise of the
Option will be acquired for Parent's own account, for investment
purposes only and will not be, and the Option is not being, acquired by
Parent with a view to the public distribution of the Company Shares, in
violation of any applicable provision of the Securities Act; and
(b) any Company Shares acquired by Parent upon exercise of the
Option will not be transferred or otherwise disposed of except in a
transaction registered, or exempt from registration, under the
Securities Act and otherwise in accordance with this Company Stock
Option Agreement.
7. Certain Repurchases.
(a) At the request of Parent by written notice (the "CASH-OUT NOTICE")
at any time during which the Option is exercisable pursuant to Section 2,
the Company (or any successor entity thereof) shall, to the extent
permitted by applicable law and subject to the receipt by it of any consent
or waiver required by it under the terms of any indenture, loan document or
other contract, pay to Parent, in consideration of the redelivery and
cancellation without exercise of the Option (in whole and not in part), an
amount in cash (the "CASH-OUT AMOUNT") equal to the difference between the
"MARKET/OFFER PRICE" (as defined below) for shares of the Company Common
Stock as of the date Parent delivers the Cash-Out Notice and the Exercise
Price, multiplied by the total number of the Company Shares, but only if
the Market/Offer Price is greater than the Exercise Price. For purposes of
this Section 7, the "MARKET/OFFER PRICE" shall mean, as of any date, the
higher of (x) the price
C-3
<PAGE> 145
per share offered as of such date pursuant to any tender or exchange offer
or other public offer with respect to the highest Acquisition Proposal with
respect to the Company which was made prior to such date and not terminated
or withdrawn as of such date (the "OFFER PRICE") and (y) Fair Market Value
(as defined below) as of such date. As used herein, "FAIR MARKET VALUE"
shall be the average of the daily closing sales price for a share of the
Company Common Stock on the NYSE during the ten NYSE trading days prior to
the fifth NYSE trading day immediately preceding the date such Fair Market
Value is to be determined. In the event that the consideration offered
pursuant to any Acquisition Proposal includes any consideration other than
cash, such consideration shall be valued as follows for purposes of
calculating the Offer Price: (i) any securities that are either listed on a
national securities exchange (as defined under the Securities Act) or on
any designated offshore securities market (as defined in Regulation S under
the Securities Act) or included in a national securities quotation system
(as defined in the Securities Act) (collectively, "LISTED SECURITIES")
shall be valued based on the average of the daily closing sale price of
such Listed Securities for the ten trading days on such national securities
exchange, designated offshore securities market or national securities
quotation system prior to the fifth trading day immediately preceding the
date of delivery of the Cash-Out Notice; and (ii) any consideration other
than cash or Listed Securities shall be valued based on the written opinion
of an investment banking firm of nationally recognized reputation selected
by Parent, which firm is reasonably acceptable to the Company. The costs
and fees of such investment banking firm in connection with such valuation
shall be borne equally by Parent and the Company.
(b) In the event Parent exercises its right under this Section 7, the
Company shall, within ten business days thereafter, pay the required amount
to Parent in immediately available funds and Parent shall surrender to the
Company the Option, and Parent shall warrant that it owns the Option and
that the Option is then free and clear of all liens, claims, damages,
charges and encumbrances of any kind or nature whatsoever.
8. Voting of Shares. Following the date hereof and prior to the
fifth anniversary of the date hereof (the "EXPIRATION DATE"), Parent shall
vote any shares of capital stock of the Company acquired by Parent pursuant
to this Company Stock Option Agreement or otherwise beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT")), by Parent on each matter
submitted to a vote of shareholders of the Company for and against such
matter in the same proportion as the vote of all other shareholders of the
Company are voted (whether by proxy or otherwise) for and against such
matter.
9. Restrictions on Transfer.
(a) The Company Shares shall not be directly or indirectly, by
operation of law or otherwise, sold, assigned, pledged, or otherwise
disposed of or transferred, other than in accordance with Section 9(b) or
Section 10.
(b) Parent shall be permitted to sell, assign, transfer or dispose of
any Company Shares beneficially owned by it if such sale is made (i)
pursuant to a transaction that has been approved or recommended, or
otherwise determined to be fair to and in the best interests of the
shareholders of the Company, by a majority of the members of the Board of
Directors of the Company, which majority shall include a majority of
directors who were directors prior to the announcement of such transaction
or (ii) to any purchaser or transferee who would not, to Parent's knowledge
after reasonable inquiry, immediately following such sale, assignment,
transfer or disposal beneficially own more than 1% of the Company Common
Stock on a fully diluted basis (excluding any shares of Company Common
Stock held by a subsidiary of the Company).
10. Registration Rights.
(a) On or prior to the second anniversary of the exercise of the
Option, Parent may by written notice (the "REGISTRATION NOTICE") to the
Company request the Company to register under the Securities Act all or any
part of the Company Shares beneficially owned by Parent (the ("REGISTRABLE
SECURITIES") pursuant to a bona fide firm commitment underwritten public
C-4
<PAGE> 146
offering, in which Parent and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable
and shall use their best efforts to prevent any person (including any group
(as used in Rule 13d-5 under the Exchange Act)) and its affiliates from
purchasing through such offering Company Shares representing more than 1%
of the outstanding shares of Company Common Stock on a fully diluted basis
(excluding any shares of Company Common Stock held by a subsidiary of the
Company) (a "PERMITTED OFFERING").
(b) The Registration Notice shall include a certificate executed by
Parent and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "MANAGER"),
stating that
(i) they have a good faith intention to commence promptly a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the
then-prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least 80% of the
then Fair Market Value of such shares.
(c) The Company (and/or any person designated by the Company) shall
thereupon have the option exercisable by written notice delivered to the
Parent within ten business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price (the "OPTION PRICE")
equal to the product of (i) the number of Registrable Securities to be so
purchased by the Company and (ii) the then Fair Market Value of such
shares.
(d) Any purchase of Registrable Securities by the Company (or its
designee) under Section 10(c) shall take place at a closing to be held at
the principal executive offices of the Company or at the offices of its
counsel at any reasonable date and time designated by the Company and/or
such designee in such notice within twenty business days after delivery of
such notice, and any payment for the shares to be so purchased shall be
made by delivery at the time of such closing in immediately available
funds.
(e) If the Company does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use
its reasonable efforts to effect, as promptly as reasonably practicable,
the registration under the Securities Act of the unpurchased Registrable
Securities proposed to be so sold; PROVIDED, HOWEVER, that
(i) Parent shall not be entitled to more than an aggregate of two
effective registration statements hereunder, and
(ii) the Company will not be required to file any such registration
statement during any period of time (not to exceed 180 days after such
request) when:
(A) the Company is in possession of material non-public
information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to the Company,
such information would have to be disclosed if a registration
statement were filed at that time;
(B) the Company is required under the Securities Act to include
audited financial statements for any period in such registration
statement and such financial statements are not yet available for
inclusion in such registration statement; or
(C) the Company determines, in its reasonable judgment, that
such registration would interfere with any financing, acquisition or
other material transaction involving the Company or any of its
affiliates.
(f) The Company shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be
qualified for sale under the securities or Blue Sky laws of such
jurisdictions as Parent may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; PROVIDED,
HOWEVER, that the Company shall not be required to qualify
C-5
<PAGE> 147
to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10 are subject
to the condition that Parent shall provide the Company with such
information with respect to its Registrable Securities, the plans for the
distribution thereof, and such other information with respect to such
holder as, in the reasonable judgment of counsel for the Company, is
necessary to enable the Company to include in such registration statement
all material facts required to be disclosed with respect to a registration
thereunder.
(h) A registration effected under this Section 10 shall be effected at
the Company's expense, except for underwriting discounts and commissions
and the fees and the expenses of counsel to Parent, and the Company shall
provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as is customary in
connection with underwritten public offerings as such underwriters may
reasonably require.
(i) In connection with any registration effected under this Section
10, the parties agree
(i) to indemnify each other and the underwriters in the customary
manner,
(ii) to enter into an underwriting agreement in form and substance
customary for transactions of such type with the Manager and the other
underwriters participating in such offering, and
(iii) to take further reasonable actions which are necessary to
effect such registration and sale.
(j) The Company shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant
to this Section 10 only if and to the extent the Manager determines that
such inclusion will not adversely affect the prospects for success of such
offering.
11. Adjustment upon Changes in Capitalization. Without limitation to
any restriction on the Company contained in this Company Stock Option
Agreement or in the Merger Agreement, in the event of any change in Company
Common Stock by reason of stock dividends, splitups, mergers (other than
the Merger), recapitalizations, combinations, exchange of shares or the
like, the type and number of shares or securities subject to the Option and
the Exercise Price shall be adjusted appropriately and proper provision
will be made in the agreements governing such transaction, so that Parent
will receive upon exercise of the Option the number and class of shares or
other securities or property that Parent would have received in respect of
Company Common Stock if the Option had been exercised immediately prior to
such event or the record date therefor, as applicable. Subject to Section
1, and without limiting the parties' relative rights and obligations under
the Merger Agreement, if any additional shares of Company Common Stock are
issued after the date of this Company Stock Option Agreement (other than
pursuant to an event described in the first sentence of this Section
11(a)), the number of Company Shares will be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Company Common Stock
(excluding any shares of Company Common Stock held by a subsidiary of the
Company) then issued and outstanding, without giving effect to any shares
subject to the Option.
12. Restrictive Legends. Each certificate representing shares of the
Company Common Stock issued to Parent hereunder shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
COMPANY STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY OF
WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities Act
and state securities or Blue Sky laws in the above legend shall be
removed by delivery of substitute certificate(s) without such
C-6
<PAGE> 148
reference, if Parent shall have delivered to the Company a copy of a
letter from the staff of the Commission, or an opinion of counsel, in
form and substance satisfactory to the Company, to the effect that such
legend is not required for purposes of the Securities Act or such laws;
(ii) the reference to the provisions to this Company Stock Option
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Company Stock
Option Agreement and under circumstances that do not require the
retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions
in the preceding clauses (i) and (ii) are both satisfied.
In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered
public offering pursuant to Section 10 shall not be required to bear the
legend set forth in this Section 12.
13. Binding Effect: No Assignment: No Third Party Beneficiaries. (a)
This Company Stock Option Agreement shall be binding upon and inure solely
to the benefit of each party hereto and their respective successors and
permitted assigns.
(b) Except as expressly provided for in this Company Stock Option
Agreement, neither this Company Stock Option Agreement nor the rights or
obligations of either party hereto are assignable except with the written
consent of the other party.
(c) Nothing contained in this Company Stock Option Agreement, express
or implied, is intended to confer upon any person other than the parties
hereto and their respective permitted assigns any rights or remedies
hereunder.
(d) Any Company Shares sold by Parent in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free of
the restrictions imposed with respect to such shares by this Company Stock
Option Agreement,.
14. Specific Performance. The parties hereto agree that irreparable
harm would occur in the event that any of the provisions of this Company
Stock Option Agreement were not performed in accordance with their
specified terms or were otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Company Stock Option Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
15. Validity. (a) The invalidity or unenforceability of any
provision of this Company Stock Option Agreement shall not affect the
validity or enforceability of the other provisions of this Company Stock
Option Agreement, which shall remain in full force and effect.
(b) In the event any court or other competent authority holds any
provision of this Company Stock Option Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Company Stock Option
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) Each party agrees that, should any court or other competent
authority hold any provision of this Company Stock Option Agreement or part
hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith, or not take any action required herein, the
other party shall not be entitled to specific performance of such provision
or part hereof or to any other remedy, including but not limited to money
damages, for breach hereof or of any other provision of this Company Stock
Option Agreement or part hereof as the result of such holding or order.
16. Notices. All notices and other communications under this Company
Stock Option Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by
C-7
<PAGE> 149
delivery in person, if (a) delivered personally, by overnight courier,
telecopy or by registered or certified mail, postage prepaid, return
receipt requested addressed as follows:
A. If to Parent, to:
The B.F. Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General Counsel
Fax: (330) 659-7737
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
B. If to the Company, to:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: George W. Bilicic, Jr., Esq. and
Allen Finkelson, Esq.
Fax: (212) 474-3700
or to such other address as either party may have furnished to the other
party in writing in accordance with this Section.
17. Governing Law: Choice of Forum. This Company Stock Option
Agreement shall be governed in all respects, including validity,
interpretation and effect by and construed in accordance with the laws of
the Commonwealth of Pennsylvania without giving effect to the provisions
thereof relating to conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
18. Interpretation.
(a) When reference is made in this Company Stock Option Agreement to
Articles, Sections, Schedules or Exhibits, such reference shall be to an
Article, Section, Schedule or Exhibit of this Company Stock Option
Agreement, as the case may be, unless otherwise indicated.
(b) The headings contained in this Company Stock Option Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of the Company Stock Option Agreement.
C-8
<PAGE> 150
(c) Whenever the words "include," "includes," or "including" are used
in this Company Stock Option Agreement and are not followed by the words
"without limitation", they shall be deemed to be followed by the words
"without limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Company Stock Option Agreement
shall refer to this Company Stock Option Agreement as a whole and not to
any particular provision of this Company Stock Option Agreement.
(d) Whenever "or" is used in this Company Stock Option Agreement it
shall be construed in the nonexclusive sense.
19. Counterparts; Effect. This Company Stock Option Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement
and each of which shall only become effective when one or more counterparts
have been signed by each party and delivered to the other party.
20. Amendments; Waiver. This Company Stock Option Agreement may be
amended by the parties hereto and the terms and conditions hereof may be
waived but, in the case of an amendment, only by an instrument in writing
signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
21. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Company Stock Option Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Company Stock Option Agreement, if mutilated, the
Company will execute and deliver a new Company Stock Option Agreement of
like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Company Stock
Option Agreement to be executed by their respective duly authorized officers as
of the date first above written.
THE B.F. GOODRICH COMPANY
By: /s/ DAVID L. BURNER
------------------------------------
Name: David L. Burner
Title: Chairman and Chief
Executive Officer
COLTEC INDUSTRIES INC
By: /s/ JOHN W. GUFFEY, JR.
------------------------------------
Name: John W. Guffey, Jr.
Title: Chairman and Chief
Executive Officer
C-9
<PAGE> 151
ANNEX D
November 22, 1998
Board of Directors
The B.F.Goodrich Company
4020 Kinross Lakes Parkway
Richfield, OH 44286-9368
Members of the Board:
We understand that Coltec Industries Inc ("Coltec"), The B.F.Goodrich Company
("BFGoodrich" or the "Company") and Runway Acquisition Corporation ("Acquisition
Sub"), a wholly-owned subsidiary of BFGoodrich, propose to enter into an
Agreement and Plan of Merger substantially in the form of the draft dated
November 19, 1998 (the "Merger Agreement") which provides, among other things,
for the merger (the "Merger") of Acquisition Sub with and into Coltec. Pursuant
to the Merger, Coltec will become a wholly-owned subsidiary of BFGoodrich, and
each outstanding share of common stock, par value $.01 per share (the "Coltec
Common Stock"), of Coltec other than shares held in treasury or held by
BFGoodrich or any affiliate of BFGoodrich, will be converted into the right to
receive 0.56 shares (the "Exchange Ratio") of common stock, par value $5 per
share, of BFGoodrich (the "BFGoodrich Common Stock"). The terms and conditions
of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to BFGoodrich.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Coltec and BFGoodrich, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning Coltec and BFGoodrich, respectively;
(iii) analyzed certain projections prepared by the managements of Coltec
and BFGoodrich, respectively;
(iv) discussed the past and current operations and financial condition and
the prospects of BFGoodrich with senior executives of BFGoodrich;
(v) discussed the past and current operations and financial condition and
the prospects of Coltec with senior executives of Coltec;
(vi) discussed with the senior managements of BFGoodrich and Coltec their
estimates of the synergies and costs savings expected to be derived
from the Merger;
(vii) reviewed the pro forma impact of the Merger on BFGoodrich's earnings
per share, consolidated capitalization and financial ratios;
(viii) reviewed the reported prices and trading activity for the Coltec
Common Stock and the BFGoodrich Common Stock;
(ix) compared the financial performance of Coltec and BFGoodrich and the
prices and trading activity of the Coltec Common Stock and the
BFGoodrich Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xi) participated in discussions and negotiations among representatives of
Coltec and BFGoodrich and their financial and legal advisors;
(xii) reviewed the draft Merger Agreement and certain related documents;
and
(xiii) performed such other analyses as we have deemed appropriate.
D-1
<PAGE> 152
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including the estimates of
the synergies and cost savings expected to be derived from the Merger, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of the Company and Coltec.
In addition, we have assumed that the Merger will be consummated in accordance
with the terms set forth in the Merger Agreement, including, among other things,
that the Merger will be accounted for as a "pooling-of-interests" business
combination in accordance with U.S. Generally Accepted Accounting Principles and
the Merger will be treated as a tax-free reorganization and/or exchange, each
pursuant to the Internal Revenue Code of 1986. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company or Coltec,
nor have we been furnished with any such appraisals. Our opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of BFGoodrich in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for BFGoodrich and Coltec and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of BFGoodrich and may not be used for any other purpose without our
prior written consent. In addition, this opinion does not in any manner address
the prices at which the BFGoodrich Common Stock will trade following
consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how the shareholders of BFGoodrich should vote at the
shareholders meeting to be held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to BFGoodrich.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
D-2
<PAGE> 153
ANNEX E
[LOGO]
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
November 21, 1998
Board of Directors
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Members of the Board:
You have asked us to advise you with respect to the fairness, from a financial
point of view, to the shareholders of Coltec Industries Inc (the "Company"), of
the Exchange Ratio (as defined below) contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") proposed to be entered into among The
B.F.Goodrich Company ("Parent"), Runway Acquisition Corporation, a wholly owned
subsidiary of Parent ("Merger Sub") and the Company. The Merger Agreement
provides for the merger (the "Merger") of Merger Sub with and into the Company
pursuant to which the Company will become a wholly owned subsidiary of Parent
and each outstanding share of common stock, par value $0.01 per share, of the
Company will be converted into the right to receive 0.56 shares ( the "Exchange
Ratio") of common stock, par value $5.00 per share, of Parent (the "Parent
Common Stock").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and Parent, as well as a
draft, dated November 20, 1998, of the Merger Agreement. We have also reviewed
certain other information, including financial forecasts and estimates of the
cost savings and related expenses and other potential synergies anticipated to
result from the Merger, provided to us by the Company and Parent, and have met
with the managements of the Company and Parent to discuss the business and
prospects of the Company and Parent.
We have also considered certain financial and stock market data of the Company
and Parent, and we have compared that data with similar data for other publicly
held companies in businesses similar to the Company and Parent and we have
considered the financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of the Company and Parent as to the future financial performance of
the Company and Parent and as to the cost savings and related expenses and other
potential synergies (including the amount, timing and achievability thereof)
anticipated to result from the Merger. In addition, we have not been requested
to make, and have not made, an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of the Company or Parent, nor have we
been furnished with any such evaluations or appraisals. Furthermore, we assumed
the Merger will qualify (i) for pooling of interests accounting treatment and
(ii) as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. We are not expressing any opinion as to what the
value of the Parent Common Stock actually will be when issued to the Company's
shareholders pursuant to the Merger or the prices at which the Parent Common
Stock will trade subsequent to the Merger.
E-1
<PAGE> 154
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We will also receive a fee for
rendering this opinion.
In the past, we have performed certain investment banking services for the
Company and have received customary fees for such services.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and Parent for our accounts
and that of such affiliates and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Merger,
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the Merger and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair from a financial point of view to the
shareholders of the Company.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
E-2
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the BFGoodrich certificate of incorporation no member of the
BFGoodrich Board shall have any personal liability to BFGoodrich or its
shareholders for damages for any breach of duty in such capacity, provided that
such liability shall not be limited if a judgment or other final adjudication
adverse to the director establishes that his or her acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that the director personally gained a financial profit or other advantage to
which he or she was not legally entitled or that the director's acts violated
section 719 of the New York Business Corporation Law ("NYBCL") (generally
relating to the improper declaration of dividends, improper purchases of shares,
improper distribution of assets after dissolution, or making any improper loans
to directors contrary to specified statutory provisions). Reference is made to
Article TWELFTH of the BFGoodrich certificate of incorporation filed as Exhibit
3(A) to BFGoodrich's Annual Report on Form 10-K for the year ended December 31,
1998.
Under the BFGoodrich bylaws, any person made, or threatened to be made, a
party to an action or proceeding by reason of the fact that he, his testator or
intestate is or was a director or officer of BFGoodrich or served any other
corporation in any capacity at the request of BFGoodrich shall be indemnified by
BFGoodrich to the extent and in a manner permissible under the laws of the State
of New York.
In addition, the BFGoodrich bylaws provide indemnification for directors
and officers where they are acting on behalf of BFGoodrich where the final
judgment does not establish that the director or officer acted in bad faith or
was actively and deliberately dishonest, were material to the cause of action so
adjudicated, or gained a financial profit or other advantage to which he was not
legally entitled. The BFGoodrich bylaws provide that the indemnification rights
shall be deemed to be "contract rights" and continue after a person ceases to be
a director or officer, or after rescission or modification of the BFGoodrich
bylaws with respect to prior occurring events. They also provide directors and
officers with the benefit of any additional indemnification which may be
permitted by later amendment to the NYBCL. The BFGoodrich bylaws further provide
for advancement of expenses and specify procedures in seeking and obtaining
indemnification. The BFGoodrich bylaws permit it to maintain insurance, at its
own expense, to indemnify its directors and officers. Reference is made to
Article VI of the BFGoodrich bylaws filed as Exhibit 3(B) to BFGoodrich's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
BFGoodrich has insurance to indemnify its directors and officers, within
the limits of BFGoodrich's insurance policies, for those liabilities in respect
of which such indemnification insurance is permitted under the laws of the State
of New York.
Reference is made to Sections 721-726 of the NYBCL, which are summarized
below.
Section 721 of the NYBCL provides that indemnification pursuant to NYBCL
shall not be deemed exclusive of other indemnification rights to which a
director or officer may be entitled, provided that no indemnification may be
made if a judgment or other final adjudication adverse to the director or
officer establishes that (i) his acts were committed in bad faith or were the
result of active and deliberate dishonesty, and, in either case, where material
to the cause of action so adjudicated, or (ii) he personally gained in fact a
financial profit or other advantage to which he was not legally entitled.
Section 722(a) of the NYBCL provides that a corporation may indemnify a
director or officer made, or threatened to be made, a party to any civil or
criminal action, other than a derivative action, against judgments, fines,
amounts paid in settlement and reasonable expenses actually and necessarily
incurred as a result of such action or proceeding, or any appeal therein, if
such director or officer acted in good faith, for a purpose which he reasonably
believed to be in the best interests of the corporation and, in criminal actions
or proceedings, in addition, had no reasonable cause to believe that his conduct
was unlawful. With respect to derivative actions, Section 722(c) of the NYBCL
provides that a director or officer may be indemnified only
S-1
<PAGE> 156
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense or
settlement of such action, or any appeal therein, if such director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation and that no indemnification shall be made in
respect of (1) a threatened action, or a pending action which is settled or
otherwise disposed of, or (2) any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and to the
extent an appropriate court determines that the person is fairly and reasonably
entitled to partial or full indemnification.
Section 723 of the NYBCL specifies the manner in which payment of such
indemnification may be authorized by a corporation. It provides that
indemnification by a corporation is mandatory in any case in which the director
or officer has been successful, whether on the merits or otherwise, in defending
an action. If the director or officer has not been successful or the action is
settled, indemnification may be made by the corporation only if authorized by
any of the corporate actions set forth in such Section 723 (unless the
corporation has provided for indemnification in some other manner as otherwise
permitted by Section 721 of the NYBCL).
Section 724 of the NYBCL provides that upon proper application by a
director or officer, indemnification shall be awarded by a court to the extent
authorized under Sections 722 and 723 of the NYBCL. Section 725 of the NYBCL
contains certain other miscellaneous provisions affecting the indemnification of
directors and officers, including a provision for the return of amounts paid as
indemnification if any such person is ultimately found not be entitled thereto.
Section 726 of the NYBCL authorizes the purchase and maintenance of
insurance to indemnify (1) a corporation for any obligation which it incurs as a
result of the indemnification of directors and officers under the above
sections, (2) directors and officers in instances in which they may be
indemnified by a corporation under such sections, and (3) directors and officers
in instances in which they may not otherwise be indemnified by a corporation
under such sections, provided the contract of insurance covering such directors
and officers provides, in a manner acceptable to the New York State
Superintendent of Insurance, for a retention amount and for co-insurance.
The Registrant has purchased liability insurance for its officers and
directors as permitted by the NYBCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of Exhibits included as part of this Registration
Statement. The Registrant agrees to furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request. Items marked with an
asterisk are filed herewith.
<TABLE>
<C> <S>
*2.1 Agreement and Plan of Merger dated as of November 22, 1998
among The B.F.Goodrich Company, Runway Acquisition
Corporation and Coltec Industries Inc (included as Annex A
to the Joint Proxy Statement/Prospectus).
*2.2 Parent Stock Option Agreement dated as of November 22, 1998
between The B.F.Goodrich Company and Coltec Industries Inc
(included as Annex B to the Joint Proxy
Statement/Prospectus).
*2.3 Company Stock Option Agreement dated as of November 22, 1998
between The B.F.Goodrich Company and Coltec Industries Inc
(included as Annex C to the Joint Proxy
Statement/Prospectus).
3.1 The Certificate of Incorporation, as amended, of The
B.F.Goodrich Company is incorporated by reference to Exhibit
3(A) to BFGoodrich's Form 10-K for the year ended December
31, 1998.
3.2 The Bylaws, as amended, of The B.F.Goodrich Company are
incorporated by reference to Exhibit 3(B) to BFGoodrich's
Form 10-Q for the quarter ended March 31, 1998.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation and Bylaws of The B.F.Goodrich Company
defining the rights of holders of common stock of The
B.F.Goodrich Company.
*5.1 Opinion of Nicholas J. Calise, Vice President, Associate
General Counsel and Secretary for The B.F.Goodrich Company,
as to the legality of the securities being registered.
</TABLE>
S-2
<PAGE> 157
<TABLE>
<C> <S>
*8.1 Opinion of Cravath, Swaine & Moore as to the United States
federal income tax consequences of the Merger.
*8.2 Opinion of Squire, Sanders & Dempsey L.L.P. as to the United
States federal income tax consequences of the Merger.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Deloitte & Touche LLP.
*23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Nicholas J. Calise (included in Exhibit 5.1 to
this Registration Statement).
23.5 Consent of Cravath, Swaine & Moore (included in Exhibit 8.1
to this Registration Statement).
23.6 Consent of Squire, Sanders & Dempsey L.L.P. (included in
Exhibit 8.2 to this Registration Statement).
*23.7 Consent of Morgan Stanley & Co. Incorporated.
*23.8 Consent of Credit Suisse First Boston Corporation.
*24.1 Powers of Attorney.
*99.1 The B.F.Goodrich Company Proxy card.
*99.2 Coltec Industries Inc Proxy card.
*99.3 Consent of John W. Guffey, Jr.
*99.4 Consent of William R. Holland.
*99.5 Consent of David I. Margolis.
</TABLE>
ITEM 22. 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;
(ii) To reflect in the Joint Proxy Statement/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. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar amount of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(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 (i) and (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
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, 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; and
S-3
<PAGE> 158
(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) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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.
(c) The undersigned Registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form; and
(2) that every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
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.
(d) Insofar as indemnification for liabilities arising under the Securities
Act 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 Commission such indemnification is
against public policy as expressed in the Securities 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 of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form S-4,
within one business day of receipt of such requests, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
requests.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
S-4
<PAGE> 159
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 the City of Richfield,
State of Ohio, on this 8th day of March, 1999.
THE B.F.GOODRICH COMPANY
By: /s/ N. J. Calise
------------------------------------
Nicholas J. Calise
Vice President, Associate General
Counsel
and Secretary
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 indicated on this 8th day of March, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DAVID L. BURNER* Chairman, Chief Executive Officer,
- ------------------------------------------------ President and Director
David L. Burner (Principal Executive Officer)
/s/ LES C. VINNEY* Senior Vice President,
- ------------------------------------------------ Chief Financial Officer
Les C. Vinney (Principal Financial Officer)
/s/ ROBERT D. KONEY, JR.* Vice President and Controller
- ------------------------------------------------ (Principal Accounting Officer)
Robert D. Koney, Jr.
/s/ JEANETTE GRASSELLI BROWN* Director
- ------------------------------------------------
Jeanette Grasselli Brown
/s/ DIANE C. CREEL* Director
- ------------------------------------------------
Diane C. Creel
/s/ GEORGE A. DAVIDSON, JR.* Director
- ------------------------------------------------
George A. Davidson, Jr.
/s/ JAMES J. GLASSER* Director
- ------------------------------------------------
James J. Glasser
/s/ JODIE K. GLORE* Director
- ------------------------------------------------
Jodie K. Glore
/s/ DOUGLAS E. OLESEN* Director
- ------------------------------------------------
Douglas E. Olesen
/s/ RICHARD DE J. OSBORNE* Director
- ------------------------------------------------
Richard de J. Osborne
/s/ ALFRED M. RANKIN, JR.* Director
- ------------------------------------------------
Alfred M. Rankin, Jr.
</TABLE>
S-5
<PAGE> 160
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ ROBERT H. RAU* Director
- ------------------------------------------------
Robert H. Rau
/s/ JAMES R. WILSON* Director
- ------------------------------------------------
James R. Wilson
/s/ A. THOMAS YOUNG* Director
- ------------------------------------------------
A. Thomas Young
</TABLE>
* The undersigned, as attorney-in-fact, does hereby sign this Registration
Statement on behalf of each of the officers and directors indicated above.
By: /s/ N. J. CALISE
-----------------------------------
Nicholas J. Calise
S-6
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF THE B.F.GOODRICH COMPANY]
March 8, 1999
Board of Directors
The B.F.Goodrich Company
4020 Kinross Lakes Parkway
Richfield, Ohio 44286-9368
Directors:
In connection with the proposed registration under the Securities Act of
1933, as amended, of up to 52,432,091 shares of common stock (collectively, the
"Shares") of The B.F.Goodrich Company, a New York corporation (the "Company"),
which are to be issued by the Company upon consummation of the merger (the
"Merger") of Runway Acquisition Corporation, a Pennsylvania corporation and a
wholly owned subsidiary of the Company, with and into Coltec Industries Inc, a
Pennsylvania corporation. I have examined such corporate records and other
documents, including the Registration Statement on Form S-4 relating to the
Shares together with the Joint Proxy Statement/Prospectus contained in such
Registration Statement, and any amendments or supplements thereto, the
("Registration Statement") and have reviewed such matters of law as I have
deemed necessary or appropriate for this opinion. Based on such examination and
review, it is my opinion that, when issued upon consummation of the Merger as
contemplated by the Registration Statement, the Shares will be duly authorized,
validly issued, fully paid and nonassessable.
I consent to be named in the Registration Statement as the attorney who
passed upon the validity of the Shares, and to the filing of a copy of this
opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ Nicholas J. Calise
<PAGE> 1
Exhibit 8.1
[CRAVATH, SWAINE & MOORE LETTERHEAD]
[New York Office]
March 8, 1999
Agreement and Plan of Merger,
Dated as of November 22, 1998,
Among the B.F. Goodrich Company,
Runway Acquisition Corporation and
Coltec Industries Inc.
Ladies and Gentlemen:
We have acted as special tax counsel for Coltec Industries Inc., a
Pennsylvania corporation (the "Company"), in connection with the proposed
merger (the "Merger") of Runway Acquisition Corporation ("Sub"), a Pennsylvania
corporation and a wholly owned subsidiary of The B.F. Goodrich Company, a New
York corporation ("Parent"), with and into the Company pursuant to an Agreement
and Plan of Merger, dated as of November 22, 1998 (the "Merger Agreement"),
among Parent, Sub and the Company. In the Merger, each issued and outstanding
share of common stock, par value $.01 per share, of the Company (the "Company
Common Stock") not owned directly by the Company, Parent or Sub will be
converted into .56 of a share of common stock, par value $5.00 per share, of
Parent ("Parent Common Stock").
In that connection, you have requested our opinion regarding the material
U.S. Federal income tax consequences of the Merger. In providing our opinion,
we have examined the Merger Agreement, the registration statement on Form S-4
(the "Registration Statement"), which includes the proxy statement/prospectus
of the Company and Parent, as filed with the Securities and Exchange
Commission, and such other documents and corporate records as we have deemed
necessary or appropriate for purposes of our opinion. In addition, we have
assumed that (i) the Merger will be consummated in the manner contemplated by
the Registration Statement and in accordance with the provisions of the Merger
Agreement,
<PAGE> 2
(ii) the statements concerning the Merger set forth in the Merger Agreement and
the Registration Statement are true, correct and complete, (iii) the
representations made to us by the Company and Parent in their respective
letters to us each dated as of the date hereof, and delivered to us for
purposes of this opinion are true, correct and complete (such letters, the
"Representation Letters"), and (iv) any representations made in the
Representation Letters or in the Merger Agreement "to the best knowledge of"
or similarly qualified are true, correct and complete without such
qualification. If any of the above-described assumptions are untrue for any
reason or if the Merger is consummated in a manner that is inconsistent with
the manner in which it is described in the Merger Agreement or the Registration
Statement, our opinions as expressed below may be adversely affected and may
not be relied upon.
Based upon the foregoing, we are of opinion that, for U.S. Federal income
tax purposes, (i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) the Company, Parent and Sub will each be a party to such
reorganization within the meaning of Section 368(b) of the Code, (iii) the
Company will not recognize any gain or loss as a result of the Merger, (iv)
Company shareholders will not recognize gain or loss upon their exchange of
Company Common Stock for Parent Common Stock pursuant to the Merger, except
that a Company shareholder who receives cash proceeds instead of a fractional
share interest in Parent Common Stock will recognize a gain or loss equal to
the difference between the cash received and the tax basis allocated to the
fractional share interest. Such gain or loss will be capital gain or loss if
the shareholder's shares of Company Common Stock are held as a capital asset at
the effective time of the Merger, and will be long-term capital gain or loss if
such shares of Company Common Stock have been held for more than one year at
the effective time of the Merger, (v) Company shareholders will have the same
tax basis in Parent Common Stock as they had in their Company Common Stock
(reduced by any tax basis allocable to a fractional share interest for which
cash is received) and (vi) the holding period of Parent Common Stock received
by a Company shareholder will include the period during which the Company
Common Stock surrendered in exchange therefor was held, provided that such
Company Common Stock was held by such Company shareholder as a capital asset at
the effective date of the Merger.
Our opinions are limited to the tax matters specifically covered hereby,
and we have not been asked to
<PAGE> 3
address, nor have we addressed, any other tax consequences of the Merger or any
other transactions. Our opinions are based upon current statutory, regulatory
and judicial authority, any of which may be changed at any time with
retroactive effect. We disclaim any undertaking to advise you of any subsequent
changes of the matters stated, represented or assumed herein or any subsequent
changes in applicable law, regulations or interpretations thereof.
We consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement and to the reference to our firm name therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules or regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ CRAVATH, SWAINE & MOORE
Coltec Industries Inc.
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
<PAGE> 1
Exhibit 8.2
Letterhead of Squire, Sanders & Dempsey L.L.P.
March 8, 1999
AGREEMENT AND PLAN OF MERGER,
DATED AS OF NOVEMBER 22 , 1998,
AMONG THE B.F. GOODRICH COMPANY,
RUNWAY ACQUISITION CORPORATION AND
COLTEC INDUSTRIES INC
Ladies and Gentlemen:
We have acted as counsel for The B.F. Goodrich Company, a New
York corporation (the "Parent"), in connection with the proposed merger (the
"Merger") of Runway Acquisition Corporation ("Sub"), a Pennsylvania corporation
and a wholly owned subsidiary of Company, with and into Coltec Industries Inc, a
Pennsylvania corporation, ("Company") pursuant to an Agreement and Plan of
Merger, dated as of November 22, 1998 (the "Merger Agreement"), among Parent,
Sub and Company. In the Merger, each issued and outstanding share of common
stock, par value $.01 per share, of Company (the "Company Common Stock") not
owned directly by the Parent, Sub, or Company will be converted into 0.56 shares
of common stock, par value $5.00 per share, of Parent ("Parent Common Stock").
In that connection, you have requested our opinion regarding
the material U.S. Federal income tax consequences of the Merger. In providing
our opinion, we have examined the Merger Agreement, the registration statement
on Form S-4 (the "Registration Statement"), which includes the proxy
statement/prospectus of the Company and Parent, as filed with the Securities and
Exchange Commission, and such other documents and corporate records as we have
deemed necessary or appropriate for purposes of our opinion. In addition, we
have assumed that (i) the Merger will be consummated in the manner contemplated
by the Registration Statement and in accordance with the provisions of the
Merger Agreement, (ii) the statements concerning the Merger set forth in the
Merger Agreement and the Registration Statement are true, correct and complete,
(iii) the representations made to us by the Company and Parent in their
respective letters to us each dated as of the date hereof, and delivered to us
for purposes of this opinion are true, correct and complete (such letters, the
"Representation
<PAGE> 2
Letters"), and (iv) any representations made in the Representation Letters or in
the Merger Agreement "to the best knowledge of" or similarly qualified are true,
correct and complete without such qualification. If any of the above-described
assumptions are untrue for any reason or if the Merger is consummated in a
manner that is inconsistent with the manner in which it is described in the
Merger Agreement or the Registration Statement, our opinions as expressed below
may be adversely affected and may not be relied upon.
Based upon the foregoing, we are of opinion that, for U.S.
Federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
(ii) Parent, Sub, and Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
(iii) Parent will not recognize gain or loss as a result of
the Merger;
(iv) Company shareholders will not recognize gain or loss upon
their exchange of Company Common Stock for Parent Common Stock pursuant
to the Merger, except that a Company shareholder who receives cash
proceeds instead of a fractional share interest in Parent Common Stock
will recognize a gain or loss equal to the difference between the cash
received and the tax basis allocated to the fractional share interest.
Such gain or loss will be capital gain or loss if the shareholder's
shares of Company Common Stock are held as a capital asset at the
effective time of the Merger, and will be long-term capital gain or
loss if such shares of Company Common Stock have been held for more
than one year at the effective time of the Merger;
(v) Company shareholders will have the same tax basis in the
Parent Common Stock as they had in the Company Common Stock (reduced by
any tax basis allocable to a fractional share interest for which cash
is received); and
(vi) The holding period of the Parent Common Stock received by
a Company shareholder will include the period during which the Company
Common Stock surrendered in exchange therefor was held (provided that
such Company Common Stock was held by such shareholder as a capital
asset at the effective date of the Merger).
Our opinions are limited to the tax matters specifically
covered hereby, and we have not been asked to address, nor have we addressed,
any other tax consequences of the Merger or any other transactions. Our opinions
are based upon current statutory, regulatory and judicial authority, any of
which may be changed at any time with retroactive effect. We disclaim any
undertaking to advise you of any
<PAGE> 3
subsequent changes of the matters stated, represented or assumed herein or any
subsequent changes in applicable law, regulations or interpretations thereof.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm name therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement/Prospectus of The B.F.Goodrich Company and Coltec Industries,
Inc. that is made a part of the Registration Statement (Form S-4) of The
B.F.Goodrich Company for the registration of 52,432,091 shares of its common
stock and to the incorporation by reference therein of our report dated February
5, 1999, with respect to the consolidated financial statements of The
B.F.Goodrich Company included in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
March 3, 1999
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The BFGoodrich Company on Form S-4 of our report dated September 11, 1997, on
our audit of Rohr, Inc. for the year ended July 31, 1996, appearing in the
Annual Report on Form 10-K of The BFGoodrich Company for the year ended December
31, 1998, and to the reference to us under the headings "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
March 3, 1999
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 2, 1998,
included in and incorporated by reference in Coltec Industries Inc's Form 10-K
for the year ended December 31, 1997, and our report dated January 22, 1999,
included in Coltec Industries Inc's Current Report on Form 8-K filed March 4,
1999, and to all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
Charlotte, North Carolina
March 5, 1999
<PAGE> 1
EXHIBIT 23.7
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
March 8, 1999
The B.F.Goodrich Company
Dear Sirs:
We hereby consent to all references of our firm name in or made part of the
Registration Statement on Form S-4 of The B.F. Goodrich Company. We also consent
to the filing of our fairness opinion dated November 22, 1998 as an exhibit to
the Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations adopted
by the Securities and Exchange Commission thereunder nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Lance Hirt
--------------------------------------
Lance Hirt, Vice President
<PAGE> 1
EXHIBIT 23.8
CONSENT
OF
CREDIT SUISSE FIRST BOSTON CORPORATION
Board of Directors
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Members of the Board:
We hereby consent to the inclusion of (i) our opinion letter, dated November
21, 1998, to the Board of Directors of Coltec Industries Inc (the "Company") as
Exhibit 23.8 to the Registration Statement on Form S-4 (the "Registration
Statement") relating to the proposed merger involving the Company and
B.F.Goodrich Company, and (ii) references made to our firm and such opinion in
the Registration Statement under the captions entitled "SUMMARY - The Merger -
Fairness Opinions of Financial Advisors", "THE MERGER - Background of the
Merger", "THE MERGER - Coltec's Reasons for the Merger; Recommendation of the
Coltec Board" and "THE MERGER - Fairness Opinions of Financial Advisors -
Credit Suisse First Boston Corporation". In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under, nor do we admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
CREDIT SUISSE FIRST BOSTON CORPORATION
March 8, 1999
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David L. Burner, Terrence G. Linnert and
Nicholas J. Calise, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation, in
his or her name and on his or her behalf, to do any and all acts and things and
to execute any and all instruments which they may deem necessary or advisable to
enable The B.F.Goodrich Company (the "Company") to comply with the Securities
Act of 1933 (the "Act") and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the Act of up to 75 million shares of the Company's Common
Stock ($5 par value) to be issued in connection with the acquisition of Coltec
Industries Inc, including power and authority to sign his or her name in any and
all capacities (including his or her capacity as a Director and/or Officer of
the Company) to Registration Statements on Form S-4, and to any and all
amendments, including post-effective amendments, to such Registration Statement,
and to any and all instruments or documents filed as part of or in connection
with such Registration Statement or any amendments thereto; and the undersigned
hereby ratifies and confirms all that said attorneys-in-fact and agents, or any
of them, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this
7th day of December, 1998.
/s/Jeanette Grasselli Brown /s/David L. Burner
- ---------------------------------- ----------------------------------------
(Jeanette Grasselli Brown) (David L. Burner)
Director Chairman of the Board, President and
Chief Executive Officer, and Director
(Principal Executive Officer)
/s/Diane C. Creel /s/George A. Davidson, Jr.
- ---------------------------------- ----------------------------------------
(Diane C. Creel) (George A. Davidson, Jr.)
Director Director
/s/James J. Glasser /s/Jodie K. Glore
- ---------------------------------- ----------------------------------------
(James J. Glasser) (Jodie K. Glore)
Director Director
<PAGE> 2
/s/Robert D. Koney, Jr. /s/Douglas E. Olesen
- ---------------------------------- ----------------------------------------
(Robert D. Koney, Jr.) (Douglas E. Olesen)
Vice President and Controller Director
(Principal Accounting Officer)
/s/Richard de J. Osborne /s/Alfred M. Rankin, Jr.
- ---------------------------------- ----------------------------------------
(Richard de J. Osborne) (Alfred M. Rankin, Jr.)
Director Director
/s/Robert H. Rau /s/Les C. Vinney
- ---------------------------------- ----------------------------------------
(Robert H. Rau) (Les C. Vinney)
Director Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/James R. Wilson /s/A. Thomas Young
- ---------------------------------- ----------------------------------------
(James R. Wilson) (A. Thomas Young)
Director Director
<PAGE> 1
EXHIBIT 99.1
THE B.F.GOODRICH COMPANY
P.O. BOX 11029
NEW YORK, N.Y. 10203-0029
THE B.F.GOODRICH COMPANY
PROXY
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes DAVID L. BURNER and NICHOLAS J. CALISE,
or either of them, with full power of substitution, to represent the undersigned
and to vote all Common Stock of THE B.F.GOODRICH COMPANY which the undersigned
would be entitled to vote at the Special Meeting of Shareholders of the Company
to be held on April 7, 1999, at 10:30 a.m., at The St. Regis Hotel, Two East
55th Street, New York, New York and at any adjournment thereof, as indicated and
in their discretion upon other matters as may properly come before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATION. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU
SIGN AND RETURN THIS CARD. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
PROPOSAL.
This card also constitutes your voting instructions for any and all shares
held of record by The Bank of New York for your account in the Company's
Dividend Reinvestment Plan.
Please sign on the reverse side of this card and return it promptly in the
enclosed return envelope to The Bank of New York, Proxy Department, New York, NY
10203-0029.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Approval of the issuance of shares of common stock of the Company and the
associated preferred share purchase rights pursuant to the merger of a
wholly-owned subsidiary of the Company into Coltec Industries, Inc.
For / / Against / / Abstain / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
CHANGE OF ADDRESS AND/OR COMMENTS MARK HERE. / /
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such.
Signature ------------------------- Dated ------------------------, 1999
Signature ------------------------- Dated ------------------------, 1999
Votes MUST be indicated in Black or Blue Ink. [X]
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
<PAGE> 1
EXHIBIT 99.2
[LOGO] COLTEC INDUSTRIES INC
3 COLISEUM CENTRE
2550 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA
28217
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOHN W. GUFFEY, JR., and DAVID D. HARRISON,
and each of them, with full power of substitution, as proxy or proxies to vote
all stock of Coltec Industries Inc owned by the undersigned, with like effect as
if the undersigned were personally present and voting at the special meeting of
shareholders of Coltec Industries Inc to be held at 10:30 a.m., local time, on
April 7, 1999, at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina,
and at any adjournment or adjournments thereof, on the item of business set
forth on the reverse side hereof and on such other business as may properly come
before the meeting, or any adjournment or adjournments thereof, and hereby
revokes any proxy or proxies heretofore given.
This proxy card also constitutes your voting instructions for any and all
shares held of record by Bankers Trust Company for your account in the Coltec
Industries Inc Retirement Savings Plan for Salaried Employees.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE
AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED FOR PROPOSAL 1 AND ACCORDING TO THE JUDGMENT OF THE
PROXIES WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE MEETING OR
ANY ADJOURNMENT OR ADJOURNMENTS THEREOF. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSAL 1.
Please mark your vote as indicated in this example [X]
Proposal 1 -- Approval and adoption of the Agreement and Plan of Merger dated as
of November 22, 1998 among The B.F.Goodrich Company, Runway Acquisition
Corporation and Coltec Industries Inc and the transactions contemplated thereby.
For / / Against / / Abstain / /
The undersigned hereby authorizes the proxies to vote in their discretion on any
other business that may properly be brought before the meeting or any
adjournment or adjournments thereof.
The undersigned hereby acknowledges receipt of the Joint Proxy
Statement/Prospectus relating to the meeting.
Signature(s) ------------------------------ Dated ------------------------, 1999
Note: Please sign as name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title.
<PAGE> 1
EXHIBIT 99.3
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, John W. Guffey, Jr., hereby consent to be named as a person about to
become a director of The B.F.Goodrich Company in the Registration Statement on
Form S-4 of The B.F.Goodrich Company dated March 8, 1999.
/s/ John W. Guffey, Jr.
-----------------------
John W. Guffey, Jr.
Dated: March 8, 1999
<PAGE> 1
EXHIBIT 99.4
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, William R. Holland, hereby consent to be named as a person about to
become a director of The B.F.Goodrich Company in the Registration Statement on
Form S-4 of The B.F.Goodrich Company dated March 8, 1999.
/s/ William R. Holland
-----------------------
William R. Holland
Dated: March 8, 1999
<PAGE> 1
EXHIBIT 99.5
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, David I. Margolis, hereby consent to be named as a person about to
become a director of The B.F.Goodrich Company in the Registration Statement on
Form S-4 of The B.F.Goodrich Company dated March 8, 1999.
/s/ David I. Margolis
-----------------------
David I. Margolis
Dated: March 8, 1999
