<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
3590
(Primary Standard Industrial Classification Code Number)
<TABLE>
<CAPTION>
(Exact name of registrant as (State or other jurisdiction of (I.R.S. Employer
specified in its charter) incorporation or organization) Identification No.)
<S> <C> <C>
Coltec Industries Inc Pennsylvania 13-1846375
AMI Industries, Inc. Colorado 84-1045236
CII Holdings Inc Delaware 13-3314412
Coltec Canada Inc Delaware 13-3887111
Coltec Holdings Inc Delaware 52-1571894
Coltec Industrial Products Inc Delaware 23-2825769
Coltec International Services Co Delaware 13-3895074
Coltec North Carolina Inc North Carolina 58-2043890
Coltec Technical Services Inc Delaware 13-3314406
</TABLE>
<TABLE>
<CAPTION>
(Exact name of registrant as (State or other jurisdiction of (I.R.S. Employer
specified in its charter) incorporation or organization) Identification No.)
<S> <C> <C>
Delavan Inc Delaware 42-1467902
Garlock Inc Ohio 13-2838953
Garlock International Inc Delaware 13-3035538
Garlock Overseas Corporation Delaware 16-1010822
Haber Tool Inc Michigan 38-3147840
Jamco Products LLC Texas 76-0559044
Menasco Aerosystems Inc Delaware 13-3799120
Stemco Inc Texas 06-0943080
Walbar Inc Delaware 04-2895576
</TABLE>
ROBERT J. TUBBS, ESQ.
3 COLISEUM CENTRE
2550 WEST TYVOLA ROAD
CHARLOTTE, N.C. 28217
(704) 423-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
GEORGE W. BILICIC, JR., ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be 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>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT(1) OFFERING PRICE FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 1/2% Senior Exchange Notes Due 2008........ $300,000,000 100% $300,000,000 $88,500
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 7 1/2% Series B Senior Notes
Due 2008(3)................................ $300,000,000 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933, as
amended (the "Securities Act").
(3) The subsidiaries of Coltec Industries Inc listed above will guarantee the
7 1/2% Series B Senior Notes Due 2008 being registered hereby.
(4) Pursuant to Rule 457(n), no separate fee is required to be paid in respect
of the guarantees of the 7 1/2% Series B Senior Notes Due 2008 being
registered hereby.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 18, 1998
$300,000,000
Offer for all Outstanding 7 1/2% Senior Notes Due 2008
of
COLTEC INDUSTRIES INC
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK
CITY TIME ON , 1998, UNLESS EXTENDED.
------------------
Coltec Industries Inc ("Coltec" or the "Company") hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to $300.0 million aggregate principal amount of
its 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes") that have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus, constitutes a part, for a like principal amount of its 7 1/2% Senior
Notes Due 2008 (the "Outstanding Notes" and, together with the Exchange Notes,
the "Senior Notes") with the holders thereof. The terms of the Exchange Notes
are identical in all material respects to the Outstanding Notes except for
certain transfer restrictions and registration rights relating to the
Outstanding Notes and except that, if the Exchange Offer is not consummated by
October 13, 1998, the interest rate borne by the Outstanding Notes will increase
by amounts specified herein until the Exchange Offer is consummated. The
Exchange Notes will evidence the same indebtedness as the Outstanding Notes and
will be issued under and entitled to the same benefits under the Indenture (as
defined herein) as the Outstanding Notes. In addition, the Exchange Notes and
the Outstanding Notes will be treated as one series of securities under the
Indenture. The Outstanding Notes were issued on April 16, 1998 (the "Issue
Date"), pursuant to an offering (the "Original Senior Notes Offering") exempt
from registration under the Securities Act.
Interest on the Exchange Notes will be payable on April 15 and October 15 of
each year, commencing October 15, 1998. The Exchange Notes will be redeemable at
any time, in whole or in part, at the option of the Company at the redemption
price set forth herein and will not be entitled to the benefit of any sinking
fund. The Exchange Notes will be senior obligations of the Company and will rank
pari passu in right of payment with all existing and future senior obligations
of the Company (including indebtedness under the Amended Credit Agreement (as
defined herein)) and will rank senior in right of payment to all subordinated
obligations of the Company. As of December 31, 1997, on a pro forma basis after
giving effect to the Original Senior Notes Offering and the concurrent TIDES
Offering (as defined herein) (collectively the "Offerings") and the application
of the estimated net proceeds therefrom to reduce indebtedness under the Amended
Credit Agreement, the Company would have had approximately $323.9 million of
other senior indebtedness ($262.0 million of which would have been indebtedness
outstanding under the Amended Credit Agreement). The Exchange Notes will be
unconditionally guaranteed, jointly and severally, on a senior basis, by the
Subsidiary Guarantors (as defined herein). The Subsidiary Guarantees (as defined
herein) will be senior obligations of the Subsidiary Guarantors and will rank
pari passu in right of payment with all existing and future senior obligations
of the Subsidiary Guarantors (including guarantees of indebtedness under the
Amended Credit Agreement) and will rank senior to all subordinated obligations
of such Subsidiary Guarantors. The Subsidiary Guarantees may be released without
action on the part of the holders of Senior Notes in certain circumstances. See
"Description of the Senior Notes -- Guarantees". As of December 31, 1997, after
giving effect to the Offerings and the application of the estimated net proceeds
therefrom to reduce indebtedness under the Amended Credit Agreement, the
Subsidiary Guarantors would have had approximately $262.0 million of other
senior indebtedness (all of which would have been guarantees of indebtedness
under the Amended Credit Agreement). The Indenture does not contain any
limitation on the incurrence of additional indebtedness by the Company or its
subsidiaries.
The Exchange Notes and the Subsidiary Guarantees will be secured, subject to
the provisions of the Amended Collateral Documents (as defined herein), equally
and ratably with the indebtedness of the Company and the Subsidiary Guarantors
under the Amended Credit Agreement and related documents and liability in
connection with interest rate protection and other hedging agreements
contemplated by the Amended Credit Agreement, by a security interest in the
Collateral (as defined herein). The Collateral may be released without action on
the part of the holders of Senior Notes in certain circumstances. See
"Description of the Senior Notes -- Collateral". As of December 31, 1997, on a
pro forma basis after giving effect to the Offerings and the application of the
estimated net proceeds therefrom to reduce indebtedness under the Amended Credit
Agreement, the Company and its subsidiaries would have had approximately $262.0
million of other secured indebtedness outstanding (all of which would have been
indebtedness outstanding under the Amended Credit Agreement). See "Description
of the Senior Notes".
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to midnight, New York City time,
on the date the Exchange Offer expires (the "Expiration Date"), which will be
, 1998 (20 business days following the commencement of the Exchange
Offer), unless the Exchange Offer is extended. Tenders of Outstanding Notes may
be withdrawn at any time prior to midnight, New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Outstanding Notes being tendered for exchange. Outstanding
Notes may be tendered only in integral multiples of $1,000. See "The Exchange
Offer".
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Notes will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Outstanding Notes surrendered in exchange therefor, or if no interest has been
paid on the Outstanding Notes surrendered in exchange therefor, or if no
interest has been paid on the Outstanding Notes, from the Issue Date. Holders of
Outstanding Notes whose Outstanding Notes are accepted for exchange will not
receive any interest payment in respect of interest on such Outstanding Notes
otherwise payable on any interest payment date the record date for which occurs
on or after the consummation of the Exchange Offer. Consequently, holders who
exchange their Outstanding Notes for Exchange Notes will receive the same
interest payment on October 15, 1998 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes) that they would have
received had they not accepted the Exchange Offer. See "the Exchange Offer --
Interest on the Exchange Notes".
(Cover continued on next page)
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO
TENDER THEIR OUTSTANDING NOTES FOR EXCHANGE NOTES IN THE EXCHANGE OFFER, SEE
"RISK FACTORS" BEGINNING ON PAGE 11.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE> 3
(Cover continued from previous page)
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined herein). See "The Exchange Offer -- Consequences of Exchanging
Outstanding Senior Notes" for a discussion of the Company's belief, based on
interpretations by the staff of the Securities and Exchange Commission (the
"SEC" or the "Commission") as set forth in no-action letters issued to third
parties, as to the transferability of the Exchange Notes upon satisfaction of
certain conditions. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes where
such Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any resale
of Exchange Notes. See "Plan of Distribution".
There is no established trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange
Notes, or the ability of the holders of the Exchange Notes to sell their
Exchange Notes or the price at which such holders may be able to sell their
Exchange Notes. The Company does not currently intend to list the Exchange Notes
on any securities exchange or to seek approval for quotation of the Exchange
Notes on any securities exchange or to seek approval for quotation of the
Exchange Notes through any automated quotation system. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Exchange
Notes.
The Company will not receive any proceeds for the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Outstanding Notes, the Company will promptly return the Outstanding Notes to
the holders thereof. See "The Exchange Offer".
<PAGE> 4
AVAILABLE INFORMATION
Coltec is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). Such reports, proxy statements and
other information filed by Coltec with the Commission may be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, 13th floor, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Such material may also be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov.
Such reports and other information may also be inspected at the offices of the
New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York
10005 and the Pacific Exchange Incorporated (the "PSE"), 301 Pine Street, Suite
1104, San Francisco, California 94104.
This Prospectus constitutes a part of a registration statement on form S-4
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and exhibits and schedules thereto for
further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Coltec pursuant to the Exchange Act are
incorporated in this Prospectus by reference:
(i) Annual Report on Form 10-K for the year ended December 31, 1997;
(ii) Quarterly Report on Form 10-Q for the period ended March 29,
1998;
(iii) Current Report on Form 8-K, dated March 30, 1998;
(iv) Current Report on Form 8-K, dated April 8, 1998;
(v) Current Report on Form 8-K, dated April 14, 1998; and
(vi) Current Report on Form 8-K, dated May 15, 1998.
All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Exchange Offer shall be deemed to be
incorporated by reference in this Prospectus and to be a part of this Prospectus
from the date of filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates) and any other information requested thereby as
described above under "Available Information". Written or oral requests should
be directed to the Company's principal executive office at: Coltec Industries
Inc, 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina 28217,
Attention: Corporate Secretary (telephone (704) 423-7000).
i
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Certain
capitalized terms used but not defined are used as defined elsewhere in this
Prospectus.
THE COMPANY
Coltec and its consolidated subsidiaries manufacture and sell a diversified
range of highly engineered aerospace and industrial products primarily in the
United States, Canada and Europe. Coltec's operations are conducted through its
two principal segments -- Aerospace and Industrial. Through its Aerospace
segment, which in 1997 accounted for approximately 42% of total Company sales
and approximately 37% of total Company operating profit, Coltec is a leading
manufacturer of landing gear systems, engine fuel controls, flight attendant and
cockpit seats, turbine blades, fuel injectors, nozzles and related components
for commercial and military aircraft. Through its Industrial segment, which in
1997 accounted for approximately 58% of total Company sales and approximately
63% of total Company operating profit, Coltec is a leading manufacturer of
industrial seals, gaskets, packing products, self-lubricating bearings and oil
seals and hubodometers for trucks and trailers and is a producer of
technologically advanced spray nozzles for agricultural, home heating and
industrial applications. Coltec also produces high-horsepower diesel engines for
naval ships and diesel, gas and dual-fuel engines for electric power plants and
produces air compressors and tooling for industrial applications.
The Company derived approximately 50% of sales in 1997 from its
aftermarket, or parts and services, business. Aftermarket sales tend to generate
significantly higher margins and tend to be less affected by general economic
cycles than the Company's sales of products to original equipment manufacturers
("OEMs"). In addition, management believes the Company is benefiting from
several other industry trends which will help the Company achieve its growth and
operating goals. These trends include strong growth in world airline fleets,
preference by OEMs to source complex integrated systems rather than component
parts, an increased preference to consolidate purchasing of consumable products
from a single full line supplier and customer demand for integrated sales and
service providers.
In 1997, Coltec had sales and EBITDA (as defined herein) of $1,314.9
million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from
1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3
million at year end 1996. Coltec's common stock is listed on the NYSE, and based
on the closing price of $23 1/2 per share on May 15, 1998, the Company had a
total equity market capitalization of approximately $1,553.4 million.
BUSINESS STRATEGY
The Company's strategy is to develop and maintain market leading positions
and attractive margins for its products through technological innovation, cost
efficiencies, product differentiation and superior quality and service. The
Company emphasizes targeted development of highly engineered, value-added
products designed to meet specific customer requirements. This emphasis enables
the Company to maintain close, interactive relationships with major aircraft
manufacturers as well as the Company's principal industrial customers and to
develop new products in response to customer needs. Coltec views its superior
customer responsiveness as one of its key competitive strengths. Successful
introduction of new products, cost reductions, productivity improvements and
selected divestitures have helped the Company maintain operating margins
averaging more than 12.5% over the last five years.
Through "Coltec 2000", the Company's three-year growth and operating plan,
the Company has set specific growth and operating targets focused on achieving
annual revenues of $2 billion by the year 2000 while maintaining the quality of
earnings. The plan calls for substantial growth internally, complemented by
strategic acquisitions which extend product offerings of the Company's existing
businesses and leverage the Company's existing distribution network. The key
elements of the plan are as follows:
1
<PAGE> 6
- Focus on Aftermarket -- For the year ended December 31, 1997,
approximately 50% of the Company's sales were derived from the
aftermarket. The Company's products sold in the aftermarket include
industrial seals, hub systems and a variety of aftermarket parts used in
the maintenance of engines, compressors, pumps and gas turbines. A broad
and fragmented buyer base coupled with the critical nature of replacement
parts generates sales with generally higher margins than sales to
original equipment manufacturers. In addition, because the products are
consumable in nature and are replaced over time, the aftermarket provides
a stable source of income.
- Develop New Products -- The Company believes that responsiveness to
customer demands is a critical success factor in both its Aerospace and
Industrial markets. As a result, the Company has undertaken a number of
initiatives to reduce the time and cost of bringing new products to
market and has established a long term objective of generating 50% of
sales from products introduced within the prior five years. Recent new
product and application introductions have included (i) landing gear
systems for the Boeing 777, (ii) Power$ync II computerized controls for
compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM)
industrial sealing products, (iv) the Raindrop Ultra agricultural spray
nozzle, (v) new versions of FADEC electronic fuel controls for aircraft,
(vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company
to enter the large jet engine market and (vii) the Company's Chandler
Evans Control Systems Division's agreement to develop and utilize its
advanced Variable Displacement Vane Pump technology in aircraft engine
applications.
- Focus on Globalization -- For the year ended December 31, 1997,
approximately 10% of the Company's revenues were generated from outside
of the United States and Canada. As part of its Coltec 2000 strategy, the
Company seeks to grow its international operations, through a mix of
internal growth and acquisitions. Given the global nature of many of the
markets in which the Company competes, management believes that an
increased global presence will lead to substantial operating
efficiencies, as fixed development and operating costs can be amortized
over a greater sales base. In terms of internal growth, the Company will
emphasize the development and expansion of its international customer
base, through the sale of products such as the fuel injectors to
Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has
established sales and distribution capabilities in Asian and South
American countries and will pursue international growth through
complementary acquisitions such as its recent acquisition of Groupe
Carbone Lorraine's sealing products business.
- Total Systems Sourcing -- Management believes that many of the Company's
largest customers, including The Boeing Company ("Boeing"), are placing
increased emphasis on suppliers which are capable of providing integrated
systems rather than component parts. The Company believes that its design
and engineering competencies and cellular manufacturing processes provide
a competitive advantage in the design and manufacture of integrated
systems and are areas in which the Company will continue to invest. For
example, in 1995 the Company supplied Boeing with non-integrated landing
gear systems. However, in 1996 with the Boeing 737 and 757, Coltec began
providing fully integrated landing gear which includes the installation
of wheels, tires, brakes, hydraulics, electrical harnesses, lights and
sensing systems on the base landing gear. In 1997, the Company began
providing fully integrated landing gear for the Boeing 777 aircraft
thereby increasing revenue by more than 20% per unit. The Company will
begin providing fully integrated landing gear for the Boeing 767 in 1998.
- Productivity Initiatives -- A number of productivity initiatives have
been implemented which have been designed to reduce lead times, curtail
scrap and enhance throughput, which are expected among other things, to
improve inventory turns. Such initiatives have included the consolidation
of multiple product lines into common production facilities and the
relocation of the Company's Delavan Spray Technologies Division to new
state-of-the-art facilities near major transportation hubs. Cycle time
reductions have reduced required inventory levels while improving
customer responsiveness. For example, during 1997, Walbar Arizona reduced
cycle times on damper seal production by approximately 70%, while the
Company's Menasco Division reduced production time for Boeing 737 landing
gear main cylinders from 20 weeks to 12. The Company intends to continue
to enhance its production processes through optimization of workflow,
investment in upgraded manufacturing technologies and robotics, and
related initiatives. In addition, all of the Company's major divisions
are in the late stages of implementing new
2
<PAGE> 7
enterprise reporting systems. The new systems are enhancing shop floor
reporting, materials management, order entry and cost evaluation and
control. Management believes that these programs are leading to
productivity and efficiency improvements and are having a positive impact
on operating performance. The new enterprise systems have the added
benefit of addressing year 2000 systems issues. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
Coltec is a Pennsylvania corporation with its principal executive offices
located at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina
28217. The telephone number of Coltec is (704) 423-7000.
TIDES OFFERING
Concurrently with the Original Senior Notes Offering, Coltec Capital Trust
(the "Trust") offered and sold, by means of a separate offering circular (the
"TIDES Offering"), 3,000,000 5 1/4% Convertible Preferred Securities (the
"Convertible Preferred Securities"), liquidation preference $50 per Convertible
Preferred Security, which are guaranteed to the extent set forth therein by, and
convertible into common stock of, the Company. The Company issued to the Trust
5 1/4% Convertible Subordinated Deferrable Interest Debentures Due 2028 (the
"TIDES Debentures"), which have an aggregate principal amount, interest,
conversion and other terms substantially similar or analogous to those of the
Convertible Preferred Securities. Indebtedness under the TIDES Debentures is
unsecured and subordinated to the Senior Notes and all other Senior Debt (as
defined in the Indenture relating to the TIDES Debentures) of the Company.
RECENT DEVELOPMENT
On May 15, 1998, the Company completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary ("Holley") to
Kohlberg & Co., L.L.C., a private merchant banking firm located in Mount Kisco,
New York, for $100 million in cash. The proceeds from this acquisition were
applied toward reducing debt. For 1997, Holley had gross revenues and operating
income of approximately $99.0 million and $8.0 million, respectively.
3
<PAGE> 8
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $300.0 million
aggregate principal amount of Outstanding Notes for an equal aggregate principal
amount of Exchange Notes. The Exchange Notes will evidence the same indebtedness
as the Outstanding Notes and will be issued under and entitled to the same
benefits as the Outstanding Notes under the Indenture (the "Indenture"), dated
as of April 16, 1998 among the Company, the Subsidiary Guarantors and Bankers
Trust Company, as Trustee (the "Trustee"). In addition, the Exchange Notes and
the Outstanding Notes will be treated as one series of securities under the
Indenture.
Securities Offered......... Up to $300.0 million aggregate principal amount of
7 1/2% Senior Exchange Notes Due 2008, which have
been registered under the Securities Act. The terms
of the Exchange Notes are identical in all material
respects to the Outstanding Notes except for
certain transfer restrictions and registration
rights relating to the Outstanding Notes and except
that, if the Exchange Offer is not consummated on
or prior to October 13, 1998, the interest rate
borne by the Outstanding Notes will increase by
amounts specified herein until the Exchange Offer
is consummated. See "Description of the Senior
Notes -- Registered Exchange Offer; Registration
Rights".
The Exchange Offer......... The Exchange Notes are being offered in exchange
for a like principal amount of Outstanding Notes
validly tendered pursuant to the Exchange Offer. As
of the date hereof, $300.0 million in aggregate
principal amount of Outstanding Notes are
outstanding. The Company will issue the Exchange
Notes to tendering holders of Outstanding Notes on
or promptly after the Expiration Date. The issuance
of the Exchange Notes is intended to satisfy the
obligations of the Company contained in the
Registration Rights Agreement. For procedures on
tendering, see "The Exchange Offer" and
"Description of the Senior Notes -- Registered
Exchange Offer; Registration Rights".
Expiration of the
Exchange Offer........... Midnight, New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Terms of the
Exchange Offer; Period of Tendering Outstanding
Notes".
Tenders; Withdrawal........ The tender of Outstanding Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date. Any Outstanding Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Conditions to the
Exchange Offer........... The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer does
not violate applicable law or any applicable
interpretation of the staff of the Commission.
There can be no assurance that any such condition
will not occur. Holders of Outstanding Notes will
have certain rights under the Registration Rights
Agreement should the Company fail to consummate the
Exchange Offer. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer".
United States Taxation
Considerations........... The exchange pursuant to the Exchange Offer should
not be a taxable event for Federal income tax
purposes. See "United States Taxation".
4
<PAGE> 9
Exchange Agent............. Bankers Trust Company, the Trustee under the
Indenture, is serving as the exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer.
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of
Proceeds" for a description of the use of proceeds
from the issuance of the Outstanding Notes.
5
<PAGE> 10
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions of the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that (i) the Exchange Notes received by such holder will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such holder will have not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and has no
arrangement or understanding to participate in a distribution of Exchange Notes
and (iii) such holder is not an affiliate of the Company within the meaning of
Rule 405 of the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. If any holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution". However, to
comply with state securities laws, the Exchange Notes may not be offered or sold
in any state unless they have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with. The offer and sale of the Exchange Notes to "qualified
institutional buyers" (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under state
securities laws. The Company currently does not intend to register or qualify
the sale of the Exchange Notes in any state where an exemption from registration
or qualification is required and not available. See "The Exchange
Offer -- Consequences of Failure to Exchange and Requirements for Transfer of
Exchange Notes".
6
<PAGE> 11
SUMMARY DESCRIPTION OF EXCHANGE NOTES
Securities Offered......... $300.0 million aggregate principal amount of 7 1/2%
Series B Senior Notes Due April 15, 2008 of Coltec
Industries Inc.
Maturity Date.............. April 15, 2008.
Interest Payment Dates..... April 15 and October 15 of each year, commencing
October 15, 1998. Interest on the Exchange Notes
will accrue from the last interest payment date on
which interest was paid on the Outstanding Notes
surrendered in exchange therefor, or if no interest
has been paid on the Outstanding Notes, from the
Issue Date. Holders of Outstanding Notes whose
Outstanding Notes are accepted for exchange will
not receive any payment in respect of interest on
such Outstanding Notes otherwise payable on any
interest payment date the record date for which
occurs on or after consummation of the Exchange
Offer. Consequently, holders who exchange their
Outstanding Notes for Exchange Notes will receive
the same interest payment on October 15, 1998 (the
first interest payment date with respect to the
Senior Notes) that they would have received had
they not accepted the Exchange Offer. See "The
Exchange Offer -- Interest on the Exchange Notes".
Optional Redemption........ The Senior Notes are redeemable, in whole or in
part, at any time, at the option of the Company, at
a redemption price equal to the greater of (i) 100%
of the principal amount of such Senior Notes and
(ii) the sum of the present value of the remaining
scheduled payments of principal and interest
thereon from the redemption date to the maturity
date, discounted to the redemption date on a
semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury
Rate plus 37.5 basis points, plus accrued interest
thereon to the date of redemption. The Senior Notes
are not entitled to the benefit of any sinking
fund.
Ranking.................... The Senior Notes are senior obligations of the
Company and will rank pari passu in right of
payment with all existing and future senior
obligations of the Company (including indebtedness
under the Amended Credit Agreement) and will rank
senior in right of payment to all subordinated
obligations of the Company. As of December 31,
1997, on a pro forma basis after giving effect to
the Offerings and the application of the estimated
net proceeds therefrom to reduce indebtedness under
the Amended Credit Agreement, the Company would
have had approximately $323.9 million of other
senior indebtedness ($262.0 million of which would
have been indebtedness outstanding under the
Amended Credit Agreement). The Indenture does not
contain any limitation on the incurrence of
additional indebtedness by the Company.
Guarantees................. The Senior Notes are unconditionally guaranteed,
jointly and severally, on a senior basis, by the
Subsidiary Guarantors. The Subsidiary Guarantees
will be senior obligations of the Subsidiary
Guarantors and will rank pari passu in right of
payment with all existing and future senior
obligations of the Subsidiary Guarantors (including
guarantees of indebtedness under the Amended Credit
Agreement) and will rank senior to all subordinated
obligations of such Subsidiary Guarantors. The
Subsidiary Guarantees may be released without
action on the part of the holders of Senior Notes
in certain circumstances. As of December 31, 1997,
on a pro forma basis after giving effect to the
Offerings and the application of the estimated net
proceeds therefrom to reduce indebtedness under the
Amended Credit Agreement, the Subsidiary Guarantors
would have had approximately
7
<PAGE> 12
$262.0 million of other senior indebtedness (all of
which would have been guarantees of indebtedness
under the Amended Credit Agreement). The Indenture
relating to the Senior Notes does not contain any
limitation on the incurrence of additional
indebtedness by the Company's subsidiaries.
Security................... The Senior Notes and the Subsidiary Guarantees are
secured, subject to the provisions of the Amended
Collateral Documents, equally and ratably with the
indebtedness of the Company and the Subsidiary
Guarantors under the Amended Credit Agreement and
related documents and liabilities in connection
with interest rate protection and other hedging
agreements contemplated by the Amended Credit
Agreement, by a security interest in the
Collateral. The Collateral may be released without
action on the part of the holders of Senior Notes
in certain circumstances. As of December 31, 1997,
after giving effect to the Offerings and the
application of the estimated net proceeds therefrom
to reduce indebtedness under the Amended Credit
Agreement, the Company and its subsidiaries would
have had approximately $262.0 million of other
secured indebtedness outstanding (all of which
would have been indebtedness outstanding under the
Amended Credit Agreement). For a description of the
Collateral and the Amended Collateral Documents,
see "Description of Other Indebtedness" and
"Description of the Senior Notes".
Restrictive Covenants...... The Indenture contains certain covenants that limit
(i) the granting of certain additional liens
without securing the Senior Notes equally and
ratably, (ii) the entering into of certain sale and
leaseback transactions and (iii) certain
consolidations, mergers and transfers of assets.
However, these limitations are subject to a number
of important qualifications. See "Description of
the Senior Notes -- Certain Covenants" and
"-- Merger, Consolidation or Sale of Assets".
Use of Proceeds............ There will be no cash proceeds to the Company from
the Exchange Offer.
8
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth summary consolidated financial and other data
of Coltec for the five years ended December 31, 1997 and for three months ended
March 30, 1998 and March 29, 1998. The information should be read in conjunction
with Coltec's consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus and incorporated by reference
herein. The statement of earnings data and other financial data for 1993, 1994
and 1995 have been restated to reflect the sale of the Company's automotive
original equipment components business in 1996, which was accounted for as a
discontinued operation. The summary consolidated financial and other data, with
the exception of order backlog, at and for the years ended December 31, 1993
through 1997, were derived from the consolidated financial statements of Coltec
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated financial and other data, with the exception of order
backlog, at and for the three months ended March 30, 1997 and March 29, 1998
were derived from the unaudited consolidated financial statements of Coltec
which are incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ---------------------
---------------------------------------------------- MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales....................................... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $1,314.9 $ 309.2 $ 374.4
Cost of goods sold.............................. 703.9 648.3 744.2 811.1 898.3 211.7 260.1
-------- -------- -------- -------- -------- -------- --------
Gross profit.................................... 357.5 351.9 355.4 348.6 416.6 97.5 114.3
Selling and administrative...................... 183.8 186.7 186.4 191.0 218.8 52.6 61.0
Special charge(a)............................... 25.2 -- 27.0 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income(b)............................. 148.5 165.2 142.0 157.6 197.8 44.9 53.3
Interest expense and other, net................. 110.2 89.5 89.9 74.9 54.0 12.4 15.1
Income taxes.................................... 13.7 27.2 17.6 28.1 48.9 11.0 13.0
-------- -------- -------- -------- -------- -------- --------
Earnings from continuing operations before
extraordinary item(b)......................... 24.6 48.5 34.5 54.6 94.9 21.5 25.2
Discontinued operations(c)...................... 40.6 45.5 36.7 57.1 -- -- --
Extraordinary item(d)........................... (17.8) (1.5) (.3) (30.6) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings.................................... $ 47.4 $ 92.5 $ 70.9 $ 81.1 $ 94.9 $ 21.5 $ 25.2
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share:(e)
Before extraordinary item..................... $ .35 $ .70 $ .49 $ .79 $ 1.42 $ .32 $ .38
Discontinued operations....................... .59 .65 .53 .82 -- -- --
Extraordinary item............................ (.26) (.02) -- (.44) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings per share.......................... $ .68 $ 1.33 $ 1.02 $ 1.17 $ 1.42 $ .32 $ .38
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................. $ 163.1 $ 189.6 $ 208.9 $ 215.6 $ 187.9 $ 217.2 $ 228.4
Total assets.................................... 796.5 847.5 894.5 849.5 933.0 851.9 1,076.1
Total debt...................................... 1,033.6 970.1 945.8 720.3 759.4 731.3 860.0
Shareholders' equity............................ (625.5) (525.6) (453.8) (417.0) (359.2) (413.7) (335.2)
OTHER FINANCIAL DATA:
EBITDA(f)....................................... $ 197.5 $ 207.3 $ 184.1 $ 193.6 $ 236.2 $ 53.4 $ 65.7
Capital expenditures............................ 38.6 38.2 42.5 44.6 81.2 13.6 15.0
Order backlog (at end of period)(g)............. 598.6 594.2 657.1 678.3 875.6 805.9 968.2
Ratio of earnings to fixed charges(h)........... 1.3x 1.8x 1.6x 2.1x 3.5x 3.5x 3.4x
Ratio of EBITDA to interest expense(i).......... 1.8x 2.3x 2.0x 2.6x 4.4x 4.3x 4.4x
Ratio of total debt to EBITDA(j)................ 5.2x 4.7x 5.1x 3.7x 3.2x 13.7x 13.1x
</TABLE>
- ---------------
(a) In 1997, Coltec incurred a special charge of $10.0 million for the
restructuring of its Industrial segment. In 1997, the remaining $10.0 million
accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a
special charge of $27.0 million primarily to cover the costs of closing the
Walbar compressor blade facility in Canada. The charge also covered selected
workforce reductions throughout the Company. In 1993, Coltec incurred a
special charge of $25.2 million to cover the cost of consolidation and
rearrangement of certain manufacturing facilities and related workforce
reductions primarily in the Aerospace segment.
9
<PAGE> 14
(b) Operating income for 1996 included a charge of $14.2 million related to the
bankruptcy of Fokker Aircraft B.V. ("Fokker"), a major aerospace customer of
Coltec.
(c) See note 2 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus.
(d) See note 3 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus. Extraordinary charges relate to either early
retirement of debt or debt refinancings.
(e) Represents diluted earnings per common share. See note 5 to the consolidated
financial statements of Coltec included elsewhere in this Prospectus. The
Company's reported earnings per common share for 1996, 1995, 1994 and 1993
equaled diluted earnings per share as set forth in Statement of Financial
Accounting Standards No. 128.
(f) "EBITDA" as used herein means earnings from continuing operations before
extraordinary item plus interest expense, taxes, depreciation and
amortization. EBITDA is presented because the Company believes that it is a
widely accepted indicator of cash flow and a company's ability to incur and
service indebtedness. However, EBITDA should not be considered as a measure
of operating performance or as an alternative to, or more meaningful than,
operating income, net income or cash flows from operations (as measured by
U.S. generally accepted accounting principles). EBITDA for 1993 would have
been $222.7 million excluding the special charge of $25.2 million described
in note (a) above. EBITDA for 1995 would have been $211.1 million excluding
the $27.0 million special charge described in note (a) above.
(g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was
scheduled to be shipped after 1998.
(h) For purposes of calculating the ratio of earnings to fixed charges, earnings
are determined by adding fixed charges (excluding capitalized interest) and
income taxes to earnings from continuing operations before extraordinary
item. Fixed charges consist of interest expense, capitalized interest and
that portion of rental expense deemed to be representative of the interest
factor.
(i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA
of $222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 2.0x and 2.3x, respectively.
(j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of
$222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 4.6x and 4.5x, respectively.
10
<PAGE> 15
RISK FACTORS
Prospective holders of the Exchange Notes should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following factors.
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact included in this Prospectus,
including, without limitation, the statements under "Prospectus Summary",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and located elsewhere herein regarding industry
prospects, the Company's prospects and the Company's financial position are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations (the "Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, those factors described below. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
SUBSTANTIAL LEVERAGE; SHAREHOLDERS' DEFICIT
As of December 31, 1997, Coltec's total indebtedness was $759.4 million. At
such date, Coltec had total assets of $933.0 million and a shareholders' deficit
of $359.2 million. As of December 31, 1997 after giving effect to the Offerings
and use the estimated net proceeds therefrom to reduce indebtedness under the
Amended Credit Agreement, Coltec's indebtedness would have been $623.9 million.
The degree to which Coltec is leveraged could have important consequences
to the holders of Senior Notes. Coltec's substantial indebtedness could
materially adversely limit its capacity to respond to changing business and
economic conditions. Insofar as changing business and economic conditions may
affect the financial condition and financing requirements of Coltec, they could
impose significant risks to the holders of the securities offered hereby.
Furthermore, the ability of Coltec to satisfy its obligations and to service,
repay or refinance its debt will be dependent upon the future performance of
Coltec, which will be subject to prevailing economic conditions and to
financial, business and other factors, including factors beyond the control of
Coltec, affecting the business and operations of Coltec.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Amended Credit Agreement imposes significant operating and financial
restrictions on Coltec. Such restrictions affect, and in many respects
significantly limit or prohibit, among other things, the ability of Coltec to
incur additional indebtedness, create liens, sell assets, engage in mergers and
acquisitions, make certain capital expenditures or pay dividends. These
restrictions, in combination with the highly leveraged nature of Coltec, could
limit the ability of Coltec to effect future financings and otherwise limit
future business activities, which, in each case, could have a material adverse
effect on Coltec. See "Description of Other Indebtedness".
CYCLICAL BUSINESS; GOVERNMENT CONTRACTS
The Aerospace, Industrial and other business sectors to which Coltec sells
its products are, to varying degrees, cyclical and have historically experienced
periodic downturns, which often have had a negative effect on demand for
Coltec's products. Prior downturns have resulted in negative effects on Coltec's
net sales, gross margin and net income. Although Coltec believes that, by
concentrating on products with strong aftermarket demand, it has reduced its
exposure to such business downturns, any future material weakness in demand in
any of these industries could have a material adverse effect on the business,
financial condition and results of operations of Coltec. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
Additionally, many of Coltec's competitors have substantially greater financial
resources than Coltec and may be better able to withstand the effects of such
periodic downturns.
Certain of the contracts under which Coltec is a supplier, including those
with commercial aviation manufacturers and the United States government, contain
provisions allowing for early termination, including
11
<PAGE> 16
termination due to lack of congressional appropriation or for convenience. In
addition, substantially all of Coltec's government contracts are fixed-price
contracts under which Coltec agrees to perform the work for a fixed price and,
accordingly, realizes all the benefit or detriment occasioned by decreased or
increased costs of performing the contracts. From time to time, Coltec accepts
fixed-price contracts for products that have not been previously developed. In
such cases, Coltec is subject to the risk of delays and cost overruns. See
"Business -- Contract Risks".
ASBESTOS LITIGATION
The historical business operations of Coltec have resulted in a substantial
volume of asbestos litigation, in which plaintiffs have alleged personal injury
or death as a result of exposure to asbestos fibers in a number of products
which were manufactured or distributed by two of the Company's subsidiaries.
While the Company believes that several factors, including agreed upon funding
agreements with its insurance carriers, will provide resources sufficient to
meet the vast majority of the currently anticipated costs and expenses
associated with this litigation, the large volume of current and potential
future asbestos claims, the depletion of insurance coverage of a small
non-operating subsidiary, the payment of some non-insured litigation costs and
the unavailability of insurance for claims alleging first exposure to asbestos
after July 1, 1984 may result in liabilities to the Company in the future that
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Potential Exposure to Environmental
Liabilities" below and "Business -- Legal Proceedings -- Asbestos Litigation".
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
Coltec is subject to various federal, state and local environmental laws,
ordinances and regulations, including those governing discharges of pollutants
into the air and water, the storage, handling and disposal of solid wastes,
hazardous wastes and hazardous substances and the health and safety of employees
("Environmental Laws"). Violations of Environmental Laws could result in
liability for government penalties, claims by third parties for personal injury
and property damage, costs of investigation and remediation of contamination and
the cost of natural resource damage. Agencies responsible for enforcing
Environmental Laws have authority to impose significant civil or criminal
penalties for non-compliance. Coltec believes it is currently in material
compliance with all applicable requirements of Environmental Laws, but there can
be no assurance that some future non-compliance will not result in the
imposition of significant liabilities.
Future events, such as new information concerning past releases of
hazardous substances, changes in existing Environmental Laws or their
interpretation, and more rigorous enforcement by regulatory authorities, may
give rise to additional expenditures, compliance requirements or liabilities
that could have a material adverse effect on the business, financial condition
and results of the operations of Coltec. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations -- Environmental
Matters" and "Business -- Environmental Matters".
COLLATERAL
The Senior Notes are secured, equally and ratably, with indebtedness under
the Amended Credit Agreement and related documents and liabilities in connection
with interest rate protection and other hedging agreements contemplated by the
Amended Credit Agreement, by a security interest in the Collateral pursuant to
the Amended Collateral Documents. The Amended Collateral Documents may be
amended to, among other things, secure additional extensions of credit or add
additional secured creditors without the consent of the Senior Noteholders or
the Trustee under the Indenture. See "Description of Other Indebtedness -- The
Amended Credit Agreement -- Collateral" for a description of the Collateral and
the Amended Collateral Documents.
In the event of foreclosure on the Collateral, the proceeds from the sale
of the Collateral may not be sufficient to satisfy the Company's obligations
under the Senior Notes and the Amended Credit Agreement in full. The amount to
be received upon such a sale would be dependent upon numerous factors including
the timing and the manner of the sale. In addition, the book value of the
Collateral should not be relied upon as a measure of realizable value. By its
nature, the Collateral will be illiquid and may have no readily ascertainable
market value.
12
<PAGE> 17
Accordingly, there can be no assurance that the Collateral can be sold in a
short period of time. A significant portion of the Collateral includes assets
which may only be usable as part of the existing operating businesses of the
Company. Accordingly, any such sale of the Collateral, including the real
property portion thereof, separate from the sale of certain of the Company's
operating businesses, may not be feasible or of significant value. To the extent
that third parties enjoy Permitted Liens (as defined herein) or liens otherwise
permitted under the Indenture, such third parties may have rights and remedies
with respect to the property subject to such permitted Liens that, if exercised,
could adversely affect the value or availability of the Collateral. In addition,
the ability of the holders of Senior Notes to realize upon any of the Collateral
may be subject to certain bankruptcy law limitations in the event of a
bankruptcy.
Under the Amended Collateral Documents, the control of foreclosure
proceedings, the enforcement and amendment of the Amended Collateral Documents
and the right to take other actions with respect to the Collateral belong solely
to the Collateral Agent and the lenders under the Amended Credit Agreement. The
lenders under the Amended Credit Agreement may release Collateral, in whole or
in part, from time to time, and in such event, the Collateral so released will
be automatically released as security for the Senior Notes without any action on
the part of the Trustee or the Senior Noteholders. In addition, all Collateral
under the Amended Credit Agreement and the Amended Collateral Documents will be
automatically released upon the Company's long-term indebtedness being rated
BBB- by Standard & Poor's Ratings Group and Baa3 by Moody's Investors Service,
Inc., and in such event, all Collateral securing the Senior Notes will also be
automatically released without any action on the part of the Trustee or the
Senior Noteholders. See "Description of Other Indebtedness -- The Amended Credit
Agreement -- Collateral".
CERTAIN SUBSIDIARIES NOT INCLUDED AS SUBSIDIARY GUARANTORS
The Subsidiary Guarantors include only the domestic subsidiaries of the
Company that have guaranteed the Company's obligations under the Amended Credit
Agreement. However, the consolidated financial information included in this
Offering Circular is presented on a consolidated basis, including both domestic
and foreign subsidiaries of the Company. See note 20 to the Company's
consolidated financial statements included elsewhere in this Prospectus for
Subsidiary Guarantor financial information.
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Outstanding Notes are currently owned by a small number of beneficial
owners. The Outstanding Notes have not been registered under the Securities Act
and are subject to significant restrictions on resale. The Exchange Notes will
be a new issue of securities for which there is currently no trading market.
There can be no assurance regarding the future development of a market for the
Exchange Notes, or the ability of holders of the Exchange Notes to sell their
Exchange Notes or the price at which holders may be able to sell their Exchange
Notes. If the Exchange Notes are traded after their initial issuance, they may
trade at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities and other factors, including
general economic conditions and the financial condition and performance of, and
prospects for, the Company. To the extent that Outstanding Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Outstanding Notes could be adversely affected. The
Company does not intend to apply for listing of the Exchange Notes on any
securities exchange, or for quotation of the Exchange Notes on any automated
quotation system.
Historically, the market for non-investment grade debt securities has from
time to time been subject to disruptions that have caused substantial volatility
in the prices of such securities. There can be no assurance that the market for
the Senior Notes will not be subject to similar disruptions. Any such
disruptions may have an adverse effect on the holders of the Senior Notes and
the Exchange Notes.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Outstanding Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
Outstanding Notes, a properly completed and duly executed Letter of Transmittal
or an Agent's Message (as defined herein) in lieu thereof and all other required
documents.
13
<PAGE> 18
Therefore, holders of the Outstanding Notes desiring to tender their Outstanding
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of Outstanding Notes for exchange.
Outstanding Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions on transfer thereof. See "The Exchange Offer".
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE
NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from or in transactions not subject to,
the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that (i) the Exchange Notes received by such holder will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such holder will have not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and has no
arrangement or understanding to participate in a distribution of Exchange Notes
and (iii) such holder is not an affiliate of the Company within the meaning of
Rule 405 of the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. If any holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirement of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution". However, to
comply with state securities laws, the Exchange Notes may not be offered or sold
in any state unless they have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with. The offer and sale of the Exchange Notes to "qualified
institutional buyers" (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under state
securities laws. The Company currently does not intend to register or qualify
the sale of the Exchange Notes in any state where an exemption from registration
or qualification is required and not available. See "The Exchange
Offer -- Consequences of Failure to Exchange and Requirements for Transfer for
Exchange Notes".
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<PAGE> 19
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept for
exchange Outstanding Notes which are properly tendered on or prior to the
Expiration Date and not withdrawn as permitted below. As used herein, the term
"Expiration Date" means midnight, New York City time, on , 1998;
provided, however, that if the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term "Expiration Date"
means the latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, $300.0 million aggregate principal
amount of the Outstanding Notes is outstanding. This Prospectus, together with
the Letter of Transmittal, is first being sent on or about , 1998, to
all holders of Outstanding Notes known to the Company. The Company's obligation
to accept Outstanding Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth below under "-- Certain Conditions to
the Exchange Offer".
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer remains open, and
thereby delay acceptance for exchange of any Outstanding Notes, by giving oral
or written notice of such extension in the manner described below. During any
such extension, all Outstanding Notes previously tendered will remain subject to
the Exchange Offer and may be accepted for exchange by the Company. Any
Outstanding Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.
Outstanding Notes tendered in the Exchange Offer must be in denominations
of principal amounts of $1,000 and any integral multiples thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the events specified below
under "-- Certain Conditions to the Exchange Offer". The Company will give oral
or written notice of any extension, amendment, non-acceptance or termination to
the holders of the Outstanding Notes as promptly as practicable, such notice in
the case of any extension to be issued by means of press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender to the Company of Outstanding Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Outstanding Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal or (in the case of a book-entry
transfer) an Agent's Message in lieu of such Letter of Transmittal, to the
Exchange Agent at the address set forth below under "-- Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Outstanding Notes must be received by the Exchange Agent along with the Letter
of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Outstanding Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date with the Letter of Transmittal or Agent's Message
in lieu of such Letter of Transmittal, or (iii) the holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message, transmitted by the Book-Entry Transfer Facility to and received by
the Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by, and makes the
representations and warranties contained in,
15
<PAGE> 20
the Letter of Transmittal and that the Company may enforce such Letter of
Transmittal against such participant. THE METHOD OF DELIVERY OF THE OUTSTANDING
NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NO LETTER OF TRANSMITTAL OR
OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or a firm which is otherwise an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (collectively,
"Eligible Institutions"), unless the Outstanding Notes tendered pursuant thereto
are tendered (i) by a registered holder of the Outstanding Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. If Outstanding Notes are registered in the name of a
person other than a signer of the Letter of Transmittal, the Outstanding Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by, the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder or holders of any Outstanding Notes listed therein, such
Outstanding Notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name of the registered holder or
holders appears on the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Outstanding Notes not properly tendered or to not
accept any particular Outstanding Notes the Company's acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any particular Outstanding Notes either before or
after the Expiration Date (including the right to waive the ineligibility of any
holder who seeks to tender Outstanding Notes in the Exchange Offer). The
Company's interpretation of the terms and conditions of the Exchange Offer as to
any particular Outstanding Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions therein) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the Exchange
Agent to the tendering holder of such Outstanding Notes unless otherwise
provided in the Letter of Transmittal as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "-- Certain
16
<PAGE> 21
Conditions to the Exchange Offer", to terminate the Exchange Offer and (b) to
the extent permitted by applicable law, purchase Outstanding Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.
By tendering, each holder of Outstanding Notes will represent to the
Company that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder,
and that neither the holder nor any other person has any arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes. In the case of a holder that is not a broker-dealer, each such holder, by
tendering, will also represent to the Company that such holder is not engaged
in, or intends to engage in, a distribution of the Exchange Notes. If any holder
or any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company, or is engaged in or intends to engage in or has
an arrangement or understanding with any person to participate in a distribution
of such Exchange Notes to be acquired pursuant to the Exchange Offer, such
holder or any such other person (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution". The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Outstanding
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Outstanding Notes. See "--Certain Conditions to the Exchange
Offer".
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Outstanding Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent, with
written confirmation of any oral notice to be given promptly thereafter.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Outstanding Notes surrendered in exchange therefor, or if no interest has been
paid on the Outstanding Notes, from the Issue Date. Holders of Outstanding Notes
whose Outstanding Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on such Outstanding
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer. Consequently, holders who
exchange their Outstanding Notes for Exchange Notes will receive the same
interest payment on October 15, 1998 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes) that they would have
received had they not accepted the Exchange Offer.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) certificates for such Outstanding
Notes or a timely Book-Entry Confirmation of such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility, (ii) a properly
completed and duly executed Letter of Transmittal or an Agent's Message in lieu
thereof and (iii) all other required documents. If any tendered Outstanding
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if Outstanding Notes are submitted for a greater principal
amount that the holder desired to exchange, such unaccepted or non-exchanged
Outstanding Notes will be returned without expense to the tendering holder
thereof (or, in the case of Outstanding Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry procedures described below, such non-exchanged Outstanding
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
17
<PAGE> 22
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Outstanding Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof
or an Agent's Message in lieu thereof), with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at one of the addresses set forth below, under
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Any registered holder who desires to tender its Outstanding Notes (i) whose
Outstanding Notes are not immediately available, (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal, or any other required documents to
the Exchange Agent prior to the Expiration Date, or (iii) who cannot complete
the procedure for book-entry transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days after
the Expiration Date, the certificates for all physically tendered
Outstanding Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, together with a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof or an Agent's
Message in lieu thereof), with any required signature guarantees and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) The certificates for all physically tendered outstanding Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof or an Agent's Message in lieu thereof) with any
required signature guarantees, and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three
business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to midnight, New York City time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to
midnight, New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the
Outstanding Notes to be withdrawn (the "Depositor"), (ii) include a statement
that the Depositor is withdrawing its election to have Outstanding Notes
exchanged, and identify the Outstanding Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Outstanding Notes),
and (iii) where certificates for Outstanding Notes have been transmitted,
specify the name in which such Outstanding Notes are registered, if different
from that of the Depositor. If certificates for Outstanding Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Outstanding Notes have been tendered
pursuant
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<PAGE> 23
to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Outstanding Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) for such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Outstanding Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
Exchange Notes will be issued with respect thereto unless the Outstanding Notes
so withdrawn are validly retendered. Any Outstanding Notes which have been
tendered but which are not accepted for exchange for any reason will be returned
to the holder thereof without cost to such holder (or, in the case of
Outstanding Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Outstanding Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Outstanding
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering Outstanding Notes" at any time prior to midnight,
New York City time, on the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer is not subject to any conditions, other than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the Commission. There can be no assurance that any such
condition will not occur. Holders of Outstanding Notes will have certain rights
under the Registration Rights Agreement should the Company fail to consummate
the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration Date, subject to the rights of such holders of tendered
Outstanding Notes to withdraw their tendered Outstanding Notes, or (iii) waive
such termination event with respect to the Exchange Offer and accept all
properly tendered Outstanding Notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, the Company will disclose
such change by means of a supplement to this Prospectus that will be distributed
to each registered holder of Outstanding Notes, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Outstanding Notes, if the Exchange Offer would otherwise expire
during such period.
EXCHANGE AGENT
The Trustee under the Indenture, has been appointed as Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C> <C>
By Mail or Overnight Courier By Hand
Bankers Trust Company Bankers Trust Company
4 Albany Street, 4th Floor 4 Albany Street, 4th Floor
New York, NY 10006 New York, NY 10006
Attention: Corporate Trust Services Attention: Corporate Trust Services
Confirm by Telephone
(212) 250-2500
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
19
<PAGE> 24
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated to be $100,000.
TRANSFER TAXES
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct the Company to register Exchange Notes in the name of, or request
that Outstanding Notes not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. See "Description of the
Senior Notes -- Registered Exchange Offer; Registration Rights". Based on
interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered
for resale, resold or otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes. However, the Company does not intend to
request the Commission to consider, and the Commission has not considered, the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder,
other than a broker-dealer, must acknowledge that (i) the Exchange Notes
received by such holder will be acquired in the ordinary course of its business,
(ii) at the time of the consummation of the Exchange Offer such holder will have
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes and has no arrangement or understanding to participate in a distribution
of Exchange Notes and (iii) such holder is not an affiliate of the Company
within the meaning of Rule 405 of the Securities Act or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable. If any holder is
an affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the Exchange
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirement of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Outstanding
Notes must acknowledge that such Outstanding Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of
20
<PAGE> 25
Exchange Notes received in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." In addition, to comply with state securities
laws, the Exchange Notes may not be offered or sold in any state unless they
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with. The offer and
sale of the Exchange Notes to "qualified institutional buyers" (as such term is
defined under Rule 144A of the Securities Act) is generally exempt from
registration or qualification under state securities laws. The Company currently
does not intend to register or qualify the sale of the Exchange Notes in any
state where an exemption from registration or qualification is required and not
available.
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<PAGE> 26
USE OF PROCEEDS
There will be no cash proceeds payable to the Company from the Exchange
Offer.
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes contemplated in this Prospectus,
the Company will receive Outstanding Notes in like principal amount, the form
and terms of which are the same as the form and terms of the Exchange Notes
(which they replace), except as otherwise described herein. The Outstanding
Notes surrendered in exchange for Exchange Notes will be retired and canceled
and cannot be reissued. Accordingly, the issuance of the Exchange Notes will not
result in any increase or decrease in the indebtedness of the Company.
The aggregate net proceeds to the Company from the Original Offering were
approximately $262.0 million. The net proceeds from the Original Offering were
used by the Company to reduce indebtedness under the Amended Credit Agreement.
CAPITALIZATION
The following table sets forth the consolidated capitalization of Coltec as
of December 31, 1997 and as of March 29, 1998 on a historical basis, and as
adjusted to give effect to the Offerings and the use of the estimated net
proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, as
if such transactions had occurred on December 31, 1997 and on March 29, 1998,
respectively. The table should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Prospectus and
incorporated by reference. See "Selected Consolidated Financial and Other Data".
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 29, 1998
----------------------- -----------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
--------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 14,693 $ 14,693 $ 21,075 $ 21,075
========= ========= ========= =========
Current maturities of long-term debt.............. $ 1,811 $ 1,811 $ 4,184 $ 4,184
Long-term debt (excluding current maturities):
Amended Credit Agreement........................ 697,500 262,000 808,000 372,500
Senior Notes due 2008........................... -- 300,000 -- 300,000
Other debt due 1999-2010........................ 60,078 60,078 47,854 47,854
--------- --------- --------- ---------
Total long-term debt.................... 759,389 623,889 860,038 724,538
--------- --------- --------- ---------
Company-obligated mandatorily redeemable
convertible preferred securities of Coltec
Capital Trust................................... -- 150,000 -- 150,000
--------- --------- --------- ---------
Shareholders' equity:
Preferred Stock, $.01 par value, 2,500,000
shares authorized; no shares outstanding..... -- -- -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized, 70,517,363 shares issued at March
29, 1998 and 70,501,948 shares issued at
December 31, 1997 (excluding 25,000,000
shares held by a wholly owned subsidiary).... 705 705 705 705
Capital surplus................................... 642,828 642,828 641,815 641,815
Retained deficit.................................. (912,029) (912,029) (886,808) (886,808)
Other equity...................................... (11,112) (11,112) (13,495) (13,495)
Less cost of 4,542,000 shares at March 31, 1998
and 4,666,406 shares at December 31, 1997 of
Common Stock in treasury........................ (79,553) (79,553) (77,445) (77,445)
--------- --------- --------- ---------
Total shareholders' equity.............. (359,161) (359,161) (335,228) (335,228)
--------- --------- --------- ---------
Total capitalization.................... $ 400,228 $ 414,728 $ 524,810 $ 539,310
========= ========= ========= =========
</TABLE>
22
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated financial and other
data of Coltec for the five years ended December 31, 1997 and for the three
months ended March 30, 1997 and March 29, 1998. The information should be read
in conjunction with Coltec's consolidated financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus and incorporated by reference
herein. The statement of earnings data and other financial data for 1993, 1994
and 1995 have been restated to reflect the sale of the Company's automotive
original equipment components business in 1996, which was accounted for as a
discontinued operation. The selected consolidated financial and other data, with
the exception of order backlog, at and for the years ended December 31, 1993
through 1997, were derived from the consolidated financial statements of Coltec
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated financial and other data, with the exception of order
backlog, at and for the three months ended March 30, 1997 and March 29, 1998
were derived from the unaudited consolidated financial statements of Coltec
which are incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ---------------------
---------------------------------------------------- MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales....................................... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $1,314.9 $ 309.2 $ 374.4
Cost of goods sold.............................. 703.9 648.3 744.2 811.1 898.3 211.7 260.1
-------- -------- -------- -------- -------- -------- --------
Gross profit.................................... 357.5 351.9 355.4 348.6 416.6 97.5 114.3
Selling and administrative...................... 183.8 186.7 186.4 191.0 218.8 52.6 61.0
Special charge(a)............................... 25.2 -- 27.0 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income(b)............................. 148.5 165.2 142.0 157.6 197.8 44.9 53.3
Interest expense and other, net................. 110.2 89.5 89.9 74.9 54.0 12.4 15.1
Income taxes.................................... 13.7 27.2 17.6 28.1 48.9 11.0 13.0
-------- -------- -------- -------- -------- -------- --------
Earnings from continuing operations before
extraordinary item(b)......................... 24.6 48.5 34.5 54.6 94.9 21.5 25.2
Discontinued operations(c)...................... 40.6 45.5 36.7 57.1 -- -- --
Extraordinary item(d)........................... (17.8) (1.5) (.3) (30.6) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings.................................... $ 47.4 $ 92.5 $ 70.9 $ 81.1 $ 94.9 $ 21.5 $ 25.2
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per common share:(e)
Before extraordinary item..................... $ .35 $ .70 $ .49 $ .79 $ 1.42 $ .32 $ .38
Discontinued operations....................... .59 .65 .53 .82 -- -- --
Extraordinary item............................ (.26) (.02) -- (.44) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings per share.......................... $ .68 $ 1.33 $ 1.02 $ 1.17 $ 1.42 $ .32 $ .38
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................. $ 163.1 $ 189.6 $ 208.9 $ 215.6 $ 187.9 $ 217.2 $ 228.4
Total assets.................................... 796.5 847.5 894.5 849.5 933.0 851.9 1,076.1
Total debt...................................... 1,033.6 970.1 945.8 720.3 759.4 731.3 860.0
Shareholders' equity............................ (625.5) (525.6) (453.8) (417.0) (359.2) (413.7) (335.2)
OTHER FINANCIAL DATA:
EBITDA(f)....................................... $ 197.5 $ 207.3 $ 184.1 $ 193.6 $ 236.2 $ 53.4 $ 65.7
Capital expenditures............................ 38.6 38.2 42.5 44.6 81.2 13.6 15.0
Order backlog (at end of period)(g)............. 598.6 594.2 657.1 678.3 875.6 805.9 968.2
Ratio of earnings to fixed charges(h)........... 1.3x 1.8x 1.6x 2.1x 3.5x 3.5x 3.4x
Ratio of EBITDA to interest expense(i).......... 1.8x 2.3x 2.0x 2.6x 4.4x 4.3x 4.4x
Ratio of total debt to EBITDA(j)................ 5.2x 4.7x 5.1x 3.7x 3.2x 13.7x 13.1x
</TABLE>
- ---------------
(a) In 1997, Coltec incurred a special charge of $10.0 million for the
restructuring of its Industrial segment. In 1997, the remaining $10.0 million
accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a
special charge of $27.0 million primarily to cover the costs of closing the
Walbar compressor blade facility in Canada. The charge also covered selected
workforce reductions throughout the Company. In 1993, Coltec incurred a
special charge of $25.2 million to cover the cost of consolidation and
rearrangement of certain manufacturing facilities and related workforce
reductions primarily in the Aerospace segment.
(b) Operating income for 1996 included a charge of $14.2 million related to the
bankruptcy of Fokker, a major aerospace customer of Coltec.
23
<PAGE> 28
(c) See note 2 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus.
(d) See note 3 to the consolidated financial statements of Coltec included
elsewhere in this Prospectus. Extraordinary charges relate to either early
retirement of debt or debt refinancings.
(e) Represents diluted earnings per common share. See note 5 to the consolidated
financial statements of Coltec included elsewhere in this Prospectus. The
Company's reported earnings per common share for 1996, 1995, 1994 and 1993
equaled diluted earnings per share as set forth in Statement of Financial
Accounting Standards No. 128.
(f) "EBITDA" as used herein means earnings from continuing operations before
extraordinary item plus interest expense, taxes, depreciation and
amortization. EBITDA is presented because the Company believes that it is a
widely accepted indicator of cash flow and a company's ability to incur and
service indebtedness. However, EBITDA should not be considered as a measure
of operating performance or as an alternative to, or more meaningful than,
operating income, net income or cash flows from operations (as measured by
U.S. generally accepted accounting principles). EBITDA for 1993 would have
been $222.7 million excluding the special charge of $25.2 million described
in note (a) above. EBITDA for 1995 would have been $211.1 million excluding
the $27.0 million special charge described in note (a) above.
(g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was
scheduled to be shipped after 1998.
(h) For purposes of calculating the ratio of earnings to fixed charges, earnings
are determined by adding fixed charges (excluding capitalized interest) and
income taxes to earnings from continuing operations before extraordinary
item. Fixed charges consist of interest expense, capitalized interest and
that portion of rental expense deemed to be representative of the interest
factor.
(i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA
of $222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 2.0x and 2.3x, respectively.
(j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of
$222.7 million and $211.1 million, respectively, as described in note (f)
above, would have been 4.6x and 4.5x, respectively.
24
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In conjunction with the divestitures of the Company's automotive OEM
components operations during 1996 (see note 2 to the Company's consolidated
financial statements included elsewhere in this Prospectus), the Company was
realigned into two operating segments. The following are the major products in
each industry segment:
Aerospace: Menasco landing gear and flight control actuation systems;
Walbar blades, vanes and discs for jet and other gas turbine engines;
Chandler Evans fuel pumps and control systems; Delavan gas turbine
products; Lewis Engineering cockpit instrumentation and sensors; AMI flight
attendant seats.
Industrial: Garlock seals, gaskets, packings, bearings, valves and
tape; Quincy air compressors; Delavan spray nozzles; France compressor
products; FM Engine large diesel and dual-fuel engines; Haber and Sterling
dies; Ortman Fluid Power cylinders.
In January 1998, Coltec acquired Marine & Petroleum Mfg., Inc.,'s ("M&P")
manufacturing facilities based in Texas for approximately $17.0 million and
Tex-o-Lon and Repro-Lon for approximately $25.0 million. The M&P facilities
produce flexible graphite and PTFE fluid sealing products used in the
petrochemical business. Tex-o-Lon manufactures, machines and distributes PTFE
products, primarily for the semiconductor industry. Repro-Lon reprocesses PTFE
compounds for the chemical and semiconductor industries. These acquisitions were
combined into one division, Coltec Specialty Products. See note 19 to the
Company's consolidated financial statements included elsewhere in this
Prospectus.
In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint
Etienne and Montbrison, France, produces seals, gaskets and packings, metal
o-rings and spiral-wound gaskets used in the chemical, power and refining
industries. Helicoflex, based in Columbia, South Carolina, produces metal
o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products
are specifically designed for equipment and processes exposed to high
temperatures, cryogenic temperatures, high pressures, vacuum conditions,
radioactive environments or corrosive applications. See note 19 to the Company's
consolidated financial statements included elsewhere in this Prospectus.
On May 15, 1998, the Company completed the previously-announced sale of the
capital stock of its Holley Performance Products subsidiary to Kohlberg & Co.,
L.L.C., a private merchant banking firm located in Mount Kisco, New York, for
$100 million in cash. The proceeds from this acquisition were applied toward
reducing debt. For 1997, Holley had gross revenues and operating income of
approximately $99.0 million and $8.0 million, respectively.
The financial review that follows is based on continuing operations,
excluding the impact of the 1996 discontinued operations discussed in note 2 to
the consolidated financial statements of Coltec included elsewhere in this
Prospectus, and Coltec's two operating segments, Aerospace and Industrial. The
1995 information has been restated to reflect the discontinued operations and
Coltec's two realigned operating segments. Earnings per share information
represents diluted earnings per common share (see note 5 to the Company's
consolidated financial statements included elsewhere in this Prospectus). The
following discussion of operating results has been structured to provide an
analysis from the perspective of Coltec as a whole, followed by a more detailed
analysis for each operating segment.
25
<PAGE> 30
INDUSTRY SEGMENT INFORMATION
The following table shows financial information by industry segment for the
five years ended December 31, 1997 and the three months ended March 30, 1997 and
March 29, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ----------------------
--------------------------------------------------------- MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Aerospace............. $ 356.9 $ 339.2 $ 378.3 $ 433.5 $ 558.3 $ 119.1 $ 166.2
Industrial............ 705.4 662.7 722.6 726.9 757.6 190.1 209.2
Intersegment
elimination(a)...... (.9) (1.7) (1.3) (.7) (1.0) -- (1.0)
-------- -------- -------- -------- --------- --------- --------
Total............... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $ 1,314.9 $ 309.2 $ 374.4
======== ======== ======== ======== ========= ========= ========
Operating income:
Aerospace............. $ 44.5(c) $ 51.0 $ 32.4(d) $ 51.6(e) $ 87.7(f) $ 18.3 26.1
Industrial............ 135.6(c) 145.4 146.6 147.1 149.8(f) 36.3 37.3
-------- -------- -------- -------- --------- --------- --------
Total segments........ 180.1 196.4 179.0 198.7 237.5 54.6 63.4
Corporate
unallocated(b)...... (31.6) (31.2) (37.0)(d) (41.1) (39.7) (9.7) (10.1)
-------- -------- -------- -------- --------- --------- --------
Total............... $ 148.5(c) $ 165.2 $ 142.0(d) $ 157.6(e) $ 197.8(f) $ 44.9 $ 53.3
======== ======== ======== ======== ========= ========= ========
Operating margin:
Aerospace............. 12.5% 15.0% 8.6% 11.9% 15.7% 15.4% 15.7%
Industrial............ 19.2 21.9 20.3 20.2 19.8 19.1 17.9
Total............... 14.0% 16.5% 12.9% 13.6% 15.0% 14.5% 14.2%
Return on total
assets:(g)
Aerospace............. 12.7% 14.3% 8.3% 12.4% 20.1% 17.2% 19.0%
Industrial............ 49.8 53.3 49.1 51.2 48.2 46.7 32.6
Total............... 18.6% 19.5% 15.9% 18.5% 21.2% 21.1% 19.8%
Backlog:(h)
Aerospace............. $ 475.1 $ 445.7 $ 538.0 $ 560.7 $ 734.3 $ 674.2 $ 804.9
Industrial............ 124.0 148.5 119.5 117.8 142.0 132.6 163.3
Intersegment
elimination......... (.5) -- (.4) (.2) (.7) (.9) --
-------- -------- -------- -------- --------- --------- --------
Total............... $ 598.6 $ 594.2 $ 657.1 $ 678.3 $ 875.6 $ 805.9 $ 968.2
======== ======== ======== ======== ========= ========= ========
</TABLE>
- ---------------
(a) Reflects elimination of intercompany sales between divisions in different
segments.
(b) Represents corporate selling and administrative expense, including other
income and expense, that is not allocable to individual industry segments.
(c) Operating income for 1993 included a special charge of $25.2 million as
follows: $17.2 million in the Aerospace Segment and $8.0 million in the
Industrial Segment. Excluding the special charge, operating income,
operating margin and return on total assets for 1993 would have been $61.7
million, 17.3% and 17.6%, respectively, for Aerospace, and $143.6 million,
20.4% and 52.7%, respectively, for Industrial.
(d) Operating income for 1995 included a special charge of $27.0 million as
follows: $23.4 million in the Aerospace Segment and $3.6 million in
Corporate Unallocated. Excluding the special charge, operating income,
operating margin and return on total assets for 1995 would have been $55.8
million, 14.7% and 13.4%, respectively, for Aerospace.
(e) Operating income for 1996 included a charge of $14.2 million related to the
bankruptcy of a major aerospace customer (Fokker). Excluding this charge,
operating income, operating margin and return on total assets for 1996 would
have been $65.8 million, 15.2% and 18.1%, respectively, for Aerospace and
$171.8 million, 15.9% and 22.0%, respectively, for the Company.
(f) Operating income for 1997 included a special charge of $10.0 million for
the restructuring of its Industrial Segment. In 1997 the remaining $10.0
million accrual for the 1995 special charge was reversed.
(g) Return on total assets is calculated for each segment by dividing annualized
segment operating income by segment total assets at end of applicable
period, and for total Company by dividing total Company annualized operating
income by total assets at end of applicable period.
(h) Of the $875.6 million backlog at December 31, 1997, $267.2 million was
scheduled to be shipped after 1998.
26
<PAGE> 31
RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
COMPANY REVIEW
Net sales for first quarter 1998 increased 21.1% to $374.4 million from
$309.2 million for first quarter 1997 primarily driven by increases in the
Aerospace Segment. Gross profit increased to $114.3 million for first quarter
1998 from $97.5 million in first quarter 1997. The gross profit margin decreased
slightly to 30.5% in first quarter 1998 from 31.5% in first quarter 1997 as a
result of slightly lower gross profit margins in the Industrial Segment. Selling
and administrative expenses totaled $61.0 million, or 16.3% of sales, in first
quarter 1998 compared to $52.6 million, or 17.0% of sales in first quarter 1997.
Operating income increased to $53.3 million in first quarter 1998 from
$44.9 million in first quarter 1997. Operating margin for first quarter 1998 was
14.2% compared to 14.5% for first quarter 1997. The margin decrease related to a
slight decrease in operating margin in the Industrial Segment.
Interest expense increased to $15.1 million in first quarter 1998 from
$12.4 million for first quarter 1997. This increase was a result of increased
outstanding amounts under the credit facility due to acquisitions discussed
below under Liquidity and Capital Resources.
The effective tax rate was 34% in the first quarter of 1998 and 1997.
As a result of the foregoing, net earnings were $25.2 million in first
quarter 1998, or $0.38 per share, compared to net earnings of $21.5 million, or
$0.32 per share, in first quarter 1997.
SEGMENT REVIEW -- AEROSPACE
Sales in first quarter 1998 for the Aerospace Segment totaled $166.2
million increasing 39.5% from $119.1 million in first quarter 1997. At Menasco,
sales increased significantly due to rising commercial aircraft production as
well as improved military sales. Menasco deliveries of main landing gear systems
for the Boeing 737 increased from 33 shipsets in first quarter 1997 to 69
shipsets in first quarter 1998, while military sales benefited primarily from
higher shipset deliveries for the F-15 and F-16 programs. At Walbar,
significantly higher sales were primarily due to increased customer demand and
expanding product lines. Aerospace Segment sales were also favorably impacted by
the acquisition of AMI Seating Systems in July 1997.
Operating income for the Aerospace Segment increased to $26.1 million in
first quarter 1998 from $18.3 million in first quarter 1997. Operating margin
for first quarter 1998 was 15.7% compared to 15.4% for first quarter 1997. At
Menasco's Aerospace Division, operating margin was impacted by a favorable mix
of landing gear systems for certain commercial airline programs as well as
improved manufacturing efficiencies due to higher production. Walbar also
yielded improved manufacturing efficiencies as a result of its higher production
levels. The increased margin was also driven by higher sales volumes and
improved margins for the Segment's other businesses.
SEGMENT REVIEW -- INDUSTRIAL
Industrial sales increased to $209.1 million in first quarter 1998 from
$190.1 million in first quarter 1997. The Stemco and Quincy Compressor Divisions
experienced solid sales volume increases. Sales for Garlock Sealing Technologies
increased primarily due to the acquisition of the sheet rubber and conveyor belt
business of Dana Corporation's Boston Weatherhead division. Holley sales
decreased due to curtailed orders by two major customers. Industrial sales
increased as a result of first quarter 1998 Industrial Segment acquisitions,
Tex-o-Lon, and Repro-Lon and the Sealing Division of Group Carbone Lorraine.
Operating income for the Industrial Segment increased slightly at $37.3
million in first quarter 1998 compared to $36.3 million in first quarter 1997.
Operating income increased for Garlock Sealing Technologies and Quincy
Compressor Divisions due to higher sales volumes. Operating results at Holley
were lower due to decreased sales volumes. Excluding Holley, operating income in
the Industrial Segment increased 6% on a 14% sales increase. On May 15, 1998 the
Company completed its previously-announced sale of Holley for $100 million. See
"-- Overview".
27
<PAGE> 32
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $10.1 million of operating cash flows in first
quarter 1998 compared with $12.7 million for first quarter 1997. The lower
operating cash flows in 1998 were primarily due to negative cash flow generated
by working capital requirements primarily from the increase in accounts
receivable. The change in assets and liabilities generated negative cash flow of
$28.8 million in first quarter 1998 compared to negative cash flow of $1.7
million in first quarter 1997. This negative cash flow impact was offset by
increased net earnings and decreased payments related to liabilities of
discontinued operations and asbestos claims.
The current ratio of current assets to current liabilities at March 29,
1998 was 1.91, increasing from 1.78 at December 31, 1997. Cash and cash
equivalents increased to $21.1 million at March 29, 1998 from $14.7 million at
December 31, 1997.
In the first quarter of 1998 the Company invested $15.0 million in capital
expenditures compared to $13.6 million during the same prior year period. Debt
increased by $100.6 million at March 29, 1998 compared to December 31, 1997
through additional borrowings under the Company's revolving credit facility
primarily for first quarter 1998 acquisitions.
In January 1998, the Company acquired certain M&P manufacturing facilities
based in Texas for approximately $17.0 million. Combined annual sales for these
facilities are expected to approximate $18.0 million. The Company also acquired
Tex-o-Lon and Repro-Lon for approximately $25.0 million. These two Texas
businesses have combined annual sales of $15.0 million. The acquisitions were
accounted for as purchases; accordingly, the purchase prices, which were
financed through available cash resources, were allocated to the acquired assets
based upon their fair markets values. See "-- Overview".
In February 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45.6 million. Sales for this division in 1998 are expected
to approximate $38.0 million. This acquisition was accounted for as a purchase
and the purchase price, also financed through available cash resources, was
allocated to the acquired assets based upon their fair market values. See
"-- Overview".
RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996
COMPANY REVIEW
Net sales for 1997 increased 12.9% to $1.31 billion from $1.16 billion in
1996 primarily driven by increases in the Aerospace Segment. Gross profit
increased to $416.6 million in 1997 from $348.6 million in 1996. The gross
profit margin increase in 1997 to 31.7% from 30.1% in 1996 primarily resulted
from the 1996 bankruptcy of a major aerospace customer (Fokker). Selling and
administrative expenses totaled $218.8 million, or 16.6%, of sales in 1997
compared to $191.0 million, or 16.5%, of sales (15.9% excluding the Fokker
impact) in 1996. The increase resulted from costs associated with expanding
Coltec's businesses, both domestically and internationally.
Operating income amounted to $197.8 million in 1997 compared to $157.6
million for 1996. The 1996 amount includes the effect of the $14.2 million
charge related to the bankruptcy of Fokker. Operating margin for 1997 was 15.0%
and was 13.6% (14.8% excluding the effect of the charge related to Fokker) for
1996.
Interest expense decreased 27.8% from $74.9 million in 1996 to $54.0
million in 1997, a result of lower interest rates primarily from refinancing
high-cost, fixed-rate debt with lower-cost, variable-rate bank debt, and a full
year impact of applying a substantial portion of the proceeds from the 1996
second quarter sale of Coltec's automotive original equipment ("OE") components
operations to debt reduction.
The effective tax rate was 34.0% in 1997 and 1996.
The 1996 results of discontinued operations reflect the aforementioned 1996
second quarter sale of the automotive OE components operations as well as the
1996 fourth quarter sale of Farnam Sealing Systems. Note 2 to the Company's
consolidated financial statements describes these transactions.
The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In
January and December 1996, Coltec redeemed $605.8 million of such high-cost
debt.
28
<PAGE> 33
Net earnings and earnings from continuing operations were $94.9 million, or
$1.42 per share, in 1997 while 1996 net earnings amounted to $81.1 million, or
$1.17 per share, with earnings from continuing operations for 1996 of $54.6
million, or $0.79 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share. The reduction in interest expense increased earnings by
$0.20 per share in 1997.
SEGMENT REVIEW -- AEROSPACE
Sales in 1997 for the Aerospace Segment aggregated $558.3 million, a 28.8%
increase over 1996 sales of $433.5 million. At Menasco, sales increased
significantly due to rising commercial aircraft production as well as improved
military sales. Menasco deliveries of main landing gear systems for the Boeing
737 increased to 196 shipsets in 1997 from 72 shipsets in 1996, while military
sales benefited primarily from higher shipset deliveries for the F-15 and F-16
programs (151 shipsets in 1997 versus 83 shipsets in 1996). At Chandler Evans,
higher sales were primarily due to increased sales of spare parts while original
equipment sales also improved. Aerospace Segment sales were favorably impacted
by the acquisition of AMI Industries Inc. ("AMI") in July 1997 (see note 2 to
the Company's consolidated financial statements included elsewhere in this
Prospectus). Sales in 1997 for the other aerospace businesses increased due to
increased sales volumes resulting from the continued strengthening of the
commercial aircraft market and regional airlines.
Operating income for the Aerospace Segment increased 33.3% to $87.7 million
in 1997 from $65.8 million in 1996, excluding the 1996 charge for the Fokker
bankruptcy. The Segment's operating margin for 1997 was 15.7% versus 15.2% in
1996 excluding the Fokker bankruptcy charge. At the Menasco Aerospace division,
operating margin was impacted by improved manufacturing efficiencies due to
higher production. Chandler Evans realized higher margins due to higher
after-market sales and selling price increases for certain products. The
increase was also driven by higher sales volumes and improved margins for the
other engine components businesses.
SEGMENT REVIEW -- INDUSTRIAL
Industrial Segment sales increased to $757.6 million in 1997 from $726.9
million in 1996. During 1997, Quincy Compressor and Fairbanks Morse Engine (FM
Engine) divisions had significant sales volume increases. The FM Engine increase
was due to increased orders and the recovery from a ten-week strike in 1996.
Garlock Sealing Technologies (Garlock) also experienced sales increases in part
as a result of Coltec's acquisition of the sheet rubber and conveyor belt
business from Dana Corporation's Boston Weatherhead division (see note 2 to the
Company's consolidated financial statements included elsewhere in this
Prospectus). The above increases were partially offset by lower sales volumes at
Holley Performance Products (Holley).
Operating income for the Industrial Segment was $149.8 million in 1997
compared to $147.1 million in 1996. The Segment's operating margin for 1997 was
19.8% compared to 20.2% in 1996. Operating income increased for Quincy
Compressor and FM Engine due to the higher sales volumes as mentioned above
while Garlock was impacted by increased costs related to international
initiatives. Holley's operating income was lower as a result of decreased sales
volumes.
RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995
COMPANY REVIEW
Net sales for 1996 increased 5.5% to $1.16 billion from $1.10 billion in
1995 primarily due to increases in the Aerospace Segment. Gross profit decreased
to $348.6 million in 1996 from $355.4 million in 1995. The gross profit decline
in 1996 to 30.1% from 32.3% in 1995 stemmed from the impact of the bankruptcy of
a major aerospace customer (Fokker), increased spending related to asbestos (see
note 16 to the Company's consolidated financial statements included elsewhere in
this Prospectus) and higher other manufacturing costs. Selling and
administrative expenses totaled $191.0 million, or 16.5% of sales (15.9%
excluding the Fokker impact), in 1996 compared to $186.4 million, or 17.0% of
sales, in 1995.
Operating income amounted to $157.6 million in 1996 compared to $142.0
million for 1995. These amounts include the effect of the $14.2 million charge
in 1996 related to the bankruptcy of Fokker and the 1995 special
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<PAGE> 34
charge of $27.0 million. Operating margin for 1996 was 13.6% (14.8% excluding
the effect of the charge related to Fokker) and 1995 was 12.9% (15.4% excluding
the special charge). The operating margin decrease to 14.8% from 15.4% related
to the same reasons as those explaining the decrease in overall gross profit
margin (excluding Fokker).
Interest expense decreased 16.7% from $89.9 million in 1995 to $74.9
million in 1996, a direct result of applying a substantial portion of the
proceeds from the second quarter sale of the Company's automotive OE components
operations to debt reduction. The Company also benefited from the January 1996
redemption of $46.4 million of 11 1/4% debentures which was funded with
lower-cost, variable-rate bank debt.
The effective tax rate was 34.0% in 1996 and 33.8% in 1995.
The results of discontinued operations reflect the aforementioned second
quarter sale of the automotive OE components operations as well as the fourth
quarter sale of Farnam Sealing Systems. Note 2 to the Company's consolidated
financial statements included elsewhere in this Prospectus describes these
transactions.
The 1996 extraordinary charge of $30.6 million relates to the refinancing
of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In
January and December 1996, the Company redeemed $605.8 million of such high-cost
debt.
As a result of the foregoing, net earnings were $81.1 million, or $1.17 per
share, in 1996 while 1995 net earnings amounted to $70.9 million, or $1.02 per
share. Earnings from continuing operations in 1996 were $54.6 million, or $0.79
per share, compared to 1995 earnings from continuing operations of $34.5
million, or $0.49 per share. The 1996 charge related to Fokker impacted earnings
by $0.13 per share while the 1995 special charge affected earnings by $0.25 per
share. The aforementioned reduction in interest expense increased earnings by
$0.14 per share in 1996.
SEGMENT REVIEW -- AEROSPACE
Sales in 1996 for the Aerospace Segment aggregated $433.5 million, a 14.6%
increase over 1995 sales of $378.3 million. At Menasco, deliveries doubled in
1996 (41 versus 20) for shipsets of landing gear systems for the Boeing 777
while shipset deliveries for the McDonnell Douglas MD-80 increased more than
50%. These increases more than offset the lost business for the F-70 and F-100
programs due to the bankruptcy of Fokker. Sales for Walbar increased
significantly due to a change in the billing practices for consigned inventory
at its Arizona facility although profitability levels were not affected. Sales
in 1996 for the other aerospace businesses increased due to higher sales volumes
resulting from the continued strength of the commercial and regional airline
markets, as well as higher selling prices for certain products and new product
sales.
Operating income for the Aerospace Segment increased 18.0% to $65.8 million
in 1996 from $55.8 million in 1995, excluding the 1996 charge for the Fokker
bankruptcy and the 1995 special charge. Excluding such charges, the Segment's
operating margin for 1996 was 15.2% versus 14.7% in 1995. Contributing to this
increase were the significant improvement in 1996 operating results of Walbar's
Canadian operations due to the closing of the compressor blade facility, as well
as higher margins which were achieved at its turbine blade business. The
increase was also driven by higher sales volumes and improved margins for the
other engine components businesses. At Menasco, operating results were flat
compared to 1995 with the improvement from the Boeing 777 and MD-80 programs
offsetting the loss of the Fokker business. Menasco was also impacted by a less
favorable mix of landing gear systems for certain commercial airline programs.
SEGMENT REVIEW -- INDUSTRIAL
Industrial Segment sales increased slightly to $726.9 million in 1996 from
$722.6 million in 1995. During 1996, Garlock realized the full year benefit of
its December 1995 acquisition of certain assets of Furon Company's metallic
gasket business. Garlock's sales were also favorably impacted by continued
volume increases for KLOZURE oil seals, cut gaskets and GYLON gasketing
products. Moderate sales increases were registered by the Holley and France
Compressor Products (France Compressor) divisions. FM Engine sales were
unfavorably affected by lower shipments of commercial, government and Alco
engines due to the effects of a ten week strike. The Stemco division also
experienced a downturn in sales due to lower trailer production levels.
30
<PAGE> 35
Operating income for the Industrial Segment was essentially unchanged at
$147.1 million in 1996 compared to $146.6 million in 1995. The Segment's
operating margin for 1996 was 20.2% compared to 20.3% in 1995. Operating income
increased for Garlock, Holley and France Compressor primarily due to higher
sales volumes. The negative impact of the strike at FM Engine was offset by the
gain on the sale of Stemco's truck exhaust business (see note 2 to the Company's
consolidated financial statements included elsewhere in this Prospectus).
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The Company generated cash from operations of $61.4 million in 1997
compared to $49.5 million in 1996. The increase in operating cash flows stemmed
from the increase in net earnings. The increase in inventory in response to the
ramp-up for certain aircraft was offset by the increase in accounts payable.
Working capital at December 31, 1997 of $187.9 million was $27.7 million lower
than year-end 1996 as a result of the sale of $82.5 million of trade accounts
receivable (see note 6 to the Company's consolidated financial statements
included elsewhere in this Prospectus) partially offset by a $12.5 million
increase of accounts receivable prior to sale and a $52.5 million increase of
inventories. The 1997 ratio of current assets to current liabilities was 1.78
compared to 1.95 in 1996. Cash and cash equivalents decreased to $14.7 million
in 1997 from $15.0 million in 1996.
Net cash used in investing activities in 1997 included $81.2 million of
capital expenditures and $60.7 million for business acquisitions (see note 2 to
the Company's consolidated financial statements included elsewhere in this
Prospectus). Net cash provided by investing activities of $284.6 million in 1996
consisted of proceeds from divestitures amounting to $329.1 million (see note 2
to the Company's consolidated financial statements included elsewhere in this
Prospectus) with capital expenditures totaling $44.6 million in 1996.
Financing activities in 1997 generated $80.2 million primarily from the
$82.5 million proceeds from sale of accounts receivable (see note 6 to the
Company's consolidated financial statements included elsewhere in this
Prospectus). The purchase of $42.7 million of treasury stock was offset by a
$39.5 million net increase in the Company's revolving facility. Financing
activities in 1996 used cash of $323.0 million. A substantial portion of the
proceeds from the 1996 second quarter sale of the Company's automotive OE
components operations was applied to debt reduction. During 1996, Coltec
refinanced $617.0 million of high-cost, fixed-rate debt with lower-cost,
variable-rate bank debt. Coltec also purchased treasury stock with a cost of
$46.4 million in 1996.
CAPITAL EXPENDITURES
Capital expenditures increased to $81.2 million in 1997 from $44.6 million
in 1996 and $42.5 million in 1995, as Coltec continued to invest in capital
improvements to increase efficiency, reduce costs, pursue new opportunities,
expand production capacity and improve facilities. The level of capital
expenditures has and will vary from year to year, affected by the timing of
capital spending for production equipment for new products, periodic plant and
facility expansion, and cost reduction and labor efficiency programs. Capital
expenditures during 1997 included amounts for the construction of and equipment
purchases for significant production expansions at Menasco's original equipment
facilities. Coltec estimates capital expenditures for 1998 to approximate $60.0
million, including amounts for equipment purchases related to capacity
expansions and upgrades.
ENVIRONMENTAL MATTERS
Coltec's policy is to accrue environmental remediation costs when it is
both probable that a liability was incurred and the amount can be reasonably
estimated. Coltec currently estimates its future non-capital expenditures
related to environmental matters to range between $27.0 million and $50.0
million. In connection with these environmental expenditures, Coltec had accrued
$31.7 million at December 31, 1997 representing management's best estimate of
probable non-capital expenditures. These non-capital expenditures are estimated
to be incurred over the next 10 to 20 years. In addition, capital expenditures
aggregating $5.0 million may be required during the next two years related to
environmental matters. Although Coltec is pursuing insurance recovery in
connection with certain of these matters, no receivable has been recorded with
respect to any potential recovery of costs in connection with any environmental
matter. During 1997, costs associated with environmental
31
<PAGE> 36
remediation and ongoing assessment were not significant. See "Risk
Factors -- Potential Exposure to Environmental Liabilities" and
"Business -- Environmental Matters".
ASBESTOS LITIGATION
The Company and certain of its subsidiaries are defendants in various
lawsuits involving asbestos-containing products. See "Risk Factors -- Potential
Exposure to Environmental Liabilities", "Business -- Legal
Proceedings -- Asbestos Litigation" and note 16 to the Company's consolidated
financial statements included elsewhere in this Prospectus.
OTHER COMMITMENTS
Liabilities of discontinued operations at December 31, 1997 of $159.9
million relate to contingent contractual obligations, reserves for
postretirement benefits and other future estimated costs for various
discontinued operations. The Company expects future cash payments will extend at
least over the next five to ten years.
As is the case with most other companies, the Company recognizes the need
to ensure its operations will not be adversely impacted by the Year 2000 date
transition and is faced with the task of addressing related issues. The Company
is evaluating whether the effect of the Year 2000 transition issues resulting
from relationships with customers, suppliers and other constituents will have an
impact on the Company's results of operations or financial condition. At
December 31, 1997, the Company estimates that expenditures over the next two
years for the cost of modifying its existing software for the Year 2000 date
transition will have an immaterial impact on consolidated operating results.
FINANCIAL RESOURCES
At December 31, 1997, total debt was $759.4 million compared with $720.3
million at year-end 1996. In December 1996, the Company amended the Amended
Credit Agreement increasing the total commitment to $850.0 million from $465.0
million and extending the maturity date to December 15, 2001. The additional
commitment was used to redeem substantially all of the Company's outstanding
high-cost, fixed-rate debt. The Amended Credit Agreement also provides for a
maximum issuance of $125.0 million for letters of credit and reductions in the
total commitment of $75.0 million and $100 million at December 15, 1999 and
2000, respectively. In December 1997, the Company amended the Amended Credit
Agreement to establish an $80.0 million sublimit for Canadian borrowings under
the existing facility. At December 31, 1997, $697.5 million of borrowings and
$40.1 million of letters of credit were outstanding under the credit facility,
leaving availability of $112.4 million. In February 1998, the Company amended
the Amended Credit Agreement to increase the commitment thereunder from $850
million to $900 million. In connection with the Offerings, the Amended Credit
Agreement was further amended, among other things, to permit the TIDES Offering
and the Original Offering, to provide that the Senior Notes would be secured
equally and ratably with the lenders under the Amended Credit Agreement and to
provide that the total commitment thereunder would be reduced by two-thirds of
the gross proceeds to the Company from the Offerings in lieu of the $75.0
million and $100.0 million reductions described above. On a pro forma basis
after giving effect to such amendment and the completion of the Offerings
(assuming gross proceeds therefrom of $450 million), as of December 31, 1997,
the Company would have had $262.0 million of borrowings and $40.1 million of
letters of credit outstanding and $297.9 million available for borrowing under
the Amended Credit Agreement. The Company believes that internally generated
funds and borrowings available under the Amended Credit Agreement will be
sufficient to meet its foreseeable working capital, capital expenditure and debt
service requirements.
During 1997, Coltec entered into interest rate swaps to reduce (hedge) the
impact of interest rate changes for variable rate borrowings under its credit
facility. The agreements include an aggregate notional amount of $405.0 million,
fixed interest rates ranging from 5.78% to 6.40% and maturity dates ranging from
April 1998 to October 2002.
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<PAGE> 37
BUSINESS
Coltec and its consolidated subsidiaries manufacture and sell a diversified
range of highly engineered aerospace and industrial products primarily in the
United States, Canada and Europe. Coltec's operations are conducted through its
two principal segments -- Aerospace and Industrial. Through its Aerospace
segment, which in 1997 accounted for approximately 42% of total Company sales
and approximately 37% of total Company operating profit, Coltec is a leading
manufacturer of landing gear systems, engine fuel controls, flight attendant and
cockpit seats, turbine blades, fuel injectors, nozzles and related components
for commercial and military aircraft. Through its Industrial segment, which in
1997 accounted for approximately 58% of total Company sales and approximately
63% of total Company operating profit, Coltec is a leading manufacturer of
industrial seals, gaskets, packing products, self-lubricating bearings and oil
seals and hubodometers for trucks and trailers and is a producer of
technologically advanced spray nozzles for agricultural, home heating and
industrial applications. Coltec also produces high-horsepower diesel engines for
naval ships and diesel, gas and dual-fuel engines for electric power plants and
produces air compressors and tooling for industrial applications.
The Company derived approximately 50% of sales in 1997 from its
aftermarket, or parts and services, business. Aftermarket sales tend to generate
significantly higher margins and tend to be less affected by general economic
cycles than the Company's sales of products to OEMs. In addition, management
believes the Company is benefiting from several other industry trends which will
help the Company achieve its growth and operating goals. These trends include
strong growth in world airline fleets, preference by OEMs to source complex
integrated systems rather than component parts, an increased preference to
consolidate purchasing of consumable products from a single full line supplier
and customer demand for integrated sales and service providers.
In 1997, Coltec had sales and EBITDA of $1,314.9 million and $236.2
million, an increase of 13.4% and 22.0%, respectively, from 1996. Year end 1997
backlog increased 29.1% to $875.6 million from $678.3 million at year end 1996.
Coltec's common stock is listed on the NYSE, and based on the closing price of
$23 1/2 per share on May 15, 1998, the Company had a total equity market
capitalization of approximately $1,553.4 million.
BUSINESS STRATEGY
The Company's strategy is to develop and maintain market leading positions
and attractive margins for its products through technological innovation, cost
efficiencies, product differentiation and superior quality and service. The
Company emphasizes targeted development of highly engineered, value-added
products designed to meet specific customer requirements. This emphasis enables
the Company to maintain close, interactive relationships with major aircraft
manufacturers as well as the Company's principal industrial customers and to
develop new products in response to customer needs. Coltec views its superior
customer responsiveness as one of its key competitive strengths. Successful
introduction of new products, cost reductions, productivity improvements and
selected divestitures have helped the Company maintain operating margins
averaging more than 12.5% over the last five years.
Through "Coltec 2000", the Company's three-year growth and operating plan,
the Company has set specific growth and operating targets focused on achieving
annual revenues of $2 billion by the year 2000 while maintaining the quality of
earnings. The plan calls for substantial growth internally, complemented by
strategic acquisitions which extend product offerings of the Company's existing
businesses and leverage the Company's existing distribution network. The key
elements of the plan are as follows:
- Focus on Aftermarket -- For the year ended December 31, 1997,
approximately 50% of the Company's sales were derived from the
aftermarket. The Company's products sold in the aftermarket include
industrial seals, hub systems and a variety of aftermarket parts used in
the maintenance of engines, compressors, pumps and gas turbines. A broad
and fragmented buyer base coupled with the critical nature of replacement
parts generates sales with generally higher margins than sales to
original equipment manufacturers. In addition, because the products are
consumable in nature and are replaced over time, the aftermarket provides
a stable source of income.
- Develop New Products -- The Company believes that responsiveness to
customer demands is a critical success factor in both its Aerospace and
Industrial markets. As a result, the Company has undertaken a number of
initiatives to reduce the time and cost of bringing new products to
market and has established
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<PAGE> 38
a long term objective of generating 50% of sales from products introduced
within the prior five years. Recent new product and application
introductions have included (i) landing gear systems for the Boeing 777,
(ii)Power$ync II computerized controls for compressors, (iii)
QuickSet(TM) 9001 packing systems and Tandem Seal(TM) industrial sealing
products, (iv) the Raindrop Ultra agricultural spray nozzle, (v) new
versions of FADEC electronic fuel controls for aircraft, (vi) fuel
injectors for the Rolls-Royce RB211 which allowed the Company to enter
the large jet engine market and (vii) the Company's Chandler Evans
Control Systems Division's agreement to develop and utilize its advanced
Variable Displacement Vane Pump technology in aircraft engine
applications.
- Focus on Globalization -- For the year ended December 31, 1997,
approximately 10% of the Company's revenues were generated from outside
of the United States and Canada. As part of its Coltec 2000 strategy, the
Company seeks to grow its international operations, through a mix of
internal growth and acquisitions. Given the global nature of many of the
markets in which the Company competes, management believes that an
increased global presence will lead to substantial operating
efficiencies, as fixed development and operating costs can be amortized
over a greater sales base. In terms of internal growth, the Company will
emphasize the development and expansion of its international customer
base, through the sale of products such as the fuel injectors to
Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has
established sales and distribution capabilities in Asian and South
American countries and will pursue international growth through
complementary acquisitions such as its recent acquisition of Groupe
Carbone Lorraine's sealing products business.
- Total Systems Sourcing -- Management believes that many of the Company's
largest customers, including Boeing, are placing increased emphasis on
suppliers which are capable of providing integrated systems rather than
component parts. The Company believes that its design and engineering
competencies and cellular manufacturing processes provide a competitive
advantage in the design and manufacture of integrated systems and are
areas in which the Company will continue to invest. For example, in 1995
the Company supplied Boeing with non-integrated landing gear systems.
However, in 1996 with the Boeing 737 and 757, Coltec began providing
fully integrated landing gear which includes the installation of wheels,
tires, brakes, hydraulics, electrical harnesses, lights and sensing
systems on the base landing gear. In 1997, the Company began providing
fully integrated landing gear for the Boeing 777 aircraft thereby
increasing revenue by more than 20% per unit. The Company will begin
providing fully integrated landing gear for the Boeing 767 in 1998.
- Productivity Initiatives -- A number of productivity initiatives have
been implemented which have been designed to reduce lead times, curtail
scrap and enhance throughput, which are expected among other things, to
improve inventory turns. Such initiatives have included the consolidation
of multiple product lines into common production facilities and the
relocation of the Company's Delavan Spray Technologies Division to new
state-of-the-art facilities near major transportation hubs. Cycle time
reductions have reduced required inventory levels while improving
customer responsiveness. For example, during 1997, Walbar Arizona reduced
cycle times on damper seal production by approximately 70%, while the
Company's Menasco Division reduced production time for Boeing 737 landing
gear main cylinders from 20 weeks to 12. The Company intends to continue
to enhance its production processes through optimization of workflow,
investment in upgraded manufacturing technologies and robotics, and
related initiatives. In addition, all of the Company's major divisions
are in the late stages of implementing new enterprise reporting systems.
The new systems are enhancing shop floor reporting, materials management,
order entry and cost evaluation and control. Management believes that
these programs are leading to productivity and efficiency improvements
and are having a positive impact on operating performance. The new
enterprise systems have the added benefit of addressing year 2000 systems
issues. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
AEROSPACE
Through its Aerospace segment, Coltec is a leading manufacturer of landing
gear systems, engine fuel controls, flight attendant and cockpit seats, turbine
blades, fuel injectors, nozzles and related components for
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<PAGE> 39
commercial and military aircraft. The operating units and principal products,
markets and competitors of the Aerospace segment are as follows:
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Menasco............... Aircraft landing gear Commercial and B.F. Goodrich,
and flight control military aircraft Messier- Dowty
actuators, landing manufacturers,
gear parts, repairs airlines, U.S. Gov-
and overhaul ernment
Walbar................ Aircraft and Aircraft and Chromalloy, Howmet
industrial gas turbine stationary gas turbine
engine and services, engine manufacturers,
turbocharger rotating diesel engine
assemblies manufacturers
Chandler Evans Aircraft fuel pump and Aircraft engine Argotech, Hamilton
Control............. control systems manufacturers, U.S. Standard, Sundstrand,
Government and AlliedSignal Controls
aftermarket and Accessories
Delavan Gas Turbine
Products............ Aircraft engine fuel Aircraft engine Parker-Hannifin,
nozzles, valves and manufacturers, U.S. Textron
afterburner spray bars Government and
aftermarket
Lewis Engineering..... Aircraft Commercial and Ametek, Rogerson,
instrumentation, military aircraft, Rosemont, Norwich
temperature sensors, engine manufacturers Aerospace
and level control and process industries
products and
electrical harnesses
AMI Industries, Aircraft flight Commercial aircraft IPECO, Sicma
Inc................. attendant and cockpit manufacturers, and
seats airlines
</TABLE>
Menasco. Menasco is one of the leading suppliers of landing gear systems
for medium-to-heavy commercial and military aircraft. The design, manufacture
and test of aircraft landing gear and components, and related overhaul and
repair, comprise 90% of Menasco's sales volume. Landing gear and precision
components are highly engineered and manufactured to customer specifications and
sold to aircraft manufacturers, aircraft operators and to the United States
Government ("U.S. Government"), both as original equipment and as spare parts
for existing aircraft. Menasco's historical concentration of landing gear sales
among a limited number of companies reflects the relatively small number of
medium and heavy aircraft manufacturers. Landing gear systems generally account
for up to 2% of the total cost of an aircraft. Menasco also provides spare parts
for landing gear and landing gear overhaul services. Aftermarket business
represented 22% of Menasco's total sales in 1997. The remaining 10% of Menasco's
sales are primarily flight control actuators. Menasco produces large hydraulic
and mechanical actuators and has the capability to produce shock mitigation
equipment for both military and commercial applications.
Walbar. Walbar is an original equipment manufacturer and coating and
repair service center for aircraft and industrial gas turbine engine components.
Its product base ranges from complex precision machined turbine parts to
high-technology protective coatings. Its primary machined products are turbine
blades, vanes and other related turbine airfoil components. Walbar also
manufactures disks, integrally bladed rotors and complex impellers, as well as
complete rotating assemblies for flight and auxiliary power engines and
locomotive turbochargers. Following the reduction in U.S. Government
appropriation for military aircraft engines, Walbar has successfully increased
its focus on non-aerospace applications, and now enjoys significant market share
in the locomotive turbocharger market and the gas turbine power generation
market.
Chandler Evans. Chandler Evans Control Systems Division ("CECO") produces
gas turbine engine fuel controls and pumps, and pneumatic and hydraulic
components for use in aircraft and helicopter engines and
35
<PAGE> 40
aircraft systems. CECO has carved a niche market in the area of small engine
fuel pumps and controls for both commercial and military applications. CECO also
supplies small turbine engines with Full Authority Digital Electronic Control
("FADEC") systems. Computerized electronics in a FADEC system make aircraft
safer and less expensive to operate. In 1997, a CECO FADEC was successfully
operated in the first flight test of the U.S. Army's Boeing/Sikorsky Rah-66
Comanche helicopter.
CECO continues to supply the military market with fuel pump technology. Its
combination main and afterburner centrifugal fuel pump for the Boeing F/A-18 E/F
fighter was successfully flight tested in 1997. Additionally in 1997, CECO's
latest metering fuel pump, the Variable Displacement Vane Pump, was selected as
a fueldraulic pump to be used for multinational advanced vectoring exhaust
nozzle applications.
During 1997, CECO's aftermarket sector contributed 49% of its revenues
compared to 42% during 1996. This was due, in part, to increased Company focus
on this market coupled with the recovery in the worldwide airline and general
aviation market, and also an increase in U.S. Government contracts.
Delavan Gas Turbine Products. Delavan Gas Turbine Products Division
("Delavan") is a custom designer and manufacturer of fuel injectors, flow
control valves, fuel manifolds, afterburner spray bars and other accessories for
commercial and military gas turbine engines. Product applications in the
aerospace industry include products for engines powering large commercial and
regional airliners, business aircraft, military and commercial helicopters,
military fighters and transports and auxiliary power units. In the industrial
sector, Delavan fuel injectors and valves are utilized in large land-based gas
turbines found in electrical power generation plants and natural gas pipeline
installations.
Lewis Engineering. Lewis Engineering designs, develops and produces
electromechanical and electronic instrumentation for aircraft cockpits, landing
gear electrical harnesses and temperature sensors for aircraft and engine
systems. These products are used in commercial transport, general aviation and
military markets.
AMI Industries, Inc. AMI, a Colorado-based company, was acquired in the
third quarter of 1997. AMI is a leading designer and manufacturer of flight
attendant and cockpit seats and is recognized for supplying high comfort cabin
attendant seats.
One customer (Boeing) in the Aerospace segment represented approximately
14% of Coltec's 1997 total sales.
INDUSTRIAL
Through its Industrial segment, Coltec is a leading manufacturer of
industrial seals, gaskets, packing products, self-lubricating bearings and oil
seals and hubodometers for trucks and trailers. The Industrial segment also
produces spray nozzles for agricultural, home heating and industrial
applications, as well as high-horsepower diesel engines for naval ships and
diesel, gas and dual-fuel engines for electric power plants. Coltec also
produces air compressors and automotive products. The operating units and
principal products, markets and competitors of the Industrial segment are as
follows:
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Garlock Sealing Seals, gaskets, Chemical, pulp and Applied Industrial
Technologies........ packings and expansion paper, refining, Technologies, CR
joints, butterfly utilities, industrial Industries, A.W.
valves, PTFE sheet and and electronics Chesterton, Richard
film, OEM parts and Klinger, AMRI, Durco,
gaskets Neotecha, Dewal, W.
Gore, Durametallic,
John Crane
Fairbanks Morse Diesel, gas and U.S. Navy, marine, Caterpiller, Cooper
Engine.............. dual-fuel engines locomotive and Industries, General
stationary power Motors
markets
</TABLE>
36
<PAGE> 41
<TABLE>
<CAPTION>
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
Quincy Compressor..... Air compressors and Manufacturing, climate Gardner-Denver,
vacuum pumps control, oil and gas Sullair,
industries Ingersoll-Rand, Cham-
pion
Garlock Bearings...... Self-lubricated Automotive and equip- Kolbenschmidt, Rexnord
bearings ment manufacturers
Stemco................ Heavy duty wheel-end Fleet truck operators, CR Industries, Federal
systems, oil seals, truck parts Mogul, Nelson, Donald-
hubcaps and distributors and son
hubodometers, hubnuts vehicle assemblers
Delavan Spray Spray nozzles, Home heating, Spraying Systems,
Technologies........ accessories, pumps and industrial and Danfoss
systems agriculture
France Compressor Compressor valves and Compressor manufactur- Hoerbiger, C. Lee Cook
Products............ seals ers and end users
Haber Tool............ Cold-forming dies Fastener and Form Flow
automotive
manufacturers
Plastomer Products.... PTFE tape Industrial Fluoroglas, W. Gore
manufacturers
Sterling Die.......... Thread-rolling dies Fastener manufacturers Reed Rico
Ortman Fluid Power.... Hydraulic and Fluid power market Parker-Hannifin,
pneumatic cylinders Miller Fluid Power
Garlock Rubber Sheet rubber products Steel mills, chemical B.F. Goodrich
Technologies........ processors, refineries
and paper mills
Danti Tool............ Details, jigs, Machinery builders, Uclid, Burdette
fixtures, precision automotive parts
machining manufacturers, other
production facilities
Coltec Specialty Prod- Engineered polytetra- Semiconductor, pe- Furon, EGC
ucts(1)............. fluoroethylene (PTFE) trochemical refining
products plants
Cefilac(1)............ Seals, gaskets and Chemical, power, pe- John Crane, Laddy
packing, metal o-rings trochemical refining
and spiral wound plants
gaskets
Helicoflex(1)......... Metal o-rings; spring Power generation, pe- Advanced Products
loaded seals trochemical refining
plants
</TABLE>
- ---------------
(1) Purchased in early 1998.
The more significant operating units in the Industrial segment are
discussed below.
Garlock Sealing Technologies. Garlock Sealing Technologies ("Garlock")
produces and markets fluid sealing devices that prevent leakage and exclude
contaminants from rotating and reciprocating machinery. Garlock also produces
seal joints for high temperature and corrosive environment applications.
The newest Garlock products are positioned to meet current emission
standards for valves, pumps and flanges. To assist customers in complying with
more stringent global regulations for fugitive volatile organic compound
emissions, Garlock has developed a variety of products using traditional and
newly developed materials. Garlock products include compression packings,
gaskets and gasketing materials, hydraulic, oil and mechanical seals,
elastomeric expansion joints, industrial textiles, metallic gaskets and other
specialized industrial products.
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Sophisticated Garlock products protect equipment in industry applications
where performance is vital to safety and environmental concerns. These
applications include natural resource recovery, petroleum refining, chemicals,
primary metals, food and pharmaceuticals, power generation, mining, pulp and
paper, water and waste treatment, construction and transportation.
In October 1997, Coltec acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead Division. This
division, now known as Garlock Rubber Technologies manufactures high-quality
rubber sheet products used for gasketing and other applications in steel mills,
chemical processing, refineries and paper production including conveyor belts.
All of Garlock Rubber Technologies' products are consumable. Although the
products are also purchased for use in original equipment, in 1997 the
maintenance and replacement aftermarket accounted for approximately 80% of
Garlock's total sales.
Quincy Compressor. The Quincy Compressor Division ("Quincy") is a
manufacturer of a wide range of helical screw and reciprocating air compressors
and vacuum pumps. Quincy products vary in size from one-third to 350 horsepower
and are used in a variety of industrial applications, including industrial base
load, pneumatic temperature and instrument control, diesel and gas engine
starting, paint spraying and emergency standby service. Much of Quincy's
business is in the highly competitive industrial and climate control compressor
markets.
Garlock Bearings. Garlock Bearings is a leading producer of specialized
self-lubricating bearings, which consist of either steel or reinforced epoxy
composite backings with non-metallic bearing surfaces of polytetrafluoroethylene
("PTFE") fibers or a mixture that includes PTFE. PTFE provides maintenance-free
performance and reduced friction. Garlock Bearings' products typically perform
as sleeve bearings or thrust washers under conditions of no lubrication, minimal
lubrication or pre-lubrication. Garlock Bearings has a major share of the
self-lubricating bearing market in North America. In 1997, approximately 80% of
sales were to original equipment manufacturers, with major competition coming
from companies in Japan and Germany.
Fairbanks Morse. The Fairbanks Morse Engine Division ("Fairbanks Morse")
offers a broad range of heavy-duty diesel engines. Fairbanks Morse has the
capacity to provide diesel engines from 640 to 29,320 horsepower. In addition,
Fairbanks Morse manufactures dual-fuel, gas and diesel engines ranging in size
from four to 18 cylinders. Engines are offered in both conventional "V" and
in-line, four-cycle versions as well as in-line, two-cycle opposed-piston
configurations. They are used for marine propulsion and marine power generation
and in pump, compressor and electrical power generation applications. In
September 1997, Fairbanks Morse acquired the assets related to the Alco
locomotive business of General Electric Company ("GE"). The assets pertain to
the manufacture and sale of Alco locomotive engines and turbochargers and Alco
locomotive chassis components. Fairbanks Morse can now sell FM/ALCO locomotive
products throughout the world except India, where GE has retained rights to
manufacture and sell such products.
Stemco. The Stemco Division is a developer and producer of unitized hub
systems, hub oil seals, hubcaps, axle nuts and distance-measuring devices for
medium and heavy-duty trucks.
Delavan Spray Technologies. The Delavan Spray Technologies Division
(formerly Delavan Commercial Products Division) is a designer and producer of
atomizers for combustion and industrial applications and atomizers, pumps and
accessories for agricultural, industrial and oil burner metering applications.
Danti Tool. In September 1997, Coltec acquired DM&T, Inc., doing business
as Danti Tool, which makes many of the tooling products utilized by Haber Tool's
existing customer base.
SUBSEQUENT ACQUISITIONS
In January 1998, Coltec purchased Tex-o-Lon and Repro-Lon and certain
assets of Marine & Petroleum Mfg., Inc., Texas-based businesses. The
acquisitions were combined into one division, Coltec Specialty Products. Coltec
Specialty Products manufactures PTFE fluid sealing products for the
semiconductor industry and reprocesses PTFE compounds for the chemical and
semiconductor industry.
In February 1998, Coltec purchased the Sealing Division of Groupe Carbone
Lorraine which will be segregated into two divisions. Cefilac, based in Saint
Etienne and Montbrison, France, produces seals, gaskets and packings,
metal-o-rings and spiral-wound gaskets used in the chemical, power and refining
industries.
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<PAGE> 43
Helicoflex, based in Columbia, South Carolina, produces metal-o-rings and
spring-loaded seals and metal c-rings. Helicoflex sealing products are
specifically designed for equipment and processes exposed to high temperatures,
cryogenic temperatures, high pressures, vacuum conditions, radioactive
environments or corrosive applications. See note 19 to the Company's
consolidated financial statements included elsewhere in this Prospectus.
INTERNATIONAL OPERATIONS
Coltec's international operations, mainly in Canada and France, are
conducted through foreign-based manufacturing or sales subsidiaries, or both,
and include export sales of domestic divisions to unrelated foreign customers.
Export sales of diesel engines are made either directly or through foreign
representatives. Compressors are sold through foreign distributors. Certain
products of Coltec's Industrial segment are sold in foreign countries through
salesmen and sales representatives or sales agents.
Coltec's Canadian operations include the manufacture of landing gear
systems and aircraft flight controls, the provision of overhaul services for
these systems and controls for Canadian and other customers and the manufacture
of turbine components and turbine and compressor rotating parts primarily for
aircraft gas turbine engines. The Canadian operations also manufacture and
market seals, gasketing material, packings and truck products, and market parts
for Fairbanks Morse diesel engines and accessories and other products for use in
Canada and other countries.
Coltec operates 18 plants in Canada, Mexico, France, the United Kingdom,
Australia, Germany and Poland. In addition, Coltec occupies leased office and
warehouse space in various foreign countries.
Devaluations or fluctuations relative to the United States dollar in the
exchange rates of the currency of any country where Coltec has foreign
operations could adversely affect the profitability of such operations in the
future.
For financial information on operations by geographic segments, see note 17
to the Company's consolidated financial statements included elsewhere in this
Prospectus.
Coltec's contracts with foreign nations for delivery of military equipment,
including components, are subject to deferral or cancelation by U.S. Government
regulation or orders regulating sales of military equipment abroad. Any such
action on the part of the U.S. Government could have an adverse effect on
Coltec.
SALES BY CLASS OF PRODUCTS
During the last three fiscal years, landing gear systems was the only class
of similar products that accounted for at least 10% of total Coltec sales. In
1997, 1996 and 1995, sales of landing gear systems constituted 18%, 15% and 14%,
respectively, of Coltec's total sales.
BACKLOG
At December 31, 1997, Coltec's backlog of firm unfilled orders was $875.6
million compared with $678.3 million at December 31, 1996. Approximately $267.2
million of the 1997 year-end backlog is scheduled to be shipped after 1998.
CONTRACT RISKS
Coltec, through its various operating units, primarily Menasco, Chandler
Evans, Walbar and Delavan, Gas Turbine Products produces products for
manufacturers of commercial aircraft pursuant to contracts that generally call
for deliveries at predetermined prices over varying periods of time and that
provide for termination payments intended to compensate for certain costs
incurred in the event of cancelation. In addition, certain commercial aviation
contracts contain provisions for termination for convenience similar to those
contained in U.S. Government contracts described below. Longer-term agreements
normally provide for price adjustments intended to compensate for deferral of
delivery depending upon market conditions.
A portion of the business of Coltec's Menasco, Chandler Evans, Walbar and
Delavan Gas Turbine Products divisions has been as a subcontractor and as a
prime contractor in supplying products in connection with military
39
<PAGE> 44
programs. Substantially all of Coltec's U.S. Government contracts are firm
fixed-price contracts. Under firm fixed-price contracts, Coltec agrees to
perform certain work for a fixed price and, accordingly, realizes all the
benefit or detriment occasioned by decreased or increased costs of performing
the contracts. From time to time, Coltec accepts fixed-price contracts for
products that have not been previously developed. In such cases, Coltec is
subject to the risk of delays and cost overruns. Under U.S. Government
regulations, certain costs, including certain financing costs, portions of
research and development costs, and certain marketing expenses related to the
preparation of competitive bids and proposals, are not allowable. The U.S.
Government also regulates the methods under which costs are allocated to U.S.
Government contracts. With respect to U.S. Government contracts that are
obtained pursuant to an open bid process and therefore result in a firm fixed
price, the U.S. Government has no right to renegotiate any profits earned
thereunder. In U.S. Government contracts where the price is negotiated at a
fixed price rather than on a cost-plus basis, as long as the financial and
pricing information supplied to the U.S. Government is current, accurate and
complete, the U.S. Government similarly has no right to renegotiate any profits
earned thereunder. If the U.S. Government later conducts an audit of the
contractor and determines that such data was inaccurate or incomplete and that
the contractor thereby made an excessive profit, the U.S. Government may take
action to recoup the amount of such excessive profit, plus treble damages, and
take other enforcement actions.
U.S. Government contracts are, by their terms, subject to termination by
the U.S. Government either for its convenience or for default of the contractor.
Fixed-price type contracts provide for payment upon termination for items
delivered to and accepted by the U.S. Government, and, if the termination is for
convenience, for payment of the contractor's costs incurred plus the costs of
settling and paying claims by terminated subcontractors, other settlement
expenses, and a reasonable profit on its costs incurred. However, if a contract
termination is for default by the contractor (a) the contractor is paid such
amount as may be agreed upon for completed and partially-completed products and
services accepted by the U.S. Government, (b) the U.S. Government is not liable
for the contractor's costs with respect to unaccepted items, and is entitled to
repayment of advance payments and progress payments, if any, related to the
terminated portions of the contracts, and (c) the contractor may be liable for
excess costs incurred by the U.S. Government in procuring undelivered items from
another source.
In addition to the right of the U.S. Government to terminate, U.S.
Government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds on a fiscal-
year basis even though contract performance may take many years. Consequently,
at the outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring agency
only as appropriations are made by Congress for future fiscal years.
See "Risk Factors -- Cyclical Business; Government Contracts".
RESEARCH AND PATENTS
Most divisions of Coltec maintain staffs of manufacturing and product
engineers whose activities are directed at improving the products and processes
of Coltec's operations. Manufactured and development products are subject to
extensive tests at various divisional plants. Total research and development
cost, including product development, was $46.5 million for 1997, $44.1 million
for 1996 and $45.1 million for 1995.
Coltec owns a number of United States and other patents and trademarks and
has granted licenses under some of such trademarks. Management does not consider
the business of Coltec as a whole to be materially dependent upon any patent,
patent right or trademark.
EMPLOYEE RELATIONS
As of December 31, 1997, Coltec had approximately 9,100 employees, of whom
approximately 3,700 were salaried. Approximately 41% of the hourly employees are
represented by unions for collective bargaining purposes. Union agreements
relate, among other things, to wages, hours and conditions of employment, and
the wages and benefits finished are generally comparable to industry and area
practices.
In 1997, three collective bargaining agreements covering approximately 350
hourly employees were renegotiated. Coltec considers the labor relations of
Coltec to be satisfactory, although it has experienced work
40
<PAGE> 45
stoppages from time to time in the past. One collective bargaining agreement
covering approximately 200 employees was due to expire in 1998 and has been
renegotiated for a five-year term.
Coltec is subject to extensive U.S. Government regulations with respect to
many aspects of its employee relations, including increasingly important
occupational health and safety and equal employment opportunity matters. Failure
to comply with certain of these requirements could result in ineligibility to
receive U.S. Government contracts. These conditions are common to the various
industries in which Coltec participates and entail risks of financial and other
exposure.
PROPERTIES
Coltec operates 62 manufacturing plants in 22 states in the U.S. and in
Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In
addition, Coltec has other facilities throughout the United States and in
various foreign countries, which include sales offices, repair and service
shops, light manufacturing and assembly facilities, administrative offices and
warehouses.
Certain information with respect to Coltec's significant manufacturing
plants that are owned in fee, all of which (other than the Palmyra, New York and
Ontario Facilities) are encumbered pursuant to a certain credit agreement
between Coltec and certain banks and related security documents, is set forth
below:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER APPROXIMATE
SEGMENT LOCATION OF SQUARE FEET ACREAGE
- ------- ------------------------------ ------------------ -----------
<S> <C> <C> <C>
Aerospace................ West Hartford, Connecticut(a) 538,000 71
Euless, Texas 442,000 42
Oakville, Ontario 280,000 14
Mississauga, Ontario 141,000 7
Industrial............... Palmyra, New York 677,000 137
Beloit, Wisconsin 856,000 73
Longview, Texas 265,000 52
</TABLE>
- ---------------
(a) Approximately 239,000 square feet are utilized by the Aerospace Segment with
the balance leased to third parties.
In addition to the owned facilities, certain manufacturing activities of
some industry segments are conducted within leased premises, the largest of
which is in the Industrial segment, located in Quincy, Illinois, and covers
approximately 173,000 square feet. Some of these leases provide for options to
purchase or to renew the lease with respect to the leased premises.
Coltec's total manufacturing facilities presently being utilized aggregate
approximately 4,902,000 square feet of floor area of which approximately
4,230,000 square feet of area are owned in fee and the balance is leased from
third parties.
Coltec leases approximately 35,000 square feet at 3 Coliseum Centre, 2550
West Tyvola Road, Charlotte, North Carolina, for its executive offices, and has
renewal options under such lease through 2011.
In the opinion of management, Coltec's principal properties, whether owned
or leased, are suitable and adequate for the purposes for which they are used
and are suitably maintained for such purposes.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive Environmental Laws. The
Company takes a proactive approach in addressing the applicability of all
Environmental Laws as they relate to its manufacturing operations and in
proposing and implementing any remedial plans that may be necessary. The Company
believes it is either in material compliance with all currently applicable
regulations or is operating in accordance with the appropriate variances and
compliance schedules or similar arrangements. The Company has identified certain
situations that will require future capital and non-capital expenditures to
maintain or improve compliance with current
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<PAGE> 46
Environmental Laws. The majority of the identified situations relate to
remediation projects at former operating sites which have been sold or closed
and primarily deal with soil and groundwater remediation.
The Company has been notified that it is among the potentially responsible
parties under Environmental Laws, for the costs of investigating and, in some
cases, remediating contamination by hazardous materials at approximately 28
sites. Such laws can impose joint and several liability for the costs of
investigating and remediating properties contaminated by hazardous materials.
Liability for these costs can be imposed on present and former owners or
operators of the properties or on parties who generated the wastes that
contributed to the contamination. The Company's policy is to accrue
environmental remediation costs when both it is probable that a liability has
been incurred and the amount can be reasonably estimated. The measurement of
liability is based on an evaluation of currently available facts with respect to
each individual situation and takes into consideration factors such as existing
technology, presently enacted laws and regulations and prior experience in
remediation of contaminated sites. As assessments and remediation progress at
individual sites, these liabilities are reviewed periodically and adjusted to
reflect additional technical and legal information.
The Company currently estimates that its future non-capital expenditures
related to environmental matters will range between $27.0 million and $50.0
million, representing management's best estimate of probable non-capital
expenditures. At December 31, 1997, Coltec had accrued $31.7 million for
expenditures which will be incurred over the next 10 to 20 years. In addition,
capital expenditures aggregating $5.0 million related to environmental matters,
may be required during the next two years. Although the Company is pursuing
insurance recovery in connection with certain of the underlying matters, no
receivable has been recorded with respect to any potential recovery of costs in
connection with any environmental matter. During 1997, costs associated with
environmental remediation and ongoing assessment were not significant.
Actual costs to be incurred for identified situations in future periods may
vary from estimates, given inherent uncertainties in evaluating environmental
exposures due to unknown conditions, changing government regulations and legal
standards regarding liability and evolving related technologies. Subject to the
imprecision in estimating future environmental costs, the Company believes that
compliance with current Environmental Laws will not require significant capital
expenditures or have a material adverse effect on its consolidated results of
operations or financial position.
See "Risk Factors -- Potential Exposure to Environmental Liabilities".
LEGAL PROCEEDINGS
ASBESTOS LITIGATION
As of December 31, 1997 and 1996, two subsidiaries of Coltec were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700
actions, respectively (including approximately 2,400 and 5,100 actions,
respectively, in advanced stages of processing), filed in various states by
plaintiffs alleging injury or death as a result of exposure to asbestos fibers.
During 1997, 1996 and 1995, these two subsidiaries of Coltec were named
defendants in approximately 38,200, 39,900 and 44,000 new actions, respectively.
Through December 31, 1997, approximately 199,000 of the approximately 309,000
total actions brought have been settled or otherwise disposed of.
The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1 million or more in compensatory damages and $2
million or more in punitive damages. Although the law in each state differs to
some extent, it appears, based on advice of counsel, that liability for
compensatory damages would be shared among all responsible defendants, thus
limiting the potential monetary impact of such judgments on any individual
defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in which
neither Coltec nor any of its subsidiaries were parties, that held insurance
carriers are obligated to cover asbestos-related bodily injury actions if any
injury or disease process, from first exposure through manifestation, occurred
during a covered policy period (the "continuous trigger theory of coverage"),
Coltec settled litigation with its primary and most of its first-level excess
insurance carriers, substantially on the basis of the Pennsylvania Supreme
Court's ruling. Coltec has negotiated a final agreement with most of its excess
carriers that are in the layers of coverage immediately
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<PAGE> 47
above its first layer. Coltec is currently receiving payments pursuant to this
agreement. Coltec believes that, with respect to the remaining carriers, a final
agreement can be achieved without litigation and on substantially the same basis
that it has resolved the issues with its other carriers. Settlements are
generally made on a group basis with payments made to individual claimants over
periods of one to four years. Payments were made by the Company with respect to
asbestos liability and related costs aggregating $59.2 million in 1997, $71.3
million in 1996 and $56.7 million in 1995, substantially all of which were
covered by insurance. Related to payments not covered by insurance, Coltec
recorded charges to operations amounting to $8.0 million in 1997, $8.0 million
in 1996 and $5.0 million in 1995.
In accordance with Coltec's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where Coltec
can reasonably estimate the cost to dispose of these actions. As of December 31,
1997, Coltec estimates that the aggregate remaining cost of the disposition of
the settled actions for which payments remain to be made and actions in advanced
stages of processing, including associated legal costs, is approximately $47.3
million and Coltec expects that this cost will be substantially covered by
insurance.
With respect to the 107,600 outstanding actions as of December 31, 1997
which are in preliminary procedural stages, Coltec lacks sufficient information
upon which judgments can be made as to the validity or ultimate disposition of
such actions, thereby making it difficult to estimate with reasonable certainty
the potential liability or costs to Coltec. When asbestos actions are received
they are typically forwarded to local counsel to ensure that the appropriate
preliminary procedural response is taken. The complaints typically do not
contain sufficient information to permit a reasonable evaluation as to their
merits at the time of receipt, and in jurisdictions encompassing a majority of
the outstanding actions, the practice has been that little or no discovery or
other action is taken until several months prior to the date set for trial.
Accordingly, Coltec generally does not have the information necessary to analyze
the actions in sufficient detail to estimate the ultimate liability or costs to
Coltec, if any, until the actions appear on a trial calendar. A determination to
seek dismissal, to attempt to settle or to proceed to trial is typically not
made prior to the receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that
Coltec's subsidiaries will receive in the future. Coltec has noted that, with
respect to recently settled actions or actions in advanced stages of processing,
the mix of the injuries alleged and the mix of the occupations of the plaintiffs
have been changing from those traditionally associated with Coltec's
asbestos-related actions. Coltec is not able to determine with reasonable
certainty whether this trend will continue. Based upon the foregoing, and due to
the unique factors inherent in each of the actions, including the nature of the
disease, the occupation of the plaintiff, the presence or absence of other
possible causes of a plaintiff's illness, the availability of legal defenses,
such as the statute of limitations or state of the art, and whether the lawsuit
is an individual one or part of a group, management is unable to estimate with
reasonable certainty the cost of disposing of outstanding actions in preliminary
procedural stages or of actions that may be filed in the future. However, Coltec
believes that its subsidiaries are in a favorable position compared to many
other defendants because, among other things, the asbestos fibers in its
asbestos-containing products were encapsulated.
Insurance coverage of a small nonoperating subsidiary formerly distributing
asbestos-bearing products is nearly depleted. Considering the foregoing, as well
as the experience of Coltec's subsidiaries and other defendants, and given the
substantial amount of other insurance coverage that Coltec expects to be
available from its solvent carriers to cover the majority of its exposure,
Coltec believes that pending and reasonably anticipated future actions are not
likely to have a materially adverse effect on Coltec's results of operations and
financial condition. Although the insurance coverage which Coltec has is
substantial, it should be noted that insurance coverage for asbestos claims is
not available to cover exposures initially occurring on and after July 1, 1984.
Coltec's subsidiaries continue to be named as defendants in new cases, some of
which allege initial exposure after July 1, 1984.
In addition to claims for personal injury, Coltec's subsidiaries have been
involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and private
commercial buildings. Based upon the proceedings to date, the overwhelming
majority of these claims have been resolved without a material adverse impact on
Coltec. Likewise, the insignificant number of claims to
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<PAGE> 48
be resolved are not expected to have a materially adverse effect on Coltec's
results of operations and financial condition.
Coltec has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled
actions and actions in advanced states of processing), and has separately
recorded an asset equal to the amount of such liabilities that is expected to be
recovered by insurance. In addition, Coltec has recorded a receivable for that
portion of payments previously made for asbestos product liability actions and
related litigation costs that is recoverable from its insurance carriers.
Liabilities for asbestos-related matters and the receivable from insurance
carriers included in the consolidated balance sheets of Coltec were as follows
at December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts and notes receivable............................... $56,039 $67,012
Other assets................................................ 16,249 18,728
Accrued expenses............................................ 50,688 60,659
Other liabilities........................................... 2,682 10,879
</TABLE>
See "Risk Factors -- Asbestos Litigation".
OTHER LITIGATION
In September 1983, the local employees' union at Menasco Canada Ltee. (now
Coltec Aerospace Canada Ltd.) ("Menasco Canada"), a federation of trade unions
and several member-employees filed a complaint in the Province of Quebec
Superior Court against Menasco Canada, alleging, among other things, an illegal
lock-out, failure to negotiate in good faith, interference with the affairs of
the union and various violations of local law. The plaintiffs are collectively
seeking approximately Cdn. $14.0 million in damages, and Menasco Canada has
filed a cross-claim for Cdn. $21.0 million and has closed its operations in
Quebec Province. Coltec does not believe that this action will have a material
effect on Coltec's consolidated results of operations and financial condition.
On September 24, 1986, approximately 150 former salaried employees of
Crucible Inc (a former subsidiary of Coltec) commenced an action claiming
benefits under a corporate employment policy that had been established in 1962
and was terminated in 1972 by the corporation's Board of Directors. (George W.
Henglein, et al. v. Colt Industries Operating Corporation Informal Plan for
Plant Shutdown Benefits for Salaried Employees, et al., U.S. District Court for
the Western District of Pennsylvania, 86-cv-2021). Plaintiffs alleged that the
policy continued after the Board of Directors' action by reason of the Company's
failure to notify them of elimination of the employment policy. As a result of
that failure to notify, the policy was converted into a welfare or pension
benefit plan upon the passage of the Employee Retirement Income Security Act in
1974. Based upon the occurrence of this conversion, the plaintiffs were entitled
to benefits in 1982 when Crucible Inc's Midland operations closed. Following a
non-jury trial in the U.S. District Court for the Western District of
Pennsylvania, defendant's motion to dismiss was granted and the plaintiffs
appealed. The Court of Appeals for the Third Circuit remanded the case to the
District Court directing it to make specific findings of fact and conclusions of
law and also found for the defendant on the jurisdiction of the District Court.
The defendant again moved for dismissal and again defendant's motion to dismiss
was granted by the District Court. This second decision of the District Court
was appealed to the Court of Appeals for the Third Circuit and the case was
again remanded to the District Court for additional findings as to the
application of the law. On February 10, 1994, the District Court for the third
time dismissed the plaintiffs' complaint and the plaintiffs appealed to the
Third Circuit Court of Appeals. On September 26, 1994, the Third Circuit Court
of Appeals for the third time remanded the case to the District Court. The
Circuit Court held the record established by plaintiffs in the District Court
was insufficient to allow the Court the ability to apply the appropriate legal
standard. On November 4, 1994 the Court of Appeals for the Third Circuit denied
the defendant's request for a rehearing. The defendant petitioned the U.S.
Supreme Court for a writ of Certiorari; its petition was denied in 1995. The
defendant again moved for dismissal before the District Court based upon the
holding of the Circuit Court that plaintiffs had failed to establish their case
at trial. The District Court denied the motion and sua sponte ordered a new
trial de novo. A trial was held during July 1996 with both parties introducing
evidence. A decision was rendered in 1997 finding the existence of an informal
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<PAGE> 49
plan. The District Court remanded to the administrator of Coltec's employee
benefit plans the duties of calculating the benefits due to those plaintiffs
entitled.
The District Court held that all but six of the named plaintiffs' claims
were time barred. Both the defendants and plaintiffs filed timely notices of
appeal. Notwithstanding its filing of a notice of appeal, defendant has claimed
and so notified the Circuit Court that it was of the opinion that the District
Court's order was not final and thus not now appealable. As of December 1997,
plaintiffs have concurred in defendant's position. Coltec does not believe that
this action will have a material effect on Coltec's consolidated results of
operations and financial condition.
In addition to the litigation described above, there are various pending
legal proceedings involving Coltec which are routine in nature and incidental to
the business of Coltec. Coltec does not believe that these proceedings will have
a material effect on Coltec's consolidated results of operations and financial
condition.
The U.S. Government conducts investigations into procurement of defense
contracts as a part of a continuing process. Under current federal law, if such
investigations establish the existence of improper activities, among other
matters, debarment or suspension of a company from participating in the
procurement of defense contracts could result. These conditions are common to
the aerospace and government industries in which Coltec participates and entail
the risk of financial and other exposure. See "-- Contract Risks" above. Coltec
is not aware of any such investigation, nor is Coltec aware of any facts which,
if known to investigators, might prompt any investigation.
PRODUCT LIABILITY INSURANCE
Coltec has product liability insurance coverage for liabilities arising
from aircraft products which management believes to be adequate. In addition,
with respect to other products (exclusive of liability for exposure to asbestos
products), Coltec has product liability insurance in amounts exceeding $2.5
million per occurrence, which management believes to be adequate.
Coltec is self-insured (for claims arising after July 1984) with respect to
liability for exposure to asbestos products since third party insurance became
unavailable in July 1984.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
Inflation and foreign currency fluctuations have not had a material impact
on the operating results and financial position of Coltec during the past three
years. Coltec generally has been able to offset the effects of inflation with
price increases, cost-reduction programs and operating efficiencies. Coltec's
foreign operations, which are primarily located in Canada and France, do not
operate in hyper-inflationary economies, except for Mexico, which Coltec does
not believe will have a material effect on Coltec's consolidated results of
operations and financial condition.
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<PAGE> 50
MANAGEMENT
The directors and executive officers of Coltec are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John W. Guffey, Jr................................. 60 Chairman, Chief Executive Officer and
Director.
Nishan Teshoian.................................... 56 President, Chief Operating Officer and
Director.
David D. Harrison.................................. 51 Executive Vice President, Chief Financial
Officer and Director.
Laurence H. Polsky................................. 54 Executive Vice President, Administration.
Robert J. Tubbs.................................... 51 Executive Vice President, General Counsel
and Secretary.
Michael J. Burdulis................................ 52 Senior Vice President, Group Operations.
Richard L. Dashnaw................................. 61 Senior Vice President, Group Operations and
President of the Fairbanks Morse Engine
Division.
Paul R. Kuhn....................................... 56 Senior Vice President, Group Operations.
Joseph F. Andolino................................. 45 Group President and Vice President, Taxes.
John N. Maier...................................... 46 Vice President and Controller.
Joseph R. Coppola.................................. 67 Director.
William H. Grigg................................... 65 Director.
David I. Margolis.................................. 68 Director.
Joel Moses......................................... 56 Director.
Richard A. Stuckey................................. 66 Director.
</TABLE>
Mr. Guffey has been Chairman of the Board and Chief Executive Officer of
Coltec since January 1998. Chairman of the Board, Chief Executive Officer and
President of Coltec from February 1995 to December 1997. Member of the Executive
Committee and member of the Nominating Committee of Coltec. President and Chief
Operating Officer of Coltec from prior to 1993 to January 1995. Director of
Gleason Corp., a manufacturer of machine tools.
Mr. Teshoian, President and Chief Operating Officer since January 1998.
Chairman of the Board and Chief Executive Officer of Keystone from August 1995
to December 1997. Executive Vice President of Operations of the Tools and
Hardware Division of Cooper Industries from June 1993 to July 1995. President of
the Belden Division of Cooper Industries from prior to 1993 to August 1993.
Mr. Harrison, Executive Vice President and Chief Financial Officer of
Coltec since January 1997. Executive Vice President, Chief Financial Officer and
Treasurer of Coltec from October 1996 to January 1997. Executive Vice President
and Chief Financial Officer of Pentair Inc., a diversified manufacturing
company, from February 1994 to August 1996. From prior to 1993 to February 1994
Vice President, Finance of General Electric Appliances Canada, a manufacturing
company from February 1994 to August 1996. From prior to 1992 to February 1994
Vice President, Finance of General Electric Appliances Canada (CAMCO).
Mr. Polsky, Executive Vice President, Administration since January 1994.
Senior Vice President, Administration from April 1992 to December 1993.
Mr. Tubbs, Executive Vice President, General Counsel and Secretary since
January 1997. Senior Vice President, General Counsel and Secretary from November
1995 to January 1997. Senior Vice President and General Counsel from March 1995
to November 1995. General Counsel-Operations of Olin Corporation ("Olin"), a
chemical and metals manufacturing company, from May 1993 to February 1995.
Deputy General Counsel of Olin from prior to 1993 to May 1993.
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<PAGE> 51
Mr. Burdulis, Senior Vice President, Group Operations since June 1996.
Group President from January 1995 to May 1996. President of the Garlock Sealing
Technologies Division from February 1994 to December 1994. President of the
Central Moloney Transformer Division from prior to 1993 to January 1994.
Mr. Dashnaw, Senior Vice President, Group Operations and President of the
Fairbanks Morse Engine Division since January 1994. Group President and
President of the Fairbanks Morse Engine Division from prior to 1993 to December
1993.
Mr. Kuhn, Senior Vice President, Group Operations since January 1998, Group
President and President of Chandler Evans Control Systems Division from January
1993 to December 1997.
Mr. Andolino, Group President and Vice President, Taxes since July 1997.
Vice President, Taxes from March 1997 to June 1997. Staff Vice President, Taxes
from June 1995 to March 1997. Senior Tax Counsel of AlliedSignal Inc., a
diversified manufacturing company, from prior to 1993 to May 1995.
Mr. Maier, Vice President and Controller since March 1997. Staff Vice
President and Controller from March 1995 to March 1997. Vice President and
Controller of Lukens, Inc., a speciality steel and industrial products company,
from prior to 1993 to February 1995.
Mr. Coppola, Member of the Audit Committee, member of the Stock Option and
Compensation Committee (the "Compensation Committee") and Chairman of the
Nominating and Corporate Governance Committee (the "Nominating Committee") of
Coltec. Chairman, Chief Executive Officer and President of Giddings & Lewis,
Inc. ("Giddings & Lewis"), a machine tool manufacturing company from July 1993
to retirement from Giddings & Lewis in July 1997. From prior to 1993 to July
1993 he was Senior Vice President, Manufacturing Services of Cooper Industries,
Inc. ("Cooper Industries"), a diversified manufacturing company. Director of
Belden Inc., a manufacturer of electrical wire and cable.
Mr. Grigg, Chairman of the Audit Committee and member of the Nominating
Committee of Coltec. Chairman and Chief Executive Officer of Duke Power Company,
now Duke Energy Corporation, ("Duke"), a public utility company, from April 1994
to June 1997. Mr. Grigg retired from Duke in December 1997. Vice Chairman of
Duke from prior to 1993 to April 1994. Director of Duke and the following mutual
funds: Hatteras Income Securities Inc., Nations Fund Inc., Nations Fund Trust,
Nations Fund Portfolios Inc., Nations LifeGoal Portfolios Inc., Nations
Institutional Reserves Inc., Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target
Maturity Inc. Director of Shaw Group, Inc. a designer, manufacturer and service
provider of complex piping systems.
Mr. Margolis, Chairman of the Executive Committee of Coltec since October
1994. Chairman of the Board and Chief Executive Officer of Coltec from prior to
1993 to retirement from Coltec in January 1995. Director of Burlington
Industries, Inc., a manufacturer of textiles.
Mr. Moses, Chairman of the Compensation Committee and member of the
Executive Committee of Coltec. Provost, Massachusetts Institute of Technology
("MIT"), since June 1995. D.C. Jackson Professor of Computer Science and
Engineering, MIT since June 1995. Dean, School of Engineering, MIT, from prior
to 1993 to June 1995. Director of Analog Devices, Inc., a manufacturer of
integrated circuits.
Mr. Stuckey, member of the Audit Committee and member of the Compensation
Committee of Coltec. Chief Economist, E.I. du Pont de Nemours and Company, Inc.,
a diversified chemical manufacturing company, from prior to 1993 to retirement
from du Pont in December 1994. Economic consultant since January 1995.
Certain of the Company's officers are participants in or parties to certain
employee benefit and compensation plans and agreements which provide for
accelerated or increased benefits upon a change of control of the Company. Such
plans and agreements are described in more detail in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders, the relevant part of
which is incorporated by reference into the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. See "Available Information".
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<PAGE> 52
DESCRIPTION OF THE SENIOR NOTES
GENERAL
The Senior Notes were, and the Exchange Notes will be, issued under the
Indenture among the Company, the Subsidiary Guarantors and Bankers Trust
Company, as Trustee.
The following is a summary of certain provisions of the Indenture, the
Amended Collateral Documents, and the Senior Notes, a copy of each of which,
together with the form of Senior Notes, is available upon request to the Company
at the address set forth under "Available Information". The following summary of
certain provisions of the Indenture and such documents and instruments does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture and such documents and
instruments, including the definitions of certain terms therein and those terms
made a part thereof by the TIA. Capitalized terms used herein and not otherwise
defined have the meanings set forth under "-- Certain Definitions". For purposes
of this summary, the term "Company" refers only to Coltec Industries Inc and not
to any Subsidiary of the Company.
Principal of, premium, if any, and interest on the Senior Notes will be
payable, and the Senior Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee, in New York, New
York), except that, at the option of the Company, payment of interest may be
made by check mailed to the registered holders of the Senior Notes at their
registered addresses.
The Senior Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of
Senior Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.
For each Outstanding Note accepted for exchange, the Holder thereof will
receive an Exchange Note having a principal amount equal to that of the
surrendered Outstanding Note.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Outstanding Notes, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes and except that, if the
Exchange Offer is not consummated on or prior by October 13, 1998, the rate per
annum at with the Outstanding Notes bear interest will be increased by amounts
specified herein. See "-- Registered Exchange Offer; Registration Rights."
The Exchange Notes will evidence the same indebtedness as the Outstanding
Notes and will be issued under and entitled to the same benefits under the
Indenture as the Outstanding Notes. In addition, the Exchange Notes and the
Outstanding Notes will be treated as one series of securities under the
Indenture.
TERMS OF THE SENIOR NOTES
The Senior Notes are senior obligations of the Company, limited to $300
million aggregate principal amount, and will mature on April 15, 2008. The
Senior Notes are secured to the extent set forth below under "-- Collateral" and
are guaranteed by the Subsidiary Guarantors to the extent set forth below under
"-- Guarantees".
Each Senior Note will bear interest at a rate per annum shown on the front
cover of this Prospectus from April 16, 1998 or from the most recent date to
which interest has been paid or provided for, payable semiannually to Senior
Noteholders of record at the close of business on the April 1 or October 1
immediately preceding the interest payment date on April 15 and October 15 of
each year, commencing October 15, 1998. Interest on the Senior Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The Senior Notes are redeemable, in whole or in part, at any time, at the
option of the Company, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Senior Notes and (ii) the sum of the present value
of the remaining scheduled payments of principal and interest thereon from the
redemption date to the maturity date, discounted to the redemption date on a
semiannual basis (assuming a 360-day year
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<PAGE> 53
consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points,
plus accrued interest thereon to the date of redemption.
"Treasury Rate" means, with respect to any redemption date for the Senior
Notes, (i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall be calculated
on the third Business Day preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Senior Notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Senior Notes. "Independent Investment Banker" means one
of the Reference Treasury Dealers appointed by the Trustee after consultation
with the Company.
"Comparable Treasury Price" means with respect to any redemption date for
the Senior Notes (i) the average of four Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government
securities dealers in New York City (each, a "Primary Treasury Dealer")
appointed by the Trustee in consultation with the Company; provided, however,
that if any of the foregoing shall cease to be a Primary Treasury Dealer, the
Company shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but no more than
60 days before the redemption date to each holder of Senior Notes to be
redeemed. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest will cease to accrue on the Senior Notes or
portions thereof called for redemption.
Except as set forth above, the Senior Notes are not redeemable by the
Company prior to maturity and are not entitled to the benefit of any sinking
fund.
RANKING
The Senior Notes are senior obligations of the Company and will rank pari
passu in right of payment with all existing and future senior obligations of the
Company (including indebtedness under the Amended Credit Agreement) and will
rank senior in right of payment to all subordinated obligations of the Company,
including the TIDES Debentures issued by the Company. The Senior Notes are
secured to the extent set forth below under "-- Collateral" and guaranteed by
the Subsidiary Guarantors to the extent set forth below under "-- Guarantees".
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<PAGE> 54
As of December 31, 1997, on a pro forma basis after giving effect to the
Offerings and the application of the estimated net proceeds therefrom to reduce
indebtedness under the Amended Credit Agreement, the Company would have had
approximately $623.9 million of total consolidated long-term indebtedness,
including (i) approximately $323.9 million of other senior indebtedness ($281.5
million of which would have been indebtedness outstanding under the Amended
Credit Agreement) and (ii) $281.5 million of other secured indebtedness (all of
which would have been indebtedness outstanding under the Amended Credit
Agreement). The Indenture does not contain limitations on the amount of
additional indebtedness which the Company may incur.
GUARANTEES
Each Subsidiary Guarantor will fully and unconditionally guarantee, jointly
and severally, to each Holder and the Trustee, on a senior basis, the full and
prompt payment of principal of and interest on the Senior Notes, and of all
other obligations of the Company under the Indenture. The Subsidiary Guarantees
(including the payment of principal of, premium, if any, and interest on the
Senior Notes) are senior obligations of such Subsidiary Guarantors and will rank
pari passu in right of payment with all existing and future senior obligations
of the Subsidiary Guarantors and will rank senior to all subordinated
obligations of such Subsidiary Guarantors. The Subsidiary Guarantees are secured
to the extent set forth below under "-- Collateral".
As of December 31, 1997, on a pro forma basis after giving effect to the
Offerings and the application of the estimated net proceeds therefrom to reduce
indebtedness under the Amended Credit Agreement, such Subsidiary Guarantors
would have had approximately $262.0 million of other senior indebtedness (all of
which would have been guarantees of indebtedness under the Amended Credit
Agreement) and $262.0 million of other secured indebtedness (all of which would
have been guarantees of indebtedness outstanding under the Amended Credit
Agreement). The Indenture does not contain any limitation on the amount of
additional indebtedness that the Company's Subsidiaries, including the
Subsidiary Guarantors, may incur. See note 20 to the Company's consolidated
financial statements included elsewhere in this Prospectus.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including any guarantees of
indebtedness under the Amended Credit Agreement) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
The Indenture provides that any Subsidiary Guarantor may, without the
consent of the holders of any outstanding Senior Notes, consolidate with or sell
or lease as, or substantially as, an entirety its assets to, or merge with or
into, any other Person; provided that (i) immediately after giving effect to
such transaction, no Event of Default under the Indenture, and no event which,
after notice or the lapse of time, or both, would become such an Event of
Default shall have occurred and be continuing and (ii) an officers' certificate
and legal opinion covering such condition shall be delivered to the Trustee.
Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate with or
merge into or sell its assets to the Company or another Subsidiary Guarantor.
Upon the sale or other disposition of all of the assets of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the Capital Stock of such Subsidiary Guarantor, then, in
each case in accordance with the preceding paragraph, such Subsidiary Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all the Capital Stock of such Subsidiary
Guarantor) shall be automatically released from all its obligations under the
Indenture and the Subsidiary Guarantee without any action on the part of the
Trustee or the Holders.
Until such time as all Guarantees by the Subsidiary Guarantors under the
Indenture shall have been released in accordance with the next succeeding
sentence, the Company shall cause each Subsidiary that Guarantees the Company's
obligations under the Credit Agreement (other than Foreign Subsidiaries) to
become a Subsidiary Guarantor under the Indenture and thereby Guarantee the
Senior Notes on the terms and conditions set forth in the Indenture. Upon the
release of a Guarantee by a Subsidiary of the Company's obligations under the
Credit Agreement, the Subsidiary Guarantee of such Subsidiary under the
Indenture will be released and discharged at
50
<PAGE> 55
such time and will not be reinstated or renewed in the event any such Subsidiary
thereafter Guarantees obligations of the Company under the Credit Agreement, so
long as the Guarantee by such Subsidiary under the Credit Agreement remains
released (i) until the next succeeding refinancing, restatement, renewal,
extension or replacement of the Credit Agreement or amendment to increase the
available principal amount thereunder, or (ii) for a period of 90 consecutive
days, whichever is later.
COLLATERAL
The Senior Notes and the Subsidiary Guarantees are secured, subject to the
terms of the Collateral Documents, equally and ratably with the indebtedness of
the Company under the Amended Credit Agreement and related documents and
liabilities in connection with interest rate protection and other hedging
agreements contemplated by the Amended Credit Agreement, by a security interest
in the collateral (the "Collateral") under the Amended Collateral Documents
described under "Description of Other Indebtedness -- The Amended Credit
Agreement -- Collateral".
In the event of foreclosure on the Collateral, the proceeds from the sale
of the Collateral may not be sufficient to satisfy the Company's obligations
under the Senior Notes and the Amended Credit Agreement in full. The amount to
be received upon such a sale would be dependent upon numerous factors including
the timing and the manner of the sale. In addition, the book value of the
Collateral should not be relied upon as a measure of realizable value. By its
nature, the Collateral will be illiquid and may have no readily ascertainable
market value. Accordingly, there can be no assurance that the Collateral can be
sold in a short period of time. A significant portion of the Collateral,
including the real property portion thereof, includes tangible and intangible
assets which may only be usable as part of the existing operating businesses of
the Company. Accordingly, any such sale of the Collateral, including the real
property portion thereof, separate from the sale of certain of the Company's
operating businesses, may not be feasible or of significant value. To the extent
that third parties enjoy Permitted Liens or Liens otherwise permitted by the
covenant described under "-- Certain Covenants -- Limitations on Liens", such
third parties may have rights and remedies with respect to the property subject
to such Liens that, if exercised, could adversely affect the value of the
Collateral. In addition, the ability of the Senior Noteholders to realize upon
any of the Collateral may be subject to certain bankruptcy law limitations in
the event of a bankruptcy. See "Risk Factors -- Collateral".
Upon the termination of all obligations under the Amended Credit Agreement
or the release by the lenders under the Amended Credit Agreement of all
Collateral, the Amended Collateral Documents will terminate and the Collateral
will be released. Under the Amended Collateral Documents, the control of
foreclosure proceedings, the enforcement and amendment of the Amended Collateral
Documents and the right to take other actions with respect to the Collateral
belong solely to the Collateral Agent and the lenders under the Amended Credit
Agreement. The lenders under the Amended Credit Agreement may release
Collateral, in whole or in part, from time to time, and in such event, the
Collateral so released will be automatically released as security for the Senior
Notes without any action on the part of the Trustee or the Senior Noteholders.
In addition, all Collateral under the Amended Credit Agreement and the Amended
Collateral Documents will be automatically released upon the Company's long-term
indebtedness being rated BBB- by Standard & Poor's and Baa3 by Moody's, and in
such event, all Collateral securing the Senior Notes will also be automatically
released without any action on the part of the Trustee or the Senior
Noteholders. For a further description of the Amended Collateral Documents, see
"Description of Other Indebtedness -- The Amended Credit
Agreement -- Collateral".
CERTAIN COVENANTS
The Indenture contains covenants, including, among others, the following:
LIMITATION ON LIENS. The Indenture provides that, with respect to the
Senior Notes, neither the Company nor any Subsidiary Guarantor will, nor
will they permit any of their Subsidiaries (excluding Foreign Subsidiaries)
to, create, incur, or permit to exist, any Lien on any of their respective
assets, whether now owned or hereafter acquired, in order to secure any
Indebtedness of either of the Company or any Subsidiary Guarantor, without
effectively providing that the Senior Notes shall be equally and ratably
secured until such time as such Indebtedness is no longer secured by such
Lien, except: (i) Liens securing Indebtedness arising under the Credit
Agreement, so long as such Liens also secure the Senior Notes, equally and
ratably; (ii) Liens on cash and cash equivalents securing obligations in
respect of letters of credit
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<PAGE> 56
in accordance with the terms of the Credit Agreement, (iii) Liens existing
as of the closing date of the Senior Notes Offering (the "Closing Date");
(iv) Liens existing as of the Closing Date or granted after the Closing
Date on any assets of the Company or any Subsidiary Guarantor or any of
their Subsidiaries securing Indebtedness of the Company or any Subsidiary
Guarantor created in favor of the Holders of the Senior Notes; (v) Liens
securing Indebtedness of the Company or any Subsidiary which is incurred to
extend, renew or refinance Indebtedness which is secured by Liens permitted
to be incurred under the Indenture; provided that such Liens do not extend
to or cover any assets of the Company or any Subsidiary other than the
assets securing the Indebtedness being extended, renewed or refinanced and
that the principal amount of such Indebtedness does not exceed the
principal amount of the Indebtedness being extended, renewed or refinanced
at the time of such extension, renewal or replacement, or at the time the
Lien was issued, created or assumed or otherwise permitted; (vi) Permitted
Liens; and (vii) Liens created in substitution of or as replacements for
any Liens permitted by the preceding clauses (i) through (vi) or this
clause (vii), provided that, based on a good faith determination of an
officer of the Company, the asset encumbered under any such substitute or
replacement Lien is substantially similar in nature to the asset encumbered
by the otherwise permitted Lien which is being replaced.
Notwithstanding the foregoing and the covenant described under
"-- Limitation on Sale and Lease-Back Transactions" below, the Company and
any Subsidiary may, without securing any of the Senior Notes, create, incur
or permit to exist Liens which would otherwise be subject to the
restrictions set forth in the preceding paragraph, if after giving effect
thereto and at the time of determination, the aggregate amount of Exempted
Debt does not exceed the greater of (x) $100 million and (y) 15% of
Consolidated Net Assets.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Indenture
provides that neither the Company nor any Subsidiary Guarantor will, nor
will they permit any of their Subsidiaries (excluding Foreign Subsidiaries)
to, enter into any sale and lease-back transaction for the sale and leasing
back of any property or asset, whether now owned or hereafter acquired, of
the Company or any Subsidiary (except such transactions (i) entered into
prior to the Closing Date, (ii) for the sale and leasing back of any
property or asset by a Subsidiary to the Company or to another Subsidiary
Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary),
(iii) involving leases for less than three years or (iv) in which the lease
for the property or asset is entered into within 180 days after the later
of the date of acquisition, completion of construction or commencement or
full operations of such property or asset) unless (a) the Company or any
such Subsidiary would be entitled under the first paragraph of the
"Limitation on Liens" covenant described above to create, incur or permit
to exist a Lien on the assets to be leased securing Indebtedness in an
amount at least equal to the Attributable Debt in respect of such
transaction without equally and ratably securing the Senior Notes, (b) the
Company or any Subsidiary would be entitled under the second paragraph of
the "Limitations on Liens" covenant described above to create, incur or
permit to exist a Lien on the assets to be leased securing Indebtedness in
an amount at least equal to the Attributable Debt in respect of such
transaction without equally and ratably securing the Senior Notes or (c)
the proceeds of the sale of the assets to be leased are at least equal to
their fair market value and the proceeds are applied to the purchase or
acquisition (or in the case of real property, the construction) of assets
or to the repayment of Indebtedness of the Company or any Subsidiary
Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary).
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may, without the consent of the
holders of any outstanding Senior Notes, consolidate with or sell or lease its
assets as, or substantially as, an entirety, to, or merge with or into, any
other entity, provided that (i) the Company shall be the continuing entity, or
the successor entity formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets is organized
under the laws of any domestic jurisdiction and expressly assumes the Company's
obligations to pay principal of (and premium, if any) and interest on all the
Senior Notes and the due and punctual performance and observance of all the
covenants and conditions contained in the Indenture; (ii) immediately after
giving effect to such transaction, no Event of Default under the Indenture, and
no event which, after notice or the lapse of time, or both, would become such an
Event of Default shall have occurred and be continuing; and (iii) an officers'
certificate and legal opinion covering certain of such conditions shall be
delivered to the Trustee.
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<PAGE> 57
Upon any consolidation or merger, or any sale or lease of the assets of the
Company as, or substantially as, an entirety in accordance with the provisions
of the Indenture, the entity formed by such consolidation or into which the
Company shall have been merged or to which such sale or lease shall have been
made shall succeed to and be substituted for the Company with the same effect as
if it had been named in the Indenture as a party thereto and thereafter from
time to time such successor entity may exercise each and every right and power
of the Company under the Indenture in the name of the Company or in its own
name; and any act or proceeding by any provision of the Indenture required or
permitted to be done by the Board of Directors or any officer of the Company may
be done with like force and effect by the like board or officer of any entity
that shall at the time be the successor of the Company hereunder. In the event
of the sale by the Company of its assets as, or substantially as, an entirety
upon the terms and conditions of the Indenture, the Company shall be released
from all its liabilities and obligations under the Indenture and the Senior
Notes.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Senior Note when due, that continues for 30 days,
(ii) a default in the payment of principal of any Senior Note when due at its
Stated Maturity, upon declaration or otherwise, (iii) the failure by the Company
to comply with its obligations under the covenant described under "-- Merger,
Consolidation or Sale of Assets", (iv) the failure by the Company or a
Subsidiary Guarantor to comply for 60 days after notice with any of its
obligations under the covenants described under "-- Certain Covenants", (v) the
failure by the Company or any Subsidiary Guarantor to comply for 60 days after
notice with its other agreements contained in the Indenture (other than those
referred to in (i), (ii), (iii) or (iv) above), (vi) the failure by the Company,
any Subsidiary Guarantor or any Subsidiary of the Company to pay any
Indebtedness within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default if the total amount of such Indebtedness unpaid or accelerated exceeds
$30 million or its foreign currency equivalent (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or any Significant Subsidiary (the "bankruptcy provisions"), (viii)
any judgment or decree for the payment of money in excess of $30 million is
rendered against the Company or any Significant Subsidiary remains outstanding
for a period of 60 days following such judgment and is not discharged, waived or
stayed within 30 days after notice (the "judgment default provision"), (ix)
except as permitted by the Indenture, a Subsidiary Guarantee ceases to be in
full force and effect for 30 days after notice or a Subsidiary Guarantor denies
or disaffirms its obligations under its Subsidiary Guarantee (the "subsidiary
guarantee provision") or (x) except as permitted by the Amended Collateral
Documents, the Credit Agreement and the Indenture or any amendments thereto, any
of the Collateral Documents ceases to be in full force and effect or ceases to
be effective, in all material respects, to create a Lien on the Collateral in
favor of the Senior Noteholders for 30 days after notice (the "collateral
provision").
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv), (v), (viii), (ix) and (x) will not
constitute an Event of Default until the Trustee or the Holders of 25% in
aggregate principal amount of the outstanding Senior Notes notify the Company as
provided in the Indenture of the default and the Company does not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Senior
Noteholders of at least 25% in aggregate principal amount of the outstanding
Senior Notes by notice to the Company may declare the principal of and accrued
but unpaid interest on all the Senior Notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
accrued interest on all the Senior Notes will ipso facto become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Senior Noteholders. Under certain circumstances, the Senior Noteholders of a
majority in aggregate principal amount of the outstanding Senior Notes may
rescind any such acceleration with respect to the Senior Notes and its
consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable indemnity or security against any
loss, liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Senior Notes unless (i) such Holder
shall have previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in aggregate principal amount of the
outstanding Senior Notes shall have requested the Trustee to pursue the remedy,
(iii) such Holders shall have offered the Trustee security or indemnity
satisfactory to the Trustee against any loss, liability or expense, (iv) the
Trustee shall not have complied with such request within 60 days after the
receipt of the request and the offer of such reasonable security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding Senior
Notes shall not have given the Trustee a direction inconsistent with such
request within such 60-day period. Subject to certain restrictions, the Holders
of a majority in principal amount of the outstanding Senior Notes are given the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the Trustee
in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 30 days after it is known to a Trust officer or written notice of it is
received by the Trustee. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Senior Note, the Trustee may
withhold notice if and so long as a committee of its Trust officers in good
faith determines that withholding notice is not opposed to the interests of the
Senior Noteholders. In addition, the Company is required to deliver to the
Trustee, within 120 days after the end of each fiscal year, (i) a certificate
indicating whether the signers thereof know of any Default that occurred during
the previous year and (ii) an opinion of counsel either stating that action has
been taken with respect to any filing, refiling, recording or re-recording with
respect to the Collateral as is necessary to maintain the Lien on the Collateral
in favor of the Senior Noteholders or that no such action is necessary to
maintain such Lien. The Company also is required to deliver to the Trustee,
within 30 days after the occurrence thereof, written notice of any event which
would constitute certain Defaults, their status and what action the Company is
taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Senior Notes
then outstanding and any past default or compliance with any provisions may be
waived with the consent of the Holders of a majority in principal amount of the
Senior Notes then outstanding. However, without the consent of each Holder of an
outstanding Senior Note affected, no amendment may, among other things, (i)
reduce the amount of Senior Notes whose Holders must consent to an amendment,
(ii) reduce the rate of or extend the time for payment of interest on any Senior
Note, (iii) reduce the principal of or extend the Stated Maturity of any Senior
Note, (iv) reduce the premium payable upon any redemption of any Senior Note or
change the time at which any Senior Note may be redeemed, (v) make any Senior
Note payable in money other than that stated in the Senior Note, (vi) impair the
right of any Holder to receive payment of principal of and interest on such
Holder's Senior Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such Holder's Senior
Notes, (vii) make any changes that would affect the ranking of the Senior Notes
or, except (a) in accordance with the terms of the Collateral Documents or the
Indenture, (b) as permitted by the following paragraph or (c) in order to give
effect to amendments to any of the Amended Collateral Documents, the security
for the Senior Notes in a manner material and adverse to the Senior Noteholders
or (viii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Company, the Subsidiary Guarantors
and the Trustee may amend the Indenture to cure any ambiguity, omission, defect
or inconsistency whether wholly within the Indenture or as compared to any of
the Amended Collateral Documents, or to make such other provisions in regard to
matters or questions arising under the Indenture as the Board of Directors of
the Company may deem necessary or desirable
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and which shall not materially and adversely affect the rights of the Holders,
to provide for the assumption by a successor corporation of the obligations the
Company under the Indenture, to provide for uncertificated Senior Notes in
addition to or in place of certificated Senior Notes (provided that the
uncertificated Senior Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated Senior
Notes are as described in Section 163(f)(2)(B) of the Code), to add additional
Guarantees with respect to the Senior Notes, to add additional security for the
Senior Notes, to add to the covenants of the Company for the benefit of the
Senior Noteholders or to surrender any right or power conferred upon the
Company, to make any change that does not adversely affect the rights of any
Holder in any material respect, to comply with, or allow for compliance with,
any requirement of the SEC in connection with qualifying the Indenture under the
TIA or giving effect to the security arrangements contemplated by the Indenture,
to give effect to the provisions of the Amended Collateral Documents and the
Indenture, including with regard to the release of all or a portion of the
Collateral in accordance with such provisions and to give effect to the release
of any Subsidiary Guarantee in accordance with the terms of the Indenture.
The consent of the Senior Noteholders is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Senior Noteholders a notice briefly describing such
amendment. However, the failure to give such notice to all Senior Noteholders,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Senior Noteholder may transfer or exchange Senior Notes in accordance
with the Indenture. Upon any transfer or exchange, the registrar and the Trustee
may require a Senior Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Senior
Noteholder to pay any taxes required by law or permitted by the Indenture,
including any transfer tax or other similar governmental charge payable in
connection therewith. The Company is not required to transfer or exchange any
Senior Note selected for redemption or to transfer or exchange any Senior Note
for a period of 15 days prior to a selection of Senior Notes to be redeemed. The
Senior Notes will be issued in registered form and the registered holder of a
Senior Note will be treated as the owner of such Senior Note for all purposes.
DEFEASANCE
GENERAL
The Company at any time may terminate all its obligations under the Senior
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Senior Notes, to replace mutilated, destroyed, lost
or stolen Senior Notes and to maintain a registrar and paying agent in respect
of the Senior Notes. The Company at any time may terminate its obligations under
the covenants described under "Certain Covenants", (other than the covenant
described under "-- Merger, Consolidation or Sale of Assets") and the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries, the judgment default provision, the subsidiary
guarantee provision or the collateral provision described under "-- Defaults"
("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Senior Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Senior Notes may not be
accelerated because of an Event of Default specified in clause (iv), (v), (vi),
(vii) (with respect only to Significant Subsidiaries), (viii), (ix) or (x) under
"-- Defaults" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit or cause to be deposited in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide cash at such times and in such amounts as will be sufficient to pay
principal and interest when due on all the Senior
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Notes (except lost, stolen or destroyed Senior Notes which have been replaced or
repaid) to maturity or redemption, as the case may be, and must comply with
certain other conditions.
TAX CONSEQUENCES
Under current law such deposit and discharge would, in the case of legal
defeasance, and could, in the case of covenant defeasance, constitute a taxable
exchange of the related Senior Notes. If the defeasance of such Senior Notes is
considered to be a taxable exchange, each Holder of such Senior Notes would be
required to recognize gain or loss equal to the difference between the Holder's
tax basis in such Senior Notes and the value of the Holder's interest in the
defeasance trust. In addition, such Holders thereafter might be required to
include in income a different amount than would be includable in the absence of
the discharge. Prospective investors are urged to consult their own tax advisers
as to the specific consequences of such a deposit and discharge, including the
applicability and effect of tax laws other than the federal income tax law.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Senior
Notes.
The Indenture contains certain limitations on the rights of the Trustee, if
it is a creditor of the Company, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim as
security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign. Bankers Trust Company is also the Administrative Agent under
the Amended Credit Agreement and will act as Collateral Agent on behalf of all
the secured creditors under the Amended Collateral Documents (including, without
limitations, the Holders of the Senior Notes and the lenders under the Amended
Credit Agreement).
The Holders of a majority in principal amount of the outstanding Senior
Notes have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured) the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
Senior Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Senior Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Attributable Debt" means in connection with a sale and lease-back
transaction, the lesser of (i) the fair market value of the assets subject to
such transaction and (ii) the present value (discounted at a rate per annum
equal to the average interest borne by all outstanding securities issued under
the Indenture (which may include securities in addition to the Senior Notes)
determined on a weighted average basis and compounded semiannually) of the
obligations of the lessee for rental payments during the term of the related
lease.
"Capital Lease" means any Indebtedness represented by a lease obligation of
a person incurred with respect to real property or equipment acquired or leased
by such person and used in its business that is required to be recorded as a
capital lease in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participations, rights to purchase, warrants, options or other equivalents
(however designated) of corporate stock or other equity of such Person.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Consolidated Net Assets" means as of any particular time the aggregate
amount of assets after deducting therefrom all current liabilities except for
(i) notes and loans payable, (ii) current maturities of long-term debt and (iii)
current maturities of obligations under capital leases, all as set forth on the
most recent consolidated balance sheet of the Company and its consolidated
Subsidiaries and computed in accordance with GAAP.
"Credit Agreement" means the Amended and Restated Credit Agreement as
amended and restated as of December 18, 1996, as amended by the Fifth Amendment
thereto, dated March 16, 1998, among the Company, Coltec Aerospace Canada
Limited, a Subsidiary of the Company, Bankers Trust Company, as Administrative
Agent, Bank of America National Trust and Savings Association, as Documentation
Agent, The Chase Manhattan Bank, as Syndication Agent, Bank of Montreal, as
Canadian Paying Agent, and the various lenders party thereto, as such agreement
may be amended (including any amendment, restatement and successors thereof),
supplemented, refinanced, renewed, extended, replaced, in whole or in part, or
otherwise modified from time to time, including any increase in the principal
amount of the obligations thereunder.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the Company and its Subsidiaries (other than
Foreign Subsidiaries) incurred after the Closing Date and secured by Liens not
otherwise permitted by the covenant described under "-- Limitation on Liens"
above and (ii) Attributable Debt of the Company and its Subsidiaries in respect
of sale and lease-back transactions entered into after the Closing Date, other
than sale and lease-back transactions permitted by clauses (a) and (c) of the
covenant described under the "-- Limitation on Sale and Lease-Back Transactions"
above.
"Foreign Subsidiary" means any Subsidiary which is incorporated or
otherwise organized under the laws of any jurisdiction other than the United
States of America, any state thereof or the District of Columbia and any
Subsidiary thereof.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means a guarantee, direct or indirect, in any manner
(including, without limitation, letters of credit and reimbursement agreements
in respect thereof), of all or any part of any Indebtedness; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"Holder" or "Senior Noteholder" means the Person in whose name a Senior
Note is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, without duplication, (i)
principal of, and premium, if any, and interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to such Person whether or not such claim for post-petition interest is allowed
in such proceeding) on any indebtedness of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets, of
such person or only to a portion thereof), (b) evidenced by notes, debentures or
similar instruments (including purchase money obligations) given in connection
with the acquisition of any property or assets (other than trade accounts
payable for inventory or similar property acquired in the ordinary course of
business), including securities, for the payment of which such Person is liable,
directly or indirectly, or the payment of which is secured by a lien, charge or
encumbrance on property or assets of such Person, (c) for goods, materials or
services purchased in the ordinary course of business (other than trade accounts
payable arising in the ordinary course of business which are due less than three
months after the acceptance of such goods, materials or services), (d) with
respect to letters of credit or bankers acceptances issued for the account of
such Person or performance, surety or similar bonds, (e) for the payment of
money relating to a
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Capital Lease obligation or (f) under interest rate swaps, caps or similar
agreements and foreign exchange contracts, currency swaps or similar agreements;
(ii) any liability of any other Person of the kind described in the preceding
clause (i), which such Person has Guaranteed or which is otherwise its legal
liability; and (iii) any and all deferrals, renewals, extensions and refunding
of, or amendments, modifications or supplements to, any indebtedness of the kind
described in any of the preceding clauses (i) or (ii).
"Lien" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security interest).
"Permitted Liens" means (i) Liens on any asset of the Company or any
Subsidiary created solely to secure obligations incurred to finance the
refurbishment, improvement or construction of such asset, which obligations are
incurred no later than 180 days after completion of such refurbishment,
improvement or construction, and all renewals, extensions, refinancings,
replacements or refundings of such obligations, or to secure all or part of the
cost of such refurbishment, improvement or construction; (ii) (a) Liens to
secure the payment of the purchase price incurred in connection with the
acquisition (including acquisition through merger or consolidation) of any asset
(including shares of stock), including Capital Lease transactions in connection
with any such acquisition and (b) Liens existing on any asset at the time of
acquisition thereof or at the time of acquisition by the Company or any
Subsidiary of any Person then owning such asset, directly or indirectly, whether
or not such existing Liens were given to secure the payment of the purchase
price of the property to which they attach; provided that, with respect to
clause (a), such Liens shall be given within one year after such acquisition and
shall attach solely to the assets acquired or purchased and any improvements
then or thereafter placed thereon; (iii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (iv) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods; (v) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (vi) Liens encumbering
customary initial deposits and margin deposits and other Liens, in each case
securing Indebtedness of the Company or any Subsidiary under interest rate and
currency hedging instruments and forward contract, option, futures contracts,
futures options or similar agreements or arrangements designed to protect the
Company or any Subsidiary from fluctuations in interest rates, currencies or the
price of commodities or any combination of the foregoing; (vii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any Subsidiary in the
ordinary course of business, (viii) Liens in favor of the Company or any
Subsidiary; (ix) Liens for taxes, assessments or governmental charges or levies
on the assets of the Company or any Subsidiary if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being contested
in good faith and by appropriate proceedings or Liens for the excess of the
amount of any past due taxes for which a final assessment has not been received
over the amount of such taxes as estimated and paid; (x) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens and other similar Liens
on the assets of the Company or any Subsidiary arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
are being contested in good faith and by appropriate proceedings; (xi) Liens on
the assets of the Company or any Subsidiary incurred in the ordinary course of
business to secure performance of obligations with respect to statutory or
regulatory requirements, performance or return-of-money bonds, surety bonds or
other obligations of a like nature and incurred in a manner consistent with
industry practice; (xii) Liens on the assets of a Receivables Subsidiary in a
Qualified Receivables Transaction; (xiii) Liens in respect of any judgment
rendered which is being contested diligently and in good faith by appropriate
proceedings by the Company or any of its Subsidiaries and which does not have a
material adverse effect on the ability of the Company and its Subsidiaries to
operate the business or operations of the Company or its Subsidiaries taken as a
whole; and (xiv) Liens in favor of the United States or any state or territory
or possession thereof, or any foreign country, or any department, agency,
instrumentality or political subdivision of any of such domestic or foreign
governmental entity, to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any liability incurred for the
purpose of financing all or part of the purchase price or the cost of
constructing the asset subject to such Liens.
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"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or a Subsidiary) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including all
collateral securing such accounts receivable, all contracts and all guarantees
or other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets which, in each case, are customarily and
regularly transferred, or in respect of which security interests are customarily
granted, in connection with asset securitization transactions involving accounts
receivable.
"Receivables Subsidiary" means a Subsidiary of the Company which engages in
no activities other than in connection with the financing of accounts receivable
and which is designated by or pursuant to the authority of the Board of
Directors as a Receivables Subsidiary (a) no portion of the Indebtedness of
which (i) is guaranteed by the Company or any Subsidiary, (ii) is recourse to or
obligates the Company or any Subsidiary in any manner other than pursuant to
customary representations, warranties, covenants and indemnities entered into in
connection with a Qualified Receivables Transactions or (iii) subjects any
assets of the Company or any Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to the
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction and other than in respect of the related pledge of the financed
accounts receivable and (b) with which neither the Company nor any Subsidiary
has any obligation to maintain or preserve such Subsidiary's financial condition
or cause such Subsidiary to achieve certain levels of operating results.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" means a Person (other than an individual), a majority of the
outstanding voting stock, partnership interests, membership interests or other
equity interest, as the case may be, of which is owned or controlled, directly
or indirectly, by the Company or by one or more other Subsidiaries of the
Company. For the purposes of this definition, "voting stock" means stock having
voting power for the election of directors, trustees or managers, as the case
may be, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
"Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Senior Notes.
"Subsidiary Guarantor" means each Subsidiary of the Company existing on the
Closing Date and each new Subsidiary created after the Closing Date (in each
case other than Foreign Subsidiaries), in each case, that Guarantees the
Company's obligations under the Credit Agreement; provided that, if such
Subsidiary's Guarantee of the Company's obligations under the Credit Agreement
is released or ceases to be in effect, such Subsidiary shall no longer be a
Subsidiary Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec.
77aaa-77bbbb) as in effect on the Closing Date.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the
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payment of which the full faith and credit of the United States of America is
pledged and which are not callable or redeemable at the issuer's option.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be issued in the form of a Global Exchange Note.
The Global Exchange Note will be deposited with, or on behalf of, the Depository
and registered in the name of the Depository or its nominee. Except as set forth
below, the Global Exchange Note may be transferred, in whole and not in part,
only to the Depository or another nominee of the Depository. Investors may hold
their beneficial interests in the Global Exchange Note directly through the
Depository if they have an account with the Depository or indirectly through
organizations which have accounts with the Depository.
Exchange Notes that are issued as described below under "-- Certificated
Exchange Notes" will be issued in definitive form. Upon the transfer of an
Exchange Note in definitive form, such Exchange Note will, unless the Global
Exchange Note has previously been exchanged for Exchange Notes in definitive
form, be exchanged for an interest in the Global Exchange Note representing the
principal amount of Exchange Notes being transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Exchange Note, the Depository will credit,
on its book-entry registration and transfer system, the principal amount of the
Exchange Notes represented by such Global Exchange Note to the accounts of
participants. Ownership of beneficial interests in the Global Exchange Note will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Exchange Note will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'
interest) and such participants (with respect to the owners of beneficial
interests in the Global Exchange Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the Global Exchange
Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Exchange Note, the Depository or such nominee, as the case
may be, will be considered the sole legal owner and holder of the related
Exchange Notes for all purposes of such Exchange Notes and the Indenture. Except
as set forth below, owners of beneficial interests in the Global Exchange Note
will not be entitled to have the Exchange Notes represented by the Global
Exchange Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated Exchange Notes in definitive form and
will not be considered to be the owners or holders of any Exchange Notes under
the Global Exchange Note. The Company understands that under existing industry
practice, in the event an owner of a beneficial interest in the Global Exchange
Note desires to take any action that the Depository, as the holder of the Global
Exchange Note, is entitled to take, the Depository would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Exchange Note registered in the name of and held by the Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner and holder of the Global Exchange Note.
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The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Exchange
Note as shown on the records of the Depository or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Exchange Note held through such participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants. The Company will not have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interests in the Global Exchange Note for any Exchange Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depository and its participants or the relationship between such participants
and the owners of beneficial interests in the Global Exchange Note owning
through such participants.
Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, the Global Exchange Note may not be
transferred except as a whole by the Depository to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of such
Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Note among participants
of the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance by
the Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE NOTES
The Exchange Notes represented by the Global Exchange Note are exchangeable
for certificated Exchange Notes in definitive form of like tenor as such
Exchange Notes in denominations of U.S. $1,000 and integral multiples thereof if
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository of the Global Exchange Note or if at any time the
Depository ceases to be a clearing agency registered under the Exchange Act and
a successor Depository is not appointed by the Company within 90 days, (ii) the
Company in its discretion at any time determines not to have all of the Exchange
Notes represented by the Global Exchange Note or (iii) an Event of Default has
occurred and is continuing. Any Exchange Note that is exchangeable pursuant to
the preceding sentence is exchangeable for certificated Exchange Notes issuable
in authorized denominations and registered in such names as the Depository shall
direct. Subject to the foregoing, the Global Exchange Note is not exchangeable,
except for a Global Exchange Note of the same aggregate denomination to be
registered in the name of the Depository or its nominee.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. The Company and the Subsidiary Guarantors have
agreed pursuant to a registration rights agreement (the "Registration Rights
Agreement") with the Initial Purchasers, for the benefit of the holders of the
Senior Notes, that the Company will, at its cost, (i) within 90 days after the
Issue Date, file a Registration Statement with the SEC with respect to the
Exchange Offer to exchange the Outstanding Notes for Exchange Notes having terms
substantially identical in all material respects to the Outstanding Notes except
that such notes will not contain terms with respect to transfer restrictions and
(ii) use its reasonable best efforts to cause the Registration Statement to be
declared effective under the Securities Act within 150 days after the Issue
Date. Upon the effectiveness of the Registration Statement, the Company will
offer the Exchange Notes in exchange for surrender of the Outstanding Notes. The
Company will keep the Exchange Offer open for not less than 20 days (or longer
if required by applicable law) after the date notice of the Registered Exchange
Offer is mailed to the holders of the Senior Notes. For each Outstanding Note
surrendered to the Company pursuant to the Exchange Offer, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount at
maturity equal to that of the surrendered Outstanding Note at maturity. Interest
on each Exchange Note will accrue from the last interest payment date on which
interest was paid on the Outstanding Note surrendered in exchange thereof or, if
no interest has been paid on such Outstanding Note, from the date interest
begins to accrue on such Outstanding Note.
In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect the Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 180 days of the
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Closing Date, or if the Initial Purchasers so request with respect to
Outstanding Notes not eligible to be exchanged for Exchange Notes in the
Exchange Offer, or if any holder of Outstanding Notes is not eligible to
participate in the Exchange Offer or does not receive freely tradeable Exchange
Notes in the Exchange Offer, the Company, will, at its cost, (a) as promptly as
practicable, file a shelf registration statement (the "Shelf Registration
Statement") with the SEC covering resales of the Outstanding Notes or the
Exchange Notes, as the case may be, (b) use its reasonable best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act and (c) keep the Shelf Registration Statement effective until the earlier of
(i) the time when the Senior Notes covered by the Shelf Registration Statement
can be sold pursuant to Rule 144 without any limitations under clauses (c), (e),
(f) and (h) of Rule 144 and (ii) two years from the Issue Date; provided that
the Company will be permitted to suspend the use of the prospectus which forms a
part of the Shelf Registration Statement for a period not to exceed 45 days in
any three-month period or three periods not to exceed an aggregate of 90 days in
any 12-month period under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events. The Company
will, in the event a Shelf Registration Statement is filed, among other things,
provide to each holder for whom such Shelf Registration Statement was filed
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Senior Notes. A holder selling such Senior Notes pursuant to the
Shelf Registration Statement generally would be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
If (i) within 90 days after the Issue Date, neither the Registration
Statement nor the Shelf Registration Statement has been filed with the SEC; (ii)
within 180 days after the Issue Date, neither the Exchange Offer is consummated
nor the Shelf Registration Statement is declared effective; or (iii) after
either the Registration Statement or the Shelf Registration Statement is
declared effective, such registration statement thereafter ceases to be
effective or usable (subject to certain exceptions, including the blackout
provisions described above) in connection with resales of Outstanding Notes or
Exchange Notes in accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in clause (i) through
(iii) being herein called a "Registration Default"), additional cash interest
will accrue on the Outstanding Notes and the Exchange Notes at the rate of 0.50%
per annum from and including the date on which any such Registration Default
shall occur to but excluding the date on which all Registration Defaults have
been cured, calculated on the principal amount of the Senior Notes as of the
date on which such interest is payable. Such interest is payable in addition to
any other interest payable from time to time with respect to the Senior Notes.
If the Company effects the Exchange Offer, it will be entitled to close the
Registered Exchange Offer 20 business days after the commencement thereof
provided that it has accepted all Senior Notes theretofore validly tendered in
accordance with the terms of the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following summaries of certain indebtedness of the Company do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the definitive agreements governing such indebtedness, copies of
which are available upon request to the Company.
THE AMENDED CREDIT AGREEMENT
GENERAL
The Company and Coltec Aerospace Canada Limited, a Canadian subsidiary of
the Company (the "Canadian Borrower"), are parties to the Amended Credit
Agreement with various lenders (collectively, the "Lenders"), Bankers Trust
Company, as Administrative Agent, Bank of America National Trust and Savings
Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication
Agent, and Bank of Montreal, as Canadian Paying Agent. Capitalized terms used
but not defined in this summary have the meanings assigned thereto in the
Amended Credit Agreement.
The Amended Credit Agreement provides for revolving borrowings by the
Company and the Canadian Borrower of up to $900 million, which will be reduced
by 66 2/3% of the gross proceeds to the Company from the TIDES Offering and the
Senior Notes Offering (the "Total Commitment") and which expires on December 15,
2001. The Canadian Borrower may borrow up to $80 million under the Amended
Credit Agreement with the remainder of the Total Commitment available only to
the Company.
The Amended Credit Agreement also provides for the issuance of certain
standby letters of credit and trade letters of credit (collectively, the
"Letters of Credit") for the account of the Company; provided that the
outstanding amount of all Letters of Credit does not exceed, (x) when added to
the outstanding amount of letters of credit not issued under the Amended Credit
Agreement, $125 million or (y) when added to all loans outstanding under the
Amended Credit Agreement, the Total Commitment.
GUARANTEES
The obligations of the Company under the Amended Credit Agreement are
guaranteed by each existing domestic subsidiary of the Company and will be
guaranteed by each subsequently acquired domestic subsidiary (excluding the
trust that will issue the Convertible Preferred Securities in the TIDES Offering
and certain other subsidiaries) of the Company (the "Credit Agreement Subsidiary
Guarantees"). The obligations of the Canadian Borrower under the Amended Credit
Agreement are guaranteed by the Company and by each existing Canadian subsidiary
of the Canadian Borrower and will be guaranteed by each subsequently acquired
subsidiary of the Canadian Borrower.
COLLATERAL
Pledged Securities. Pursuant to a pledge agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended
as of April 16, 1998, made by the Company to Bankers Trust Company, as
Collateral Agent (the "Company Pledge Agreement"), the obligations of the
Company under the Amended Credit Agreement and the Senior Notes are secured by
pledges of all the capital stock of the Company's direct domestic subsidiaries
and 66% of the capital stock of the Company's direct foreign subsidiaries and
any promissory notes held by the Company.
Pursuant to a pledge agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Pledge Agreement"), the obligations of each domestic
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary
Guarantees of the Senior Notes are secured by pledges of all the capital stock
of such subsidiary's direct domestic subsidiaries and 66% of all the capital
stock of such subsidiary's direct foreign subsidiaries and any promissory notes
held by such subsidiary. The securities pledged pursuant to the Company Pledge
Agreement and the Subsidiaries Pledge Agreement are referred to herein as the
"Pledged Securities".
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Other Security. Pursuant to a security agreement, dated as of March 24,
1992 and as amended and restated as of December 18, 1996 and as further amended
as of April 16, 1998, made by the Company to Bankers Trust Company, as
Collateral Agent (the "Company Security Agreement"), the obligations of the
Company and loans to the Canadian Borrower under the Amended Credit Agreement
and the Senior Notes are secured by a security interest in substantially all
inventory, accounts receivable, a cash collateral account, intellectual property
rights, computer programs, contracts, goods, general intangibles, chattel paper,
documents and instruments of the Company and all proceeds of the foregoing.
Pursuant to a security agreement, dated as of March 24, 1992 and as amended
and restated as of December 18, 1996 and as further amended as of April 16,
1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral
Agent (the "Subsidiaries Security Agreement"), the obligations of each domestic
subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary
Guarantees of the Senior Notes are secured by a security interest in
substantially all inventory, accounts receivable, a cash collateral account,
intellectual property rights, computer programs, contracts, goods, general
intangibles, chattel paper, documents and instruments of such subsidiary and all
proceeds of the foregoing.
Real Property. The obligations of the Company under the Amended Credit
Agreement and the Senior Notes are secured by first mortgages or deeds of trust
on certain of the manufacturing plants owned by the Company and its
subsidiaries, including the plants in West Hartford, Connecticut, Euless, Texas,
Beloit, Wisconsin, and Longview, Texas (collectively, the "Mortgages"). See
"Business -- Properties".
The Company Pledge Agreement, the Subsidiaries Pledge Agreement, the
Company Security Agreement, the Subsidiaries Security Agreement and the
Mortgages are hereinafter referred to as the "Amended Collateral Documents".
The following is a summary of the material provisions of the Amended
Collateral Documents pertaining to the Collateral.
Collateral Agent. Bankers Trust Company will be the Collateral Agent under
each of the Amended Collateral Documents. Bankers Trust Company is also the
Administrative Agent under the Amended Credit Agreement. The Collateral Agent is
not a fiduciary to any of the secured creditors, including, without limitation,
the holders of the Senior Notes. However, any enforcement of the provisions of
the Amended Collateral Documents by the Collateral Agent will be made for the
benefit of all the secured creditors under the Amended Collateral Documents,
including for the benefit of the holders of the Senior Notes.
Obligations Secured by the Collateral. The obligations which are secured by
the Collateral include (i) payments of principal of and interest on the loans
under the Amended Credit Agreement, all reimbursement obligations and unpaid
drawings with respect to letters of credit under the Amended Credit Agreement
and all other obligations owing to the lenders in connection with the Amended
Credit Agreement and related documents, (ii) all liabilities in connection with
interest rate protection and other hedging agreements contemplated by the
Amended Credit Agreement and (iii) payments of principal of and interest on the
Senior Notes and the Exchange Notes and all other obligations of the Company
under the Indenture and the Senior Notes and the Exchange Notes (items (i), (ii)
and (iii) above, together with certain expenses of, and amounts paid by, the
Collateral Agent or any secured creditor, are hereinafter referred to as the
"Obligations").
Enforcement of Collateral Provisions. The Amended Collateral Documents may
be enforced only by the Collateral Agent, in each case acting upon instructions
from the "Required Secured Creditors", which is defined to mean the "Required
Banks", which, in turn, is defined to mean the lenders holding a majority of the
obligations (or of all the obligations in certain cases) under the Amended
Credit Agreement. Because the holders of the Senior Notes are not included in
the definition of "Required Secured Creditors", neither the holders of the
Senior Notes nor the Trustee under the Indenture relating to the Senior Notes
will have the ability to enforce the provisions of any of the Amended Collateral
Documents.
Generally, upon an acceleration of the obligations under the Amended Credit
Agreement, an acceleration of indebtedness under third-party debt agreements in
excess of $10 million, a voluntary, involuntary or court-declared bankruptcy or
certain other events, in each case as set forth in the Amended Credit Agreement,
or upon an Event of Default under the Indenture, the Required Secured Creditors
may direct the Collateral Agent to
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enforce the provisions of the Amended Collateral Documents. In such an event,
the Collateral Agent may exercise any of its rights as a secured creditor under
the Uniform Commercial Code and the Amended Collateral Documents (such as
foreclosing upon and selling portions of the Collateral and voting the Pledged
Securities).
The occurrence of an Event of Default under the Indenture will not give the
holders of the Senior Notes or the Trustee under the Indenture relating to the
Senior Notes the right at any time to direct the Collateral Agent to exercise
any of its rights or to enforce any provisions under the Amended Collateral
Documents.
Notwithstanding the foregoing, in the event that (i) the principal of any
secured Obligations has been accelerated or the final maturity thereof has
occurred and there exists a payment Event of Default where the aggregate
principal amount of such Obligations is at least $100 million and where such
payment Event of Default has continued for 90 days and (ii) the Required Secured
Creditors have not directed the Collateral Agent to enforce the provisions of
any of the Amended Collateral Documents, then a majority of the "Secured
Creditors" (defined to mean a majority of all the secured Obligations, including
the Senior Notes) may cause the Collateral Agent to enforce such provisions. The
Required Secured Creditors, however, would continue to have the right to direct
the manner and method of such enforcement.
Upon the occurrence of an event of default under the Amended Credit
Agreement, the Administrative Agent may notify the Company and the Canadian
Borrower of its election to terminate the Amended Credit Agreement and, upon
such notice, the obligations of the Company and the Canadian Borrower will be
accelerated and be immediately due and payable except that, upon the occurrence
of certain bankruptcy-related events of default, such termination and
acceleration will be deemed to occur immediately without notice. Upon such
acceleration, in addition to such other rights as are permitted by the Amended
Credit Agreement or by law, the Collateral Agent has the right to enforce all of
the liens and security interests created pursuant to the Amended Credit
Agreement and the Amended Collateral Documents.
Application of Proceeds. All moneys collected by the Collateral Agent upon
any sale or other disposition of the Collateral shall be applied as follows:
(i) first, to the payment of all amounts owing to the Collateral Agent;
(ii) second, to the payment of the "Primary Obligations," which is defined
to include all of (i) the obligations under the Amended Credit Agreement,
(ii) the Senior Notes and (iii) the obligations in connection with interest
rate protection and other hedging agreements contemplated by the Amended
Credit Agreement;
(iii) third, to the payment of the "Secondary Obligations," which is
defined to mean all Obligations other than the Primary Obligations; and
(iv) fourth, to the Company or its subsidiaries, as the case may be.
All actions required or permitted to be taken by the Senior Noteholders
will be taken only by the Trustee as directed by the Senior Noteholders and all
payments required to be made with respect to the Senior Notes will be paid to
the Trustee on behalf of the Senior Noteholders.
Amendments and Waivers. The Amended Collateral Documents may be amended or
waived by the Required Banks; provided that any change, waiver or modification
materially adversely affecting the rights and benefits of a single "Class" of
secured creditors (and not all secured creditors in a like or similar manner)
will require the written consent of the "Requisite Class Creditors" of such
Class, which is defined to mean a majority of such affected Class; provided
further that any Class will not be considered to be affected differently from
any other Class due to the Obligations of any such other Class being paid,
repaid, refinanced, renewed or extended and the Collateral being released, in
whole or in part (whether by action of such other Class or otherwise), as
security for such Class and such other Class. Each of the lenders under the
Amended Credit Agreement, the interest rate protection creditors and the holders
of the Senior Notes will constitute a separate Class.
Notwithstanding the foregoing, the Required Banks may at any time agree to
amendments to the Amended Collateral Documents in order to, among other things,
(i) secure additional extensions of credit or (ii) add
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additional Secured Creditors to a specified Class, in each case, without the
consent of the other Secured Creditors.
Release of Collateral. Pursuant to the terms of the Amended Collateral
Documents, any Collateral representing less than all or substantially all of the
Collateral may be released upon the direction of the Required Banks, which in
this context means Lenders representing holders of a majority of the Obligations
under the Amended Credit Agreement. The approval of all the Lenders under the
Amended Credit Agreement is required for releases of all or substantially all of
the Collateral, except as set forth in the following paragraph. Upon such
direction by the applicable Required Banks, the applicable Collateral will be
released whether or not the Senior Notes remain outstanding and without regard
to the ratings of the Company's Rated Indebtedness. Notwithstanding the
foregoing, in the event the Trustee notifies the Collateral Agent in writing
that the Senior Notes have been accelerated, the Collateral Agent will not
release any Collateral or terminate any Amended Collateral Documents, except
with the prior written consent of the holders of the Senior Notes holding a
majority of the then-outstanding Senior Notes.
In addition, all Collateral under the Amended Collateral Documents shall be
automatically released and all such Amended Collateral Documents shall be
terminated and of no further force or effect at such time as (x) no default or
event of default under the Amended Credit Agreement is in existence and (y) the
Company has then outstanding Rated Indebtedness which is at such time rated at
least BBB- by Standard & Poor's and Baa3 by Moody's; provided that the Rated
Indebtedness described above shall be required to be unsecured or, if secured,
both Standard & Poor's and Moody's shall have stated to the Company and the
Administrative Agent in writing that, assuming that neither the Amended Credit
Agreement nor the Senior Notes were secured, the long-term unsecured Debt
pursuant to the Amended Credit Agreement and the Senior Notes would be rated at
least BBB-by Standard & Poor's and Baa3 by Moody's at such time; provided
further that such release shall not be effected until the tenth Business Day
after the Company delivers to the Administrative Agent written notice of the
attainment of such rating and, if required, a copy of the written statements
specified above. Notwithstanding anything to the contrary contained in the
immediately preceding sentence or the proviso thereto, if the Company at any
time requests in writing that the Administrative Agent cause the release of all
Collateral under all the Amended Collateral Documents and establishes to the
satisfaction of the Administrative Agent that (x) no default or event of default
under the Amended Credit Agreement is in existence (and no default or event of
default shall be in existence after the release described below) and (y) at the
time of the release of all Collateral under all the Amended Collateral Documents
(and after giving effect thereto), the Company's Rated Indebtedness (which shall
be unsecured Debt after the release of Collateral contemplated by this
paragraph, and shall include the Debt under the Amended Credit Agreement and the
Senior Notes, to the extent then outstanding) shall be rated at least BBB-by
Standard & Poor's and Baa3 by Moody's (and the Company shall have furnished to
the Administrative Agent a written statement from each of Standard & Poor's and
Moody's to the effect that, if neither the Amended Credit Agreement nor the
Senior Notes were secured, the long term unsecured Debt pursuant to the Amended
Credit Agreement and the Senior Notes would be rated at least BBB- by Standard &
Poor's and Baa3 by Moody's at such time), then all Collateral under all the
Amended Collateral Documents shall be released and all such Amended Collateral
Documents shall be terminated and of no further force or effect.
Upon the disposition of Holley, Holley was released under the Amended
Credit Agreement and the Indenture as a Subsidiary Guarantor and its assets and
its capital stock was released under the Amended Collateral Documents as
security for borrowings under the Amended Credit Agreement and the Senior Notes.
See "Prospectus Summary -- Recent Development".
Termination. Each of the Amended Collateral Documents will terminate on
the date on which all Obligations under the Amended Credit Agreement have been
paid. In addition, the Amended Collateral Documents may be terminated upon the
direction of the Required Banks, which in this context means Lenders
representing all the Obligations under the Amended Credit Agreement. Upon such
termination of the Amended Collateral Documents, the Collateral will be released
whether or not the Senior Notes remain outstanding.
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COVENANTS
The Amended Credit Agreement includes certain financial covenants that
require the Company to maintain (i) a ratio of Consolidated Current Assets to
Consolidated Current Liabilities at all times of greater than 1.25 to 1.0, (ii)
an Interest Coverage Ratio for any period of four consecutive fiscal quarters of
greater than 3.0 to 1.0, (iii) a Leverage Ratio at all times prior to and
including June 30, 1998 of less than 4.25 to 1.0, from July 1, 1998 to and
including December 31, 1999 of less than 3.75 to 1.0, and thereafter of less
than 3.25 to 1.0. The Company has also agreed that the Company and its
subsidiaries will not make capital expenditures which in the aggregate exceed
$90 million for the fiscal year ending December 31, 1997, $75 million for the
fiscal year ending December 31, 1998, $65 million for each of the fiscal years
ending December 31, 1999 and December 31, 2000, and $70 million for the fiscal
year ending December 31, 2001.
The Amended Credit Agreement also includes covenants that prohibit the
Company and its subsidiaries from, among other things and subject to certain
exceptions, (i) incurring certain liens on the property and assets of the
Company and its subsidiaries, (ii) winding up, liquidating or dissolving its
affairs or entering into any transaction of merger or consolidation, or
conveying, selling, leasing or otherwise disposing of property or assets, (iii)
authorizing, declaring or paying any dividends (other than, among other things,
distributions on the Common Stock or Convertible Preferred Securities) or
repurchasing Common Stock or Convertible Preferred Securities, except, in any
fiscal year, subject to certain limitations, the Company may pay dividends or
repurchase Common Stock or Convertible Preferred Securities in an amount equal
to the greater of $7.5 million or 30% of Consolidated Net Income for the
preceding fiscal year, (iv) incurring Debt, other than Debt outstanding under
the Amended Credit Agreement and certain other existing Debt, accrued expenses,
the Senior Notes, the TIDES Debentures, Debt incurred to pay all or a portion of
the purchase price of equipment or machinery secured by liens placed upon
equipment or machinery used in the ordinary course of the business of the
Company, Debt incurred with respect to certain lease obligations, Debt under
interest rate protection agreements, certain permitted acquired Debt, Debt of
foreign subsidiaries of the Company not to exceed $100 million, and other Debt
not otherwise permitted under the Amended Credit Agreement up to the aggregate
amount of $100 million, (v) lending money or extending credit or making advances
to any person or purchasing or acquiring any stock, obligations or securities of
any person, (vi) entering into transactions with affiliates, except in the
ordinary course of business and on terms and conditions substantially as
favorable to the Company or such subsidiary as would be obtainable in a
comparable arm's-length transaction with an unaffiliated entity, (vii) prepaying
or redeeming the Senior Notes in an amount greater than $100 million, (viii)
restricting the ability of its subsidiaries to pay dividends or other
distributions on its capital stock, make loans or advances to the Company or
other subsidiaries or transfer assets to the Company, (ix) making certain
issuances of capital stock or securities convertible into or exercisable for
capital stock and (x) certain other restrictions.
CERTAIN DEFINITIONS
"Backstopped Letters of Credit" means certain existing Letters of Credit
described in the Amended Credit Agreement with respect to which standby Letters
of Credit serve as support for the reimbursement obligations of the Company and
its subsidiaries to the issuers of such Backstopped Letters of Credit.
"Capitalized Lease Obligations" of any person means all rental obligations
which, under generally accepted accounting principles, are or will be required
to be capitalized on the books of such person, in each case taken at the amount
thereof accounted for as indebtedness in accordance with such principles.
"Consolidated Current Assets" means the consolidated current assets of the
Company and its subsidiaries plus the Total Unutilized Commitment less the
aggregate amount of Non-Facility Letter of Credit Outstandings at such time.
"Consolidated Current Liabilities" means the consolidated current
liabilities of the Company and its subsidiaries, but excluding the current
portion of any long-term Debt which would otherwise be included therein.
"Consolidated EBITDA" means for any period Consolidated EBIT, adjusted by
adding thereto the amount of all amortization of intangibles and depreciation
that were deducted in arriving at Consolidated EBIT for such period.
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"Consolidated EBIT" means for any period the consolidated net income of the
Company and its subsidiaries before interest income, consolidated interest
expense and provision for taxes and without giving effect to any extraordinary
gains or gains from sales of assets other than inventory sold in the ordinary
course of business (determined after taking into account losses from sales of
such assets).
"Credit Documents" means the Amended Credit Agreement, and all documents
executed in connection therewith, including each of the promissory notes
required to be executed by the Company, any subsidiary of the Company or the
Canadian Borrower under the Amended Credit Agreement, the Credit Guarantees and
each Security Document.
"Debt" means, as to any person, without duplication, (i) all indebtedness
(including principal, interest, fees and charges) of such person for borrowed
money or for the deferred purchase price of property or services (other than
trade payables incurred in the ordinary course of business), (ii) the maximum
amount available to be drawn under all letters of credit (excluding Backstopped
Letters of Credit so long as (x) fully supported by one or more Letters of
Credit issued under the Amended Credit Agreement and (y) no unreimbursed drawing
has been made under the respective Backstopped Letter of Credit) issued for the
account of such person and with respect to which such person has a reimbursement
obligation and all unpaid drawings in respect of such letters of credit, (iii)
all Debt of the types described in clause (i) (other than certain trade
payables), (ii), (iv), (v), (vi) or (vii) secured by liens on property of such
person, (iv) all Capitalized Lease Obligations of such person, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all contingent obligations of such persons and (vii) all
obligations under any interest rate protection or other hedging agreement or
under any similar type of agreement entered into with a person not a Lender;
provided that the aggregate outstanding amount of any Debt described in clause
(iii) above shall equal the lesser of (x) the aggregate outstanding amount of
all Debt secured by such lien and (y) the fair market value of all property
subject to such lien; provided further that on and after the date on which any
other Debt for borrowed money (the "Defeased Debt") shall have been permanently
defeased or otherwise satisfied and discharged in the manner provided in the
documentation governing such Defeased Debt, and so long as the Company and its
subsidiaries are permanently relieved as a result thereof of all monetary
obligations, and obligations to comply with covenants, with respect thereto
(which defeasances, satisfactions and discharges are subject to the limitations
set forth in the Amended Credit Agreement), such Defeased Debt shall not be
considered outstanding Debt for purposes of the Amended Credit Agreement.
"Interest Coverage Ratio" means for any period the ratio of Consolidated
EBITDA for such period to consolidated interest expense for such period.
"Letter of Credit Outstandings" means, at any time, the sum of (i) the
aggregated stated amount of all then outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid drawings at such time.
"Leverage Ratio" means, at any date of determination, the ratio of (i)
consolidated indebtedness on such date to (ii) Consolidated EBITDA for the
period of four consecutive quarters most recently ended on or prior to such
date, in each case taken as one accounting period.
"Moody's" means Moody's Investors Service, Inc.
"Non-Facility Letters of Credit" means each letter of credit (other than
any Letter of Credit issued pursuant to the Amended Credit Agreement) issued for
the account of the Company and its subsidiaries.
"Rated Indebtedness" means long-term unsecured Debt of the Company which is
rated by both Standard & Poor's and Moody's, or if no such Debt of the Company
shall be rated, Debt under the Amended Credit Agreement or Debt of the Company
which is equally and ratably secured with Debt under the Amended Credit
Agreement, to the extent such Debt shall be rated by either Standard & Poor's or
Moody's.
"Security Documents" means each pledge agreement, each security agreement,
each mortgage and each additional security document.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc.
68
<PAGE> 73
"Total Unutilized Commitment" means, at any time, an amount equal to the
remainder of (x) the then Total Commitment, less (y) the sum of (I) the
aggregate principal amount of revolving borrowings then outstanding plus (II)
the then aggregate amount of Letter of Credit Outstandings.
OTHER INDEBTEDNESS
As of December 31, 1997, the Company had outstanding $7.5 million of 9 3/4%
senior notes due 1999, $7.4 million of 9 3/4% senior notes due 2000 and $48.8
million of other indebtedness due between 1998 and 2010. In 1996, the Company
conducted a tender offer and consent solicitation for the 9 3/4% senior notes
due 1999 and 9 3/4% senior notes due 2000, pursuant to which all restrictive
covenants were removed and all notes other than the amounts set forth in the
preceding sentence were repurchased.
UNITED STATES TAXATION
GENERAL
The following is a general discussion of the material U.S. Federal income
tax consequences of a holder's rights under the Registration Rights Agreement.
This discussion assumes that a holder of Senior Notes will hold such Senior
Notes as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"). This discussion does not deal
with all U.S. Federal income tax consequences that may be relevant to particular
investors in light of their personal investment circumstances, including persons
holding Senior Notes as part of a conversion or constructive sale transaction or
as part of a hedge or hedging transaction, or as a position in a straddle for
tax purposes, nor does it discuss U.S. Federal income tax consequences
applicable to certain types of investors subject to special treatment under U.S.
Federal income tax laws, including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, persons that have a
functional currency other than the U.S. dollar, investors in pass-through
entities and foreign persons, including foreign corporations, partnerships and
individuals. In addition, this discussion does not consider the effect of any
foreign, state, local, gift, estate or other tax laws that may be applicable to
a particular investor.
This discussion is based upon current provisions of the Code, Treasury
regulations promulgated thereunder, administrative rulings and pronouncements of
the Internal Revenue Service ("IRS") and judicial decisions currently in effect,
all of which are subject to change, possibly with retroactive effect. The
Company has not and will not seek any rulings or opinions from the IRS with
respect to the matters discussed herein, and as a result, there can be no
assurance that the IRS will not disagree with or challenge any of the
conclusions set forth in this discussion.
EXCHANGE OFFER
The Company will be required to pay additional cash interest on the Senior
Notes if it fails to comply with certain of its obligations under the
Registration Rights Agreement. Such additional interest should be taxable to a
holder as ordinary interest income at the time it accrues or is received in
accordance with each such holder's usual method of tax accounting. It is
possible, however, that the IRS may take a different position, in which case
holders might be required to include such additional interest in income as it
accrues or becomes fixed (regardless of their usual method of tax accounting).
The exchange of Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer will not constitute a taxable event for U.S. Federal income tax
purposes. As a result, (i) a holder of Outstanding Notes will not recognize
taxable gain or loss as a result of the exchange of Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer, (ii) the holding period of the
Exchange Notes will include the holding period of the Outstanding Notes
surrendered in exchange therefor and (iii) a holder's adjusted tax basis in the
Exchange Notes will be the same as such holder's adjusted tax basis in the
Outstanding Notes immediately prior to the surrender of such Outstanding Notes
pursuant to the Exchange Offer.
UNITED STATES ALIEN HOLDERS OF NOTES
For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of a Senior Note that is a corporation, individual,
partnership, estate or trust that is, as to the United States, a foreign
corporation, a non-resident alien individual, a foreign partnership or a
nonresident fiduciary of a foreign estate or trust.
69
<PAGE> 74
Under present United States Federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payment of principal and interest on the Senior Notes by the Company or
any paying agent to any United States Alien Holder will not be subject to United
States Federal withholding tax, provided that, in the case of interest, (i) such
Holder does not own, actually or constructively, ten percent or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, is not a controlled foreign corporation related, directly or indirectly,
to the Company through stock ownership, and is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (ii) either (A) the beneficial
owner of the Senior Note certifies to the Company or its agent, under penalties
of perjury, that it is not a United States holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution"), and holds the Senior Notes in such
capacity, certifies to the Company or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and furnishes the
Company or its agent with a copy thereof.
(b) a United States Alien Holder of a Senior Note will not be subject to
United States Federal income tax on gain realized on the sale, exchange or other
disposition of such Senior Note unless (i) subject to certain exceptions, such
Holder is an individual who is present in the United States for 183 days or more
during the taxable year of disposition and certain other requirements are met;
(ii) such gain is effectively connected with the conduct by such Holder of a
trade or business in the United States; or (iii) the United States Alien Holder
is subject to tax pursuant to the provisions of the Code applicable to certain
former citizens and residents of the United States; and
(c) a Senior Note or coupon held by an individual who is not a citizen or
resident of the United States at the time of his death will not be subject to
United States Federal estate tax as a result of such individual's death,
provided that the individual does not own, actually or constructively, ten
percent or more of the total combined voting power of all classes of stock of
the Company entitled to vote and, at the time of the individual's death,
payments with respect to such Senior Note would not have been effectively
connected to the conduct by such individual of a trade or business in the United
States.
If a United States Alien Holder is engaged in a trade or business in the
United States and interest paid with respect to the Notes is effectively
connected with the conduct of such trade or business, the United States Alien
Holder, although exempt from the withholding tax discussed in clause (a) above,
will be subject to United States federal income tax on such interest on a net
income basis in the same manner as if it were a United States person. In
addition, if such United States Alien Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to adjustments.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Annual information reporting will apply to interest income on the Senior
Notes and payments made on, and proceeds from the sale of, the Senior Notes may
be subject to a backup withholding tax of 31% unless the holder complies with
certain identification requirements. Any amounts withheld from payment to a
United States Alien Holder under the backup withholding rules will be allowed as
a credit against such Holder's United States Federal income tax liability and
may entitle such Holder to a refund, provided that the required information is
furnished to the United States Internal Revenue Service.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF
THE SENIOR NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.
70
<PAGE> 75
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Senior Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the issuance and sale of the Exchange
Notes offered hereby will be passed upon for the Company by Robert J. Tubbs,
Executive Vice President, General Counsel and Secretary of the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report with respect thereto, and is included herein.
71
<PAGE> 76
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Earnings for Years Ended December
31, 1997, 1996 and 1995................................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1996... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.......................... F-5
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995.............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 77
COLTEC INDUSTRIES INC
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Coltec Industries Inc:
We have audited the accompanying consolidated balance sheets of Coltec
Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coltec Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
February 2, 1998 (except with respect to information discussed in Note 20, as to
which the
date is April 16, 1998)
F-2
<PAGE> 78
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net sales............................................... $1,314,869 $1,159,691 $1,099,624
Cost of sales........................................... 898,269 811,123 744,201
---------- ---------- ----------
Gross profit............................................ 416,600 348,568 355,423
Selling and administrative.............................. 218,808 190,993 186,401
Special charges......................................... -- -- 27,000
---------- ---------- ----------
Operating income........................................ 197,792 157,575 142,022
Interest expense and other, net......................... 54,043 74,894 89,886
---------- ---------- ----------
Earnings from continuing operations before income taxes
and extraordinary item................................ 143,749 82,681 52,136
Income taxes............................................ 48,875 28,111 17,615
---------- ---------- ----------
Earnings from continuing operations before extraordinary
item.................................................. 94,874 54,570 34,521
---------- ---------- ----------
Discontinued operations (net of tax)
Income from operations................................ -- 19,252 36,639
Gain on sale.......................................... -- 37,931 --
---------- ---------- ----------
Total discontinued operations.................... -- 57,183 36,639
---------- ---------- ----------
Extraordinary item (net of tax)......................... -- (30,614) (254)
---------- ---------- ----------
Net earnings............................................ $ 94,874 $ 81,139 $ 70,906
========== ========== ==========
Basic earnings per common share
Before extraordinary item............................. $ 1.44 $ .79 $ .49
---------- ---------- ----------
Discontinued operations
Income from operations............................. -- .28 .53
Gain on sale....................................... -- .55 --
---------- ---------- ----------
Total discontinued operations.................... -- .83 .53
---------- ---------- ----------
Extraordinary item.................................... -- (.44) --
---------- ---------- ----------
Net earnings.......................................... $ 1.44 $ 1.18 $ 1.02
========== ========== ==========
Weighted-average common shares.......................... 65,896 69,091 69,839
========== ========== ==========
Diluted earnings per common share
Before extraordinary item............................. $ 1.42 $ .79 $ .49
---------- ---------- ----------
Discontinued operations
Income from operations............................. -- .28 .53
Gain on sale....................................... -- .54 --
---------- ---------- ----------
Total discontinued operations.................... -- .82 .53
---------- ---------- ----------
Extraordinary item.................................... -- (.44) --
---------- ---------- ----------
Net earnings.......................................... $ 1.42 $ 1.17 $ 1.02
========== ========== ==========
Diluted weighted-average common shares.................. 66,911 69,376 69,839
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE> 79
COLTEC INDUSTRIES INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 14,693 $ 15,029
Accounts and notes receivable, net of allowance of $2,894 in
1997 and $2,007 in 1996................................... 120,311 190,325
Inventory, net.............................................. 256,736 204,198
Deferred income taxes....................................... 15,195 10,524
Other current assets........................................ 20,508 22,895
---------- ----------
Total current assets................................... 427,443 442,971
Property, plant and equipment, net.......................... 287,619 214,790
Costs in excess of net assets acquired, net................. 157,751 132,872
Other assets................................................ 60,221 58,869
---------- ----------
$ 933,034 $ 849,502
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt........................... $ 1,811 $ 2,528
Accounts payable............................................ 93,799 55,410
Accrued expenses............................................ 138,969 155,229
Current portion of liabilities of discontinued operations... 4,999 14,229
---------- ----------
Total current liabilities.............................. 239,578 227,396
Long-term debt.............................................. 757,578 717,722
Deferred income taxes....................................... 79,229 50,646
Other liabilities........................................... 60,892 100,005
Liabilities of discontinued operations...................... 154,918 170,740
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock -- $.01 par value, 2,500,000 shares
authorized, issued and outstanding -- none
Common stock -- $.01 par value, 100,000,000 shares
authorized, 70,501,948 and 70,398,661 shares issued at
December 31, 1997 and 1996, respectively (excluding
25,000,000 shares held by a wholly owned subsidiary)...... 705 704
Capital surplus............................................. 642,828 643,221
Retained deficit............................................ (912,029) (1,006,903)
Unearned compensation....................................... (2,721) (2,136)
Minimum pension liability................................... (1,646) (3,200)
Foreign currency translation adjustments.................... (6,745) (1,151)
---------- ----------
(279,608) (369,465)
Less cost of 4,666,406 and 3,182,822 shares of common stock
in treasury at December 31, 1997 and 1996, respectively... (79,553) (47,542)
---------- ----------
(359,161) (417,007)
---------- ----------
$ 933,034 $ 849,502
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 80
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................... $ 94,874 $ 81,139 $ 70,906
Adjustments to reconcile net earnings to cash provided
by operating activities
Gain on divestitures................................. -- (66,791) --
Extraordinary item................................... -- 51,001 390
Special charge provision............................. -- -- 27,000
Depreciation and amortization........................ 38,415 36,014 42,086
Deferred income taxes................................ 24,791 39,146 5,665
Payments of liabilities of discontinued operations... (25,052) (19,563) (2,504)
Special charge payments.............................. (11,746) (6,309) (8,945)
Foreign currency translation adjustment.............. (5,594) 665 (1,135)
Other operating items................................ (6,951) (4,370) 19,791
Changes in assets and liabilities, net of effects
from acquisitions and divestitures:
Accounts and notes receivable..................... (4,263) (42,602) (6,632)
Inventories....................................... (42,508) 2,704 (32,373)
Other current assets.............................. 3,455 (617) 3,762
Accounts payable.................................. 35,963 (55) (4,283)
Accrued expenses.................................. (18,972) (21,302) (21,071)
Accrued pension liability......................... (20,993) 443 (1,649)
--------- --------- ---------
Cash provided by operating activities................ 61,419 49,503 91,008
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from divestitures............................. -- 329,113 --
Capital expenditures................................... (81,218) (44,550) (42,496)
Acquisition of businesses.............................. (60,711) -- (21,750)
Other.................................................. -- -- (2,512)
--------- --------- ---------
Cash provided by (used in) investing activities...... (141,929) 284,563 (66,758)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt refinancing......................... -- 542,000 --
Issuance of long-term debt............................. 813 -- 19,070
Repayment of long-term debt............................ (8,113) (622,582) (13,537)
Increase (decrease) in revolving facility, net......... 39,500 (196,000) (30,000)
Purchase of treasury stock............................. (42,695) (46,426) --
Proceeds from sale of accounts receivable.............. 82,500 -- --
Proceeds from exercise of stock options................ 8,169 -- --
--------- --------- ---------
Cash provided by (used in) financing activities...... 80,174 (323,008) (24,467)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents....... (336) 11,058 (217)
Cash and cash equivalents -- beginning of year......... 15,029 3,971 4,188
--------- --------- ---------
Cash and cash equivalents -- end of year............... $ 14,693 $ 15,029 $ 3,971
========= ========= =========
Supplemental cash flow data:
Cash paid for:
Interest.......................................... $ 50,207 $ 74,870 $ 92,292
Income taxes...................................... 19,327 27,667 41,685
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 81
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK MINIMUM CURRENCY
--------------- CAPITAL RETAINED UNEARNED PENSION TRANSLATION
SHARES AMOUNT SURPLUS DEFICIT COMPENSATION LIABILITY ADJUSTMENTS
------ ------ -------- ----------- ------------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994... 70,016 $700 $638,407 $(1,158,948) $(3,480) $ -- $ (681)
Net earnings................. 70,906
Issuance of restricted stock,
net........................ 61 1 1,006 1,072
Exercise of stock options.... (30)
Tax benefit from stock option
and incentive plan......... 36
Foreign currency translation
adjustments................ (1,135)
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1995... 70,077 701 639,419 (1,088,042) (2,408) -- (1,816)
Net earnings................. 81,139
Repurchase of common stock...
Issuance of restricted stock,
net........................ 322 3 3,941 272
Exercise of stock options....
Tax benefit from stock option
and incentive plan......... (139)
Minimum pension liability.... (3,200)
Foreign currency translation
adjustments................ 665
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1996... 70,399 704 643,221 (1,006,903) (2,136) (3,200) (1,151)
Net earnings................. 94,874
Repurchase of common stock...
Issuance of restricted stock,
net........................ 103 1 2,173 (585)
Exercise of stock options.... (2,566)
Minimum pension liability.... 1,554
Foreign currency translation
adjustments................ (5,594)
------ ---- -------- ----------- ------- ------- -------
Balance, December 31, 1997... 70,502 $705 $642,828 $(912,029) $(2,721) $(1,646) $(6,745)
====== ==== ======== =========== ======= ======= =======
<CAPTION>
TREASURY STOCK
-----------------
SHARES AMOUNT TOTAL
------ -------- ---------
<S> <C> <C> <C>
Balance, December 31, 1994... (99) $ (1,599) $(525,601)
Net earnings................. 70,906
Issuance of restricted stock,
net........................ (26) (422) 1,657
Exercise of stock options.... 25 405 375
Tax benefit from stock option
and incentive plan......... 36
Foreign currency translation
adjustments................ (1,135)
------ -------- ---------
Balance, December 31, 1995... (100) (1,616) (453,762)
Net earnings................. 81,139
Repurchase of common stock... (3,129) (46,426) (46,426)
Issuance of restricted stock,
net........................ (10) (142) 4,074
Exercise of stock options.... 56 642 642
Tax benefit from stock option
and incentive plan......... (139)
Minimum pension liability.... (3,200)
Foreign currency translation
adjustments................ 665
------ -------- ---------
Balance, December 31, 1996... (3,183) (47,542) (417,007)
Net earnings................. 94,874
Repurchase of common stock... (2,160) (42,695) (42,695)
Issuance of restricted stock,
net........................ (4) (51) 1,538
Exercise of stock options.... 681 10,735 8,169
Minimum pension liability.... 1,554
Foreign currency translation
adjustments................ (5,594)
------ -------- ---------
Balance, December 31, 1997... (4,666) $(79,553) $(359,161)
====== ======== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 82
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF ACCOUNTING POLICIES
Organization:
Coltec Industries Inc (the Company) is a diversified manufacturing company
serving the aerospace and general industrial markets primarily in the United
States, Canada and Europe.
Basis of Presentation:
Investments in which the Company has ownership of 50% or more of the voting
common stock are consolidated in the financial statements. Intercompany accounts
and transactions are eliminated.
Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
presentation.
Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Revenue Recognition:
Revenue, including revenue under long-term commercial and government
contracts and programs, is recorded at the time deliveries or customer
acceptances are made and the Company has the contractual right to bill.
Inventories:
Inventories, including inventories under long-term commercial and
government contracts and programs, are valued at the lower of cost or market.
Cost elements included in inventory are material, labor and factory overhead,
primarily using standard cost, which approximates actual cost. Cost on
approximately 50% of the domestic inventory at December 31, 1997 and 1996 was
determined on the last-in first-out basis. Cost on the remainder of the
inventory is generally determined on the first-in first-out basis.
Property, Plant and Equipment:
Property, plant and equipment is carried at cost. Depreciation of plant and
equipment is provided generally by using the straight-line method, based on
estimated useful lives of the assets. The ranges of estimated useful lives used
in computing depreciation for financial reporting are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements........................................... 5-40
Buildings and equipment..................................... 10-45
Machinery and equipment..................................... 3-20
</TABLE>
For leasehold improvements, the estimated useful life is the lesser of the
asset life or the lease term.
Renewals and betterments are capitalized by additions to the related asset
accounts, while repair and maintenance costs are charged against earnings.
Costs in Excess of Net Assets Acquired:
It is the Company's policy to amortize the excess costs arising from
acquisitions on a straight-line basis over periods not to exceed 40 years. In
evaluating the value and future benefits of the excess costs arising from
acquisitions, the recoverability from operating income is measured. Under this
approach, the carrying value would be reduced if it is probable that
management's best estimate of future operating income from related
F-7
<PAGE> 83
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
operations before amortization will be less than the carrying amount of the
excess costs arising from acquisitions over the remaining amortization period.
At December 31, 1997 and 1996, accumulated amortization related to all completed
acquisitions was $74,013 and $68,045, respectively.
Income Taxes:
Income taxes are provided using the liability method. Under this method,
deferred tax assets and liabilities are recognized based on differences between
the financial statement and tax bases of assets and liabilities using presently
enacted tax rates.
Environmental Expenditures:
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are accrued when it is probable that an obligation has been incurred and the
amount can be reasonably estimated. Expenditures incurred for environmental
compliance with respect to pollution prevention and ongoing monitoring programs
are expensed as incurred. Expenditures that increase the value of the property
are capitalized.
Start-up Costs:
Start-up costs related to new operations and new product lines are expensed
as incurred.
Cash and Cash Equivalents:
The Company considers all short-term investments purchased with a maturity
of three months or less to be cash equivalents.
Foreign Currency Translation:
The financial statements of foreign subsidiaries were prepared in their
respective local currencies and were translated into U.S. dollars at year-end
rates for assets and liabilities and at monthly weighted-average rates for
income and expenses. Translation adjustments are included in shareholders'
equity in the Consolidated Balance Sheets. Foreign currency transaction gains
and losses are included in net earnings. For 1997, 1996 and 1995, such gains and
losses were not significant.
2. ACQUISITIONS AND DIVESTITURES
On June 30, 1997, the Company acquired the assets of AMI Industries Inc.
(AMI), a Colarado-based manufacturer of flight attendant and cockpit seats for
commercial aircraft, for approximately $25,000. The purchase agreement also
includes contingent payments based on earning levels for the years ended
December 31, 1997-2000. These contingent payments will be recorded as additional
purchase price and amortized over the remaining life of goodwill. For financial
statement purposes, the acquisition was accounted for as a purchase and,
accordingly, AMI's results are included in the Company's consolidated financial
statements since the date of acquisition. The purchase price, which was financed
through available cash resources, has been allocated to the acquired assets
based upon their fair market values. The $12,200 excess of the purchase price
over net assets is being amortized over 25 years. AMI expects annual sales to
approximate $40,000.
On October 7, 1997, the Company acquired the assets of the sheet rubber and
conveyor belt business of Dana Corporation's Boston Weatherhead division for
$28,000. Annualized sales are expected to approximate $35,000. The acquisition
was accounted for as a purchase and its results are included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price, which was also financed through available cash resources, has been
allocated to the acquired assets based upon their fair market values. The $6,900
excess of the purchase price over net assets is being amortized over 25 years.
The impact of these acquisitions was not material in relation to the
Company's results of operations. Consequently, pro forma information is not
presented. The Company also had several small acquisitions during 1997, which
were not material to the Company's financial position or results of operations.
F-8
<PAGE> 84
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In June 1996, the Company sold Holley Automotive, Coltec Automotive and
Performance Friction Products to Borg-Warner Automotive, Inc. for $296,522 in
cash. In December 1996, Coltec sold Farnam Sealing Systems division to Meillor
SA for $20,728 in cash and a note receivable for $3,000. The sale of these
automotive original equipment (OE) components businesses resulted in an
after-tax gain of $37,931 (net of income taxes of $25,332), net of liabilities
retained, transaction costs and obligations relating to the sales. The sale of
the automotive OE components businesses represented a disposal of the Company's
Automotive Segment. Accordingly, the 1996 and 1995 Consolidated Statements of
Earnings were restated to reflect the operations of the automotive OE components
businesses as a discontinued operation. Net sales of the discontinued automotive
OE components businesses were $182,599 and $302,260 in 1996 and 1995,
respectively.
In December 1996, the Company also sold the exhaust systems and components
business of its Stemco division for $11,863 resulting in a pre-tax gain of
$3,528. Such gain is reflected in the 1996 Consolidated Statement of Earnings in
continuing operations. Net sales of the exhaust systems and components business
were $18,085 and $20,503 in 1996 and 1995, respectively.
3. EXTRAORDINARY ITEM
In 1996, the Company redeemed all of its outstanding 11 1/4% debentures and
substantially all of its outstanding 9 3/4% and 10 1/4% senior notes at
redemption prices ranging from 105.125% to 106.987% of par. The redemption of
these notes including consent payments resulted in an extraordinary charge of
$30,614, net of income taxes of $20,387.
The Company incurred extraordinary charges of $254, net of income taxes of
$136, in 1995 in connection with early retirement of debt.
4. SPECIAL CHARGES
In the third quarter of 1995, the Company recorded a special charge of
$27,000, primarily to cover the costs of closing the Walbar compressor blade
facility in Canada. The facility was closed during 1996. The charge also covered
selected workforce reductions throughout the Company. The special charge
included costs to cover the cancellation of contractual obligations resulting
from the decision to close the Walbar facility, asset write-downs, severance and
employee-related costs and other costs necessary to implement the shutdown of
the Walbar facility and selected workforce reductions throughout the Company.
At December 31, 1997 all related costs had been charged and the remaining
accrual was reversed. The activity in the related reserve through December 31,
1997 was as follows:
<TABLE>
<CAPTION>
CONTRACTUAL ASSET
OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL
----------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
1995 charge........................ $ 9,065 $ 7,845 $ 5,084 $ 5,006 $ 27,000
1995 activity...................... (65) (4,549) (1,778) (2,553) (8,945)
------- ------- ------- ------- --------
December 31, 1995.................. 9,000 3,296 3,306 2,453 18,055
1996 activity...................... (961) (1,875) (1,876) (1,597) (6,309)
------- ------- ------- ------- --------
December 31, 1996.................. 8,039 1,421 1,430 856 11,746
1997 activity...................... (1,200) -- (517) (29) (1,746)
Reversal........................... (6,839) (1,421) (913) (827) (10,000)
------- ------- ------- ------- --------
December 31, 1997.................. $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ========
</TABLE>
F-9
<PAGE> 85
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In the third quarter of 1997, the Company recorded a special charge of
$10,000, to cover the restructuring of its Industrial Segment. This special
charge included the costs of closing its FMD Electronics operations in Roscoe,
Illinois and its Ortman Fluid Power operations in Hammond, Indiana. The special
charge also included the costs to restructure the Company's Industrial Segment
businesses in Canada and Germany and certain termination costs related to the
relocation of the Delavan Commercial divisional headquarters to North Carolina.
The third quarter 1997 charge included costs resulting from cancellation of
contractual obligations, asset writedowns, severance and employee-related costs
and other costs to shut down these facilities that will not benefit future
operations. The related reserve activity for the year ended December 31, 1997
was as follows:
<TABLE>
<CAPTION>
CONTRACTUAL ASSET
OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL
----------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
1997 charge........................ $ 641 $ 1,049 $ 5,425 $ 2,885 $ 10,000
1997 activity...................... 641 1,049 5,425 2,885 10,000
------- ------- ------- ------- --------
December 31, 1997.................. $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ========
</TABLE>
5. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share, effective December 15, 1997. The Company's
reported earnings per common share for 1996 and 1995 equaled diluted earnings
per share as set forth in SFAS No. 128. As a result, the Company's reported
earnings per share for 1996 and 1995 were not restated.
Basic earnings per common share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the year.
Diluted earnings per common share is computed by using the treasury stock method
to determine shares related to stock options and restricted stock.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted-average common shares.............................. 65,896 69,091 69,839
Stock options and restricted stock issued................... 1,015 285 --
------ ------ ------
Diluted weighted-average common shares...................... 66,911 69,376 69,839
====== ====== ======
</TABLE>
6. SALE OF ACCOUNTS RECEIVABLE
In September 1997, the Company and certain of its subsidiaries sold their
U.S. and Canadian customer trade receivables to CNC Finance LLC (CNC Finance), a
wholly-owned bankruptcy remote subsidiary of the Company. CNC Finance entered
into a three-year agreement to sell without recourse, on a revolving basis, an
undivided fractional ownership interest in the receivables, based on the level
of eligible receivables, up to a maximum of $85,000 to a special purpose entity
of a financial institution. At December 31, 1997, $82,500 of the Company's
receivables were sold under this agreement and the sale was reflected as a
reduction of accounts receivable in the 1997 Consolidated Balance Sheet. The
undivided interests were sold at a discount which was included in Interest
expense and other, net in the 1997 Consolidated Statement of Earnings.
F-10
<PAGE> 86
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
7. INVENTORY
Inventories consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Finished goods.............................................. $ 53,748 $ 48,813
Work in process and finished parts.......................... 158,937 122,817
Raw materials and supplies.................................. 44,051 32,568
-------- --------
Total.................................................. $256,736 $204,198
======== ========
</TABLE>
At December 31, 1997 and 1996, $54,441 and $45,371, respectively, of
contract advances were offset against inventories under long-term commercial and
government contracts and programs in the Consolidated Balance Sheets. Losses on
commercial and government contracts and programs are recognized in full when
identified.
The excess of current cost over last-in, first-out cost at December 31,
1997 and 1996 was $22,022 and $20,152, respectively.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and improvements....................................... $ 14,517 $ 16,182
Buildings and equipment..................................... 135,173 121,515
Machinery and equipment..................................... 486,335 415,749
Leasehold improvements...................................... 12,209 11,239
Construction in progress.................................... 30,535 23,010
-------- --------
Total.................................................. 678,769 587,695
Less accumulated depreciation............................... 391,150 372,905
-------- --------
Total.................................................. $287,619 $214,790
======== ========
</TABLE>
9. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Salaries, wages and employee benefits....................... $ 34,603 $ 37,979
Taxes....................................................... 13,728 18,995
Interest.................................................... 7,115 3,032
Asbestos.................................................... 50,688 60,659
Other....................................................... 32,835 34,564
-------- --------
Total.................................................. $138,969 $155,229
======== ========
</TABLE>
F-11
<PAGE> 87
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
10. INCOME TAXES
Domestic and foreign components of earnings from operations before income
taxes and extraordinary item were as follows for the years ended December 31,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Domestic................................................. $114,517 $ 68,199 $ 25,426
Foreign.................................................. 29,232 14,482 26,710
-------- -------- --------
Total............................................... $143,749 $ 82,681 $ 52,136
======== ======== ========
</TABLE>
Income taxes on earnings from continuing operations were as follows for the
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current
Domestic............................................... $ 18,094 $ (2,912) $ 4,717
Foreign................................................ 6,872 13,634 7,638
-------- -------- --------
24,966 10,722 12,355
-------- -------- --------
Deferred
Domestic............................................... 17,706 24,126 3,836
Foreign................................................ 6,203 (6,737) 1,424
-------- -------- --------
23,909 17,389 5,260
-------- -------- --------
Total............................................... $ 48,875 $ 28,111 $ 17,615
======== ======== ========
</TABLE>
As discussed in note 2 to consolidated financial statements, the Company
sold its original equipment components businesses in 1996 resulting in income
tax on the gain of the sale of $25,332. As discussed in note 3 to consolidated
financial statements, the Company incurred extraordinary charges related to
early retirement of debt resulting in income taxes of $20,387 in 1996 and $136
in 1995.
Reconciliation of tax at the U.S. statutory income tax rate of 35% for the
years ended December 31, 1997, 1996 and 1995 to income taxes on earnings from
continuing operations was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Tax at U.S. statutory rate.................................. $50,312 $28,938 $18,248
Repatriation of non-U.S. earnings......................... (1,195) 1,900 2,692
Non-U.S. rate differential................................ 2,844 1,828 (287)
Utilization of tax credits................................ (997) (1,104) (960)
Adjustment of reserves.................................... (2,736) (6,979) (6,172)
Other..................................................... 647 3,528 4,094
------- ------- -------
Income taxes.............................................. $48,875 $28,111 $17,615
------- ------- -------
Effective tax rate.......................................... 34.0% 34.0% 33.8%
======= ======= =======
</TABLE>
F-12
<PAGE> 88
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The significant components of deferred tax assets and liabilities at
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Excess tax over book depreciation............... $ -- $(21,828) $ -- $(26,754)
Book/tax differences on contract income......... -- (24,230) -- (27,154)
Employee benefit plans.......................... 7,747 -- 19,749 --
Accrued expenses and liabilities................ 5,375 -- 10,625 --
Foreign tax credit carryforwards................ 3,700 -- 6,600 --
Capital transactions, net....................... -- (27,901) -- (28,127)
Other........................................... -- (3,194) 11,538 --
------- -------- ------- --------
16,822 (77,153) 48,512 (82,035)
Less valuation allowance........................ (3,700) -- (6,600) --
------- -------- ------- --------
Total........................................... $13,122 $(77,153) $41,912 $(82,035)
======= ======== ======= ========
</TABLE>
The valuation allowance is attributable to foreign tax credit
carryforwards, which expire in 1998 through 2002.
11. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Credit Agreement 6.7%*(a)................................... $697,500 $658,000
9 3/4% senior notes due 1999(b)............................. 7,507 7,507
9 3/4% senior notes due 2000(c)............................. 7,405 7,405
10 1/4% senior subordinated notes due 2002(d)............... -- 3,909
Other due 1998-2010......................................... 46,977 43,429
-------- --------
759,389 720,250
Less current portion........................................ 1,811 2,528
-------- --------
$757,578 $717,722
======== ========
</TABLE>
- ---------------
* Indicates average interest rate for 1997 and 1996.
(a) In 1996, the reducing revolving credit facility (the Credit Agreement),
entered into with a syndicate of banks, was amended to expire December 15,
2001 with the total commitment increased to $850,000 from $465,000 (see note
3 to consolidated financial statements). The facility will be reduced by
$75,000 on December 15, 1999 and an additional $100,000 on December 15,
2000. The Credit Agreement provides up to $125,000 for the issuance of
letters of credit. At December 31, 1997, $40,089 of letters of credit had
been issued under the Credit Agreement. Obligations under the facility are
secured by substantially all of the Company's assets. Borrowings under the
facility bear interest, at the Company's option, at an annual rate equal to
the base rate or the Eurodollar rate plus 0.875%. The base rate is the
higher of 0.50% in excess of the Federal Reserve reported certificate of
deposit rate and the prime lending rate. Letter of credit fees of 0.875% are
payable on outstanding letters of credit and a commitment fee of 0.375% is
payable on the unutilized facility.
During 1997, the Company entered into interest rate swaps to reduce (hedge)
the impact of interest rate changes for variable rate borrowings under its
credit facility. The agreements include an aggregate notional amount of
$405,000, fixed interest rates ranging from 5.78% to 6.40% and maturity
dates ranging from April 1998 to October 2002.
(b) The 9 3/4% senior notes due 1999 are not redeemable prior to maturity on
November 1, 1999.
(c) The 9 3/4% senior notes due 2000 are not redeemable prior to maturity on
April 1, 2000.
(d) The 10 1/4% senior subordinated notes were redeemed on April 1, 1997 at
105.125% of par.
F-13
<PAGE> 89
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Minimum payments on long-term debt due within five years from December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 1,811
1999........................................................ 23,797
2000........................................................ 9,180
2001........................................................ 699,831
2002........................................................ 1,361
Thereafter.................................................. 23,409
--------
Total....................................................... $759,389
========
</TABLE>
12. PENSION PLANS
The Company and certain of its subsidiaries have in effect, for
substantially all U.S. employees, pension plans under which funds are deposited
with trustees. The benefits under these plans are based primarily on years of
service and either final average salary or fixed amounts for each year of
service. The Company's policy is to fund amounts which are actuarially
determined to provide the plans with sufficient assets to meet future benefit
payment requirements. Plan assets consist principally of publicly traded equity
and fixed-income securities. Pension coverage for employees of non-U.S.
subsidiaries is provided in accordance with local requirements and customary
practices.
For certain pension plans, the plan assets exceed the accumulated benefit
obligations (overfunded plans); and in the remainder of the plans, the
accumulated benefit obligations exceed the plan assets (underfunded plans).
During 1997, the Company merged several of its underfunded plans with its
overfunded plans.
As of December 31, 1997 and 1996, the funded status of the Company's
pension plans was as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
OVER-FUNDED UNDER-FUNDED OVER-FUNDED UNDER-FUNDED
PLANS PLANS PLANS PLANS
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations............... $396,189 $ 30,604 $259,200 $119,158
-------- -------- -------- --------
Accumulated benefit obligations.......... $406,385 $ 30,878 $265,396 $124,022
-------- -------- -------- --------
Projected benefit obligations............ $427,737 $ 34,039 $289,973 $127,234
Plan assets at fair value.................. 568,094 1,551 408,979 79,735
-------- -------- -------- --------
Funded status.............................. 140,357 (32,488) 119,006 (47,499)
Unrecognized net (gain) loss............... (120,839) 6,889 (89,702) (205)
Unrecognized transition (asset)
obligations.............................. (2,192) 1,525 (1,389) 628
Unrecognized prior service cost............ 15,255 2,571 2,837 15,033
Minimum liability adjustment............... -- (7,824) -- (12,200)
-------- -------- -------- --------
(Accrued) prepaid pension cost............. $ 32,581 $(29,327) $ 30,752 $(44,243)
======== ======== ======== ========
</TABLE>
Included in the underfunded plans are amounts for unfunded, non-qualified
defined benefit plans.
At December 31, 1997 and 1996, the Company recorded a minimum liability of
$7,824 and $12,200, respectively, for underfunded plans with a partial offset to
other assets of $5,292 and $7,300, respectively, and an after-tax charge to
shareholders' equity of $1,646 and $3,200, respectively.
F-14
<PAGE> 90
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Assumptions as of December 31 used to develop the net periodic pension cost
for U.S. plans were:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Discount rate for benefit obligations....................... 7.25% 7.75% 7.50%
Expected long-term rate of return on assets................. 9.00% 9.00% 9.00%
Rate of increase in compensation levels..................... 4.75% 5.00% 5.00%
</TABLE>
For non-U.S. plans, which were not material, similar economic assumptions
were used.
The components of net periodic pension cost for the years ended December
31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................. $ 8,404 $ 9,377 $ 7,618
Interest cost on projected benefit obligations........... 31,996 31,142 30,317
Actual return on assets.................................. (95,430) (52,049) (91,611)
Amortization and deferral, net........................... 47,782 11,443 52,953
-------- -------- --------
Net periodic pension cost................................ $ (7,248) $ (87) $ (723)
======== ======== ========
</TABLE>
For discontinued operations, the total projected benefit obligations at
December 31, 1997 and 1996 were $203,737 and $214,822, respectively, and are
fully funded. Interest cost on the projected benefit obligations for 1997, 1996
and 1995 was $16,097, $16,502 and $19,609, respectively, and was fully offset by
return on assets resulting in no net periodic pension cost.
13. POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits to its
eligible retired employees, principally in the United States, with some of these
retirees paying a portion of the related costs. The Company's accumulated
postretirement benefit obligations, none of which are funded, and the accrued
postretirement benefit cost at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligations:
Retirees.................................................. $ 16,980 $ 13,493
Fully eligible plan participants.......................... 1,925 2,416
Other plan participants................................... 3,113 3,053
-------- --------
Total..................................................... 22,018 18,962
Unrecognized transition obligations......................... (15,330) (16,614)
Unrecognized net loss....................................... (4,611) (561)
Unrecognized prior service cost............................. 1,964 2,495
-------- --------
Accrued postretirement benefit cost......................... $ 4,041 $ 4,282
======== ========
</TABLE>
F-15
<PAGE> 91
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The components of postretirement benefit cost for the years ended December
31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................. $ 187 $ 395 $ 198
Interest cost on accumulated postretirement benefit
obligations............................................ 1,433 1,951 1,927
Amortization of transition obligations................... 1,022 1,107 1,373
Amortization and deferral, net........................... (756) (124) (63)
-------- -------- --------
Postretirement benefit cost.............................. $ 1,886 $ 3,329 $ 3,435
======== ======== ========
</TABLE>
Discount rates of 7.25% and 7.75% were used in determining the accumulated
postretirement benefit obligations at December 31, 1997 and 1996, respectively.
The health care cost trend rates used in determining the accumulated
postretirement benefit obligations at December 31, 1997 were 8.7% in 1998
gradually declining to 5.0% by 2005. The effect of a 1% increase in the health
care cost trend rates in each year would increase the total service and interest
cost components of the postretirement benefit cost for 1997 by approximately
$142 and increase the accumulated postretirement benefit obligations at December
31, 1997 by approximately $1,400.
14. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments.
Cash and cash equivalents, accounts and notes receivable and accounts payable:
The carrying amount approximates fair value due to the short-term nature of
these items.
Long-term receivables and investments:
The fair value is based on quoted market prices for similar publicly-traded
securities or on the present value of estimated future cash flows.
Long-term debt:
The fair value of variable-rate long-term debt approximates carrying value.
Forward exchange contracts and interest rate hedges:
The fair value is based on quoted market prices of similar contracts.
The estimated fair value of the Company's financial instruments at December
31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Long-term receivables and investments......... $ 35,017 $ 42,737 $ 32,427 $ 39,817
Long-term debt................................ 759,389 760,609 720,250 720,824
Forward exchange contracts.................... -- (8,384) -- 87
Interest rate hedges.......................... -- (3,555) -- --
</TABLE>
The Company utilizes forward exchange contracts to hedge U.S.
dollar-denominated sales, under long-term contracts, of certain foreign
subsidiaries. The Company does not engage in speculation. The Company's forward
exchange contracts do not subject the Company to risk due to exchange rate
movements because gains and losses
F-16
<PAGE> 92
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
on these contracts offset gains and losses on the sales and related receivables
being hedged. At December 31, 1997 and 1996, the Company had $162,000 and
$216,000, respectively, of forward exchange contracts, denominated in Canadian
dollars, which had a fair value of $153,616 and $216,087, respectively. The
contracts have varying maturities with none exceeding five years. Gains and
losses on forward exchange contracts are deferred and recognized over the life
of the underlying long-term contract being hedged.
The Company has an outstanding contingent liability for guaranteed debt and
lease payments of $30,772, and for letters of credit $55,969. It was not
practical to obtain independent estimates of the fair values for the contingent
liability for guaranteed debt and lease payments and for letters of credit
without incurring excessive costs. In the opinion of management, non-performance
by the other parties to the contingent liabilities will not have a material
effect on the Company's results of operations and financial condition.
15. STOCK OPTION AND INCENTIVE PLANS
Pursuant to the Company's stock option plans, stock options and shares of
restricted stock have been granted to officers and key employees and stock
options to directors. Under the stock option plans, 7,468,000 shares of common
stock may be issued. Stock options outstanding under the stock option plans were
granted at a price equal to 100% of the market price on the date of grant and
are exercisable in annual installments of 20% or 33%, commencing one year from
date of grant and expiring ten years from date of grant.
The Company applies Accounting Principles Board Opinion #25, Accounting for
Stock Issued to Employees, in accounting for its stock option plans.
Accordingly, no compensation expense has been recognized for these plans. Had
compensation expense for the Company's stock option plans been determined based
on the fair value at the grant dates for awards under these plans consistent
with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's pro
forma net earnings would have been $92,137 for 1997, $79,425 for 1996 and
$69,487 for 1995 and earnings per share would have been $1.38 in 1997, $1.15 in
1996 and $1.00 in 1995.
The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.75% for 1997 and 7.0% for 1996 and
1995, no dividends paid, expected life of 3.7 years for 1997 and five years for
1996 and 1995, and volatility of 21% for 1997 and 23% for 1996 and 1995. The
weighted-average fair value of options granted was $5.75 for 1997, $4.76 for
1996 and $4.00 for 1995.
F-17
<PAGE> 93
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
A summary of the status of the Company's fixed stock option plans as of
December 31, 1997, 1996 and 1995 was follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OPTION AVERAGE
OF SHARES PRICE RANGE EXERCISE
(000S) PER SHARE PRICE
--------- ------------ ---------
<S> <C> <C> <C>
December 31, 1994....................................... 2,317 $15.00-21.25 N/A
Granted................................................. 2,960 10.75-18.08
Exercised............................................... (25) 15.00
Canceled................................................ (64) 15.00-18.25
------ ------------ ------
December 31, 1995....................................... 5,188 10.75-21.25 $13.16
Granted................................................. 516 11.00-15.75 13.43
Exercised............................................... (56) 10.75-11.63 11.37
Canceled................................................ (236) 10.75-21.25 12.82
------ ------------ ------
December 31, 1996....................................... 5,412 10.75-21.25 13.22
Granted................................................. 1,069 18.88-22.88 21.09
Exercised............................................... (1,004) 10.75-18.75 14.64
Canceled................................................ (217) 10.75-18.75 12.08
------ ------------ ------
December 31, 1997....................................... 5,260 $10.75-22.88 $14.59
------ ------------ ------
</TABLE>
Stock options exercisable were 2,156,000, 2,103,000 and 1,188,000 at
December 31, 1997, 1996 and 1995, respectively.
The following summarizes information about the Company's stock options
outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------
WEIGHTED- WEIGHTED-
NUMBER AVERAGE AVERAGE
OUTSTANDING REMAINING EXERCISE
(000S) LIFE PRICE
RANGE OF EXERCISE PRICES ----------- --------- ---------
<S> <C> <C> <C>
$10.75 to $15.75......................................... 3,559 7.1 years $12.05
$16.25 to $20.13......................................... 744 6.9 years 18.02
$21.19 to $22.88......................................... 957 9.6 years 21.35
----- --------- ------
$10.75 to $22.88......................................... 5,260 7.6 years $14.59
----- --------- ------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
------------------------
WEIGHTED-
NUMBER AVERAGE
OUTSTANDING EXERCISE
(000S) PRICE
RANGE OF EXERCISE PRICES ----------- ---------
<S> <C> <C>
$10.75 to $15.75............................................ 1,755 $12.79
$16.25 to $20.13............................................ 383 17.91
$21.19 to $22.88............................................ 18 21.25
----- ------
$10.75 to $22.88............................................ 2,156 $13.77
----- ------
</TABLE>
In addition to the granting of stock options, the Company has granted
shares of restricted stock. Restrictions on certain shares lapse 100% three
years from the date of grant. Restrictions on the remaining shares lapse in
annual installments of 33% commencing one year from date of grant. The unearned
compensation resulting from
F-18
<PAGE> 94
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
the grant of restricted shares is reported as a reduction to shareholders'
equity in the Consolidated Balance Sheets and is being charged to earnings over
the period the restricted shares vest.
Shares available for grant at December 31, 1997 under the stock option
plans were 138,569.
16. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are liable for lease payments
and are defendants in various lawsuits, including actions involving
asbestos-containing products and certain environmental proceedings.
With respect to asbestos product liability and related litigation costs, as
of December 31, 1997 and 1996, two subsidiaries of the Company were among a
number of defendants (typically 15 to 40) in approximately 110,000 and 94,700
actions, respectively (including approximately 2,400 and 5,100 actions,
respectively, in advanced stages of processing), filed in various states by
plaintiffs alleging injury or death as a result of exposure to asbestos fibers.
During 1997, 1996 and 1995, two subsidiaries of the Company received
approximately 38,200, 39,900 and 44,000 new actions, respectively. Through
December 31, 1997, approximately 199,000 of the approximately 309,000 total
actions brought have been settled or otherwise disposed of.
The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1,000 or more in compensatory damages and $2,000
or more in punitive damages. Although the law in each state differs to some
extent, it appears, based on advice of counsel, that liability for compensatory
damages would be shared among all responsible defendants, thus limiting the
potential monetary impact of such judgments on any individual defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in which
neither the Company nor any of its subsidiaries were parties, that held
insurance carriers are obligated to cover asbestos-related bodily injury actions
if any injury or disease process, from first exposure through manifestation,
occurred during a covered policy period (the "continuous trigger theory of
coverage"), the Company settled litigation with its primary and most of its
first-level excess insurance carriers, substantially on the basis of the Court's
ruling. The Company has negotiated a final agreement with most of its excess
carriers that are in the layers of coverage immediately above its first layer.
The Company is currently receiving payments pursuant to this agreement. The
Company believes that, with respect to the remaining carriers, a final agreement
can be achieved without litigation and on substantially the same basis that it
has resolved the issues with its other carriers. Settlements are generally made
on a group basis with payments made to individual claimants over periods of one
to four years. Payments were made with respect to asbestos liability and related
costs aggregating $59,247 in 1997, $71,354 in 1996 and $56,739 in 1995,
substantially all of which were covered by insurance. Related to payments not
covered by insurance, the Company recorded charges to operations amounting to
$8,000 in 1997, $8,000 in 1996 and $5,000 in 1995.
In accordance with the Company's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where the
Company can reasonably estimate the cost to dispose of these actions. As of
December 31, 1997, the Company estimates that the aggregate remaining cost of
the disposition of the settled actions for which payments remain to be made and
actions in advanced stages of processing, including associated legal costs, is
approximately $47,350, and the Company expects that this cost will be
substantially covered by insurance.
With respect to the 107,600 outstanding actions as of December 31, 1997,
which are in preliminary procedural stages, the Company lacks sufficient
information upon which judgments can be made as to the validity or ultimate
disposition of such actions, thereby making it difficult to estimate with
reasonable certainty the potential liability or costs to the Company. When
asbestos actions are received they are typically forwarded to local counsel to
ensure that the appropriate preliminary procedural response is taken. The
complaints typically do
F-19
<PAGE> 95
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
not contain sufficient information to permit a reasonable evaluation as to their
merits at the time of receipt, and in jurisdictions encompassing a majority of
the outstanding actions, the practice has been that little or no discovery or
other action is taken until several months prior to the date set for trial.
Accordingly, the Company generally does not have the information necessary to
analyze the actions in sufficient detail to estimate the ultimate liability or
costs to the Company, if any, until the actions appear on a trial calendar. A
determination to seek dismissal, to attempt to settle or to proceed to trial is
typically not made prior to the receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that the
Company's subsidiaries will receive in the future. The Company has noted that,
with respect to recently settled actions or actions in advanced stages of
processing, the mix of the injuries alleged and the mix of the occupations of
the plaintiffs have been changing from those traditionally associated with the
Company's asbestos-related actions. The Company is not able to determine with
reasonable certainty whether this trend will continue. Based upon the foregoing,
and due to the unique factors inherent in each of the actions, including the
nature of the disease, the occupation of the plaintiff, the presence or absence
of other possible causes of a plaintiff's illness, the availability of legal
defenses, such as the statute of limitations or state of the art, and whether
the lawsuit is an individual one or part of a group, management is unable to
estimate with reasonable certainty the cost of disposing of outstanding actions
in preliminary procedural stages or of actions that may be filed in the future.
However, the Company believes that its subsidiaries are in a favorable position
compared to many other defendants because, among other things, the asbestos
fibers in its asbestos-containing products were encapsulated. Considering the
foregoing, as well as the experience of the Company's subsidiaries and other
defendants in asbestos litigation, the likely sharing of judgments among
multiple responsible defendants, and the substantial amount of insurance
coverage that the Company expects to be available from its solvent carriers, the
Company believes that pending and reasonably anticipated future actions are not
likely to have a material effect on the Company's results of operations and
financial condition.
Although the insurance coverage which the Company has is substantial, it
should be noted that insurance coverage for asbestos claims is not available to
cover exposures initially occurring on and after July 1, 1984. The Company's
subsidiaries continue to be named as defendants in new cases, some of which
allege initial exposure after July 1, 1984.
In addition to claims for personal injury, the Company's subsidiaries have
been involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and private
commercial buildings. Based upon proceedings to date, the overwhelming majority
of these claims have been resolved without a material adverse impact on the
Company. Likewise, the insignificant number of claims remaining to be resolved
are not expected to have a material effect on the Company's results of
operations and financial condition.
F-20
<PAGE> 96
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company has recorded an accrual for its liabilities for
asbestos-related matters that are deemed probable and can be reasonably
estimated (settled actions and actions in advanced stages of processing), and
has separately recorded an asset equal to the amount of such liabilities that is
expected to be recovered by insurance. In addition, the Company has recorded a
receivable for that portion of payments previously made for asbestos product
liability actions and related litigation costs that is recoverable from its
insurance carriers. Liabilities for asbestos-related matters and the receivable
from insurance carriers included in the Consolidated Balance Sheets were as
follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts and notes receivable............................... $56,039 $67,012
Other assets................................................ 16,249 18,728
Accrued expenses............................................ 50,688 60,659
Other liabilities........................................... 2,682 10,879
</TABLE>
With respect to environmental proceedings, the Company has been notified
that it is among the Potentially Responsible Parties under federal environmental
laws, or similar state laws, relative to the costs of investigating and in some
cases remediating contamination by hazardous materials at several sites. Such
laws impose joint and several liability for the costs of investigating and
remediating properties contaminated by hazardous materials. Liability for these
costs can be imposed on present and former owners or operators of the properties
or on parties who generated the wastes that contributed to the contamination.
The Company's policy is to accrue environmental remediation costs when it is
both probable that a liability has been incurred and the amount can be
reasonably estimated. While it is often difficult to reasonably quantify future
environmental-related expenditures, the Company currently estimates its future
non-capital expenditures related to environmental matters to range between
$27,000 and $50,000. In connection with these expenditures, the Company has
accrued $31,716 at December 31, 1997 representing management's best estimate of
probable non-capital environmental expenditures. These non-capital expenditures
are estimated to be incurred over the next 10 to 20 years. In addition, capital
expenditures aggregating $5,000 may be required during the next two years
related to environmental matters. Although the Company is pursuing insurance
recovery in connection with certain of these matters, no receivable has been
recorded with respect to any potential recovery of costs in connection with any
environmental matters.
Under operating lease commitments, expiring on various dates after December
31, 1997, the Company and certain of its subsidiaries are obligated as of
December 31, 1997, to pay rentals totaling $30,658 as follows: $5,482 in 1998,
$4,970 in 1999, $3,573 in 2000, $2,673 in 2001, $1,973 in 2002 and $11,987 in
later years.
At December 31, 1997, the Company had committed to a minimum employer
contribution of $15,806 to the Company's 401K plans.
17. SEGMENT INFORMATION
As discussed in note 2 to consolidated financial statements, the Company
divested all of its automotive OE components businesses in 1996. As a result of
the divestitures, the Company is now reporting the results of its business units
in two operating segments, Aerospace and Industrial.
F-21
<PAGE> 97
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Information on total assets, depreciation of property, plant and equipment
and capital expenditures by industry segment was as follows for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Total assets:
Aerospace................................................. $437.3 $415.5 $391.3
Industrial................................................ 310.6 287.2 298.3
Corporate unallocated..................................... 185.1 146.8 134.3
------ ------ ------
Subtotal............................................... 933.0 849.5 823.9
Discontinued operations................................... -- -- 70.6
------ ------ ------
Total.................................................. $933.0 $849.5 $894.5
====== ====== ======
Depreciation of property, plant and equipment:
Aerospace................................................. $ 13.4 $ 12.2 $ 12.3
Industrial................................................ 14.0 12.9 12.9
Corporate unallocated..................................... 2.3 1.9 1.6
------ ------ ------
Subtotal............................................... 29.7 27.0 26.8
Discontinued operations................................... -- 3.5 5.7
------ ------ ------
Total.................................................. $ 29.7 $ 30.5 $ 32.5
====== ====== ======
Capital expenditures:
Aerospace................................................. $ 46.9 $ 26.9 $ 17.6
Industrial................................................ 31.4 13.7 13.7
Corporate unallocated..................................... 2.9 4.0 2.6
------ ------ ------
Subtotal............................................... 81.2 44.6 33.9
Discontinued operations................................... -- 5.4 8.6
------ ------ ------
Total.................................................. $ 81.2 $ 50.0 $ 42.5
====== ====== ======
</TABLE>
F-22
<PAGE> 98
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Information by geographic segment was as follows for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
OPERATING TOTAL
SALES INCOME ASSETS
-------- --------- ------
(IN MILLIONS)
<S> <C> <C> <C>
1997
Domestic operations......................................... $1,027.2 $198.4 $590.1
Foreign operations.......................................... 287.7 39.1 157.8
-------- ------ ------
Total segments.............................................. 1,314.9 237.5 747.9
Corporate unallocated....................................... -- (39.7) 185.1
-------- ------ ------
Total.................................................. $1,314.9 $197.8 $933.0
======== ====== ======
1996
Domestic operations......................................... $ 888.6 $182.5 $554.2
Foreign operations.......................................... 271.1 16.2 148.5
-------- ------ ------
Total segments.............................................. 1,159.7 198.7 702.7
Corporate unallocated....................................... -- (41.1) 146.8
-------- ------ ------
Total.................................................. $1,159.7 $157.6 $849.5
======== ====== ======
1995
Domestic operations*........................................ $ 854.0 $168.7 $554.8
Foreign operations.......................................... 245.6 10.3 205.4
-------- ------ ------
Total segments.............................................. 1,099.6 179.0 760.2
Corporate unallocated....................................... -- (37.0) 134.3
-------- ------ ------
Total.................................................. $1,099.6 $142.0 $894.5
======== ====== ======
</TABLE>
- ---------------
* Includes total assets from discontinued operations.
18. SUPPLEMENTARY EARNINGS INFORMATION
The following expenses were included in the Consolidated Statements of
Earnings for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Maintenance................................................. $24,000 $22,816 $22,633
Taxes, other than federal income taxes
Payroll................................................... 30,025 24,633 24,379
Property.................................................. 4,928 4,626 4,226
State and local........................................... 6,241 5,121 2,601
Rent........................................................ 8,950 9,965 8,604
Research and developments costs............................. 46,548 44,125 45,730
</TABLE>
19. SUBSEQUENT EVENTS
On January 30, 1998, the Company acquired Marine and Petroleum Mfg. Inc.'s
manufacturing facilities based in Texas for approximately $17,000. The plants
acquired produce flexible graphite and Teflon sealing products used in the
petrochemical industry. Combined annual sales for these facilities are expected
to approximate $18,000. The Company also acquired Tex-o-Lon and Repro-Lon for
approximately $25,000. These
F-23
<PAGE> 99
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
two Texas businesses have combined annual sales of $15,000. Tex-o-Lon
manufactures, machines and distributes Teflon products, primarily for the
semiconductor industry. Repro-Lon reprocesses Teflon compounds for the chemical
and semiconductor industries. The acquisitions were accounted for as purchases;
accordingly, the purchase price, which was financed through available cash
resources, was allocated to the acquired assets based upon their fair market
values.
On February 2, 1998, the Company purchased the Sealing Division of Groupe
Carbone Lorraine for $45,600. This division, with facilities in France and South
Carolina, produces high-technology metallic gaskets used in the nuclear,
petroleum and chemical industries. Sales for 1998 are expected to approximate
$38,000. This acquisition will be accounted for as a purchase and the purchase
price, also financed through available cash resources, will be allocated to the
acquired assets based upon their fair market values.
In February 1998, the Company amended its existing credit facility
increasing the total commitment to $900,000 from $850,000.
20. SUPPLEMENTAL GUARANTOR INFORMATION
Substantially all the Company's subsidiaries incorporated in the United
States (the "Subsidiary Guarantors") have fully and unconditionally guaranteed
the Company's obligations to pay principal and interest with respect to the
Company's 7 1/2% Senior Notes Due 2008. The subsidiaries of the Company that are
not Subsidiary Guarantors are referred to in this note as the "Non-Guarantor
Subsidiaries".
The following supplemental consolidating condensed financial statements
present balance sheets as of December 31, 1997 and 1996 and statements of
earnings and of cash flows for the years ended December 31, 1997, 1996 and 1995.
In the consolidating financial statements, Coltec Industries Inc ("Parent")
accounts for its investments in wholly-owned subsidiaries using the equity
method and the Subsidiary Guarantors account for their investments in
Non-Subsidiary Guarantors using the equity method. Interest expense related to
the indebtedness under the Company's credit agreement and its three series of
senior notes is allocated to United States subsidiaries based on net sales.
F-24
<PAGE> 100
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $430,206 $586,901 $340,833 $(43,071) $1,314,869
Cost of sales................... 295,466 394,948 250,926 (43,071) 898,269
-------- -------- -------- -------- ----------
Gross profit.................... 134,740 191,953 89,907 -- 416,600
Selling and administrative...... 49,854 122,251 46,703 -- 218,808
-------- -------- -------- -------- ----------
Operating income................ 84,886 69,702 43,204 -- 197,792
Equity earnings of
subsidiaries.................. 55,570 22,156 -- (77,726) --
Interest expense and other,
net........................... (30,505) (54,975) 31,437 -- (54,043)
-------- -------- -------- -------- ----------
Earnings before income taxes.... 109,951 36,883 74,641 (77,726) 143,749
Income taxes.................... 15,077 8,630 25,168 -- 48,875
-------- -------- -------- -------- ----------
Net earnings.................... $ 94,874 $ 28,253 $ 49,473 $(77,726) $ 94,874
======== ======== ======== ======== ==========
</TABLE>
F-25
<PAGE> 101
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $363,743 $530,876 $285,875 $(20,803) $1,159,691
Cost of sales................... 253,345 360,074 218,507 (20,803) 811,123
-------- -------- -------- -------- ----------
Gross profit.................... 110,398 170,802 67,368 -- 348,568
Selling and administrative...... 32,749 82,812 75,432 190,993
-------- -------- -------- -------- ----------
Operating income................ 77,649 87,990 (8,064) -- 157,575
Equity earnings of
subsidiaries.................. 43,755 12,820 -- (56,575) --
Interest expense and other,
net........................... (66,891) (16,676) 8,673 (74,894)
-------- -------- -------- -------- ----------
Earnings from continuing
operations before income taxes
and extraordinary item........ 54,513 84,134 609 (56,575) 82,681
Income taxes.................... (19,309) 24,672 22,748 28,111
-------- -------- -------- -------- ----------
Earnings from continuing
operations before
extraordinary item............ 73,822 59,462 (22,139) (56,575) 54,570
Discontinued operations (net of
tax).......................... 37,931 -- 19,252 57,183
Extraordinary item (net of
tax).......................... (30,614) -- -- (30,614)
-------- -------- -------- -------- ----------
Net earnings.................... $ 81,139 $ 59,462 $ (2,887) $(56,575) $ 81,139
======== ======== ======== ======== ==========
</TABLE>
F-26
<PAGE> 102
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales........................ $472,806 $379,419 $253,071 $ (5,672) $1,099,624
Cost of sales.................... 317,612 242,777 189,484 (5,672) 744,201
-------- -------- -------- -------- ----------
Gross profit..................... 155,194 136,642 63,587 -- 355,423
Selling and administrative....... 89,562 77,614 19,225 186,401
Special charges.................. 27,000 -- -- 27,000
-------- -------- -------- -------- ----------
Operating income................. 38,632 59,028 44,362 -- 142,022
Equity earnings in
subsidiaries................... 58,100 12,820 -- (70,920) --
Interest expense and other,
net............................ (79,910) (9,264) (712) (89,886)
-------- -------- -------- -------- ----------
Earnings from continuing
operations before income taxes
and extraordinary item......... 16,822 62,584 43,650 (70,920) 52,136
Income taxes..................... (18,850) 21,827 14,638 17,615
-------- -------- -------- -------- ----------
Earnings from continuing
operations before extraordinary
item........................... 35,672 40,757 29,012 (70,920) 34,521
Discontinued operations (net of
tax)........................... 35,488 1,151 -- 36,639
Extraordinary item (net of
tax)........................... (254) -- (254)
-------- -------- -------- -------- ----------
Net earnings..................... $ 70,906 $ 41,908 $ 29,012 $(70,920) $ 70,906
======== ======== ======== ======== ==========
</TABLE>
F-27
<PAGE> 103
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents..... $ 9,912 $ 722 $ 4,059 $ 14,693
Accounts and notes receivable,
net......................... -- 60,881 59,430 120,311
Inventory, net................ 99,100 71,958 85,678 256,736
Deferred income taxes......... 4,535 10,689 (29) 15,195
Other current assets.......... 4,540 10,406 5,562 20,508
---------- -------- -------- ----------- --------
Total current assets........ 118,087 154,656 154,700 -- 427,443
Intercompany, net............. (741,897) 10,933 730,964 --
Investments in affiliates..... 1,057,890 355,399 2,688 $(1,415,977) --
Property, plant and
equipment................... 89,488 118,405 79,726 287,619
Cost in excess of net assets
acquired, net............... 21,820 133,441 2,490 157,751
Other assets.................. 40,266 3,490 16,465 60,221
---------- -------- -------- ----------- --------
Total assets................ $ 585,654 $776,324 $987,033 $(1,415,977) $933,034
========== ======== ======== =========== ========
Total current liabilities..... $ 93,669 $ 49,494 $ 96,415 $239,578
Long term debt................ 689,302 1,611 66,665 757,578
Deferred income taxes......... (32,780) 101,871 10,138 79,229
Other liabilities............. 39,706 12,844 10,544 $ (2,202) 60,892
Liabilities of discontinued
operations.................. 154,918 -- -- 154,918
Shareholders' equity.......... (359,161) 610,504 803,271 (1,413,775) (359,161)
---------- -------- -------- ----------- --------
Total liabilities and
shareholders' equity..... $ 585,654 $776,324 $987,033 $(1,415,977) $933,034
========== ======== ======== =========== ========
</TABLE>
F-28
<PAGE> 104
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------------------------
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....... $ 5,475 $ 570 $ 8,984 $ 15,029
Accounts and notes receivable,
net........................... 38,773 49,556 101,996 190,325
Inventory, net.................. 77,816 54,269 72,113 204,198
Deferred income taxes........... 5,566 8,830 (3,872) 10,524
Other current assets............ 14,417 5,583 2,895 22,895
---------- -------- -------- ----------- ---------
Total current assets.......... 142,047 118,808 182,116 -- 442,971
Intercompany, net............... (955,038) 274,177 680,861 --
Investments in affiliates....... 1,159,429 97,481 -- $(1,256,910) --
Property, plant and equipment... 72,933 75,166 66,691 214,790
Cost in excess of net assets
acquired, net................. 14,728 115,525 2,619 132,872
Other assets.................... 39,025 954 18,890 58,869
---------- -------- -------- ----------- ---------
Total assets.................. $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502
========== ======== ======== =========== =========
Total current liabilities....... $ 11,341 $ 7,541 $208,514 $ 227,396
Long term debt.................. 689,116 -- 28,606 717,722
Deferred income taxes........... (49,402) 92,120 7,928 50,646
Other liabilities............... 68,337 6,989 24,679 100,005
Liabilities of discontinued
operations.................... 170,740 -- -- 170,740
Shareholders' equity............ (417,008) 575,461 681,450 $(1,256,910) (417,007)
---------- -------- -------- ----------- ---------
Total liabilities and
shareholders' equity....... $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502
========== ======== ======== =========== =========
</TABLE>
F-29
<PAGE> 105
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
NON-GUARANTOR
PARENT GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating activities... $ 66,192 $ 152 $ (4,925) -- $ 61,419
--------- -------- --------- -------- ---------
Cash flows from investing
activities:
Capital expenditures........... (28,720) (29,542) (22,956) (81,218)
Acquisition of businesses...... (32,716) (27,995) -- (60,711)
Cash from (to) Parent.......... (80,493) 57,537 22,956 --
--------- -------- --------- -------- ---------
Cash used in investing
activities................ (141,929) -- -- -- (141,929)
--------- -------- --------- -------- ---------
Cash flows from financing
activities:
Issuance of long-term debt..... 813 -- -- 813
Repayment of long-term debt.... (4,929) (133) (3,051) (8,113)
Increase (decrease) in
revolving facility, net..... (500) -- 40,000 39,500
Purchase of treasury stock..... (42,695) -- -- (42,695)
Proceeds from sale of accounts
receivable.................. -- -- 82,500 82,500
Proceeds from exercise of
stock options............... 8,169 -- -- 8,169
Cash from (to) Parent.......... 119,316 133 (119,449) --
--------- -------- --------- -------- ---------
Cash provided by financing
activities................ 80,174 -- -- -- 80,174
--------- -------- --------- -------- ---------
Increase (decrease) in cash and
cash equivalents............... 4,437 152 (4,925) (336)
Cash and cash equivalents --
beginning of period............ 5,475 570 8,984 15,029
--------- -------- --------- -------- ---------
Cash and cash equivalents --
end of period.................. $ 9,912 $ 722 $ 4,059 -- $ 14,693
========= ======== ========= ======== =========
</TABLE>
F-30
<PAGE> 106
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating
activities.................... $ 43,920 $ (179) $ 5,762 -- $ 49,503
--------- ------- -------- -------- ---------
Cash flows from investing
activities:
Capital expenditures.......... (20,799) (8,376) (15,375) (44,550)
Proceeds from divestitures.... 329,113 -- -- 329,113
Cash from (to) Parent......... (23,751) 8,376 15,375 --
--------- ------- -------- -------- ---------
Cash provided by investing
activities............... 284,563 -- -- -- 284,563
--------- ------- -------- -------- ---------
Cash flows from financing
activities:
Proceeds from debt
refinancing................ 542,000 -- -- 542,000
Repayment of long-term debt... (622,582) -- -- (622,582)
Decrease in revolving
facility, net.............. (196,000) -- -- (196,000)
Purchase of treasury stock.... (46,426) -- -- (46,426)
--------- ------- -------- -------- ---------
Cash used in financing
activities............... (323,008) -- -- -- (323,008)
--------- ------- -------- -------- ---------
Increase (decrease) in cash and
cash equivalents.............. 5,475 (179) 5,762 11,058
Cash and cash equivalents --
beginning of period........... -- 749 3,222 3,971
--------- ------- -------- -------- ---------
Cash and cash equivalents -- end
of period..................... $ 5,475 $ 570 $ 8,984 -- $ 15,029
========= ======= ======== ======== =========
</TABLE>
F-31
<PAGE> 107
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash from operating
activities.................... $ 89,825 $ (485) $ 1,668 -- $ 91,008
-------- ------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures.......... (25,559) (8,900) (8,037) (42,496)
Acquisition of business....... (21,750) -- -- (21,750)
Other......................... (2,512) -- -- (2,512)
Cash from (to) Parent......... (16,937) 8,900 8,037 --
-------- ------- -------- -------- --------
Cash used in investing
activities............... (66,758) -- -- -- (66,758)
-------- ------- -------- -------- --------
Cash flows from financing
activities:
Issuance of long-term debt.... -- -- 19,070 19,070
Repayment of long-term debt... (11,084) -- (2,453) (13,537)
Decrease in revolving
facility, net.............. (30,000) -- -- (30,000)
Cash from (to) Parent......... 16,617 -- (16,617) --
-------- ------- -------- -------- --------
Cash used in financing
activities............... (24,467) -- -- -- (24,467)
-------- ------- -------- -------- --------
Increase (decrease) in cash
and cash equivalents....... (1,400) (485) 1,668 (217)
Cash and cash equivalents --
beginning of period........ 1,400 1,234 1,554 4,188
-------- ------- -------- -------- --------
Cash and cash equivalents --
end of period.............. -- $ 749 $ 3,222 -- $ 3,971
======== ======= ======== ======== ========
</TABLE>
F-32
<PAGE> 108
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS CONFIDENTIAL
OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL
PURCHASER. THIS CONFIDENTIAL OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS CONFIDENTIAL OFFERING CIRCULAR
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Incorporation of Certain Documents by
Reference........................... i
Prospectus Summary.................... 1
Risk Factors.......................... 11
The Exchange Offer.................... 15
Use of Proceeds....................... 22
Capitalization........................ 22
Selected Consolidated Financial and
Other Data.......................... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 33
Management............................ 46
Description of the Senior Notes....... 48
Description of Other Indebtedness..... 63
United States Taxation................ 69
Plan of Distribution.................. 71
Legal Matters......................... 71
Independent Public Accountants........ 71
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
COLTEC INDUSTRIES INC
$300,000,000
7 1/2% Series B Senior Notes
Due 2008
PROSPECTUS
- ------------------------------------------------------
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Sections 1741 and 1742 of the 1988 Business
Corporation Law of the Commonwealth of Pennsylvania, which provide for
indemnification of directors and officers in certain circumstances. In addition,
Article VIII of the By-laws of Coltec provides that, except as prohibited by
law, any director, officer or employee of Coltec is entitled to be indemnified
in any action or proceeding in which he or she may be involved by virtue of
holding such position.
In addition, Coltec maintains a directors' and officers' liability
insurance policy and has entered into indemnification agreements with each of
its executive officers and directors.
The indemnification referred to above will not limit the liability of any
director or officer of Coltec for violation of any of the federal securities
laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
*4.1 Indenture dated April 16, 1998, between Coltec and Bankers
Trust Company as trustee, relating to the 7 1/2% Senior
Secured Notes.
*4.2 Form of 7 1/2% Series B Senior Secured Notes (included in
Exhibit 4.1 above).
*4.3 Registration Rights Agreement, dated as of April 16, 1998,
between Coltec and the Initial Purchasers named therein.
*4.4 Fifth Amendment to the Credit Agreement, dated as of March
16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the
Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
*4.5 Consent and Agreement, dated as of March 31, 1998, with
respect to the Credit Agreement among Coltec, Coltec
Aerospace Canada Ltd., the Subsidiary Guarantors named
therein, the financial institutions party thereto from time
to time, Bank of America National Trust and Savings
Association, as Documentation Agent, The Chase Manhattan
Bank, as Syndication Agent, Bankers Trust Company, as
Administrative Agent, and Bank of Montreal, as Canadian
Paying Agent.
*4.6 Modification to Fifth Amendment to Credit Agreement, dated
as of April 20, 1998, among Coltec, Coltec Aerospace Canada
Ltd., the Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
*4.7 The Amended and Restated Company Pledge Agreement, dated as
of March 24, 1998, made by Coltec in favor of Bankers Trust
Company as collateral agent.
*4.8 The Amended and Restated Company Security Agreement, dated
as of March 24, 1998, made by Coltec in favor of Bankers
Trust Company as collateral agent.
**4.9 The Amended and Restated Subsidiary Pledge Agreement, dated
March 24, 1998, made by the Subsidiary named therein in
favor of Bankers Trust Company as collateral agent.
*4.10 The Amended and Restated Subsidiary Security Agreement,
dated March 24, 1998, made by the Subsidiary named therein
in favor of Bankers Trust Company as collateral agent.
</TABLE>
II-1
<PAGE> 110
<TABLE>
<C> <S>
*4.11 Second Amendment to Receivables Transfer and Administration
Agreement, dated January 26, 1998, between Coltec and Coltec
North Carolina Inc.
**5.1 Opinion of Robert J. Tubbs, Executive Vice President,
General Counsel and Secretary of Coltec.
*12.1 Computation of Ratio of Earnings to Fixed Charges and other
Ratios.
**23.1 Consent of Robert J. Tubbs (included in Item 5.1).
*23.2 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney (contained on the signature page)
*25.1 Statement of Eligibility under the Trust Indenture Act of
1939 of Bankers Trust Company on Form T-1.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
*99.4 Form of Letter to Clients.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement.
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum 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 percent 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.
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(c) 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;
(d) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered
II-2
<PAGE> 111
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(e) to deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities and Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X are not set forth in the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(f) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue;
(g) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, 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 request; and
(h) 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.
II-3
<PAGE> 112
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 Charlotte,
State of North Carolina on the 14th day of May, 1998.
COLTEC INDUSTRIES, INC
by /s/ JOHN W. GUFFEY, JR.
------------------------------------
Name: John W. Guffey, Jr.
Title:Chairman and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ JOHN W. GUFFEY, JR. Chairman, Chief Executive Officer
- --------------------------------------------- and Director
John W. Guffey, Jr.
/s/ NISHAN TESHOIAN President, Chief Operating Officer
- --------------------------------------------- and Director
Nishan Teshoian
/s/ DAVID D. HARRISON Executive Vice President,
- --------------------------------------------- Chief Financial Officer and
David D. Harrison Director
/s/ JOHN N. MAIER Vice President and Controller
- ---------------------------------------------
John N. Maier
/s/ WILLIAM H. GRIGG Director
- ---------------------------------------------
William H. Grigg
</TABLE>
II-4
<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ JOEL MOSES Director
- ---------------------------------------------
Joel Moses
/s/ RICHARD A. STUCKEY Director
- ---------------------------------------------
Richard A. Stuckey
/s/ DAVID I. MARGOLIS Director
- ---------------------------------------------
David I. Margolis
/s/ JOSEPH R. COPPOLA Director
- ---------------------------------------------
Joseph R. Coppola
</TABLE>
II-5
<PAGE> 114
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, at Charlotte, North
Carolina on the 14th day of May, 1998.
AMI INDUSTRIES, INC.
by /s/ JOHN M. CYBULSKI
------------------------------------
Name: John M. Cybulski
Title: Chairman and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ JOHN M. CYBULSKI Chairman and Director
- -----------------------------------------------------
John M. Cybulski
/s/ THOMAS C. EKLE Vice President and Treasurer
- -----------------------------------------------------
Thomas C. Ekle
/s/ ROBERT J. TUBBS Vice President, Secretary and
- ----------------------------------------------------- Director
Robert J. Tubbs
/s/ DAVID D. HARRISON Director
- -----------------------------------------------------
David D. Harrison
</TABLE>
II-6
<PAGE> 115
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, at Charlotte, North
Carolina on the 14th day of May, 1998.
CII HOLDINGS INC.
by /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ ROBERT J. TUBBS President and Director
- -----------------------------------------------------
Robert J. Tubbs
/s/ DAVID D. HARRISON Vice President and Treasurer
- -----------------------------------------------------
David D. Harrison
</TABLE>
II-7
<PAGE> 116
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, at Charlotte, North
Carolina on the 14th day of May, 1998.
COLTEC CANADA INC
by /s/ JOHN M. CYBULSKI
------------------------------------
Name: John M. Cybulski
Title: Chairman and President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ JOHN M. CYBULSKI Chairman, President and Director
- -----------------------------------------------------
John M Cybulski
/s/ DAVID D. HARRISON Vice President, Treasurer and Director
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-8
<PAGE> 117
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, at Ewless, Texas, on the
14th day of May, 1998.
COLTEC INDUSTRIAL PRODUCTS INC
by /s/ KLEMENS B. SCHOENFELDER
------------------------------------
Name: Klemens B. Schoenfelder
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ KLEMENS B. SCHOENFELDER President and Director
- -----------------------------------------------------
Klemens B. Schoenfelder
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-9
<PAGE> 118
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, at Charlotte, North
Carolina on the 14th day of May, 1998.
COLTEC INTERNATIONAL SERVICES CO
by /s/ MICHAEL J. BURDULIS
------------------------------------
Name: Michael J. Burdulis
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs, and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ MICHAEL J. BURDULIS President
- -----------------------------------------------------
Michael J. Burdulis
/s/ DAVID D. HARRISON Vice President and Treasurer
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
/s/ LAWRENCE H. POLSKY Director
- -----------------------------------------------------
Lawrence H. Polsky
</TABLE>
II-10
<PAGE> 119
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
COLTEC NORTH CAROLINA INC
by /s/ DAVID D. HARRISON
------------------------------------
Name: David D. Harrison
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>
/s/ DAVID D. HARRISON President and Director
- -----------------------------------------------------
David D. Harrison
/s/ THOMAS B. JONES, JR. Vice President and Treasurer
- -----------------------------------------------------
Thomas B. Jones, Jr.
/s/ ROBERT J. TUBBS Vice President , Secretary and
- ----------------------------------------------------- Director
Robert J. Tubbs
</TABLE>
II-11
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, at Charlotte, North
Carolina, on the 14th day of May, 1998.
COLTEC TECHNICAL SERVICES INC
by /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>
/s/ ROBERT J. TUBBS President and Director
- -----------------------------------------------------
Robert J. Tubbs
/s/ DAVID D. HARRISON Vice President and Treasurer
- -----------------------------------------------------
David D. Harrison
</TABLE>
II-12
<PAGE> 121
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
DELAVAN INC
by /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ ROBERT J. TUBBS President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
/s/ DAVID D. HARRISON Vice President, Treasurer and Director
- -----------------------------------------------------
David D. Harrison
</TABLE>
II-13
<PAGE> 122
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
GARLOCK INC
by /s/ MICHAEL J. BURDULIS
------------------------------------
Name: Michael J. Burdulis
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>
/s/ MICHAEL J. BURDULIS President
- -----------------------------------------------------
Michael J. Burdulis
/s/ DAVID D. HARRISON Vice President, Treasurer and
- ----------------------------------------------------- Director
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and
- ----------------------------------------------------- Director
Robert J. Tubbs
</TABLE>
II-14
<PAGE> 123
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
GARLOCK INTERNATIONAL INC
by /s/ MICHAEL J. BURDULIS
------------------------------------
Name: Michael J. Burdulis
Title:President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ MICHAEL J. BURDULIS President
- -----------------------------------------------------
Michael J. Burdulis
/s/ DAVID D. HARRISON Vice President, Treasurer and Director
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-15
<PAGE> 124
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
GARLOCK OVERSEAS CORPORATION
by /s/ MICHAEL J. BUSDULIS
------------------------------------
Name: Michael J. Burdulis
Title:Chairman and President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S> <C>
/s/ MICHAEL J. BUSDULIS President
- -----------------------------------------------------
Michael J. Burdulis
/s/ DAVID D. HARRISON Vice President, Treasurer and
- ----------------------------------------------------- Director
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and
- ----------------------------------------------------- Director
Robert J. Tubbs
</TABLE>
II-16
<PAGE> 125
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, at Beloit, Wisconsin on
the 14th day of May, 1998.
HABER TOOL COMPANY INC
by /s/ RICHARD L. DASHNAW
------------------------------------
Name: Richard L. Dashnaw
Title:President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ RICHARD L. DASHNAW President
- -----------------------------------------------------
Richard L. Dashnaw
/s/ DAVID D. HARRISON Vice President, Treasurer and Director
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-17
<PAGE> 126
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
JAMCO PRODUCTS LLC
by /s/ THOMAS C. JOHNS
------------------------------------
Name: Thomas C. Johns
Title:President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ THOMAS C. JOHNS President and Manager
- -----------------------------------------------------
Thomas C. Johns
/s/ DAVID D. HARRISON Manager
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Manager
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-18
<PAGE> 127
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, at Charlotte, North
Carolina, on the 14th day of May, 1998.
MENASCO AEROSYSTEMS INC
by /s/ JOHN M. CYBULSKI
------------------------------------
Name: John M. Cybulski
Title: Chairman
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ JOHN M. CYBULSKI Chairman
- -----------------------------------------------------
John M. Cybulski
/s/ JOHN J. ORCT Vice President, Finance and Director
- -----------------------------------------------------
John J. Orct
/s/ DAVID D. HARRISON Vice President and Treasurer
- -----------------------------------------------------
David D. Harrison
</TABLE>
II-19
<PAGE> 128
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, at Longview, Texas on the
14th day of May, 1998.
STEMCO INC
by /s/ MICHAEL J. LESLIE
------------------------------------
Name: Michael J. Leslie
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>
/s/ MICHAEL J. LESLIE President
- -----------------------------------------------------
Michael J. Leslie
/s/ DAVID D. HARRISON Vice President, Treasurer and
- ----------------------------------------------------- Director
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and
- ----------------------------------------------------- Director
Robert J. Tubbs
</TABLE>
II-20
<PAGE> 129
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, at Euless, Texas on the
14th day of May, 1998.
WALBAR INC
by /s/ PETER CHALLINOR
------------------------------------
Name: Peter Challinor
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and all documents relating thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ PETER CHALLINOR President
- -----------------------------------------------------
Peter Challinor
/s/ DAVID D. HARRISON Vice President and Treasurer
- -----------------------------------------------------
David D. Harrison
/s/ ROBERT J. TUBBS Vice President, Secretary and Director
- -----------------------------------------------------
Robert J. Tubbs
</TABLE>
II-21
<PAGE> 130
EXHIBIT INDEX
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS PAGE
- -------- ----
<C> <S> <C>
*4.1 Indenture dated April 16, 1998, between Coltec and Bankers
Trust Company as trustee, relating to the 7 1/2% Senior
Secured Notes.
*4.2 Form of 7 1/2% Series B Senior Secured Notes (included in
Exhibit 4.1 above).
*4.3 Registration Rights Agreement, dated as of April 16, 1998,
between Coltec and the Initial Purchasers named therein.
*4.4 Fifth Amendment to the Credit Agreement, dated as of March
16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the
Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, the Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
*4.5 Consent and Agreement, dated as of March 31, 1998, with
respect to the Credit Agreement among Coltec, Coltec
Aerospace Canada Ltd., the Subsidiary Guarantors named
therein, the financial institutions party thereto from time
to time, Bank of America National Trust and Savings
Association, as Documentation Agent, the Chase Manhattan
Bank, as Syndication Agent, Bankers Trust Company, as
Administrative Agent, and Bank of Montreal, as Canadian
Paying Agent.
*4.6 Modification to Fifth Amendment to Credit Agreement, dated
as of April 20, 1998, among Coltec, Coltec Aerospace Canada
Ltd., the Subsidiary Guarantors named therein, the financial
institutions party thereto from time to time, Bank of
America National Trust and Savings Association, as
Documentation Agent, The Chase Manhattan Bank, as
Syndication Agent, Bankers Trust Company, as Administrative
Agent, and Bank of Montreal, as Canadian Paying Agent.
*4.7 The Amended and Restated Company Pledge Agreement, dated as
of March 24, 1998, made by Coltec in favor of Bankers Trust
Company as collateral agent.
*4.8 The Amended and Restated Company Security Agreement, dated
as of March 24, 1998, made by Coltec in favor of Bankers
Trust Company as collateral agent.
**4.9 The Amended and Restated Subsidiary Pledge Agreement, dated
March 24, 1998, made by the Subsidiary named therein in
favor of Bankers Trust Company as collateral agent.
*4.10 The Amended and Restated Subsidiary Security Agreement,
dated March 24, 1998, made by the Subsidiary named therein
in favor of Bankers Trust Company as collateral agent.
*4.11 Second Amendment to Receivables Transfer and Administration
Agreement, dated January 26, 1998, between Coltec and Coltec
North Carolina Inc.
**5.1 Opinion of Robert J. Tubbs, Executive Vice President,
General Counsel and Secretary of Coltec.
*12.1 Computation of Ratio of Earnings to Fixed Charges and other
Ratios.
**23.1 Consent of Robert J. Tubbs (included in Item 5.1).
*23.2 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney (contained on the signature page)
*25.1 Statement of Eligibility under the Trust Indenture Act of
1939 of Bankers Trust Company on Form T-1.
</TABLE>
II-22
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBITS PAGE
- -------- ----
<C> <S> <C>
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
*99.4 Form of Letter to Clients.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
II-23
<PAGE> 1
EXHIBIT 4.1
================================================================================
COLTEC INDUSTRIES INC
ISSUER
7 1/2% Senior Notes Due 2008
------------------------------------
INDENTURE
Dated as of April 16, 1998
------------------------------------
BANKERS TRUST COMPANY
TRUSTEE
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
INDENTURE
TIA SECTION SECTION
----------- ----------
<S> <C> <C> <C>
310 (a) (1) ....................................................... 7.10
(a) (2) ....................................................... 7.10
(a) (3) ....................................................... N.A.
(a) (4) ....................................................... N.A.
(b) ............................................................ 7.8; 7.10
(c) ............................................................ N.A.
311 (a) ............................................................ 7.11
(b) ............................................................ 7.11
(c) ............................................................ N.A.
312 (a) ............................................................ 2.5
(b) ............................................................ 12.3
(c) ............................................................ 12.3
313 (a) ............................................................ 7.6
(b) (1) ....................................................... N.A.
(b) (2) ....................................................... 7.6
(c) ............................................................ 7.6
(d) ............................................................ 7.6
314 (a) ............................................................ 4.10
4.4; 12.2
(b) ............................................................ 11.2
(c) (1) ....................................................... 12.4
(c) (2) ....................................................... 12.4
(c) (3) ....................................................... N.A.
(d) ............................................................ 11.2; 11.3
(e) ............................................................ 12.5
(f) ............................................................ 4.10
315 (a) ............................................................ 7.1
(b) ............................................................ 7.5; 12.2
(c) ............................................................ 7.1
(d) ............................................................ 7.1
(e) ............................................................ 6.11
316 (a) (last sentence) ........................................... 12.6
(a) (1) (A) ................................................... 6.5
(a) (1) (B) ................................................... 6.4
(a) (2)......................................................... N.A.
(b) ............................................................ 6.7
317 (a) (1) ....................................................... 6.8
(a) (2) ....................................................... 6.9
(b) ............................................................ 2.4
318 (a) ............................................................ 12.1
N.A. means Not Applicable.
</TABLE>
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
Definitions and Incorporation by Reference..................
SECTION 1.1. Definitions.................................................
SECTION 1.2. Other Definitions...........................................
SECTION 1.3. Incorporation by Reference of Trust Indenture Act...........
SECTION 1.4. Rules of Construction.......................................
SECTION 1.5. One Class of Securities.....................................
ARTICLE II
The Securities..............................................
SECTION 2.1. Form and Dating.............................................
SECTION 2.2. Execution and Authentication................................
SECTION 2.3. Registrar and Paying Agent..................................
SECTION 2.4. Paying Agent To Hold Money in Trust.........................
SECTION 2.5. Securityholder Lists........................................
SECTION 2.6. [Intentionally Omitted].....................................
SECTION 2.7. Replacement Securities......................................
SECTION 2.8. Outstanding Securities......................................
SECTION 2.9. Temporary Securities........................................
SECTION 2.10. Cancellation................................................
SECTION 2.11. Defaulted Interest..........................................
SECTION 2.12. CUSIP Numbers...............................................
ARTICLE III
Redemption..................................................
SECTION 3.1. Notices to Trustee..........................................
SECTION 3.2. Selection of Securities To Be Redeemed......................
SECTION 3.3. Notice of Redemption........................................
SECTION 3.4. Effect of Notice of Redemption..............................
SECTION 3.5. Deposit of Redemption Price.................................
SECTION 3.6. Securities Redeemed in Part.................................
ARTICLE IV
Covenants...................................................
SECTION 4.1. Payment of Securities.......................................
SECTION 4.2. Limitations on Liens........................................
SECTION 4.3. Limitation on Sale and Lease-Back Transactions..............
SECTION 4.4. Compliance Certificate......................................
SECTION 4.5. Further Instruments and Acts................................
SECTION 4.6. Maintenance of Office or Agency.............................
SECTION 4.7. SEC Reports.................................................
ARTICLE V
Successor Company...........................................
SECTION 5.1. When the Company May Merge or Transfer Assets...............
ARTICLE VI
Defaults and Remedies.......................................
SECTION 6.1. Events of Default...........................................
</TABLE>
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<TABLE>
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SECTION 6.2. Acceleration................................................
SECTION 6.3. Other Remedies..............................................
SECTION 6.4. Waiver of Past Defaults.....................................
SECTION 6.5. Control by Majority.........................................
SECTION 6.6 Limitation on Suits.........................................
SECTION 6.7. Rights of Holders To Receive Payment........................
SECTION 6.8. Collection Suit by Trustee..................................
SECTION 6.9. Trustee May File Proofs of Claim............................
SECTION 6.10. Priorities..................................................
SECTION 6.11. Undertaking for Costs.......................................
SECTION 6.12. Waiver of Stay or Extension Laws............................
ARTICLE VII
Trustee.....................................................
SECTION 7.1. Duties of Trustee...........................................
SECTION 7.2. Rights of Trustee...........................................
SECTION 7.3. Individual Rights of Trustee................................
SECTION 7.4 Trustee's Disclaimer........................................
SECTION 7.5. Notice of Defaults..........................................
SECTION 7.6. Reports by Trustee to Holders...............................
SECTION 7.7. Compensation and Indemnity..................................
SECTION 7.8. Replacement of Trustee......................................
SECTION 7.9. Successor Trustee by Merger.................................
SECTION 7.10. Eligibility; Disqualification...............................
SECTION 7.11. Preferential Collection of Claims Against Company...........
ARTICLE VIII
Discharge of Indenture; Defeasance..........................
SECTION 8.1 Discharge of Liability on Securities; Defeasance............
SECTION 8.2 Conditions to Defeasance....................................
SECTION 8.3 Application of Trust Money..................................
SECTION 8.4 Repayment to Company........................................
SECTION 8.5 Indemnity for Government Obligations........................
SECTION 8.6 Reinstatement...............................................
ARTICLE IX
Amendments..................................................
SECTION 9.1 Without Consent of Holders..................................
SECTION 9.2 With Consent of Holders.....................................
SECTION 9.3 Compliance with Trust Indenture Act.........................
SECTION 9.4 Revocation and Effect of Consents and Waivers...............
SECTION 9.5 Notation on or Exchange of Securities.......................
SECTION 9.6 Trustee To Sign Amendments..................................
SECTION 9.7 Payment for Consent.........................................
ARTICLE X
Subsidiary Guarantee........................................
SECTION 10.1 Subsidiary Guarantee........................................
SECTION 10.2 Limitation on Liability.....................................
SECTION 10.3 Successors and Assigns......................................
SECTION 10.4 No Waiver...................................................
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 10.5 Right of Contribution.......................................
SECTION 10.6 No Subrogation..............................................
SECTION 10.7 Additional Subsidiary Guarantors............................
SECTION 10.8 Modification................................................
SECTION 10.9 Release of Subsidiary Guarantor.............................
SECTION 10.10 Merger, Consolidation and Sale of Assets of a Subsidiary
Guarantor...................................................
ARTICLE XI
Collateral and Security.....................................
SECTION 11.1 Collateral Documents........................................
SECTION 11.2 Opinions....................................................
SECTION 11.3 Release and Substitution of Collateral; Amendment of
Collateral Documents........................................
SECTION 11.4 Certificates of the Company.................................
SECTION 11.5. Authorization of Actions to be Taken by the Trustee Under
the Collateral..............................................
SECTION 11.6. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents........................................
SECTION 11.7 Release Upon Termination of the Company's Obligations.......
SECTION 11.8. Security Agreement Collateral...............................
ARTICLE XII
Miscellaneous...............................................
SECTION 12.1. Trust Indenture Act Controls................................
SECTION 12.2. Notices.....................................................
SECTION 12.3. Communication by Holders with other Holders.................
SECTION 12.4. Certificate and Opinion as to Conditions Precedent..........
SECTION 12.5. Statements Required in Certificate or Opinion...............
SECTION 12.6. When Securities Disregarded.................................
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar................
SECTION 12.8. Legal Holidays..............................................
SECTION 12.9. Governing Law...............................................
SECTION 12.10. No Recourse Against Others..................................
SECTION 12.11. Successors..................................................
SECTION 12.12. Multiple Originals..........................................
SECTION 12.13. Qualification of Indenture..................................
SECTION 12.14. Table of Contents; Headings.................................
Rule 144A/Regulation S Appendix.............................................
Exhibit A -- Form of Exchange Security and Private Exchange Security........
Exhibit B -- Form of Collateral Agent Acknowledgment........................
Exhibit C -- Form of Company Pledge Agreement...............................
Exhibit D -- Form of Subsidiaries Pledge Agreement..........................
Exhibit E -- Form of Company Security Agreement.............................
Exhibit F -- Form of Subsidiaries Security Agreement........................
Exhibit G -- Form of Mortgage Amendment.....................................
Exhibit H -- Form of Guarantor Supplement...................................
</TABLE>
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<PAGE> 6
INDENTURE, dated as of April 16, 1998, among COLTEC INDUSTRIES INC, a
Pennsylvania corporation (as further defined below, the "Company"), the
Subsidiary Guarantors (as defined herein) and Bankers Trust Company, a New York
banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 7 1/2% Senior
Notes Due 2008 (the "Initial Securities") and, if and when issued in exchange
for Initial Securities as provided in the Registration Rights Agreement (as
hereinafter defined in the Rule 144A/Regulation S Appendix), the Company's
Series B 7 1/2% Senior Notes Due 2008 (the "Exchange Securities") and if and
when issued pursuant to a private exchange for Initial Securities, the Company's
Series C 7 1/2% Senior Notes Due 2008 (the "Private Exchange Securities" and,
together with the Initial Securities and the Exchange Securities, the
"Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"ATTRIBUTABLE DEBT" means in connection with a sale and lease-back
transaction, the lesser of (a) the fair market value of the assets subject to
such transaction and (b) the present value (discounted at a rate per annum equal
to the average interest borne by all outstanding securities issued under this
Indenture determined on a weighted average basis and compounded semiannually) of
the obligations of the lessee for rental payments during the term of the related
lease.
"BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York City are authorized or required by law to
close.
"CAPITAL LEASE" means any Indebtedness represented by a lease obligation of
a person incurred with respect to real property or equipment acquired or leased
by such person and used in its business that is required to be recorded as a
capital lease in accordance with GAAP.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, rights to purchase, warrants, options or other equivalents
(however designated) of corporate stock or other equity of such Person.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the collective reference to all of the property and
assets that are from time to time subject to the Liens of the Collateral
Documents.
"COLLATERAL AGENT" means Bankers Trust Company, acting in its capacity as
agent with respect to the Collateral for the secured creditors under the
Collateral Documents, including, without limitation, the Holders of the
Securities and the lenders under the Credit Agreement, or any successor thereto.
"COLLATERAL AGENT ACKNOWLEDGMENT" means the agreement, dated as of March
16, 1998, between the Trustee, on behalf of the Holders of the Securities, and
Bankers Trust Company, acting in its capacity as Collateral Agent, substantially
in the form of Exhibit B, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof.
"COLLATERAL DOCUMENTS" means the collective reference to the Company Pledge
Agreement, the Subsidiaries Pledge Agreement, the Company Security Agreement,
the Subsidiaries Security Agreement, the Mortgages, and any other security
agreement, pledge agreement, mortgage, deed of trust or other agreement,
instrument or document which may be entered into or delivered after the date of
this Indenture in favor of the Collateral Agent to secure the obligations
thereunder and any other instruments, agreements or documents entered into or
delivered in connection with any of the foregoing, as such agreements,
instruments or documents may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
<PAGE> 7
"COMPANY PLEDGE AGREEMENT" means the pledge agreement, dated as of March
24, 1992, as amended and restated as of December 18, 1996, and as further
amended and restated as of March 16, 1998 in connection with the offering of the
Securities, made by the Company to Bankers Trust Company, as Collateral Agent,
substantially in the form of Exhibit C, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the provisions
thereof.
"COMPANY SECURITY AGREEMENT" means the security agreement, dated as of
March 24, 1992, as amended and restated as of December 18, 1996, and as further
amended and restated as of March 16, 1998 in connection with the offering of the
Securities, made by the Company to Bankers Trust Company, as Collateral Agent,
substantially in the form of Exhibit E, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the provisions
thereof.
"CONSOLIDATED NET ASSETS" means as of any particular time the aggregate
amount of assets after deducting therefrom all current liabilities except for
(a) notes and loans payable, (b) current maturities of long-term debt and (c)
current maturities of obligations under capital leases, all as set forth on the
most recent consolidated balance sheet of the Company and its consolidated
Subsidiaries and computed in accordance with GAAP.
"CORPORATE TRUST OFFICE" shall mean the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at the date of the execution of this Indenture is located at Four
Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency
Group or at any other time at time such other address as the Trustee may
designate from time to time by notice to the Holders.
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement, dated
as of March 24, 1992, as amended and restated as of January 11, 1994 and further
as amended and restated as of December 18, 1996, as amended by the Fifth
Amendment thereto, dated as of March 16, 1998, among the Company, Coltec
Aerospace Canada Limited, a Subsidiary of the Company, Bankers Trust Company, as
Administrative Agent, Bank of America National Trust and Savings Association, as
Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bank of
Montreal, as Canadian Paying Agent, and the various lenders party thereto, as
such agreement may be amended (including any amendment, restatement and
successors thereof), supplemented, refinanced, renewed, extended, replaced, in
whole or in part, or otherwise modified from time to time, including any
increase in the principal amount of the obligations thereunder.
"DEFAULT" means any event as defined in Section 6.1 herein which is, or
after notice or passage of time or both would be, an Event of Default.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXEMPTED DEBT" means the sum of the following as of the date of
determination: (i) Indebtedness of the Company and its Subsidiaries (other than
Foreign Subsidiaries) incurred after the Issue Date and secured by Liens not
otherwise permitted by Section 4.2 and (ii) Attributable Debt of the Company and
its Subsidiaries in respect of sale and lease-back transactions entered into
after the Issue Date, other than sale and lease-back transactions permitted by
clauses (a) and (c) of Section 4.3.
"FOREIGN SUBSIDIARY" means any Subsidiary which is incorporated or
otherwise organized under the laws of any jurisdiction other than the United
States of America, any state thereof or the District of Columbia and any
Subsidiary thereof.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GUARANTEE" means a guarantee, direct or indirect, in any manner
(including, without limitation, letters of credit and reimbursement agreements
in respect thereof), of all or any part of any Indebtedness; provided,
2
<PAGE> 8
however, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"HOLDER" or "SENIOR NOTEHOLDER" or "SECURITYHOLDER" means the Person in
whose name a Senior Note is registered on the Registrar's books.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (i)
principal of, and premium, if any, and interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to such Person, whether or not a claim for such post-petition interest is
allowed in such proceeding) on any indebtedness of such Person (A) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets,
of such person or only to a portion thereof), (B) evidenced by notes, debentures
or similar instruments (including purchase money obligations) given in
connection with the acquisition of any property or assets (other than trade
accounts payable for inventory or similar property acquired in the ordinary
course of business), including securities, for the payment of which such Person
is liable, directly or indirectly, or the payment of which is secured by a lien,
charge or encumbrance on property or assets of such Person, (C) for goods,
materials or services purchased in the ordinary course of business (other than
trade accounts payable arising in the ordinary course of business), (D) with
respect to letters of credit or bankers acceptances issued for the account of
such Person or performance, surety or similar bonds, (E) for the payment of
money relating to a Capital Lease obligation or (F) under interest rate swaps,
caps or similar agreements and foreign exchange contracts, currency swaps or
similar agreements; (ii) any liability of any other Person of the kind described
in the preceding clause (i), which such Person has Guaranteed or which is
otherwise its legal liability; and (iii) any and all deferrals, renewals,
extensions and refunding of, or amendments, modifications or supplements to, any
indebtedness of the kind described in any of the preceding clauses (i) or (ii).
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"ISSUE DATE" means the date on which the Initial Securities are originally
issued.
"LEGAL HOLIDAY" has the meaning ascribed in Section 12.8.
"LIEN" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security interest).
"MORTGAGES" means each of the mortgages or deeds of trust, in each case
dated as of March 24, 1992, as amended and restated as of January 11, 1994, as
further amended and restated as of December 18, 1996, and as further amended as
of March 16, 1998 which amendment shall be substantially in the form of Exhibit
G in connection with the offering of the Securities, made by the Company or by
the Company's Subsidiaries, as the case may be, to Bankers Trust Company, as
Collateral Agent, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the provisions thereof.
"OFFERING CIRCULAR" means the Offering Circular dated April 8, 1998
relating to the Initial Securities; provided that after the issuance of Exchange
Securities, all references herein to "Offering Circular" shall be deemed
references to the prospectus contained in the registration statement relating to
the Exchange Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, and Guarantor as
applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by any two Officers of
the Company.
"OPINION OF COUNSEL" means an executed written opinion complying with
Section 12.5 herein from Robert J. Tubbs, Esq. or any other legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PERMITTED LIENS" means (i) Liens on any asset of the Company or any
Subsidiary created solely to secure obligations incurred to finance the
refurbishment, improvement or construction of such asset, which obligations are
incurred no later than 180 days after completion of such refurbishment,
improvement or construction, and all renewals, extensions, refinancings,
replacements or refundings of such obligations, or to secure all or part of the
cost of such refurbishment, improvement or construction; (ii) (a) Liens to
secure the payment of the purchase price incurred in connection with the
acquisition (including acquisition through merger or consolidation) of any
3
<PAGE> 9
asset (including shares of stock), including Capital Lease transactions in
connection with any such acquisition and (b) Liens existing on any asset at the
time of acquisition thereof or at the time of acquisition by the Company or any
Subsidiary of any Person then owning such asset, directly or indirectly, whether
or not such existing Liens were given to secure the payment of the purchase
price of the property to which they attach; provided that, with respect to
clause (a), such Liens shall be given within one year after such acquisition and
shall attach solely to the assets acquired or purchased and any improvements
then or thereafter placed thereon; (iii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (iv) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods; (v) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (vi) Liens encumbering
customary initial deposits and margin deposits and other Liens, in each case
securing Indebtedness of the Company or any Subsidiary under interest rate and
currency hedging instruments and forward contract, option, futures contracts,
futures options or similar agreements or arrangements designed to protect the
Company or any Subsidiary from fluctuations in interest rates, currencies or the
price of commodities; (vii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any Subsidiary in the ordinary course of business; (viii)
Liens in favor of the Company or any Subsidiary; (ix) Liens for taxes,
assessments or governmental charges or levies on the assets of the Company or
any Subsidiary if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings or Liens for the excess of the amount of any past due taxes for
which a final assessment has not been received over the amount of such taxes as
estimated and paid; (x) Liens imposed by law, such as carriers', warehousemen's
and mechanics' Liens and other similar Liens on the assets of the Company or any
Subsidiary arising in the ordinary course of business which secure payment of
obligations not more than 60 days past due or are being contested in good faith
and by appropriate proceedings; (xi) Liens on the assets of the Company or any
Subsidiary incurred in the ordinary course of business to secure performance of
obligations with respect to statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a like nature and
incurred in a manner consistent with industry practice; (xii) Liens on the
assets of a Receivables Subsidiary in a Qualified Receivables Transaction;
(xiii) Liens in respect of any judgment (other than any judgment which
constitutes an Event of Default or which, after the passage of time may
constitute an Event of Default) rendered which is being contested diligently and
in good faith by appropriate proceedings by the Company or any of its
Subsidiaries and which does not have a material adverse effect on the ability of
the Company and its Subsidiaries to operate the business or operations of the
Company or its Subsidiaries taken as a whole; and (xiv) Liens in favor of the
United States or any state or territory or possession thereof, or any foreign
country, or any department, agency, instrumentality or political subdivision of
any of such domestic or foreign governmental entity, to secure partial,
progress, advance or other payments pursuant to any contract or statute or to
secure any liability incurred for the purpose of financing all or part of the
purchase price or the cost of constructing the asset subject to such Liens;
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PRINCIPAL" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time; provided, however, that for purposes of calculating
any such premium, the term "principal" shall not include the premium with
respect to which such calculation is being made.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or a Subsidiary) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including all
collateral securing such accounts receivable, all
4
<PAGE> 10
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which, in each
case, are customarily and regularly transferred, or in respect of which security
interests are customarily granted, in connection with asset securitization
transactions involving accounts receivable.
"RECEIVABLES SUBSIDIARY" means a Subsidiary of the Company which engages in
no activities other than in connection with the financing of accounts receivable
and which is designated by or pursuant to the authority of the Board of
Directors as a Receivables Subsidiary (a) no portion of the Indebtedness of
which (i) is Guaranteed by the Company or any Subsidiary, (ii) is recourse to or
obligates the Company or any Subsidiary in any manner other than pursuant to
customary representations, warranties, covenants and indemnities entered into in
connection with a Qualified Receivables Transaction or (iii) subjects any assets
of the Company or any Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to the
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction and other than in respect of the related pledge of the financed
accounts receivable and (b) with which neither the Company nor any Subsidiary
has any obligation to maintain or preserve such Subsidiary's financial condition
or cause such Subsidiary to achieve certain levels of operating results.
"SEC" means the U.S. Securities and Exchange Commission, or any successor
agency.
"SECURITIES" means the Initial Securities, the Exchange Securities and the
Private Exchange Securities issued or to be issued under this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"STATED MATURITY" means, with respect to any Security, the date specified
in such Security as the fixed date on which the payment of Principal of such
Security is due and payable, including pursuant to any mandatory redemption
provision.
"SUBSIDIARIES PLEDGE AGREEMENT" means the pledge agreement, dated as of
March 24, 1992, as amended and restated as of December 18, 1996, and as further
amended and restated as of March 16, 1998 in connection with the offering of the
Securities, made by the Company's Subsidiaries to Bankers Trust Company, as
Collateral Agent, substantially in the form of Exhibit D, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof.
"SUBSIDIARIES SECURITY AGREEMENT" means the security agreement, dated as of
March 24, 1992, as amended and restated as of January 11, 1994, as further
amended and restated as of December 18, 1996, and as further amended and
restated as of March 16, 1998 in connection with the offering of the Securities,
made by the Company's Subsidiaries to Bankers Trust Company, as Collateral
Agent, substantially in the form of Exhibit F, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof.
"SUBSIDIARY" means a Person (other than an individual), a majority of the
outstanding voting stock, partnership interests, membership interests or other
equity interest, as the case may be, of which is owned or controlled, directly
or indirectly, by the Company or by one or more other Subsidiaries of the
Company. For the purposes of this definition, "voting stock" means stock having
voting power for the election of directors, trustees or managers, as the case
may be, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
"SUBSIDIARY GUARANTEE" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Securities.
"SUBSIDIARY GUARANTOR" means each Subsidiary of the Company existing on the
Issue Date and each new Subsidiary created after the Issue Date (in each case,
other than Foreign Subsidiaries), in each case that Guarantees the Company's
obligations under the Credit Agreement; provided that, if such Subsidiary's
Guarantee
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of the Company's obligations under the Credit Agreement is released or ceases to
be in effect, such Subsidiary shall no longer be a Subsidiary Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec.
77aaa-77bbbb) as in effect on the date of this Indenture; provided, however,
that, in the event the Trust Indenture Act of 1939 is amended after such date,
"TIA" means, to the extent required by any such amendments, the Trust Indenture
Act of 1939 as so amended.
"TRUSTEE" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means such successor.
"TRUST OFFICER" means any officer within the Corporate Trust Office
including any Vice President, Managing Director, Assistant Vice President,
Secretary, Assistant Secretary Treasurer or Assistant Treasurer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in
effect from time to time.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- ----------
<S> <C>
"Appendix".................................................. 2.1
"Authenticating Agent"...................................... 2.2
"Bankruptcy Law"............................................ 6.1
"covenant defeasance option"................................ 8.1(b)
"Custodian"................................................. 6.1
"Event of Default".......................................... 6.1
"Obligations"............................................... 10.1
"legal defeasance option"................................... 8.1(b)
"Paying Agent".............................................. 2.3
"Registrar"................................................. 2.3
"Successor Company"......................................... 5.1
</TABLE>
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Guarantor and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by the TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
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SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(8) the principal amount of any preferred stock shall be (i) the
maximum liquidation preference of such preferred stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
preferred stock, whichever is greater; and
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
SECTION 1.5. ONE CLASS OF SECURITIES.
The Initial Securities, the Private Exchange Securities and the Exchange
Securities shall vote and consent together on all matters as one class and none
of the Initial Securities, the Private Exchange Securities or the Exchange
Securities shall have the right to vote or consent as a separate class on any
matter.
ARTICLE II
THE SECURITIES
SECTION 2.1. FORM AND DATING.
Certain provisions relating to the Initial Securities, the Private Exchange
Securities and the Exchange Securities are set forth in the Rule 144A/Regulation
S Appendix attached hereto (the "Appendix"), which is hereby incorporated in and
expressly made a part of this Indenture. The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit 1 to the Appendix, which is hereby incorporated in and expressly made a
part of this Indenture. The Exchange Securities, the Private Exchange Securities
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit A, which is hereby incorporated by reference and expressly made
a part of this Indenture. The Securities may have notations, legends or
endorsements required by law, rule of any securities exchange or
over-the-counter market on which such Securities are then listed or quoted, or
usage, in addition to those set forth on the Appendix and Exhibit A. The Company
and the Trustee shall approve the forms of the Securities and any notation,
endorsement or legend on them. Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in the Appendix and
Exhibit A are part of the terms of this Indenture and, to the extent applicable,
the Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to be bound by such terms.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature and may be imprinted or otherwise reproduced.
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If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually authenticates the Security. The signature of the Trustee on a Security
shall be conclusive evidence that such Security has been duly and validly
authenticated and issued under this Indenture.
The Trustee may appoint an agent (the "Authenticating Agent") reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, any such Authenticating Agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. The Trustee
shall authenticate Securities for original issue up to the aggregate principal
amount stated in Section 2.2 of the Appendix to this Indenture upon a written
order of the Company signed by two Officers. The aggregate principal amount of
Securities outstanding at any time may not exceed that amount except as provided
in Section 2.7.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where Securities may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-registrars and one or
more additional paying agents. The term "Paying Agent" includes any such
additional paying agent.
In the event the Company shall retain any Person not a party to this
Indenture as an agent hereunder, the Company shall enter into an appropriate
agency agreement with any Registrar, Paying Agent or co-registrar not a party to
this Indenture, which shall incorporate the terms of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of each such agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.7. The Company or any of its domestically incorporated wholly owned
Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee as Registrar and Paying Agent
for the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
By at least 11:00 a.m. (New York City time) on the date on which any
Principal or interest (including any Additional Interest) on any Security is due
and payable, the Company shall deposit with the Paying Agent a sum sufficient to
pay such Principal or interest (including any Additional Interest) when due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that such Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by such Paying Agent for the
payment of Principal of or interest (including any Additional Interest) on the
Securities and shall promptly notify the Trustee in writing of any default by
the Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the Trustee and to
account for any funds disbursed by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money delivered to the Trustee. Upon any
bankruptcy, reorganization or similar proceeding with respect to the Company,
the Trustee shall serve as Paying Agent for the Securities.
SECTION 2.5. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall cause
the Registrar to furnish to the Trustee, in writing at least five Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
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<PAGE> 14
SECTION 2.6. [INTENTIONALLY OMITTED]
SECTION 2.7. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Registrar or if the Holder of
a Security shall provide the Company and the Trustee with evidence to their
satisfaction that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security if
the requirements of the Trustee and the Company are met. If required by the
Trustee or the Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the Company, the
Trustee, the Paying Agent, the Registrar and any co-registrar or other agent
from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge the Holder for their expenses in replacing a
Security, including reasonable fees and expenses of counsel. Every replacement
Security is an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES.
Securities outstanding at any time are all Securities authenticated by the
Trustee except for those canceled, those delivered for cancellation and those
described in this Section 2.8 as not outstanding. A Security does not cease to
be outstanding because the Company or an affiliate of the Company holds the
Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
Principal and interest payable on that date with respect to the Securities (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.9. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may execute
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities. After the preparation of definitive
Securities, the temporary Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities at any office or agency
maintained by the Company for that purpose and such exchange shall be without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, one or more definitive Securities
representing an equal principal amount of Securities. Until so exchanged, the
Holder of temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as a Holder of definitive Securities.
SECTION 2.10. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
for cancellation any Securities surrendered to them for registration of transfer
or exchange or payment. The Trustee and no one else shall cancel and destroy all
Securities surrendered for registration of transfer or exchange, payment or
cancellation in accordance with its customary practices and procedures in effect
from time to time. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, the
Company shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) at the rate specified therefor in the Securities in any
lawful manner. The Company may pay the defaulted interest to the Persons who are
Securityholders on a
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<PAGE> 15
subsequent special record date. The Company shall fix or cause to be fixed (or
upon the Company's failure to do so the Trustee shall fix) any such special
record date and payment date to the reasonable satisfaction of the Trustee which
specified record date shall not be less than 10 days prior to the payment date
for such defaulted interest and shall promptly mail or cause to be mailed to
each Securityholder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid. The Company shall notify
the Trustee in writing of the amount of defaulted interest proposed to be paid
on each Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when so deposited to be held in trust for the
benefit of the Person entitled to such defaulted interest as provided in this
Section 2.11.
SECTION 2.12. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders, provided, however, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE III
REDEMPTION
SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to paragraph 5 of the
Securities, it shall notify the Trustee in writing of the redemption date and
the principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 30 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein.
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED.
If fewer than all the Securities then outstanding are to be redeemed, the
Trustee shall select the Securities to be redeemed by a method that the Trustee
in its sole discretion considers to be fair and appropriate. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. Upon
request of the Company, the Trustee shall notify the Company of the Securities
or portions of Securities to be redeemed.
SECTION 3.3. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a date for redemption of
Securities, the Trustee at the expense of the Company shall mail a notice of
redemption by first-class mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price if such price is calculable at the time such
notice is sent or, if not, the formula for calculating such price;
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<PAGE> 16
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued and unpaid
interest, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
The Trustee shall give the notice of redemption in the Company's name and
at the Company's expense. In such event, the Company shall compute and provide
the Trustee with the information required by this Section 3.3.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption shall
become due and payable on the redemption date and at the redemption price stated
or calculable as set forth in the notice. Upon surrender to the Paying Agent,
such Securities shall be paid at the redemption price stated in the notice, plus
accrued and unpaid interest, if any, to the redemption date; provided that the
Company shall have deposited the redemption price and accrued interest, if any,
with the Paying Agent or the Trustee on or before 11:00 a.m. (New York City
time) on the date of redemption; provided, further, that if the redemption date
is on an interest payment date, any accrued and unpaid interest shall be payable
to the Securityholder of the redeemed Securities registered on the relevant
record date. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
By at least 11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Security is due and payable, the Company shall
deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying
Agent, shall segregate and hold in trust) money sufficient to pay the redemption
price of and accrued and unpaid interest on all Securities to be redeemed on
that date other than Securities or portions of Securities called for redemption
which are owned by the Company or an affiliate and have been delivered by the
Company or such Subsidiary to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such redemption price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
redemption date, whether or not such Securities are presented for payment.
SECTION 3.6. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company shall
execute and the Trustee shall authenticate for the Holder (at the Company's
expense) a new Security equal in a principal amount to the unredeemed portion of
the Security surrendered.
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ARTICLE IV
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES.
The Company shall promptly pay the Principal of and interest (including
Additional Interest) on the Securities on the dates and in the manner provided
in the Securities and in this Indenture. Principal and interest (including
Additional Interest) shall be considered paid on the date due if on or before
11:00 a.m. (New York City time) on such date the Trustee or the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, the segregated account
or separate trust fund maintained by the Company or such Subsidiary pursuant to
Section 2.4) holds in accordance with this Indenture money sufficient to pay all
Principal and interest (including Additional Interest) then due and the Trustee
or the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, the
Company or such Subsidiary), as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture.
The Company shall pay interest on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful as provided in Section 2.11.
Notwithstanding anything to the contrary contained in this Indenture, the
Company or the Paying Agent may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States of
America or other domestic or foreign taxing authorities from Principal or
interest payments hereunder.
SECTION 4.2. LIMITATIONS ON LIENS.
(a) Neither the Company nor any Subsidiary Guarantor will, nor will they
permit any of their Subsidiaries (excluding Foreign Subsidiaries) to create,
incur, or permit to exist, any Lien on any of their respective assets, whether
now owned or hereafter acquired, in order to secure any Indebtedness of either
of the Company or any Subsidiary Guarantor, without effectively providing that
the Securities shall be equally and ratably secured until such time as such
Indebtedness is no longer secured by such Lien, except: (i) Liens securing
Indebtedness arising under the Credit Agreement so long as such Liens also
secure the Securities, equally and ratably; (ii) Liens on cash and cash
equivalents securing obligations in respect of letters of credit in accordance
with the terms of the Credit Agreement; (iii) Liens existing as of the Issue
Date; (iv) Liens existing on the Issue Date or granted after the Issue Date on
any assets of the Company or any Subsidiary Guarantor or any of their
Subsidiaries securing Indebtedness of the Company or any Subsidiary created in
favor of the Holders of the Securities; (v) Liens securing Indebtedness of the
Company or any Subsidiary Guarantor which is incurred to extend, renew or
refinance Indebtedness which is secured by Liens permitted to be incurred under
this Indenture; provided that such Liens do not extend to or cover any assets of
the Company or any Subsidiary other than the assets securing the Indebtedness
being extended, renewed or refinanced and that the principal amount of such
Indebtedness does not exceed the principal amount of the Indebtedness being
extended, renewed or refinanced at the time of such extension, renewal or
replacement, or at the time the Lien was issued, created or assumed or otherwise
permitted; (vi) Permitted Liens; and (vii) Liens created in substitution of or
as replacements for any Liens permitted by the preceding clauses (i) through
(vi) or this clause (vii), provided that, based on a good faith determination of
an officer of the Company, the asset encumbered under any such substitute or
replacement Lien is substantially similar in nature to the asset encumbered by
the otherwise permitted Lien which is being replaced.
(b) Notwithstanding the foregoing and Section 4.3, the Company and any
Subsidiary may, without securing any of the Securities, create, incur or permit
to exist Liens which would otherwise be subject to the restrictions set forth in
the preceding paragraph, if after giving effect thereto and at the time of
determination, the aggregate amount of Exempted Debt does not exceed the greater
of (x) $100 million and (y) 15% of Consolidated Net Assets.
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SECTION 4.3. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.
Neither the Company nor any Subsidiary Guarantor will, nor will they permit
any of their Subsidiaries (excluding Foreign Subsidiaries) to, enter into any
sale and lease-back transaction for the sale and leasing back of any property or
asset, whether now owned or hereafter acquired, of the Company or any Subsidiary
(except such transactions (i) entered into prior to the Issue Date, (ii) for the
sale and leasing back of any property or asset by a Subsidiary to the Company or
to another Subsidiary Guarantor (or, if there are no Subsidiary Guarantors,
another Subsidiary), (iii) involving leases for less than three years or (iv) in
which the lease for the property or asset is entered into within 180 days after
the later of the date of acquisition, completion of construction or commencement
or full operations of such property or asset) unless (a) the Company or any such
Subsidiary would be entitled under Section 4.2(a) to create, incur or permit to
exist a Lien on the assets to be leased securing Indebtedness in an amount at
least equal to the Attributable Debt in respect of such transaction without
equally and ratably securing the Securities, (b) the Company or any Subsidiary
would be entitled under Section 4.2(b) to create, incur or permit to exist a
Lien on the assets to be leased securing Indebtedness in an amount at least
equal to the Attributable Debt in respect of such transaction without equally
and ratably securing the Securities or (c) the proceeds of the sale of the
assets to be leased are at least equal to their fair market value and the
proceeds are applied to the purchase or acquisition (or in the case of real
property, the construction) of assets or to the repayment of Indebtedness of the
Company or any Subsidiary Guarantor (or, if there are no Subsidiary Guarantors,
another Subsidiary).
SECTION 4.4. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate stating that in the
course of the performance by the signers of their duties as Officers of the
Company whether or not the signers know of any Default or Event of Default that
occurred during such period. If they do, the certificate shall describe the
Default or Event of Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company and each of the Subsidiary
Guarantors also shall, to the extent required, comply with TIA sec. 314(a)(4).
SECTION 4.5. FURTHER INSTRUMENTS AND ACTS.
Upon reasonable request of the Trustee, the Company will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 4.6. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section 2.3.
The Company shall give prior written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 12.2.
SECTION 4.7. SEC REPORTS.
The Company and each Subsidiary Guarantor will comply, to the extent
required, with all the applicable provisions of TIA sec. 314(a) and, for so long
as the Company is not required to file reports under Sections 13 or 15(d) of the
Exchange Act, the Company will comply with the applicable provisions of Rule
144A(d)(4) under the Securities Act.
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ARTICLE V
SUCCESSOR COMPANY
SECTION 5.1. WHEN THE COMPANY MAY MERGE OR TRANSFER ASSETS.
The Company will not consolidate with or sell or lease its assets as, or
substantially as, an entirety, to, or merge with or into, in one transaction or
a series of transactions, any other Person, unless:
(i) the Company shall be the continuing entity, or the resulting,
surviving or transferee Person (the "Successor Company") shall be a Person
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and
(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture, as set forth in this Indenture.
Upon any consolidation or merger, or any sale or lease of the assets of the
Company as, or substantially as, an entirety in accordance with this Section
5.1, the entity formed by such consolidation or into which the Company shall
have been merged or to which such sale or lease shall have been made shall
succeed to and be substituted for the Company with the same effect as if it had
been named in this Indenture as a party hereto and thereafter from time to time
such successor entity may exercise each and every right and power of the Company
under this Indenture in the name of the Company or in its own name; and any act
or proceeding by any provision of this Indenture required or permitted to be
done by the Board of Directors or any Officer of the Company may be done with
like force and effect by the like board or officer of any entity that shall at
the time be the successor of the Company hereunder. In the event of the sale by
the Company of its assets as, or substantially as, an entirety upon the terms
and conditions of this Section 5.1, the Company shall be released from all its
liabilities and obligations under this Indenture and the Securities, but the
predecessor Company in the case of a lease of all its assets or substantially
all its assets will not be released from the obligation to pay the Principal of
and interest on the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the Principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
declaration or otherwise;
(3) the Company fails to comply with Article V;
(4) a Subsidiary Guarantor or the Company fails to comply with Section
4.2 or 4.3 and such failure continues for 60 days after the notice
specified below;
(5) the Company or a Subsidiary Guarantor fails to comply with any of
its agreements in the Securities or this Indenture (other than those
referred to in (1), (2), (3) or (4) above) and such failure continues for
60 days after the notice specified below;
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(6) the Company or the Subsidiary Guarantors or any Subsidiary of the
Company fails to pay any interest or Principal on any Indebtedness within
any applicable grace period provided in such Indebtedness after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default and the total amount of such Indebtedness
unpaid or accelerated exceeds $30 million or its foreign currency
equivalent;
(7) the Company or a Significant Subsidiary of the Company pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant Subsidiary
of the Company in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any assets that constitute a substantial part of the
assets of the Company or that constitute all or substantially all of the
assets of a Significant Subsidiary; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary of the Company;
(or any similar relief is granted under any foreign laws) and the order,
decree or relief remains unstayed and in effect for 60 days;
(9) any judgment or decree by a court of competent jurisdiction for
the payment of money in excess of $30 million or its foreign currency
equivalent at the time is rendered against the Company or any Significant
Subsidiary of the Company and such judgment or decree remains unpaid and
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 30 days after notice;
(10) except as permitted under this Indenture, a Subsidiary Guarantee
ceases to be in full force and effect for 30 days after notice or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guarantee; or
(11) except as permitted by the Collateral Documents, the Credit
Agreement and this Indenture or any amendments hereto or thereto, any of
the Collateral Documents ceases to be in full force and effect or ceases to
be effective, in all material respects, to create a Lien on the Collateral
in favor of the Senior Noteholders for 30 days after notice.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (9), (10) and (11) of this Section 6.1 is
not an Event of Default until the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities gives notice to the
Company of the Default and the Company does not cure such Default within the
time specified in said
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clause (4), (5), (9), (10) and (11) after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) of this Section 6.1 and any event which
with the giving of notice or the lapse of time would become an Event of Default
under clause (4), (5), (9), (10) and (11) of this Section 6.1 and what action
the Company is taking or proposes to take with respect thereto.
SECTION 6.2. ACCELERATION.
If an Event of Default (other than an Event of Default specified in Section
6.1(7) or (8) with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities by notice to the Company and the Trustee,
may declare the Principal of and accrued but unpaid interest on all the
Securities to be due and payable. Upon such a declaration, such Principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.1(7) or (8) with respect to the Company or a Significant Subsidiary
occurs and is continuing, the Principal of and accrued interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders. The
Holders of a majority in aggregate principal amount of the outstanding
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of Principal or interest that has become due solely because of
acceleration and the Trustee has been paid all amounts due to it pursuant to
Section 7.7. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of Principal of or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
SECTION 6.4. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Securities
then outstanding by notice to the Trustee may waive any past or existing Default
and its consequences except (i) a Default in the payment of the Principal of or
interest on a Security or (ii) a Default in respect of a provision that under
Section 9.2 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, and any Event of Default
arising therefrom shall be deemed to have been cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent right.
SECTION 6.5. CONTROL BY MAJORITY.
Upon provision of reasonable indemnity to the Trustee satisfactory to the
Trustee, the Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee, which shall be
entitled to receive and may conclusively rely on Opinions of Counsel, may refuse
to follow any direction that conflicts with law or this Indenture or, subject to
Section 7.1, that the Trustee determines is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction.
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SECTION 6.6. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(i) the Holder gives to the Trustee previous written notice stating
that an Event of Default is continuing;
(ii) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee security or
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(v) the Holders of a majority in aggregate principal amount of the
Securities then outstanding do not give the Trustee a direction
inconsistent with the written request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of Principal of and interest on the Securities held by
such Holder, on or after the respective due dates expressed in the Securities,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount then due and owing
(together with interest on any unpaid interest to the extent lawful) and the
amounts provided for in Section 7.7.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Securityholders allowed in any judicial proceedings relative to the Company, its
creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article VI,
it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for Principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for Principal and interest, respectively; and
THIRD: to the Company.
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The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate
principal amount of the outstanding Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS.
The Company (to the extent it may lawfully do so) shall not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE VII
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company.
(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.1 and to the provisions of the TIA.
(h) The Trustee shall not be bound to make any investigation into facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine books, records and premises of the Company,
personally or by agent or attorney.
(i) Any request or direction of the Company mentioned in the Indenture
shall be sufficiently evidenced by a written request or order of the Company and
any resolution of the Board of Directors may be sufficiently evidenced by a copy
of the resolution certified by the Secretary or Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification.
(j) The Trustee shall not be responsible for the recording, rerecording,
filing of UCC Statements or UCC Continuation Statements.
(k) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its gross negligence or willful misconduct.
SECTION 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it shall be entitled
to and may require an Officers' Certificate or an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents, attorneys, custodians or nominees
and shall not be responsible for the misconduct or negligence or supervision of
any agent, attorney, custodian or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of counsel with respect to matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
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(g) The Trustee shall not be charged with knowledge of any Default or Event
of Default with respect to the Securities unless either (1) a Trust Officer
shall have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of Default shall have been given to the Trustee
by the Company or any other obligor on the Securities or by any Holder of the
Securities.
(h) If the Trustee is acting as Paying Agent or Registrar hereunder, the
rights and protections of the Trustee under this Article VII shall also apply to
the Trustee as Paying Agent or Registrar.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or its respective
Affiliates with the same rights it would have if it were not Trustee. Any Paying
Agent, Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company or any Subsidiary
Guarantor in this Indenture or in any document issued in connection with the
sale of the Securities or in the Securities other than the Trustee's certificate
of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if it is
actually known to a Trust Officer of the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 30 days after it is known to a Trust
Officer or written notice of it is received by the Trustee. Except in the case
of a Default in payment of Principal of or interest on any Security, the Trustee
may withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is not opposed to the
interests of Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
As promptly as practicable after each April 15 beginning with the April 15,
1999 following the date of this Indenture, and in any event prior to July 15 in
each year, the Trustee shall mail to each Securityholder a brief report dated as
of such April 15 that complies with TIA sec. 313(a). The Trustee also shall
comply with TIA sec. 313(b). The Trustee shall promptly deliver to the Company a
copy of any report it delivers to Holders pursuant to this Section 7.6.
A copy of each report at the time of its mailing to Securityholders shall
be filed by the Trustee with the SEC and each stock exchange (if any) on which
the Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such compensation
for its services as the Company and the Trustee shall from time to time agree in
writing. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses, disbursements
and advances, incurred or made by it, including costs of collection, in addition
to such compensation for its services, except any such expense, disbursement or
advance as may arise from its negligence, wilful misconduct or bad faith, unless
the Trustee shall have complied with the applicable standard of care required by
the TIA. Such expenses shall include the reasonable compensation and reasonable
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Trustee shall provide the Company reasonable notice
of any expenditure not in the ordinary course of business; provided that prior
approval by the Company of any such expenditure shall not be a requirement for
the making
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of such expenditure nor for reimbursement by the Company thereof. The Company
shall indemnify each of the Trustee and any predecessor Trustees and their
officers, directors, employees and agents against any and all loss, damage,
claim, liability or expense (including reasonable attorneys' fees and expenses)
including taxes (other than taxes applicable to the Trustee's compensation
hereunder) incurred by it in connection with the acceptance or administration of
this trust and the performance of its duties hereunder. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the sole discretion of the Trustee, the Company shall
defend the claim and the Trustee may have separate counsel, and the Company will
pay the reasonable fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith, unless the Trustee shall have complied with the applicable
standard of care required by the TIA.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
Principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the resignation or removal of the Trustee and discharge of this
Indenture. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.1(7) or (8) with respect to the Company, the expenses are
intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time with 30 days notice to the Company. The
Holders of a majority in principal amount of the Securities then outstanding,
may remove the Trustee with 30 days written notice to the Trustee and the
Company and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
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SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee, provided
that such corporation shall be eligible under this Article VII and TIA Section
310(a).
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA sec. 310(a).
The Trustee shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA sec. 310(b); provided, however, that there shall be
excluded from the operation of TIA sec. 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA sec. 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA sec. 311(a), excluding any creditor
relationship listed in TIA sec. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA sec. 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) Discharge. When (i) the Company delivers to the Trustee all
outstanding Securities (other than Securities replaced pursuant to Section 2.7)
for cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article III hereof or the Securities will become due and payable at
their Stated Maturity within 91 days, or the Securities are to be called for
redemption within 91 days under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the expense,
of the Company, and, in each case of this clause (ii), the Company irrevocably
deposits or causes to be deposited with the Trustee funds sufficient to pay at
Stated Maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than Securities
replaced pursuant to Section 2.7 or delivered to the Trustee for cancellation),
and if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.1(c), cease to be of
further effect and all the Subsidiary Guarantees shall be discharged and
released and all rights of the Trustee or the Holders under any of the
Collateral Documents shall terminate. The Trustee shall acknowledge satisfaction
and discharge of this Indenture and the discharge and release of the Subsidiary
Guarantees and the termination of such rights under the Collateral Documents on
demand of the Company accompanied by an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent provided for herein relating to
satisfaction and discharge of this Indenture have been complied with.
(b) Defeasance. Subject to Sections 8.1(c) and 8.2, the Company at any
time may terminate (i) all of its obligations and the obligations of all
Subsidiary Guarantors under the Securities and this Indenture and, upon
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such termination, all the Subsidiary Guarantees shall be discharged and released
and all rights of the Trustee or the Holders under any of the Collateral
Documents shall terminate ("legal defeasance option") or (ii) its obligations
and the obligations of all Subsidiary Guarantors under Sections 4.2 and 4.3 and
the operation of Sections 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect
to a Significant Subsidiary), 6.1(8) (but only with respect to a Significant
Subsidiary), 6.1(9), 6.1(10) and 6.1(11) and, upon such termination, all the
Subsidiary Guarantees shall be discharged and released and all rights of the
Trustee or the Holders under any of the Collateral Documents shall terminate
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.1(4), 6.1(5),
6.1(6), 6.1(7) (but only with respect to a Significant Subsidiary), 6.1(8) (but
only with respect to a Significant Subsidiary) 6.1(9), 6.1(10) or 6.1(11).
Upon satisfaction of the conditions set forth herein and upon request of
the Company, the Trustee shall acknowledge in writing the discharge of those
obligations of the Company and the Subsidiary Guarantors that are terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.3, 2.4, 2.5, 2.7, 4.1, 4,6, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive
until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. CONDITIONS TO DEFEASANCE.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) the Company irrevocably deposits or causes to be deposited in
trust with the Trustee money or U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide cash at such times and in such
amounts as will be sufficient to pay Principal and interest when due on all
outstanding Securities (except Securities replaced pursuant to Section 2.7
or delivered to the Trustee for cancellation) to maturity or redemption, as
the case may be;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their view
that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay Principal and interest when due
on all outstanding Securities (except Securities replaced pursuant to
Section 2.7 or delivered to the Trustee for cancellation) to maturity or
redemption, as the case may be;
(iii) no Default specified in Section 6.1(7) or (8) with respect to
the Company shall have occurred which is continuing at the time of the
deposit described in clause (i) of this Section 8.2;
(iv) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
VIII have been complied with.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article III.
SECTION 8.3. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article VIII. It shall apply the deposited
money and the money from U.S. Government Obligations either directly or through
the Paying Agent as the Trustee may determine and in accordance with this
Indenture to the payment of Principal of and interest on the Securities.
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SECTION 8.4. REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly turn over to the Company
upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of Principal or interest that remains unclaimed for two
years after the Stated Maturity or full redemption of the Securities, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
SECTION 8.5. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
The Company shall pay and shall indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations other than any such tax, fee or other charge which by law is for the
account of the Holders of the defeased Securities; provided that the Trustee
shall be entitled to charge any such tax, fee or other charge to such Holder's
account.
SECTION 8.6. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article VIII by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article VIII until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article VIII; provided, however, that, (a) if the Company has made any payment
of interest on or Principal of any Securities following the reinstatement of
their obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent and (b) unless otherwise
required by any legal proceeding or any order or judgment of any court or
governmental authority, the Trustee or Paying Agent shall return all such money
and U.S. Government Obligations to the Company promptly after receiving a
written request therefor at any time, if such reinstatement of the Company's
obligations has occurred and continues to be in effect.
ARTICLE IX
AMENDMENTS
SECTION 9.1. WITHOUT CONSENT OF HOLDERS.
The Company, the Subsidiary Guarantors and the Trustee may amend this
Indenture or the Securities without notice to or consent of any Securityholder:
(i) to cure any ambiguity, omission, defect or inconsistency, whether
wholly within this Indenture or as compared to any of the Collateral
Documents; or to make such other provisions in regard to matters or
questions arising under this Indenture as the Board of Directors may deem
necessary or desirable and which shall not materially and adversely affect
the rights of the Securityholders;
(ii) to comply with Article V;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are as described in Section 163(f)(2)(B) of the Code;
(iv) to add additional Guarantees with respect to the Securities;
(v) to add additional security for the Securities;
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(vi) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(vii) to make any change that does not adversely affect the rights of
any Securityholder in any material respect;
(viii) to comply with, or allow for compliance with, any requirements
of the SEC in connection with qualifying this Indenture under the TIA or
giving effect to the security arrangements contemplated hereby;
(ix) to give effect to the provisions of the Collateral Documents and
this Indenture, including with regard to the release of all or a portion of
the Collateral in accordance with such provisions;
(x) to give effect to the release of any Subsidiary Guarantor in
accordance with the terms of this Indenture; and
(xi) to evidence the acceptance of the appointment of any successor
Trustee.
After an amendment under this Section 9.1 becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.1.
SECTION 9.2. WITH CONSENT OF HOLDERS.
The Company, the Subsidiary Guarantors and the Trustee may amend this
Indenture or the Securities without notice to any Securityholder but with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for Securities). However, without the consent of each
Securityholder affected, an amendment to this Indenture may not:
(i) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of interest on
any Security;
(iii) reduce the principal of or extend the Stated Maturity of any
Security;
(iv) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article III;
(v) make any Security payable in money other than that stated in the
Security;
(vi) impair the right of any Holder to receive payment of Principal of
and interest on such Holder's Securities on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Holder's Securities;
(vii) make any changes that would affect the ranking of the Securities
or (except (a) in accordance with the terms of the Collateral Documents or
this Indenture, (b) as permitted by Section 9.1 or (c) any changes to give
effect to amendments to any of the Collateral Documents) the security for
the Securities in a manner adverse to the Holders; or
(viii) make any change in the second sentence of this Section 9.2.
It shall not be necessary for the consent of the Holders under this Section
9.2 to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.2 becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.2.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Securities shall comply with the
TIA as then in effect.
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SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS.
A consent to an amendment or a waiver by a Holder of a Security shall bind
the Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same debt as the consenting Holder's Security, even
if notation of the consent or waiver is not made on the Security. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment changes the terms of a Security, the Trustee may require
the Holder of the Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security regarding the changed terms and return
it to the Holder. Alternatively, if the Company so determines, the Company in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS.
The Trustee shall sign any amendment authorized pursuant to this Article IX
if the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may but need not sign it. In
signing such amendment the Trustee shall be entitled to receive indemnity
satisfactory to it and to receive, and shall be fully protected in relying upon,
in addition to the documents required by Section 12.4, an Officers' Certificate
and an Opinion of Counsel stating that such amendment complies with the
provisions of this Article IX.
SECTION 9.7. PAYMENT FOR CONSENT.
Neither the Company nor any affiliate of the Company shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for, or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to all Holders
that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.1. SUBSIDIARY GUARANTEE.
The Subsidiary Guarantors hereby, jointly and severally, unconditionally
and irrevocably, Guarantee to each Holder and to the Trustee and its successors
and assigns (a) the full and punctual payment of Principal of, interest on and
Additional Interest, if any, with respect to the Securities when due, whether at
Stated Maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture (including obligations
to the Trustee) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company under
this Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). The Subsidiary Guarantors further agree
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from the Subsidiary Guarantors, and that the Subsidiary
Guarantors will remain bound under this Article X notwithstanding any extension
or renewal of any Obligation.
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The Subsidiary Guarantors waive presentation to, demand of, payment from
and protest to the Company of any of the Obligations and also waive notice of
protest for nonpayment. The Subsidiary Guarantors waive notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantors under this Section 10.1 shall not be affected by (a) the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any right
or remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any Obligation; (c) any rescission, waiver, amendment, modification or
supplement of any of the terms or provisions of this Indenture (other than this
Article X), the Securities or any other agreement, unless such rescission,
waiver, amendment, modification or supplement expressly affects the obligations
of any Subsidiary Guarantor under this Section 10.1; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or Trustee to exercise any right or remedy against
any other guarantor of the Obligations; or (f) any change in the ownership of
the Company.
The Subsidiary Guarantors further agree that their Guarantees herein
constitute a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waive any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the
Obligations.
Except as set forth in this Indenture, the obligations of the Subsidiary
Guarantors hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense, setoff, counterclaim, recoupment or termination whatsoever or by reason
of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, except as set forth
in this Indenture, the obligations of the Subsidiary Guarantors herein shall not
be discharged or impaired or otherwise affected by the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of the Subsidiary Guarantors or would otherwise operate as
a discharge of the Subsidiary Guarantors as a matter of law or equity.
The Subsidiary Guarantors further agree that their Guarantees herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Holder or the Trustee upon the bankruptcy or reorganization
of the Company or otherwise, unless such Guarantee has been released in
accordance with Section 10.9.
In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has or may have at law or in equity against the
Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay
any Obligation when and as the same shall become due, whether at Stated
Maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Subsidiary Guarantors hereby promise to and will,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i)
the unpaid principal amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
The Subsidiary Guarantors agree that, as between the Subsidiary Guarantors,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article VI for the purposes of the Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantors for the purposes of this Section.
The Subsidiary Guarantors also agree to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
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SECTION 10.2. LIMITATION ON LIABILITY.
Any term or provision of this Indenture to the contrary notwithstanding,
the obligations of each Subsidiary Guarantor are limited to the maximum amount
as will result in the Obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
SECTION 10.3. SUCCESSORS AND ASSIGNS.
This Article X shall inure to the benefit of the successors and assigns of
the Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in this Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
SECTION 10.4. NO WAIVER.
Neither a failure nor a delay on the part of either the Trustee or the
Holders in exercising any right, power or privilege under this Article X shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege. The
rights, remedies and benefits of the Trustee and the Holders herein expressly
specified are cumulative and not exclusive of any other rights, remedies or
benefits which either may have under this Article X at law, in equity, by
statute or otherwise.
SECTION 10.5. RIGHT OF CONTRIBUTION.
Each Subsidiary Guarantor hereby agrees that to the extent that a
Subsidiary Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and
receive contribution from and against any other Subsidiary Guarantor hereunder
who has not paid its proportionate share of such payment. Each Subsidiary
Guarantor's right of contribution shall be subject to the terms and conditions
of Section 10.6. The provisions of this Section shall in no respect limit the
obligations and liabilities of any Subsidiary Guarantor to the Trustee and the
Securityholders and each Subsidiary Guarantor shall remain liable to the Trustee
and the Securityholders for the full amount guaranteed by such Subsidiary
Guarantor hereunder.
SECTION 10.6. NO SUBROGATION.
Notwithstanding any payment or payments made by any of the Subsidiary
Guarantors hereunder, no Subsidiary Guarantor shall be entitled to be subrogated
to any of the rights of the Trustee or any Securityholder against the Company or
any other Subsidiary Guarantor or any collateral security or guarantee or right
of offset held by the Trustee or any Securityholder for the payment of the
Obligations, nor shall any Subsidiary Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Subsidiary Guarantor
in respect of payments made by such Subsidiary Guarantor hereunder, until all
amounts owing to the Trustee and the Securityholders by the Company on account
of the Obligations are paid in full. If any amount shall be paid to any
Subsidiary Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held
by such Subsidiary Guarantor in trust for the Trustee and the Securityholders,
segregated from other funds of such Subsidiary Guarantor, and shall, forthwith
upon receipt by such Subsidiary Guarantor, be turned over to the Trustee in the
exact form received by such Subsidiary Guarantor (duly indorsed by such
Subsidiary Guarantor to the Trustee, if required), to be applied against the
Obligations.
SECTION 10.7. ADDITIONAL SUBSIDIARY GUARANTORS.
Until such time as all Guarantees by the Subsidiary Guarantors under this
Indenture shall have been released in accordance with Section 10.9, the Company
shall cause each Subsidiary that Guarantees the Company's obligations under the
Credit Agreement (other than a Foreign Subsidiary) to execute and deliver a
supplement to this Indenture providing that such Subsidiary will be a Subsidiary
Guarantor hereunder. Each such supplement shall be substantially in the form of
Exhibit H attached hereto. Subsidiaries that are Subsidiary Guarantors on the
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date any such supplement is executed by an additional Subsidiary shall not be
required to become parties to such supplement and hereby agree to the execution
and delivery by any additional Subsidiary of any such supplement.
SECTION 10.8. MODIFICATION.
No modification, amendment or waiver of any provision of this Article X,
nor the consent to any departure by the Subsidiary Guarantors therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given; it being understood that the
release of the Guarantees of Subsidiary Guarantors pursuant to Section 10.9
shall not be an amendment or waiver of any provision of this Article X and shall
not require any action on the part of the Trustee. No notice to or demand on the
Subsidiary Guarantors in any case shall entitle the Subsidiary Guarantors to any
other or further notice or demand in the same, similar or other circumstances.
SECTION 10.9. RELEASE OF SUBSIDIARY GUARANTOR.
(a) Upon the sale or other disposition of all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the Capital Stock of such Subsidiary Guarantor, in
each case in accordance with the terms of Section 10.10, such Subsidiary
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise of all the Capital Stock of such Subsidiary
Guarantor) shall be automatically released from all its obligations under the
Indenture and the Subsidiary Guarantee without any action on the part of the
Trustee or the Holders. The Trustee shall receive written notice of the release
of any Subsidiary Guarantor if such release is effected other than under Section
10.10.
(b) Upon the release of a Guarantee by a Subsidiary of the Company's
obligations under the Credit Agreement, the Subsidiary Guarantee of such
Subsidiary under this Indenture will be released and discharged at such time and
will not be reinstated or renewed in the event any such Subsidiary thereafter
Guarantees obligations of the Company under the Credit Agreement, so long as the
Guarantee by such Subsidiary under the Credit Agreement remains released (i)
until the next succeeding refinancing, restatement, renewal, extension or
replacement of the Credit Agreement or amendment to increase the available
principal amount thereunder, or (ii) for a period of 90 consecutive days,
whichever is later.
SECTION 10.10. MERGER, CONSOLIDATION AND SALE OF ASSETS OF A SUBSIDIARY
GUARANTOR.
No Subsidiary Guarantor may consolidate with or sell or lease its assets
as, or substantially as, an entirety, to, or merge with or into, in one
transaction or a series of transactions, any other Person, unless:
(i) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(ii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, sale, lease, or merger complies with the foregoing clause
(i).
Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate
with or merge into or sell its assets to the Company or another Subsidiary
Guarantor.
ARTICLE XI
COLLATERAL AND SECURITY
SECTION 11.1. COLLATERAL DOCUMENTS.
The due and punctual payment of the Principal and premium, if any, of, and
interest on (including Additional Interest), the Securities when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, repurchase, redemption or otherwise, interest on the overdue
principal of and interest (to the extent permitted by law), if any, on the
Securities and performance of all other obligations under this Indenture,
including, without limitation, the obligations of the Company set forth in
Section 7.7 herein, and the Securities, shall be secured as provided in the
Collateral Documents. The Trustee, the Company and each
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Subsidiary Guarantor hereby agree that the Collateral Agent shall hold the
Collateral in trust for the equal and ratable benefit of all of the secured
creditors under the Collateral Documents, including, without limitation, the
Holders and the Trustee and the lenders under the Credit Agreement, in each case
pursuant to the terms of the Collateral Documents.
Each Holder of the Securities, by its acceptance thereof, consents and
agrees to the terms of the Collateral Documents and the Collateral Agent
Acknowledgment (including, without limitation, the provisions providing for
foreclosure and release of Collateral) as the same may be in effect or may be
amended from time to time in accordance with their terms and authorizes and
directs (i) the Collateral Agent, with respect to each of the Collateral
Documents to which it is a party and the Collateral Agent Acknowledgment, and
(ii) the Trustee, with respect to the Collateral Agent Acknowledgment, to
perform their respective obligations and exercise their respective rights
thereunder in accordance therewith: provided, however, that upon qualification
of this Indenture with the TIA, if any provisions of the Collateral Agent
Acknowledgment limits, qualifies or conflicts with the duties imposed by the
provisions of the TIA, the TIA shall control.
The Trustee and each Holder, by accepting the Securities, acknowledges
that, as more fully set forth in the Collateral Documents, the Collateral as now
or hereafter constituted shall be held for the equal and ratable benefit of all
the secured creditors under the Collateral Documents, including, without
limitation, the lenders under the Credit Agreement and that the Lien of this
Indenture and the Collateral Documents in respect of the Trustee and the Holders
is subject to and qualified and limited in all respects by the Collateral
Documents and actions that may be taken thereunder.
As amongst the Holders, the Collateral as now or hereafter constituted
shall be held for the equal and ratable benefit of the Holders without
preference, priority or distinction of any thereof over any other by reason of
difference in time of issuance, sale or otherwise, as security for the
Securities.
SECTION 11.2. OPINIONS.
Promptly after the execution and delivery of this Indenture, the Company
shall deliver the opinion(s) required by Section 314(b)(1) of the TIA.
Subsequent to the execution and delivery of this Indenture, to the extent
required by the TIA, the Company shall furnish to the Trustee within three
months after each anniversary of the Issue Date, an Opinion of Counsel, dated as
of such date, stating either that (i) in the opinion of such counsel, all action
has been taken with respect to any filing, re-filing, recording or re-recording
with respect to the Collateral as is necessary to maintain the Lien on the
Collateral in favor of the Holders or (ii) in the opinion of such counsel, that
no such action is necessary to maintain such Lien.
SECTION 11.3. RELEASE AND SUBSTITUTION OF COLLATERAL; AMENDMENT OF COLLATERAL
DOCUMENTS.
(a) The parties hereto hereby agree and acknowledge that the Collateral may
be released by the Collateral Agent at any time in accordance with the
provisions of the Collateral Documents and the Credit Agreement or upon the
termination of the Credit Agreement and, in any such case, the Collateral so
released shall automatically be released as Collateral for the Securities
without any action on the part of the Trustee or the Securityholders. For
purposes of the TIA, the release of any Collateral from the terms of the
Collateral Documents will not be deemed to impair the security under this
Indenture in contravention of the provisions hereof or affect the Lien of this
Indenture or the Collateral Documents if and to the extent the Collateral is
released pursuant to the Collateral Documents or upon the termination of the
Credit Agreement. To the extent applicable, the Company shall cause TIA Section
314(d) relating to the release of property or securities from the lien of the
Collateral Documents and relating to the substitution therefor of any property
or securities to be subjected to the lien of the Collateral Documents to be
complied with.
(b) Notwithstanding the foregoing, the Company and each Subsidiary, as the
case may be, pursuant to the terms of the Credit Agreement and the Collateral
Documents, may
(i) sell, lease or otherwise dispose of in the ordinary course of
business free from the Liens of the Collateral Documents, any machinery,
equipment, furniture, apparatus, tools or implements, materials or supplies
or other similar property ("Subject Property") which, in its reasonable
opinion, may have become
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obsolete or unfair for use in the conduct of its businesses or the
operation of the Collateral upon replacing the same with, or substituting
for the same, new Subject Property constituting Collateral not necessarily
of the same character but being of a least equal value as the Subject
Property so disposed of as long as such new Subject Property becomes
subject to the Liens of the Collateral Documents;
(ii) abandon, sell, assign, transfer, license or otherwise dispose of
in the ordinary course of business any personal property the use of which
is no longer necessary or desirable in the proper conduct of the business
of the Company and is not material to the conduct of the business of the
Company and its Subsidiaries taken as a whole;
(iii) grant in the ordinary course of business, rights-of-way and
easements over or in respect of any of the Company's or such Subsidiary's
real property, provided that such grant will not, in the reasonable opinion
of the Company's Board of Directors, impair the usefulness of such property
in the conduct of the Company's business;
(iv) sell, transfer or otherwise dispose of inventory in the ordinary
course of business;
(v) sell, collect, liquidate, factor or otherwise dispose of accounts
receivable in the ordinary course of business;
(vi) make cash payments (including for the scheduled repayment of
Indebtedness) from cash that is at any time part of the Collateral in the
ordinary course of business that are not otherwise prohibited by this
Indenture and the Collateral Documents; and
[(vii) release any Collateral in accordance with the terms of the
Credit Agreement and the Collateral Documents or as otherwise permitted by
the lenders under the Credit Agreement,]
in each case, without the delivery of any opinions or certificates upon any such
release; provided that the Company shall deliver to the Trustee, within 15 days
after each of the six-month periods ended April 15 and October 15 in each year
an Officers' Certificate to the effect that all releases of Collateral pursuant
to this Section 11.3(b) by the Company or any Subsidiary, as the case may be,
during the preceding six-month period were in the ordinary course of the
Company's or such Subsidiary's business and that all proceeds therefrom were
used by the Company or such Subsidiary as permitted herein.
(c) The fair value of Collateral released from the Liens of the Collateral
Documents pursuant to Section 11.3(b) hereof shall not be considered in
determining whether the aggregate fair value of Collateral released from the
Liens of the Collateral Documents in any calendar year exceeds the 10% threshold
specified in Section 314(d)(l) of the TIA; provided that the Company's right to
rely on this sentence at any time is conditioned upon the Company having
furnished to the Trustee the certificates described in Section 11.3(b) hereof
that were required to be furnished to the Trustee at or prior to such time. It
is expressly understood that Section 11.3(b) and this Section 11.3(c) relate
only to the Company's obligations under the TIA and shall not restrict or
otherwise affect the Company's and its Subsidiaries' rights or abilities to
release Collateral pursuant to the terms of the Credit Agreement and the
Collateral Documents or as otherwise permitted by the lenders under the Credit
Agreement.
SECTION 11.4. CERTIFICATES OF THE COMPANY.
Subject to Section 11.3(b) the Company shall furnish to the Trustee prior
to each proposed release of Collateral all documents required by TIA sec.
314(d), if any. The Trustee may, to the extent permitted by Sections 7.1 and 7.2
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents. Any
certificate or opinion required by TIA sec. 314(d), if applicable, may be made
by an Officer of the Company except in cases where TIA sec. 314(d) requires that
such certificate or opinion be made by an independent engineer, appraiser or
other expert within the meaning of TIA sec. 314(d).
31
<PAGE> 37
SECTION 11.5. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
COLLATERAL DOCUMENTS.
The Trustee shall be the Representative (as such term is defined in the
Collateral Documents) on behalf of the Holders and shall act upon the written
direction of the Holders with regard to all voting, consent and other rights
granted to the Holders under the Collateral Documents. Subject to the provisions
of the Collateral Documents and the Collateral Agent Acknowledgment, the Trustee
may, in its sole discretion and without the consent of the Holders, on behalf of
the Holders, take all actions it deems necessary or appropriate in order to (a)
enforce any of its rights or any of the rights of the Holders under the
Collateral Documents and (b) receive any and all amounts payable from the
Collateral in respect of the obligations of the Company and the Subsidiary
Guarantors hereunder. Subject to the provisions of the Collateral Documents and
the Collateral Agent Acknowledgment, the Trustee shall have the power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts that may be unlawful or in
violation of the Collateral Documents or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interest and the interests of the Holders in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders or the
Trustee).
SECTION 11.6. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
COLLATERAL DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Collateral Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Collateral Documents.
SECTION 11.7. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS.
(a) If (i) the Company delivers an Officer's Certificate and an Opinion of
Counsel certifying that all of its obligations under this Indenture have been
satisfied and discharged by complying with the provisions of Article VIII
hereof, (ii) all outstanding Securities issued under this Indenture shall be
surrendered to the Trustee for cancellation, (iii) upon the release of the
Collateral in accordance with the terms of the Collateral Documents or (iv) any
other release of the Collateral as security for obligations of the Company or a
Subsidiary under the Credit Agreement, the Trustee shall deliver to the
Collateral Agent a notice stating that the Trustee, for itself and on behalf of
the Holders, disclaims and has given up any and all rights it has in or to the
Collateral, and any rights it has under the Collateral Documents, and, upon and
after the receipt by the Collateral Agent of such notice, the Collateral Agent
shall no longer be deemed to hold the Lien in the Collateral on behalf of the
Trustee for the benefit of the Holders. Notwithstanding the foregoing, the
conditions set forth in the foregoing sentence shall not be required to be
satisfied in connection with, and nothing contained in this Indenture shall
limit or otherwise affect, the release of the Collateral as security for the
Senior Notes, or any part of it, pursuant to the Collateral Documents or action
of the lenders under the Credit Agreement.
(b) Any release of Collateral made in compliance with this Section 11.7
shall not be deemed to impair the Lien under the Collateral Documents or the
Collateral thereunder in contravention of the provisions of this Indenture or
the Collateral Documents.
SECTION 11.8. SECURITY AGREEMENT COLLATERAL.
Notwithstanding anything to the contrary contained in this Indenture, the
Credit Agreement or the Collateral Documents, to the extent that the
representations, warranties and covenants contained in this Indenture, in the
Credit Agreement or in the Collateral Documents with respect to Collateral are
at any time incorrect (in the case of representations or warranties) or not
complied with (in the case of covenants), then in each case so long as the
aggregate fair market value of all Collateral under the Collateral Documents
with respect to which such representations or warranties are incorrect, or
covenants are not complied with, does not exceed $10,000,000 the existence of
such circumstances shall be deemed not to be a violation of this Indenture or
constitute a Default under Article VI.
32
<PAGE> 38
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the provision required by the TIA shall control.
SECTION 12.2. NOTICES.
Any notice or communication shall be in writing and delivered in person or
mailed by first-class mail addressed as follows:
if to the Company or the Subsidiary Guarantors:
Coltec Industries Inc.
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28219
Attention: Corporate Secretary
if to the Trustee:
Bankers Trust Company
Four Albany Street
Corporate Trust & Agency Services
New York, New York 10006
Attention: Corporate Market Services
Facsimile: 212-250-6961
The Company, the Subsidiary Guarantors, or the Trustee by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA sec. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA sec. 312(c).
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
33
<PAGE> 39
SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(i) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 12.6. WHEN SECURITIES DISREGARDED.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an affiliate or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company shall be disregarded and deemed not to be outstanding, except that, for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities which a Trust Officer of
the Trustee actually knows are so owned shall be so disregarded. Also, subject
to the foregoing, only Securities outstanding at the time shall be considered in
any such determination.
SECTION 12.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 12.8. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York. If a payment
date is a Legal Holiday, payment shall be made on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue on such payment for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 12.9. GOVERNING LAW.
This Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company or
the Subsidiary Guarantors shall not have any liability for any obligations of
the Company or the Subsidiary Guarantors under the Securities or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
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<PAGE> 40
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture and the Securities shall bind their respective successors in
accordance with the terms hereof. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 12.12. MULTIPLE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 12.13. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance with
the terms and conditions of the Registration Rights Agreement and shall pay all
reasonable costs and expenses (including reasonable attorneys' fees for the
Company, the Trustee and the Holders) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of this
Indenture and the Securities and printing this Indenture and the Securities. The
Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA. Notwithstanding anything else herein, any obligations imposed on the
parties hereto by the TIA (except for the opinion(s) contemplated in Section
11.2 hereof) shall not be effective until such time as the Indenture becomes
qualified under the TIA.
35
<PAGE> 41
SECTION 12.14. TABLE OF CONTENTS; HEADINGS.
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
COLTEC INDUSTRIES INC
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title:Executive Vice President,
General Counsel and Secretary
AMI Industries Inc.
CII Holdings Inc
Coltec Canada Inc
Coltec Industrial Products Inc
Coltec International Services Co
Coltec North Carolina Inc.
Coltec Technical Services Inc
Delavan Inc (F/K/A Delavan Newco Inc.)
Garlock Inc
Garlock International Inc
Garlock Overseas Corporation
Haber Tool Company Inc
Holley Performance Products Inc
Jamco Products, LLC
Menasco Aerosystems Inc
Stemco Inc
Walbar Inc
On behalf of each of the above
Subsidiary Guarantors
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title:Executive Vice President,
General Counsel and Secretary
BANKERS TRUST COMPANY, as Trustee
By: /s/ SANDRA J. SCHAFFER
------------------------------------
Name: Sandra J. Schaffer
Title:Assist Vice President
36
<PAGE> 42
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A AND TO
CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. DEFINITIONS.
1.1 DEFINITIONS.
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"ADDITIONAL INTEREST" shall have the meaning set forth in the Registration
Rights Agreement.
"DEPOSITARY" means The Depository Trust Company, its nominees and their
respective successors and assigns.
"EXCHANGE SECURITIES" means the 7 1/2% Series B Senior Notes Due 2008 to be
issued pursuant to the Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"INITIAL PURCHASERS" means Credit Suisse First Boston Corporation, BT
Alex.Brown Incorporated, BancAmerica Robertson Stephens Inc. and NationsBanc
Montgomery Securities LLC.
"INITIAL SECURITIES" means the 7 1/2% Senior Notes Due 2008, issued under
the Indenture on the date hereof.
"PRIVATE EXCHANGE" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"PRIVATE EXCHANGE SECURITIES" means the 7 1/2% Series C Senior Notes Due
2008, if any, to be issued pursuant to the Indenture to the Initial Purchasers
in a Private Exchange.
"PURCHASE AGREEMENT" means the Purchase Agreement dated April 8, 1998,
among the Company, the Subsidiary Guarantors and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REGISTERED EXCHANGE OFFER" means the offer by the Company, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated April 16, 1998 among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"SECURITIES" means the Initial Securities, the Exchange Securities and the
Private Exchange Securities, treated as a single class.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES CUSTODIAN" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"SHELF REGISTRATION STATEMENT" means the registration statement issued by
the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Rights Agreement.
<PAGE> 43
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are required
to bear the legend set forth in Section 2.3(d) hereto.
1.2 OTHER DEFINITIONS
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION:
---- ----------
<S> <C>
"Agent Members"............................................. 2.1(b)
"Global Security"........................................... 2.1(a)
"Regulation S".............................................. 2.1(a)
"Rule 144A"................................................. 2.1(a)
</TABLE>
2. THE SECURITIES.
2.1 FORM AND DATING.
The Initial Securities are being offered and sold by the Company pursuant
to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on
Regulation S under the Securities Act ("Regulation S"), in each case as provided
in the Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Securities represented
thereby with the Trustee as custodian for the Depositary (or with such other
custodian as the Depositary may direct), and registered in the name of the
Depositary or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global Securities
that (a) shall be registered in the name of the Depositary for such Global
Security or Global Securities or the nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under the Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the custodian of the Depositary or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1 or
Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not
be entitled to receive physical delivery of certificated Securities.
2
<PAGE> 44
2.2 AUTHENTICATION.
The Trustee shall authenticate and deliver: (1) Initial Securities for
original issue in an aggregate principal amount of U.S.$300.0 million and (2)
Exchange Securities or Private Exchange Securities for issue only in a
Registered Exchange Offer or a Private Exchange, respectively, pursuant to the
Registration Rights Agreement, for a like principal amount of Initial
Securities, in each case upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities and shall also specify
delivery instructions for such securities. The aggregate principal amount of
Securities outstanding at any time may not exceed U.S.$300.0 million except as
provided in Section 2.7 of the Indenture.
2.3 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Securities.
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance
with the Indenture (including applicable restrictions on transfer set forth
herein, if any) and the procedures of the Depositary therefor. A transferor
of a beneficial interest in a Global Security shall deliver to the
Registrar a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions,
instruct the Depositary to credit to the account of the Person specified in
such instructions a beneficial interest in the Global Security and to debit
the account of the Person making the transfer the beneficial interest in
the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other than
the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary of another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section 2.9 of the Indenture, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.3 (including the certification requirements
set forth on the reverse of the Initial Securities intended to ensure that
such transfers comply with Rule 144A or Regulation S, as the case may be)
and such other procedures as may from time to time be adopted by the
Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities (and all
Securities issued in exchange therefor or in substitution thereof) shall
bear a legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS
NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
3
<PAGE> 45
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, in the case of any
Transfer Restricted Security that is represented by a Global Security, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule
144 (such certification to be in the form set forth on the reverse of the
Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Securities or such Private Exchange Securities will cease to
apply, but the requirements requiring such Initial Securities or such
Private Exchange Securities issued to certain Holders be issued in global
form will continue to apply, and Initial Securities or Private Exchange
Securities in global form without legends will be available to the
transferee of the Holder of such Initial Securities or Private Exchange
Securities upon exchange of such transferring Holder's Initial Securities
or Private Exchange Securities or directions to transfer such Holder's
interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
continue to apply and Initial Securities in global form with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in global form will be available to
Holders that exchange such Initial Securities in such Registered Exchange
Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
still apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities
4
<PAGE> 46
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities
and Global Securities at the Registrar's or any co-registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.6 and Section 9.5.
(iii) The Registrar or any co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security
selected for redemption in whole or in part pursuant to Article III of the
Indenture, except the unredeemed portion of any certificated Security being
redeemed in part, or (b) any Security for a period beginning 15 Business
Days before the mailing of a notice of redemption of Securities.
(iv) Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of Principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of the Indenture shall evidence the same debt and shall be
entitled to the same benefits under the Indenture as the Securities
surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or other Person with respect to the accuracy of the records of
the Depositary or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under the Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of the Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
5
<PAGE> 47
2.4 CERTIFICATED SECURITIES.
(a) A Global Security deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of certificated Securities in an aggregate
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such transfer complies with Section
2.3 and (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or (iii)
the Company, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated Securities under the Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
certificated Initial Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(d), bear the
restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered Holder of a
Global Security may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under the Indenture or the
Securities.
(d) In the event of the occurrence of either of the events specified in
Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
6
<PAGE> 48
EXHIBIT 1
TO RULE 144A/REGULATION S
APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[GLOBAL SECURITIES LEGEND]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[RESTRICTED SECURITIES LEGEND]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS
NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED
STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH
(iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
<PAGE> 49
COLTEC INDUSTRIES INC
No. 1 Principal Amount $ ___________________
CUSIP NO. ___________________
7 1/2% SENIOR NOTE DUE 2008
Coltec Industries Inc., a Pennsylvania corporation, promises to pay to CEDE
& Co., or registered assigns, the principal sum of
____________________________ Dollars on April 15, 2008.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: April 16, 1998
COLTEC INDUSTRIES INC
by
by
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Securities referred
to in the Indenture.
BANKERS TRUST COMPANY
as Trustee
by
Authorized Signatory
<PAGE> 50
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
(REVERSE OF SECURITY)
7 1/2% SENIOR NOTE DUE 2008
1. INTEREST
Coltec Industries Inc, a Pennsylvania corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
additional cash interest will accrue on this Security at a rate of 0.50% per
annum from and including the date on which any such Registration Default shall
occur (subject to the terms of the Registration Rights Agreement) to but
excluding the date on which all Registration Defaults have been cured,
calculated on the principal amount of this Security as of the date on which such
interest is payable. Such interest is payable in addition to any other interest
payable from time to time with respect to this Security. The Trustee will not be
deemed to have notice of a Registration Default until it shall have received
actual notice of such Registration Default.
The Company will pay interest semiannually on April 15 and October 15 of
each year, commencing October 15, 1998. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from April 16, 1998. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT
By at least 11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such Principal and/or interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the April 1 or October 1 next preceding the interest payment
date. Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay Principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay Principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. PAYING AGENT AND REGISTRAR
Initially, Bankers Trust Company, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated wholly owned
Subsidiaries may act as Paying Agent.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of April 16,
1998 (as it may be amended or supplemented from time to time in accordance with
the terms thereof, the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture for a
statement of those terms.
The Securities are senior obligations of the Company limited to $300.0
million aggregate principal amount (subject to Section 2.7 of the Indenture).
The Security is one of the Initial Securities referred to in the Indenture. The
Securities include the Initial Securities and any Private Exchange Securities
and Exchange Securities issued in exchange for the Initial Securities pursuant
to the Indenture and the Registration Rights Agreement. The Initial Securities,
the Private Exchange Securities and the Exchange Securities are treated as a
single class of securities
<PAGE> 51
under the Indenture. The Indenture imposes certain limitations on the ability of
the Company to create liens, enter into sale and leaseback transactions and
enter into mergers and consolidations.
To guarantee the due and punctual payment of the Principal and interest, if
any, on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Subsidiary Guarantors, as primary obligors and
not merely as surety, have unconditionally and irrevocably guaranteed, on a
joint and several basis, such obligations on a senior basis pursuant to the
terms of Article X of the Indenture.
The Securities are secured to the extent set forth in the Collateral
Documents and Article XI of the Indenture.
5. OPTIONAL REDEMPTION
The Securities will be redeemable, in whole or in part, at any time, at the
option of the Company, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Securities and (ii) the sum of the present value of
the remaining scheduled payments of principal and interest thereon from the
redemption date to the maturity date, discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the
date of redemption.
"TREASURY RATE" means, with respect to any redemption date for the
Securities, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall be calculated
on the third Business Day preceding the redemption date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Securities. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"COMPARABLE TREASURY PRICE" means with respect to any redemption date for
the Securities (i) the average of four Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
"REFERENCE TREASURY DEALER" means each of Credit Suisse First Boston
Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government
securities dealers in New York City (each, a "Primary Treasury Dealer")
appointed by the Trustee in consultation with the Company; provided, however,
that if any of the foregoing shall cease to be a Primary Treasury Dealer, the
Company shall substitute therefor another Primary Treasury Dealer.
2
<PAGE> 52
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Except as set forth above, the Securities will not be redeemable by the
Company prior to maturity and will not be entitled to the benefit of any sinking
fund.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date by first-class mail to each Holder of Securities
to be redeemed at his registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. REGISTRATION RIGHTS
The Company is party to a Registration Rights Agreement, dated as of April
16, 1998, among the Company, the Subsidiary Guarantors, Credit Suisse First
Boston Corporation, BT Alex.Brown Incorporated, BancAmerica Robertson Stephens
Inc. and NationsBanc Montgomery Securities LLC pursuant to which it is obligated
to pay Additional Interest (as defined therein) upon the occurrence of certain
Registration Defaults (as defined therein).
8. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may register,
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange (i)
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) for a period
beginning 15 days before a selection of Securities to be redeemed and ending on
the date of such selection or (ii) any Securities for a period beginning 15 days
before an interest payment date and ending on such interest payment date.
9. PERSONS DEEMED OWNERS
The registered holder of this Security may be treated as the owner of it
for all purposes.
10. UNCLAIMED MONEY
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of Principal or interest that remains unclaimed for two
years after the Stated Maturity or full redemption of the Securities, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
11. DEFEASANCE
Subject to certain conditions set forth in the Indenture, the Company at
any time may terminate some or all of its obligations and the obligations of the
Subsidiary Guarantors under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of Principal of and interest on the Securities to redemption or maturity, as the
case may be.
3
<PAGE> 53
12. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended with the written consent of the Holders of at
least a majority in principal amount of the outstanding Securities and (ii) any
default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Securityholder, the Company, the Subsidiary Guarantors and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency whether wholly within the Indenture or as
compared to any of the Collateral Documents, or to make such other provisions in
regard to matters or questions arising under the Indenture as the Board of
Directors of the Company may deem necessary or desirable and which shall not
materially and adversely affect the rights of the Holders, or to comply with
Article 5 of the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to add additional
guarantees with respect to the Securities or to add additional security for the
Securities, or to add additional covenants of or surrender rights and powers
conferred on the Company, or to comply, or allow compliance with, any
requirement of the SEC in connection with qualifying the Indenture under the Act
or giving effect to the security arrangements contemplated by the Indenture, or
to make any change that does not adversely affect the rights of any
Securityholder in any material respect or to give effect to the provisions of
the Collateral Documents and the Indenture, including with regard to the release
of all or a portion of the Collateral in accordance with such provisions and to
give effect to the release of any Subsidiary Guarantee in accordance with the
terms of the Indenture.
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days in
any payment of interest on the Securities when due, that continues for 30 days;
(ii) default in payment of Principal on the Securities when due at its Stated
Maturity, upon declaration or otherwise; (iii) failure by the Company or the
Subsidiary Guarantors to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other indebtedness of the Company, the Subsidiary Guarantors or any
of the Company's Subsidiaries if the amount accelerated (or so unpaid) exceeds
$30 million; (v) certain events of bankruptcy or insolvency with respect to the
Company or any Significant Subsidiary; (vi) certain judgments or decrees for the
payment of money in excess of $30 million against the Company or any Significant
Subsidiary; (vii) except as permitted under the Indenture, a Subsidiary
Guarantee ceases to be in full force and effect for 30 days after notice or a
Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary
Guarantee; or (viii) except as permitted by the Collateral Documents, the Credit
Agreement and the Indenture or any amendment thereto, any of the Collateral
Documents ceases to be in full force and effect or ceases to be effective, in
all material respects, to create a Lien on the Collateral in favor of the Senior
Noteholders for 30 days after notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of Principal
or interest) if it determines that withholding notice is not opposed to their
interest.
4
<PAGE> 54
14. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
15. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company or
the Subsidiary Guarantors shall not have any liability for any obligations of
the Company or the Subsidiary Guarantors under the Securities or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
17. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. GOVERNING LAW
This Security shall be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable principles
of conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made to: Coltec Industries
Inc, 3 Coliseum Center, 2550 West Tyvola Road, Charlotte, NC 28217 Attention:
Chief Financial Officer.
5
<PAGE> 55
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
Signature Guarantee: ___________________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
CHECK ONE BOX BELOW:
(1)[ ] to the Company; or
(2)[ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3)[ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4)[ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5)[ ] pursuant to another available exemption from registration provided
by Rule 144 under the Securities act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (4) or (5) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
--------
Signature Guarantee: Signature
- ------------------------------------------------------ --------
(Signature must be guaranteed by a participant in a Signature
recognized Signature Guarantee Medallion Program or other
signature guarantor program reasonably acceptable to the
Trustee)
- --------------------------------------------------------------------------------
<PAGE> 56
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
<TABLE>
<S> <C>
Dated: ------------------------------------ ---------------------------------------------------
NOTICE: To be executed by
an executive officer
</TABLE>
<PAGE> 57
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
AMOUNT OF DECREASE AMOUNT OF INCREASE PRINCIPAL AMOUNT OF SIGNATURE OF
IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT THIS GLOBAL SECURITY AUTHORIZED OFFICER
DATE OF OF THIS GLOBAL OF THIS GLOBAL FOLLOWING SUCH OF TRUSTEE OR
EXCHANGE SECURITY SECURITY DECREASE OR INCREASE SECURITIES CUSTODIAN
-------- ------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 58
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY [OR PRIVATE
EXCHANGE SECURITY]]
*/
**/
COLTEC INDUSTRIES INC.
No. ____ Principal Amount $ ___________________
CUSIP NO. ___________________
7 1/2% SENIOR NOTE DUE 2008
Coltec Industries Inc., a Pennsylvania corporation, promises to pay to CEDE
& Co., or registered assigns, the principal sum of ___________________ Dollars
on April 15, 2008.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: _____________________
COLTEC INDUSTRIES INC
by
by
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Securities referred
to in
the Indenture.
BANKERS TRUST COMPANY
by
Authorized Signatory
- ---------------
*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
Captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] -- SCHEDULE OF INCREASES
OR DECREASES IN GLOBAL SECURITY".]
**/ [If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment,
add the Restricted Securities Legend from Exhibit 1 to Appendix A and
replace the Assignment Form included in such Exhibit 1.]
<PAGE> 59
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY [OR
PRIVATE EXCHANGE SECURITY]]
7 1/2% SENIOR NOTE DUE 2008
1. INTEREST
Coltec Industries Inc., a Pennsylvania corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above[; provided, however, that if
a Registration Default (as defined in the Registration Rights Agreement) occurs,
additional cash interest will accrue on this Security at a rate of 0.50% per
annum from and including the date on which any such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured, calculated on the principal amount of this Security as of the date on
which such interest is payable. Such interest is payable in addition to any
other interest payable from time to time with respect to this Security. The
Trustee will not be deemed to have notice of a Registration Default until it
shall have received actual notice of such Registration Default].***/
The Company will pay interest semiannually on April 15 and October 15 of
each year, commencing October 15, 1998 Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from April 16, 1998. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT
By at least 11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such Principal and/or interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the April 1 or October 1 next preceding the interest payment date
even if Securities are cancelled, repurchased or redeemed after the record date
and on or before the interest payment date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company will pay Principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
Principal and interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, Bankers Trust Company, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated wholly owned
Subsidiaries may act as Paying Agent.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of April 16,
1998 (as it may be amended or supplemented from time to time in accordance with
the terms thereof, the "Indenture"), among the Company Subsidiary, the
Subsidiary Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on
the date of the Indenture (the "Act"). Capitalized terms used
- ---------------
***/ Insert if at the time of issuance of the Exchange Security or Private
Exchange Security (as the case may be) neither the Registered Exchange
Offer has been consummated nor a Shelf Registration Statement has been
declared effective in accordance with the Registration Rights Agreement.
<PAGE> 60
herein and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.
The Securities are senior obligations of the Company limited to $300.0
million aggregate principal amount (subject to Section 2.7 of the Indenture).
The Security is one of the Exchange Securities referred to in the Indenture. The
Securities include the Initial Securities and any Private Exchange Securities
and Exchange Securities issued in exchange for the Initial Securities pursuant
to the Indenture and the Registration Rights Agreement. The Initial Securities,
the Private Exchange Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company to create liens, enter into sale and
leaseback transactions and enter into mergers and consolidations.
To guarantee the due and punctual payment of the Principal and interest, if
any, on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Subsidiary Guarantors, as primary obligors and
not merely as surety, have unconditionally and irrevocably guaranteed, on a
joint and several basis, such obligations on a senior basis pursuant to the
terms of Article X of the Indenture.
The Securities are secured to the extent set forth in Article XI of the
Indenture.
5. OPTIONAL REDEMPTION
The Securities will be redeemable, in whole or in part, at any time, at the
option of the Company, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Securities and (ii) the sum of the present value of
the remaining scheduled payments of principal and interest thereon from the
redemption date to the maturity date, discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the
date of redemption.
"TREASURY RATE" means, with respect to any redemption date for the
Securities, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall be calculated
on the third Business Day preceding the redemption date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Securities. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"COMPARABLE TREASURY PRICE" means with respect to any redemption date for
the Securities (i) the average of four Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such quotations.
2
<PAGE> 61
"REFERENCE TREASURY DEALER" means each of Credit Suisse First Boston
Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government
securities dealers in New York City (each, a "Primary Treasury Dealer")
appointed by the Trustee in consultation with the Company; provided, however,
that if any of the foregoing shall cease to be a Primary Treasury Dealer, the
Company shall substitute therefor another Primary Treasury Dealer.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Except as set forth above, the Securities will not be redeemable by the
Company prior to maturity and will not be entitled to the benefit of any sinking
fund.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date by first-class mail to each Holder of Securities
to be redeemed at his registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may register
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange (i)
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) for a period
beginning 15 days before a selection of Securities to be redeemed and ending on
the date of such selection or (ii) any Securities for a period beginning 15 days
before an interest payment date and ending on such interest payment date.
8. PERSONS DEEMED OWNERS
The registered holder of this Security may be treated as the owner of it
for all purposes.
9. UNCLAIMED MONEY
If money for the payment of Principal or interest remains unclaimed for two
years after the date of payment of Principal and interest, the Trustee or Paying
Agent shall pay the money back to the Company at its request unless an abandoned
property law designates another Person. After any such payment, Holders entitled
to the money must look only to the Company and not to the Trustee for payment.
10. DEFEASANCE
Subject to certain conditions set forth in the Indenture, the Company at
any time may terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of Principal of and interest on the Securities to
redemption or maturity, as the case may be.
3
<PAGE> 62
11. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended with the written consent of the Holders of at
least a majority in principal amount of the outstanding Securities and (ii) any
default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Securityholder, the Company, the Subsidiary Guarantors and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add additional guarantees with respect to the
Securities or to add additional security for the Securities, or to add
additional covenants of or surrender rights and powers conferred on the Company,
or to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not adversely affect
the rights of any Securityholder or to give effect to the provisions of the
Collateral Documents and the Indenture with regard to the release of all or a
portion of the Collateral in accordance with such provisions.
12. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days in
payment of interest on the Securities; (ii) default in payment of principal on
the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company or the Subsidiary Guarantors to comply with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other indebtedness of the
Company, the Subsidiary Guarantors or any of the Company's Subsidiaries if the
amount accelerated (or so unpaid) exceeds $30 million; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Significant
Subsidiary; (vi) certain judgments or decrees for the payment of money in excess
of $30 million against the Company or any Significant Subsidiary; (vii) except
as permitted under the Indenture, a Subsidiary Guarantee ceases to be in full
force and effect for 30 days after notice or a Subsidiary Guarantor denies or
disaffirms its obligations under its Subsidiary Guarantee; or (viii) except as
permitted by the Collateral Documents, the Credit Agreement and the Indenture or
any amendment thereto, any of the Collateral Documents ceases to be in full
force and effect or ceases to be effective, in all material respects, to create
a Lien on the Collateral in favor of the Senior Noteholders for 30 days after
notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives indemnity or security satisfactory to it.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of Principal
or interest) if it determines that withholding notice is not opposed to their
interest.
13. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
4
<PAGE> 63
14. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company or
the Subsidiary Guarantors shall not have any liability for any obligations of
the Company or the Subsidiary Guarantors under the Securities or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
15. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
16. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
18. GOVERNING LAW
This Security shall be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable principles
of conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made to: Coltec Industries
Inc., 3 Coliseum Center, 2550 West Tyvola Road, Charlotte, NC 28217 Attention:
Chief Financial Officer.
5
<PAGE> 64
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
Signature Guarantee: ___________________________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE> 65
EXHIBIT H
[FORM OF GUARANTOR SUPPLEMENT]
GUARANTOR SUPPLEMENT, dated as of
-----------------------------
-----------, among Coltec Industries Inc, a Pennsylvania corporation (the
"Company"), [NEW SUBSIDIARY GUARANTOR], a
- ------------------------corporation (the "New Subsidiary Guarantor") and Bankers
Trust Company, a New York banking corporation, as trustee (the "Trustee") to the
Indenture dated as of April 16, 1998 (as amended to the date hereof, the
"Indenture") among the Company, the Subsidiary Guarantors named therein and the
Trustee.
W I T N E S S E T H :
WHEREAS, Section 9.1 of the Indenture provides that the Company and the
Trustee may, among other things, amend the Indenture or the Securities without
notice to or consent of any Securityholder to add Guarantees with respect to the
Securities or to secure the Securities;
WHEREAS, Section 10.7 of the Indenture provides that until such time as all
Guarantees by the Subsidiary Guarantors under the Indenture shall have been
released in accordance with Section 10.9 of the Indenture, the Company shall
cause each Subsidiary that Guarantees the Company's obligations under the Credit
Agreement (other than a Foreign Subsidiary) to execute and deliver this
Guarantor Supplement pursuant to which such Subsidiary shall agree to be bound
by the provisions of Article X of the Indenture; and
WHEREAS, the New Subsidiary Guarantor shall execute and deliver to the
Trustee this Guarantor Supplement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein shall
have the meaning specified in or pursuant to the Indenture.
2. Guarantee. The New Subsidiary Guarantor hereby agrees to
unconditionally assume all the obligations of a Subsidiary Guarantor under the
Indenture as described therein.
3. Trustee. The Trustee accepts the modification of the Indenture
effected by this Guarantor Supplement, but only upon the terms and conditions
set forth in the Indenture. Without limiting the generality of the foregoing,
the Trustee assumes no responsibility for the correctness of the recitals herein
contained. The Trustee makes no representation and shall have no responsibility
as to the validity and sufficiency of this Guarantor Supplement.
4. Effect on Indenture. As supplemented by this Guarantor Supplement, the
Indenture is hereby ratified and confirmed in all aspects.
5. Counterparts. This Guarantor Supplement may be executed in
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
6. Governing Law. This Guarantor Supplement shall be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another Jurisdiction would be required thereby.
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this Guarantor
Supplement to be duly executed as of the day and year first above written.
[NEW SUBSIDIARY GUARANTOR]
By:
------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By:
------------------------------------
Name:
Title:
COLTEC INDUSTRIES INC
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
$300,000,000
COLTEC INDUSTRIES INC
7 1/2% SENIOR NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
April 16, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
BT ALEX. BROWN INCORPORATED
BANCAMERICA ROBERTSON STEPHENS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Coltec Industries Inc, a Pennsylvania corporation (the "Issuer"), proposes
to issue and sell to Credit Suisse First Boston Corporation, BT Alex. Brown
Incorporated, BancAmerica Robertson Stephens Inc. and NationsBanc Montgomery
Securities LLC (collectively, the "Initial Purchasers"), upon the terms set
forth in a purchase agreement of even date herewith (the "Purchase Agreement"),
$300,000,000 aggregate principal amount of its 7 1/2% Senior Notes Due 2008 (the
"Initial Securities") to be unconditionally guaranteed (the "Guaranties") by the
parties listed on the signature page hereto (the "Guarantors" and together with
the Issuer, the "Company"). The Initial Securities will be issued pursuant to an
Indenture, dated as of April 16, 1998 (the "Indenture") among the Issuer, the
Guarantors named therein and Bankers Trust Company (the "Trustee"). As an
inducement to the Initial Purchasers, the Company agrees with the Initial
Purchasers, for the benefit of the holders of the Initial Securities (including,
without limitation, the Initial Purchasers), the Exchange Securities (as defined
below) and the Private Exchange Securities (as defined below) (collectively the
"Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost, prepare
and, within 90 days after (or if the 90th day is not a business day, the first
business day thereafter) the date of original issue of the Initial Securities
(the "Issue Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in
Section 6 hereof) who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Initial Securities, a like aggregate principal
amount of debt securities (the "Exchange Securities") of the Company issued
under the Indenture and identical in all material respects to the Initial
Securities (except for the transfer restrictions relating to the Initial
Securities and the provisions relating to the matters described in Section 6
hereof) that would be registered under the Securities Act. The Company shall use
its reasonable best efforts to cause such Exchange Offer Registration Statement
to become effective under the Securities Act within 150 days (or if the 150th
day is not a business day, the first business day thereafter) after the Issue
Date of the Initial Securities and shall keep the Exchange Offer Registration
Statement effective for not less than 20 business days (or longer, if required
by applicable law) after the date notice of the Registered Exchange Offer is
mailed to the Holders (such period being called the "Exchange Offer Registration
Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 20 business days after the
commencement thereof provided that the Company has accepted all the Initial
Securities theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
<PAGE> 2
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing
substantially the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Exchange Securities acquired in exchange for Securities constituting any portion
of an unsold allotment is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such sale.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Company
shall make such prospectus and any amendment or supplement thereto, available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 90 days after the consummation of the
Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) except as provided elsewhere herein, keep the Registered Exchange
Offer open for not less than 20 business days (or longer, if required by
applicable law) after the date notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
2
<PAGE> 3
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(y) deliver to the Trustee for cancellation all the Initial Securities
so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a broker-
dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an 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 not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Initial Securities (or the Private Exchange Securities) not eligible to
be exchanged for Exchange Securities in the Registered Exchange Offer and held
by it following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging
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<PAGE> 4
Dealer) that participates in the Registered Exchange Offer, such Holder does not
receive freely tradeable Exchange Securities on the date of the exchange, the
Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but in
no event more than 60 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its reasonable
best efforts to cause to be declared effective a registration statement
(the "Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter,
the "Shelf Registration"); provided, however, that no Holder (other than an
Initial Purchaser) shall be entitled to have the Securities held by it
covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to
such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to this paragraph (b) or to Section 3(j) below) from
the date of its effectiveness or such shorter period that will terminate
when all the Securities covered by the Shelf Registration Statement (i)
have been sold pursuant thereto or (ii) are no longer restricted securities
(as defined in Rule 144 under the Securities Act, or any successor rule
thereof); provided, however, the Company shall not be obligated to keep the
Shelf Registration Statement continuously effective to the extent set forth
above if (i) the Company determines, in its reasonable judgment, upon
advice of counsel, as authorized by a resolution of its Board of Directors,
that the continued effectiveness and usability of the Shelf Registration
Statement would (x) require the disclosure of material information, which
the Company has a bona fide business reason for preserving as confidential,
or (y) interfere with any financing, acquisition, corporate reorganization
or other material transaction or development involving the Company or any
of its subsidiaries or its parent or the contemplated timing thereof,
provided that the failure to keep the Shelf Registration Statement
effective and usable for offers and sales of Securities for such reason
shall last no longer than 45 days in any three-month period or three
periods not to exceed an aggregate of 90 days in any 12-month period
(whereafter Additional Interest (as defined in Section 6(a)) shall accrue
and be payable), and (ii) the Company promptly thereafter complies with the
requirements of Section 3(j) hereof, if applicable; provided further that
the number of days of any actual Suspension Period (as defined below) shall
be added on to the end of the two-year period specified above. Any such
period during which the Company is excused from keeping the Shelf
Registration Statement effective and usable for offers and sales of
Securities is referred to herein as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Company gives notice
that the Shelf Registration Statement is no longer effective or the
prospectus included therein is no longer usable for offers and sales of
Securities and shall end on the earlier to occur of (1) the date on which
each seller of Securities covered by the Shelf Registration Statement
either receives the copies of the supplemented or amended prospectus
contemplated by Section 3(j) hereof or is advised in writing by the Company
that the use of the prospectus may be resumed and (2) the expiration of 45
days in any three-month period or three periods not to exceed an aggregate
of 90 days in any 12-month period during which one or more Suspension
Periods has been in effect. Except as provided above, the Company shall be
deemed not to have used its best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not being
able to offer and sell such Securities during that period, unless such
action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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<PAGE> 5
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use its reasonable best efforts
to reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement; (iv) include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the
staff of the Commission with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of Exchange Securities received by such broker-dealer in the Registered
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission or
such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders, who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers
and any Participating Broker-Dealer from whom the Company has received
prior written notice that it will be a Participating Broker-Dealer in the
Registered Exchange Offer when the Registration Statement or any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become effective.
After the effectiveness of the Registration Statement, the Company
shall give written notice to the Initial Purchasers, the Holders and any
such Participating Broker-Dealer (which notice pursuant to clauses (i)-(iv)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) of any request by the Commission for amendments or supplements
to the Registration Statement or the prospectus included therein or for
additional information;
(ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iii) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(iv) of the happening of any event (including, without limitation,
of any event resulting in a Suspension Period) that requires the Company
to make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus do not contain an
untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the circumstances
under which they were made) not misleading.
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<PAGE> 6
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by each
of the selling Holders of the Securities in connection with the offering
and sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Participating Broker-Dealer and such other persons required
to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by
the prospectus, or any amendment or supplement thereto, included in such
Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally to
do business in any jurisdiction where it is not then so qualified or (ii)
take any action which would subject it to general service of process or to
taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event (other than an event resulting in
a Suspension Period) contemplated by paragraphs (i) through (iv) of Section
3(b) above during the period for which the Company is required to maintain
an effective Registration Statement, the Company shall promptly prepare and
file a post-effective amendment to the Registration Statement or a
supplement to the related prospectus and any other required document so
that, as thereafter delivered to Holders of the Securities or purchasers of
Securities, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Company
notifies the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer in accordance with paragraphs (i) through
(iv) of Section 3(b) above to suspend the use of the prospectus until the
requisite changes to the prospectus have
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<PAGE> 7
been made, then the Initial Purchasers, the Holders of the Securities and
any such Participating Broker-Dealers shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days (without duplication of any extension under Section 2(b))
from and including the date of the giving of such notice to and including
the date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement of the Company
satisfying the provisions of Section 11(a) of the Securities Act, no later
than 45 days after the end of four quarterly periods (or 90 days, if such
period is a fiscal year) beginning with the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such four quarterly periods.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Company shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form) and take all
such other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant
to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Company and (ii) cause the Company's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement, in each case, as shall be reasonably necessary to enable such
persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one
counsel designated by and on behalf of such other parties as described in
Section 4 hereof. Each Holder of Securities or any underwriter, attorney,
accountant or agent conducting an inspection under this Section 3(p) will
be required, as a condition to conducting such investigation, to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such
information is generally available to the public.
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<PAGE> 8
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel
(which may include internal counsel) to deliver an opinion and updates
thereof relating to the Securities in customary form and substance
addressed to such Holders and the managing underwriters, if any, thereof
and dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement covering the matters customarily covered in
opinions requested in underwritten offerings; (ii) its officers to execute
and deliver all customary documents and certificates and updates thereof
requested by any underwriters of the applicable Securities and (iii) its
independent public accountants and the independent public accountants with
respect to any other entity for which financial information is provided in
the Shelf Registration Statement to provide to the selling Holders of the
applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in
comfort letters in connection with public underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in substantially the form set
forth in Section 6(c) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Registration Statement to deliver to such
Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) and (f) of the Purchase Agreement, with appropriate
date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Company will use its reasonable best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities were
not previously rated, cause the Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, in each case,
if so requested prior to the effectiveness of the Registration Statement by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will
reasonably assist such broker-dealer in complying with the requirements of
such Rules, including, without limitation, by (i) if such Rules, including
Rule 2720, shall so require, engaging a "qualified independent underwriter"
(as defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of the
offering contemplated by such Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 5 hereof and (iii) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules.
(v) The Company shall use its reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby. The Initial Purchasers
agree to provide any reasonable assistance requested by the Company in
complying with its
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<PAGE> 9
obligations pursuant to this Section 3, including, without limitation,
identifying and contacting Holders entitled to participate in the
Registered Exchange Offer.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of Simpson
Thacher & Bartlett, counsel for the Initial Purchasers, incurred in connection
with the Registered Exchange Offer), whether or not the Registered Exchange
Offer or a Shelf Registration is filed or becomes effective, and, in the event
of a Shelf Registration, shall bear or reimburse the Holders of the Securities
covered thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Initial
Securities covered thereby to act as counsel for the Holders of the Initial
Securities in connection therewith; provided that such Holders shall be
responsible for any and all underwriting discounts and commissions and all other
costs and expenses customarily borne by securityholders in similar
circumstances; provided further that prior to employing counsel in connection
with a Registered Exchange Offer, the Initial Purchasers will consult with the
Company and the Company's counsel to determine if separate counsel is necessary.
5. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Holder of the Securities, any Participating Broker-Dealer and each person,
if any, who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer, such controlling persons and their respective
affiliates, directors, officers, employees, representatives and agents are
referred to collectively as the "Indemnified Parties") from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to
which each Indemnified Party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement or prospectus
or in any amendment or supplement thereto or in any preliminary prospectus
relating to a Shelf Registration, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
subject to the limitation set forth in the immediately preceding clause, shall
reimburse, as incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action in respect thereof; provided,
however, that (i) the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in a Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the extent
that a prospectus relating to such Securities was required to be delivered by
such Holder or Participating Broker-Dealer under the Securities Act in
connection with such purchase and any such loss, claim, damage or liability of
such Holder or Participating Broker-Dealer results from the fact that there was
not sent or given to such person, at or prior to the written confirmation of the
sale of such Securities to such person, a copy of the final prospectus if the
Company had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company, its subsidiaries, affiliates,
directors, officers, employees, representatives and agents and any such
controlling person and each person, if any, who controls the Company within the
meaning of the Securities Act or the
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<PAGE> 10
Exchange Act from and against any losses, claims, damages or liabilities or any
actions in respect thereof, to which the Company, its subsidiaries, affiliates,
directors, officers, employees, representatives and agents and any such
controlling person or any such controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company or
any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Securities, pursuant to
the Registered Exchange Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to
10
<PAGE> 11
contribute any amount in excess of the amount by which the net proceeds received
by such Holders from the sale of the Securities pursuant to a Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default":
(i) If within 90 days of April 16, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) If within 180 days of April 16, 1998, neither the Registered
Exchange Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or the
Shelf Registration Statement is declared effective (A) such Registration
Statement thereafter ceases to be effective; or (B) such Registration
Statement or the related prospectus ceases to be usable (except as
permitted in paragraph (b)) in connection with resales of Transfer
Restricted Securities during the periods specified herein because either
(1) any event occurs as a result of which the related prospectus forming
part of such Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or (2) it shall be necessary to amend such
Registration Statement or supplement the related prospectus, to comply with
the Securities Act or the Exchange Act or the respective rules thereunder.
Subject to paragraph (b) below, Additional Interest shall accrue on the Initial
Securities over and above the interest set forth in the title of the Securities
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all such Registration Defaults have been
cured, at a rate of 0.50% per annum, calculated on the principal amount of the
Notes as of the day on which such interest is payable.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus, (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus or (z) a Suspension Period not to exceed 45
days in any three-month period or three periods not to exceed an aggregate of 90
days in any 12-month period pursuant to Section 2(b) and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
such events; provided, however, that in any case if such Registration Default
occurs for a continuous period in excess of 30 days, Additional Interest shall
be payable in accordance with the above paragraph from the day such Registration
Default occurs until such Registration Default is cured or until the Company is
no longer required to keep such Registration Statement effective or such
prospectus useable pursuant to the terms of this Agreement.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal
11
<PAGE> 12
amount of the Initial Securities, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve
30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the date
on which such Transfer Restricted Security has been exchanged by a person other
than a broker-dealer for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of an Initial Security for an Exchange Note, the date
on which such Exchange Note is sold to a purchaser who receives from such
brokerdealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
7. Rules 144 and 144A. The Company shall use its reasonable best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Initial
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further reasonable action as any Holder of
Initial Securities may reasonably request, all to the extent required from time
to time to enable such Holder to sell Initial Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company
will provide a copy of this Agreement to prospective purchasers of Initial
Securities identified to the Company by the Initial Purchasers upon request.
Upon the request of any Holder of Initial Securities, the Company shall deliver
to such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address given by
such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
12
<PAGE> 13
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Vincent Pagano, Jr., Esq.
(3) if to the Company, at its address as follows:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: George W. Bilicic, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
13
<PAGE> 14
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers, the Issuer and the Guarantors in accordance with
its terms.
Very truly yours,
COLTEC INDUSTRIES INC
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: Executive Vice President,
General Counsel and Secretary
AMI Industries Inc.
CII Holdings Inc
Coltec Canada Inc
Coltec Industrial Products Inc
Coltec International Services Co
Coltec North Carolina Inc.
Coltec Technical Services Inc
Delavan Inc
Garlock Inc
Garlock International Inc
Garlock Overseas Corporation
Haber Tool Company Inc
Holley Performance Products Inc
Jamco Products, LLC
Menasco Aerosystems Inc
Stemco Inc
Walbar Inc
On behalf of each of the above
Guarantors
By: /s/ ROBERT J. TUBBS
------------------------------------
Name: Robert J. Tubbs
Title: Vice President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BT ALEX. BROWN INCORPORATED
BANCAMERICA ROBERTSON STEPHENS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
by: CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ ROBERT MALKANI
----------------------------------
Name: Robert Malkani
Title: Associate
14
<PAGE> 1
EXHIBIT 4.4
FIFTH AMENDMENT TO CREDIT AGREEMENT
FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of March 16,
1998, among COLTEC INDUSTRIES INC, a corporation organized and existing under
the laws of the State of Pennsylvania (the "Company"), Coltec Aerospace Canada
Ltd., an Ontario corporation (the "Canadian Borrower"), the various Subsidiaries
of the Company that are Credit Parties on the date of this Amendment, the
various Banks party to the Credit Agreement referred to below, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of
America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as
Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF
MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent,
the Syndication Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of March 24, 1992, amended and restated as of January 11,
1994 and further amended and restated as of December 18, 1996, (as amended,
modified or supplemented to the date hereof, the "Credit Agreement");
WHEREAS, the parties hereto have agreed to amend the Credit Agreement as herein
provided;
NOW, THEREFORE, it is agreed:
Amendments to Credit Agreement.
Section 3.03 of the Credit Agreement is hereby amended by (1) deleting
in its entirety in clause (c) thereof and inserting in lieu thereof the
following new text:
"(c) [intentionally omitted]";
(2) inserting immediately after the phrase "is in effect on the
Restatement Effective Date" appearing in clause (d) thereof the phrase
", or of TIDES, New Senior Notes or New Senior Exchange Notes";
(3) inserting at the end of clause (d) the following new proviso:
"provided that notwithstanding the foregoing, on each date upon which
New Senior Notes or TIDES are issued, the Total Commitment shall be
reduced by an amount equal to 66-2/3% of the gross cash proceeds
received by the Company and its Subsidiaries (including the Trust,
without duplication) from the respective issuance"; and
(4) inserting in clause (e) thereof the following new clauses (ii)(D)
and (E), in appropriate order, in the second parenthetical appearing in
said clause (e):
<PAGE> 2
"and (D) the proceeds of the sale of 100% of the capital stock of, or
all or substantially all of the assets of, Holley Automotive pursuant
to Section 9.02(xxiii) and (E) the proceeds of the issuance of TIDES,
New Senior Notes or New Senior Exchange Notes, as the case may be".
Section 7.14 of the Credit Agreement is hereby amended by
adding the following phrase immediately at the end of the third
sentence thereof:
"and except that TIDES and TIDES Mirror Debentures shall be convertible
into common stock of the Company in accordance with the terms thereof
(and of the documentation relating thereto)".
Section 7.17 of the Credit Agreement is hereby amended by
inserting immediately following the phrase "any of its Subsidiaries"
therein the phrase "(other than the Trust)".
Section 7.23 of the Credit Agreement is hereby amended by
(x) deleting the word "and" immediately preceding clause (iv) thereof
and by inserting in lieu thereof a comma and (y) inserting the
following phrase at the end thereof:
"and (v) following the issuance of TIDES, the Trust may be subject to
restrictions as provided in the documentation relating to the TIDES and
the TIDES Mirror Debentures".
Section 8.04 of the Credit Agreement is hereby amended by
deleting the phrase "or (iii)" appearing therein and inserting in lieu
thereof the following phrase:
", (iii) the dissolution or liquidation of the Trust pursuant
to, or other compliance by the Trust with, the documentation relating
to the TIDES and the TIDES Mirror Debentures or (iv)".
Section 8.12 of the Credit Agreement is hereby amended by
adding the following new phrase immediately at the end thereof :
"and (z) the Trust so long as same would be a Wholly Owned
Subsidiary of the Company but for its issuance of TIDES which are then
outstanding".
Section 8.15 of the Credit Agreement is hereby amended by
adding the following new clause (i) immediately at the end thereof:
"(i) Notwithstanding anything to the contrary contained in
this Section 8.15, elsewhere in this Agreement or in any other Credit
Document, the Trust (so long as same issues TIDES within a reasonable
period of
<PAGE> 3
time after the establishment of the Trust) shall not be required to
become a Guarantor or to execute any Credit Documents, and the equity
interests in the Trust owned by the Company shall not be required to be
pledged pursuant to any Pledge Agreement."
Section 9.01 of the Credit Agreement is hereby
amended by (x) deleting the word "and" at the end of clause (xxii)
thereof, (y) deleting the period at the end of clause (xxiii) thereof
and inserting "; and" in lieu thereof and (z) inserting in appropriate
order the following new clause (xxiv):
"(xxiv) after the issuance of the New Senior Notes, Liens on
Collateral securing the New Senior Notes and, after the issuance
thereof, the New Senior Exchange Notes on an equal and ratable basis
with the obligations otherwise secured pursuant to the Security
Documents to the extent permitted by Section 9.04(xxi); provided that
such Liens may not continue in existence at any time, and for so long
as, the Liens on the respective items of Collateral have been released
pursuant to the Security Documents or as contemplated by Section 26 of
Part I of the Fifth Amendment to this Agreement."
Section 9.02 of the Credit Agreement is hereby
amended by (x) deleting the word "and" at the end of clause (xxi)
thereof, (y) deleting the period at the end of clause (xxii) thereof
and inserting a semi-colon in lieu thereof and (z) inserting in
appropriate order the following new clauses:
"(xxiii) so long as there shall exist no Default or Event of
Default (both before and after giving effect thereto), the Company
shall be permitted to sell 100% of the capital stock of, or all or
substantially all of the assets of, Holley Automotive, so long as (A)
such sale is for fair market value (as determined in good faith by the
Board of Directors of the Company), (B) the business and assets
of Holley Automotive shall not have materially changed from the
business and assets, respectively, of Holley Automotive on the Fifth
Amendment Effective Date and (C) such sale results in
consideration consisting at least 75% (for this purpose, taking the
amount of cash and the fair market value of all non-cash consideration,
as determined in good faith by the Company) of cash;
(xxiv) New Senior Notes and/or New Senior Exchange Notes may
be repurchased (so long as retired by the Company) in accordance with
the provisions of clause (iv) of Section 9.11; and
(xxv) the activities of the Trust and the Company in
connection with its issuance of TIDES, and any dissolution of the Trust
and distribution of TIDES Mirror Debentures, any conversions of TIDES
Mirror Debentures into common stock of the Company, repurchases or
<PAGE> 4
redemptions of TIDES by the Trust in accordance with the provisions of
Section 9.03 and corresponding repurchases or redemptions of TIDES
Mirror Debentures by the Company in each case as contemplated by the
documentation relating to the TIDES and the TIDES Mirror Debentures
shall be permitted without causing a violation of this Section 9.02."
Section 9.03 of the Credit Agreement is hereby
amended by (x) in clause (iii)(A) thereof, inserting the phrase
"and/or, after the issuance thereof, the Trust shall be permitted to
purchase TIDES (and in the case any outstanding TIDES are so purchased,
the Company shall, and shall be permitted to, repay, or the Trust shall
cancel, a like principal of amount of TIDES Mirror Debentures, with the
Trust using the proceeds thereof to repurchase the TIDES, which TIDES
so purchased shall be retired)" immediately after the phrase "shares of
Company Common Stock" appearing therein and (y) adding the following
new sentence immediately at the end thereof:
"Notwithstanding anything to the contrary contained in this
Section 9.03 or elsewhere in this Agreement, following the issuance of
TIDES in accordance with the provisions of Section 9.13(a)(viii), no
payments or distributions (except payments made to purchase TIDES
pursuant to clause (iii)(A) of the first sentence of this Section 9.03)
may be made with respect to the TIDES or the TIDES Mirror Debentures
except that (x) any TIDES and/or TIDES Mirror Debentures, as the case
may be, from time to time outstanding may, in accordance with the terms
of the relevant documentation therefor, be converted into common stock
of the Company, (y) cash interest may be paid on the TIDES Mirror
Debentures so long as the Trust in turn utilizes all cash interest
payments so received by it to pay accrued dividends (which shall be
permitted to be paid by the Trust with proceeds of such cash interest
payments received by it) owing with respect to TIDES then outstanding,
provided that (i) the cash interest payments made from time to
time to the Trust shall not exceed the amounts needed by it to make
dividend payments owing with respect to outstanding TIDES and costs and
expenses of the Trust in accordance with the indenture for the TIDES
Mirror Debentures, (ii) no such payments shall be made at any
time when the payment of cash interest on the TIDES Mirror Debentures
is not permitted to be made pursuant to the subordination provisions
applicable thereto and (iii) no such payments shall be made at any time
following the occurrence and during the continuance of any Default or
Event of Default or if a Default or Event of Default would exist
immediately after giving effect to such payment, and (z) to the limited
extent provided in the documentation relating to the TIDES, TIDES
Mirror Debentures may be issued by the Trust to the holders of the
TIDES in exchange therefor."
<PAGE> 5
Section 9.04 of the Credit Agreement is hereby
amended by (x) deleting the word "and" at the end of clause (xix)
thereof, (y) deleting the period at the end of clause (xx) thereof and
inserting a semicolon in lieu thereof and (z) inserting in appropriate
order the following new clauses (xxi) and (xxii):
"(xxi) Indebtedness of the Company evidenced by its senior
notes (the "New Senior Notes") and by its senior notes issued in a
registered exchange offer for the New Senior Notes (the "New Senior
Exchange Notes"), so long as (v) the New Senior Notes are issued at par
(subject to a de minimus discount not to exceed in any event 1%) and
the aggregate principal amount of New Senior Notes so issued does not
exceed $300,000,000, (w) the terms and conditions of the New Senior
Notes shall be consistent with the term sheet therefor delivered to the
Administrative Agent prior to the Fifth Amendment Effective Date and
otherwise in form and substance reasonably satisfactory to the Agents
and the Required Banks, (x) the aggregate principal amount of New
Senior Exchange Notes so issued shall not exceed the aggregate
principal amount of New Senior Notes surrendered in exchange for the
New Senior Exchange Notes so issued, (y) the terms and conditions of
the New Senior Exchange Notes shall be substantially identical (with
exceptions regarding registration requirements, the requirement to
conduct an exchange offer and other differences not adverse to the
Banks which are approved by the Administrative Agent) to the terms of
the New Senior Notes (except that the New Senior Exchange Notes shall
be registered under the Securities Act of 1933, as amended) and (z) all
documentation evidencing the New Senior Notes and the New Senior
Exchange Notes shall be satisfactory to each Agent and the Required
Banks; provided that the New Senior Notes and the New Senior Exchange
Notes shall be permitted to be (i) guaranteed by any Subsidiary of the
Company which is a Guarantor (for so long as such Subsidiary remains a
Guarantor) and (ii) secured on a pari passu basis by the Collateral (or
any portion thereof) on terms satisfactory to the Agents and the
Required Banks (which security interests shall be granted pursuant to
the Security Documents, by amendments thereto satisfactory to the
Agents and the Required Banks); provided further that if any Guarantor
or Collateral, as the case may be, is released pursuant to the Credit
Documents, such Guarantor or Collateral shall also be automatically
released as guarantor of or security for, as the case may be,
obligations pursuant to the New Senior Notes and the New Senior
Exchange Notes. At the time of the issuance of the New Senior Notes and
the New Senior Exchange Notes, if same are secured as contemplated
above, all actions reasonably deemed necessary or desirable by the
Administrative Agent, the Collateral Agent or the Required Banks
(including, without limitation, the filing of additional UCC financing
statements, mortgage amendments, etc.) to
<PAGE> 6
protect and preserve the security interests granted (and intended to be
granted) pursuant to the Security Documents (as same may be amended as
contemplated above) shall be taken by the Company and its Subsidiaries
at their own expense. All intercreditor arrangements, if any, in
connection with any securing of the New Senior Notes and/or the New
Senior Exchange Notes shall be required to be satisfactory to the
Agents and the Required Banks. To the extent the foregoing provisions
of this clause (xxi) require that any documentation or terms relating
to the New Senior Notes (excluding amendments to Credit Documents) be
satisfactory or approved by the Required Banks, such documentation or
terms shall be deemed satisfactory and approved by the Required Banks
so long as (i) the relevant documentation (in substantially final form
excluding pricing information and in form satisfactory to the
Administrative Agent) and a term sheet containing a range of pricing
information for the New Senior Notes is distributed to the Banks at
least five Business Days prior to pricing of the New Senior Notes, (ii)
the Required Banks do not object thereto within such five Business Day
period, (iii) the final economic terms of the New Senior Notes are
within the range of pricing information contained in the term sheet
distributed to the Banks and (iv) the Administrative Agent approves the
final form of the documentation relating to the New Senior Notes. To
the extent the foregoing provisions of this clause (xxi) require that
any documentation or terms relating to the New Senior Exchange Notes
(excluding amendments to Credit Documents) be satisfactory or approved
by the Required Banks, such documentation or terms shall be deemed
satisfactory and approved by the Required Banks so long as the relevant
documentation and terms are substantially identical (with modifications
of the type described in clause (y) of the first sentence of this
clause (xxi)) to the documentation and terms of the New Senior Notes
and satisfactory to the Administrative Agent. To the extent the Credit
Documents are to be amended (including any amendments and restatements
thereof) as contemplated above to provide for the sharing of security
with the New Senior Notes and the New Senior Exchange Notes, (i) such
amendments (or amendments and restatements) to the Pledge Agreements
and Security Agreements shall be distributed to the Banks and shall
require the affirmative approval of the Required Banks (with each Bank
which executes and delivers a copy of the Fifth Amendment hereby
agreeing that it will not unreasonably withhold or delay its consent)
and (ii) such amendments (or amendments and restatements) to Mortgages
or any other Security Documents (excluding the Pledge Agreements and
Security Agreements) shall be deemed satisfactory to the Required Banks
so long as same are in form approved by the Administrative Agent and
are reasonably consistent with the changes made pursuant to the Pledge
Agreements and Security Agreements; and
<PAGE> 7
(xxii) at the time of the issuance of TIDES by the Trust
pursuant to Section 9.13(a)(viii), (x) the Company shall be permitted
to issue to the Trust, and, upon liquidation or dissolution of the
Trust in accordance with the terms of the documentation for the TIDES
and the TIDES Mirror Debentures, the Trust shall be permitted to issue
to the public, convertible junior subordinated deferrable interest
debentures ("TIDES Mirror Debentures") which (i) will constitute
unsecured and unguaranteed obligations of the Company, (ii) shall
at no time exceed, in aggregate principal amount outstanding, 102% of
the aggregate liquidation preference of TIDES then outstanding (except
to the extent TIDES Mirror Debentures are issued by the Trust to
holders of TIDES in exchange therefor in the circumstances contemplated
by the relevant documentation therefor), (iii) will mature not
sooner than 15 years from the date of the issuance thereof, (iv) will
pay interest at a rate per annum not to exceed the stated dividend rate
on the TIDES, (v) will allow the Company to defer interest payments for
periods of up to 20 consecutive quarters and (vi) will have provisions
with respect to optional redemption and conversion into common stock of
the Company which are substantially similar to those of the TIDES and
(y) the Company shall be permitted to irrevocably guarantee, on a
subordinated basis, the Trust's payment of (i) all declared and unpaid
distributions on the TIDES to the extent of funds of the Trust
available therefor, (ii) all payments in the event of redemption of
TIDES to the extent of funds of the Trust available therefor and (iii)
the liquidation preference of the TIDES to the extent of the assets of
the Trust available for distribution to TIDES holders (the "TIDES
Guarantee"); provided that all documentation as described above in this
clause (xxii) shall be required to be reasonably satisfactory to the
Agents and the Required Banks. To the extent the foregoing provisions
of this clause (xxii) require that any documentation or terms relating
to the TIDES, the TIDES Guarantee and the TIDES Mirror Debentures be
satisfactory or approved by the Required Banks, such documentation or
terms shall be deemed satisfactory and approved by the Required Banks
so long as (i) the relevant documentation (in substantially final form
excluding pricing information and in form satisfactory to the
Administrative Agent) and a term sheet containing a range of pricing
information for the TIDES is distributed to the Banks at least five
Business Days prior to pricing of the TIDES, (ii) the Required Banks do
not object thereto within such five Business Day period, (iii) the
final economic terms of the TIDES are within the range of pricing
information contained in the term sheet distributed to the Banks and
(iv) the Administrative Agent approves the final form of the
documentation relating to the TIDES."
Section 9.05 of the Credit Agreement is modified by
(x) deleting the word "and" at the end of
<PAGE> 8
clause (xx) thereof, (y) deleting the period at the end of clause (xxi)
thereof and inserting in lieu thereof "; and" and (z) inserting the
following new clause (xxii) immediately at the end thereof:
"(xxii) the Company shall be permitted to establish the Trust
and acquire common equity interests therein, the Company shall be
permitted to issue and the Trust shall be permitted to acquire the
TIDES Mirror Debentures issued in accordance with Section 9.04(xxii)
and the Company may issue the TIDES Guarantee in accordance with the
provisions of Section 9.04(xxii)."
Section 9.06 of the Credit Agreement is amended by
adding the following immediately at the end thereof:
"Notwithstanding anything to the contrary contained in this
Section 9.06, the Company and the Trust shall be permitted to enter
into the transactions with each other contemplated by the documentation
for the TIDES, the TIDES Mirror Debentures and the TIDES Guarantee."
Section 9.11 of the Credit Agreement is hereby
modified by (x) deleting the word "or" immediately before clause
(iii) thereof and (y) inserting in appropriate order the
following new clauses (iv) and (v):
", (iv) after the issuance of New Senior Notes, New Senior
Exchange Notes, TIDES or TIDES Mirror Debentures, as the case may be,
make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption or acquisition for value of, or
any prepayment or redemption as a result of any change of control or
similar event of, including, in each case without limitation, by way of
depositing with the trustee with respect thereto money or securities
before due for the purpose of paying when due, any New Senior Notes,
New Senior Exchange Notes, TIDES or TIDES Mirror Debentures; provided
that, so long as no Default or Event of Default is in existence at the
time of the taking of any actions pursuant to this proviso or
immediately after giving effect thereto, the Company may from time to
time (A) purchase, repay or prepay New Senior Notes or New Senior
Exchange Notes so long as the aggregate amount of cash expended by the
Company and its Subsidiaries pursuant to this clause (A) after the
Fifth Amendment Effective Date does not exceed $100,000,000, (B) the
Company may issue New Senior Exchange Notes in exchange for New Senior
Notes, (C) in the circumstances contemplated by the documentation
relating to the TIDES and TIDES Mirror Debentures, the Trust may
dissolve and the TIDES Mirror Debentures may be distributed to the
holders of TIDES in accordance with the documentation therefor and (D)
to the extent permitted by Section 9.03(iii)(A), TIDES may be purchased
or redeemed and the correlating payments may be made with respect to
the TIDES Mirror Debentures, or (v) after the issuance of New Senior
Notes, New Senior
<PAGE> 9
Exchange Notes, TIDES or TIDES Mirror Debentures, as the case may be,
amend or modify, or permit the amendment or modification of, any
provision of the New Senior Notes, the New Senior Exchange Notes, the
TIDES or the TIDES Mirror Debentures or any agreement (including
without limitation, any certificate of designations, purchase
agreement, indenture or loan agreement) related thereto other than
amendments not adverse to the interest of Banks".
Section 9.12 of the Credit Agreement is hereby
amended by (x) deleting the word "and" immediately at the end of clause
(iv) thereof and by inserting a comma in lieu thereof and (y) inserting
the new phrase immediately at the end thereof:
"and (vi) applicable to the Trust and the Company under or by
reason of the TIDES, the TIDES Mirror Debentures, the TIDES Guarantee
or the documentation relating thereto as approved pursuant to Section
9.13(a)(viii) and/or 9.04(xxii), as the case may be".
Section 9.13(a) of the Credit Agreement is
hereby amended by inserting in appropriate order the following new
clause (viii):
"and (viii) for the issuance by a newly-created Wholly-Owned
Subsidiary of the Company, which shall be a grantor trust (the
"Trust"), of term income deferrable equity securities ("TIDES") and
trust common securities to the Company so long as (x) the gross
proceeds (which shall include the proceeds received from any exercise
of the underwriters' over-allotment option) received from such issuance
shall not exceed $150,000,000, (y) the terms and conditions thereof
shall be consistent with the term sheet therefor delivered to the
Administrative Agent prior to the Fifth Amendment Effective Date and
otherwise in form and substance reasonably satisfactory to the Agents
and the Required Banks and (z) all documentation evidencing the TIDES
shall be reasonably satisfactory to each Agent and the Required Banks.
To the extent the foregoing provisions of this clause (viii) require
that any documentation or terms relating to the TIDES, the TIDES
Guarantee and the TIDES Mirror Debentures be satisfactory or approved
by the Required Banks, such documentation or terms shall be deemed
satisfactory and approved by the Required Banks so long as (i) the
relevant documentation (in substantially final form excluding pricing
information and in form satisfactory to the Administrative Agent) and a
term sheet containing a range of pricing information for the TIDES is
distributed to the Banks at least five Business Days prior to pricing
of the TIDES, (ii) the Required Banks do not object thereto within such
five Business Day period, (iii) the final economic terms of the TIDES
are within the range of pricing information contained in the term sheet
distributed to the Banks and (iv) the Administrative
<PAGE> 10
Agent approves the final form of the documentation relating to the
TIDES."
Section 9.15 of the Credit Agreement is hereby
amended by adding the following new sentence immediately at the end
thereof:
"Notwithstanding anything to the contrary contained above, the
Trust may be established by the Company so long as all equity interests
therein (excluding equity interest represented by the TIDES) are owned
by the Company and, as contemplated by Section 8.15(i), the Trust shall
not be required to become a Guarantor or otherwise execute and deliver
Credit Documents."
Section 9 of the Credit Agreement is hereby
amended by inserting the following new Section 9.17 immediately at the
end thereof:
"9.17 Trust. Following the issuance of any TIDES,
the Trust (x) shall not engage in any business other than its holding
of TIDES Mirror Debentures and its issuance of TIDES, or engage in any
activities other than those that are incidental or related to the
foregoing and (y) shall not transfer any TIDES Mirror Debentures,
except in connection with an exchange therefor into common stock of the
Company or to the extent same are required to be distributed in
exchange for outstanding TIDES in accordance with the terms of the
relevant documentation therefor."
Section 10.07 of the Credit Agreement is hereby
amended by adding immediately following the phrase "any of the Security
Documents" each place it appears therein the phrase "(other than such
Security Documents, if any, that have been superseded or replaced in
accordance with the terms hereof by new Security Documents to effect
the security of the New Senior Notes and/or New Senior Exchange Notes
as permitted by Section 9.04(xxi) hereof, which new Security Documents
shall instead be included)".
The definition of Consolidated EBIT appearing in
Section 11 of the Credit Agreement is hereby amended by adding,
immediately after the phrase "income, Consolidated Interest Expense and
provision for taxes" appearing therein, the phrase "(in each case to
the extent same were deducted in determining Consolidated Net Income
for such period)".
The definition of Consolidated Interest Expense
appearing in Section 11 of the Credit Agreement is hereby amended by
inserting at the end thereof the following new sentence:
"Notwithstanding the foregoing, Consolidated Interest Expense
shall not include any amounts relating to interest or dividends
accruing on the TIDES Mirror
<PAGE> 11
Debentures (so long as held by the Trust) or the TIDES, except that an
amount equal to all cash payments made to holders of TIDES or, after
any exchange of same for TIDES Mirror Debentures, in respect of TIDES
Mirror Debentures shall be treated as a component of Consolidated
Interest Expense.
The definition of Leverage Ratio appearing in Section
11 is hereby amended by inserting at the end thereof the following new
sentence:
"Notwithstanding the foregoing, for purposes of calculating
Leverage Ratio, Consolidated Indebtedness shall not include the TIDES,
the TIDES Guarantee or the TIDES Mirror Debentures."
The definition of Secured Creditors appearing in
Section 11 is hereby amended by inserting at the end thereof the
following new sentence:
"After the date of issuance of New Senior Notes in accordance
with Section 9.04(xxi), to the extent the New Senior Notes and the New
Senior Exchange Notes are secured pursuant to the Security Documents
(as a result of the amendments to the Security Documents as
contemplated by Section 9.04(xxi)), then the term "Secured Creditors"
shall also include the holders of the New Senior Notes and the New
Senior Exchange Notes and any trustee therefor, in each case to the
extent same constitute Secured Creditors pursuant to the Security
Documents as so amended."
The definition of Security Documents in Section 11 is
hereby amended by adding immediately preceding the semi-colon therein
the phrase ", as each shall be amended (including as amended and
restated), modified or supplemented from time to time, including
without limitation to secure the New Senior Notes and the New Senior
Exchange Notes as permitted by Section 9.04(xxi)".
Section 11 of the Credit Agreement is hereby further
amended by inserting in appropriate order the following new
definitions:
"'Fifth Amendment' shall mean the Fifth Amendment to this
Agreement, dated as of March 16, 1998.
'Fifth Amendment Effective Date' shall mean the date the Fifth
Amendment becomes effective in accordance with its terms.
'New Senior Exchange Notes' shall have the meaning provided in
Section 9.04(xxi).
'New Senior Notes' shall have the meaning provided
in Section 9.04(xxi).
<PAGE> 12
'TIDES' shall have the meaning provided in Section
9.13(a)(viii).
'TIDES Guarantee' shall have the meaning provided in
Section 9.04(xxii).
'TIDES Mirror Debentures' shall have the meaning
provided in Section 9.04(a)(xxii).
'Trust' shall have the meaning provided in Section
9.13(a)(viii)."
As contemplated by Section 13.12(a) of the Credit
Agreement, the Banks hereby agree that all Collateral under all of the
Security Documents shall be automatically released and all such
Security Documents shall be terminated and of no further force or
effect on the first date after the Fifth Amendment Effective Date upon
which (x) no Default or Event of Default shall be in existence and (y)
the Company has then outstanding Rated Indebtedness which is at such
time rated at least BBB- by S&P and Baa3 by Moody's, provided that the
Rated Indebtedness described above shall be required to be unsecured
or, if secured, both S&P and Moody's shall have stated to the Company
and the Administrative Agent in writing that, assuming that neither the
Credit Agreement nor the New Senior Notes were secured, the long-term
unsecured Indebtedness pursuant to the Credit Agreement and the New
Senior Notes would be rated at least BBB- by S&P and Baa3 by Moody's at
such time, provided further that such release shall not be effected
until the tenth Business Day after the Company delivers to the
Administrative Agent written notice of the attainment of such rating
and, if required above, a copy of the written statements specified
above. Notwithstanding anything to the contrary contained in the
immediately preceding sentence or the proviso thereto, the Required
Banks hereby agree that if the Company at any time requests in writing
that the Administrative Agent cause the release of all Collateral under
all the Security Documents and establishes to the satisfaction of the
Administrative Agent that (x) no Default or Event of Default is in
existence (and no Default or Event of Default shall be in existence
after the release described below) and (y) at the time of the release
of all Collateral under all the Security Documents (and after giving
effect thereto), the Company's Rated Indebtedness (which shall be
unsecured Indebtedness after the release of Collateral contemplated
hereby, and shall include the Indebtedness under the Credit Agreement
and the New Senior Notes or the New Senior Exchange Notes, as the case
may be, to the extent then outstanding) shall be rated at least BBB- by
S&P and Baa3 by Moody's (and the Company shall have furnished to the
Administrative Agent a written statement from each of S&P and Moody's
to the effect that, if neither the Credit Agreement nor the New Senior
Notes or the New Senior Exchange Notes, as the case may be, were
secured, the
<PAGE> 13
long term unsecured Indebtedness pursuant to the Credit Agreement and
the New Senior Notes would be rated at least BBB- by S&P and Baa3 by
Moody's at such time), then the Administrative Agent is hereby
authorized and directed by the Banks to release (and direct the
Collateral Agent to release) all Collateral under all the Security
Documents, in which case all Collateral under all the Security
Documents shall be so released and all such Security Documents shall be
terminated and of no further force or effect. The Administrative Agent
and the Collateral Agent shall be entitled (but not required), as a
condition to granting any releases as described above, to request such
officer's certificates and opinions of counsel from the Company as it
may reasonably deem necessary or desirable. The Banks hereby authorize
and direct the Administrative Agent and the Collateral Agent to take
all actions as may be reasonably requested by the Company in
effectuating the intent of the foregoing provisions of this Section 26,
and the Banks further agree that neither the Administrative Agent nor
the Collateral Agent shall have any liability for any actions taken by
the Administrative Agent or Collateral Agent in good faith in
accordance with the provisions of this Section 26 or in furtherance
thereof.
In addition to the express terms of this Amendment
and notwithstanding anything to the contrary contained in the Credit
Documents, the parties hereto acknowledge and agree that this Amendment
is intended to permit, and nothing contained in the Credit Documents
shall prohibit (except as expressly set forth in this Amendment), the
creation of the Trust, the issuance of the TIDES, the TIDES Mirror
Debentures, the TIDES Guarantee, the New Senior Notes and the New
Senior Exchange Notes (subject to the requirements therefor contained
in this Amendment) and the compliance by the Company and the Trust with
the documentation related thereto once such documentation has been
approved in accordance with Sections 9.04 and 9.13(a) to the Credit
Agreement (as amended hereby).
By executing and delivering this Amendment, each Bank
which is a signatory hereto agrees (x) that it will not unreasonably
withhold or delay its consent to any modifications to the Pledge
Agreements or Security Agreements as contemplated by the provisions of
clause (i) of the last sentence of Section 9.04(xxi) to the Credit
Agreement and (y) that such Bank hereby consents to any amendments (or
amendments and restatements) to other Security Documents effected in
accordance with the provisions of clause (ii) of the last sentence of
Section 9.04(xxi) to the Credit Agreement.
Miscellaneous.
In order to induce the Banks to enter into this
Amendment, the Company and the Canadian Borrower hereby
<PAGE> 14
represent and warrant that (i) all representations and warranties
contained in Section 7 of the Credit Agreement (as amended by this
Amendment) are true and correct in all material respects on and as of
the Fifth Amendment Effective Date and after giving effect to the
Amendment (unless such representations and warranties relate to a
specific earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date) and (ii)
there exists no Default or Event of Default on the Fifth Amendment
Effective Date after giving effect to this Amendment.
This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision
of the Credit Agreement or any other Credit Document.
This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one
and the same instrument. A complete set of counterparts shall be lodged
with the Company and the Administrative Agent.
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
This Amendment shall become effective on the date
(the "Fifth Amendment Effective Date") when each Credit Party
(including without limitation, the Company, the Canadian Borrower and
each Subsidiary Guarantor) and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by usage of facsimile transmission) the
same to the Administrative Agent at its Notice Office. This Amendment
and the agreements contained herein (including without limitation the
agreements contained in Section 26 of Part I hereof) shall be binding
on the successors and assigns of the parties hereto.
From and after the Fifth Amendment Effective Date,
all references in the Credit Agreement and each of the Credit Documents
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
To induce the Banks to enter into this Amendment, the
Company hereby agrees to pay to each Bank which executes and delivers
to the Administrative Agent a copy of this Amendment and consents to
any modifications or amendment to the Pledge Agreements and Security
Agreements contemplated by Section 9.04(xxi) a fee in the amount equal
to 1/5 of 1% of the Commitment of such Bank as same is in effect on the
date which occurs
<PAGE> 15
10 days after the first date after the execution of this Amendment upon
which New Senior Notes or TIDES are issued (which Commitment shall be
determined after giving effect to any reduction on or prior to such
date to the Commitment of such Bank as a result of any reductions to
the Total Commitment on or prior to such date pursuant to the proviso
of Section 3.03(d) of the Credit Agreement as added by this Amendment),
which fee shall be payable on the date which occurs 10 days after the
first date after the Fifth Amendment Effective Date upon which New
Senior Notes or TIDES are issued. Notwithstanding anything to the
contrary contained above, the fee described above shall not be payable
(i) if the Required Banks shall not have executed and delivered this
Amendment or (ii) to any Bank if such Bank refuses to consent to any
documentation which requires the approval of the Required Banks
pursuant to Section 9.04(xxi), 9.04(xxii) or 9.13(a)(viii); provided
that a Bank shall not be deemed to have withheld its consent to any
documentation which is deemed approved by the Required Banks if not
objected to by them, so long as the respective Bank has not objected in
writing to the Administrative Agent to the terms of the respective
documentation.
* * *
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused a
counterpart of this Amendment to be duly executed and delivered as of
the date first above written.
COLTEC INDUSTRIES INC
By_______________________
Title:
COLTEC AEROSPACE CANADA LTD.
By_______________________
Title:
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By_______________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Individually and as
Documentation Agent
<PAGE> 17
By____________________________
Title:
THE CHASE MANHATTAN BANK,
Individually and as
Syndication Agent
By____________________________
Title:
BANK OF MONTREAL,
Individually and as Canadian
Paying Agent and Canadian
Documentation Agent
By____________________________
Title:
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
<PAGE> 18
By____________________________
Title:
BANK OF IRELAND
By____________________________
Title:
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By____________________________
Title:
By____________________________
Title:
BANK LEUMI TRUST COMPANY
OF NEW YORK
By____________________________
Title:
<PAGE> 19
THE BANK OF NEW YORK
By____________________________
Title:
BANK OF SCOTLAND
By____________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By____________________________
Title:
NATEXIS BANQUE BFCE, formerly
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By____________________________
Title:
CIBC INC.
<PAGE> 20
By____________________________
Title:
THE YASUDA TRUST & BANKING
COMPANY, LTD.
COMMERCIAL LOAN FUNDING TRUST I
By Lehman Commercial Paper
Inc., not in its
individual capacity but
solely as administrative
agent.
By___________________________
Title:
CORESTATES BANK
By___________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By___________________________
Title:
<PAGE> 21
CREDIT LYONNAIS NEW YORK
BRANCH
By___________________________
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By___________________________
Title:
FIRST UNION NATIONAL BANK
(f/k/a First Union National
Bank of North Carolina)
By___________________________
Title:
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By___________________________
Title:
<PAGE> 22
ERSTE BANK DER
OESTERREICHISCHEN SPARKASSEN
AG (f/k/a Girocredit Bank AG
Der Sparkassen,
Grand Cayman Island Branch)
By___________________________
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By___________________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By___________________________
Title:
LLOYDS BANK PLC
<PAGE> 23
By___________________________
Title:
MELLON BANK, N.A.
By___________________________
Title:
NATIONSBANK, N.A.
By___________________________
Title:
THE SAKURA BANK, LTD.
By___________________________
Title:
THE SANWA BANK, LIMITED
By___________________________
Title:
SOCIETE GENERALE
By___________________________
<PAGE> 24
Title:
THE SUMITOMO BANK, LIMITED
By___________________________
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By___________________________
Title:
WACHOVIA BANK, N.A.
By___________________________
Title:
BT BANK OF CANADA
By___________________________
Title:
BANK OF AMERICA CANADA
By___________________________
<PAGE> 25
Title:
THE CHASE MANHATTAN BANK OF
CANADA
By___________________________
Title:
CREDIT LYONNAIS CANADA
By___________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By___________________________
Title:
MELLON BANK CANADA
By___________________________
Title:
Acknowledged and agreed:
AMI INDUSTRIES INC.
<PAGE> 26
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC INTERNATIONAL SERVICES
CO
COLTEC NORTH CAROLINA INC.
COLTEC TECHNICAL SERVICES INC
DELAVAN INC (F/K/A DELAVAN
NEWCO INC.)
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HABER TOOL COMPANY INC
HOLLEY PERFORMANCE PRODUCTS
INC
JAMCO PRODUCTS, LLC
MENASCO AEROSYSTEMS INC
STEMCO INC
WALBAR INC
By__________________________
Title:
On behalf of each of the
above
Subsidiary Guarantors
<PAGE> 1
EXHIBIT 4.5
CONSENT AND AGREEMENT WITH RESPECT TO CREDIT AGREEMENT
CONSENT AND AGREEMENT WITH RESPECT TO CREDIT AGREEMENT (this "Consent"), dated
as of March_31, 1998, among COLTEC INDUSTRIES INC, a corporation organized
and existing under the laws of the State of Pennsylvania (the "Company"), Coltec
Aerospace Canada Ltd., an Ontario corporation (the "Canadian Borrower"), the
various Subsidiaries of the Company that are Credit Parties on the date of this
Consent, the various Banks party to the Credit Agreement referred to below, BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to
Bank of America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as
Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF
MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation
Agent, the Syndication Agent and the Administrative Agent are parties to a
Credit Agreement, dated as of March 24, 1992, amended and restated as of January
11, 1994 and further amended and restated as of December 18, 1996, (as amended,
modified or supplemented to the date hereof, the "Credit Agreement");
WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation
Agent, the Syndication Agent and the Administrative Agent have previously
entered into the Fifth Amendment to Credit Agreement to provide, among other
things, for the issuance of the New Senior Notes, the New Senior Exchange Notes,
the TIDES and the TIDES Mirror Debentures and the extension of the TIDES
Guarantee, all in accordance with the terms and subject to the conditions set
forth in the Credit Agreement;
WHEREAS, the Credit Agreement requires the approval of the Required Banks with
respect to the (i) terms of the respective issuances of New Senior Notes and
TIDES and (ii) certain amendments (including amendments and restatements) of
certain Credit Documents to provide for the sharing of security with the New
Senior Notes and the New Senior Exchange Notes;
WHEREAS, subject to the terms and conditions set forth below, the parties
hereto have agreed as follows; NOW, THEREFORE, it is agreed:
New Senior Notes and New Senior Exchange Notes.
The Banks hereby acknowledge that they have received (x) a preliminary
Offering Memorandum, dated March 31, 1998, with respect to the New Senior Notes
(the "New Senior Notes Preliminary Offering Memorandum") and (y) a term sheet
containing a range of pricing information for the New Senior Notes (the "New
Senior Notes Term Sheet"). Notwithstanding anything to the contrary contained in
the Credit Agreement or the Fifth Amendment to Credit Agreement, the Banks
hereby approve such documentation and agree that, so long as the
<PAGE> 2
final documentation for the New Senior Notes is substantially consistent with
the New Senior Notes Preliminary Offering Memorandum and the New Senior Notes
Term Sheet, such documentation shall require no further approval of the Required
Banks (although the Administrative Agent shall retain the right to approve the
final form of any documentation relating to the New Senior Notes). So long as
the requirements of the immediately preceding sentence are satisfied, no further
approval on the part of the Required Banks (whether pursuant to Section
9.04(xxi) of the Credit Agreement or otherwise) shall be required with respect
to the issuance of or documentation for the New Senior Notes.
TIDES, TIDES Mirror Debentures and TIDES Guarantee.
The Banks hereby acknowledge that they have received (x) a preliminary
Offering Memorandum, dated March 31, 1998, with respect to the TIDES (the "TIDES
Preliminary Offering Memorandum") and (y) a term sheet containing a range of
pricing information for the TIDES (the "TIDES Term Sheet"). Notwithstanding
anything to the contrary contained in the Credit Agreement or the Fifth
Amendment to Credit Agreement, the Banks hereby approve such documentation and
agree that, so long as the final documentation for the TIDES, the TIDES Mirror
Debentures and the TIDES Guarantee is substantially consistent with the TIDES
Preliminary Offering Memorandum and the TIDES Term Sheet, such documentation
shall require no further approval of the Required Banks (although the
Administrative Agent shall retain the right to approve the final form of any
documentation relating to the TIDES, the TIDES Mirror Debentures and the TIDES
Guarantee). So long as the requirements of the immediately preceding sentence
are satisfied, no further approval on the part of the Required Banks (whether
pursuant to Section 9.04(xxii) or 9.13 of the Credit Agreement or otherwise)
shall be required with respect to the issuance of or documentation for the
TIDES, the TIDES Mirror Debentures or the TIDES Guarantee.
2. Notwithstanding anything to the contrary set forth in the Credit Agreement,
the Trust may issue TIDES and trust common securities to the Company so long as
the gross proceeds (which shall include the proceeds received from any exercise
of the underwriters' over-allotment option) received from such issuance shall
not exceed $200,000,000 (it being expressly understood and agreed that such
gross proceeds are to be applied in the manner provided in the Credit Agreement
(including without limitation Section 3.03)). In furtherance of the foregoing,
it is hereby agreed that the amount "$150,000,000" appearing in Section
9.13(a)(viii) of the Credit Agreement is hereby changed to "$200,000,000".
Security Documents.
The Banks hereby acknowledge that they have received the form of Amended
and Restated Company Pledge Agreement (in substantially final form) providing
for the sharing of security with the New Senior Notes and the New Senior
Exchange
<PAGE> 3
Notes and certain intercreditor arrangements relating thereto. The Banks hereby
consent to the execution and delivery by the Collateral Agent of the Amended and
Restated Company Pledge Agreement in the form furnished to the Banks prior to
the Consent Effective Date (with such changes, which are not adverse to the
Banks in any material respect, as may be agreed to by the Administrative Agent
and Collateral Agent). The Banks hereby further agree that the Administrative
Agent and/or Collateral Agent, as appropriate, may enter into such amendments
and restatements of, or amendments to, the other Security Documents so long as
same are in form approved by the Administrative Agent and are reasonably
consistent with the changes made in the Amended and Restated Company Pledge
Agreement in the form furnished to the Banks prior to the Consent Effective
Date. The Banks further consent to the Administrative Agent and Collateral Agent
taking all such other actions as may be deemed necessary or desirable by them in
furtherance of the foregoing (which shall include, without limitation, executing
such ancillary documentation or agreements as may be deemed necessary or
desirable by the Administrative Agent and/or Collateral Agent). So long as the
foregoing requirements are satisfied, the Banks hereby acknowledge and agree
that no further consent of the Banks shall be required in connection with the
amendments (including amendments and restatements) to the various Security
Documents and the taking of the related actions described above, in each case in
connection with the modifications thereto to be effected in connection with the
issuance of New Senior Notes and New Senior Exchange Notes. Without limiting the
foregoing, the requirements of Section 9.04(xxi) shall be deemed satisfied with
respect to any amended (including any amended and restated) Security Documents
executed and delivered in accordance with the foregoing provision.
Miscellaneous.
In order to induce the Banks to enter into this Consent, each of the
Company and the Canadian Borrower hereby represent and warrant that (i) all
representations and warranties contained in Section 7 of the Credit Agreement
are true and correct in all material respects on and as of the Consent Effective
Date (as defined below) after giving effect to the Consent (unless such
representations and warranties relate to a specific earlier date, in which case
such representations and warranties shall be true and correct as of such earlier
date) and (ii) there exists no Default or Event of Default on the Consent
Effective Date after giving effect to this Consent.
This Consent is limited to the approvals and other matters as specified
herein and shall not constitute a modification, acceptance or waiver of any
other provision of the Credit Agreement or any other Credit Document.
This Consent may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and
<PAGE> 4
delivered shall be an original, but all of which shall together constitute one
and the same instrument. A complete set of counterparts shall be lodged with the
Company and the Administrative Agent.
THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.
This Consent shall become effective on the date (the "Consent Effective
Date") when each Credit Party (including without limitation, the Company, the
Canadian Borrower and each Subsidiary Guarantor) and the Required Banks shall
have signed a counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by usage of facsimile transmission) the same
to the Administrative Agent at its Notice Office.
From and after the Consent Effective Date, all references in the Credit
Agreement and each of the Credit Documents to the Credit Agreement shall be
deemed to be references to the Credit Agreement as modified hereby.
* * *
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this
Amendment to be duly executed and delivered as of the date first above written.
COLTEC INDUSTRIES INC
By_______________________
Title:
COLTEC AEROSPACE CANADA LTD.
By_______________________
Title:
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By_______________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Individually and as
Documentation Agent
<PAGE> 6
By____________________________
Title:
THE CHASE MANHATTAN BANK,
Individually and as
Syndication Agent
By____________________________
Title:
BANK OF MONTREAL,
Individually and as Canadian
Paying Agent and Canadian
Documentation Agent
By____________________________
Title:
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
<PAGE> 7
By____________________________
Title:
BANK OF IRELAND
By____________________________
Title:
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By____________________________
Title:
By____________________________
Title:
BANK LEUMI TRUST COMPANY
OF NEW YORK
By____________________________
Title:
<PAGE> 8
THE BANK OF NEW YORK
By____________________________
Title:
BANK OF SCOTLAND
By____________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By____________________________
Title:
NATEXIS BANQUE BFCE, formerly
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By____________________________
Title:
CIBC INC.
<PAGE> 9
By____________________________
Title:
THE YASUDA TRUST & BANKING
COMPANY, LTD.
COMMERCIAL LOAN FUNDING TRUST I
By Lehman Commercial Paper
Inc., not in its
individual capacity but
solely as administrative
agent.
By___________________________
Title:
CORESTATES BANK
By___________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By___________________________
Title:
<PAGE> 10
CREDIT LYONNAIS NEW YORK
BRANCH
By___________________________
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By___________________________
Title:
FIRST UNION NATIONAL BANK
(f/k/a First Union National
Bank of North Carolina)
By___________________________
Title:
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By___________________________
Title:
<PAGE> 11
ERSTE BANK DER
OESTERREICHISCHEN SPARKASSEN
AG (f/k/a Girocredit Bank AG
Der Sparkassen,
Grand Cayman Island Branch)
By___________________________
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By___________________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By___________________________
Title:
LLOYDS BANK PLC
<PAGE> 12
By___________________________
Title:
MELLON BANK, N.A.
By___________________________
Title:
NATIONSBANK, N.A.
By___________________________
Title:
THE SAKURA BANK, LTD.
By___________________________
Title:
THE SANWA BANK, LIMITED
By___________________________
Title:
SOCIETE GENERALE
By___________________________
<PAGE> 13
Title:
THE SUMITOMO BANK, LIMITED
By___________________________
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By___________________________
Title:
WACHOVIA BANK, N.A.
By___________________________
Title:
BT BANK OF CANADA
By___________________________
Title:
BANK OF AMERICA CANADA
By___________________________
<PAGE> 14
Title:
THE CHASE MANHATTAN BANK OF
CANADA
By___________________________
Title:
CREDIT LYONNAIS CANADA
By___________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By___________________________
Title:
MELLON BANK CANADA
By___________________________
Title:
Acknowledged and agreed:
AMI INDUSTRIES INC.
<PAGE> 15
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC INTERNATIONAL SERVICES
CO
COLTEC NORTH CAROLINA INC.
COLTEC TECHNICAL SERVICES INC
DELAVAN INC (F/K/A DELAVAN
NEWCO INC.)
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HABER TOOL COMPANY INC
HOLLEY PERFORMANCE PRODUCTS
INC
JAMCO PRODUCTS, LLC
MENASCO AEROSYSTEMS INC
STEMCO INC
WALBAR INC
By__________________________
Title:
On behalf of each of the
above
Subsidiary Guarantors
<PAGE> 1
EXHIBIT 4.6
MODIFICATION TO
FIFTH AMENDMENT TO CREDIT AGREEMENT
MODIFICATION TO FIFTH AMENDMENT TO CREDIT AGREEMENT (this
"Modification"), dated as of April 20, 1998, among COLTEC INDUSTRIES INC, a
corporation organized and existing under the laws of the State of Pennsylvania
(the "Company"), Coltec Aerospace Canada Ltd., an Ontario corporation (the
"Canadian Borrower"), the various Subsidiaries of the Company that are Credit
Parties on the date of this Modification, the various Banks party to the Credit
Agreement referred to below, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as successor by merger to Bank of America Illinois), as
Documentation Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, BANKERS
TRUST COMPANY, as Administrative Agent, and BANK OF MONTREAL, as Canadian Paying
Agent. All capitalized terms used herein and not otherwise defined shall have
the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Canadian Borrower, the Banks, the
Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the
Administrative Agent are parties to a Credit Agreement, dated as of March 24,
1992, amended and restated as of January 11, 1994 and further amended and
restated as of December 18, 1996, (as amended, modified or supplemented to the
date hereof, the "Credit Agreement");
WHEREAS, the Company, the Canadian Borrower, the Banks, the
Documentation Agent, the Syndication Agent and the Administrative Agent have
previously entered into the Fifth Amendment to Credit Agreement to provide,
among other things, for the sale by the Company of a Subsidiary thereof and the
application of the proceeds of such sale, all in accordance with the terms and
subject to the conditions set forth in the Fifth Amendment to Credit Agreement;
WHEREAS, the parties hereto have agreed to modify the Fifth
Amendment to Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Modifications to Fifth Amendment to Credit Agreement.
1. Subclause (4) of Section 1 of Part I of the Fifth Amendment to Credit
Agreement is hereby amended in its entirety to read as follows:
"(4) inserting in clause (e) thereof the following new clauses (ii)(D) and
(E), in appropriate order, in the second parenthetical appearing in said
clause (e):
<PAGE> 2
'and (D) the proceeds of the Holley Performance Disposition pursuant to
Section 9.02(xxiii) and (E) the proceeds of the issuance of TIDES, New
Senior Notes or New Senior Exchange Notes, as the case may be.'"
2. Section 9 of Part I of the Fifth Amendment to Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 9.02 of the Credit Agreement is hereby amended by (x) deleting
the word "and" at the end of clause (xxi) thereof, (y) deleting the period
at the end of clause (xxii) thereof and inserting a semi-colon in lieu
thereof and (z) inserting in appropriate order the following new clauses:
'(xxiii) so long as there shall exist no Default or Event of Default
(both before and after giving effect thereto), the Company shall be
permitted to dispose of the business of Holley Performance by the
sale of 100% of the capital stock of, or all or substantially all of
the assets of, Holley Performance, which sale transaction may
include the sale of those assets of the Company or a Subsidiary
thereof utilized solely by Holley Performance in its business, and
the lease (and any subsequent sale) of certain industrial
development facilities owned or utilized by Holley Performance
financed by City of Bowling Green, Kentucky industrial revenue
refunding bonds in the original aggregate principal amount of
$1,000,000 maturing on March 1, 2009 (collectively, the "Holley
Performance Disposition"), so long as (A) such sale transaction is
for fair market value (as determined in good faith by the Board of
Directors of the Company), (B) the business and assets of Holley
Performance shall not have materially changed from the business and
assets, respectively, of Holley Performance on the Fifth Amendment
Effective Date and (C) such sale transaction results in
consideration consisting of at least 75% (for this purpose, taking
the amount of cash and the fair market value of all non-cash
consideration, as determined in good faith by the Company) of cash;
(xxiv) New Senior Notes and/or New Senior Exchange Notes may be
repurchased (so long as retired by the Company) in accordance with
the provisions of clause (iv) of Section 9.11; and
(xxv) the activities of the Trust and the Company in connection with
its issuance of TIDES, and any dissolution of the Trust and
distribution of TIDES Mirror Debentures, any conversions of TIDES
Mirror Debentures into common stock of the Company, repurchases or
redemptions of TIDES by the Trust in accordance with the provisions
of Section 9.03 and corresponding repurchases or redemptions of
TIDES Mirror Debentures by the Company in each case as contemplated
by the documentation relating to the TIDES and the TIDES Mirror
Debentures shall be permitted without causing a violation of this
Section 9.02.'"
3. Section 25 of Part I of the Fifth Amendment to Credit Agreement is
hereby amended in its entirety to read as follows:
-2-
<PAGE> 3
"Section 11 of the Credit Agreement is hereby further amended by inserting
in appropriate order the following new definitions:
''Fifth Amendment' shall mean the Fifth Amendment to this Agreement,
dated as of March 16, 1998.
'Fifth Amendment Effective Date' shall mean the date the Fifth
Amendment becomes effective in accordance with its terms.
'Holley Performance' shall mean Holley Performance Products Inc,
a Delaware corporation.
'Holley Performance Disposition' shall have the meaning provided
in Section 9.02(xxiii).
'New Senior Exchange Notes' shall have the meaning provided in
Section 9.04(xxi).
'New Senior Notes' shall have the meaning provided in Section
9.04(xxi).
'TIDES' shall have the meaning provided in Section 9.13(a)(viii).
'TIDES Guarantee' shall have the meaning provided in Section
9.04(xxii).
'TIDES Mirror Debentures' shall have the meaning provided in
Section 9.04(a)(xxii).
'Trust' shall have the meaning provided in Section
9.13(a)(viii).'"
II. Miscellaneous.
1. In order to induce the Banks to enter into this Modification, the
Company and the Canadian Borrower hereby represent and warrant that (i) all
representations and warranties contained in Section 7 of the Credit Agreement
are true and correct in all material respects on and as of the Modification
Effective Date (as defined below) and after giving effect to this Modification
(unless such representations and warranties relate to a specific earlier date,
in which case such representations and warranties shall be true and correct as
of such earlier date) and (ii) there exists no Default or Event of Default on
the Modification Effective Date after giving effect to this Modification.
2. This Modification is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Modification may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same
-3-
<PAGE> 4
instrument. A complete set of counterparts shall be lodged with the Company and
the Administrative Agent.
4. THIS MODIFICATION AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Modification shall become effective on the date (the "Modification
Effective Date") when each Credit Party (including without limitation, the
Company, the Canadian Borrower and each Subsidiary Guarantor) and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by usage of facsimile
transmission) the same to the Administrative Agent at its Notice Office. This
Modification and the agreements contained herein shall be binding on the
successors and assigns of the parties hereto.
6. From and after the Modification Effective Date, all references in the
Credit Agreement and each of the Credit Documents to the Credit Agreement shall
be deemed to be references to the Credit Agreement as modified hereby.
* * *
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused a counterpart of
this Modification to be duly executed and delivered as of the date first above
written.
COLTEC INDUSTRIES INC
By________________________________
Title:
COLTEC AEROSPACE CANADA LTD.
By________________________________
Title:
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By________________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
Individually and as
Documentation Agent
By________________________________
Title:
THE CHASE MANHATTAN BANK,
Individually and as
Syndication Agent
By________________________________
Title:
-5-
<PAGE> 6
BANK OF MONTREAL,
Individually and as Canadian
Paying Agent and Canadian
Documentation Agent
By________________________________
Title:
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
By________________________________
Title:
BANK OF IRELAND
By________________________________
Title:
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By________________________________
Title:
By________________________________
Title:
BANK LEUMI TRUST COMPANY
OF NEW YORK
By________________________________
Title:
-6-
<PAGE> 7
THE BANK OF NEW YORK
By________________________________
Title:
BANK OF SCOTLAND
By________________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By________________________________
Title:
NATEXIS BANQUE BFCE, formerly
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By________________________________
Title:
CIBC INC.
By________________________________
Title:
THE YASUDA TRUST & BANKING COMPANY, LTD.
By________________________________
Title:
-7-
<PAGE> 8
COMMERCIAL LOAN FUNDING TRUST I
By Lehman Commercial Paper Inc.,
not in its individual capacity but
solely as administrative agent.
By________________________________
Title:
CORESTATES BANK
By________________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By________________________________
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By________________________________
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By________________________________
Title:
-8-
<PAGE> 9
FIRST UNION NATIONAL BANK
(f/k/a First Union National
Bank of North Carolina)
By________________________________
Title:
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By________________________________
Title:
ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN
AG (f/k/a Girocredit Bank AG Der
Sparkassen, Grand Cayman Island Branch)
By________________________________
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By________________________________
Title:
-9-
<PAGE> 10
LLOYDS BANK PLC
By________________________________
Title:
MELLON BANK, N.A.
By________________________________
Title:
NATIONSBANK, N.A.
By________________________________
Title:
THE SAKURA BANK, LTD.
By________________________________
Title:
THE SANWA BANK, LIMITED
By________________________________
Title:
SOCIETE GENERALE
By________________________________
Title:
-10-
<PAGE> 11
THE SUMITOMO BANK, LIMITED
By________________________________
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By________________________________
Title:
WACHOVIA BANK, N.A.
By________________________________
Title:
BT BANK OF CANADA
By________________________________
Title:
BANK OF AMERICA CANADA
By________________________________
Title:
THE CHASE MANHATTAN BANK OF
CANADA
By________________________________
Title:
-11-
<PAGE> 12
CREDIT LYONNAIS CANADA
By________________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By________________________________
Title:
MELLON BANK CANADA
By________________________________
Title:
Acknowledged and agreed:
AMI INDUSTRIES INC
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC INTERNATIONAL SERVICES CO
COLTEC NORTH CAROLINA INC.
COLTEC TECHNICAL SERVICES INC
DELAVAN INC (F/K/A DELAVAN NEWCO INC.)
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HABER TOOL COMPANY INC
HOLLEY PERFORMANCE PRODUCTS INC
JAMCO PRODUCTS, LLC
MENASCO AEROSYSTEMS INC
STEMCO INC
WALBAR INC
By__________________________
Title:
On behalf of each of the above
Subsidiary Guarantors
-12-
<PAGE> 1
EXHIBIT 4.7
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of March 24, 1992,
amended and restated as of December 18, 1996 and further amended and restated as
of March 16, 1998, made by COLTEC INDUSTRIES INC, a Pennsylvania corporation
(the "Pledgor"), to BANKERS TRUST COMPANY, as Collateral Agent, (the "Pledgee")
for the benefit of the Secured Creditors (as defined below) (except as otherwise
defined herein, terms used herein and defined in the Credit Agreement shall be
used herein as therein defined).
W I T N E S S E T H :
WHEREAS, the Pledgor, Coltec Aerospace Canada Ltd., the financial
institutions (the "Banks") from time to time party thereto, Bank of America
National Trust and Savings Association, as Documentation Agent (in such
capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication
Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian
Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust
Company, as Administrative Agent (together with any successor administrative
agent, the "Administrative Agent" and together with the Pledgee, the
Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the
Banks and their respective successors and assigns, and together with any other
financial institutions from time to time party to the Credit Agreement
hereinafter referred to, the "Bank Creditors"), have entered into a Credit
Agreement, dated as of March 24, 1992, and amended and restated as of January
11, 1994, and further amended and restated as of December 18, 1996, and as
further amended, providing for the making of Loans to the Borrowers and the
issuance of, and participation in, Letters of Credit, all as contemplated
therein (as used herein, the term "Credit Agreement" means the Credit Agreement
described above in this paragraph, as the same has been, and may from time to
time in the future be, amended, modified, extended, renewed, replaced, restated,
supplemented or refinanced from time to time, and including any agreement
extending the maturity of, or refinancing or restructuring (including, but not
limited to, the inclusion of additional guarantors or additional borrowers
thereunder that are Subsidiaries of the Pledgor and whose obligations are
guaranteed by the Pledgor thereunder or any increase in the amount borrowed) all
or any portion of, the Indebtedness under such agreement or any successor
agreements, whether or not with the same agent, trustee, representative,
financial institutions or holders; provided that, with respect to any agreement
providing for the refinancing or replacement of Indebtedness under the Credit
Agreement, such agreement shall only be treated as, or as part of, the Credit
Agreement hereunder if (i) either (A) all obligations under the Credit Agreement
being refinanced or replaced shall be paid in full at the time of such
refinancing or replacement, and all commitments and letters of credit issued
pursuant to the refinanced or replaced Credit Agreement shall have terminated in
accordance with their terms or (B) the Required Banks shall have consented in
writing to the refinancing or replacement Indebtedness being treated, along with
their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the
refinancing Indebtedness shall be permitted to be incurred under the Credit
Agreement being refinanced (if such Credit Agreement
<PAGE> 2
is to remain outstanding) and (iii) a notice to the effect that the refinancing
or replacement Indebtedness shall be treated as issued under the Credit
Agreement shall be delivered by the Pledgor to the Pledgee);
WHEREAS, the Pledgor may at any time and from time to time
enter into (or guarantee obligations of one or more of its Subsidiaries under)
one or more of the following agreements: (i) interest rate protection agreements
(including, without limitation, interest rate swaps, caps, floors, collars and
similar agreements), (ii) foreign exchange contracts, currency swap agreements
or other similar agreements or arrangements designed to protect against the
fluctuations in currency values and/or (iii) other types of hedging agreements
from time to time (collectively, the "Interest Rate Protection or Other Hedging
Agreements") with one or more Bank Creditors or affiliates of Bank Creditors
(each such Bank Creditor or affiliate, even if the respective Bank Creditor
subsequently ceases to be a Bank under the Credit Agreement for any reason,
together with such Bank Creditor's or affiliate's successors and assigns,
collectively, the "Interest Rate Protection Creditors");
WHEREAS, the Pledgor may issue New Senior Notes and New Senior
Exchange Notes as provided in the Credit Agreement that may be (to the extent
permitted pursuant to the Credit Agreement) equally and ratably secured
hereunder with the Credit Agreement Obligations as hereinafter provided (with
any holders of New Senior Notes and New Senior Exchange Notes from time to time
being herein collectively called "Senior Noteholders" and with all documentation
evidencing any New Senior Notes or New Senior Exchange Notes, including without
limitation the indenture and any subsidiary guarantees to be entered into in
connection with the New Senior Notes, being herein called "Senior Note
Documents");
WHEREAS, the Pledgor has heretofore entered into a Pledge
Agreement, dated as of March 24, 1992, amended and restated as of January 11,
1994 and further amended and restated as of December 18, 1996 (as amended,
modified or supplemented prior to the date hereof, the "Original Company Pledge
Agreement");
WHEREAS, it is a condition to the extensions of credit under
the Credit Agreement and to the obligations of the initial purchasers of the New
Senior Notes under the purchase agreement to be entered into in connection with
the issuance by the Pledgor of the New Senior Notes that the Pledgor shall have
executed and delivered to the Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to (i)
satisfy the conditions described in the preceding paragraph and (ii) amend and
restate the Original Company Pledge Agreement;
NOW, THEREFORE, in consideration of the extensions of credit
to be made to the Pledgor under the Credit Agreement and to the obligations of
the initial purchasers of the New Senior Notes under the purchase agreement to
be entered into in connection with the issuance by the Pledgor of the New Senior
Notes and other benefits accruing to the Pledgor, the receipt and sufficiency of
which are hereby acknowledged, the Pledgor hereby makes the following
representations and warranties to the Pledgee for the ratable benefit of the
Secured Creditors and
-2-
<PAGE> 3
hereby covenants and agrees with the Pledgee for the ratable benefit of the
Secured Creditors as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the ratable benefit of the Bank Creditors, the Interest Rate
Protection Creditors and the Senior Noteholders, in each case to the extent from
time to time holding Obligations (as defined below) of such Pledgor secured
hereunder (collectively, and together with the Pledgee, the "Secured
Creditors"), to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of (x) the principal of
and interest on the Notes issued, and Loans made, under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with
respect to the Letters of Credit under the Credit Agreement and (y) all
other obligations (including obligations which, but for the automatic
stay under Section 362(a) of the Bankruptcy Code, would become due),
liabilities and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of the Pledgor to the Bank
Creditors, now existing or hereafter incurred under, arising out of, or
in connection with the Credit Agreement and the other Credit Documents,
and the due performance of, and compliance with, all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents by the Pledgor (all such principal, interest,
obligations, liabilities and indebtedness described in this clause (i)
being herein collectively called the "Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due), liabilities and indebtedness of
the Pledgor to the Interest Rate Protection Creditors, now existing or
hereafter incurred under, arising out of or in connection with any
Interest Rate Protection or Other Hedging Agreement (including, without
limitation, all such obligations and liabilities of the Pledgor under
any guarantee by it of obligations pursuant to any Interest Rate
Protection or Other Hedging Agreement), and the due performance of, and
compliance with, all of the terms, conditions and agreements contained
therein by the Pledgor (all such obligations, liabilities and
indebtedness described in this clause (ii) being herein collectively
called the "Interest Rate Protection Obligations");
(iii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all (x) principal of and
interest on the New Senior Notes and the New Senior Exchange Notes and
(y) other obligations (including obligations which, but for the
automatic stay under Section 362(a) of the Bankruptcy Code, would
become due), liabilities and indebtedness of the Pledgor to the Senior
Noteholders, whether now existing or hereafter incurred under, arising
out of or in connection with the New Senior Notes, the New Senior
Exchange Notes and the other Senior Note Documents, and the due
performance of, and compliance with, all of the terms, conditions and
agreements contained therein by the Pledgor (all such obligations,
liabilities and indebtedness described in this clause (iii) being
herein collectively called the "Senior Note Obligations");
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(iv) (x) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral in a manner not in violation of the
terms hereof and (y) any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Pledgee in performing its duties
hereunder, or in any way relating to or arising out of its actions as
Pledgee in respect of the Pledge Agreement except for those resulting
solely from the Pledgee's own gross negligence or willful misconduct;
(v) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of the
Pledgor referred to in clauses (i) through (iv) above, after an Event
of Default (such term, as used in this Agreement, shall mean any Event
of Default at any time under, and as defined in, any of the Credit
Agreement and the Senior Note Documents and any payment default (after
the expiration of any applicable grace period) on any of the
Obligations (as defined below) secured hereunder at such time) shall
have occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of
or realizing on the Collateral, or of any exercise by the Pledgee of
its rights hereunder, together with reasonable attorneys' fees and
court costs; and
(vi) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (vi) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein, (i) the term "Stock" shall mean (x) with respect to corporations
incorporated under the laws of the United States or any State or territory
thereof (each a "Domestic Corporation"), all of the issued and outstanding
shares of capital stock of any Domestic Corporation at any time owned by the
Pledgor and (y) with respect to corporations that are not Domestic Corporations
(each a "Foreign Corporation"), all of the issued and outstanding shares of
capital stock of any Foreign Corporation at any time owned by the Pledgor,
provided that, except as provided in the last sentence of this Section 2, the
Pledgor shall not be required to pledge hereunder more than 66% of the total
combined voting power of all classes of capital stock of any Foreign Corporation
entitled to vote and (ii) the term "Notes" shall mean (x) all promissory notes
at any time issued to the Pledgor by any of its Subsidiaries or Affiliates and
(y) all other promissory notes from time to time issued to, or held by, the
Pledgor, provided that, except as provided in the last sentence of this Section
2, the Pledgor shall not be required to pledge hereunder any promissory notes
issued to the Pledgor by any Subsidiary of the Pledgor which is a Foreign
Corporation. As used herein, the term "Securities" shall mean all of the Stock
and Notes. The Pledgor represents and warrants, as to the stock of corporations
and promissory notes owned by the Pledgor, that on the Fifth Amendment Effective
Date (a) the Stock consists of the number and type of shares of the stock of
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the corporations as described in Part I of Annex A hereto; (b) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Part I of Annex A hereto; (c) the Notes
consist of the promissory notes described in Part II of Annex A hereto; and (d)
the Pledgor is the holder of record and sole beneficial owner of the Stock and
the Notes and there exist no options or preemption rights in respect of any of
the Stock. In the circumstances and only to the extent provided in Section 8.11
of the Credit Agreement, the 66% limitation set forth in the proviso in clause
(i)(y) and the limitation set forth in the proviso in clause (ii) of this
Section 2 and the last sentence of Section 3.2 shall no longer be applicable.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes
set forth in Section 1, the Pledgor (i) hereby grants to the Pledgee a security
interest in all of the Collateral, (ii) hereby pledges and deposits as security
with the Pledgee the Securities owned by the Pledgor on the date hereof, and
delivers to the Pledgee certificates therefor, duly endorsed in blank in the
case of promissory notes and accompanied by undated stock powers duly executed
in blank by the Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such securities, with signatures appropriately
guaranteed) in the case of capital stock, or such other instruments of transfer
as are acceptable to the Pledgee and (iii) hereby assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor's right, title and interest in and to such Securities (and in and to the
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If the Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities at
any time or from time to time after the date hereof, the Pledgor will promptly
thereafter pledge and deposit such Securities (or certificates or instruments
representing Securities) as security with the Pledgee and deliver to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
by the Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such securities, with signatures appropriately
guaranteed) in the case of capital stock, or such other instruments of transfer
as are acceptable to the Pledgee, and will promptly thereafter deliver to the
Pledgee a certificate executed by a principal executive officer of the Pledgor
describing such Securities and certifying that the same have been duly pledged
with the Pledgee hereunder. Subject to the last sentence of Section 2, the
Pledgor shall not be required at any time to pledge hereunder any promissory
notes issued to the Pledgor by a Subsidiary which is a Foreign Corporation or
more than 66% of the total combined voting power of all classes of capital stock
of any Foreign Corporation entitled to vote.
3.3. Uncertificated Securities. Notwithstanding anything to
the contrary contained in Sections 3.1 and 3.2, if any Securities (whether now
owned or hereafter acquired) are uncertificated securities, the Pledgor shall
promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under applicable law.
The Pledgor further agrees to take such actions as the Pledgee deems necessary
or desirable to effect the foregoing and to permit the Pledgee to exercise any
of its rights and remedies
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<PAGE> 6
hereunder, and agrees to provide an opinion of counsel reasonably satisfactory
to the Pledgee with respect to any such pledge of uncertificated Securities
promptly upon request of the Pledgee.
3.4. Definitions of Pledged Stock; Pledged Notes; Pledged
Securities and Collateral. (a) All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock"; all Notes at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Notes"; all Pledged Stock and Pledged Notes together are called the
"Pledged Securities"; and the Pledged Securities, together with all proceeds
thereof, including any securities and moneys received and at the time held by
the Pledgee hereunder, are hereinafter called the "Collateral."
(b) If (i) a Bankruptcy Default or Notified Acceleration Event
(as each such term is defined in the Company Security Agreement, provided,
however, references therein to the Assignor and the Collateral Agent shall be
references to the Pledgor and the Pledgee, respectively) has occurred and is
continuing, or (ii) any other Event of Default or Acceleration Event (as each
such term is defined in the Company Security Agreement, provided, however,
references therein to the Assignor and the Collateral Agent shall be references
to the Pledgor and the Pledgee, respectively) has occurred and is continuing,
but in the case of this clause (b) only if, and to the extent that, the Pledgee
(acting at the direction of the Required Secured Creditors (as defined in Annex
B hereto)) has given notice to the Pledgor to take the actions specified below
in this sentence, then in either such case all cash proceeds of, and cash
payments received in respect of, Collateral shall be paid by the Pledgor (or the
respective payor) as directed by the Pledgee. At any time while the
circumstances described in the immediately preceding sentence do not exist, all
cash payments received in respect of the Collateral, but excluding cash proceeds
of sales of Collateral unless the respective sale and release of Collateral is
permitted pursuant to this Agreement and the Credit Agreement, shall be paid to
the Pledgor.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO SPECIFIED EVENT OF DEFAULT. Unless
and until there shall have occurred and be continuing (i) a Bankruptcy Default
or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Pledgee (acting at the direction of the Required Secured Creditors) has so
notified the Pledgor, the Pledgor shall be entitled to vote any and all Pledged
Securities owned by it, and to give consents, waivers or ratifications in
respect thereof, provided that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate, result in breach of
any covenant contained in, or be inconsistent with, any of the terms of this
Agreement, the Credit Agreement, any other Credit Document, any Interest Rate
Protection or Other Hedging Agreement or any Senior Note Document, or which
would have the effect of impairing the value of the Collateral (other than any
impairment in the form of a decline in the market value of such Pledged Security
which occurred solely as a result of any vote relating to the manner in which
the business of the corporation issuing such Pledged Security is to be
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<PAGE> 7
conducted to the extent the Pledgor shall have voted the Pledged Securities
owned by it in good faith and in accordance with its prudent business judgment)
or any part thereof or the rights, priorities, remedies, position or interests
of the Pledgee or any Secured Creditor. All such rights of the Pledgor to vote
and to give consents, waivers and ratifications shall cease in case either (i) a
Bankruptcy Default or Notified Acceleration Event shall occur and be continuing
or (ii) any other Event of Default or Acceleration Event has occurred and is
continuing but in the case of this clause (ii) only to the extent the Pledgee
(acting at the direction of the Required Secured Creditors) has so notified the
Pledgor, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there
shall have occurred and be continuing (i) a Bankruptcy Default or Notified
Acceleration Event or (ii) any other Event of Default or Acceleration Event, but
in the case of this clause (ii) only to the extent the Pledgee (acting at the
direction of the Required Secured Creditors) has so notified the Pledgor, all
dividends and distributions payable in respect of the Pledged Stock and all
payments in respect of the Pledged Notes shall be paid to the Pledgor. The
Pledgee shall be entitled to receive directly, and to retain as part of the
Collateral:
(a) all other or additional stock or securities paid or
distributed by way of dividend or otherwise, as the case may be, in
respect of the Pledged Stock;
(b) all other or additional stock or other securities paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(c) all other or additional stock or other securities or
property (excluding cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by the Pledgor contrary to the provisions of this Section 6
and Section 7 shall be received in trust for the benefit of the Pledgee, shall
be segregated from other property or funds of the Pledgor and shall be forthwith
paid over to the Pledgee as Collateral in the same form as so received (with any
necessary endorsement).
7. REMEDIES IN CASE OF SPECIFIED EVENTS. If there shall have
occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration
Event or (ii) any other Event of Default or Acceleration Event, but in the case
of this clause (ii) only to the extent the Required Secured Creditors have so
directed, then and in every such case, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or any other Credit Document, any Interest Rate Protection or Other Hedging
Agreement or any Senior Note Documents, in each case to the extent then in
effect and secured hereby (with all of the documents listed above being herein
collectively called the "Secured Debt Documents") or by law) for the protection
and enforcement of its rights in respect of the Collateral, and the Pledgee
shall be entitled to exercise all the rights and remedies of a secured party
under the Uniform
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<PAGE> 8
Commercial Code and also shall be entitled, without limitation, to exercise the
following rights, which the Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 to the Pledgor;
(b) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect
upon any Pledged Note;
(d) to vote all or any part of the Pledged Stock (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise
act with respect thereto as though it were the outright owner thereof
(the Pledgor hereby irrevocably constituting and appointing the Pledgee
the proxy and attorney-in-fact of the Pledgor, with full power of
substitution to do so); and
(e) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by the Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine, provided that at least 10 days' notice of the time and place
of any such sale shall be given to the Pledgor. The Pledgee shall not
be obligated to make any such sale of Collateral regardless of whether
any such notice of sale has theretofore been given. The Pledgor hereby
waives and releases to the fullest extent permitted by law any right or
equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise. At
any such sale, unless prohibited by applicable law, the Pledgee on
behalf of the Secured Creditors may bid for and purchase all or any
part of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any Secured Creditor shall be
liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Pledgee provided for in this Agreement or any other Secured Debt
Document or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Document or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or
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<PAGE> 9
remedies, and no failure or delay on the part of the Pledgee or any other
Secured Creditor to exercise any such right, power or remedy shall operate as a
waiver thereof. No notice to or demand on the Pledgor in any case shall entitle
it to any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Pledgee or any other Secured
Creditor to any other or further action in any circumstances without notice or
demand. The Secured Creditors agree that this Agreement may be enforced only by
the action of the Pledgee acting upon the instructions of the Required Secured
Creditors and that no other Secured Creditor shall have any right individually
or as a group, directly or indirectly, to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby or to cause the
Pledgee or the Required Secured Creditors to take or cause to be taken any
action in respect of this Agreement (except as expressly contemplated hereby),
it being understood and agreed that such rights and remedies may be exercised
only by the Pledgee for the ratable benefit of all Secured Creditors upon the
terms and conditions of this Agreement, it being further understood and agreed
that nothing in this Agreement shall affect the rights of the Secured Creditors
to accelerate their respective Obligations in accordance with their respective
Secured Debt Documents.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied as follows:
(i) first, to the payment of all Obligations owing to the
Collateral Agent of the type provided in clauses (iv) and (v) of the
definition of Obligations;
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as defined below) of the Pledgor
shall be paid to the Secured Creditors as provided in Section 9(e),
with each Secured Creditor receiving an amount equal to its outstanding
Primary Obligations of the Pledgor or, if the proceeds are insufficient
to pay in full all such Primary Obligations, its Pro Rata Share (as
defined below) of the amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations of the Pledgor shall be
paid to the Secured Creditors as provided in Section 9(e), with each
Secured Creditor receiving an amount equal to its outstanding Secondary
Obligations of the Pledgor or, if the proceeds are insufficient to pay
in full all such Secondary Obligations, its Pro Rata Share of the
amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 18, to the Pledgor or to whomever may be lawfully entitled to
receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as
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a percentage) equal to a fraction the numerator of which is the then unpaid
amount of such Secured Creditor's Primary Obligations or Secondary Obligations,
as the case may be, of the Pledgor and the denominator of which is the then
outstanding amount of all Primary Obligations or Secondary Obligations, as the
case may be, of the Pledgor, (y) "Primary Obligations" of the Pledgor shall mean
(i) in the case of the Credit Agreement Obligations, all Obligations of the
Pledgor arising out of or in connection with (including, without limitation, as
obligor or guarantor, as the case may be) the principal of, and interest on, all
Loans, all Unpaid Drawings theretofore made (together with all interest accrued
thereon), and the aggregate Stated Amounts of all Letters of Credit issued under
the Credit Agreement and outstanding, and all Fees outstanding and unpaid at the
relevant time, (ii) in the case of the Senior Note Obligations, all Obligations
of the Pledgor secured hereby arising out of or in connection with the principal
of, and interest on, the New Senior Notes and the New Senior Exchange Notes and
(iii) in the case of the Interest Rate Protection Obligations, all Obligations
of the Pledgor arising out of or in connection with (including, without
limitation, as a direct obligor or a guarantor, as the case may be) Interest
Rate Protection or Other Hedging Agreements (other than indemnities, fees
(including, without limitation, attorneys' fees) and similar obligations and
liabilities), and (z) "Secondary Obligations" of the Pledgor shall mean all
Obligations of the Pledgor secured hereby other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 9 only) (i) first, to the Primary Obligations of the Pledgor and (ii)
second, to the Secondary Obligations of the Pledgor. If any payment to any
Secured Creditor of its Pro Rata Share of any distribution would result in
overpayment to such Secured Creditor, such excess amount shall instead be
distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each
Secured Creditor whose Primary Obligations or Secondary Obligations, as the case
may be, have not been paid in full to receive an amount equal to such excess
amount multiplied by a fraction the numerator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of such Secured
Creditor and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to
such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued under the Credit Agreement,
such amounts shall be paid to the Paying Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Bank Creditors as such. If
any amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Bank Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Paying Agent to the Collateral Agent for
distribution in accordance with Section 9(a).
(e) Except as set forth in Section 9(d), all payments required
to be made hereunder shall be made (i) if to the Bank Creditors, to the Paying
Agent under the Credit
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Agreement for the account of the Bank Creditors, and (ii) if to any other
Secured Creditors (other than the Collateral Agent), to the trustee, paying
agent or other similar representative (each a "Representative") for such Secured
Creditors or, in the absence of such a Representative, directly to the other
Secured Creditors.
(f) For purposes of applying payments received in accordance
with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the
Paying Agent under the Credit Agreement and (ii) the Representative for any
other Secured Creditors or, in the absence of such a Representative, upon the
respective Secured Creditors for a determination (which the Paying Agent, each
Representative for any other Secured Creditors and the Secured Creditors agree
(or shall agree) to provide upon request of the Collateral Agent) of the
outstanding Primary Obligations and Secondary Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Representative for any Secured Creditor or directly from a Secured
Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be
entitled to assume that no Interest Rate Protection or Other Hedging Agreements
are in existence.
(g) It is understood and agreed that the Pledgor shall remain
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral pledged by it hereunder and the aggregate amount of the Obligations
of the Pledgor.
Notwithstanding anything to the contrary in this Agreement (including Annex B),
(i) all actions required or permitted to be taken under this Agreement by the
Senior Noteholders shall be so taken only by the trustee under the indenture
under which the Senior Notes were issued on behalf of the Senior Noteholders
(the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all
payments required to be made with respect to the Senior Note Obligations shall
be paid to the Senior Notes Trustee, and the Pledgee shall be entitled (but not
required) to conclusively rely upon and act in accordance with any instructions
from the Senior Notes Trustee subject to the terms and conditions of this
Agreement and to assume that such instructions are being given in accordance
with such indenture.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of sale proceeds by the
Pledgee or the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Pledgee or such officer or be answerable in any
way for the misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees to indemnify and hold
harmless the Pledgee and each other Secured Creditor (other than the Senior
Noteholders) and their respective successors, assigns, employees, agents,
servants and Representatives (including the Administrative Agent) hereunder
(individually an "Indemnitee," and collectively the "Indemnitees") from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and to
reimburse each Indemnitee for all costs and expenses, including reasonable
attorneys' fees, in each case growing out of or resulting from this
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Agreement or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under the other Credit Documents or the Interest Rate Protection
and Other Hedging Agreements, provided that the Pledgor shall not be required to
indemnify any Indemnitee in respect of any claims, demands, losses, judgments,
liabilities, costs or expenses to the extent arising from the gross negligence
or willful misconduct of such Indemnitee. In no event shall any Indemnitee be
liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. If and
to the extent that the obligations of the Pledgor under this Section 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Pledgor
agrees that it will join with the Pledgee in executing and, at the Pledgor's own
expense, file and refile under the applicable Uniform Commercial Code or other
applicable law such financing statements, continuation statements and other
documents in such offices as the Pledgee may deem necessary or appropriate and
wherever required or permitted by law in order to perfect and preserve the
Pledgee's security interest in the Collateral and hereby authorizes the Pledgee
to file financing statements and amendments thereto relative to all or any part
of the Collateral without the signature of the Pledgor where permitted by law,
and agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
the Pledgee may reasonably require or deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder.
(b) The Pledgor hereby appoints the Pledgee the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's discretion
to take any action and to execute any instrument which the Pledgee may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth in Annex B hereto, the terms of which shall be
deemed incorporated herein by reference as fully as if same were set forth
herein in their entirety.
14. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except as may
be permitted in accordance with the terms of the Credit Agreement).
-12-
<PAGE> 13
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor represents and warrants that (a) it is, or at the time when pledged
hereunder will be, the legal, record and beneficial owner of, and has (or will
have) good and marketable title to, all Securities pledged hereunder, subject to
no Lien (except the Lien created by this Agreement); (b) it has full corporate
power, authority and legal right to pledge all the Securities pursuant to this
Agreement; (c) this Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms except to the extent the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law); (d) except
to the extent already obtained, no consent of any other party (including,
without limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by the Pledgor in
connection with (i) the execution, delivery or performance of this Agreement,
(ii) the validity or enforceability of this Agreement, (iii) the perfection or
enforceability of the Pledgee's security interest in the Collateral or (iv) the
exercise by the Pledgee of any of its rights or remedies provided herein; (e)
the execution, delivery and performance of this Agreement will not violate any
provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign applicable to the Pledgor, or of the Certificate of Incorporation or
By-Laws of the Pledgor or of any securities issued by the Pledgor or any of its
Subsidiaries, or of any mortgage, indenture, lease, loan agreement, credit
agreement or other material contract, agreement or instrument or undertaking to
which the Pledgor or any of its Subsidiaries is a party or which purports to be
binding upon the Pledgor or any of its Subsidiaries or upon any of their
respective assets and will not result in the creation or imposition of any Lien
or encumbrance on any of the assets of the Pledgor or any of its Subsidiaries
except as contemplated by this Agreement; (f) all the shares of the Stock have
been duly and validly issued, are fully paid and non-assessable and are subject
to no options to purchase or similar rights; (g) each of the Pledged Notes, when
executed by the obligor thereof, will be the legal, valid and binding obligation
of such obligor, enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and equitable principles (regardless of whether enforcement is
sought in equity or at law); and (h) the pledge, assignment and delivery of the
Securities pursuant to this Agreement creates a valid and perfected first
priority Lien in such Securities, and the proceeds thereof (other than any cash
proceeds thereof to the extent not required to be delivered to the Pledgee
pursuant to the terms hereof), subject to no Lien or to any agreement purporting
to grant to any third party a Lien on the property or assets of the Pledgor
which would include the Securities. The Pledgor covenants and agrees that it
will defend the Pledgee's right, title and security interest in and to the
Securities and the proceeds thereof against the claims and demands of all
Persons whomsoever; and the Pledgor covenants and agrees that it will have like
title to and right to pledge any other property at any time hereafter pledged to
the Pledgee as Collateral hereunder and will likewise defend the right thereto
and security interest therein of the Pledgee and the other Secured Creditors.
-13-
<PAGE> 14
16. PLEDGOR'S OBLIGATIONS ABSOLUTE ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Document or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (b) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement; (c)
any furnishing of any additional security to the Pledgee or its assignee or any
acceptance thereof or any release of any security by the Pledgee or its
assignee; (d) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (e) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to the Pledgor or any Subsidiary
of the Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not the
Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any
other Event of Default or Acceleration Event, but in the case of this clause
(ii) only to the extent the Required Secured Creditors have so directed then,
and in every such case, upon receipt by the Pledgor from the Pledgee of a
written request or requests that the Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, the Pledgor as
soon as practicable and at its expense will use its best efforts to cause such
registration to be effected (and be kept effective) and will use its best
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation, registration
under the Securities Act of 1933, as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements, provided that the Pledgee shall furnish to the Pledgor such
information regarding the Pledgee as the Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. The Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee and all others participating in the distribution of such Pledged Stock
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to the Pledgor by the Pledgee
expressly for use therein.
-14-
<PAGE> 15
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7, and such Pledged Securities or the part thereof to be sold shall not,
for any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion, (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as
defined below), without any action on the part of any Secured Creditor, this
Agreement shall terminate and be of no further force or effect (provided that
all indemnities set forth herein including, without limitation, in Section 11
hereof shall survive any such termination) and the Pledgee, at the request and
expense of the Pledgor, will execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the first to occur of (i) that date upon which the
Total Commitment and all Interest Rate Protection or Other Hedging Agreements
have been terminated, no Note under the Credit Agreement is outstanding, all
Letters of Credit have been terminated and all other Credit Agreement
Obligations (excluding normal continuing indemnity obligations which survive in
accordance with their terms, so long as no amounts are then due and payable in
respect thereof) then owing by the Pledgor have been paid in full, (ii) that
date upon which the Collateral is automatically released pursuant to the first
sentence of Section 26 of Part I of the Fifth Amendment to Credit Agreement or
the Administrative Agent directs the Pledgee to release the Collateral pursuant
to the second sentence of Section 26 of Part I of the Fifth Amendment to the
Credit Agreement and (iii) that date upon which the Credit Documents are amended
to release all Collateral subject to this Agreement.
(b) It is expressly acknowledged and agreed that the
Collateral may be sold from time to time to the extent permitted by, and in
accordance with the terms of, the Credit Agreement. In addition, it is expressly
acknowledged and agreed that any or all of the Collateral may be released by the
Pledgee acting at the direction of the Required Secured Creditors. Upon any sale
of the type described in the second preceding sentence or release of any such
Collateral
-15-
<PAGE> 16
as provided in the immediately preceding sentence, the Pledgee shall, at the
request and expense of the Pledgor, and without the further consent of, or
liability to, any Secured Creditor, release such Collateral and execute and
deliver to the Pledgor a proper instrument or instruments acknowledging the
release of such Collateral from this Agreement, and will duly assign, transfer
and deliver to the Pledgor (without recourse and without any representation or
warranty) the Collateral being sold or released as described above.
Notwithstanding anything to the contrary contained above in this Section 18(b),
in the event the Senior Notes Trustee shall have notified the Pledgee in writing
that the Senior Note Obligations have been accelerated in accordance with the
terms of the Senior Note Documents (and (x) the Senior Note Obligations have not
been paid in full and (y) the respective acceleration has not been rescinded),
the Collateral Agent shall not thereafter release any Collateral pursuant to
this Section 18(b) or consent to any termination of this Agreement, except in
each case with the prior written consent of the Senior Noteholders holding a
majority of the then outstanding Senior Note Obligations secured hereby (or
following the payment in full of the Senior Note Obligations or the rescission
of the respective acceleration).
(c) At any time that the Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a) or (b), it shall deliver to
the Pledgee a certificate signed by its chief financial officer stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b), and the Pledgee shall be entitled (but not required) to conclusively rely
thereon. If requested by the Pledgee (although the Pledgee shall have no
obligation to make any such request), the Pledgor shall furnish appropriate
legal opinions (from counsel acceptable to the Pledgee) to the effect set forth
in the immediately preceding sentence.
(d) Notwithstanding anything to the contrary contained above,
upon the presentment of satisfactory evidence to the Pledgee in its sole
discretion that all obligations evidenced by any Pledged Note have been repaid
in full, and that any payments received by the Pledgor were permitted to be
received by the Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon
the request and at the expense of the Pledgor, duly assign, transfer and deliver
to the Pledgor (without recourse and without any representation or warranty)
such Pledged Note if same is then in the possession of the Pledgee and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. The Pledgee shall have no liability whatsoever to any Secured
Creditor as the result of any release of Collateral by it as permitted by this
Section 18. Upon any release of Collateral pursuant to Section 18(a), (b), (c)
or (d), none of the Secured Creditors shall have any continuing right or
interest in such Collateral or the proceeds thereof.
19. NOTICES ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, addressed as follows:
-16-
<PAGE> 17
(a) if to the Pledgor, at:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Thomas B. Jones, Jr.
Telephone: (704) 423-7052
Facsimile: (704) 423-7127
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Facsimile: (212) 250-7200
(c) if to any Bank Creditor (other than the Pledgee), either
(x) to the Administrative Agent, at the address of the Administrative
Agent specified in the Credit Agreement or (y) at such address as such
Bank Creditor shall have specified in the Credit Agreement;
(d) if to any other Secured Creditor, either (x) to the
Representative for such Secured Creditor at such address as such
Representative may have provided to the Pledgor and the Pledgee from
time to time, or (y) in the absence of such a Representative, directly
to such Secured Creditor at such address as such Secured Creditor shall
have specified in writing to the Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with
the written consent of the Required Banks (or all the Banks if required by
Section 13.12 of the Credit Agreement)); provided, however, that any change,
waiver, modification or variance materially adversely affecting the rights and
benefits of a single Class (as defined below) of Secured Creditors (and not all
Secured Creditors in a like or similar manner) shall also require the written
consent of the Requisite Class Creditors (as defined below) of such affected
Class; provided, further, that any Class shall not be considered to be affected
differently from any other Class due to the Obligations of any such other Class
being paid, repaid, refinanced, renewed or extended and the Collateral being
released, in
-17-
<PAGE> 18
whole or in part (whether by action of such other Class or otherwise), as
security for such Class and such other Class. Notwithstanding anything to the
contrary contained above, it is understood and agreed that the Required Banks
may agree to modifications to this Agreement for the purpose, among other
things, of securing additional extensions of credit (including, without
limitation, pursuant to the Credit Agreement or any refinancing or extension
thereof). For the purpose of this Agreement, the term "Class" shall mean, at any
time, each class of Secured Creditors with outstanding Obligations secured
hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit
Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders
of Senior Note Obligations secured hereby or (z) the Interest Rate Protection
Creditors as the holders of the Interest Rate Protection Obligations secured
hereby; provided that, without limiting the foregoing, it is expressly
acknowledged and agreed that other creditors may be added as "Secured Creditors"
hereunder (either as part of an existing Class of creditors or as a newly
created Class) with the consent of the Required Secured Creditors, and that such
addition shall not require the written consent of the Requisite Class Creditors
of the various Classes. For the purpose of this Agreement, the term "Requisite
Class Creditors" of any Class shall mean each of (i) with respect to the Credit
Agreement Obligations, the Required Banks and (ii) with respect to any other
Obligations, the holders of at least a majority of all Obligations outstanding
from time to time.
21. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns; provided that the
Pledgor may not assign any of its rights or obligations hereunder without the
prior written consent of the Pledgee (with the consent of the Required Secured
Creditors). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement
are for purposes of reference only and shall not limit or define the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one instrument. In
the event that any provision of this Agreement shall prove to be invalid or
unenforceable, such provision shall be deemed to be severable from the other
provisions of this Agreement which shall remain binding on all parties hereto.
22. AMENDMENT AND WAIVER. Upon the execution and delivery of
this Agreement by the parties hereto, the Original Company Pledge Agreement
shall be amended, restated and superseded in its entirety by this Agreement,
effective as of the date hereof, with all rights, obligations and security
interests created under or granted pursuant to the Original Company Pledge
Agreement continuing from the date thereof.
-18-
<PAGE> 19
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Agreement to be executed and delivered by their duly elected officers duly
authorized as of the date first above written.
COLTEC INDUSTRIES INC,
(as "Pledgor")
By /s/ THOMAS B. JONES, JR.
___________________________
Title: Vice President
and Treasurer
BANKERS TRUST COMPANY,
as Collateral Agent
(as "Pledgee")
By /s/ ANTHONY LOGRIPPO
__________________________
Title: Vice President
-19-
<PAGE> 20
ANNEX A
ANNEX A
LIST OF PLEDGED STOCK AND PLEDGED NOTES
Part I. Pledged Stock
<TABLE>
<CAPTION>
=========================================================================================================
Percentage of
Name of Issuing Corporation Type of Shares Number of Shares Outstanding Shares of
Capital Stock
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
</TABLE>
<PAGE> 21
Annex A
Page 2
Part II. Pledged Notes
<TABLE>
<CAPTION>
Principal
Lender Borrower Amount
------ -------- ------
<S> <C> <C>
</TABLE>
<PAGE> 22
Annex A
Page 3
<PAGE> 23
ANNEX B
ANNEX B
THE PLEDGEE
1. Appointment. The Secured Creditors, by their acceptance of
the benefits of the Company Pledge Agreement to which this Annex B is attached
(the "Pledge Agreement") hereby irrevocably designate the Collateral Agent (and
any successor Pledgee) to act as Pledgee as specified herein and therein. Unless
otherwise defined herein, all capitalized terms used herein (x) and defined in
the Pledge Agreement, are used herein as therein defined and (y) not defined in
the Pledge Agreement, are used herein as defined in the Credit Agreement
referenced in the Pledge Agreement. Each Secured Creditor hereby irrevocable
authorizes, and each holder of any Obligation by the acceptance of such
Obligation and by the acceptance of the benefits of the Pledge Agreement shall
be deemed irrevocably to authorize, the Pledgee to take such action on its
behalf under the provisions of the Pledge Agreement and any instruments and
agreements referred to therein and to exercise such powers and to perform such
duties thereunder as are specifically delegated to or required of the Pledgee by
the terms thereof and such other powers as are reasonably incidental thereto.
The Pledgee may perform any of its duties hereunder or thereunder by or through
its authorized agents, sub-agents or employees.
2. Nature of Duties. (a) The Pledgee shall have no duties or
responsibilities except those expressly set forth herein or in the Pledge
Agreement. The duties of the Pledgee shall be mechanical and administrative in
nature; the Pledgee (in such capacity) shall not have by reason of this
Agreement, any other Credit Document or any other Secured Debt Document a
fiduciary relationship in respect of any Secured Creditor; and nothing in this
Agreement, any other Credit Document or any other Secured Debt Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Pledgee any obligations in respect of the Pledge Agreement except as
expressly set forth herein and therein.
(b) The Pledgee shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or discharging of
Liens upon the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Pledgee shall not be required to ascertain or inquire
as to the performance by any Pledgor of any of the covenants or agreements
contained in the Pledge Agreement, any other Credit Document or any other
Secured Debt Document.
(d) The Pledgee shall be under no obligation or duty to take
any action under, or with respect to, the Pledge Agreement if taking such action
(i) would subject the Pledgee to a tax in any jurisdiction where it is not then
subject to a tax , (ii) would require the Pledgee to qualify to do business, or
obtain any license, in any jurisdiction where it is not then so qualified or
licensed or (iii) would subject the Pledgee to in personam jurisdiction in any
locations where it is not then so subject.
<PAGE> 24
Annex B
Page 2
(e) Notwithstanding any other provision of this Annex B,
neither the Pledgee nor any of its officers, directors, employees, affiliates or
agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with, or pursuant to this Annex
B or the Pledge Agreement except for its own gross negligence or willful
misconduct.
3. Lack of Reliance on the Pledgee. Independently and without
reliance upon the Pledgee, each Secured Creditor, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Pledgor and its
Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith
and (ii) its own appraisal of the creditworthiness of the Pledgor and its
Subsidiaries, and the Pledgee shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Secured Creditor with any
credit or other information with respect thereto, whether coming into its
possession before the extension of any Obligations or the purchase of any notes
or at any time or times thereafter. The Pledgee shall not be responsible in any
manner whatsoever to any Secured Creditor for the correctness of any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Pledge Agreement or the security
interests granted thereunder or the financial condition of the Pledgor or any
Subsidiary of the Pledgor or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Pledge Agreement, or the financial condition of the Pledgor or any
Subsidiary of the Pledgor, or the existence or possible existence of any default
or event of default. The Pledgee makes no representations as to the value or
condition of the Collateral or any part thereof, or as to the title of the
Pledgor thereto or as to the security afforded by the Pledge Agreement.
4. Certain Rights of the Pledgee. (a) No Secured Creditor
shall have the right to cause the Pledgee to take any action with respect to the
Collateral, with only the Required Secured Creditors having the right to direct
the Pledgee to take any such action, it being understood and agreed that nothing
in this Annex B shall affect the rights of the Secured Creditors to accelerate
their respective Obligations in accordance with their respective Secured Debt
Documents. If the Pledgee shall request instructions from the Required Secured
Creditors, with respect to any act or action (including failure to act) in
connection with the Pledge Agreement, the Pledgee shall be entitled to refrain
from such act or taking such action unless and until it shall have received
instructions from the Required Secured Creditors and to the extent requested,
appropriate indemnification in respect of actions to be taken, and the Pledgee
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Secured Creditor shall have any right of action
whatsoever against the Pledgee as a result of the Pledgee acting or refraining
from acting hereunder in accordance with the instructions of the Required
Secured Creditors. As used herein, the term "Required Secured Creditors" shall
mean the Required Banks (or, to the extent required by Section 13.12 of the
Credit Agreement, all of the Banks). Notwithstanding anything to the contrary
contained in the immediately preceding sentence, if at any time the principal of
any Obligations secured hereby has been accelerated, or the final maturity date
with respect to any such principal Obligations has occurred, and as a result
thereof one or more payment Events of Default (where the aggregate principal
amount of such Obligations accelerated or not paid at final maturity equals or
exceeds $100,000,000), which
<PAGE> 25
Annex B
Page 3
payment Events of Default shall have continued in existence for at least 90
consecutive days after the date of such acceleration or final maturity, and the
Required Secured Creditors at such time (determined without regard to this
sentence) have not directed the Pledgee to commence enforcement proceedings
pursuant to the Pledge Agreement, then so long as such payment Event of Default
is continuing the Secured Creditors holding at least a majority of the
outstanding Obligations secured hereby subject to such payment Event of Default
shall constitute the Required Secured Creditors for purposes of causing the
Pledgee to commence enforcement proceedings pursuant to the Pledge Agreement,
provided that in such event the Secured Creditors which would constitute the
Required Secured Creditors in the absence of this sentence shall have the right
to direct the manner and method of enforcement so long as such directions do not
materially delay or impair the taking of enforcement action.
(b) Notwithstanding anything to the contrary contained herein,
the Pledgee is authorized, but not obligated, (i) to take any action reasonably
required to perfect or continue the perfection of the Liens on the Collateral
for the benefit of the Secured Creditors and (ii) when instructions from the
Required Secured Creditors have been requested by the Pledgee but have not yet
been received, to take any action which the Pledgee, in good faith, believes to
be reasonably required to promote and protect the interests of the Secured
Creditors in the Collateral; provided that once instructions have been received,
the actions of the Pledgee shall be governed thereby and the Pledgee shall not
take any further action which would be contrary thereto.
(c) Notwithstanding anything to the contrary contained herein
or in the Pledge Agreement, the Pledgee shall not be required to take any action
that exposes or, in the good faith judgment of the Pledgee may expose, the
Pledgee or its officers, directors, agents or employees to personal liability,
unless the Pledgee shall be adequately indemnified as provided herein, or that
is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge
Agreement, any Secured Debt Document or applicable law.
5. Reliance. The Pledgee shall be entitled to rely, and shall
be fully protected in relying, upon, any note, writing, resolution, notice,
statement, certificate, telex, teletype message, cablegram, radiogram, order or
other document or telephone message signed, sent or made by the proper Person or
entity, and, with respect to all legal matters pertaining hereto or to the
Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel
selected by it.
6. Indemnification. To the extent the Pledgee is not
reimbursed and indemnified by the Pledgor under the Pledge Agreement, the
Secured Creditors (other than the Senior Noteholders) will reimburse and
indemnify the Pledgee, in proportion to their respective outstanding principal
amounts (including, for this purpose, the Stated Amount of outstanding Letters
of Credit, as well as any unpaid Primary Obligations in respect of Interest Rate
Protection or Other Hedging Agreements, as outstanding principal) of
Obligations, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Pledgee in performing its duties hereunder, or in any way
relating to or arising out of its actions as Pledgee in respect of the Pledge
Agreement except for those resulting solely from the Pledgee's own gross
negligence or willful misconduct. The indemnities set forth in this Section 6
shall survive the repayment of all Obligations, with the respective
indemnification at
<PAGE> 26
Annex B
Page 4
such time to be based upon the outstanding principal amounts (determined as
described above) of Obligations at the time of the respective occurrence upon
which the claim against the Pledgee is based or, if same is not reasonably
determinable, based upon the outstanding principal amounts (determined as
described above) of Obligations as in effect immediately prior to the
termination of the Pledge Agreement. The indemnities set forth in this Section 6
are in addition to any indemnities provided by the Banks to the Pledgee pursuant
to the Credit Agreement, with the effect being that the Banks shall be
responsible for indemnifying the Pledgee to the extent the Pledgee does not
receive payments pursuant to this Section 6 from the Secured Creditors (other
than the Senior Noteholders) (although in such event, and upon the payment in
full of all such amounts owing to the Pledgee by the Banks, the Banks shall be
subrogated to the rights of the Pledgee to receive payment from such Secured
Creditors).
7. The Pledgee in its Individual Capacity. With respect to its
obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Pledgee is a party, and to act as agent under one or more
of such Credit Documents, the Pledgee shall have the rights and powers specified
therein and herein for a "Bank", or an "Agent", as the case may be, and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the terms "Banks," "Required Banks," "holders of Notes,"
or any similar terms shall, unless the context clearly otherwise indicates,
include the Pledgee in its individual capacity. The Pledgee and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
banking, investment banking, trust or other business with the Pledgor or any
Affiliate or Subsidiary of the Pledgor as if it were not performing the duties
specified herein or in the other Credit Documents, and may accept fees and other
consideration from the Pledgor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
8. Holders. The Pledgee may deem and treat the payee of any
note as the owner thereof for all purposes hereof unless and until written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Pledgee. Any request, authority or consent of any
person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any note, shall be final and conclusive
and binding on any subsequent holder, transferee, assignee or endorsee, as the
case may be, of such note or of any note or notes issued in exchange therefor.
9. Resignation by the Pledgee. (a) The Pledgee may resign from
the performance of all of its functions and duties hereunder and under the
Pledge Agreement at any time by giving 15 Business Days' prior written notice to
the Pledgor and the Secured Creditors. Such resignation shall take effect upon
the appointment of a successor Pledgee pursuant to Section 9(b) or (c) below.
(b) If a successor Pledgee shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the
Pledgee, with the consent of the Pledgor, which consent shall not be
unreasonably withheld or delayed, shall then appoint a successor Pledgee who
shall serve as Pledgee hereunder or thereunder until such time, if any, as the
Required Secured Creditors appoint a successor Pledgee as provided above.
<PAGE> 27
Annex B
Page 5
(c) If no successor Pledgee has been appointed pursuant to
Section 9(b) above by the 15th Business Day after the date of such notice of
resignation was given by the Pledgee, as a result of a failure by the Pledgor to
consent to the appointment of such a successor Pledgee, the Required Secured
Creditors shall then appoint a successor Pledgee who shall serve as Pledgee
hereunder or thereunder until such time, if any, as the Required Secured
Creditors appoint a successor Pledgee as provided above.
<PAGE> 1
EXHIBIT 4.8
AMENDED AND RESTATED
SECURITY AGREEMENT
between
COLTEC INDUSTRIES INC
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of March 24, 1992
and
AMENDED AND RESTATED
as of
December 18, 1996
and
FURTHER AMENDED AND RESTATED
as of
March 16, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
SECURITY INTERESTS ...........................................................3
1.1.Grant of Security Interests......................................3
1.2.Power of Attorney................................................4
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ............................4
2.1.Necessary Filings................................................4
2.2.No Liens.........................................................4
2.3.Other Financing Statements.......................................4
2.4.Chief Executive Office; Records..................................5
2.5.Location of Inventory and Equipment..............................5
2.6.Recourse.........................................................6
2.7.Trade Names; Change of Name......................................6
ARTICLE III
SPECIAL PROVISIONS CONCERNINGRECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS .......................................6
3.1.Additional Representations and Warranties........................6
3.2.Maintenance of Records...........................................7
3.3.Direction to Account Debtors; Contracting Parties; etc...........7
3.4.Modification of Terms; etc.......................................8
3.5.Collection.......................................................8
3.6.Instruments......................................................8
3.7. Government Contracts...........................................8
3.8. Assignment of Claims Act Notices...............................9
3.9. Further Actions................................................9
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS .........................................10
4.1.Additional Representations and Warranties.......................10
(i)
<PAGE> 3
Page
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4.2.Licenses and Assignments........................................10
4.3.Infringements...................................................10
4.4.Preservation of Marks...........................................10
4.5.Maintenance of Registration.....................................11
4.6.Future Registered Marks.........................................11
4.7.Remedies........................................................11
ARTICLE V
SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS ........................12
5.1.Additional Representations and Warranties.......................12
5.2.Licenses and Assignments........................................12
5.3.Infringements...................................................12
5.4.Maintenance of Patents..........................................12
5.5.Prosecution of Patent Application...............................12
5.6.Other Patents and Copyrights....................................13
5.7.Remedies........................................................13
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL ........................................13
6.1.Protection of Collateral Agent's Security.......................13
6.2.Warehouse Receipts Non-negotiable...............................14
6.3.Further Actions.................................................14
6.4.Financing Statements............................................14
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT ................................14
7.1.Remedies; Obtaining the Collateral Upon Default.................14
7.2.Remedies; Disposition of the Collateral.........................15
7.3.Waiver of Claims................................................16
7.4.Application of Proceeds.........................................17
7.5.Remedies Cumulative.............................................19
7.6.Discontinuance of Proceedings...................................20
7.7.Purchasers Of Collateral........................................20
ARTICLE VIII
(ii)
<PAGE> 4
Page
----
INDEMNITY ....................................................................20
8.1.Indemnity........................................................20
8.2.Indemnity Obligations Secured by Collateral; Survival............21
ARTICLE IX
DEFINITIONS...................................................................22
ARTICLE X
THE COLLATERAL AGENT .........................................................28
10.1.Appointment.....................................................28
10.2.Nature of Duties................................................28
10.3.Lack of Reliance on the Collateral Agent........................29
10.4.Certain Rights of the Collateral Agent..........................29
10.5.Reliance........................................................30
10.6.Indemnification.................................................30
10.7.The Collateral Agent in its Individual Capacity.................31
10.8.Holders.........................................................31
10.9.Resignation by the Collateral Agent.............................32
10.10.Fees and Expenses of Collateral Agent..........................32
ARTICLE XI
MISCELLANEOUS
11.1.Notices.........................................................32
11.2.Waiver; Amendment...............................................33
11.3.Obligations Absolute............................................34
11.4.Successors and Assigns..........................................34
11.5.Headings Descriptive............................................35
11.6.Severability....................................................35
11.7.GOVERNING LAW...................................................35
11.8.Assignor's Duties...............................................35
11.9.Termination; Release............................................35
ANNEX A Schedule of Permitted Filings
ANNEX B Schedule of Record Locations
ANNEX C Schedule of Inventory and Equipment Locations
ANNEX D Schedule of Trade, Fictitious and Other Names
ANNEX E Schedule of Marks
(iii)
<PAGE> 5
Page
----
ANNEX F Schedule of Patents and Applications
ANNEX G Schedule of Copyrights and Applications
(iv)
<PAGE> 6
AMENDED AND RESTATED COMPANY SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of March 24,
1992, amended and restated as of December 18, 1996 and further amended and
restated as of March 16, 1998, between COLTEC INDUSTRIES INC, a Pennsylvania
corporation (the "Assignor"), and BANKERS TRUST COMPANY, as Collateral Agent
(the "Collateral Agent") for the benefit of the Secured Creditors (as defined
below) (except as otherwise defined herein, terms used herein and defined in the
Credit Agreement shall be used herein as therein defined).
W I T N E S S E T H :
WHEREAS, the Assignor, Coltec Aerospace Canada Ltd., the
financial institutions (the "Banks") from time to time party thereto, Bank of
America National Trust and Savings Association, as Documentation Agent (in such
capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication
Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian
Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust
Company, as Administrative Agent (together with any successor administrative
agent, the "Administrative Agent" and together with the Pledgee, the
Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the
Banks and their respective successors and assigns, and together with any other
financial institutions from time to time party to the Credit Agreement
hereinafter referred to, the "Bank Creditors"), have entered into a Credit
Agreement, dated as of March 24, 1992, and amended and restated as of January
11, 1994, and further amended and restated as of December 18, 1996 and as
further amended, providing for the making of Loans to the Borrowers and the
issuance of, and participation in, Letters of Credit, all as contemplated
therein (as used herein, the term "Credit Agreement" means the Credit Agreement
described above in this paragraph, as the same has been, and may from time to
time in the future be, amended, modified, extended, renewed, replaced, restated,
supplemented or refinanced from time to time, and including any agreement
extending the maturity of, or refinancing or restructuring (including, but not
limited to, the inclusion of additional guarantors or additional borrowers
thereunder that are Subsidiaries of the Assignor and whose obligations are
guaranteed by the Assignor thereunder or any increase in the amount borrowed)
all or any portion of, the Indebtedness under such agreement or any successor
agreements, whether or not with the same agent, trustee, representative,
financial institutions or holders; provided that with respect to any agreement
providing for the refinancing or replacement of Indebtedness under the Credit
Agreement, such agreement shall only be treated as, or as part of, the Credit
Agreement hereunder if (i) either (A) all obligations under the Credit Agreement
being refinanced or replaced shall be paid in full at the time of such
refinancing or replacement, and all commitments and letters of credit issued
pursuant to the refinanced or replaced Credit Agreement shall have terminated in
accordance with their terms or (B) the Required Banks shall have consented in
writing to the refinancing or replacement
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<PAGE> 7
Indebtedness being treated, along with their Indebtedness, as Indebtedness
pursuant to the Credit Agreement, (ii) the refinancing Indebtedness shall be
permitted to be incurred under the Credit Agreement being refinanced (if such
Credit Agreement is to remain outstanding) and (iii) a notice to the effect that
the refinancing or replacement Indebtedness shall be treated as issued under the
Credit Agreement shall be delivered by the Assignor to the Collateral Agent);
WHEREAS, the Assignor may at any time and from time to time
enter into (or guaranty obligations of one or more of its Subsidiaries under)
one or more of the following agreements: (i) interest rate protection agreements
(including, without limitation, interest rate swaps, caps, floors, collars and
similar agreements), (ii) foreign exchange contracts, currency swap agreements
or other similar agreements or arrangements designed to protect against the
fluctuations in currency values and/or (iii) other types of hedging agreements
from time to time (collectively, the "Interest Rate Protection or Other Hedging
Agreements") with one or more Bank Creditors or affiliates of Bank Creditors
(each such Bank Creditor or affiliate, even if the respective Bank Creditor
subsequently ceases to be a Bank under the Credit Agreement for any reason,
together with such Bank Creditor's or affiliate's successors and assigns,
collectively, the "Interest Rate Protection Creditors");
WHEREAS, the Assignor may issue New Senior Notes and New
Senior Exchange Notes as provided in the Credit Agreement that may be (to the
extent permitted pursuant to the Credit Agreement) equally and ratably secured
hereunder with the Credit Agreement Obligations as hereinafter provided (with
any holders of New Senior Notes and New Senior Exchange Notes from time to time
being herein collectively called "Senior Noteholders" and with all documentation
evidencing any New Senior Notes or New Senior Exchange Notes, including without
limitation the indenture and any subsidiary guarantees to be entered into in
connection with the New Senior Notes, being herein called "Senior Note
Documents");
WHEREAS, the Assignor has heretofore entered into a Security
Agreement, dated as of March 24, 1992 (as amended, modified or supplemented
prior to the date hereof, the "Original Company Security Agreement");
WHEREAS, it is a condition to the extensions of credit under
the Credit Agreement and to the obligations of the initial purchasers of the New
Senior Notes under the purchase agreement to be entered into in connection with
the issuance by the Assignor of the New Senior Notes that the Assignor shall
have executed and delivered to the Collateral Agent this Agreement; and
WHEREAS, the Assignor desires to execute this Agreement to (i)
satisfy the condition described in the preceding paragraph and (ii) amend and
restate the Original Company Security Agreement;
NOW, THEREFORE, in consideration of the extensions of credit
to be made to the Assignor under the Credit Agreement and to the obligations of
the initial purchasers of the New Senior Notes under the purchase agreement to
be entered into in connection with the issuance by the Assignor of the New
Senior Notes and other benefits accruing to the Assignor, the receipt and
sufficiency of which are hereby acknowledged, the Assignor hereby makes the
following representations and warranties to the Collateral Agent for the ratable
benefit of the Secured Creditors and hereby covenants and agrees with the
Collateral Agent for the ratable benefit of the Secured Creditors as follows:
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<PAGE> 8
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt and
complete payment and performance when due of all of the Obligations, the
Assignor does hereby sell, assign and transfer unto the Collateral Agent, and
does hereby grant to the Collateral Agent for the ratable benefit of the Bank
Creditors, the Interest Rate Protection Creditors and the Senior Noteholders, in
each case to the extent from time to time holding Obligations of the Assignor
secured hereunder (collectively, and together with the Collateral Agent, the
"Secured Creditors"), a continuing security interest of first priority (subject
to Liens evidenced by Permitted Filings and other Liens permitted under Section
9.01 of the Credit Agreement) in, all of the right, title and interest of the
Assignor in, to and under all of the following, whether now existing or
hereafter from time to time acquired: (i) each and every Receivable, (ii) all
Contracts, together with all Contract Rights arising thereunder, (iii) all
Inventory, (iv) the Cash Collateral Account established for the Assignor and all
moneys, securities and instruments deposited or required to be deposited in such
Cash Collateral Account, (v) all Equipment, (vi) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of the Assignor symbolized by the Marks, (vii) all Patents and
Copyrights, and all reissues, renewals or extensions thereof, (viii) all
computer programs of the Assignor and all intellectual property rights therein
and all other proprietary information of the Assignor, including, but not
limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel
Paper, Documents and Instruments (other than the Pledged Securities and any
other capital stock or promissory notes not required to be pledged pursuant to
the Company Pledge Agreement), and (x) all Proceeds and products of any and all
of the foregoing (all of the above, collectively, the "Collateral"); provided,
however that to the extent that any Contract may be terminated (in accordance
with the terms thereof after giving effect to any applicable laws) in the event
of granting of a security interest therein, or in the event the granting of a
security interest in any Contract shall violate applicable law, then the
security interest granted hereby shall be limited to the extent necessary so
that such Contract may not be so terminated or no such violation of law shall
exist, as the case may be.
(b) The security interest of the Collateral Agent under this Agreement
extends to all Collateral of the kind which is the subject of this Agreement
which the Assignor may acquire at any time during the continuation of this
Agreement.
(c) If (i) a Bankruptcy Default or Notified Acceleration Event has
occurred and is continuing or (ii) any other Event of Default or Acceleration
Event has occurred and is continuing, but in the case of this clause (ii) only
if, and to the extent that, the Collateral Agent (acting at the direction of the
Required Secured Creditors) has given notice to the Assignor to take the actions
specified below in this sentence, then in either such case all cash Proceeds of,
and cash payments received in respect of, Collateral shall be paid by the
Assignor (or the respective payor) directly to the Cash Collateral Account or as
otherwise directed by the Collateral Agent. At any time while the circumstances
described in the immediately preceding sentence do not exist, all cash payments
received in respect of the Collateral (including without limitation all payments
received in respect of Receivables and Contracts, or in payment for sales of
Inventory, but excluding cash Proceeds of sales of other Collateral unless the
respective sale and release of
-3-
<PAGE> 9
Collateral is permitted pursuant to this Agreement and the Credit Agreement)
shall be paid to the Assignor.
1.2. Power of Attorney. The Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of the Assignor or otherwise), in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, which appointment as attorney is coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement and the occurrence of the Restatement Effective Date, as
follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interests granted by the Assignor to the Collateral Agent hereby in respect of
the Collateral have been or shall have been accomplished and the security
interest granted to the Collateral Agent pursuant to this Agreement in and to
the Collateral constitutes or shall constitute a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other
Liens (except that the Collateral may be subject to the security interests
evidenced by the financing statements disclosed on Annex A hereto, but only to
the respective date, if any, set forth on Annex A (the "Permitted Filings") and
to any other Liens permitted under Section 9.01 of the Credit Agreement) and is
or shall be entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests.
2.2. No Liens. The Assignor is, and as to Collateral acquired by it
from time to time after the date hereof the Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby, Liens
permitted under Section 9.01 of the Credit Agreement or evidenced by the
Permitted Filings), and the Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the Restatement Effective Date,
there is no financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) on file or of record in any
relevant jurisdiction covering or purporting to cover any interest of any kind
in the Collateral except as disclosed in Annex A hereto or to the extent filed
after the Effective Date so long as the respective such filing did not (and the
Lien evidenced thereby did not) violate the applicable provisions of the
Original Credit Agreement, and so long as the Total Commitment has not been
terminated or any Letter of Credit or Note remains outstanding or any of the
Obligations remain unpaid or any Interest Rate Protection or Other
-4-
<PAGE> 10
Hedging Agreement remains in effect or any obligations are owed with respect
thereto, the Assignor will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by the Assignor or as otherwise
permitted pursuant to Section 9.01 of the Credit Agreement.
2.4. Chief Executive Office; Records. The chief executive office of the
Assignor is located at 3 Coliseum Center, 2550 West Tyvola Road, Charlotte,
North Carolina 28217. The Assignor will not move its chief executive office
except to such new location as the Assignor may establish in accordance with the
last sentence of this Section 2.4. The originals of all documents evidencing all
Receivables and Contract Rights of the Assignor and the only original books of
account and records of the Assignor relating thereto are, and will continue to
be, kept at such chief executive office, at such other locations shown on Annex
B hereto or at such new locations as the Assignor may establish in accordance
with the last sentence of this Section 2.4, provided that, so long as (x) true
and correct copies of all documents evidencing such Receivables and Contract
Rights and copies of such books and records are kept at such chief executive
office or at such other locations shown on Annex B hereto, and (y) the failure
to maintain any original copies of the foregoing at such locations could not
have an adverse effect upon the validity, perfection or priority of any security
interest granted hereunder, the Assignor shall be permitted to keep original
copies of the foregoing at other locations to be determined in a manner
consistent with its past practices. All Receivables and Contract Rights of the
Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the office locations described above. The Assignor shall not establish new
locations for such offices until (i) it shall have given to the Collateral Agent
not less than 30 days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Collateral Agent may reasonably request, (ii) with respect to
such new location, it shall have taken all action to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect and (iii) at the
request of the Collateral Agent, it shall have furnished an opinion of counsel
reasonably acceptable to the Collateral Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by the Assignor is located at one of the locations shown
on Annex C hereto. The Assignor agrees that all Inventory and all Equipment now
held or subsequently acquired by it shall be kept at (or shall be in transport
to) any one of the locations shown on Annex C hereto, or such new location as
the Assignor may establish in accordance with the last sentence of this Section
2.5. The Assignor may establish a new location for Inventory and Equipment only
if (i) it shall give to the Collateral Agent written notice of such new location
as promptly as practicable and in no
-5-
<PAGE> 11
event later than 60 days after the establishment thereof, clearly describing
such new location and providing such other information in connection therewith
as the Collateral Agent may reasonably request, (ii) with respect to such new
location, as promptly as practicable and in no event later than 75 days after
the establishment thereof, it shall have taken all action to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect and
(iii) at the request of the Collateral Agent, it shall have furnished an opinion
of counsel reasonably acceptable to the Collateral Agent to the effect that all
financing or continuation statements and amendments or supplements thereto have
been filed in the appropriate filing office or offices, and all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.6. Recourse. This Agreement is made with full recourse to the
Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of the Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection or Other Hedging
Agreements, the Senior Note Documents and otherwise in writing in connection
herewith or therewith.
2.7. Trade Names; Change of Name. The Assignor does not have or operate
in any jurisdiction under, or in the preceding 12 months has not had or has not
operated in any jurisdiction under, any trade names, fictitious names or other
names (including, without limitation, any names of divisions or operations)
except its legal name and such other trade, fictitious or other names as are
listed on Annex D hereto. The Assignor shall not change its legal name or assume
or operate in any jurisdiction under any trade, fictitious or other name except
those names listed on Annex D hereto and new names (including, without
limitation, any names of divisions or operations) established in accordance with
the last sentence of this Section 2.7. The Assignor shall not assume or operate
in any jurisdiction under any new trade, fictitious or other name until (i) it
shall have given to the Collateral Agent not less than 30 days' prior written
notice of its intention so to do, clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new name, it shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) at the request of the Collateral Agent, it shall have furnished
an opinion of counsel reasonably acceptable to the Collateral Agent to the
effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or offices,
and all other actions (including, without limitation, the payment of all filing
fees and taxes, if any, payable in connection with such filings) have been
taken, in order to perfect (and maintain the perfection and priority of) the
security interest granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, the Assignor shall be deemed to have represented
and warranted that (x) such
-6-
<PAGE> 12
Receivable, and all records, papers and documents relating thereto (if any) are
genuine and in all respects what they purport to be, and that all papers and
documents (if any) relating thereto (i) will represent the obligation of the
account debtor evidencing indebtedness unpaid and owed by the respective account
debtor arising out of the performance of labor or services or the sale or lease
and delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the account debtor
named therein (other than copies created for general accounting purposes), and
(iii) will be in compliance and will conform in all material respects with all
applicable federal, state and local laws and applicable laws of any relevant
foreign jurisdiction and (y) there is no fact or circumstance known to Assignor
which would suggest that any such Receivable (i) will not represent the genuine,
legal, valid and binding obligation of such account debtor or (ii) will not
evidence true and valid obligations, enforceable in accordance with their
respective terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
3.2. Maintenance of Records. The Assignor will keep and maintain at its
own cost and expense satisfactory and complete records of its Receivables and
Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Assignor will make the same available on the
Assignor's premises to the Collateral Agent for inspection, at the Assignor's
own cost and expense, at any and all reasonable times upon demand. Upon the
occurrence and during the continuance of any of the conditions specified in the
first sentence of Section 1.1(c) of this Agreement, and upon the request of the
Collateral Agent, the Assignor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts) and such
books and records to the Collateral Agent or to its representatives (copies of
which evidence and books and records may be retained by the Assignor). If the
Collateral Agent so directs, the Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents of the Assignor evidencing or
pertaining to such Receivables and Contracts with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the
occurrence and during the continuance of any of the conditions described in the
first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent
so directs the Assignor, the Assignor agrees (x) to cause all payments on
account of the Receivables and Contracts to be made directly to the Cash
Collateral Account established for the Assignor, (y) that the Collateral Agent
may, at its option, directly notify the obligors with respect to any Receivables
and/or under any Contracts to make payments with respect thereto as provided in
the preceding clauses (x) and (z) that the Collateral Agent may enforce
collection of any such Receivables and Contracts and may adjust, settle or
compromise the amount of payment thereof, in the same manner and to the same
extent that the Assignor might have done. Without notice to or assent by the
Assignor, the Collateral Agent may apply any or all amounts then in, or
thereafter deposited in, the Cash Collateral
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Account in the manner provided in Section 7.4 of this Agreement. The reasonable
costs and expenses (including attorneys' fees) of collection, whether incurred
by the Assignor or the Collateral Agent, shall be borne by the Assignor.
3.4. Modification of Terms; etc. The Assignor shall not rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any term thereof or make any adjustment with respect thereto, or extend
or renew the same, or compromise or settle any material dispute, claim, suit or
legal proceeding relating thereto, or sell any Receivable or Contract, or
interest therein, without the prior written consent of the Collateral Agent,
except as permitted by Section 3.5 and except, so long as none of the conditions
described in the first sentence of Section 1.1(c) shall occur and be continuing,
such modifications, adjustments and sales effected by the Assignor in the
ordinary course of business consistent with past practice. The Assignor will
duly fulfill all obligations on its part to be fulfilled under or in connection
with the Receivables and Contracts and will do nothing to impair the rights of
the Collateral Agent in the Receivables or Contracts.
3.5. Collection. The Assignor shall endeavor to cause to be collected
from the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts which are
delinquent, such amounts to be collected in accordance with generally accepted
lawful collection procedures) any and all amounts owing under or on account of
such Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable or
under such Contract, except that, at any time when payments in respect of
Receivables and Contracts may be made to the Assignor in accordance with the
second sentence of Section 1.1(c) of this Agreement, the Assignor may allow in
the ordinary course of business as adjustments to amounts owing under its
Receivables and Contracts (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which the
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the Assignor.
3.6.Instruments. If the Assignor owns or acquires any Instrument
constituting Collateral, the Assignor will within 10 days after such
acquisition, notify the Collateral Agent thereof, and upon request by the
Collateral Agent will promptly deliver such Instrument to the Collateral Agent
appropriately endorsed to the order of the Collateral Agent as further security
hereunder.
3.7. Government Contracts. a)" \* MERGEFORMAT (a) The Assignor hereby
covenants and agrees that promptly after any request by the Collateral Agent,
the Assignor will provide to the Collateral Agent (i) notice setting forth in
reasonable detail all Government Contracts with respect to which the Assignor
reasonably expects to receive payments or other consideration with a value in
excess of $500,000 to which the Assignor is a party at such time, and (ii) with
respect to each Government Contract referred to in clause (i) above, (a) the
true and correct GC Notice Recipient and (b) the anticipated annual gross
revenue under such Government Contract.
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<PAGE> 14
(b) The Assignor hereby covenants and agrees that, at the request of
the Collateral Agent, as promptly as practicable and in any event within 60 days
following its entering into of any Government Contract (other than a Restricted
Government Contract) with respect to which the Assignor reasonably expects to
receive payments or other consideration with a value in excess of $500,000 after
the date of such request, the Assignor shall notify the Collateral Agent
thereof, which notice shall set forth (i) each GC Notice Recipient with respect
to such Government Contract and (ii) the anticipated gross revenue under such
Government Contract.
(c) The Assignor agrees that promptly upon obtaining knowledge that any
of the information provided to the Collateral Agent pursuant to Section 3.7(a)
or (b) has changed, it shall give written notice of such change to the
Collateral Agent.
(d) The Assignor hereby covenants and agrees that it will not enter
into any Restricted Government Contract unless the Assignor (i) determines in
good faith that it must agree to a prohibition on the assignment of Receivables
arising under such Government Contract in order to obtain such Government
Contract and (ii) gives the Collateral Agent at least 10 Business Days' prior
written notice of its intention to enter into such Restricted Government
Contract.
3.8. Assignment of Claims Act Notices. (a) Upon the occurrence and
during the continuance of any of the conditions described in the first sentence
of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs the
Assignor, the Assignor shall prepare and deliver to the Collateral Agent, with
respect to each Government Contract to which the Assignor is a party on the date
of such request, (i) a written notice of the assignment contained herein, each
of which notices shall be in form and substance satisfactory to the Collateral
Agent (each such notice, an "Assignment of Claims Act Notice") and (ii) an
executed, attested and sealed (but undated) instrument of assignment, each of
which instruments shall be in form and substance satisfactory to the Collateral
Agent (each such instrument, an "Instrument of Assignment"). At any time after
the occurrence and during the continuance of any of the conditions described in
the first sentence of Section 1.1(c), the Assignor shall, upon five Business
Days' notice from the Collateral Agent, file on behalf of the Collateral Agent
an Assignment of Claims Act Notice (by certified mail, return receipt requested,
or in such other manner acceptable to the Collateral Agent), together with three
copies thereof and a true copy of the corresponding Instrument of Assignment,
with each GC Notice Recipient with respect to each Government Contract of the
Assignor as shall be designated from time to time by the Collateral Agent. The
Assignor hereby further agrees that the Collateral Agent may at any time after
the occurrence and during the continuance of any of the conditions described in
the first sentence of Section 1.1(c) directly file the notices and instruments
of assignment described in this Section 3.8.
(b) The Assignor acknowledges and agrees that each Instrument of
Assignment is supplemental to, and not in substitution for, the terms and
provisions of this Agreement.
3.9. Further Actions. The Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent, or
the GC Notice Recipients with respect to any Government Contract, from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of
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<PAGE> 15
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to its Receivables, Contracts, Instruments and other
property or rights covered by the security interest hereby granted, as the
Collateral Agent may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. Additional Representations and Warranties. The Assignor represents
and warrants that it is the true and lawful exclusive owner of the Marks listed
in Annex E hereto and that said listed Marks include all the United States
federal registrations or applications registered in the United States Patent and
Trademark Office that the Assignor now owns in connection with its business. The
Assignor represents and warrants that it owns or is licensed to use all Marks
that it uses. The Assignor further warrants that it is aware of no third party
claim that any aspect of the Assignor's present or contemplated business
operations infringes or will infringe any mark. The Assignor represents and
warrants that it is the owner of record of all U.S. Trademark registrations and
applications listed in Annex E hereto and that said registrations are valid,
subsisting, have not been cancelled and that the Assignor is not aware of any
third-party claim that any of said registrations is invalid or unenforceable.
The Assignor hereby grants to the Collateral Agent an absolute power of attorney
to sign, upon the occurrence and during the continuance of (i) a Bankruptcy
Default or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Required Secured Creditors have so directed, any document which may be required
by the U.S. Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each Mark, and record the same.
4.2. Licenses and Assignments. Except as otherwise expressly permitted
in the Credit Agreement, the Assignor hereby agrees not to divest itself of any
right under any Mark absent prior written approval of the Collateral Agent
(which approval shall not be unreasonably withheld).
4.3. Infringements. Except as otherwise expressly permitted in the
Credit Agreement, the Assignor agrees, promptly upon learning thereof, to notify
the Collateral Agent in writing of the name and address of, and to furnish such
pertinent information that may be available with respect to, any party who, in
any material respect, may be infringing or otherwise violating any of the
Assignor's rights in and to any significant Mark, or with respect to any party
claiming that the Assignor's use of any significant Mark violates in any
material respect any property right of that party. The Assignor further agrees,
unless otherwise agreed by the Collateral Agent, diligently to prosecute any
Person infringing, in any material respect, any significant Mark.
4.4. Preservation of Marks. Except as otherwise expressly permitted in
the Credit Agreement, the Assignor agrees to use its significant Marks in
interstate or foreign commerce during the time in which this Agreement is in
effect, sufficiently to preserve such Marks as trademarks or service marks
registered under the laws of the United States.
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<PAGE> 16
4.5. Maintenance of Registration. Except as otherwise explicitly
permitted in the Credit Agreement, the Assignor shall, at its own expense,
diligently process all documents required by the Trademark Act of 1946, 15
U.S.C. Sections 1051 et seq. to maintain trademark registration, including
but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
significant Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Collateral Agent. The Assignor agrees to notify the
Collateral Agent not later than 6 months prior to the dates on which the
affidavits of use or the applications for renewal registration are due with
respect to any significant Mark that the affidavits of use or the renewal is
being processed.
4.6. Future Registered Marks. If any Mark registration issues hereafter
to the Assignor as a result of any application now or hereafter pending before
the United States Patent and Trademark Office, within 30 days of receipt of such
certificate the Assignor shall deliver a copy of such certificate, and a grant
of security in such mark to the Collateral Agent, confirming the grant thereof
hereunder, the form of such confirmatory grant to be substantially the same as
the form hereof.
4.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy
Default or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Required Secured Creditors have so directed, the Collateral Agent may, by
written notice to the Assignor, take any or all of the following actions: (i)
declare the entire right, title and interest of the Assignor in and to each of
the Marks, together with all trademark rights and rights of protection to the
same, vested, in which event such rights, title and interest shall immediately
vest, in the Collateral Agent for the benefit of the Secured Creditors, in which
case the Collateral Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 to execute, cause to be acknowledged and notarized
and record said absolute assignment with the applicable agency; (ii) take and
use or sell the Marks and the goodwill of the Assignor's business symbolized by
the Marks and the right to carry on the business and use the assets of the
Assignor in connection with which the Marks have been used; and (iii) direct the
Assignor to refrain, in which event the Assignor shall refrain, from using the
Marks in any manner whatsoever, directly or indirectly, and, if requested by the
Collateral Agent, change the Assignor's corporate name to eliminate therefrom
any use of any Mark and execute such other and further documents that the
Collateral Agent may request to further confirm this and to transfer ownership
of the Marks and registrations and any pending trademark application in the
United States Patent and Trademark Office to the Collateral Agent.
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<PAGE> 17
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. Additional Representations and Warranties. The Assignor represents
and warrants that it is the true and lawful exclusive owner of all rights in the
Patents listed in Annex F hereto and in the Copyrights listed in Annex G hereto,
that said Patents include all the United States patents and applications for
United States patents that such Assignor now owns and that said Copyrights
constitute all the United States copyrights registered with the United States
Copyright Office and applications for United States copyrights that the Assignor
now owns. The Assignor represents and warrants that it owns or is licensed to
practice under all Patents and Copyrights that it now uses or practices under.
The Assignor further warrants that it is aware of no third party claim that any
aspect of the Assignor's present or contemplated business operations infringes
or will infringe any patent or any copyright. The Assignor hereby grants to the
Collateral Agent an absolute power of attorney to sign, upon the occurrence and
during the continuance of (i) a Bankruptcy Default or Notified Acceleration
Event or (ii) any other Event of Default or Acceleration Event, but in the case
of this clause (ii) only to the extent the Required Secured Creditors have so
directed, any document which may be required by the United States Patent and
Trademark Office or the United States Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and record the same.
5.2. Licenses and Assignments. Except as otherwise expressly permitted
in the Credit Agreement, the Assignor hereby agrees not to divest itself of any
right under any Patent or Copyright absent prior written approval of the
Collateral Agent (which approval shall not be unreasonably withheld).
5.3. Infringements. The Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to the Assignor with respect to any material infringement
or other material violation of the Assignor's rights in any significant Patent
or Copyright, or with respect to any claim that practice of any significant
Patent or Copyright materially violates any property right of that party. The
Assignor further agrees, absent direction of the Collateral Agent to the
contrary, diligently to prosecute any Person infringing, in any material
respect, any significant Patent or Copyright.
5.4. Maintenance of Patents. Except as otherwise expressly permitted in
the Credit Agreement, at its own expense, the Assignor shall make timely payment
of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain
in force rights under each Patent.
5.5. Prosecution of Patent Application. Except as otherwise expressly
permitted in the Credit Agreement, at its own expense, the Assignor shall
diligently prosecute all applications for United States patents listed in Annex
F hereto and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Collateral
Agent.
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<PAGE> 18
5.6. Other Patents and Copyrights. Within 30 days of acquisition of a
United States Patent or Copyright, or of filing of an application for a United
States Patent or Copyright, the Assignor shall deliver to the Collateral Agent a
copy of said Patent or Copyright or such application, as the case may be, with a
grant of security as to such Patent or Copyright, as the case may be, confirming
the grant thereof hereunder, the form of such confirmatory grant to be
substantially the same as the form hereof.
5.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy
Default or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Required Secured Creditors have so directed, the Collateral Agent may by written
notice to the Assignor, take any or all of the following actions: (i) declare
the entire right, title, and interest of the Assignor in each of the Patents and
Copyrights vested, in which event such right, title, and interest shall
immediately vest in the Collateral Agent for the benefit of the Secured
Creditors, in which case the Collateral Agent shall be entitled to exercise the
power of attorney referred to in Section 5.1 to execute, cause to be
acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and practice or sell the Patents and Copyrights;
and (iii) direct the Assignor to refrain, in which event the Assignor shall
refrain, from practicing the Patents and Copyrights directly or indirectly, and
the Assignor shall execute such other and further documents as the Collateral
Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Collateral Agent for the benefit of the Secured
Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. The Assignor will do
nothing to impair the rights of the Collateral Agent in the Collateral. The
Assignor will at all times keep its Inventory and Equipment insured in favor of
the Collateral Agent, at the Assignor's own expense to the extent and in the
manner provided in the Credit Agreement; all policies or certificates (or
certified copies thereof) with respect to such insurance (and any other
insurance maintained by the Assignor) (i) shall be endorsed to the Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee), (ii) shall state that
such insurance policies shall not be cancelled or revised without 30 days' prior
written notice thereof by the insurer to the Collateral Agent, (iii) shall
provide that the respective insurers irrevocably waive any and all rights of
subrogation with respect to the Collateral Agent and the Secured Creditors and
(iv) shall be deposited with the Collateral Agent. If the Assignor shall fail to
insure its Inventory and Equipment in accordance with the preceding sentence, or
if the Assignor shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and the Assignor
agrees to reimburse the Collateral Agent for all costs and expenses of procuring
such insurance. The Collateral Agent may apply any proceeds of such insurance in
accordance with Section 7.4. The Assignor assumes all liability and
responsibility in connection with the Collateral acquired by it and the
liability of the Assignor to pay the Obligations shall in no way be
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<PAGE> 19
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Assignor.
6.2. Warehouse Receipts Non-negotiable. The Assignor agrees that if any
warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be "negotiable" (as such term is used in Section 7-104 of the
Uniform Commercial Code as in effect in any relevant jurisdiction or under other
relevant law).
6.3. Further Actions. The Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. The Assignor agrees to execute and deliver
to the Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are necessary or desirable in the opinion of the Collateral Agent
to establish and maintain a valid, enforceable, first priority perfected
security interest in the Collateral as provided herein and the other rights and
security contemplated hereby all in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other relevant law. The
Assignor will pay any applicable filing fees, recordation taxes and related
expenses. The Assignor authorizes the Collateral Agent to file any such
financing statements without the signature of the Assignor where permitted by
law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. The Assignor
agrees that, if there shall have occurred and be continuing (i) a Bankruptcy
Default or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Required Secured Creditors have so directed, then and in every such case,
subject to any mandatory requirements of applicable law then in effect, the
Collateral Agent, in addition to any rights now or hereafter existing under
applicable law, shall have all rights as a secured creditor under the Uniform
Commercial Code in all relevant jurisdictions and may also:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from the Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
the Assignor's premises where any of the Collateral is located and
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<PAGE> 20
remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of the Assignor; and
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Receivables and the Contracts) constituting the Collateral to make any
payment required by the terms of such agreement, instrument or other
obligation directly to the Collateral Agent and may exercise any and
all remedies of the Assignor in respect of such Collateral; and
(c) withdraw all moneys, securities and instruments in the
Cash Collateral Account for application to the Obligations in
accordance with Section 7.4; and
(d) sell, assign or otherwise liquidate, or direct the
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take possession of the proceeds of
any such sale or liquidation; and
(e) take possession of the Collateral or any part thereof, by
directing the Assignor in writing to deliver the same to the Collateral
Agent at any place or places designated by the Collateral Agent, in
which event the Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place
or places so designated by the Collateral Agent and there
delivered to the Collateral Agent, and
(ii) store and keep any Collateral so delivered to
the Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section 7.2, and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition; and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as
the Collateral Agent shall in its sole judgment determine; it being
understood that the Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral
Agent shall be entitled to a decree requiring specific performance by
the Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when
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<PAGE> 21
taken by the Collateral Agent or after any overhaul or repair which the
Collateral Agent shall determine to be commercially reasonable. Any such
disposition which shall be a private sale or other private proceedings permitted
by such requirements shall be made upon not less than 10 days' written notice to
the Assignor specifying the time at which such disposition is to be made and the
intended sale price or other consideration therefor, and shall be subject, for
the 10 days after the giving of such notice, to the right of the Assignor or any
nominee of the Assignor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days' written
notice to the Assignor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Collateral Agent's option, be subject to reserve), after publication
of notice of such auction not less than 10 days prior thereto in two newspapers
in general circulation in the City of New York. To the extent permitted by any
such requirement of law, the Collateral Agent and the Secured Creditors may bid
for and become the purchaser of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to the Assignor. If,
under mandatory requirements of applicable law, the Collateral Agent shall be
required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the Assignor as hereinabove specified,
the Collateral Agent need give the Assignor only such notice of disposition as
shall be reasonably practicable in view of such mandatory requirements of
applicable law. The Assignor agrees to do or cause to be done all such other
acts and things as may be reasonably necessary to make such sale or sales of all
or any portion of the Collateral valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at the
Assignor's expense.
7.3. Waiver of Claims. Except as otherwise provided in this Agreement,
THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION
OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD OTHERWISE HAVE UNDER
THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the
Assignor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except
any damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any
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portion thereof, and the Assignor, for itself and all who may claim
under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Assignor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Assignor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Assignor.
7.4. Application of Proceeds. a)" \* MERGEFORMAT (a) All moneys
collected by the Collateral Agent (or, to the extent a Mortgage to which the
Company is a party requires proceeds of Collateral under such Mortgage to be
applied in accordance with the provisions of this Agreement, the Mortgagee under
such Mortgage) upon any sale or other disposition of the Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied as follows:
(i) first, to the payment of all Obligations owing the
Collateral Agent of the type described in clauses (iv) and (v) of the
definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as defined below) shall be paid to
the Secured Creditors as provided in Section 7.4(e), with each Secured
Creditor receiving an amount equal to such outstanding Primary
Obligations or, if the proceeds are insufficient to pay in full all
such Primary Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations (as defined below) shall
be paid to the Secured Creditors as provided in Section 7.4(e), with
each Secured Creditor receiving an amount equal to its outstanding
Secondary Obligations or, if the proceeds are insufficient to pay in
full all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 11.9(a) hereof, to the Assignor or to whomever may be lawfully
entitled to receive such surplus.
(b) For purposes of this Agreement (w) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (x) "Primary Obligations" shall mean (i) in the case of the
Credit Agreement Obligations, all Obligations arising out of or in connection
with (including, without limitation, as obligor or guarantor, as the case may
be) the principal of, and interest on, all Loans, all Unpaid Drawings
theretofore made (together with all interest accrued thereon), and the
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aggregate Stated Amounts of all Letters of Credit issued under the
Credit Agreement and outstanding, and all Fees outstanding and unpaid
at the relevant time, (ii) in the case of the Senior Note Obligations,
all Obligations secured hereby arising out of or in connection with the
principal of, and interest on, the New Senior Notes and the New Senior
Exchange Notes and (iii) in the case of the Interest Rate Protection
Obligations, all Obligations arising out of or in connection with
(including, without limitation, as a direct obligor or a guarantor, as
the case may be) Interest Rate Protection or Other Hedging Agreements
(other than indemnities, fees (including, without limitation,
attorneys' fees) and similar obligations and liabilities) and (y)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall
be applied (for purposes of making determinations under this Section 7.4 only)
(i) first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any
distribution would result in overpayment to such Secured Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of the other Secured Creditors,
with each Secured Creditor whose Primary Obligations or Secondary Obligations,
as the case may be, have not been paid in full to receive an amount equal to
such excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such
Secured Creditor and the denominator of which is the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of all Secured Creditors entitled
to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that if the
Bank Creditors are to receive a distribution on account of undrawn amounts with
respect to Letters of Credit issued (or deemed issued) under the Credit
Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Paying Agent under the Credit Agreement and held by
it, for the equal and ratable benefit of the Bank Creditors as such. If any
amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Bank Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Paying Agent to the Collateral Agent for
distribution in accordance with Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d) hereof, all payments required
to be made hereunder shall be made (x) if to the Bank Creditors, to the Paying
Agent under the Credit Agreement for the account of the Bank Creditors and (y)
if to any other Secured Creditors (other than the Collateral Agent), to the
trustee, paying agent or other similar representative (each a "Representative")
for such Secured Creditors or, in the absence of such a Representative, directly
to the other Secured Creditors.
(f) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Paying
Agent under the Credit Agreement and (ii) the Representative for any other
Secured Creditors or, in the absence of such a Representative, upon the
respective Secured Creditors for a determination (which the Paying
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Agent, each Representative for any Secured Creditors and the Secured Creditors
agree (or shall agree) to provide, upon request of the Collateral Agent) of the
outstanding Primary Obligations and Secondary Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Representative for any Secured Creditor or directly from a Secured
Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be
entitled to assume that no Interest Rate Protection or Other Hedging Agreements
are in existence.
(g) It is understood and agreed that the Assignor shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the Obligations.
Notwithstanding anything to the contrary in this Agreement, (i) all actions
required or permitted to be taken under this Agreement by the Senior Noteholders
shall be so taken only by the trustee under the indenture under which the Senior
Notes were issued on behalf of the Senior Noteholders (the "Senior Notes
Trustee") as directed by the Senior Noteholders and (ii) all payments required
to be made with respect to the Senior Note Obligations shall be paid to the
Senior Notes Trustee, and the Collateral Agent shall be entitled (but not
required) to conclusively rely upon and act in accordance with any instructions
from the Senior Notes Trustee subject to the terms and conditions of this
Agreement and to assume that such instructions are being given in accordance
with such indenture.
7.5. Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Collateral Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement or any other
Secured Debt Document now or hereafter existing at law or in equity, or by
statute and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time or simultaneously
and as often and in such order as may be deemed expedient by the Collateral
Agent. All such rights, powers and remedies shall be cumulative and the exercise
or the beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on the Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment. The Secured Creditors agree that this
Agreement may be enforced only by the action of the Collateral Agent acting upon
the instructions of the Required Secured Creditors and that no other Secured
Creditor shall have any right individually or as a group, directly or
indirectly, to seek to enforce or to enforce this Agreement or to realize upon
the security to be granted hereby or to cause the Collateral Agent or the
Required Secured Creditors to take or cause to be taken any action in respect of
this Agreement (except as expressly contemplated hereby), it being understood
and agreed that such rights and remedies may be exercised only by the Collateral
Agent for the ratable benefit of all Secured Creditors upon the terms and
conditions of this
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Agreement, it being further understood and agreed that nothing in this Agreement
shall affect the rights of the Secured Creditors to accelerate their respective
Obligations in accordance with their respective Secured Debt Documents.
7.6. Discontinuance of Proceedings. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the Assignor, the
Collateral Agent and each holder of any of the Obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest created under this Agreement, and all rights,
remedies and powers of the Collateral Agent shall continue as if no such
proceeding had been instituted.
7.7. Purchasers Of Collateral. Upon any sale of the Collateral by the
Collateral Agent hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt of sale
proceeds by the Collateral Agent or the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication or
nonapplication thereof.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) The Assignor agrees to indemnify, reimburse and
hold the Collateral Agent, each other Secured Creditor (other than the Senior
Noteholders) and their respective successors, assigns, employees, agents,
servants and Representatives (including the Administrative Agent) hereunder
(hereinafter in this Section 8.1 referred to individually as "Indemnitee," and
collectively as "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs, expenses or disbursements (including reasonable
attorneys' fees and expenses) (for the purposes of this Section 8.1 the
foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any other Secured Debt Document or
any other document executed in connection herewith and therewith or in any other
way connected with the administration of the transactions contemplated hereby
and thereby or the enforcement of any of the terms of, or the preservation of
any rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), any contract claim or, to the
maximum extent permitted under applicable law, the violation of the laws of any
country, state or other governmental body or unit, or any tort (including,
without limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage); provided that no
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Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to
the extent caused by the gross negligence or willful misconduct of such
Indemnitee. The Assignor agrees that upon written notice by any Indemnitee of
the assertion of such a liability, obligation, damage, injury, penalty, claim,
demand, action, suit or judgment, the Assignor shall assume full responsibility
for the defense thereof. Each Indemnitee agrees to use its best efforts to
promptly notify the Assignor of any such assertion of which such Indemnitee has
knowledge.
(b) Without limiting the application of Section 8.1(a), the Assignor
agrees to pay, or reimburse, the Collateral Agent for (if the Collateral Agent
shall have incurred fees, costs or expenses because the Assignor shall have
failed to comply with its obligations under this Agreement or any other Secured
Debt Document), any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b), the
Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this Agreement or any other Secured Debt Document or in any writing
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any other Secured Debt Document.
(d) If and to the extent that the obligations of the Assignor under
this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the full payment of all the New Senior
Notes and the New Senior Exchange Notes issued under the Senior Note Documents,
the termination of all Interest Rate Protection or Other Hedging Agreements and
the payment of all other Obligations and notwithstanding the discharge thereof.
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ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.
"Acceleration Event" shall mean the acceleration prior to the
stated final maturity, or the failure to pay at the stated final maturity, of
(i) Obligations representing principal of, or interest on, extensions of credit
(including, without limitation, all Letter of Credit Outstandings) pursuant to
the Credit Agreement, (ii) Obligations representing principal of, or interest
on, the New Senior Notes or the New Senior Exchange Notes or (iii) any Interest
Rate Protection Obligations if such Interest Rate Protection Obligations
aggregate at least $10,000,000 in amount, provided that, in each case, any such
Acceleration Event shall cease to exist upon payment in full of the Obligations
so accelerated or not paid.
"Administrative Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Agreement" shall mean this Security Agreement as the same may
be modified, supplemented or amended from time to time in accordance with its
terms.
"Assignment of Claims Act Notice" shall have the meaning
provided in Section 3.8 of this Agreement.
"Assignor" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Bankruptcy Default" shall mean any Default or Event of
Default with respect to the Assignor pursuant to Section 10.05 of the Credit
Agreement.
"Banks" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing
cash collateral account maintained with the Collateral Agent for the benefit of
the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 11.2 to
this Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a)
of this Agreement.
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"Collateral Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Contract Rights" shall mean all rights of the Assignor
(including, without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between the Assignor and
one or more additional parties (including, without limitation, (i) each
partnership agreement to which the Assignor is a party, (ii) any Interest Rate
Protection or Other Hedging Agreements and (iii) any Government Contracts).
"Copyrights" shall mean any United States copyright which the
Assignor now or hereafter has registered with the United States Copyright
Office, as well as any application for a United States copyright registration
now or hereafter made with the United States Copyright Office by the Assignor.
"Credit Agreement" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of
time, or both, would constitute an Event of Default.
"Documentation Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by the Assignor and, in any event,
shall include, but shall not be limited to, all machinery, equipment,
furnishings, movable trade fixtures and vehicles now or hereafter owned by the
Assignor and any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default at any time
under, and as defined in, any of the Credit Agreement and the Senior Note
Documents and any payment default (after the expiration of any applicable grace
period) on any of the Obligations secured hereunder at such time.
"GC Notice Recipient" shall mean each (i) contracting officer,
or the head of the respective U.S. government department or agency relating to
such Government Contract, (ii)
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surety or sureties upon the bond or bonds, if any, relating to such Government
Contract, and (iii) disbursing officer, if any, designated in such Government
Contract to make payment.
"General Intangibles" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the State of New York
and shall in any event include all of the Assignor's claims, rights, powers,
privileges, authority, options, security interests, liens and remedies under any
partnership agreement to which the Assignor is a party or with respect to any
partnership of which the Assignor is a partner.
"Goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Government Contract" shall mean all Contracts between the
Assignor and the United States of America or any agency or department thereof.
"Indemnitee" shall have the meaning provided in Section 8.1 of
this Agreement.
"Instrument" shall have the meaning provided in Article 9 of
the Uniform Commercial Code as in effect on the date hereof in the State of New
York; provided that "Instrument" shall not include any Pledged Note or other
promissory note not required to be pledged pursuant to the Company Pledge
Agreement.
"Instrument of Assignment" shall have the meaning provided in
Section 3.8 of this Agreement.
"Interest Rate Protection Creditors" shall have the meaning
provided in the second WHEREAS clause of this Agreement.
"Interest Rate Protection Obligations" shall have the meaning
provided in the definition of "Obligations" in this Article IX.
"Interest Rate Protection or Other Hedging Agreements" shall
have the meaning provided in the second WHEREAS clause of this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and
all additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials, labels,
materials and any other items used or usable in manufacturing, processing,
packaging or shipping same; in all stages of production --from raw materials
through work-in-process to finished goods -- and all products and proceeds of
whatever sort and wherever located and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Collateral Agent from the
Assignor's customers, and shall specifically include all "inventory" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York, now or hereafter owned by the Assignor.
"Marks" shall mean any trademarks and service marks now held
or hereafter acquired by the Assignor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any political
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subdivision thereof and any application for such trademarks and service marks,
as well as any unregistered marks used by the Assignor in the United States and
trade dress including logos, designs, trade names, company names, business
names, fictitious business names and other business identifiers in connection
with which any of these registered or unregistered marks are used.
"Notified Acceleration Event" shall mean any Acceleration
Event with respect to which the Required Secured Creditors have given written
notice to the Collateral Agent that a "Notified Acceleration Event" exists,
provided that such written notice may only be given if such Acceleration Event
is continuing and, provided further that any such Notified Acceleration Event
shall cease to exist once there is no longer any Acceleration Event in
existence.
"Obligations" shall mean (i) the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of (x) the
principal of and interest on the Notes issued, and Loans made, under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with respect to
the Letters of Credit under the Credit Agreement and (y) all other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due), liabilities and indebtedness (including,
without limitation, indemnities, Fees and interest thereon) of the Assignor to
the Bank Creditors, now existing or hereafter incurred under, arising out of, or
in connection with the Credit Agreement and the other Credit Documents, and the
due performance of, and compliance with, all of the terms, conditions and
agreements contained in the Credit Agreement and the other Credit Documents by
the Assignor (all such principal, interest, obligations, liabilities and
indebtedness described in this clause (i) being herein collectively called the
"Credit Agreement Obligations"); (ii) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness of the Assignor to the Interest Rate Protection Creditors, now
existing or hereafter incurred under, arising out of or in connection with any
Interest Rate Protection or Other Hedging Agreement (including, without
limitation, all such obligations and liabilities of the Assignor under any
guarantee by it of obligations pursuant to any Interest Rate Protection or Other
Hedging Agreement), and the due performance of, and compliance with, all of the
terms, conditions and agreements contained therein by the Assignor (all such
obligations, liabilities and indebtedness described in this clause (ii) being
herein collectively called the "Interest Rate Protection Obligations"); (iii)
the full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all (x) principal of and interest on the New
Senior Notes and the New Senior Exchange Notes and (y) other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due), liabilities and indebtedness of the
Assignor to the Senior Noteholders, whether now existing or hereafter incurred
under, arising out of or in connection with the New Senior Notes, the New Senior
Exchange Notes and the other Senior Note Documents, and the due performance of,
and compliance with, all of the terms, conditions and agreements contained
therein by the Assignor (all such obligations, liabilities and indebtedness
described in this clause (iii) being herein collectively called the "Senior Note
Obligations"); (iv) (x) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral or preserve its security interest in the
Collateral in a manner not in violation of the terms hereof and (y) any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,
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expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Collateral Agent in performing its
duties hereunder, or in any way relating to or arising out of its actions as
Collateral Agent in respect of this Agreement except for those resulting solely
from the Collateral Agent's own gross negligence or willful misconduct; (v) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Assignor referred to in clauses
(i) through (iv) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Collateral Agent of its rights hereunder, together with
reasonable attorneys' fees and court costs; and (vi) all amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 8.1 of this Agreement. It is acknowledged and agreed that the
"Obligations" shall include extensions of credit of the types described above,
whether outstanding on the date of this Agreement or extended from time to time
after the date of this Agreement.
"Original Company Security Agreement" shall have the meaning
provided in the fourth WHEREAS clause of this Agreement.
"Other Undisclosed Inventory" shall mean all Undisclosed
Inventory under and as defined in the Subsidiaries Security Agreement.
"Patents" shall mean any United States patent to which the
Assignor now or hereafter has title or license to use, as well as any
application for a United States patent now or hereafter made by the Assignor.
"Permitted Filings" shall have the meaning provided in Section
2.1 of this Agreement.
"Pledged Securities" shall have the meaning provided in the
Company Pledge Agreement.
"Primary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform
Commercial Code as in effect in the State of New York on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Collateral Agent or the Assignor from time to time with respect
to any of the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
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"Receivables" shall mean any "account" as such term is defined
in the Uniform Commercial Code as in effect on the date hereof in the State of
New York, now or hereafter owned by the Assignor and, in any event, shall
include, but shall not be limited to, all of the Assignor's rights to payment
for goods sold or leased or services performed by the Assignor, whether now in
existence or arising from time to time hereafter, including, without limitation,
rights evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness or security, together with (a) all
security pledged, assigned, hypothecated or granted to or held by the Assignor
to secure the foregoing, (b) all of the Assignor's right, title and interest in
and to any goods, the sale of which gave rise thereto, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith, (e) all books, records, ledger cards,
and invoices relating thereto, (f) all evidences of the filing of financing
statements and other statements and the registration of other instruments in
connection therewith and amendments thereto, notices to other creditors or
secured parties, and certificates from filing or other registration officers,
(g) all credit information, reports and memoranda relating thereto, and (h) all
other writings related in any way to the foregoing; provided that "Receivables"
shall not include any Pledged Note or other promissory note not required to be
pledged pursuant to the Company Pledge Agreement.
"Representative" shall have the meaning provided in Section
7.4 of this Agreement.
"Required Secured Creditors" shall have the meaning provided
in Section 10.4(a) to this Agreement.
"Requisite Class Creditors" shall have the meaning provided in
Section 11.2 to this Agreement.
"Restricted Government Contract" shall mean any Government
Contract which by its terms prohibits the assignment of Receivables arising
thereunder.
"Secondary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in Section
1.1 of this Agreement.
"Secured Debt Documents" shall mean this Agreement, any other
Credit Document, any Interest Rate Protection or Other Hedging Agreement and any
Senior Note Documents, in each case to the extent then in effect and subject to
the security interest granted hereby, collectively.
"Senior Noteholders" shall have the meaning provided in the
third WHEREAS clause of this Agreement.
"Senior Note Documents" shall have the meaning provided in the
third WHEREAS clause of this Agreement.
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<PAGE> 33
"Senior Note Obligations" shall have the meaning provided in
the definition of "Obligations" in this Article IX.
"Syndication Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Termination Date" shall have the meaning provided in Section
11.9(a) of this Agreement.
ARTICLE X
THE COLLATERAL AGENT
10.1. Appointment. The Secured Creditors, by their acceptance of the
benefits of this Agreement hereby irrevocably designate Bankers Trust Company,
as Collateral Agent, to act as specified herein. Each Secured Creditor hereby
irrevocably authorizes, and each holder of any Obligation by the acceptance of
such Obligation and by the acceptance of the benefits of this Agreement shall be
deemed irrevocably to authorize, the Collateral Agent to take such action on its
behalf under the provisions of this Agreement and any instruments and agreements
referred to herein and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Collateral Agent
by the terms hereof and such other powers as are reasonably incidental thereto.
The Collateral Agent may perform any of its duties hereunder or thereunder by or
through its authorized agents, sub-agents or employees.
10.2. Nature of Duties. (a) The Collateral Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement. The
duties of the Collateral Agent shall be mechanical and administrative in nature;
the Collateral Agent (in such capacity) shall not have by reason of this
Agreement, any other Credit Document or any other Secured Debt Document a
fiduciary relationship in respect of any Secured Creditor; and nothing in this
Agreement, any other Credit Document or any other Secured Debt Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein.
(b) The Collateral Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or discharging of
Liens upon the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Collateral Agent shall not be required to ascertain or inquire
as to the performance by the Assignor of any of the covenants or agreements
contained in this Agreement, any other Credit Document or any other Secured Debt
Document.
(d) The Collateral Agent shall be under no obligation or duty to take
any action under this Agreement or any Credit Document if taking such action (i)
would subject the Collateral Agent to a tax in any jurisdiction where it is not
then subject to a tax or (ii) would require the Collateral Agent to qualify to
do business in any jurisdiction where it is not then so qualified, unless the
Collateral Agent receives security or indemnity satisfactory to it against such
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<PAGE> 34
tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under this
Agreement or (iii) would subject the Collateral Agent to in personam
jurisdiction in any locations where it is not then so subject.
(e) Notwithstanding any other provision of this Agreement, neither the
Collateral Agent nor any of its officers, directors, employees, affiliates or
agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with this Agreement except for
its own gross negligence or willful misconduct.
10.3. Lack of Reliance on the Collateral Agent. Independently and
without reliance upon the Collateral Agent, each Secured Creditor, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Assignor
and its Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Assignor and its
Subsidiaries, and the Collateral Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Secured Creditor with
any credit or other information with respect thereto, whether coming into its
possession before the extension of any Obligations or the purchase of any Notes
or at any time or times thereafter. The Collateral Agent shall not be
responsible in any manner whatsoever to any Secured Creditor for the correctness
of any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or the security interests granted hereunder or the financial condition
of the Assignor or any Subsidiary of the Assignor or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, or the financial condition of the
Assignor or any Subsidiary of the Assignor, or the existence or possible
existence of any Default or Event of Default. The Collateral Agent makes no
representations as to the value or condition of the Collateral or any part
thereof, or as to the title of the Assignor thereto or as to the security
afforded by this Agreement.
10.4. Certain Rights of the Collateral Agent. a)" \* MERGEFORMAT (a) No
Secured Creditor shall have the right to cause the Collateral Agent to take any
action with respect to the Collateral, with only the Required Secured Creditors
having the right to direct the Collateral Agent to take any such action, it
being understood and agreed that nothing in this Agreement shall affect the
rights of the Secured Creditors to accelerate their respective Obligations in
accordance with their respective Secured Debt Documents. If the Collateral Agent
shall request instructions from the Required Secured Creditors, with respect to
any act or action (including failure to act) in connection with this Agreement,
the Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Required
Secured Creditors and to the extent requested, appropriate indemnification in
respect of actions to be taken, and the Collateral Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Secured Creditor shall have any right of action whatsoever against
the Collateral Agent as a result of the Collateral Agent acting or refraining
from acting hereunder in accordance with the instructions of the Required
Secured Creditors. As used herein, the term "Required Secured Creditors" shall
mean the Required Banks (or, to the extent required by
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<PAGE> 35
Section 13.12 of the Credit Agreement, all of the Banks). Notwithstanding
anything to the contrary contained in the immediately preceding sentence, if at
any time the principal of any Obligations secured hereby has been accelerated,
or the final maturity date with respect to any such principal Obligations has
occurred, and as a result thereof one or more payment Events of Default (where
the aggregate principal amount of such Obligations accelerated or not paid at
final maturity equals or exceeds $100,000,000), which payment Events of Default
shall have continued in existence for at least 90 consecutive days after the
date of such acceleration or final maturity, and the Required Secured Creditors
at such time (determined without regard to this sentence) have not directed the
Collateral Agent to commence enforcement proceedings pursuant to this Agreement,
then so long as such payment Event of Default is continuing the Secured
Creditors holding at least a majority of the outstanding Obligations secured
hereby subject to such payment Event of Default shall constitute the Required
Secured Creditors for purposes of causing the Collateral Agent to commence
enforcement proceedings pursuant to this Agreement, provided that in such event
the Secured Creditors which would constitute the Required Secured Creditors in
the absence of this sentence shall have the right to direct the manner and
method of enforcement so long as such directions do not materially delay or
impair the taking of enforcement action.
(b) Notwithstanding anything to the contrary contained herein, the
Collateral Agent is authorized, but not obligated, (i) to take any action
reasonably required to perfect or continue the perfection of the Liens on the
Collateral for the benefit of the Secured Creditors and (ii) when instructions
from the Required Secured Creditors have been requested by the Collateral Agent
but have not yet been received, to take any action which the Collateral Agent,
in good faith, believes to be reasonably required to promote and protect the
interests of the Secured Creditors in the Collateral; provided that once
instructions have been received, the actions of the Collateral Agent shall be
governed thereby and the Collateral Agent shall not take any further action
which would be contrary thereto.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Collateral Agent shall not be required to take any action that
exposes or, in the good faith judgment of the Collateral Agent may expose, the
Collateral Agent or its officers, directors, agents or employees to personal
liability, unless the Collateral Agent shall be adequately indemnified as
provided herein, or that is, or in the good faith judgment of the Collateral
Agent may be, contrary to this Agreement, any Secured Debt Document or
applicable law.
10.5. Reliance. The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
to this Agreement and the other Security Documents and its duties thereunder and
hereunder, upon advice of counsel selected by it.
10.6. Indemnification. To the extent the Collateral Agent is not
reimbursed and indemnified by the Assignor under this Agreement, the Secured
Creditors (other than the Senior Noteholders) will reimburse and indemnify the
Collateral Agent, in proportion to their respective outstanding principal
amounts (including, for this purpose, the stated amount of outstanding
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<PAGE> 36
letters of credit and any unreimbursed drawings in respect of letters of credit,
as well as any unpaid Primary Obligations in respect of Interest Rate Protection
or Other Hedging Agreements, as outstanding principal) of Obligations, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Collateral Agent in performing its duties hereunder, or in any way relating to
or arising out of its actions as Collateral Agent in respect of this Agreement
except for those resulting solely from the Collateral Agent's own gross
negligence or willful misconduct. The indemnities set forth in this Article X
shall survive the repayment of all Obligations, with the respective
indemnification at such time to be based upon the outstanding principal amounts
(determined as described above) of Obligations at the time of the respective
occurrence upon which the claim against the Collateral Agent is based or, if
same is not reasonably determinable, based upon the outstanding principal
amounts (determined as described above) of Obligations as in effect immediately
prior to the termination of this Agreement. The indemnities set forth in this
Article X are in addition to any indemnities provided by the Banks to the
Collateral Agent pursuant to the Credit Agreement, with the effect being that
the Banks shall be responsible for indemnifying the Collateral Agent to the
extent the Collateral Agent does not receive payments pursuant to this Section
10.6 from the Secured Creditors (other than the Senior Noteholders) (although in
such event, and upon the payment in full of all such amounts owing to the
Collateral Agent, the respective Banks who paid same shall be subrogated to the
rights of the Collateral Agent to receive payment from such Secured Creditors).
10.7. The Collateral Agent in its Individual Capacity. With respect to
its obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Collateral Agent is a party, and to act as agent under
one or more of such Credit Documents, the Collateral Agent shall have the rights
and powers specified therein and herein for a "Bank", an "Agent" or an
"Administrative Agent", as the case may be, and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
terms "Banks," "holders of Notes," or any similar terms shall, unless the
context clearly otherwise indicates, include the Collateral Agent in its
individual capacity. The Collateral Agent and its Affiliates may accept deposits
from, lend money to, and generally engage in any kind of banking, investment
banking, trust or other business with the Assignor or any Affiliate or
Subsidiary of the Assignor as if it were not performing the duties specified
herein or in the other Credit Documents, and may accept fees and other
consideration from the Assignor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
10.8. Holders. The Collateral Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Collateral Agent. Any request, authority or
consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note, shall be final and
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or Note issued in exchange therefor.
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<PAGE> 37
10.9. Resignation by the Collateral Agent. (a) The Collateral Agent may
resign from the performance of all of its functions and duties under this
Agreement at any time by giving 15 Business Days' prior or written notice to the
Assignor and the Secured Creditors. Such resignation shall take effect upon the
appointment of a successor Collateral Agent pursuant to clause (b) or (c) below.
(b) If a successor Collateral Agent shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the
Collateral Agent, with the consent of the Assignor, which consent shall not be
unreasonably withheld, shall then appoint a successor Collateral Agent who shall
serve as Collateral Agent hereunder or thereunder until such time, if any, as
the Required Secured Creditors appoint a successor Collateral Agent as provided
above.
(c) If no successor Collateral Agent has been appointed pursuant to
clause (b) above by the 15th Business Day after the date of such notice of
resignation was given by the Collateral Agent, as a result of a failure by the
Assignor to consent to the appointment of such a successor Collateral Agent, the
Required Secured Creditors shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent hereunder or thereunder until such time, if any,
as the Required Secured Creditors appoint a successor Collateral Agent as
provided above.
10.10. Fees and Expenses of Collateral Agent. (a) The Assignor (by its
execution and delivery hereof) hereby agrees that it shall pay to Bankers Trust
Company as the original Collateral Agent, such fees as have been separately
agreed to in writing with Bankers Trust Company for acting as Administrative
Agent and as Collateral Agent hereunder. In the event a successor Collateral
Agent is at any time appointed pursuant to the preceding Section 10.9, the
Assignor hereby agrees to pay such successor Collateral Agent such fees for
acting as such as would customarily be charged by such Collateral Agent for
acting in such capacity in similar situations. Absent manifest error, the
determination by a successor Collateral Agent of the fees owing to it shall be
conclusive and binding upon the Assignor.
(b) In addition, the Assignor agrees to pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent in connection with this
Agreement and any actions taken by the Collateral Agent hereunder, and agrees to
pay all costs and expenses of the Collateral Agent in connection with the
enforcement of this Agreement and the documents and instruments referred to
herein (including, without limitation, reasonable fees and disbursements of
counsel for the Collateral Agent).
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
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<PAGE> 38
(a) if to the Assignor, at:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Thomas B. Jones, Jr.
Telephone: (704) 423-7052
Facsimile: (704) 423-7127
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Facsimile: (212) 250-7200
(c) if to any Bank Creditor (other than the Collateral Agent),
either (x) to the Administrative Agent, at the address of the
Administrative Agent specified in the Credit Agreement or (y) at such
address as such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any other Secured Creditor, either (x) to the
Representative for such Secured Creditor, at such address as such
Representative may have provided to the Assignor and the Collateral
Agent from time to time, or (y) in the absence of such a Representative
directly to such Secured Creditor at such address as such Secured
Creditor shall have specified in writing to the Assignor and the
Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
11.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Assignor and the Collateral Agent (with the
written consent of the Required Banks (or all the Banks if required by Section
13.12 of the Credit Agreement)); provided, however, that any change, waiver,
modification or variance materially adversely affecting the rights and benefits
of a single Class (as defined below) of Secured Creditors (and not all Secured
Creditors in a like or similar manner) shall also require the written consent of
the Requisite Class Creditors (as defined below) of such affected Class;
provided, further, that any Class shall not be considered to be affected
differently from any other Class due to the Obligations of any such other Class
being paid, repaid, refinanced, renewed or extended and the Collateral being
released, in whole or in part (whether by action of such other Class or
otherwise), as security for such Class and such other Class. Notwithstanding
anything to the contrary contained above, it is understood and
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<PAGE> 39
agreed that the Required Banks may agree to modifications to this Agreement for
the purpose, among other things, of securing additional extensions of credit
(including, without limitation, pursuant to the Credit Agreement or any
refinancing or extension thereof). For the purpose of this Agreement, the term
"Class" shall mean, at any time, each class of Secured Creditors with
outstanding Obligations secured hereby at such time, i.e., (x) the Bank
Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the
Senior Noteholders as the holders of Senior Note Obligations secured hereby or
(z) the Interest Rate Protection Creditors as the holders of the Interest Rate
Protection Obligations secured hereby; provided that, without limiting the
foregoing, it is expressly acknowledged and agreed that other creditors may be
added as "Secured Creditors" hereunder (either as part of an existing Class of
creditors or as a newly created Class) with the consent of the Required Secured
Creditors, and that such addition shall not require the written consent of the
Requisite Class Creditors of the various Classes. For the purpose of this
Agreement, the term "Requisite Class Creditors" of any Class shall mean each of
(i) with respect to the Credit Agreement Obligations, the Required Banks and
(ii) with respect to any other Obligations, the holders of at least a majority
of all Obligations outstanding from time to time.
11.3. Obligations Absolute. The obligations of the Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Secured Debt
Document except as specifically set forth in a waiver granted pursuant to
Section 11.2 hereof; (c) any renewal of, extension of, amendment to or
modification of any Secured Debt Document or any security for any of the
Obligations; (d) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument including,
without limitation, this Agreement; (e) any furnishing of any additional
security to the Collateral Agent or its assignee or any acceptance thereof or
any release of any security by the Collateral Agent or its assignee; or (f) any
limitation on any party's liability or obligations under any such instrument or
agreement or any invalidity or unenforceability, in whole or in part, of any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; whether or not
the Assignor shall have notice or knowledge of any of the foregoing.
11.4. Successors and Assigns. This Agreement shall be binding upon the
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and each Secured Creditor and their respective successors and
assigns, provided that the Assignor may not transfer or assign any or all of its
rights or obligations hereunder without the written consent of the Collateral
Agent (with the consent of the Required Secured Creditors). All agreements,
statements, representations and warranties made by the Assignor herein or in any
certificate or other instrument delivered by the Assignor or on its behalf under
this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of this Agreement, the
other Credit Documents and the Interest Rate Protection or Other Hedging
Agreements, regardless of any investigation made by the Secured Creditors or on
their behalf.
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<PAGE> 40
11.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
11.6. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
11.8. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Assignor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of the Assignor under or with
respect to any Collateral.
11.9. Termination; Release. a)" \* MERGEFORMAT (a) After the
Termination Date (as defined below), without any action on the part of any
Secured Creditor, this Agreement shall terminate and be of no further force or
effect (provided that all indemnities set forth herein including, without
limitation, in Section 10.6 hereof shall survive any such termination) and the
Collateral Agent, at the request and expense of the Assignor, will execute and
deliver to the Assignor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to the Assignor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of the Collateral
Agent and has not theretofore been sold or otherwise applied or released
pursuant to this Agreement, together with any moneys at the time held by the
Collateral Agent hereunder. As used in this Agreement, "Termination Date" shall
mean the first to occur of (i) that date upon which the Total Commitment and all
Interest Rate Protection or Other Hedging Agreements have been terminated, no
Note under the Credit Agreement is outstanding, all Letters of Credit have been
terminated and all other Credit Agreement Obligations (excluding normal
continuing indemnity obligations which survive in accordance with their terms,
so long as no amounts are then due and payable in respect thereof) then owing by
the Assignor have been paid in full, (ii) that date upon which the Collateral is
automatically released pursuant to the first sentence of Section 26 of Part I of
the Fifth Amendment to Credit Agreement or the Administrative Agent directs the
Collateral Agent to release the Collateral pursuant to the second sentence of
Section 26 of Part I of the Fifth Amendment to the Credit Agreement and (iii)
that date upon which the Credit Documents are amended to release all Collateral
subject to this Agreement.
(b) It is expressly acknowledged and agreed that the Collateral may be
sold from time to time to the extent permitted by, and in accordance with the
terms of, the Credit
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<PAGE> 41
Agreement. In addition, it is expressly acknowledged and agreed that any or all
of the Collateral may be released by the Collateral Agent acting at the
direction of the Required Secured Creditors. Upon any sale of the type described
in the second preceding sentence or release of any such Collateral as provided
in the immediately preceding sentence, the Collateral Agent shall, at the
request and expense of the Assignor, and without the further consent of, or
liability to, any Secured Creditor, release such Collateral and execute and
deliver to the Assignor a proper instrument or instruments acknowledging the
release of such Collateral from this Agreement, and will duly assign, transfer
and deliver to the Assignor (without recourse and without any representation or
warranty) the Collateral being sold or released as described above.
Notwithstanding anything to the contrary contained above in this Section
11.9(b), in the event the Senior Notes Trustee shall have notified the
Collateral Agent in writing that the Senior Note Obligations have been
accelerated in accordance with the terms of the Senior Note Documents (and (x)
the Senior Note Obligations have not been paid in full and (y) the respective
acceleration has not been rescinded), the Collateral Agent shall not thereafter
release any Collateral pursuant to this Section 11.9(b) or consent to any
termination of this Agreement, except in each case with the prior written
consent of the Senior Noteholders holding a majority of the then outstanding
Senior Note Obligations secured hereby (or following the payment in full of the
Senior Note Obligations or the rescission of the respective acceleration).
(c) At any time that the Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the
Collateral Agent a certificate signed by its chief financial officer stating
that the release of the respective Collateral is permitted pursuant to Section
11.9(a) or (b), and the Collateral Agent shall be entitled (but not required) to
conclusively rely thereon. If requested by the Collateral Agent (although the
Collateral Agent shall have no obligation to make any such request), the
Assignor shall furnish appropriate legal opinions (from counsel acceptable to
the Collateral Agent) to the effect set forth in the immediately preceding
sentence. The Collateral Agent shall have no liability whatsoever to any Secured
Creditor as the result of any release of Collateral by it as permitted by this
Section 11.9. Upon any release of Collateral pursuant to Section 11.9(a) or (b),
none of the Secured Creditors shall have any continuing right or interest in
such Collateral, or the proceeds thereof.
11.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Assignor and the
Collateral Agent.
11.11. Amendment and Restatement. Upon the execution and delivery of
this Agreement by the parties hereto, the Original Company Security Agreement
shall be amended, restated and superseded in its entirety by this Agreement,
effective as of the date hereof, with all rights, obligations and security
interests created under or granted pursuant to the Original Company Security
Agreement continuing from the date thereof.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
ADDRESSES
3 Coliseum Center COLTEC INDUSTRIES INC,
2550 West Tyvola Road as Assignor
Charlotte, NC 28217
Attention: Thomas B. Jones, Jr.
By /s/ THOMAS B. JONES, JR.
--------------------------------
Title: Vice President and
Treasurer
One Bankers Trust Plaza BANKERS TRUST COMPANY,
130 Liberty Street as Collateral Agent
New York, New York 10006
Attention: Mary Kay Coyle
By /s/ ANTHONY LOGRIPPO
--------------------------------
Title: Vice President
<PAGE> 43
ANNEX A
To
Company Security Agreement
--------------------------
SCHEDULE OF PERMITTED FILINGS
-----------------------------
<TABLE>
<CAPTION>
Secured Original Description
Location Party/ies Number File Date of Collateral Permitted
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 44
ANNEX B
to
COMPANY SECURITY AGREEMENT
SCHEDULE OF RECORD LOCATIONS
<TABLE>
<CAPTION>
Assignor Location County
- -------- -------- ------
<S> <C> <C>
Coltec Industries Inc Three Coliseum Centre Mecklenburg
2550 West Tyvola Road
Charlotte, NC 28217
DIVISIONS
1. Chandler Evans Control Charter Oak Boulevard Hartford
Systems Division P. O. Box 330651
W. Hartford, CT 06133-0651
2. Coltec Specialty Products 9426 Old Katy Rd. Harris
Division Houston, TX 77055
a. Specialty Products - Burnet 101 John Kelly Drive Burnet
Burnet, TX 78611
b. Repro-Lon-Burnet 203 Repro Drive Burnet
Burnet, TX 78611
c. Freeport Facility 1404 N. Ave. J Brazoria
Freeport, TX 77541
3. Delavan Spray Technologies 4115 Corporate Center Dr. Union
Monroe, NC 28110
a. Delavan Fuel Metering P. O. Box 969 Bamberg
U.S. Highway 301 South
Bamberg, SC 29003
4. Fairbanks Morse Engine Division 701 White Avenue Rock
Beloit, WI 53511
a. Fairbanks Morse Engine Northwoods Industrial Park West Harris
Division Houston Facility 12253 F.M. 529
Houston, TX 77041
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
Assignor Location County
- -------- -------- ------
<S> <C> <C>
b. Fairbanks Morse Engine 630 Tidewater Dr. Independ.
Division Norfolk, VA 23504 City of
Norfolk
c. Fairbanks Morse Engine 18926 13th Place South King
Division Seattle, WA 98148
5. Garlock Helicoflex 2770 The Boulevard Richland
P. O. Box 9889
Columbia, SC 29209
6. Lewis Engineering 238 Water Street New Haven
Naugatuck, CT 06770-0231
a. Delavan Process Instrumentation 11 Rado Drive New Haven
P. O. Box 559
Naugatuck, CT 06770-0559
7. Menasco Aerospace Texas 4000 South Highway 157 Tarrant
Euless, TX 76040-7012
8. Quincy Compressor Division 3501 Wismann Lane Adams
Quincy, IL 62301-3116
a. Bay Minette 701 North Dobson Ave. Baldwin
Bay Minette, AL 36507-3174
9. Sterling Die Operation 13811 Enterprise Avenue Cuyahoga
Cleveland, OH 44135-5196
</TABLE>
-2-
<PAGE> 46
ANNEX B
to
Company Security Agreement
SCHEDULE OF RECORD LOCATIONS
<TABLE>
<CAPTION>
Location County
- -------- ------
<S> <C>
</TABLE>
<PAGE> 47
ANNEX C
to
Company Security Agreement
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
<TABLE>
<CAPTION>
ADDRESS STATE COUNTY
- ------- ----- ------
<S> <C> <C>
</TABLE>
<PAGE> 48
ANNEX D
to
Company Security Agreement
SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
<PAGE> 49
ANNEX E
to
Company Security Agreement
SCHEDULE OF MARKS
<PAGE> 50
ANNEX F
to
Company Security Agreement
SCHEDULE OF PATENTS AND APPLICATIONS
<TABLE>
<CAPTION>
Patent Number Date Issued
(Application) (Applied)
- ------------- ---------
<S> <C>
</TABLE>
<PAGE> 51
Annex F
to
Company Security Agreement
<PAGE> 52
Annex G
to
Company Security Agreement
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
<PAGE> 53
ANNEX C
to
COMPANY SECURITY AGREEMENT
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATION
<TABLE>
<CAPTION>
Assignor Location County
- -------- -------- ------
<S> <C> <C>
Coltec Industries Inc Three Coliseum Centre Mecklenburg
2550 West Tyvola Road
Charlotte, NC 28217
DIVISIONS
Chandler Evans Control Charter Oak Boulevard Hartford
Systems Division P. O. Box 330651
W. Hartford, CT 06133-0651
Coltec Specialty Products 9426 Old Katy Rd. Harris
Division Houston, TX 77055
a. Specialty Products - Burnet 101 John Kelly Drive Burnet
Burnet, TX 78611
b. Repro-Lon-Burnet 203 Repro Drive Burnet
Burnet, TX 78611
c. Freeport Facility 1404 N. Ave. J Brazoria
Freeport, TX 77541
Delavan Spray Technologies 4115 Corporate Center Dr. Union
Monroe, NC 28110
a. Delavan Fuel Metering P. O. Box 969 Bamberg
U.S. Highway 301 South
Bamberg, SC 29003
Fairbanks Morse Engine Division 701 White Avenue Rock
Beloit, WI 53511
a. Fairbanks Morse Engine Northwoods Industrial Park West Harris
Division Houston Facility 12253 F.M. 529
Houston, TX 77041
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C>
b. Fairbanks Morse Engine 630 Tidewater Dr. Independ.
Division Norfolk, VA 23504 City of
Norfolk
c. Fairbanks Morse Engine 18926 13th Place South King
Division Seattle, WA 98148
Garlock Helicoflex 2770 The Boulevard Richland
P. O. Box 9889
Columbia, SC 29209
Lewis Engineering 238 Water Street New Haven
Naugatuck, CT 06770-0231
a. Delavan Process Instrumentation 11 Rado Drive New Haven
P. O. Box 559
Naugatuck, CT 06770-0559
Menasco Aerospace Texas 4000 South Highway 157 Tarrant
Euless, TX 76040-7012
Quincy Compressor Division 3501 Wismann Lane Adams
Quincy, IL 62301-3116
a. Bay Minette 701 North Dobson Ave. Baldwin
Bay Minette, AL 36507-3174
Sterling Die Operation 13811 Enterprise Avenue Cuyahoga
Cleveland, OH 44135-5196
</TABLE>
-2-
<PAGE> 55
ANNEX D
to
COMPANY SECURITY AGREEMENT
SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
Divisions of the Company
Chandler Evans Control Systems
Delavan Spray Technologies
Fairbanks Morse Engine
Lewis Engineering
Menasco Aerospace Texas
Quincy Compressor
Sterling Die
Coltec Specialty Products
Tex-O-Lon
Repro-Lon
Garlock Helicoflex
Operations of the Company
None
<PAGE> 56
Annex E
TO
COMPANY SECURITY AGREEMENT
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
OWNED BY COLTEC INDUSTRIES INC
<TABLE>
<CAPTION>
Registration No. Registration Date Mark
- ---------------- ----------------- ----
<S> <C> <C>
1,595,097 May 8, 1989 AUTOCOACH
845,374 March 5, 1968 CENTRI-VAC
1,504,797 September 20, 1988 CONTENDER
1,656,150 September 10, 1991 DEMAND-A-MATIC
1,050,018 October 12, 1976 DOMINATOR
1,133,503 April 22, 1980 DOMINATOR
1,118,641 May 22, 1979 ECONOMASTER
1,896,777 May 30, 1995 ENVIRO DESIGN
1,297,367 September 25, 1984 FAIRBANKS MORSE
1,874,506 January 17,1995 FMD
1,595,098 May 8, 1990 FUELCOACH
1,020,361 September 16, 1975 HOLLEY
1,021,903 October 17, 1975 HOLLEY
1,062,188 March 29, 1977 HOLLEY
1,120,891 June 26, 1979 HOLLEY
188,941 September 9, 1924 HOLLEY
1,844,076 July 12, 1994 HOLLEY
1,712,058 September 8, 1992 IQ-500
1,754,899 March 2, 1993 IQ-750
</TABLE>
<PAGE> 57
ANNEX E
Page 2
<TABLE>
<CAPTION>
<S> <C> <C>
858,916 October 22, 1968 LE
1,353,694 August 13, 1985 MASTER-FIT
1,270,570 March 20, 1984 MEP & DESIGN
1,016,317 July 22, 1975 M/T
658,999 March 4, 1978 MOLONEY
700,479 July 5, 1960 PEP
1,553,662 August 29, 1989 PRO DOMINATOR
1,778,849 June 29, 1993 PRO-JECTION
1,655,245 September 3, 1991 QA
1,654,761 August 27, 1991 QE
1,676,566 February 25, 1992 QQ
1,821,009 February 15, 1994 QR-25
1,654,763 August 27, 1991 QRD
1,654,762 August 27, 1991 QSI
1,821,010 February 15, 1994 QTS
1,821,011 February 15, 1994 QT
1,578,649 January 23, 1990 QUANTUM
1,824,058 March 1, 1994 QUINC-CIP
1,874,995 January 24, 1995 QUINSYN-F
1,955,520 February 13, 1996 QUINSYN
1,657,165 September 17, 1991 QUINCY
1,656,010 September 10, 1991 QUINCY AIR MASTER
578,458 August 11, 1953 QUINCY COMPRESSORS
</TABLE>
<PAGE> 58
ANNEX E
Page 3
<TABLE>
<CAPTION>
<S> <C> <C>
1,159,708 July 7, 1981 RENEW KIT
1,066,680 May 31, 1977 STREET DOMINATOR
1,050,017 October 12, 1976 STRIP DOMINATOR
1,658,217 September 24, 1991 THE ENGINE BUILDER
1,750,137 February 2, 1993 THE PRIDE AND THE POWER
1,557,635 September 26, 1989 TRICK KIT
1,730,640 November10, 1992 VOLUMAX
2,132,398 January 27, 1998 Ortman Logo
Pending Applications:
Serial No. Filing Date Mark
- ---------- ----------- ----
75/009,602 October 16, 1995 HOLLEY
75/070,904 March 11, 1996 POWER$YNC
75/319,517 July 3, 1997 Q-SERV
75/249,484 February 28, 1997 Q911
75/249,485 February 28, 1997 QUIN-C-BLUE
75/349,741 September 2, 1997 DOMINATOR
75/349,914 August 28, 1997 STRIP DOMINATOR
75/400,240 December 4, 1997 QQ & Design
75/400,584 December 5, 1997 MENASCO
</TABLE>
<PAGE> 59
Annex F
to
Company Security Agreement
None
<PAGE> 60
Annex G
to
Company Security Agreement
UNITED STATES PATENTS AND PATENT APPLICATIONS
OWNED BY COLTEC INDUSTRIES INC
<TABLE>
<CAPTION>
Patent No. Issue Date Title
- ---------- ---------- -----
<S> <C> <C>
4,193,947 03/18/80 Carbureting Discharge Means
4,197,822 04/15/80 Circuit Means and Apparatus for
Controlling the Air-Fuel Ratio Supplied
to a Combustion Engine
4,213,735 07/22/80 Constant Flow Centrifugal Pump
4,223,749 09/16/80 Pulse Generating Means
4,223,651 09/23/80 Solenoid Vacuum Control Valve
Means and Apparatus for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,224,908 09/30/80 Apparatus and System for
Controlling the Air-Fuel Ration Supplied
to a Combustion Engine
4,225,536 09/30/80 Power Valve
4,230,645 10/28/80 Induction Passage Structure
4,232,372 12/04/80 Positive and Negative Acceleration
Responsive Means and System
4,246,875 01/27/81 Apparatus and System for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,246,929 01/27/81 Temper Proof Idle Adjusting Screws.
4,247,263 01/27/81 Pump Assembly Including Vane and Impeller
4,258,317 03/24/81 Combination Analog-Digital Indicator
</TABLE>
<PAGE> 61
ANNEX G
Page 2
<TABLE>
<CAPTION>
<S> <C> <C>
4,269,062 05/26/81 Method for Gauging Fluid Flow
4,283,353 08/11/81 Tamper Proof Sealing Plug
4,289,460 09/15/81 Bearing Lubricating System for Gear Pump
4,294,282 10/13/81 Apparatus and System for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,302,931 12/01/81 Fuel Flow Limiting Device
4,306,441 12/22/81 Method and Apparatus for Manufacturing
and Forming Engine Induction Passage
Venturi
4,307,451 12/22/81 Backup Control
4,318,214 03/09/82 Method and Apparatus for Manufacturing
and Forming Engine Induction Passage
Venturi
4,325,339 04/20/82 Apparatus and System for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,354,809 10/19/82 Fixed Displacement Vane Pump with Pumping
4,357,283 11/02/82 Carburetor
4,361,073 11/30/82 Sub Critical Control Mechanism
4,393,651 07/19/83 Fuel Control Method and Apparatus
4,395,441 07/26/83 Method of Coating Liquid Penetrable
Articles with Polymeric Dispersions
4,408,418 10/11/83 Through Feed Cylindrical Dies
4,408,953 10/11/83 High Performance Centrifugal Pump
4,408,961 10/11/83 Jet Pump with Integral Pressure Regulator
</TABLE>
<PAGE> 62
ANNEX G
Page 3
<TABLE>
<CAPTION>
<S> <C> <C>
4,415,855 11/15/83 Combination Analog-Digital Indicator
4,417,734 11/29/83 Shaft Seal Assembly
4,423,593 01/03/84 Fuel Control for Controlling Helicopter
Rotor/Turbine Acceleration
4,434,762 03/06/84 Apparatus and System for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,434,763 03/06/84 Apparatus and System for Controlling the
Air-Fuel Ratio Supplied to a Combustion
Engine
4,453,378 06/12/84 Torsional Mode Suppressor
4,454,754 06/19/84 Engine Failure Detection
4,462,268 07/31/84 Anti-Twist Throttle Lever
4,464,895 08/14/84 Gas Turbine Engine Starting Technique
and Control
4,465,640 08/14/84 Adjustable Choke Linkage Means
4,466,526 08/21/84 Helicopter Engine Control with Dela
Anticipator
4,467,640 08/28/84 Gas Turbine Engine Power Availability
Measurement
4,470,118 09/04/84 Gas Turbine Engine Fuel Control
4,478,038 10/23/84 Manual Training Mode for Fuel Control
4,483,508 11/20/84 Gradient Power Valve Assembly
4,487,548 12/11/84 Centrifugal Main Fuel Pump Having
Starting Element
4,488,236 12/11/84 Helicopter Cruise Fuel Conserving Engine
Control
</TABLE>
<PAGE> 63
ANNEX G
Page 4
<TABLE>
<CAPTION>
<S> <C> <C>
4,490,791 12/25/84 Adaptive Gas Turbine Acceleration Control
4,493,465 01/15/85 Helicopter Engine Torque Compensator
4,493,623 01/15/85 Oil Lube Drive Shaft for Fuel Pump
4,500,268 02/19/85 Rotary Pump Having Brake Means with
Thermal Fuse
4,500,966 02/19/85 Super Contingency Aircraft Engine Control
4,502,842 03/05/85 Multiple Compressor Controller
4,529,361 07/16/85 Vane Pump with Spokes with U-Shaped Vanes
4,537,025 08/27/85 Electronic Fuel Control with Manual Train
4,546,539 10/15/85 Dies for Producing Swedge Form Thread
4,556,032 12/03/85 Adapter Means for Creating an Open Loop
Manually Adjustable Apparatus and System
for Selectively Controlling the Air-Fuel
Ratio Supplied to a Combustion Engine
4,558,673 12/17/85 Electronic Ignition System For Internal
Combustion Engines
4,573,376 03/04/86 Method of Producing Thread Die
4,576,033 03/18/86 Thread Rolling Die Construction
4,578,945 04/01/86 Limiter for Gas Turbine Fuel Control
4,605,235 08/12/86 Shaft Seal Assembly for Fuel Pumps
4,608,820 09/02/86 Dual Stepper Motor Actuator
</TABLE>
<PAGE> 64
ANNEX G
Page 5
<TABLE>
<CAPTION>
<S> <C> <C>
4,608,880 09/02/86 Push Pull Multiplier Linkage
4,611,093 09/09/86 Electric Bushing Having Replaceable Stud
4,628,797 12/16/86 Rotary Actuator
4,629,394 12/16/86 Centrifugal Pump with Low Flow Diffuser
4,631,947 12/30/86 Thread Rolling Dies
4,643,635 02/17/87 Vapor Core Pump with Impeller
4,666,348 05/19/87 Cutter for Thread Rolling Dies
4,669,735 06/02/87 Fail Safe High Pressure Seal
4,681,178 06/21/87 Vehicular Intake Scoop
4,711,619 12/08/87 Fuel Pump with Reduced Displacement
4,713,954 12/22/87 Self Pointing Thread Rolling Dies
4,716,751 01/05/88 Non-Slip Thread Rolling Dies
4,736,155 04/05/88 Transducer Temperature Control
4,736,331 04/05/88 Helicopter Hover Indicator
4,754,927 07/05/88 Control Vanes
4,793,133 12/27/88 Manual Backup/Fuel Control
4,793,219 12/27/88 Method of Manufacturing Thread Rolling
Dies
4,804,313 02/14/89 Side Channel Fuel Pump
4,873,955 10/17/89 Idle Air Flow Shutoff Valve
4,929,260 05/29/90 Adjustable Air Cleaner Fastening Assembly
4,969,444 11/13/90 Transfer System for Comb Engine Fuel
</TABLE>
<PAGE> 65
ANNEX G
Page 6
<TABLE>
<CAPTION>
<S> <C> <C>
5,010,487 04/23/91 Engine Diagnostic Program
5,012,780 05/07/91 Stand Alone Fuel Injection System
5,020,316 06/04/91 Helicopter Control with Decay
Anticipation
5,230,952 06/27/93 Improved Friction Material
5,208,540 05/04/93 Ignition Performance Monitor and
Monitoring Method for Capacitive
Discharge Ignition Systems
5,297,520 03/29/94 Fuel Supply System With High Turn Down
Ratio
5,367,875 11/29/94 Automated Catalytic Reduction System
Des.348,429 07/05/94 Insulating Cover for Pole Bracket
Supports
5,413,466 5/9/95 Unified Fuel Pump Assembly
5,490,387 2/13/96 Flame-Out Resistant Fuel Pumping System
5,545,014 8/13/96 Variable Displacement Vane Pump,
Component Parts and Method
5,545,018 8/13/96 Variable Displacement Vane Pump Having
Floating Ring Seal
5,551,404 9/3/96 Fuel Injection System For Marine Engines
5,556,271 9/17/96 Valve System for Capacity Control of a
Screw Compressor and Method of
Manufacturing Such Valves
5,694,682 12/9/97 Valve System for Capacity Control of a
Screw Compressor and Method of
Manufacturing Such Valves
</TABLE>
<PAGE> 66
ANNEX G
Page 7
<TABLE>
<CAPTION>
<S> <C> <C>
5,713,724 2/3/98 System and Methods for Controlling
Rotary Screw Compressors
5,716,201 2/10/98 Variable Displacement Vane PumpWith Vane
Tip Relief
5,726,891 3/10/98 Surge Detection System Using Engine
Signature
5,733,109 3/31/98 Variable Displacement Vane PumpWith
Regulated Vane Loading
</TABLE>
<PAGE> 67
ANNEX G
Page 8
<TABLE>
<CAPTION>
Pending Applications:
Serial No. Filing Date Description
- ---------- ----------- -----------
<S> <C> <C>
08/500,297 July 10, 1995 Variable Displacement Vane Pump
Adjustable By Low Actuation Loads
08/509,400 July 31, 1995 Variable Displacement Vane Pump Having
Cam Seal With Seal Land
08/544,374 October 17, 1995 Low Actuation Friction Cam Seal
08/890,144 July 9, 1997 Floating Wrist Pin for Piston Assembly
08/946,635 October 8, 1997 System and Methods for Controlling
Rotary Screw Compressors
08/960,388 October 29, 1997 Method and Apparatus for Adjusting the
Rotors of a Rotary Screw Compressor
</TABLE>
<PAGE> 68
Annex H
to
Company Security Agreement
UNITED STATES COPYRIGHT REGISTRATIONS
OWNED BY COLTEC INDUSTRIES INC
<TABLE>
<CAPTION>
Registration No. Effective Date Description
- ---------------- -------------- -----------
<S> <C> <C>
VAu 338-209 May 9, 1996 TA-7 Fuel Control System Technical
Drawings Volume #1
VAu 338-210 May 9, 1996 TA-7 Fuel Control System Technical
Drawings Volume #2
VAu 338-212 May 9, 1996 TA-7 Fuel Control System Technical
Drawings Volume #3
VAu 338-211 May 9, 1996 TA-7 Fuel Control System Technical
Drawings Volume #4
</TABLE>
<PAGE> 1
EXHIBIT 4.9
AMENDED AND RESTATED SUBSIDIARIES PLEDGE AGREEMENT
PLEDGE AGREEMENT, (this "Agreement") dated as of March 24,
1992, amended and restated as of December 18, 1996 and further amended and
restated as of March 16, 1998, made by each of the undersigned (each a "Pledgor"
and collectively the "Pledgors"), to BANKERS TRUST COMPANY, as Collateral Agent
(the "Pledgee") for the benefit of the Secured Creditors (as defined below)
(except as otherwise defined herein, terms used herein and defined in the Credit
Agreement shall be used herein as therein defined).
W I T N E S S E T H :
WHEREAS, Coltec Industries Inc (the "Company"), Coltec
Aerospace Canada Ltd., the financial institutions (the "Banks") from time to
time party thereto, Bank of America National Trust and Savings Association, as
Documentation Agent (in such capacity, the "Documentation Agent"), The Chase
Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication
Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the
"Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent
(together with any successor administrative agent, the "Administrative Agent"
and together with the Pledgee, the Documentation Agent, the Syndication Agent,
the Canadian Paying Agent and the Banks and their respective successors and
assigns, and together with any other financial institutions from time to time
party to the Credit Agreement hereinafter referred to, the "Bank Creditors"),
have entered into a Credit Agreement, dated as of March 24, 1992, and amended
and restated as of January 11, 1994, and further amended and restated as of
December 18, 1996, and as further amended, providing for the making of Loans to
the Borrowers and the issuance of, and participation in, Letters of Credit, all
as contemplated therein (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this paragraph, as the same has been, and
may from time to time in the future be, amended, modified, extended, renewed,
replaced, restated, supplemented or refinanced from time to time, and including
any agreement extending the maturity of, or refinancing or restructuring
(including, but not limited to, the inclusion of additional guarantors or
additional borrowers thereunder that are Subsidiaries of the Company and whose
obligations are guaranteed by the Company thereunder or any increase in the
amount borrowed) of all or any portion of, the Indebtedness under such agreement
or any successor agreements, whether or not with the same agent, trustee,
representative, financial institutions or holders; provided that, with respect
to any agreement providing for the refinancing or replacement of Indebtedness
under the Credit Agreement, such agreement shall only be treated as, or as part
of, the Credit Agreement hereunder if (i) either (A) all obligations under the
Credit Agreement being refinanced or replaced shall be paid in full at the time
of such refinancing or replacement, and all commitments and letters of credit
issued pursuant to the refinanced or replaced Credit Agreement shall have
terminated in accordance with their terms or (B) the Required Banks shall have
consented in writing to the refinancing or replacement Indebtedness being
treated, along with their Indebtedness, as Indebtedness pursuant to the Credit
Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred
under the Credit Agreement being refinanced (if such Credit Agreement is to
remain outstanding) and (iii) a notice to the effect that the refinancing or
replacement Indebtedness shall be treated as issued under the Credit Agreement
shall be delivered by the Company to the Pledgee);
<PAGE> 2
2
WHEREAS, the Company and its Subsidiaries may at any time and
from time to time enter into (or guarantee obligations under) one or more of the
following agreements: (i) interest rate protection agreements (including,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements), (ii) foreign exchange contracts, currency swap agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (collectively, the "Interest Rate Protection or Other Hedging Agreements")
with one or more Bank Creditors or affiliates of Bank Creditors (each such Bank
Creditor or affiliate, even if the respective Bank Creditor subsequently ceases
to be a Bank under the Credit Agreement for any reason, together with such Bank
Creditor's or affiliate's successors and assigns, collectively, the "Interest
Rate Protection Creditors");
WHEREAS, the Company may issue New Senior Notes and New Senior
Exchange Notes as provided in the Credit Agreement that may be (to the extent
permitted pursuant to the Credit Agreement) (x) guaranteed by various of the
Pledgors pursuant to a subsidiary guarantee (the "Senior Note Subsidiaries
Guaranty") and (y) equally and ratably secured hereunder with the Credit
Agreement Obligations as hereinafter provided (with any holders of New Senior
Notes and New Senior Exchange Notes from time to time being herein collectively
called "Senior Noteholders" and with all documentation evidencing any New Senior
Notes or New Senior Exchange Notes, including without limitation the indenture
and any Senior Note Subsidiaries Guaranty to be entered into in connection with
the New Senior Notes, being herein called "Senior Note Documents");
WHEREAS, each Pledgor is a direct or indirect Subsidiary of
the Company and, as such, will receive benefits from the above-described
extensions of credit;
WHEREAS, each Pledgor has entered into a guaranty dated as of
March 24, 1992 and amended and restated as of December 18, 1996 (the
"Subsidiaries Guaranty") pursuant to which each Pledgor has unconditionally
guaranteed any and all obligations and liabilities of the Company under, or with
respect to, the Credit Documents and the Interest Rate Protection or Other
Hedging Agreements;
WHEREAS, certain of the Pledgors have heretofore entered into
a Pledge Agreement, dated as of March 24, 1992 (as amended, modified or
supplemented prior to the date hereof, the "Original Subsidiaries Pledge
Agreement");
WHEREAS, it is a condition to the extensions of credit under
the Credit Agreement and to the obligations of the initial purchasers of the New
Senior Notes under the purchase agreement to be entered into in connection with
the issuance by the Company of the New Senior Notes that each Pledgor shall have
executed and delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to (i)
satisfy the conditions described in the preceding paragraph and (ii) amend and
restate the Original Subsidiaries Pledge Agreement.
NOW, THEREFORE, in consideration of the extensions of credit
to be made to each Pledgor under the Credit Agreement and to the obligations of
the initial purchasers of the New Senior Notes under the purchase agreement to
be entered into in connection with the issuance by the Company of the New Senior
Notes and other benefits accruing to each Pledgor, the receipt and
<PAGE> 3
3
sufficiency of which are hereby acknowledged, each Pledgor hereby makes the
following representations and warranties to the Pledgee for the ratable benefit
of the Secured Creditors and hereby covenants and agrees with the Pledgee for
the ratable benefit of the Secured Creditors as follows:
1. SECURITY FOR OBLIGATIONS, ETC. This Agreement is made by
each Pledgor for the ratable benefit of the Bank Creditors, the Interest Rate
Protection Creditors and the Senior Noteholders, in each case to the extent from
time to time holding Obligations (as defined below) of such Pledgor secured
hereunder (collectively, and together with the Pledgee, the "Secured
Creditors"), to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness of such Pledgor whether now existing or hereafter incurred
under, arising out of or in connection with the Subsidiaries Guaranty
and the due performance and compliance by such Pledgor with all of the
terms, conditions and agreements contained in the Subsidiaries Guaranty
(all such obligations, liabilities and indebtedness described in this
clause (i) being herein collectively called the "Credit Agreement
Obligations");
(ii) without duplication of the obligations, liabilities and
indebtedness covered by the foregoing clause (i), the full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations (including obligations which, but for the
automatic stay under Section 362(a) of the Bankruptcy Code, would
become due), liabilities and indebtedness of such Pledgor to the
Interest Rate Protection Creditors, now existing or hereafter incurred
under, arising out of or in connection with any Interest Rate
Protection or Other Hedging Agreement (including, without limitation,
all such obligations and liabilities of such Pledgor under any
guarantee by it of obligations pursuant to any Interest Rate Protection
or Other Hedging Agreement), and the due performance of, and compliance
with, all of the terms, conditions and agreements contained therein by
such Pledgor (all such obligations, liabilities and indebtedness
described in this clause (ii) being herein collectively called the
"Interest Rate Protection Obligations");
(iii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness of such Pledgor whether now existing or hereafter incurred
under, arising out of or in connection with the Senior Note
Subsidiaries Guaranty and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained in
the Senior Note Subsidiaries Guaranty (all such obligations,
liabilities and indebtedness described in this clause (iii) being
herein collectively called the "Senior Note Obligations");
(iv) (x) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral in a manner not in violation of the
terms hereof and (y) any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Pledgee
<PAGE> 4
4
in performing its duties hereunder, or in any way relating to or
arising out of its actions as Pledgee in respect of the Pledge
Agreement except for those resulting solely from the Pledgee's own
gross negligence or willful misconduct;
(v) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of such
Pledgor referred to in clauses (i) through (iv) above, after an Event
of Default (such term, as used in this Agreement, shall mean any Event
of Default at any time under, and as defined in, any of the Credit
Agreement and the Senior Note Documents and any payment default (after
the expiration of any applicable grace period) on any of the
Obligations (as defined below) secured hereunder at such time) shall
have occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of
or realizing on the Collateral, or of any exercise by the Pledgee of
its rights hereunder, together with reasonable attorneys' fees and
court costs; and
(vi) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (vi) of this Section 1 being herein collectively called the
"Obligations;" provided that it is acknowledged and agreed that the
"Obligations" shall include extensions of credit of the types described above,
whether outstanding on the date of this Agreement or extended from time to time
after the date of this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein, (i) the term "Stock" shall mean (x) with respect to corporations
incorporated under the laws of the United States or any State or territory
thereof (other than Garlock Bearings, Inc.) (each a "Domestic Corporation"), all
of the issued and outstanding shares of capital stock of any Domestic
Corporation at any time owned by any Pledgor and (y) with respect to
corporations that are not Domestic Corporations (each a "Foreign Corporation"),
all of the issued and outstanding shares of capital stock of any Foreign
Corporation at any time owned by any Pledgor, provided that, except as provided
in the last sentence of this Section 2, each Pledgor shall not be required to
pledge hereunder more than 66% of the total combined voting power of all classes
of capital stock of any Foreign Corporation entitled to vote and (ii) the term
"Notes" shall mean (x) all promissory notes at any time issued to any Pledgor by
any of its Subsidiaries or Affiliates and (y) all other promissory notes from
time to time issued to, or held by, any Pledgor, provided that, except as
provided in the last sentence of this Section 2, no Pledgor shall be required to
pledge hereunder any promissory notes issued to such Pledgor by any Subsidiary
of such Pledgor which is a Foreign Corporation. As used herein, the term
"Securities" shall mean all of the Stock and Notes. Each Pledgor represents and
warrants, as to the stock of corporations and promissory notes owned by such
Pledgor, that on the Fifth Amendment Effective Date (a) the Stock of such
Pledgor consists of the number and type of shares of the stock of the
corporations as described under the name of such Pledgor in Part I of Annex A
hereto; (b) such Stock constitutes that percentage of the issued and outstanding
capital stock of the issuing corporation as is set forth in Part I of Annex A
hereto; (c) the Notes of such Pledgor consist of the promissory notes described
in Part II of Annex A hereto where such Pledgor is listed as the "Lender"; and
(d) such Pledgor is the holder of record and sole beneficial owner of the Stock
so shown under its name and there exist no options or preemption rights in
respect of any such Stock. In the circumstances and only to the extent provided
in Section 8.11 of the Credit Agreement, the 66% limitation set forth in
<PAGE> 5
5
clause (i)(y) and the limitation set forth in the proviso contained in clause
(ii) of this Section 2 and the last sentence of Section 3.2 shall no longer be
applicable.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes
set forth in Section 1, each Pledgor hereby (i) grants to the Pledgee a security
interest in all of the Collateral, (ii) pledges and deposits as security with
the Pledgee the Securities owned by such Pledgor on the date hereof, and
delivers to the Pledgee certificates therefor, duly endorsed in blank in the
case of promissory notes and accompanied by undated stock powers duly executed
in blank by such Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such securities, with signatures appropriately
guaranteed) in the case of capital stock or such other instruments of transfer
as are acceptable to the Pledgee and (iii) assigns, transfers, hypothecates,
mortgages, charges and sets over to the Pledgee all of such Pledgor's right,
title and interest in and to such Securities (and in and to the certificates or
instruments evidencing such Securities), to be held by the Pledgee, upon the
terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If any Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities at
any time or from time to time after the date hereof, such Pledgor will promptly
thereafter pledge and deposit such Securities (or certificates or instruments
representing Securities) as security with the Pledgee and deliver to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
by such Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such securities, with signatures appropriately
guaranteed) in the case of capital stock, or such other instruments of transfer
as are acceptable to the Pledgee, and will promptly thereafter deliver to the
Pledgee a certificate executed by a principal executive officer of such Pledgor
describing such Securities and certifying that the same have been duly pledged
with the Pledgee hereunder. Subject to the last sentence of Section 2, no
Pledgor shall be required at any time to pledge hereunder any promissory notes
issued to such Pledgor by a Subsidiary of such Pledgor which is a Foreign
Corporation or more than 66% of the total combined voting power of all classes
of capital stock of any Foreign Corporation entitled to vote.
3.3. Uncertificated Securities. Notwithstanding anything to
the contrary contained in Sections 3.1 and 3.2, if any Securities (whether not
owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law. Each Pledgor further agrees to take such actions as the Pledgee
deems necessary or desirable to effect the foregoing and to permit the Pledgee
to exercise any of its rights and remedies hereunder, and agrees to provide an
opinion of counsel reasonably satisfactory to the Pledgee with respect to any
such pledge of uncertificated Securities promptly upon request of the Pledgee.
3.4. Definitions of Pledged Stock; Pledged Notes; Pledged
Securities and Collateral. (a) All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock"; all Notes at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Notes"; all Pledged Stock and Pledged Notes together are called the
"Pledged Securities"; and the Pledged Securities together with all proceeds
thereof, including any securities and moneys received and at the time held by
the Pledgee hereunder, are hereinafter called the "Collateral."
<PAGE> 6
6
(b) If (i) a Bankruptcy Default or Notified Acceleration Event
(as each such term is defined in the Subsidiaries Security Agreement, provided,
however, references therein to "Assignor" and the "Collateral Agent" shall be
references to each Pledgor and the Pledgee, respectively) has occurred and is
continuing, or (ii) any other Event of Default or Acceleration Event (as each
such term is defined in the Subsidiaries Security Agreement, provided, however,
references therein to "Assignor" and the "Collateral Agent" shall be references
to each Pledgor and the Pledgee, respectively) has occurred and is continuing,
but in the case of this clause (b) only if, and to the extent that, the Pledgee
(acting at the direction of the Required Secured Creditors (as defined in Annex
B hereto)) has given notice to any Pledgor to take the actions specified below
in this sentence, then in either such case all cash proceeds of, and cash
payments received in respect of, Collateral shall be paid by such Pledgor (or
the respective payor) as directed by the Pledgee. At any time while the
circumstances described in the immediately preceding sentence do not exist, all
cash payments received in respect of the Collateral, but excluding cash proceeds
of sales of Collateral unless the respective sale and release of Collateral is
permitted pursuant to this Agreement and the Credit Agreement, shall be paid to
such Pledgor.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of the respective Pledgor, endorsed
or assigned in blank or in favor of the Pledgee or any nominee or nominees of
the Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO SPECIFIED EVENT OF DEFAULT. Unless
and until there shall have occurred and be continuing (i) a Bankruptcy Default
or Notified Acceleration Event or (ii) any other Event of Default or
Acceleration Event, but in the case of this clause (ii) only to the extent the
Pledgee (acting at the direction of the Required Secured Creditors) has so
notified each Pledgor, each Pledgor shall be entitled to vote any and all
Pledged Securities owned by it and to give consents, waivers or ratifications in
respect thereof, provided that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate, result in a breach
of any covenant contained in, or be inconsistent with, any of the terms of this
Agreement, the Credit Agreement, any other Credit Document, any Interest Rate
Protection or Other Hedging Agreement or any Senior Note Document, or which
would have the effect of impairing the value of the Collateral (other than any
impairment in the form of a decline in the market value of a Pledged Security
which occurred solely as a result of any vote relating to the manner in which
the business of the corporation issuing such Pledged Security is to be conducted
to the extent such Pledgor shall have voted the Pledged Securities owned by it
in good faith and in accordance with its prudent business judgment) or any part
thereof or the rights, priorities, remedies, position or interests of the
Pledgee or any Secured Creditor. All such rights of each Pledgor to vote and to
give consents, waivers and ratifications shall cease in case either (i) a
Bankruptcy Default or Notified Acceleration Event shall occur and be continuing
or (ii) any other Event of Default or Acceleration Event has occurred and is
continuing but in the case of this clause (ii) only to the extent the Pledgee
(acting at the direction of the Required Secured Creditors) has so notified the
respective Pledgor, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there
shall have occurred and be continuing (i) a Bankruptcy Default or Notified
Acceleration Event or (ii) any other Event of Default or Acceleration Event, but
in the case of this clause (ii) only to the extent the Pledgee
<PAGE> 7
7
(acting at the direction of the Required Secured Creditors) has so notified the
respective Pledgor, all dividends and distributions payable in respect of the
Pledged Stock and all payments in respect of the Pledged Notes shall be paid to
the respective Pledgor. The Pledgee also shall be entitled to receive directly,
and to retain as part of the Collateral:
(a) all other or additional stock or securities paid or
distributed by way of dividend or otherwise, as the case may be, in
respect of the Pledged Stock;
(b) all other or additional stock or other securities paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(c) all other or additional stock or other securities or
property (excluding cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 shall be received in trust for the benefit of the Pledgee, shall
be segregated from other property or funds of such Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).
7. REMEDIES IN CASE OF SPECIFIED EVENTS OF DEFAULT. If there
shall have occurred and be continuing (i) a Bankruptcy Default or Notified
Acceleration Event or (ii) any other Event of Default or Acceleration Event, but
in the case of this clause (ii) only to the extent the Required Secured
Creditors have so directed, then, and in every such case, the Pledgee shall be
entitled to exercise all of the rights, powers and remedies (whether vested in
it by this Agreement or any other Credit Document, any Interest Rate Protection
or Other Hedging Agreement or any Senior Note Documents, in each case to the
extent then in effect and secured hereby (with all of the documents listed above
being herein collectively called the "Secured Debt Documents") or by law) for
the protection and enforcement of its rights in respect of the Collateral, and
the Pledgee shall be entitled to exercise all the rights and remedies of a
secured party under the Uniform Commercial Code and also shall be entitled,
without limitation, to exercise the following rights, which each Pledgor hereby
agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 to any Pledgor;
(b) to transfer all or any part of the Collateral into the
Pledgee's name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect
upon any Pledged Note;
(d) to vote all or any part of the Pledged Stock (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the
<PAGE> 8
8
Collateral and otherwise act with respect thereto as though it were the
outright owner thereof (each Pledgor hereby irrevocably constituting
and appointing the Pledgee the proxy and attorney-in-fact of such
Pledgor, with full power of substitution to do so); and
(e) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by each Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine, provided that at least 10 days' notice of the time and place
of any such sale shall be given to such Pledgor. The Pledgee shall not
be obligated to make any such sale of Collateral regardless of whether
any such notice of sale has theretofore been given. Each Pledgor hereby
waives and releases to the fullest extent permitted by law any right or
equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise. At
any such sale, unless prohibited by applicable law, the Pledgee on
behalf of the Secured Creditors may bid for and purchase all or any
part of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any Secured Creditor shall be
liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Pledgee provided for in this Agreement or any other Secured Debt
Document or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Document or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. No notice to or demand
on any Pledgor in any case shall entitle such Pledgor to any other or further
notice or demand in similar or other circumstances or constitute a waiver of any
of the rights of the Pledgee or any other Secured Creditor to any other or
further action in any circumstances without notice or demand. The Secured
Creditors agree that this Agreement may be enforced only by the action of the
Pledgee acting upon the instructions of the Required Secured Creditors and that
no other Secured Creditor shall have any right individually or as a group,
directly or indirectly, to seek to enforce or to enforce this Agreement or to
realize upon the security to be granted hereby or to cause the Pledgee or the
Required Secured Creditors to take or cause to be taken any action in respect of
this Agreement (except as expressly contemplated hereby), it being understood
and agreed that such rights and remedies may be exercised only by the Pledgee
for the ratable benefit of all Secured Creditors upon the terms and conditions
of this Agreement, it being further understood and agreed that nothing in this
Agreement shall affect the rights of the Secured Creditors to accelerate their
respective Obligations in accordance with their respective Secured Debt
Documents.
<PAGE> 9
9
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied as follows:
(i) first, to the payment of all Obligations owing to the
Collateral Agent of the type provided in clauses (iv) and (v) of the
definition of Obligations;
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations shall be paid to the Secured
Creditors as provided in Section 9(e), with each Secured Creditor
receiving an amount equal to its outstanding Primary Obligations or, if
the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations shall be paid to the
Secured Creditors as provided in Section 9(e), with each Secured
Creditor receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insufficient to pay in full all
such Secondary Obligations, its Pro Rata Share of the amount remaining
to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 18, to the respective Pledgor or to whomever may be lawfully
entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount, without duplication, of such
Secured Creditor's Primary Obligations or Secondary Obligations, as the case may
be, of the respective Pledgor and the denominator of which is the then
outstanding amount of all Primary Obligations or Secondary Obligations, as the
case may be, of the respective Pledgor, (y) "Primary Obligations" shall mean (i)
in the case of the Subsidiaries Guaranty, all obligations and liabilities of
each Pledgor arising out of or in connection with the principal of, and interest
on, all Loans, all Unpaid Drawings theretofore made (together with all interest
accrued thereon), and the aggregate Stated Amounts of all Letters of Credit
issued (or deemed issued) under the Credit Agreement and outstanding, and all
Fees outstanding and unpaid at the relevant time, (ii) in the case of the Senior
Note Subsidiaries Guaranty, all obligations and liabilities of each Pledgor
arising out of or in connection with the principal of, and interest on, the New
Senior Notes and the New Senior Exchange Notes and (iii) in the case of the
Interest Rate Protection or Other Hedging Agreements, all amounts due under the
Interest Rate Protection or Other Hedging Agreements (other than indemnities,
fees (including, without limitation, attorneys' fees) and similar obligations
and liabilities), and (z) "Secondary Obligations" shall mean all Obligations
secured hereby other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes
<PAGE> 10
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of making determinations under this Section 9 only) (i) first, to the Primary
Obligations and (ii) second, to the Secondary Obligations. If any payment to any
Secured Creditor of its Pro Rata Share of any distribution would result in
overpayment to such Secured Creditor, such excess amount shall instead be
distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each
Secured Creditor whose Primary Obligations or Secondary Obligations, as the case
may be, have not been paid in full to receive an amount equal to such excess
amount multiplied by a fraction the numerator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of such Secured
Creditor and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to
such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued under the Credit Agreement,
such amounts shall be paid to the Paying Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Bank Creditors as such. If
any amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Bank Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Paying Agent to the Collateral Agent for
distribution in accordance with Section 9(a).
(e) Except as set forth in Section 9(d), all payments required
to be made here under shall be made (i) if to the Bank Creditors, to the Paying
Agent under the Credit Agreement for the account of the Bank Creditors, and (ii)
if to any other Secured Creditors (other than the Collateral Agent), to the
trustee, paying agent or other similar representative (each a "Representative")
for such Secured Creditors or, in the absence of such a Representative, directly
to the other Secured Creditors.
(f) For purposes of applying payments received in accordance
with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the
Paying Agent under the Credit Agreement and (ii) the Representative for any
other Secured Creditors or, in the absence of such a Representative, upon the
respective Secured Creditors for a determination (which the Paying Agent, each
Representative for any other Secured Creditors and the Secured Creditors agree
(or shall agree) to provide upon request of the Collateral Agent) of the
outstanding Primary Obligations and Secondary Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Representative for any Secured Creditor or directly from a Secured
Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be
entitled to assume that no Interest Rate Protection or Other Hedging Agreements
are in existence.
(g) It is understood and agreed that each Pledgor shall remain
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral pledged by it hereunder and the aggregate amount of the Obligations
of such Pledgor.
Notwithstanding anything to the contrary in this Agreement (including Annex B),
(i) all actions required or permitted to be taken under this Agreement by the
Senior Noteholders shall be so taken only by the trustee under the indenture
under which the Senior Notes were issued on behalf of the Senior Noteholders
(the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all
payments required to be made with respect to the Senior Note Obligations shall
be paid to the Senior
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Notes Trustee, and the Pledgee shall be entitled (but not required) to
conclusively rely upon and act in accordance with any instructions from the
Senior Notes Trustee subject to the terms and conditions of this Agreement and
to assume that such instructions are being given in accordance with such
indenture.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of sale proceeds by the
Pledgee or the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Pledgee or such officer or be answerable in any
way for the misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees to
indemnify and hold harmless the Pledgee and each other Secured Creditor (other
than the Senior Noteholders) and their respective successors, assigns,
employees, agents, servants and Representatives (including the Administrative
Agent) hereunder (individually an "Indemnitee," and collectively the
"Indemnitees") from and against any and all claims, demands, losses, judgments
and liabilities (including liabilities for penalties) of whatsoever kind or
nature, and to reimburse each Indemnitee for all costs and expenses, including
reasonable attorneys' fees, in each case growing out of or resulting from this
Agreement or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under the other Credit Documents or the Interest Rate Protection
and Other Hedging Agreements, provided that the Pledgors shall not be required
to indemnify any Indemnitee in respect of any claims, demands, losses,
judgments, liabilities, costs or expenses to the extent arising from the gross
negligence or willful misconduct of such Indemnitee. In no event shall any
Indemnitee be liable, in the absence of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Agreement other
than to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of the Pledgors under this
Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such Pledgor's
own expense, file and refile under the applicable Uniform Commercial Code or
other applicable law such financing statements, continuation statements and
other documents in such offices as the Pledgee may deem necessary or appropriate
and wherever required or permitted by law in order to perfect and preserve the
Pledgee's security interest in the Collateral and hereby authorizes the Pledgee
to file financing statements and amendments thereto relative to all or any part
of the Collateral without the signature of such Pledgor where permitted by law,
and agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
the Pledgee may reasonably require or deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee as its
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's
<PAGE> 12
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discretion to take any action and to execute any instrument which the Pledgee
may reasonably deem necessary or advisable to accomplish the purposes of this
Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth in Annex B hereto, the terms of which shall be
deemed incorporated herein by reference as fully as if same were set forth
herein in their entirety.
14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the Credit Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS.
Each Pledgor represents and warrants that (a) it is, or at the time when pledged
hereunder will be, the legal, record and beneficial owner of, and has (or will
have) good and marketable title to, all Securities pledged by it hereunder,
subject to no Lien, except the Lien created by this Agreement; (b) it has full
corporate power, authority and legal right to pledge all the Securities pledged
by it pursuant to this Agreement; (c) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms
except to the extent the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law); (d) except to the extent already obtained, no consent of
any other party (including, without limitation, any stockholder or creditor of
such Pledgor or any of its Subsidiaries) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
to be obtained by such Pledgor in connection (i) with the execution, delivery or
performance of this Agreement, (ii) the validity or enforceability of this
Agreement, (iii) the perfection or enforceability of the Pledgee's security
interest in the Collateral or (iv) the exercise by the Pledgee of any of its
rights or remedies provided herein; (e) the execution, delivery and performance
of this Agreement will not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign applicable to such
Pledgor, or of the Certificate of Incorporation or By-Laws of such Pledgor or of
any securities issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, lease, loan agreement, credit agreement or other material
contract, agreement or instrument or undertaking to which such Pledgor or any of
its Subsidiaries is a party or which purports to be binding upon such Pledgor or
any of its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition of any Lien or encumbrance on any of the
assets of such Pledgor or any of its Subsidiaries except as contemplated by this
Agreement; (f) all the shares of the Stock have been duly and validly issued,
are fully paid and nonassessable and are subject to no options to purchase or
similar rights; (g) each of the Pledged Notes, when executed by the obligor
thereof, will be the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and equitable principles (regardless
<PAGE> 13
13
of whether enforcement is sought in equity or at law); and (h) the pledge,
assignment and delivery of the Securities pursuant to this Agreement creates a
valid and perfected first priority Lien in such Securities, and the proceeds
thereof (other than any cash proceeds thereof to the extent not required to be
delivered to the Pledgee pursuant to the terms hereof), subject to no Lien or to
any agreement purporting to grant to any third party a Lien on the property or
assets of such Pledgor which would include the Securities. Each Pledgor
covenants and agrees that it will defend the Pledgee's right, title and security
interest in and to the Securities and the proceeds thereof against the claims
and demands of all Persons whomsoever; and each Pledgor covenants and agrees
that it will have like title to and right to pledge any other property at any
time hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend the right thereto and security interest therein of the Pledgee and the
other Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Document or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement;
(iii) any furnishing of any additional security to the Pledgee or its assignee
or any acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; (v) any
limitation on any other Pledgor's liability or obligations under this Agreement,
the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or any other
Secured Debt Document or any invalidity or unenforceability, in whole or in
part, of this Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries
Guaranty or any other Secured Debt Documents or any term thereof; or (vi) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to such Pledgor or any Subsidiary
of such Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not
such Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any
other Event of Default or Acceleration Event, but in the case of this clause
(ii) only to the extent the Required Secured Creditors have so directed then,
and in every such case, upon receipt by any Pledgor from the Pledgee of a
written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, such Pledgor
as soon as practicable and at its expense will use its best efforts to cause
such registration to be effected (and be kept effective) and will use its best
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation, registration
under the Securities Act of 1933, as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements, provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in
<PAGE> 14
14
connection with any such registration, qualification or compliance. Such Pledgor
will cause the Pledgee to be kept reasonably advised in writing as to the
progress of each such registration, qualification or compliance and as to the
completion thereof, will furnish to the Pledgee such number of prospectuses,
offering circulars or other documents incident thereto as the Pledgee from time
to time may reasonably request, and will indemnify the Pledgee and all others
participating in the distribution of such Pledged Stock against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to such Pledgor by the Pledgee expressly for
use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale, and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as
defined below), without any action on the part of any Secured Creditor, this
Agreement shall terminate and be of no further force or effect (provided that
all indemnities set forth herein including, without limitation, in Section 11
hereof shall survive any such termination) and the Pledgee, at the request and
expense of the respective Pledgor, will execute and deliver to such Pledgor a
proper instrument or instruments acknowledging the satisfaction and termination
of this Agreement, and will duly assign, transfer and deliver to such Pledgor
(without recourse and without any representation or warranty) such of the
Collateral of such Pledgor as may be in the possession of the Pledgee and has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee hereunder.
As used in this Agreement, "Termination Date" shall mean the first to occur of
(i) that date upon which the Total Commitment and all Interest Rate Protection
or Other Hedging Agreements have been terminated, no Note under the Credit
Agreement is outstanding, all Letters of Credit have been terminated and all
other Credit Agreement Obligations (excluding normal continuing indemnity
obligations which survive in accordance with their terms, so long as no amounts
are then due and payable in respect thereof) then owing by the Pledgors have
been paid in full, (ii) that date upon which the Collateral is automatically
released pursuant to the first sentence
<PAGE> 15
15
of Section 26 of Part I of the Fifth Amendment to Credit Agreement or the
Administrative Agent directs the Pledgee to release the Collateral pursuant to
the second sentence of Section 26 of Part I of the Fifth Amendment to the Credit
Agreement and (iii) that date upon which the Credit Documents are amended to
release all Collateral subject to this Agreement.
(b) In the event that any Pledgor is released from its
obligations pursuant to the Subsidiaries Guaranty in accordance with the terms
thereof, then such Pledgor shall cease to be a Pledgor hereunder and the
Pledgee, at the request and expense of the respective Pledgor, will execute and
deliver to such Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement as to such Pledgor, and will duly
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral pledged by such Pledgor as
may be in possession of the Pledgee and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys of such Pledgor at the time held by the Pledgee hereunder.
(c) It is expressly acknowledged and agreed that the
Collateral may be sold from time to time to the extent permitted by, and in
accordance with the terms of, the Credit Agreement. In addition, it is expressly
acknowledged and agreed that any or all of the Collateral may be released by the
Pledgee acting at the direction of the Required Secured Creditors. Upon any sale
of the type described in the second preceding sentence or release of any such
Collateral as provided in the immediately preceding sentence, the Pledgee shall,
at the request and expense of the respective Pledgor, and without the further
consent of, or liability to, any Secured Creditor, release such Collateral and
execute and deliver to such Pledgor a proper instrument or instruments
acknowledging the release of such Collateral from this Agreement, and will duly
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) the Collateral being sold or released as described
above. Notwithstanding anything to the contrary contained above in this Section
18(c), in the event the Senior Notes Trustee shall have notified the Pledgee in
writing that the Senior Note Obligations have been accelerated in accordance
with the terms of the Senior Note Documents (and (x) the Senior Note Obligations
have not been paid in full and (y) the respective acceleration has not been
rescinded), the Collateral Agent shall not thereafter release any Collateral
pursuant to this Section 18(c) or consent to any termination of this Agreement,
except in each case with the prior written consent of the Senior Noteholders
holding a majority of the then outstanding Senior Note Obligations secured
hereby (or following the payment in full of the Senior Note Obligations or the
rescission of the respective acceleration).
(d) At any time that any Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a), (b) or (c), it shall
deliver to the Pledgee a certificate signed by its chief financial officer
stating that the release of the respective Collateral is permitted pursuant to
such Section 18(a), (b) or (c), and the Pledgee shall be entitled (but not
required) to conclusively rely thereon. If requested by the Pledgee (although
the Pledgee shall have no obligation to make any such request), such Pledgor
shall furnish appropriate legal opinions (from counsel acceptable to the
Pledgee) to the effect set forth in the immediately preceding sentence.
(e) Notwithstanding anything to the contrary contained above,
upon the presentment of satisfactory evidence to the Pledgee in its sole
discretion that all obligations evidenced by any Pledged Note have been repaid
in full, and that any payments received by any Pledgor were permitted to be
received by such Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon
the
<PAGE> 16
16
request and at the expense of the respective Pledgor, duly assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such Pledged Note if same is then in the possession of the Pledgee and
has not theretofore been sold or otherwise applied or released pursuant to this
Agreement. The Pledgee shall have no liability whatsoever to any Secured
Creditor as the result of any release of Collateral by it as permitted by this
Section 18. Upon any release of Collateral pursuant to Section 18(a), (b), (c),
(d) or (e), none of the Secured Creditors shall have any continuing right or
interest in such Collateral or the proceeds thereof.
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, addressed as follows:
(a) if to any Pledgor, at the address set forth opposite its
signature below:
with a copy to:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Thomas B. Jones, Jr.
Telephone: (704) 423-7052
Facsimile: (704) 423-7127
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Facsimile: (212) 250-7200
(c) if to any Bank Creditor (other than the Pledgee), either
(x) to the Administrative Agent, at the address of the Administrative
Agent specified in the Credit Agreement or (y) at such address as such
Bank Creditor shall have specified in the Credit Agreement;
(d) if to any other Secured Creditor, either (x) to the
Representative for such Secured Creditor at such address as such
Representative may have provided to the Pledgors and the Pledgee from
time to time, or (y) in the absence of such a Representative, directly
to such Secured Creditor at such address as such Secured Creditor shall
have specified in writing to each Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
<PAGE> 17
17
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Pledgor directly affected
thereby (it being understood that additional Pledgors may be added as parties
hereto from time to time in accordance with the Credit Agreement and Pledgors
may be released as parties hereto in accordance with Section 18(b), and that no
consent of any other Pledgor or of the Secured Creditors shall be required in
connection therewith) and the Pledgee (with the written consent of the Required
Banks (or all the Banks if required by Section 13.12 of the Credit Agreement));
provided, however, that any change, waiver, modification or variance materially
adversely affecting the rights and benefits of a single Class (as defined below)
of Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall also require the written consent of the Requisite Class Creditors (as
defined below) of such affected Class; provided, further, that any Class shall
not be considered to be affected differently from any other Class due to the
Obligations of any such other Class being paid, repaid, refinanced, renewed or
extended and the Collateral being released, in whole or in part (whether by
action of such other Class or otherwise), as security for such Class and such
other Class. Notwithstanding anything to the contrary contained above, it is
understood and agreed that the Required Banks may agree to modifications to this
Agreement for the purpose, among other things, of securing additional extensions
of credit (including, without limitation, pursuant to the Credit Agreement or
any refinancing or extension thereof). For the purpose of this Agreement, the
term "Class" shall mean, at any time, each class of Secured Creditors with
outstanding Obligations secured hereby at such time, i.e., (x) the Bank
Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the
Senior Noteholders as the holders of Senior Note Obligations secured hereby or
(z) the Interest Rate Protection Creditors as the holders of the Interest Rate
Protection Obligations secured hereby; provided that, without limiting the
foregoing, it is expressly acknowledged and agreed that other creditors may be
added as "Secured Creditors" hereunder (either as part of an existing Class of
creditors or as a newly created Class) with the consent of the Required Secured
Creditors, and that such addition shall not require the written consent of the
Requisite Class Creditors of the various Classes. For the purpose of this
Agreement, the term "Requisite Class Creditors" of any Class shall mean each of
(i) with respect to the Credit Agreement Obligations, the Required Banks and
(ii) with respect to any other Obligations, the holders of at least a majority
of all Obligations outstanding from time to time.
21. MISCELLANEOUS. This Agreement shall be binding upon the
respective successors and assigns of each Pledgor and shall inure to the benefit
of and be enforceable by the Pledgee and its successors and assigns; provided
that no Pledgor may assign any of its rights or obligations hereunder without
the prior written consent of the Pledgee (with the consent of the Required
Secured Creditors). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this
Agreement are for purposes of reference only and shall not limit or define the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which shall constitute one
instrument. In the event that any provision of this Agreement shall prove to be
invalid or unenforceable, such provision shall be deemed to be severable from
the other provisions of this Agreement which shall remain binding on all parties
hereto.
22. AMENDMENT AND RESTATEMENT. Upon the execution and delivery
of this Agreement by the parties hereto, the Original Subsidiaries Pledge
Agreement shall be amended, restated and superseded in its entirety by this
Agreement, effective as of the date hereof, with all
<PAGE> 18
18
rights, obligations and security interests created under or granted pursuant to
the Original Subsidiaries Pledge Agreement continuing from the date thereof.
<PAGE> 19
19
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused
this Agreement to be executed and delivered by their duly elected officers duly
authorized as of the date first above written.
Address:
AMI INDUSTRIES INC, as a Pledgor
By____________________________
Name:
Title:
CII HOLDINGS INC, as a Pledgor
By____________________________
Name:
Title:
COLTEC CANADA INC,
as a Pledgor
By____________________________
Name:
Title:
COLTEC INDUSTRIAL PRODUCTS INC,
as a Pledgor
By____________________________
Name:
Title:
COLTEC NORTH CAROLINA INC,
as a Pledgor
By____________________________
Name:
Title:
<PAGE> 20
20
COLTEC TECHNICAL SERVICES INC,
as a Pledgor
By____________________________
Name:
Title:
DELAVAN INC, as a Pledgor
By____________________________
Name:
Title:
GARLOCK INC, as a Pledgor
By____________________________
Name:
Title:
GARLOCK INTERNATIONAL INC,
as a Pledgor
By____________________________
Name:
Title:
GARLOCK OVERSEAS CORPORATION,
as a Pledgor
By____________________________
Name:
Title:
<PAGE> 21
21
HABER TOOL COMPANY INC, as a Pledgor
By____________________________
Name:
Title:
HOLLEY PERFORMANCE PRODUCTS INC,
as a Pledgor
By____________________________
Name:
Title:
JAMCO PRODUCTS, LLC, as a Pledgor
By____________________________
Name:
Title:
MENASCO AEROSYSTEMS INC,
as a Pledgor
By____________________________
Name:
Title:
COLTEC INTERNATIONAL SERVICES
CO., as a Pledgor
By____________________________
Name:
Title:
<PAGE> 22
22
STEMCO INC, as a Pledgor
By____________________________
Name:
Title:
WALBAR INC, as a Pledgor
By____________________________
Name:
Title:
BANKERS TRUST COMPANY, as Pledgee
By____________________________
Name:
Title:
<PAGE> 23
ANNEX A
ANNEX A
LIST OF PLEDGES STOCK AND PLEDGED NOTES
Part I. Pledged Stock
<TABLE>
<CAPTION>
Percentage of
Name of Issuing Corporation Type of Shares Number of Shares Outstanding Shares of
Capital Stock
<S> <C> <C> <C>
</TABLE>
<PAGE> 24
2
Part II. Pledged Notes
Principal
Lender Borrower Amount
<PAGE> 25
3
<PAGE> 26
ANNEX B
ANNEX B
THE PLEDGEE
1. Appointment. The Secured Creditors, by their acceptance of
the benefits of the Subsidiaries Pledge Agreement to which this Annex B is
attached (the "Pledge Agreement") hereby irrevocably designate the Collateral
Agent (and any successor Pledgee) to act as Pledgee as specified herein and
therein. Unless otherwise defined herein, all capitalized terms used herein (x)
and defined in the Pledge Agreement, are used herein as therein defined and (y)
not defined in the Pledge Agreement, are used herein as defined in the Credit
Agreement referenced in the Pledge Agreement. Each Secured Creditor hereby
irrevocable authorizes, and each holder of any Obligation by the acceptance of
such Obligation and by the acceptance of the benefits of the Pledge Agreement
shall be deemed irrevocably to authorize, the Pledgee to take such action on its
behalf under the provisions of the Pledge Agreement and any instruments and
agreements referred to therein and to exercise such powers and to perform such
duties thereunder as are specifically delegated to or required of the Pledgee by
the terms thereof and such other powers as are reasonably incidental thereto.
The Pledgee may perform any of its duties hereunder or thereunder by or through
its authorized agents, sub-agents or employees.
2. Nature of Duties. (a) The Pledgee shall have no duties or
responsibilities except those expressly set forth herein or in the Pledge
Agreement. The duties of the Pledgee shall be mechanical and administrative in
nature; the Pledgee (in such capacity) shall not have by reason of this
Agreement, any other Credit Document or any other Secured Debt Document a
fiduciary relationship in respect of any Secured Creditor; and nothing in this
Agreement, any other Credit Document or any other Secured Debt Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Pledgee any obligations in respect of the Pledge Agreement except as
expressly set forth herein and therein.
(b) The Pledgee shall not be responsible for insuring the Collateral or
for the payment of taxes, charges or assessments or discharging of Liens upon
the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Pledgee shall not be required to ascertain or inquire as to the
performance by any Pledgor of any of the covenants or agreements contained in
the Pledge Agreement, any other Credit Document or any other Secured Debt
Document.
(d) The Pledgee shall be under no obligation or duty to take any action
under, or with respect to, the Pledge Agreement if taking such action (i) would
subject the Pledgee to a tax in any jurisdiction where it is not then subject to
a tax , (ii) would require the Pledgee to qualify to do business, or obtain any
license, in any jurisdiction where it is not then so qualified or licensed or
(iii) would subject the Pledgee to in personam jurisdiction in any locations
where it is not then so subject.
(e) Notwithstanding any other provision of this Annex B, neither the
Pledgee nor any of its officers, directors, employees, affiliates or agents
shall, in its individual capacity, be personally liable for any action taken or
omitted to be taken by it in accordance with, or pursuant to this Annex B or the
Pledge Agreement except for its own gross negligence or willful misconduct.
<PAGE> 27
2
3. Lack of Reliance on the Pledgee. Independently and without reliance
upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has
made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of each Pledgor and its Subsidiaries in
connection with the making and the continuance of the Obligations and the taking
or not taking of any action in connection therewith and (ii) its own appraisal
of the creditworthiness of each Pledgor and its Subsidiaries, and the Pledgee
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Secured Creditor with any credit or other information with
respect thereto, whether coming into its possession before the extension of any
Obligations or the purchase of any notes or at any time or times thereafter. The
Pledgee shall not be responsible in any manner whatsoever to any Secured
Creditor for the correctness of any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of the Pledge Agreement or the security interests granted thereunder
or the financial condition of any Pledgor or any Subsidiary of any Pledgor or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of the Pledge Agreement, or the
financial condition of any Pledgor or any Subsidiary of any Pledgor, or the
existence or possible existence of any default or event of default. The Pledgee
makes no representations as to the value or condition of the Collateral or any
part thereof, or as to the title of any Pledgor thereto or as to the security
afforded by the Pledge Agreement.
4. Certain Rights of the Pledgee. (a) No Secured Creditor
shall have the right to cause the Pledgee to take any action with respect to the
Collateral, with only the Required Secured Creditors having the right to direct
the Pledgee to take any such action, it being understood and agreed that nothing
in this Annex B shall affect the rights of the Secured Creditors to accelerate
their respective Obligations in accordance with their respective Secured Debt
Documents. If the Pledgee shall request instructions from the Required Secured
Creditors, with respect to any act or action (including failure to act) in
connection with the Pledge Agreement, the Pledgee shall be entitled to refrain
from such act or taking such action unless and until it shall have received
instructions from the Required Secured Creditors and to the extent requested,
appropriate indemnification in respect of actions to be taken, and the Pledgee
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Secured Creditor shall have any right of action
whatsoever against the Pledgee as a result of the Pledgee acting or refraining
from acting hereunder in accordance with the instructions of the Required
Secured Creditors. As used herein, the term "Required Secured Creditors" shall
mean the Required Banks (or, to the extent required by Section 13.12 of the
Credit Agreement, all of the Banks). Notwithstanding anything to the contrary
contained in the immediately preceding sentence, if at any time the principal of
any Obligations secured hereby has been accelerated, or the final maturity date
with respect to any such principal Obligations has occurred, and as a result
thereof one or more payment Events of Default (where the aggregate principal
amount of such Obligations accelerated or not paid at final maturity equals or
exceeds $100,000,000), which payment Events of Default shall have continued in
existence for at least 90 consecutive days after the date of such acceleration
or final maturity, and the Required Secured Creditors at such time (determined
without regard to this sentence) have not directed the Pledgee to commence
enforcement proceedings pursuant to the Pledge Agreement, then so long as such
payment Event of Default is continuing the Secured Creditors holding at least a
majority of the outstanding Obligations secured hereby subject to such payment
Event of Default shall constitute the Required Secured Creditors for purposes of
causing the Pledgee to commence enforcement proceedings pursuant to the Pledge
Agreement, provided that in such event the Secured Creditors which would
<PAGE> 28
3
constitute the Required Secured Creditors in the absence of this sentence shall
have the right to direct the manner and method of enforcement so long as such
directions do not materially delay or impair the taking of enforcement action.
(b) Notwithstanding anything to the contrary contained herein, the
Pledgee is authorized, but not obligated, (i) to take any action reasonably
required to perfect or continue the perfection of the Liens on the Collateral
for the benefit of the Secured Creditors and (ii) when instructions from the
Required Secured Creditors have been requested by the Pledgee but have not yet
been received, to take any action which the Pledgee, in good faith, believes to
be reasonably required to promote and protect the interests of the Secured
Creditors in the Collateral; provided that once instructions have been received,
the actions of the Pledgee shall be governed thereby and the Pledgee shall not
take any further action which would be contrary thereto.
(c) Notwithstanding anything to the contrary contained herein or in
the Pledge Agreement, the Pledgee shall not be required to take any action that
exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or
its officers, directors, agents or employees to personal liability, unless the
Pledgee shall be adequately indemnified as provided herein, or that is, or in
the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement,
any Secured Debt Document or applicable law.
5. Reliance. The Pledgee shall be entitled to rely, and shall be fully
protected in relying, upon, any note, writing, resolution, notice, statement,
certificate, telex, teletype message, cablegram, radiogram, order or other
document or telephone message signed, sent or made by the proper Person or
entity, and, with respect to all legal matters pertaining hereto or to the
Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel
selected by it.
6. Indemnification. To the extent the Pledgee is not reimbursed and
indemnified by the Pledgors under the Pledge Agreement, the Secured Creditors
(other than the Senior Noteholders) will reimburse and indemnify the Pledgee, in
proportion to their respective outstanding principal amounts (including, for
this purpose, the Stated Amount of outstanding Letters of Credit, as well as any
unpaid Primary Obligations in respect of Interest Rate Protection or Other
Hedging Agreements, as outstanding principal) of Obligations, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Pledgee
in performing its duties hereunder, or in any way relating to or arising out of
its actions as Pledgee in respect of the Pledge Agreement except for those
resulting solely from the Pledgee's own gross negligence or willful misconduct.
The indemnities set forth in this Section 6 shall survive the repayment of all
Obligations, with the respective indemnification at such time to be based upon
the outstanding principal amounts (determined as described above) of Obligations
at the time of the respective occurrence upon which the claim against the
Pledgee is based or, if same is not reasonably determinable, based upon the
outstanding principal amounts (determined as described above) of Obligations as
in effect immediately prior to the termination of the Pledge Agreement. The
indemnities set forth in this Section 6 are in addition to any indemnities
provided by the Banks to the Pledgee pursuant to the Credit Agreement, with the
effect being that the Banks shall be responsible for indemnifying the Pledgee to
the extent the Pledgee does not receive payments pursuant to this Section 6 from
the Secured Creditors (other than the Senior Noteholders) (although in such
event, and
<PAGE> 29
4
upon the payment in full of all such amounts owing to the Pledgee by the Banks,
the Banks shall be subrogated to the rights of the Pledgee to receive payment
from such Secured Creditors).
7. The Pledgee in its Individual Capacity. With respect to its
obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Pledgee is a party, and to act as agent under one or more
of such Credit Documents, the Pledgee shall have the rights and powers specified
therein and herein for a "Bank", or an "Agent", as the case may be, and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the terms "Banks," "Required Banks," "holders of Notes,"
or any similar terms shall, unless the context clearly otherwise indicates,
include the Pledgee in its individual capacity. The Pledgee and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
banking, investment banking, trust or other business with any Pledgor or any
Affiliate or Subsidiary of any Pledgor as if it were not performing the duties
specified herein or in the other Credit Documents, and may accept fees and other
consideration from the Pledgors for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
8. Holders. The Pledgee may deem and treat the payee of any note as
the owner thereof for all purposes hereof unless and until written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Pledgee. Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any note, shall be final and conclusive and binding on
any subsequent holder, transferee, assignee or endorsee, as the case may be, of
such note or of any note or notes issued in exchange therefor.
9. Resignation by the Pledgee. (a) The Pledgee may resign from the
performance of all of its functions and duties hereunder and under the Pledge
Agreement at any time by giving 15 Business Days' prior written notice to the
Company and the Secured Creditors. Such resignation shall take effect upon the
appointment of a successor Pledgee pursuant to Section 9(b) or (c) below.
(b) If a successor Pledgee shall not have been appointed within said
15 Business Day period by the Required Secured Creditors, the Pledgee, with the
consent of the Pledgors, which consent shall not be unreasonably withheld or
delayed, shall then appoint a successor Pledgee who shall serve as Pledgee
hereunder or thereunder until such time, if any, as the Required Secured
Creditors appoint a successor Pledgee as provided above.
(c) If no successor Pledgee has been appointed pursuant to Section
9(b) above by the 15th Business Day after the date of such notice of resignation
was given by the Pledgee, as a result of a failure by the Company to consent to
the appointment of such a successor Pledgee, the Required Secured Creditors
shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or
thereunder until such time, if any, as the Required Secured Creditors appoint a
successor Pledgee as provided above.
<PAGE> 1
EXHIBIT 4.10
AMENDED AND RESTATED
SECURITY AGREEMENT
among
DOMESTIC SUBSIDIARIES
OF
COLTEC INDUSTRIES INC
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of March 24, 1992
and
AMENDED AND RESTATED
as of
December 18, 1996
and
FURTHER AMENDED AND RESTATED
as of
March 16, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
SECURITY INTERESTS....................................................................................... 3
1.1.Grant of Security Interests.......................................................................... 3
1.2.Power of Attorney.................................................................................... 4
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................... 4
2.1.Necessary Filings................................................................................... 4
2.2.No Liens............................................................................................ 4
2.3.Other Financing Statements.......................................................................... 5
2.4.Chief Executive Office; Records..................................................................... 5
2.5.Location of Inventory and Equipment................................................................. 6
2.6.Recourse............................................................................................ 6
2.7.Trade Names; Change of Name......................................................................... 6
ARTICLE III
SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS................................. 7
3.1.Additional Representations and Warranties........................................................... 7
3.2.Maintenance of Records.............................................................................. 7
3.3.Direction to Account Debtors; Contracting Parties; etc.............................................. 8
3.4.Modification of Terms; etc.......................................................................... 8
3.5.Collection.......................................................................................... 8
3.6.Instruments......................................................................................... 8
3.7.Government Contracts................................................................................ 9
3.8.Assignment of Claims Act Notices.................................................................... 9
3.9.Further Actions..................................................................................... 10
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS..................................................................... 10
4.1.Additional Representations and Warranties........................................................... 10
4.2.Licenses and Assignments............................................................................ 10
4.3.Infringements....................................................................................... 10
4.4.Preservation of Marks............................................................................... 11
4.5.Maintenance of Registration......................................................................... 11
4.6.Future Registered Marks............................................................................. 11
4.7.Remedies............................................................................................ 11
</TABLE>
(i)
<PAGE> 3
ARTICLE V
SPECIAL PROVISIONS CONCERNING
<TABLE>
<CAPTION>
Page
<S> <C>
PATENTS AND COPYRIGHTS .......................................................................................... 12
5.1.Additional Representations and Warranties........................................................... 12
5.2.Licenses and Assignments............................................................................ 12
5.3.Infringements....................................................................................... 12
5.4.Maintenance of Patents.............................................................................. 12
5.5.Prosecution of Patent Application................................................................... 12
5.6.Other Patents and Copyrights........................................................................ 13
5.7.Remedies............................................................................................ 13
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL.................................................................... 13
6.1.Protection of Collateral Agent's Security........................................................... 13
6.2.Warehouse Receipts Non-negotiable................................................................... 14
6.3.Further Actions..................................................................................... 14
6.4.Financing Statements................................................................................ 14
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT............................................................ 14
7.1.Remedies; Obtaining the Collateral Upon Default..................................................... 14
7.2.Remedies; Disposition of the Collateral............................................................. 15
7.3.Waiver of Claims.................................................................................... 16
7.4.Application of Proceeds............................................................................. 17
7.5.Remedies Cumulative................................................................................. 19
7.6.Discontinuance of Proceedings....................................................................... 20
7.7.Purchasers Of Collateral............................................................................ 20
ARTICLE VIII
INDEMNITY............................................................................................... 20
8.1.Indemnity........................................................................................... 20
8.2.Indemnity Obligations Secured by Collateral; Survival............................................... 21
ARTICLE IX
DEFINITIONS............................................................................................. 22
ARTICLE X
THE COLLATERAL AGENT.................................................................................... 28
10.1.Appointment........................................................................................ 28
10.2.Nature of Duties................................................................................... 28
10.3.Lack of Reliance on the Collateral Agent........................................................... 29
10.4.Certain Rights of the Collateral Agent............................................................. 29
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
10.5.Reliance........................................................................................... 30
10.6.Indemnification.................................................................................... 30
10.7.The Collateral Agent in its Individual Capacity.................................................... 31
10.8.Holders............................................................................................ 31
10.9.Resignation by the Collateral Agent................................................................ 31
10.10.Fees and Expenses of Collateral Agent............................................................. 32
ARTICLE XI
MISCELLANEOUS........................................................................................... 32
11.1.Notices............................................................................................ 32
11.2.Waiver; Amendment.................................................................................. 33
11.3.Obligations Absolute; Subrogation.................................................................. 34
11.4.Successors and Assigns............................................................................. 34
11.5.Headings Descriptive............................................................................... 35
11.6.Severability....................................................................................... 35
11.7.GOVERNING LAW...................................................................................... 35
11.8.Assignors' Duties.................................................................................. 35
11.9.Termination; Release............................................................................... 35
</TABLE>
ANNEX A Schedule of Permitted Filings
ANNEX B Schedule of Chief Executive Offices
ANNEX C Schedule of Record Locations
ANNEX D Schedule of Inventory and Equipment Locations
ANNEX E Schedule of Trade, Fictitious and Other Names
ANNEX F Schedule of Marks
ANNEX G Schedule of Patents and Applications
ANNEX H Schedule of Copyrights and Applications
(iii)
<PAGE> 5
AMENDED AND RESTATED SUBSIDIARIES SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of March 24,
1992, amended and restated as of December 18, 1996 and further amended and
restated as of March 16, 1998, among each DOMESTIC SUBSIDIARY of COLTEC
INDUSTRIES INC whose name appears on the signature pages hereto (each an
"Assignor" and collectively, the "Assignors") and BANKERS TRUST COMPANY, as
Collateral Agent (the "Collateral Agent") for the benefit of the Secured
Creditors (as defined below) (except as otherwise defined herein, terms used
herein and defined in the Credit Agreement shall be used herein as therein
defined).
W I T N E S S E T H :
WHEREAS, Coltec Industries Inc (the "Company"), Coltec
Aerospace Canada Ltd., the financial institutions (the "Banks") from time to
time party thereto, Bank of America National Trust and Savings Association, as
Documentation Agent (in such capacity, the "Documentation Agent"), The Chase
Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication
Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the
"Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent
(together with any successor administrative agent, the "Administrative Agent"
and together with the Pledgee, the Documentation Agent, the Syndication Agent,
the Canadian Paying Agent and the Banks and their respective successors and
assigns, and together with any other financial institutions from time to time
party to the Credit Agreement hereinafter referred to, the "Bank Creditors"),
have entered into a Credit Agreement, dated as of March 24, 1992, and amended
and restated as of January 11, 1994, and further amended and restated as of
December 18, 1996 and as further amended, providing for the making of Loans to
the Borrowers and the issuance of, and participation in, Letters of Credit, all
as contemplated therein (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this paragraph, as the same has been, and
may from time to time in the future be, amended, modified, extended, renewed,
replaced, restated, supplemented or refinanced from time to time, and including
any agreement extending the maturity of, refinancing or restructuring
(including, but not limited to, the inclusion of additional guarantors or
additional borrowers thereunder that are Subsidiaries of the Company and whose
obligations are guaranteed by the Company thereunder or any increase in the
amount borrowed) all or any portion of, the Indebtedness under such agreement or
any successor agreements, whether or not with the same agent, trustee,
representative, financial institutions or holders; provided, that with respect
to any agreement providing for the refinancing or replacement of Indebtedness
under the Credit Agreement, such agreement shall only be treated as, or as part
of, the Credit Agreement hereunder if (i) either (A) all obligations under the
Credit Agreement being refinanced or replaced shall be paid in full at the time
of such refinancing or replacement, and all commitments and letters of credit
issued pursuant to the refinanced or replaced Credit Agreement shall have
terminated in accordance with their terms or (B) the Required Banks shall
<PAGE> 6
have consented in writing to the refinancing or replacement Indebtedness being
treated, along with their Indebtedness, as Indebtedness pursuant to the Credit
Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred
under the Credit Agreement being refinanced (if such Credit Agreement is to
remain outstanding) and (iii) a notice to the effect that the refinancing or
replacement, Indebtedness shall be treated as issued under the Credit Agreement
shall be delivered by the Company to the Collateral Agent);
WHEREAS, the Company and its Subsidiaries may at any time and
from time to time enter into, or guaranty, one or more of the following
agreements: (i) interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
(ii) foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values and/or (iii) other types of hedging agreements from time to time
(collectively, the "Interest Rate Protection or Other Hedging Agreements") with
one or more Bank Creditors or affiliates of Bank Creditors (each such Bank
Creditor or affiliate, even if the respective Bank Creditor subsequently ceases
to be a Bank under the Credit Agreement for any reason, together with such Bank
Creditor's or affiliate's successors and assigns, collectively, the "Interest
Rate Protection Creditors");
WHEREAS, the Company may issue New Senior Notes and New Senior
Exchange Notes as provided in the Credit Agreement that may be (to the extent
permitted pursuant to the Credit Agreement) (x) guaranteed by various of the
Assignors pursuant to a subsidiary guarantee (the "Senior Note Subsidiaries
Guaranty") and (y) equally and ratably secured hereunder with the Credit
Agreement Obligations as hereinafter provided (with any holders of New Senior
Notes and New Senior Exchange Notes from time to time being herein collectively
called "Senior Noteholders" and with all documentation evidencing any New Senior
Notes or New Senior Exchange Notes, including without limitation the indenture
and any Senior Note Subsidiaries Guaranty to be entered into in connection with
the New Senior Notes, being herein called "Senior Note Documents");
WHEREAS, each Assignor is a direct or indirect Subsidiary of
the Company and, as such, will receive benefits from the above-described
extensions of credit;
WHEREAS, each Assignor has entered into a guaranty dated as of
March 24, 1992 and amended and restated as of December 18, 1996 (the
"Subsidiaries Guaranty") pursuant to which each Assignor has unconditionally
guaranteed any and all obligations and liabilities of the Company under, or with
respect to, the Credit Documents and the Interest Rate Protection or Other
Hedging Agreements;
WHEREAS, certain of the Assignors have heretofore entered into
a Security Agreement, dated as of March 24, 1992 (as amended, modified or
supplemented prior to the date hereof, the "Original Subsidiaries Security
Agreement");
WHEREAS, it is a condition to the extensions of credit under
the Credit Agreement and to the obligations of the initial purchasers of the New
Senior Notes under the purchase agreement to be entered into in connection with
the issuance by the Company of the
-2-
<PAGE> 7
New Senior Notes that each Assignor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to
(i) satisfy the condition described in the preceding paragraph and (ii) amend
and restate the Original Subsidiaries Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Assignor under the Credit Agreement and under the
purchase agreement to be entered into in connection with the issuance by the
Company of the New Senior Notes, the receipt and sufficiency of which are hereby
acknowledged, each Assignor hereby makes the following representations and
warranties to the Collateral Agent for the ratable benefit of the Secured
Creditors and hereby covenants and agrees with the Collateral Agent for the
ratable benefit of the Secured Creditors as follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the
prompt and complete payment and performance when due of all of the Obligations,
each Assignor does hereby sell, assign and transfer unto the Collateral Agent,
and does hereby grant to the Collateral Agent for the ratable benefit of the
Bank Creditors, the Interest Rate Protection Creditors and the Senior
Noteholders, in each case to the extent from time to time holding Obligations of
such Assignor secured hereunder (collectively, and together with the Collateral
Agent, the "Secured Creditors"), a continuing security interest of first
priority (subject to Liens evidenced by Permitted Filings and Liens permitted
under Section 9.01 of the Credit Agreement) in, all of the right, title and
interest of such Assignor in, to and under all of the following, whether now
existing or hereafter from time to time acquired: (i) each and every Receivable,
(ii) all Contracts, together with all Contract Rights arising thereunder, (iii)
all Inventory, (iv) the Cash Collateral Account established for each Assignor
and all moneys, securities and instruments deposited or required to be deposited
in such Cash Collateral Account, (v) all Equipment, (vi) all Marks, together
with the registrations and right to all renewals thereof, and the goodwill of
the business of such Assignor symbolized by the Marks, (vii) all Patents and
Copyrights, and all reissues, renewals or extensions thereof, (viii) all
computer programs of such Assignor and all intellectual property rights therein
and all other proprietary information of such Assignor, including, but not
limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel
Paper, Documents and Instruments (other than the Pledged Securities and any
other capital stock or promissory notes not required to be pledged pursuant to
the Subsidiaries Pledge Agreement) and (x) all Proceeds and products of any and
all of the foregoing (all of the above, collectively, the "Collateral");
provided, however that to the extent that any Contract may be terminated (in
accordance with the terms thereof after giving effect to any applicable laws) in
the event of granting of a security interest therein, or in the event the
granting of a security interest in any Contract shall violate applicable law,
then the security interest granted hereby shall be limited to the extent
necessary so that such Contract may not be so terminated or no such violation of
law shall exist, as the case may be.
-3-
<PAGE> 8
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
(c) If (i) a Bankruptcy Default or Notified Acceleration Event
has occurred and is continuing or (ii) any other Event of Default or
Acceleration Event has occurred and is continuing, but in the case of this
clause (ii) only if, and to the extent that, the Collateral Agent (acting at the
direction of the Required Secured Creditors) has given notice to any of the
Assignors to take the actions specified below in this sentence, then in either
such case all cash Proceeds of, and cash payments received in respect of,
Collateral shall be paid by such Assignor (or the respective payor) directly to
the Cash Collateral Account or as otherwise directed by the Collateral Agent. At
any time while the circumstances described in the immediately preceding sentence
do not exist, all cash payments received in respect of the Collateral (including
without limitation all payments received in respect of Receivables and
Contracts, or in payment for sales of Inventory, but excluding cash Proceeds of
sales of other Collateral unless the respective sale and release of Collateral
is permitted pursuant to this Agreement and the Credit Agreement) shall be paid
to the respective Assignor.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise), in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, which appointment as attorney is coupled with an
interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement and the occurrence of the Restatement Effective Date, as
follows:
2.1. Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interests granted by such Assignor to the Collateral Agent hereby in
respect of the Collateral have been or shall have been accomplished and the
security interest granted to the Collateral Agent pursuant to this Agreement in
and to the Collateral constitutes or shall constitute a perfected security
interest therein prior to the rights of all other Persons therein and subject to
no other Liens (except that the Collateral may be subject to the security
interests evidenced by the financing statements disclosed on Annex A hereto, but
only to the respective date, if any, set forth on Annex A (the "Permitted
Filings") and to any other Liens permitted under Section 9.01 of the Credit
Agreement) and is or shall be entitled to all the rights, priorities and
benefits afforded by the Uniform Commercial Code or other relevant law as
enacted in any relevant jurisdiction to perfected security interests.
2.2. No Liens. Such Assignor is, and as to Collateral acquired
by it from time to time after the date hereof such Assignor will be, the owner
of all Collateral free from any Lien,
-4-
<PAGE> 9
security interest, encumbrance or other right, title or interest of any Person
(other than Liens created hereby, permitted under Section 9.01 of the Credit
Agreement or evidenced by the Permitted Filings), and such Assignor shall defend
the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the Restatement
Effective Date, there is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) on file or of
record in any relevant jurisdiction covering or purporting to cover any interest
of any kind in the Collateral except as disclosed in Annex A hereto or to the
extent filed after the Effective Date so long as the respective such filing did
not (and the Lien evidenced thereby did not) violate the applicable provisions
of the Original Credit Agreement, and so long as the Total Commitment has not
been terminated or any Letter of Credit or Note remains outstanding or any of
the Obligations remain unpaid or any Interest Rate Protection or Other Hedging
Agreement remains in effect or any obligations are owed with respect thereto,
such Assignor will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of and covering the
security interests granted hereby by such Assignor or as otherwise permitted
pursuant to Section 9.01 of the Credit Agreement.
2.4. Chief Executive Office; Records. The chief executive
office of such Assignor is located at the address set forth for each such
Assignor on Annex B hereto. Such Assignor will not move its chief executive
office except to such new location as such Assignor may establish in accordance
with the last sentence of this Section 2.4. The originals of all documents
evidencing all Receivables and Contract Rights of such Assignor and the only
original books of account and records of such Assignor relating thereto are, and
will continue to be, kept at such chief executive office, at such other
locations shown on Annex C hereto or at such new locations as such Assignor may
establish in accordance with the last sentence of this Section 2.4, provided
that, so long as (x) true and correct copies of all documents evidencing such
Receivables and Contract Rights and copies of such books and records are kept at
the chief executive office of such Assignor or at such other locations shown on
Annex C hereto and (y) the failure to maintain any original copies of the
foregoing at such locations could not have an adverse effect upon the validity,
perfection or priority of any security interest granted hereunder, such Assignor
shall be permitted to keep original copies of the foregoing at other locations
to be determined in a manner consistent with its past practices. All Receivables
and Contract Rights of such Assignor are, and will continue to be, maintained
at, and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above. Such Assignor
shall not establish new locations for such offices until (i) it shall have given
to the Collateral Agent not less than 30 days' prior written notice of its
intention so to do, clearly describing such new location and providing such
other information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new location, it shall have taken all action
to maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) at the request of the Collateral Agent, it shall have furnished
an opinion of counsel reasonably acceptable to the Collateral Agent to the
effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or offices,
and all other actions (including, without
-5-
<PAGE> 10
limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by such Assignor is located at one of the
locations shown on Annex D hereto for such Assignor. Such Assignor agrees that
all Inventory and Equipment now held or subsequently acquired by it shall be
kept at (or shall be in transport to) any one of the locations shown on Annex D
hereto for such Assignor, or such new location as such Assignor may establish in
accordance with the last sentence of this Section 2.5. Such Assignor may
establish a new location for Inventory and Equipment only if (i) it shall give
to the Collateral Agent written notice of such new location as promptly as
practicable and in no event later than 60 days after the establishment thereof,
clearly describing such new location and providing such other information in
connection therewith as the Collateral Agent may reasonably request, (ii) with
respect to such new location, as promptly as practicable and in no event later
than 75 days after the establishment thereof, it shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect and (iii) at the request of the Collateral Agent, it shall have furnished
an opinion of counsel reasonably acceptable to the Collateral Agent to the
effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or offices,
and all other actions (including, without limitation, the payment of all filing
fees and taxes, if any, payable in connection with such filings) have been
taken, in order to perfect (and maintain the perfection and priority of) the
security interest granted hereby.
2.6. Recourse. This Agreement is made with full recourse to
such Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of such Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection or Other Hedging
Agreements, the Senior Note Documents and otherwise in writing in connection
herewith or therewith.
2.7. Trade Names; Change of Name. Such Assignor does not have
or operate in any jurisdiction under, or in the preceding 12 months has not had
or has not operated in any jurisdiction under, any trade names, fictitious names
or other names except its legal name and such other trade, fictitious or other
names as are listed on Annex E hereto for such Assignor. Such Assignor shall not
change its legal name or assume or operate in any jurisdiction under any trade,
fictitious or other name except those names listed on Annex E hereto for such
Assignor and new names (including, without limitation, any names of divisions or
operations) established in accordance with the last sentence of this Section
2.7. Such Assignor shall not assume or operate in any jurisdiction under any new
trade, fictitious or other name until (i) it shall have given to the Collateral
Agent not less than 30 days' prior written notice of its intention so to do,
clearly describing such new name and the jurisdictions in which such new name
shall be used and providing such other information in connection therewith as
the Collateral Agent may reasonably request, (ii) with respect to such new name,
it shall have taken all action to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect and (iii) at the request of the
Collateral Agent, it shall have furnished an opinion of counsel reasonably
acceptable to the Collateral Agent to the effect that all
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financing or continuation statements and amendments or supplements thereto have
been filed in the appropriate filing office or offices, and all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that (x) such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will represent the obligation of the account debtor evidencing indebtedness
unpaid and owed by the respective account debtor arising out of the performance
of labor or services or the sale or lease and delivery of the merchandise listed
therein, or both, (ii) will be the only original writings evidencing and
embodying such obligation of the account debtor named therein (other than copies
created for general accounting purposes), and (iii) will be in compliance and
will conform in all material respects with all applicable federal, state and
local laws and applicable laws of any relevant foreign jurisdiction and (y)
there is no fact or circumstance known to such Assignor which would suggest that
any such Receivable (i) will not represent the genuine, legal, valid and binding
obligation of such account debtor or (ii) will not evidence true and valid
obligations, enforceable in accordance with their respective terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
3.2. Maintenance of Records. Each Assignor will keep and
maintain at its own cost and expense satisfactory and complete records of its
Receivables and Contracts, including, but not limited to, the originals of all
documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon, all merchandise returned and all
other dealings therewith, and each Assignor will make the same available on such
Assignor's premises to the Collateral Agent for inspection, at such Assignor's
own cost and expense, at any and all reasonable times upon demand. Upon the
occurrence and during the continuance of any of the conditions specified in the
first sentence of Section 1.1(c) of this Agreement, and upon the request of the
Collateral Agent, each Assignor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts) and such
books and records to the Collateral Agent or to its representatives (copies of
which evidence and books and records may be retained by such Assignor). If the
Collateral Agent so directs, each Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents of such Assignor evidencing
or pertaining to such Receivables and Contracts with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest therein.
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3.3. Direction to Account Debtors; Contracting Parties; etc.
Upon the occurrence and during the continuance of the conditions described in
the first sentence of Section 1.1(c) of this Agreement, and if the Collateral
Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on
account of the Receivables and Contracts to be made directly to the Cash
Collateral Account established for such Assignor, (y) that the Collateral Agent
may, at its option, directly notify the obligors with respect to any Receivables
and/or under any Contracts to make payments with respect thereto as provided in
the preceding clauses (x) and (z) that the Collateral Agent may enforce
collection of any such Receivables and Contracts and may adjust, settle or
compromise the amount of payment thereof, in the same manner and to the same
extent that such Assignor might have done. Without notice to or assent by any
Assignor, the Collateral Agent may apply any or all amounts then in, or
thereafter deposited in, the Cash Collateral Account in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses (including
attorneys' fees) of collection, whether incurred by such Assignor or the
Collateral Agent, shall be borne by such Assignor.
3.4. Modification of Terms; etc. No Assignor shall rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any term thereof or make any adjustment with respect thereto, or extend
or renew the same, or compromise or settle any material dispute, claim, suit or
legal proceeding relating thereto, or sell any Receivable or Contract, or
interest therein, without the prior written consent of the Collateral Agent,
except as permitted by Section 3.5 and except, so long as none of the conditions
described in the first sentence of Section 1.1(c) shall occur and be continuing,
such modifications, adjustments and sales effected by each Assignor in the
ordinary course of business consistent with past practice. Each Assignor will
duly fulfill all obligations on its part to be fulfilled under or in connection
with the Receivables and Contracts and will do nothing to impair the rights of
the Collateral Agent in the Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor to cause to be
collected from the account debtor named in each of its Receivables or obligor
under any Contract, as and when due (including, without limitation, amounts
which are delinquent, such amounts to be collected in accordance with generally
accepted lawful collection procedures) any and all amounts owing under or on
account of such Receivable or Contract, and apply forthwith upon receipt thereof
all such amounts as are so collected to the outstanding balance of such
Receivable or under such Contract, except that, at any time when payments in
respect of Receivables and Contracts may be made to any Assignor in accordance
with the second sentence of Section 1.1(c) of this Agreement, each Assignor may
allow in the ordinary course of business as adjustments to amounts owing under
its Receivables and Contracts (i) an extension or renewal of the time or times
of payment, or settlement for less than the total unpaid balance, which each
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by such
Assignor or the Collateral Agent, shall be borne by such Assignor.
3.6. Instruments. If any Assignor owns or acquires any
Instrument constituting Collateral, such Assignor will within 10 days after such
acquisition, notify the Collateral Agent thereof, and upon request by the
Collateral Agent will promptly deliver such Instrument to the
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Collateral Agent appropriately endorsed to the order of the Collateral Agent as
further security hereunder.
3.7. Government Contracts. (a) Such Assignor hereby covenants
and agrees that promptly after any request by the Collateral Agent, such
Assignor will provide to the Collateral Agent (i) notice setting forth in
reasonable detail all Government Contracts with respect to which such Assignor
reasonably expects to receive payments or other consideration with a value in
excess of $500,000 to which such Assignor is a party at such time, and (ii) with
respect to each Government Contract referred to in clause (i) above, (a) the
true and correct GC Notice Recipient and (b) the anticipated annual gross
revenue under such Government Contract.
(b) Each Assignor hereby covenants and agrees that, at the
request of the Collateral Agent, as promptly as practicable and in any event
within 60 days following its entering into any Government Contract (other than a
Restricted Government Contract) with respect to which such Assignor reasonably
expects to receive payments or other consideration with a value in excess of
$500,000 after the date of such request, such Assignor shall notify the
Collateral Agent thereof, which notice shall set forth (i) each GC Notice
Recipient with respect to such Government Contract and (ii) the anticipated
gross revenue under such Government Contract.
(c) Each Assignor agrees that promptly upon obtaining
knowledge that any of the information provided to the Collateral Agent pursuant
to Section 3.7(a) or (b) with respect to such Assignor has changed, it shall
give written notice of such change to the Collateral Agent.
(d) Each Assignor hereby covenants and agrees that it will not
enter into any Restricted Government Contract unless such Assignor (i)
determines in good faith that it must agree to a prohibition on the assignment
of Receivables arising under such Government Contract in order to obtain such
Government Contract and (ii) gives the Collateral Agent at least 10 Business
Days' prior written notice of its intention to enter into such Restricted
Government Contract.
3.8. Assignment of Claims Act Notices. (a) Upon the occurrence
and during the continuance of any of the conditions described in the first
sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so
directs any Assignor, such Assignor shall prepare and deliver to the Collateral
Agent, with respect to each Government Contract to which such Assignor is a
party on the date of such request, (i) a written notice of the assignment
contained herein, each of which notices shall be in form and substance
satisfactory to the Collateral Agent (each such notice, an "Assignment of Claims
Act Notice") and (ii) an executed, attested and sealed (but undated) instrument
of assignment, each of which instruments shall be in form and substance
satisfactory to the Collateral Agent (each such instrument, an "Instrument of
Assignment"). At any time after the occurrence and during the continuance of any
of the conditions described in the first sentence of Section 1.1(c), each
Assignor shall, upon five Business Days' notice from the Collateral Agent, file
on behalf of the Collateral Agent an Assignment of Claims Act Notice (by
certified mail, return receipt requested, or in such other manner acceptable to
the Collateral Agent), together with three copies thereof and a true copy of the
corresponding Instrument of Assignment, with each GC Notice Recipient with
respect to each Government Contract of such Assignor as shall be designated from
time to time by the Collateral Agent. Each
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Assignor hereby further agrees that the Collateral Agent may at any time after
the occurrence and during the continuance of any of the conditions described in
the first sentence of 1.1(c) directly file the notices and instruments of
assignment described in this Section 3.8.
(b) Each Assignor acknowledges and agrees that each Instrument
of Assignment is supplemental to, and not in substitution for, the terms and
provisions of this Agreement.
3.9. Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral
Agent, or the GC Notice Recipients with respect to any Government Contract, from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed under its name in Annex F hereto and that said listed Marks include
all the United States registered in the United States Patent and Trademark
Office that such Assignor now owns in connection with its business. Each
Assignor represents and warrants that it owns or is licensed to use all Marks
that it uses. Each Assignor further warrants that it is aware of no third party
claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any mark. Each Assignor represents and
warrants that it is the owner of record of all U.S. Trademark registrations
listed under its name in Annex F hereto and that said registrations are valid,
subsisting, have not been cancelled and that such Assignor is not aware of any
third-party claim that any of said registrations is invalid or unenforceable.
Each Assignor hereby grants to the Collateral Agent an absolute power of
attorney to sign, upon the occurrence and during the continuance of (i) a
Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of
Default or Acceleration Event, but in the case of this clause (ii) only to the
extent the Required Secured Creditors have so directed, any document which may
be required by the U.S. Patent and Trademark Office in order to effect an
absolute assignment of all right, title and interest in each Mark, and record
the same.
4.2. Licenses and Assignments. Except as otherwise expressly
permitted in the Credit Agreement, each Assignor hereby agrees not to divest
itself of any right under any Mark absent prior written approval of the
Collateral Agent (which approval shall not be unreasonably withheld).
4.3. Infringements. Except as otherwise expressly permitted in
the Credit Agreement, each Assignor agrees, promptly upon learning thereof, to
notify the Collateral Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who, in any material respect, may be infringing or otherwise violating any
of the respective Assignor's rights in and to any significant Mark, or with
respect to
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any party claiming that such Assignor's use of any significant Mark violates in
any material respect any property right of that party. Each Assignor further
agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute
any Person infringing, in any material respect, any significant Mark.
4.4. Preservation of Marks. Except as otherwise expressly
permitted in the Credit Agreement, each Assignor agrees to use its significant
Marks in interstate or foreign commerce during the time in which this Agreement
is in effect, sufficiently to preserve such Marks as trademarks or service marks
registered under the laws of the United States.
4.5. Maintenance of Registration. Each Assignor shall, at its
own expense, diligently process all documents required by the Trademark Act of
1946, 15 U.S.C. Sections 1051 et seq. to maintain trademark registration,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
significant Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Collateral Agent. Each Assignor agrees to notify
the Collateral Agent not later than 6 months prior to the dates on which the
affidavits of use or the applications for renewal registration are due with
respect to any significant Mark that the affidavits of use or the renewal is
being processed.
4.6. Future Registered Marks. If any Mark registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate such Assignor shall deliver a copy of such
certificate, and a grant of security in such mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be substantially the same as the form hereof.
4.7. Remedies. If there shall occur and be continuing (i) a
Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of
Default or Acceleration Event, but in the case of this clause (ii) only to the
extent the Required Secured Creditors have so directed, the Collateral Agent
may, by written notice to the applicable Assignors, take any or all of the
following actions: (i) declare the entire right, title and interest of the
respective Assignor in and to each of the Marks, together with all trademark
rights and rights of protection to the same, vested, in which event such rights,
title and interest shall immediately vest, in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 4.1 to
execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and use or sell the Marks and
the goodwill of the respective Assignor's business symbolized by the Marks and
the right to carry on the business and use the assets of such Assignor in
connection with which the Marks have been used; and (iii) direct the respective
Assignor to refrain, in which event such Assignor shall refrain, from using the
Marks in any manner whatsoever, directly or indirectly, and, if requested by the
Collateral Agent, change such Assignor's corporate name to eliminate therefrom
any use of any Mark and execute such other and further documents that the
Collateral Agent may request to further confirm this and to transfer ownership
of the Marks and
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registrations and any pending trademark application in the United States Patent
and Trademark Office to the Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed under its name in Annex H hereto and in the
Copyrights listed under its name in Annex G hereto, that said Patents include
all the United States patents and applications for United States patents that
such Assignor now owns and that said Copyrights constitute all the United States
copyrights registered with the United States Copyright Office and applications
for United States copyrights that such Assignor now owns. Each Assignor
represents and warrants that it owns or is licensed to practice under all
Patents and Copyrights that it now uses or practices under. Each Assignor
further warrants that it is aware of no third-party claim that any aspect of
such Assignor's present or contemplated business operations infringes or will
infringe any patent or any copyright. Each Assignor hereby grants to the
Collateral Agent an absolute power of attorney to sign upon the occurrence and
during the continuance of (i) a Bankruptcy Default or Notified Acceleration
Event or (ii) any other Event of Default or Acceleration Event, but in the case
of this clause (ii) only to the extent the Required Secured Creditors have so
directed, any document which may be required by the United States Patent and
Trademark Office or the United States Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and record the same.
5.2. Licenses and Assignments. Except as otherwise expressly
permitted in the Credit Agreement, each Assignor hereby agrees not to divest
itself of any right under any Patent or Copyright absent prior written approval
of the Collateral Agent (which approval shall not be unreasonably withheld).
5.3. Infringements. Each Assignor agrees, promptly upon
learning thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement or other
material violation of such Assignor's rights in any significant Patent or
Copyright, or with respect to any claim that practice of any significant Patent
or Copyright violates any property right of that party. Each Assignor further
agrees, absent direction of the Collateral Agent to the contrary, diligently to
prosecute any Person infringing, in any material respect any significant Patent
or Copyright.
5.4. Maintenance of Patents. Except as otherwise expressly
permitted in the Credit Agreement, at its own expense, each Assignor shall make
timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section
41 to maintain in force rights under each Patent.
5.5. Prosecution of Patent Application. Except as otherwise
expressly permitted in the Credit Agreement, at its own expense, each Assignor
shall diligently prosecute all applications for United States patents listed
under its name in Annex G hereto and shall not
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abandon any such application prior to exhaustion of all administrative and
judicial remedies, absent written consent of the Collateral Agent.
5.6. Other Patents and Copyrights. Within 30 days of
acquisition of a United States Patent or Copyright, or of filing of an
application for a United States Patent or Copyright, the respective Assignor
shall deliver to the Collateral Agent a copy of said Patent or Copyright or such
application, as the case may be, with a grant of security as to such Patent or
Copyright, as the case may be, confirming the grant thereof hereunder, the form
of such confirmatory grant to be substantially the same as the form hereof.
5.7. Remedies. If there shall occur and be continuing (i) a
Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of
Default or Acceleration Event, but in the case of this clause (ii) only to the
extent the Required Secured Creditors have so directed, the Collateral Agent may
by written notice to the applicable Assignors, take any or all of the following
actions: (i) declare the entire right, title, and interest of the respective
Assignor in each of the Patents and Copyrights vested, in which event such
right, title, and interest shall immediately vest in the Collateral Agent for
the benefit of the Secured Creditors, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 5.1 to
execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct the respective Assignor to refrain, in
which event such Assignor shall refrain, from practicing the Patents and
Copyrights directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to confirm
this and to transfer ownership of the Patents and Copyrights to the Collateral
Agent for the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. No Assignor
will do anything to impair the rights of the Collateral Agent in the Collateral.
Each Assignor will at all times keep its Inventory and Equipment insured in
favor of the Collateral Agent, at such Assignor's own expense to the extent and
in the manner provided in the Credit Agreement; all policies or certificates or
certified copies thereof with respect to such insurance (and any other insurance
maintained by each Assignor) (i) shall be endorsed to the Collateral Agent's
satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee), (ii) shall state that
such insurance policies shall not be cancelled or revised without 30 days' prior
written notice thereof by the insurer to the Collateral Agent, (iii) shall
provide that the respective insurers irrevocably waive any and all rights of
subrogation with respect to the Collateral Agent and the Secured Creditors and
(iv) and shall be deposited with the Collateral Agent. If any Assignor shall
fail to insure its Inventory and Equipment in accordance with the preceding
sentence, or if any Assignor shall fail to so endorse and deposit all policies
or certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and such Assignor
agrees to reimburse the Collateral Agent for all costs and expenses of procuring
such insurance. The Collateral Agent may apply any proceeds of such insurance in
accordance with Section 7.4. Each Assignor assumes all liability and
responsibility in
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connection with the Collateral acquired by it and the liability of such Assignor
to pay its Obligations shall in no way be affected or diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such warehouse receipt or receipt
in the nature thereof shall not be "negotiable" (as such term is used in Section
7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law).
6.3. Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form acceptable to
the Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are necessary or desirable in the opinion of the Collateral Agent
to establish and maintain a valid, enforceable, first priority perfected
security interest in the Collateral as provided herein and the other rights and
security contemplated hereby all in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other relevant law. Each
Assignor will pay any applicable filing fees, recordation taxes and related
expenses. Each Assignor authorizes the Collateral Agent to file any such
financing statements without the signature of such Assignor where permitted by
law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each
Assignor agrees that, if there shall have occurred and be continuing (i) a
Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of
Default or Acceleration Event, but in the case of this clause (ii) only to the
extent the Required Secured Creditors have so directed, then and in every such
case, subject to any mandatory requirements of applicable law then in effect,
the Collateral Agent, in addition to any rights now or hereafter existing under
applicable law, shall have all rights as a secured creditor under the Uniform
Commercial Code in all relevant jurisdictions and may also:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from any Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
any Assignor's premises where any of the Collateral is located and
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remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of such Assignor; and
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Receivables and the Contracts) constituting the Collateral to make any
payment required by the terms of such agreement, instrument or other
obligation directly to the Collateral Agent and may exercise any and
all remedies of such Assignor in respect of such Collateral; and
(c) withdraw all moneys, securities and instruments in the
Cash Collateral Account for application to the Obligations in
accordance with Section 7.4; and
(d) sell, assign or otherwise liquidate, or direct any
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take possession of the proceeds of
any such sale or liquidation; and
(e) take possession of the Collateral or any part thereof, by
directing any Assignor in writing to deliver the same to the Collateral
Agent at any place or places designated by the Collateral Agent, in
which event such Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place
or places so designated by the Collateral Agent and there
delivered to the Collateral Agent, and
(ii) store and keep any Collateral so delivered to
the Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section 7.2, and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition; and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as
the Collateral Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly,
upon application to a court of equity having jurisdiction, the
Collateral Agent shall be entitled to a decree requiring specific
performance by such Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral
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may be sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by the Collateral Agent or after any overhaul or repair which
the Collateral Agent shall determine to be commercially reasonable. Any such
disposition which shall be a private sale or other private proceedings permitted
by such requirements shall be made upon not less than 10 days' written notice to
the relevant Assignor specifying the time at which such disposition is to be
made and the intended sale price or other consideration therefor, and shall be
subject, for the 10 days after the giving of such notice, to the right of such
Assignor or any nominee of such Assignor to acquire the Collateral involved at a
price or for such other consideration at least equal to the intended sale price
or other consideration so specified. Any such disposition which shall be a
public sale permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time and place of
such sale and, in the absence of applicable requirements of law, shall be by
public auction (which may, at the Collateral Agent's option, be subject to
reserve), after publication of notice of such auction not less than 10 days
prior thereto in two newspapers in general circulation in the City of New York.
To the extent permitted by any such requirement of law, the Collateral Agent and
the Secured Creditors may bid for and become the purchaser of the Collateral or
any item thereof, offered for sale in accordance with this Section without
accountability to any Assignor. If, under mandatory requirements of applicable
law, the Collateral Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
any Assignor as hereinabove specified, the Collateral Agent need give such
Assignor only such notice of disposition as shall be reasonably practicable in
view of such mandatory requirements of applicable law. Each Assignor agrees to
do or cause to be done all such other acts and things as may be reasonably
necessary to make such sale or sales of all or any portion of the Collateral
valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at such Assignor's expense.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and each Assignor hereby further waives, to the extent
permitted by law:
(a) all damages occasioned by such taking of possession except
any damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or
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delay the enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and each Assignor, for itself and
all who may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of any Assignor therein and thereto, and
shall be a perpetual bar both at law and in equity against such Assignor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Assignor.
7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent a Mortgage to which any Assignor is a party
requires proceeds of Collateral under such Mortgage to be applied in accordance
with the provisions of this Agreement, the Mortgagee under such Mortgage) upon
any sale or other disposition of the Collateral, together with all other moneys
received by the Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing
the Collateral Agent of the type described in clauses (iv) and
(v) of the definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount
equal to the outstanding Primary Obligations (as defined
below) shall be paid to the Secured Creditors as provided in
Section 7.4(e), with each Secured Creditor receiving an amount
equal to such outstanding Primary Obligations or, if the
proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an
amount equal to the outstanding Secondary Obligations (as
defined below) shall be paid to the Secured Creditors as
provided in Section 7.4(e), with each Secured Creditor
receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insufficient to pay in
full all such Secondary Obligations, its Pro Rata Share of the
amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after
the application pursuant to the preceding clauses (i) through
(iii), inclusive, and following the termination of this
Agreement pursuant to Section 11.9(a) hereof, to the
respective Assignor or to whomever may be lawfully entitled to
receive such surplus.
(b) For purposes of this Agreement (w) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount, without duplication, of such
Secured Creditor's Primary Obligations or Secondary Obligations, as the case
may be, and the denominator of which is the then outstanding amount of all
Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary
Obligations" shall mean
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(i) in the case of the Credit Agreement Obligations, all Obligations arising out
of or in connection with (including, without limitation, as obligor or
guarantor, as the case may be) the principal of, and interest on, all Loans, all
Unpaid Drawings theretofore made (together with all interest accrued thereon),
and the aggregate Stated Amounts of all Letters of Credit issued under the
Credit Agreement and outstanding, and all Fees outstanding and unpaid at the
relevant time, (ii) in the case of the Senior Note Obligations, all Obligations
secured hereby arising out of or in connection with the principal of, and
interest on, the New Senior Notes and the New Senior Exchange Notes and (iii) in
the case of the Interest Rate Protection Obligations, all Obligations arising
out of or in connection with (including, without limitation, as a direct obligor
or a guarantor, as the case may be) Interest Rate Protection or Other Hedging
Agreements (other than indemnities, fees (including, without limitation,
attorneys' fees) and similar obligations and liabilities) and (y) "Secondary
Obligations" shall mean all Obligations other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations or
Secondary Obligations, as the case may be, have not been paid in full to receive
an amount equal to such excess amount multiplied by a fraction the numerator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of such Secured Creditor and the denominator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued (or deemed issued) under the
Credit Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Paying Agent under the Credit Agreement and held by
it, for the equal and ratable benefit of the Bank Creditors as such. If any
amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Bank Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Paying Agent to the Collateral Agent for
distribution in accordance with Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d) hereof, all payments
required to be made hereunder shall be made (x) if to the Bank Creditors, to the
Paying Agent under the Credit Agreement for the account of the Bank Creditors
and (y) if to any other Secured Creditors (other than the Collateral Agent), to
the trustee, paying agent or other similar representative (each a
"Representative") for such Secured Creditors or, in the absence of such a
Representative, directly to the other Secured Creditors.
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(f) For purposes of applying payments received in accordance
with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i)
the Paying Agent under the Credit Agreement and (ii) the Representative for any
other Secured Creditors or, in the absence of such a Representative, upon the
respective Secured Creditors for a determination (which the Paying Agent, each
Representative for any Secured Creditors and the Secured Creditors agree (or
shall agree) to provide, upon request of the Collateral Agent) of the
outstanding Primary Obligations and Secondary Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Representative for any Secured Creditor or directly from a Secured
Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be
entitled to assume that no Interest Rate Protection or Other Hedging Agreements
are in existence.
(g) It is understood and agreed that each Assignor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
Notwithstanding anything to the contrary in this Agreement, (i) all actions
required or permitted to be taken under this Agreement by the Senior Noteholders
shall be so taken only by the trustee under the indenture under which the Senior
Notes were issued on behalf of the Senior Noteholders (the "Senior Notes
Trustee") as directed by the Senior Noteholders and (ii) all payments required
to be made with respect to the Senior Note Obligations shall be paid to the
Senior Notes Trustee, and the Collateral Agent shall be entitled (but not
required) to conclusively rely upon and act in accordance with any instructions
from the Senior Notes Trustee subject to the terms and conditions of this
Agreement and to assume that such instructions are being given in accordance
with such indenture
7.5. Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, or
any other Secured Debt Document now or hereafter existing at law or in equity,
or by statute and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by the
Collateral Agent. All such rights, powers and remedies shall be cumulative and
the exercise or the beginning of exercise of one shall not be deemed a waiver of
the right to exercise of any other or others. No delay or omission of the
Collateral Agent in the exercise of any such right, power or remedy and no
renewal or extension of any of the Obligations shall impair any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on any Assignor in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of the
Collateral Agent to any other or further action in any circumstances without
notice or demand. In the event that the Collateral Agent shall bring any suit to
enforce any of its rights hereunder and shall be entitled to judgment, then in
such suit the Collateral Agent may recover reasonable expenses, including
attorneys' fees, and the amounts thereof shall be included in such judgment. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Collateral Agent acting upon the instructions of the Required Secured
Creditors and that no other Secured Creditor shall have any right individually
or as a group, directly or indirectly, to seek to enforce or to enforce this
Agreement or to realize upon the security to be granted hereby or to
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cause the Collateral Agent or the Required Secured Creditors to take or cause to
be taken any action in respect of this Agreement (except as expressly
contemplated hereby), it being understood and agreed that such rights and
remedies may be exercised only by the Collateral Agent for the ratable benefit
of all Secured Creditors upon the terms and conditions of this Agreement, it
being further understood and agreed that nothing in this Agreement shall affect
the rights of the Secured Creditors to accelerate their respective Obligations
in accordance with their respective Secured Debt Documents.
7.6. Discontinuance of Proceedings. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case each Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
7.7. Purchasers Of Collateral. Upon any sale of the Collateral
by the Collateral Agent hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt of sale
proceeds by the Collateral Agent or the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication or
nonapplication thereof.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor hereby jointly and severally
agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured
Creditor (other than the Senior Noteholders) and their respective successors,
assigns, employees, agents, servants and Representatives (including the
Administrative Agent) hereunder (hereinafter in this Section 8.1 referred to
individually as "Indemnitee," and collectively as "Indemnitees") harmless from
any and all liabilities, obligations, damages, injuries, penalties, claims,
demands, actions, suits, judgments and any and all costs, expenses or
disbursements (including reasonable attorneys' fees and expenses) (for the
purposes of this Section 8.1 the foregoing are collectively called "expenses")
of whatsoever kind and nature imposed on, asserted against or incurred by any of
the Indemnitees in any way relating to or arising out of this Agreement, any
other Secured Debt Document or any other document executed in connection
herewith and therewith or in any other way connected with the administration of
the transactions contemplated hereby and thereby or the enforcement of any of
the terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), any contract claim or, to the maximum extent permitted under
applicable law, the violation of the laws of any country, state or other
governmental body or unit, or any tort (including, without
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limitation, claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage); provided that no Indemnitee shall be
indemnified pursuant to this Section 8.1(a) for expenses to the extent caused by
the gross negligence or willful misconduct of such Indemnitee. Each Assignor
agrees that upon written notice by any Indemnitee of the assertion of such a
liability, obligation, damage, injury, penalty, claim, demand, action, suit or
judgment, the Assignors shall assume full responsibility for the defense
thereof. Each Indemnitee agrees to use its best efforts to promptly notify the
Assignors of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), each
Assignor hereby jointly and severally agrees to pay, or reimburse, the
Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or
expenses because any Assignor shall have failed to comply with its obligations
under this Agreement or any other Secured Debt Document), any and all fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or (b),
each Assignor hereby jointly and severally agrees to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs, damages and expenses
which such Indemnitee may suffer, expend or incur in consequence of or growing
out of any misrepresentation by any Assignor in this Agreement or any other
Secured Debt Document or in any writing contemplated by or made or delivered
pursuant to or in connection with this Agreement or any other Secured Debt
Document.
(d) If and to the extent that the obligations of any Assignor
under this Section 8.1 are unenforceable for any reason, such Assignor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the full payment of all the New Senior
Notes and the New Senior Exchange Notes issued under the Senior Note Documents,
the termination of all Interest Rate Protection or Other Hedging Agreements and
the payment of all other Obligations and notwithstanding the discharge thereof.
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ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.
"Acceleration Event" shall mean the acceleration prior to the
stated final maturity, or the failure to pay at the stated final maturity, of
(i) Obligations representing principal of, or interest on, extensions of credit
(including, without limitation, all Letter of Credit Outstandings) pursuant to
the Credit Agreement, (ii) Obligations representing principal of, or interest
on, the New Senior Notes or the New Senior Exchange Notes or (iii) any Interest
Rate Protection Obligations if such Interest Rate Protection Obligations
aggregate at least $10,000,000 in amount, provided that, in each case, any such
Acceleration Event shall cease to exist upon payment in full of the Obligations
so accelerated or not paid.
"Administrative Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Agreement" shall mean this Security Agreement as the same may
be modified, supplemented or amended from time to time in accordance with its
terms.
"Assignment of Claims Act Notice" shall have the meaning
provided in Section 3.8 of this Agreement.
"Assignor" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Bankruptcy Default" shall mean any Default or Event of
Default with respect to the Company pursuant to Section 10.05 of the Credit
Agreement.
"Banks" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Cash Collateral Account" shall mean the non- interest bearing
cash collateral account maintained with the Collateral Agent for the benefit of
the Secured Creditors, with one such account to be established for each
Assignor.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 11.2 to
this Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a)
of this Agreement.
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"Collateral Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Company" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor
(including, without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and
one or more additional parties (including, without limitation, (i) each
partnership agreement to which such Assignor is a party, (ii) any Interest Rate
Protection or Other Hedging Agreements and (iii) any Government Contracts).
"Copyrights" shall mean any United States copyright which any
Assignor now or hereafter has registered with the United States Copyright
Office, as well as any application for a United States copyright registration
now or hereafter made with the United States Copyright Office by any Assignor.
"Credit Agreement" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of
time, or both, would constitute an Event of Default.
"Documentation Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by each Assignor and, in any event,
shall include, but shall not be limited to, all machinery, equipment,
furnishings, movable trade fixtures and vehicles now or hereafter owned by each
Assignor and any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default at any time
under, and as defined in, any of the Credit Agreement and the Senior Note
Documents and any payment default (after the expiration of any applicable grace
period) on any of the Obligations secured hereunder at such time.
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"GC Notice Recipient" shall mean each (i) contracting officer,
or the head of the respective U.S. government department or agency relating to
such Government Contract, (ii) surety or sureties upon the bond or bonds, if
any, relating to such Government Contract, and (iii) disbursing officer, if any,
designated in such Government Contract to make payment.
"General Intangibles" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the State of New York
and shall in any event include all of any Assignor's claims, rights, powers,
privileges, authority, options, security interests, liens and remedies under any
partnership agreement to which such Assignor is a party or with respect to any
partnership of which such Assignor is a partner.
"Goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Government Contract" shall mean all Contracts between any
Assignor and the United States of America or any agency or department thereof.
"Indemnitee" shall have the meaning provided in Section 8.1 of
this Agreement.
"Instrument" shall have the meaning provided in Article 9 of
the Uniform Commercial Code as in effect on the date hereof in the State of New
York; provided that "Instrument" shall not include any Pledged Note or other
promissory note not required to be pledged pursuant to the Subsidiaries Security
Agreement.
"Instrument of Assignment" shall have the meaning provided in
Section 3.8 of this Agreement.
"Interest Rate Protection Creditors" shall have the meaning
provided in the second WHEREAS clause of this Agreement.
"Interest Rate Protection Obligations" shall have the meaning
provided in the definition of "Obligations" in this Article IX.
"Interest Rate Protection or Other Hedging Agreements" shall
have the meaning provided in the second WHEREAS clause of this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and
all additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials, labels,
materials and any other items used or usable in manufacturing, processing,
packaging or shipping same; in all stages of production -- from raw materials
through work-in-process to finished goods -- and all products and proceeds of
whatever sort and wherever located and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Collateral Agent from any
Assignor's customers, and shall specifically include all "inventory" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York, now or hereafter owned by any Assignor.
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"Marks" shall mean any trademarks and service marks now held
or hereafter acquired by any Assignor, which are registered in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any political subdivision thereof and any
application for such trademarks or service marks, as well as any unregistered
marks used by any Assignor in the United States and trade dress including logos,
designs, trade names, company names, business names, fictitious business names
and other business identifiers in connection with which any of these registered
or unregistered marks are used.
"Notified Acceleration Event" shall mean any Acceleration
Event with respect to which the Required Secured Creditors have given written
notice to the Collateral Agent that a "Notified Acceleration Event" exists,
provided that such written notice may only be given if such Acceleration Event
is continuing and, provided further that any such Notified Acceleration Event
shall cease to exist once there is no longer any Acceleration Event in
existence.
"Obligations" shall mean, with respect to each Assignor, (i)
all obligations and liabilities of such Assignor whether now existing or
hereafter incurred under, arising out of or in connection with the Subsidiaries
Guaranty and the due performance and compliance by such Assignor with all of the
terms, conditions and agreements contained in the Subsidiaries Guaranty (all
such obligations and liabilities described in this clause (i) being herein
collectively called the "Credit Agreement Obligations"); (ii) without
duplication of the obligations and liabilities covered by the foregoing clause
(i), all obligations and liabilities owing by the Company to the Interest Rate
Protection Creditors under, or with respect to, any Interest Rate Protection or
Other Hedging Agreement, whether such Interest Rate Protection or Other Hedging
Agreement is now in existence or hereafter arising, and the due performance and
compliance by the Company with all of the terms, conditions and agreements
contained therein (all such obligations and liabilities described in this clause
(ii) being herein collectively called the "Interest Rate Protection
Obligations"); (iii) all obligations and liabilities of such Assignor whether
now existing or hereafter incurred under, arising out of or in connection with
the Senior Note Subsidiaries Guaranty and the due performance and compliance by
such Assignor with all of the terms, conditions and agreements contained in the
Senior Note Subsidiaries Guaranty (all such obligations, liabilities and
indebtedness described in this clause (iii) being herein collectively called the
"Senior Note Obligations"); (iv) (x) any and all sums advanced by the Collateral
Agent in order to preserve the Collateral or preserve its security interest in
the Collateral in a manner not in violation of the terms hereof and (y) any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Collateral Agent in
performing its duties hereunder, or in any way relating to or arising out of its
actions as Collateral Agent in respect of this Agreement except for those
resulting solely from the Collateral Agent's own gross negligence or willful
misconduct; (v) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of such Assignor referred to in
clauses (i) through (iv) above, after an Event of Default shall have occurred
and be continuing, the reasonable expenses of retaking, holding, preparing for
sale or lease, selling or otherwise disposing of or realizing on the Collateral,
or of any exercise by the Collateral Agent of its rights hereunder, together
with reasonable attorneys' fees and court costs; and (vi) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 8.1 of
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this Agreement. It is acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
"Original Subsidiaries Security Agreement" shall have the
meaning provided in the sixth WHEREAS clause of this Agreement.
"Patents" shall mean any United States patent to which any
Assignor now or hereafter has title or license to use, as well as any
application for a United States patent now or hereafter made by any Assignor.
"Permitted Filings" shall have the meaning provided in Section
2.1 of this Agreement.
"Pledged Securities" shall have the meaning provided in the
Subsidiaries Pledge Agreement.
"Primary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform
Commercial Code as in effect in the State of New York on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Collateral Agent or any Assignor from time to time with respect
to any of the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined
in the Uniform Commercial Code as in effect on the date hereof in the State of
New York, now or hereafter owned by any Assignor and, in any event, shall
include, but shall not be limited to, all of such Assignor's rights to payment
for goods sold or leased or services performed by any Assignor, whether now in
existence or arising from time to time hereafter, including, without limitation,
rights evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness or security, together with (a) all
security pledged, assigned, hypothecated or granted to or held by any Assignor
to secure the foregoing, (b) all of such Assignor's right, title and interest in
and to any goods, the sale of which gave rise thereto, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith, (e) all books, records, ledger cards,
and invoices relating thereto, (f) all evidences of the filing of financing
statements and other statements and the registration of other
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instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (g) all credit information, reports and memoranda relating thereto,
and (h) all other writings related in any way to the foregoing; provided that
"Receivables" shall not include any Pledged Note or other promissory note not
required to be pledged pursuant to the Subsidiaries Pledge Agreement.
"Representative" shall have the meaning provided in Section
7.4 of this Agreement.
"Required Secured Creditors" shall have the meaning provided
in Section 10.4(a) to this Agreement.
"Requisite Class Creditors" shall have the meaning provided in
Section 11.2 to this Agreement.
"Restricted Government Contract" shall mean any Government
Contract which by its terms prohibits the assignment of Receivables arising
thereunder.
"Secondary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in Section
1.1 of this Agreement.
"Secured Debt Documents" shall mean this Agreement, any other
Credit Document, any Interest Rate Protection or Other Hedging Agreement and any
Senior Note Documents, in each case to the extent then in effect and subject to
the security interest granted hereby, collectively.
"Senior Noteholders" shall have the meaning provided in the
third WHEREAS clause of this Agreement.
"Senior Note Documents" shall have the meaning provided in the
third WHEREAS clause of this Agreement.
"Senior Note Obligations" shall have the meaning provided in
the definition of "Obligations" in this Article IX.
"Senior Note Subsidiaries Guaranty" shall have the meaning
provided in the third WHEREAS clause of this Agreement.
"Subsidiaries Guaranty" shall have the meaning provided in the
fifth WHEREAS clause of this Agreement.
"Syndication Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
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"Termination Date" shall have the meaning provided in Section
11.9(a) of this Agreement.
ARTICLE X
THE COLLATERAL AGENT
10.1. Appointment. The Secured Creditors, by their acceptance
of the benefits of this Agreement hereby irrevocably designate Bankers Trust
Company, as Collateral Agent, to act as specified herein. Each Secured Creditor
hereby irrevocably authorizes, and each holder of any Obligation by the
acceptance of such Obligation and by the acceptance of the benefits of this
Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take
such action on its behalf under the provisions of this Agreement and any
instruments and agreements referred to herein and to exercise such powers and to
perform such duties hereunder as are specifically delegated to or required of
the Collateral Agent by the terms hereof and such other powers as are reasonably
incidental thereto. The Collateral Agent may perform any of its duties hereunder
or thereunder by or through its authorized agents, sub-agents or employees.
10.2. Nature of Duties. (a) The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Collateral Agent shall be mechanical and administrative in
nature; the Collateral Agent (in such capacity) shall not have by reason of this
Agreement, any other Credit Document or any other Secured Debt Document a
fiduciary relationship in respect of any Secured Creditor; and nothing in this
Agreement, any other Credit Document or any other Secured Debt Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein.
(a)(b) The Collateral Agent shall not be responsible for
insuring the Collateral or for the payment of taxes, charges or assessments or
discharging of Liens upon the Collateral or otherwise as to the maintenance of
the Collateral.
(b)(c) The Collateral Agent shall not be required to ascertain
or inquire as to the performance by any Assignor of any of the covenants or
agreements contained in this Agreement, any other Credit Document or any other
Secured Debt Document.
(c)(d) The Collateral Agent shall be under no obligation or
duty to take any action under this Agreement or any Credit Document if taking
such action (i) would subject the Collateral Agent to a tax in any jurisdiction
where it is not then subject to a tax or (ii) would require the Collateral Agent
to qualify to do business in any jurisdiction where it is not then so qualified,
unless the Collateral Agent receives security or indemnity satisfactory to it
against such tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under this
Agreement or (iii) would subject the Collateral Agent to in personam
jurisdiction in any locations where it is not then so subject.
(d)(e) Notwithstanding any other provision of this Agreement,
neither the Collateral Agent nor any of its officers, directors, employees,
affiliates or agents shall, in its
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individual capacity, be personally liable for any action taken or omitted to be
taken by it in accordance with this Agreement except for its own gross
negligence or willful misconduct.
10.3. Lack of Reliance on the Collateral Agent. Independently
and without reliance upon the Collateral Agent, each Secured Creditor, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of each
Assignor and its respective Subsidiaries in connection with the making and the
continuance of the Obligations and the taking or not taking of any action in
connection therewith, and (ii) its own appraisal of the creditworthiness of each
Assignor and its respective Subsidiaries, and the Collateral Agent shall have no
duty or responsibility, either initially or on a continuing basis, to provide
any Secured Creditor with any credit or other information with respect thereto,
whether coming into its possession before the extension of any Obligations or
the purchase of any Notes or at any time or times thereafter. The Collateral
Agent shall not be responsible in any manner whatsoever to any Secured Creditor
for the correctness of any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or the security interests granted hereunder or the financial condition
of any of the Assignors or any of their respective Subsidiaries or be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement, or the financial
condition of any of the Assignors or any of their respective Subsidiaries, or
the existence or possible existence of any Default or Event of Default. The
Collateral Agent makes no representations as to the value or condition of the
Collateral or any part thereof, or as to the title of the Assignors thereto or
as to the security afforded by this Agreement.
10.4. Certain Rights of the Collateral Agent. (a) No Secured
Creditor shall have the right to cause the Collateral Agent to take any action
with respect to the Collateral, with only the Required Secured Creditors having
the right to direct the Collateral Agent to take any such action, it being
understood and agreed that nothing in this Agreement shall affect the rights of
the Secured Creditors to accelerate their respective Obligations in accordance
with their respective Secured Debt Documents. If the Collateral Agent shall
request instructions from the Required Secured Creditors, with respect to any
act or action (including failure to act) in connection with this Agreement, the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Required
Secured Creditors and to the extent requested, appropriate indemnification in
respect of actions to be taken, and the Collateral Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Secured Creditor shall have any right of action whatsoever against
the Collateral Agent as a result of the Collateral Agent acting or refraining
from acting hereunder in accordance with the instructions of the Required
Secured Creditors. As used herein, the term "Required Secured Creditors" shall
mean the Required Banks (or, to the extent required by Section 13.12 of the
Credit Agreement, all of the Banks). Notwithstanding anything to the contrary
contained in the immediately preceding sentence, if at any time the principal of
any Obligations secured hereby has been accelerated, or the final maturity date
with respect to any such principal Obligations has occurred, and as a result
thereof one or more payment Events of Default (where the aggregate principal
amount of such Obligations accelerated or not paid at final maturity equals or
exceeds $100,000,000), which payment Events of Default shall have continued
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in existence for at least 90 consecutive days after the date of such
acceleration or final maturity, and the Required Secured Creditors at such time
(determined without regard to this sentence) have not directed the Collateral
Agent to commence enforcement proceedings pursuant to this Agreement, then so
long as such payment Event of Default is continuing the Secured Creditors
holding at least a majority of the outstanding Obligations secured hereby
subject to such payment Event of Default shall constitute the Required Secured
Creditors for purposes of causing the Collateral Agent to commence enforcement
proceedings pursuant to this Agreement, provided that in such event the Secured
Creditors which would constitute the Required Secured Creditors in the absence
of this sentence shall have the right to direct the manner and method of
enforcement so long as such directions do not materially delay or impair the
taking of enforcement action.
(e) Notwithstanding anything to the contrary contained herein,
the Collateral Agent is authorized, but not obligated, (i) to take any action
reasonably required to perfect or continue the perfection of the Liens on the
Collateral for the benefit of the Secured Creditors and (ii) when instructions
from the Required Secured Creditors have been requested by the Collateral Agent
but have not yet been received, to take any action which the Collateral Agent,
in good faith, believes to be reasonably required to promote and protect the
interests of the Secured Creditors in the Collateral; provided that once
instructions have been received, the actions of the Collateral Agent shall be
governed thereby and the Collateral Agent shall not take any further action
which would be contrary thereto.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the Collateral Agent shall not be required to take any action that
exposes or, in the good faith judgment of the Collateral Agent may expose, the
Collateral Agent or its officers, directors, agents or employees to personal
liability, unless the Collateral Agent shall be adequately indemnified as
provided herein, or that is, or in the good faith judgment of the Collateral
Agent may be, contrary to this Agreement, any Secured Debt Document or
applicable law.
10.5. Reliance. The Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by the proper Person or entity, and, with respect to all
legal matters pertaining to this Agreement and the other Security Documents and
its duties thereunder and hereunder, upon advice of counsel selected by it.
10.6. Indemnification. To the extent the Collateral Agent is
not reimbursed and indemnified by the Assignors under this Agreement, the
Secured Creditors (other than the Senior Noteholders) will reimburse and
indemnify the Collateral Agent, in proportion to their respective outstanding
principal amounts (including, for this purpose, the stated amount of outstanding
letters of credit and any unreimbursed drawings in respect of letters of credit,
as well as any unpaid Primary Obligations in respect of Interest Rate Protection
or Other Hedging Agreements, as outstanding principal) of Obligations, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Collateral Agent in performing its duties hereunder, or in any way relating to
or arising out of its actions as
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Collateral Agent in respect of this Agreement except for those resulting solely
from the Collateral Agent's own gross negligence or willful misconduct. The
indemnities set forth in this Article X shall survive the repayment of all
Obligations, with the respective indemnification at such time to be based upon
the outstanding principal amounts (determined as described above) of Obligations
at the time of the respective occurrence upon which the claim against the
Collateral Agent is based or, if same is not reasonably determinable, based upon
the outstanding principal amounts (determined as described above) of Obligations
as in effect immediately prior to the termination of this Agreement. The
indemnities set forth in this Article X are in addition to any indemnities
provided by the Banks to the Collateral Agent pursuant to the Credit Agreement,
with the effect being that the Banks shall be responsible for indemnifying the
Collateral Agent to the extent the Collateral Agent does not receive payments
pursuant to this Section 10.6 from the Secured Creditors (other than the Senior
Noteholders) (although in such event, and upon the payment in full of all such
amounts owing to the Collateral Agent, the respective Banks who paid same shall
be subrogated to the rights of the Collateral Agent to receive payment from such
Secured Creditors).
10.7. The Collateral Agent in its Individual Capacity. With
respect to its obligations as a lender under the Credit Agreement and any other
Credit Documents to which the Collateral Agent is a party, and to act as agent
under one or more of such Credit Documents, the Collateral Agent shall have the
rights and powers specified therein and herein for a "Bank", an "Agent" or an
"Administrative Agent", as the case may be, and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
terms "Banks", "holders of Notes", or any similar terms shall, unless the
context clearly otherwise indicates, include the Collateral Agent in its
individual capacity. The Collateral Agent and its Affiliates may accept deposits
from, lend money to, and generally engage in any kind of banking, investment
banking, trust or other business with any Assignor or any Affiliate or
Subsidiary of such Assignor as if it were not performing the duties specified
herein or in the other Credit Documents, and may accept fees and other
consideration from such Assignor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Creditors.
10.8. Holders. The Collateral Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Collateral Agent. Any request, authority
or consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note, shall be final and
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee of such Note or Note issued in exchange therefor.
10.9. Resignation by the Collateral Agent. (a) The Collateral
Agent may resign from the performance of all of its functions and duties under
this Agreement at any time by giving 15 Business Days' prior or written notice
to the Assignors and the Secured Creditors. Such resignation shall take effect
upon the appointment of a successor Collateral Agent pursuant to clause (b) or
(c) below.
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(b) If a successor Collateral Agent shall not have been
appointed within said 15 Business Day period by the Required Secured Creditors,
the Collateral Agent, with the consent of the Company, which consent shall not
be unreasonably withheld, shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent hereunder or thereunder until such time, if any,
as the Required Secured Creditors appoint a successor Collateral Agent as
provided above.
(c) If no successor Collateral Agent has been appointed
pursuant to clause (b) above by the 15th Business Day after the date of such
notice of resignation was given by the Collateral Agent, as a result of a
failure by the Company to consent to the appointment of such a successor
Collateral Agent, the Required Secured Creditors shall then appoint a successor
Collateral Agent who shall serve as Collateral Agent hereunder or thereunder
until such time, if any, as the Required Secured Creditors appoint a successor
Collateral Agent as provided above.
10.10. Fees and Expenses of Collateral Agent. (a) Each
Assignor (by its execution and delivery hereof) hereby agrees jointly and
severally to pay to Bankers Trust Company as the original Collateral Agent, such
fees as have been separately agreed to in writing with Bankers Trust Company for
acting as Administrative Agent and as Collateral Agent hereunder. In the event a
successor Collateral Agent is at any time appointed pursuant to the preceding
Section 10.9, each Assignor hereby agrees jointly and severally to pay such
successor Collateral Agent such fees for acting as such as would customarily be
charged by such Collateral Agent for acting in such capacity in similar
situations. Absent manifest error, the determination by a successor Collateral
Agent of the fees owing to it shall be conclusive and binding upon each
Assignor.
(b) In addition, each Assignor agrees jointly and severally to
pay all reasonable out-of-pocket costs and expenses of the Collateral Agent in
connection with this Agreement and any actions taken by the Collateral Agent
hereunder, and agrees jointly and severally to pay all costs and expenses of the
Collateral Agent in connection with the enforcement of this Agreement and the
documents and instruments referred to herein (including, without limitation,
reasonable fees and disbursements of counsel for the Collateral Agent).
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement, addressed as
follows:
(a) if to any Assignor, to such Assignor at its address set
forth opposite its signature below:
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with a copy to:
Coltec Industries Inc
3 Coliseum Center
2550 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Thomas B. Jones, Jr.
Telephone: (704) 423-7052
Facsimile: (704) 423-7127
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Facsimile: (212) 250-7200
(c) if to any Bank Creditor (other than the Collateral Agent),
either (x) to the Administrative Agent, at the address of the
Administrative Agent specified in the Credit Agreement or (y) at such
address as such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any other Secured Creditor, either (x) to the
Representative for such Secured Creditor, at such address as such
Representative may have provided to the Assignors and the Collateral
Agent from time to time, or (y) in the absence of such a Representative
directly to such Secured Creditor at such address as such Secured
Creditor shall have specified in writing to the Assignors and the
Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
11.2. Waiver; Amendment. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each of the Assignors and the
Collateral Agent (with the written consent of the Required Banks (or all the
Banks if required by Section 13.12 of the Credit Agreement)); provided, however,
that any change, waiver, modification or variance materially adversely affecting
the rights and benefits of a single Class (as defined below) of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall also
require the written consent of the Requisite Class Creditors (as defined below)
of such affected Class; provided, further, that any Class shall not be
considered to be affected differently from any other Class due to the
Obligations of any such other Class being paid, repaid, refinanced, renewed or
extended and the Collateral being released, in
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whole or in part (whether by action of such other Class or otherwise), as
security for such Class and such other Class. Notwithstanding anything to the
contrary contained above, it is understood and agreed that the Required Banks
may agree to modifications to this Agreement for the purpose, among other
things, of securing additional extensions of credit (including, without
limitation, pursuant to the Credit Agreement or any refinancing or extension
thereof). For the purpose of this Agreement, the term "Class" shall mean, at any
time, each class of Secured Creditors with outstanding Obligations secured
hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit
Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders
of Senior Note Obligations secured hereby or (z) the Interest Rate Protection
Creditors as the holders of the Interest Rate Protection Obligations secured
hereby; provided that, without limiting the foregoing, it is expressly
acknowledged and agreed that other creditors may be added as "Secured Creditors"
hereunder (either as part of an existing Class of creditors or as a newly
created Class) with the consent of the Required Secured Creditors, and that such
addition shall not require the written consent of the Requisite Class Creditors
of the various Classes. For the purpose of this Agreement, the term "Requisite
Class Creditors" of any Class shall mean each of (i) with respect to the Credit
Agreement Obligations, the Required Banks and (ii) with respect to any other
Obligations, the holders of at least a majority of all Obligations outstanding
from time to time.
11.3. Obligations Absolute; Subrogation. The obligations of
each Assignor hereunder shall remain in full force and effect without regard to,
and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of such
Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy,
power or privilege under or in respect of this Agreement or any other Secured
Debt Document except as specifically set forth in a waiver granted pursuant to
Section 11.2 hereof; (c) any renewal of, extension of, amendment to or
modification of any Secured Debt Document or any security for any of the
Obligations; (d) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument including,
without limitation, this Agreement; (e) any furnishing of any additional
security to the Collateral Agent or its assignee or any acceptance thereof or
any release of any security by the Collateral Agent or its assignee; (f) any
limitation on any party's liability or obligations under any such instrument or
agreement or any invalidity or unenforceability, in whole or in part, of any
such instrument or agreement or any term thereof, or (g) any limitation on any
other Assignor's liability or obligations under this Agreement, the Subsidiaries
Guaranty, the Senior Note Subsidiaries Guaranty or any other Secured Debt
Document or any invalidity or unenforceability, in whole or in part, of this
Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or
any other Secured Debt Documents or any term thereof, whether or not any
Assignor shall have notice or knowledge of any of the foregoing.
11.4. Successors and Assigns. This Agreement shall be binding
upon each Assignor and its respective successors and assigns and shall inure to
the benefit of the Collateral Agent and each Secured Creditor and their
respective successors and assigns, provided that no Assignor may transfer or
assign any or all of its rights or obligations hereunder without the written
consent of the Collateral Agent. All agreements, statements, representations and
warranties made by each Assignor herein or in any certificate or other
instrument delivered by such Assignor or on its behalf under this Agreement
shall be considered to have been relied upon
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by the Secured Creditors and shall survive the execution and delivery of this
Agreement, the other Credit Documents and the Interest Rate Protection or Other
Hedging Agreements, regardless of any investigation made by the Secured
Creditors or on their behalf.
11.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
11.6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
11.8. Assignors' Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that each Assignor shall
remain liable to perform all of the obligations, if any, assumed by it with
respect to the Collateral and the Collateral Agent shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any of the obligations of any
Assignor under or with respect to any Collateral.
11.9. Termination; Release. (a) After the Termination Date (as
defined below), without any action on the part of any Secured Creditor, this
Agreement shall terminate and be of no further force or effect (provided that
all indemnities set forth herein including, without limitation, in Section 10.6
hereof shall survive any such termination) and the Collateral Agent, at the
request and expense of the respective Assignor, will execute and deliver to such
Assignor a proper instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to the
respective Assignor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of the Collateral
Agent and has not theretofore been sold or otherwise applied or released
pursuant to this Agreement, together with any moneys at the time held by the
Collateral Agent hereunder. As used in this Agreement, "Termination Date" shall
mean the first to occur of (i) that date upon which the Total Commitment and all
Interest Rate Protection or Other Hedging Agreements have been terminated, no
Note under the Credit Agreement is outstanding, all Letters of Credit have been
terminated and all other Credit Agreement Obligations (excluding normal
continuing indemnity obligations which survive in accordance with their terms,
so long as no amounts are then due and payable in respect thereof) then owing by
such Assignor have been paid in full, (ii) that date upon which the Collateral
is automatically released pursuant to the first sentence of Section 26 of Part I
of the Fifth Amendment to Credit Agreement or the Administrative Agent directs
the Collateral Agent to release the Collateral pursuant to the second sentence
of Section
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26 of Part I of the Fifth Amendment to the Credit Agreement and (iii) that date
upon which the Credit Documents are amended to release all Collateral subject to
this Agreement.
(b) In the event that any Assignor is released from its
obligations pursuant to the Subsidiaries Guaranty in accordance with the terms
thereof, then such Person shall cease to be an Assignor hereunder and the
Collateral Agent, at the request and expense of the respective Person, will
execute and deliver to such Person, a proper instrument or instruments
acknowledging the satisfaction and termination of this Agreement as to such
Person, and will duly assign, transfer and deliver to such Person (without
recourse and without any representation or warranty) such of the Collateral
pledged by such Person as may be in possession of the Collateral Agent and has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys of such Person at the time held by the
Collateral Agent hereunder.
(c) It is expressly acknowledged and agreed that the
Collateral may be sold from time to time to the extent permitted by, and in
accordance with the terms of, the Credit Agreement. In addition, it is expressly
acknowledged and agreed that any or all of the Collateral may be released by the
Collateral Agent acting at the direction of the Required Secured Creditors. Upon
any sale of the type described in the second preceding sentence or release of
any such Collateral as provided in the immediately preceding sentence, the
Collateral Agent shall, at the request and expense of the respective Assignor,
and without the further consent of, or liability to, any Secured Creditor,
release such Collateral and execute and deliver to such Assignor a proper
instrument or instruments acknowledging the release of such Collateral from this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) the Collateral being sold
or released as described above. Notwithstanding anything to the contrary
contained above in this Section 11.9(c), in the event the Senior Notes Trustee
shall have notified the Collateral Agent in writing that the Senior Note
Obligations have been accelerated in accordance with the terms of the Senior
Note Documents (and (x) the Senior Note Obligations have not been paid in full
and (y) the respective acceleration has not been rescinded), the Collateral
Agent shall not thereafter release any Collateral pursuant to this Section
11.9(c) or consent to any termination of this Agreement, except in each case
with the prior written consent of the Senior Noteholders holding a majority of
the then outstanding Senior Note Obligations secured hereby (or following the
payment in full of the Senior Note Obligations or the rescission of the
respective acceleration)
(d) At any time that any Assignor desires that the Collateral
Agent take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9(a), (b) or (c), it shall deliver to the
Collateral Agent a certificate signed by its chief financial officer stating
that the release of the respective Collateral is permitted pursuant to Section
11.9(a), (b) or (c), and the Collateral Agent shall be entitled (but not
required) to conclusively rely thereon. If requested by the Collateral Agent
(although the Collateral Agent shall have no obligation to make any such
request), such Assignor shall furnish appropriate legal opinions (from counsel
acceptable to the Collateral Agent) to the effect set forth in the immediately
preceding sentence. The Collateral Agent shall have no liability whatsoever to
any Secured Creditor as the result of any release of Collateral by it as
permitted by this Section 11.9. Upon any release of
-36-
<PAGE> 41
Collateral pursuant to Section 11.9(a), (b) or (c), none of the Secured
Creditors shall have any continuing right or interest in such Collateral, or the
proceeds thereof.
11.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the Company
and the Collateral Agent.
11.11. Amendment and Restatement. Upon the execution and
delivery of this Agreement by the parties hereto, the Original Subsidiaries
Security Agreement shall be amended, restated and superseded in its entirety by
this Agreement, effective as of the date hereof, with all rights, obligations
and security interests created under or granted pursuant to the Original
Subsidiaries Security Agreement continuing from the date thereof.
-37-
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
ASSIGNORS:
Address:
AMI INDUSTRIES INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
CII HOLDINGS INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
COLTEC CANADA INC,
as an Assignor
By /S/ ROBERT J. TUBBS
-----------------------------------
Title: Executive Vice President,
General Counsel and Secretary
COLTEC INDUSTRIAL PRODUCTS INC,
as an Assignor
By /S/ ROBERT J. TUBBS
-----------------------------------
Title: Executive Vice President,
General Counsel and Secretary
COLTEC NORTH CAROLINA, INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
COLTEC TECHNICAL SERVICES INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
DELAVAN INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
GARLOCK INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
-38-
<PAGE> 43
GARLOCK INTERNATIONAL INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
COLTEC INTERNATIONAL SERVICES CO.,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
GARLOCK OVERSEAS CORPORATION,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
HABER TOOL COMPANY INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
HOLLEY PERFORMANCE PRODUCTS INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
JAMCO PRODUCTS, LLC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
MENASCO AEROSYSTEMS INC,
as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
STEMCO INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
-39-
<PAGE> 44
WALBAR INC, as an Assignor
By /S/ ROBERT J. TUBBS
------------------------------------
Title: Executive Vice President,
General Counsel and Secretary
-40-
<PAGE> 45
BANKERS TRUST COMPANY,
as Collateral Agent
By /s/ DAVID J. BELL
----------------------------
Title: Vice President
-41-
<PAGE> 46
ANNEX A
to
Subsidiaries Security Agreement
SCHEDULE OF PERMITTED FILINGS
<TABLE>
<CAPTION>
Secured Original Description
Location Party/ies Number File Date of Collateral Permitted
- -------- --------- ------ ----------------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 47
ANNEX B
to
Subsidiaries Security Agreement
SCHEDULE OF CHIEF EXECUTIVE OFFICES
<PAGE> 48
ANNEX C
to
Subsidiaries Security Agreement
SCHEDULE OF RECORD LOCATIONS
Location County
- -------- ------
<PAGE> 49
ANNEX D
to
Subsidiaries Security Agreement
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
ADDRESS STATE COUNTY
- ------- ----- ------
<PAGE> 50
ANNEX E
to
Subsidiaries Security Agreement
SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
<PAGE> 51
ANNEX F
to
Subsidiaries Security Agreement
SCHEDULE OF MARKS
<PAGE> 52
ANNEX G
to
Subsidiaries Security Agreement
SCHEDULE OF PATENTS AND APPLICATIONS
Patent Number Date Issued
(Application) (Applied)
- ------------- ---------
<PAGE> 53
ANNEX H
to
Subsidiaries Security Agreement
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
(i)
<PAGE> 54
ANNEX B
to
SUBSIDIARIES SECURITY AGREEMENT
SCHEDULE OF CHIEF EXECUTIVE OFFICES
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
1. AMI Industries, Inc. 1275 North Newport Rd El Paso
Colorado Springs, CO 80916-2779
2. CII Holdings Inc 1100 North Market Street New Castle
Suite 780
Wilmington, DE 19801
3. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West. Tyvola Road
Charlotte, NC 28217
4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
5. Coltec International Services Co c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
7. Coltec Technical Services Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C>
8. Delavan Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
P. O. Box 65100 Polk
811 Fourth Street
West Des Moines, IA 50265-0100
9. Garlock Inc 1666 Division Street Wayne
Palmyra, NY 14522
10. Garlock International Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
11. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
12. Haber Tool Company Inc 42001 Koppernick Wayne
Canton, MI 48187
13. Holley Performance Products Inc 1801 Russellville Road Robertson
Bowling Green, KY 42102
14. Jamco Products, LLC 9426 Old Katy Rd. Harris
Houston, TX 77055
15. Menasco Aerosystems Inc 10900 N.E. 8th Street King
Suite 900
Bellevue, WA 98004
16. Stemco Inc 300 E. Industrial Blvd. Harrison
Longview, TX 75606
17. Walbar Inc Peabody Industrial Center Essex
Peabody, MA 01960-3369
</TABLE>
-2-
<PAGE> 56
DIVISIONS
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
Delavan Gas Turbine Products P. O. Box 65100 Polk
Division of Delavan Inc 811 Fourth Street
West Des Moines, IA 50265-0100
France Compressor Products 104 Pheasant Run Bucks
Division of Coltec Industrial Newtown, PA 18940
Products Inc
Garlock Sealing Technologies 1666 Division Street Wayne
Division of Garlock Inc Palmyra, NY 14522
Haber Tool Operation of 42001 Koppernick Wayne
Haber Tool Company Inc Canton, MI 48187
Holley Performance Products 1801 Russellville Road Warren
Bowling Green, KY 42101
Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish
Division of Menasco Aerosytems Inc Everett, WA 98204
Stemco Truck Products Division 300 E. Industrial Blvd. Harrison
of Stemco Inc Longview, TX 75602-4720
Walbar Arizona Division of 323 S. Bracken Lane Maricopa
Walbar Inc Chandler, AZ 85224
Walbar Metals Division of Peabody Industrial Center Essex
Walbar Inc Fifth Street
Peabody, MA 01960-336
</TABLE>
-3-
<PAGE> 57
ANNEX C
to
SUBSIDIARIES SECURITY AGREEMENT
SCHEDULE OF RECORD LOCATIONS
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
1. AMI Industries, Inc. 1275 North Newport Rd. El Paso
Colorado Springs, CO 80916-2779
2. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
3. CII Holdings Inc 1100 North Market Street New Castle
Ste. 780
Wilmington, DE 19801
4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
a. France Compressor Products 104 Pheasant Run Bucks
Division Newtown, PA 18940
b. Plastomer Products Division 23 Friends Lane Bucks
Newtown, PA 18949
a. Porter Process 1600 Industry Road Montgomery
P. O. Box 310
Hatfield, PA 19440
c. Valves & Industrial Plastics 602 North 10th Street Camden
Camden, NJ 08101-0648
5. Coltec International Services Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
</TABLE>
<PAGE> 58
<TABLE>
<S> <C> <C>
6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
7. Coltec Technical Services Inc c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
8. Delavan Inc 811 Fourth Street Polk
West Des Moines, IA 50265-0100
c/o Coltec Industries Inc Mecklenburg
Three Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
a. Delavan Gas Turbine Products P. O. Box 65100 Polk
Division 811 Fourth Street
West Des Moines, IA 50265-0100
b. Delavan-Carroll Operation 400 North Bella Vista Drive Carroll
P. O. Box 826
Carroll, IA 51401-0826
c. Delavan Steel Treating 2250 Fuller Road Polk
Operation West Des Moines, IA 50265
d. Delavan Power Generation 2200 Delavan Drive Polk
West Des Moines, IA 50265
9. Garlock Bearings Inc 700 Mid-Atlantic Parkway Gloucester
Thorofare, NJ 08086
</TABLE>
-2-
<PAGE> 59
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
10. Garlock Inc 1666 Division Street Wayne
Palmyra, NY 14522
a. Garlock Sealing Technologies 1666 Division Street Wayne
Palmyra, NY 14522
a. Compression Packing 300 Alling Drive Wayne
Products Sodus, NY 14551
b. Garlock Rubber 201 Dana Drive Green
Technologies Paragould, AR 72450
c. Garlock Metallic Gaskets 1977 Kindred Street Harris
Houston, TX 77049
d. Lubrikup 208 Rose Street Lycoming
P. O. Drawer 3066
Williamsport, PA 17701
11. Garlock International Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
12. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
13. Haber Tool Company Inc 42001 Koppernick Wayne
Canton, MI 48187
a. Danti Tool-Saginaw 1270 Agricola Drive Wayne
Saginaw, MI 48604
b. Danti Tool-Standish 4281 Air Park Drive Arenez
P. O. Box 767
Standish, MI 48658
14. Holley Performance Products Inc 1801 Russellville Road Robertson
Bowling Green, KY 42102
a. Springfield Plant 509 Industrial Drive Robertson
Springfield, TN 37172
</TABLE>
-3-
<PAGE> 60
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
15. Jamco Products, LLC 9426 Old Katy Rd. Harris
Houston, TX 77055
16. Menasco Aerosystems Inc 10900 N.E. 8th Street King
Suite 900
Bellevue, WA 98004
a. Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish
Division Everett, WA 98204
17. Stemco Inc 300 E. Industrial Blvd. Harrison
Longview, TX 75606
18. Walbar Inc Peabody Industrial Center Essex
Peabody, MA 01960-3369
a. Walbar Arizona 323 S. Bracken Lane Maricopa
Chandler, AZ 85224
a. Walbar Tempe 811 West Broadway Maricopa
Tempe, AZ 85282
b. Walbar Metals Peabody Industrial Center Essex
Fifth Street
Peabody, MA 01960
a. Greenwood Plant 5502 Highway 25 North Greenwood
Hodges, SC 29653
19. Jamco, LLC 300 E. Industrial Blvd. Harrison
Longview, TX 75606
</TABLE>
-4-
<PAGE> 61
ANNEX D
to
SUBSIDIARIES SECURITY AGREEMENT
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATION
<TABLE>
<CAPTION>
Assignor Address County
- -------- ------- ------
<S> <C> <C>
1. AMI Industries, Inc. 1275 North Newport Rd. El Paso
Colorado Springs, CO 80916-2779
2. CII Holdings Inc 1100 North Market Street New Castle
Ste. 780
Wilmington, DE 19801
3. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
a. France Compressor Products 104 Pheasant Run Bucks
Division Newtown, PA 18940
b. Plastomer Products Division 23 Friends Lane Bucks
Newtown, PA 18949
a. Porter Process 1600 Industry Road Montgomery
P. O. Box 310
Hatfield, PA 19440
c. Valves & Industrial Plastics 602 North 10th Street Camden
Camden, NJ 08101-0648
5. Coltec International Services Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C>
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
7. Coltec Technical Products Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
8. Delavan Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
a. Delavan Gas Turbine Products P. O. Box 65100 Polk
Division 811 Fourth Street
West Des Moines, IA 50265-0100
b. Delavan-Carroll Operation 400 North Bella Vista Drive Carroll
P. O. Box 826
Carroll, IA 51401-0826
c. Delavan Steel Treating 2250 Fuller Road Polk
Operation West Des Moines, IA 50265
d. Delavan Power Generation 2200 Delavan Drive Polk
West Des Moines, IA 50265
9. Garlock Inc 1666 Division Street Wayne
Palmyra, NY 14522
a. Garlock Sealing Technologies 1666 Division Street Wayne
Palmyra, NY 14522
2860 Plymouth Drive Ontario, Canada
Oakville, Ontario
Canada L6H 5S8
4100 Rue Garlock Quebec, Canada
Sherbrooke, Quebec
Canada J1L 1W5
</TABLE>
-2-
<PAGE> 63
<TABLE>
<S> <C> <C>
a. Compression Packing 300 Alling Drive Wayne
Products Sodus, NY 14551
b. Garlock Rubber 201 Dana Drive Green
Technologies Paragould, AR 72450
c. Garlock Metallic Gaskets 1977 Kindred Street Harris
Houston, TX 77049
d. Lubrikup 208 Rose Street Lycoming
P. O. Drawer 3066
Williamsport, PA 17701
e. Stemco, Inc. 300 East Boulevard Harrison
Harrison, TX 75606
10. Garlock International Inc c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
11. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg
3 Coliseum Centre
2550 West Tyvola Rd.
Charlotte, NC 28217
12. Haber Tool Company Inc 42001 Koppernick Wayne
Canton, MI 48187
a. Danti Tool-Saginaw 1270 Agricola Drive Wayne
Saginaw, MI 48604
b. Danti Tool-Standish 4281 Air Park Drive Arenez
P. O. Box 767
Standish, MI 48658
c. General Motors Corp. 2100 Burlingame Wyoming
Grand Rapids, MI 49509 (consignment
Inventory at
GM plant)
13. Holley Performance Products Inc 1801 Russellville Road Robertson
Bowling Green, KY 42102
</TABLE>
-3-
<PAGE> 64
<TABLE>
<S> <C> <C>
a. Springfield Plant 509 Industrial Drive Robertson
Springfield, TN 37172
14. Jamco Products, LLC 9426 Old Katy Rd. Harris
Houston, TX 77055
15. Menasco Aerosystems Inc 10900 N.E. 8th Street King
Suite 900
Bellevue, WA 98004
a. Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish
Division Everett, WA 98204
16. Walbar Inc Peabody Industrial Center Essex
Peabody, MA 01960-3369
a. Walbar Arizona 323 S. Bracken Lane Maricopa
Chandler, AZ 85224
a. Walbar Tempe 811 West Broadway Maricopa
Tempe, AZ 85282
b. Walbar Metals Peabody Industrial Center Essex
Fifth Street
Peabody, MA 01960
a. Greenwood Plant 5502 Highway 25 North Greenwood
Hodges, SC 29653
</TABLE>
-4-
<PAGE> 65
ANNEX E
to
SUBSIDIARIES SECURITY AGREEMENT
SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
<TABLE>
<CAPTION>
Assignor Name
-------- ----
<S> <C>
1. AMI Industries, Inc. AMI Aircraft Seating Systems
2. Coltec Industrial Products France Compressor Products
Plastomer Products
Porter Process
Camden Operation
Valves & Industrial Plastics
3. Delavan Inc Delavan-Carroll Operation
Delavan Fuel Metering Operation
Delavan Steel Treating Operation
Delavan Power Generation Operation
Delavan Gas Turbine Products
4 Garlock Inc Garlock Sealing Technologies
Garlock Rubber Technologies
Garlock Metallic Gaskets
Lubrikup
5. Haber Tool Company Haber Tool Operation
Danti Tool & Die, Inc.
Danti Tool - Saginaw
Danti Tool - Standish
6. Lewis Engineering Company Delavan Process Instrumentation
7. Menasco Aerosystems Inc Menasco Aerospace Everett
8. Quincy Compressor Ortman Fluid Power
9. Stemco Inc Stemco Truck Products
10. Walbar Inc Walbar Arizona
Walbar Metals
</TABLE>
<PAGE> 66
Annex F
to
SUBSIDIARIES SECURITY AGREEMENT
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
UTILIZED BY THE ANCHOR PACKING COMPANY
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
254,554 March 26, 1929 A & Design
160,368 October 24, 1922 A & Design
1,644,249 May 14, 1991 A & Design
342,295 January 12, 1937 AMFLEX
1,083,502 January 24, 1978 ANCHORPAK
617,860 December 20, 1955 ANKLON
1,086,914 March 7, 1978 ANKOFLUOR
1,040,442 June 1, 1976 ANKOLITE
608,562 July 12, 1955 ANKOLITE
605,166 April 26, 1955 ANKOPRENE
391,118 October 21, 1941 ANKOR-FLEX
224,948 March 8, 1927 ANKORITE
605,505 May 3, 1955 ANKOTALLIC
1,193,180 April 6, 1982 ANKOTEX
992,853 September 10, 1974 CONQUISTADOR
91,305 April 29, 1913 HYDROIL
824,892 February 28, 1967 MOL-ANKO-THANE
1,081,037 January 3, 1978 ROTA-FACE
58,839 April 28, 1908 TAURIL
550,937 November 20, 1951 TRIPLE "U"
920,213 September 14, 1971 TWICOM
1,033,285 February 10, 1976 ULTRAGLIDE
618,677 January 3, 1956 VY/FLEX
</TABLE>
<PAGE> 67
Annex F
Page 2
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
OWNED BY COLTEC NORTH CAROLINA INC FOR USE BY
THE COMPANY AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
909,429 March 9, 1971 CORPORATE LOGO
1,699,817 July 7, 1992 COLTEC INDUSTRIES &
LOGO
1,712,599 September 1, 1992 COLTEC INDUSTRIES &
LOGO
1,737,584 December 1, 1992 COLTEC INDUSTRIES &
LOGO
1,742,117 December 22, 1992 COLTEC INDUSTRIES &
LOGO
1,767,835 April 27, 1993 COLTEC INDUSTRIES &
LOGO
1,835,154 May 10, 1994 COLTEC INDUSTRIES &
LOGO
</TABLE>
<PAGE> 68
Annex F
Page 3
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
OWNED BY DELAVAN INC
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
1,351,698 July 30, 1985 COLOR JET
1,454,865 September 1, 1987 COLOR JET
1,276,170 May 1, 1984 COLOR-BRATE
1,301,207 October 23, 1984 COLOR-BRATE
1,184,648 January 5, 1982 DEL-O-FLO
1,272,744 April 3, 1984 DELA-FIT
1,065,670 May 17, 1977 DELAVAN
1,052,304 November 9, 1976 DELAVAN
1,292,321 August 28, 1984 RAINDROP
1,012,800 June 10, 1975 RAINDROP
1,253,590 October 11, 1983 SDX
723,593 November 7, 1961 SONAC
704,944 September 27, 1960 SONAC
1,100,006 August 22, 1978 SWIRL-AIR
1,021,995 October 7, 1975 WHIRL-RAIN
167,179 May 16, 1991 BALL-JET
082,895 July 30, 1990 DURA-JET
1,837,824 May 31, 1994 DELAVAN
1,975,827 May 28, 1996 DELAVAN PROTEK
</TABLE>
<PAGE> 69
Annex F
Page 4
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
74/570,379 September 6, 1994 CLEAN AIR TECHNOLOGY
74/633,711 February 13, 1995 PRO-TEC
</TABLE>
<PAGE> 70
Annex F
Page 5
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
UTILIZED BY GARLOCK INC AND OWNED BY COLTEC NORTH CAROLINA
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
312,661 May 1, 1934 BELMONT
661,669 May 13, 1958 BELMONT
321,984 February 19, 1935 BELMONT & DESIGN
661,670 May 13, 1958 BELMONT & DESIGN
1,198,739 June 22, 1982 BLUE-GARD
48,356 December 26, 1905 CALIPER & SCALE DESIGN
181,026 March 11, 1924 CALIPER & SCALE DESIGN
642,595 March 12, 1957 CALIPER & SCALE DESIGN
647,488 June 25, 1957 CALIPER & SCALE DESIGN
439,630 July 6, 1948 CHEMISEAL
739,748 October 23, 1962 CHEMISEAL
605,500 May 3, 1955 CHEVRON
291,050 January 26, 1932 CHEVRON & DESIGN
610,403 August 9, 1955 CHEVRON & DESIGN
611,808 September 6, 1955 CHRISSCROSS BRAID
1,602,289 June 19, 1990 ENVELON
1,602,856 January 8, 1991 ES-FLO
763,513 January 21, 1964 FLEX-O-MATIC
807,815 May 3, 1966 FLUR-O-FRAN
818,903 November 22, 1966 FLUR-O-FRAN
662,591 June 3, 1958 FRANCE & DESIGN
1,076,821 November 8, 1977 GAR-FIL
1,127,190 December 4, 1979 GAR-MAX
908,922 March 2, 1971 GAR-SEAL
581,360 October 20, 1953 GAR-SEAL
849,823 May 28, 1968 GARFITE
904,160 December 15, 1970 GARFLEX
1,016,821 July 29, 1975 GARLOCK
647,010 June 18, 1957 GARLOCK
643,892 April 9, 1957 GARLOCK
801,648 January 11, 1966 GARLOCK
844,381 February 20, 1968 GARLOCK
642,594 March 12, 1957 GARLOCK
184,261 May 20, 1924 GARLOCK
356,210 April 19, 1938 GARLOCK
647,487 June 25, 1957 GARLOCK
1,284,068 July 3, 1984 GARLOCK
372,869 November 14, 1939 GARLOCK
377,981 May 21, 1940 GARLOCK
377,983 May 21, 1940 GARLOCK
</TABLE>
<PAGE> 71
Annex F
Page 6
<TABLE>
<S> <C> <C>
646,952 June 18, 1957 GARLOCK
23,420 July 25, 1893 GARLOCK & DESIGN
806,599 April 5, 1966 GARLOCK & DESIGN
37,332 November 19, 1901 GARLOCK & DESIGN
1,209,712 September 21, 1982 GARPHIL
958,129 May 1, 1973 GARTHANE
1,301,678 October 23, 1984 GRAPH-LOCK
291,999 March 1, 1932 GUARDIAN
884,653 January 20, 1970 GUARDIAN
943,554 September 26, 1972 GUARDIAN
1,120,036 June 12, 1979 GUARDIAN
860,761 November 26, 1968 GYLON
1,067,113 June 7, 1977 HC & DESIGN
508,591 April 12, 1949 KLOZURE
572,833 April 7, 1953 LATTICE BRAID
378,035 May 21, 1940 LUBALL
1,577,765 January 16, 1990 LUBRIKUP & DESIGN
756,832 September 17, 1963 MARBLOCK
855,561 August 27, 1968 MARINEPAK
612,198 September 13, 1955 MECHANIPAK
1,600,832 June 12, 1990 MILL-RIGHT
800,512 December 14, 1965 MULTI/FACTURING
728,548 March 13, 1962 F/S
1,305,022 November 13, 1984 PACKMASTER
930,297 March 7, 1972 PLAST-O-LON
871,317 June 17, 1969 PLASTI-PAK
769,027 May 5, 1964 PLASTI-THREAD
830,588 June 20, 1967 POLYFLEX
1,624,844 November 27, 1990 SLUDGE-PAK
1,278,970 May 22, 1984 SOLDIER DESIGN
721,009 September 5, 1961 STANDARD PACKING OF
THE WORLD
1,237,326 May 10, 1983 SYNTHE-PAK
1,078,252 November 29, 1977 THERMOLUBE
1,107,793 December 5, 1978 UNI-CARTRIDGE
1,717,214 September 15, 1992 POWR-STOR
1,983,797 July 2, 1996 THE SEAL CIRCUIT
2,057,119 April 29, 1997 SIGNUM
</TABLE>
<PAGE> 72
Annex F
Page 7
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
74/486,360 February 4, 1994 FLUIDTEC
74/505,505 March 24, 1994 FLEXSEAL
74/570,376 October 6, 1994 MICRO-TEC
74/713,822 August 10, 1995 IFG & Design
75/008,867 October 20, 1995 GARLOCK & Design
75/013,746 November 1, 1995 CRISSCROSS-BRAID
75/213,220 December 13, 1996 GARLOCK SEALING
TECHNOLOGIES
75/326,418 July 16, 1997 MODEL 64
75/282,702 April 29, 1997 ISO-GARD
75/274,704 April 15, 1997 QUICKSET
75/274,880 April 15, 1997 QUICKBUSHING
75/307,615 June 12, 1997 IFG
75/313,975 June 24, 1997 DURATUFF
75/346,277 August 25, 1997 MICRO-TEC
75/367,992 October 9, 1997 SHIPSET
75/367,993 October 3, 1997 STRESS-SAVER
</TABLE>
<PAGE> 73
Annex F
Page 8
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
UTILIZED BY STEMCO INC AND OWNED BY COLTEC NORTH CAROLINA
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
1,595,097 May 8, 1990 AUTOCOACH
935,683 June 13, 1972 BATT-METER
1,105,543 November 7, 1978 DRIVELESS HUBODOMETER
1,109,921 December 26, 1978 ENGLER
1,595,098 May 8, 1990 FUELCOACH
1,034,829 March 2, 1976 GRIT GUARD
876,024 September 2, 1969 REVO-COUNT
1,517,800 December 27, 1988 S & DESIGN
1,636,155 February 26, 1991 SS4
788,516 April 20, 1965 STEMCO
801,703 January 11, 1966 STEMCO
1,016,820 July 19, 1975 STEMCO
801,705 January 11, 1966 STEMCO in Oval
788,172 April 13, 1965 STEMCO in Oval
1,418,935 December 2, 1986 STEMCO in Oval
1,646,844 June 4, 1991 STEMCO SYSTEM 4
1,394,705 May 27, 1986 STEMCO-ENGLER
1,420,805 December 16, 1986 STEMCO-MONROE
602,976 March 8, 1955 WIG-WAG
1,044,631 July 27, 1976 PRO-TORQ
1,417,174 November 18, 1986 PRO TORQUE
1,977,349 May 28, 1996 HYCARB
2,038,511 February 18, 1997 SPINDLE NUT KEEPER RING DESIGN
</TABLE>
<PAGE> 74
Annex F
Page 9
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
75/345,012 August 21, 1997 SENTINEL
75/349,954 August 29, 1997 SS4
75/355,075 September 11, 1997 HIGHER STANDARD OF
PERFORMANCE
75/356,563 September 15, 1997 ESP
75/362,550 September 25, 1997 DISCOVER
75/362,551 September 25, 1997 VOYAGER
75/385,341 November 5, 1997 STEMCO & "S" Design
75/406,981 December 17, 1997 ADVANTAGE 2000
75/408,576 December 19, 1997 GUARDIAN HP
</TABLE>
<PAGE> 75
Annex F
Page 10
UNITED STATES TRADEMARK REGISTRATIONS
UTILIZED BY WALBAR INC AND OWNED BY COLTEC NORTH CAROLINA
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
992,349 September 3, 1974 WALCOAT
1,796,539 October 5, 1993 SIMULCOAT
</TABLE>
<PAGE> 76
Annex F
Page 11
UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS
UTILIZED BY COLTEC INDUSTRIAL PRODUCTS INC
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
1,776,257 June 15, 1993 MULTILUBE
</TABLE>
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
75/041,642 January 11, 1996 The Cylinder Solution
People
</TABLE>
<PAGE> 77
Annex G
None.
<PAGE> 78
Annex H
to
Subsidiary Security Agreement
UNITED STATES PATENTS AND PATENT APPLICATIONS
UTILIZED BY GARLOCK INC AND OWNED BY COLTEC NORTH CAROLINA
<TABLE>
<CAPTION>
Patent No. Issue Date Title
---------- ---------- -----
<S> <C> <C>
4,258,927 03/31/81 Shaft Seal with Retractable PTFE-Lined Sealing
Lip
4,274,641 06/23/81 Shaft Seal and Method
4,289,318 09/15/81 Hydraulic Motor Balancing Ring Seal
4,289,321 09/15/81 Pressure Shaft Seal and Method
4,308,938 01/05/82 Disc Brake Assembly and Method
4,311,316 01/19/82 Shaft Seal and Method
4,328,974 05/11/82 Stuffing Box Packing System and Method
4,335,889 06/22/82 Shaft Seal with Liner Flange
4,364,588 12/12/82 Band Seal Clamp
4,406,847 09/27/83 Method for Making a Lip type Shaft Seal Having
a Resin Liner
4,501,429 02/26/85 Mechanical Seal Flush Agitator and Wear Monitor
for Mechanical Seals
4,504,067 03/12/85 High Pressure Shaft Seal with Low-Friction
4,510,966 04/16/85 Plug Valve with Floating Stem Seal
4,552,367 11/12/85 Hub Seal and Axle Assembly and Method for Its
Making
4,817,966 04/04/89 Rotary Shaft Bearing Isolator Seal
4,852,890 08/01/8 Rotary Shaft Bearing Isolator Seal
4,859,526 08/22/89 High Temperature Compressed Asbestos Sheet
</TABLE>
<PAGE> 79
Annex H
Page 2
<TABLE>
<S> <C> <C>
Re.33,192 04/03/90 Method of Molding an Elastomeric Shaft Seal
with a Polytetrafluoroethlene Liner
Simultaneously Formed Thereon
4,900,629 02/13/90 High Compressibility Gasket Material
4,913,951 04/03/90 Fabrication of Reinforced PTFE Gasketing Materia
4,961,891 10/09/90 High Compressibility Gasketing Material
4,990,296 02/05/91 Welding of Filled Sintered PTFE
4,994,303 02/19/91 Fiber Impregnation Process
5,004,248 04/02/91 Unitized Seal with Unitizing Joint Remote from
Seal Lip
5,024,451 06/18/91 Multi-Position Labyrinth Seal Ring
5,480,161 01/2//96 Shaft Seal With Controlled Porosity Elements
5,484,173 01/16/96 Flowing Arch Expansion Joint Using FEP Liner
Bonded to Fiberglass Fabric Layer and
Reinforced With a Plurality of Fabric Plies
Covered with Elastomeric Outer Layer
5,533,737 7/9/96 Seals With Particle Exclusion Means
5,511,797 4/30/96 Tandem Seal
5,603,513 2/18/97 Compressed Non-Asbestos Gasketing for Steam
</TABLE>
<PAGE> 80
Annex H
Page 3
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
08/877,002 June 16, 1997 Gasket With Wedge-Shaped Grooves for Facing
Materials
08/620,406 March 22, 1996 Compact Five Ring Stuffing Box
08/783,094 January 14, 1997 Anti-Buckling Spiral Wound Gasket
08/844,445 April 18, 1997 Floating Wiper Seal Assembly
08/869,692 June 5, 1997 Labyrinth Seal Device And Method
of Assembly
</TABLE>
<PAGE> 81
Annex H
Page 4
UNITED STATES PATENTS
OWNED BY COLTEC INDUSTRIAL PRODUCTS INC
<TABLE>
<CAPTION>
Patent No. Issue Date Title
---------- ---------- -----
<S> <C> <C>
5,501,827 March 26, 1996 Laser Markable PTFE Resin Material and Method
of Making
5,697,390 December 16, 1997 Process for Producing Filled PTFE Resin
Composite Materials
5,722,667 March 3, 1998 Seal for Use Between Planar Surfaces
</TABLE>
<PAGE> 82
Annex H
Page 5
UNITED STATES PATENTS AND PATENT APPLICATIONS
OWNED BY JAMCO LLC
<TABLE>
<CAPTION>
Patent No. Issue Date Description
---------- ---------- -----------
<S> <C> <C>
5,421,594 June 6, 1995 Gasket
</TABLE>
<TABLE>
<CAPTION>
Pending Applications:
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
08/647,435 April 30, 1996 Hybrid Gasket
</TABLE>
<PAGE> 83
Annex H
Page 6
UNITED STATES PATENTS AND PATENT APPLICATIONS
UTILIZED BY STEMCO INC AND OWNED BY COLTEC NORTH CAROLINA INC
<TABLE>
<CAPTION>
Patent No. Issue Date Description
---------- ---------- -----------
<S> <C> <C>
4,989,222 01/29/91 Electronic Hubodometer
4,939,481 02/05/91 Axle Ring Removal Tool
5,328,275 7/12/94 Unitized Wheel Hub and Bearing Assembly
5,478,642 12/26/95 Resin-Based Friction Material Comprising
Aramid, Acrylic and Carbon Fibers In a Phenolic
Resin Binder
</TABLE>
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
08/381,699 January 31, 1995 Vented Hubcap
08/501,494 July 12, 1995 Resin-Based Friction Material
08/572,921 December 15, 1995 Vent Valve Concept
08/916,978 August 14, 1997 Unitized Wheel Hub and Bearing Assembly With
Lubricant Distributing Vanes
08/891,477 July 11, 1997 Contaminent Excluding Hubcap Vent Plug
08/957,807 October 24, 1997 Hub Seal With Machinable Thrust Ring
</TABLE>
<PAGE> 84
Annex H
Page 7
UNITED STATES PATENTS AND APPLICATIONS
UTILIZED BY WALBAR INC AND OWNED BY COLTEC NORTH CAROLINA INC
<TABLE>
<CAPTION>
Patent No. Issue Date Title
---------- ---------- -----
<S> <C> <C>
4,293,338 10/06/81 Diffusion Coating Composition of Improved
Flowability
5,482,578 1/09/96 Diffusion Coating Process
5,492,726 2/20/96 Platinum Group Silicide Modified Aluminide
Coating Process and Products
5,668,607 11/18/97 Platinum Group Silicide Modified Aluminide
Coating Process and Products
</TABLE>
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
08/520,282 August 28, 1995 Improved Diffusion Coating Process
</TABLE>
<PAGE> 85
Annex H
Page 8
UNITED STATES PATENTS AND APPLICATIONS
OWNED BY DELAVAN INC.
<TABLE>
<CAPTION>
Patent No. Issue Date Title
---------- ---------- -----
<S> <C> <C>
4,186,877 02/05/80 Bypass Nozzle
4,360,156 11/23/92 Fluid Metering and Spraying
4,570,858 02/18/86 Coating Spray Nozzle Tips
4,623,277 11/18/86 Self-Tightening Shaft Coupler
5,058,809 10/22/91 Foam Generating Aspirating Nozzle
5,115,634 5/26/92 Simplex Airblast Fuel Injection Method
5,152,463 10/6/92 Aspirating Simplex Spray Nozzle
5,224,333 7/6/93 Simplex Airblast Fuel Injection
5,472,145 12/5/95 Straight Stream Nozzle
5,491,972 2/20/96 Combination Ignitor and Fuel Atomizer Nozzle
Assembly for a Gas Turbine
5,701,732 12/30/97 Method and Appartus for Purging of Gas Turbine
Injectors
5,732,730 12/31/98 Combined Check Valve and Metering Valve Assembly
</TABLE>
Pending Applications:
<TABLE>
<CAPTION>
Serial No. Filing Date Description
---------- ----------- -----------
<S> <C> <C>
08/866,467 May 30, 1997 Purging of Fluid Spray Apparatus
</TABLE>
<PAGE> 86
Annex H
Page 9
UNITED STATES PATENTS
OWNED BY AMI INDUSTRIES INC.
<TABLE>
<CAPTION>
Patent No. Issue Date Title
---------- ---------- -----
<S> <C> <C>
5,643,128 07/01/97 Harmonic Drive Using Guided, Floating Cam
Driven Cylinders As Power Transmitting Elements
</TABLE>
<PAGE> 87
Annex I
to
SUBSIDIARIES SECURITY AGREEMENT
UNITED STATES COPYRIGHT REGISTRATIONS
OWNED BY GARLOCK INC
<TABLE>
<CAPTION>
Registration No. Registration Date Description
---------------- ----------------- -----------
<S> <C> <C>
VA 455,795 March 11, 1991 Slide Chart
</TABLE>
<PAGE> 1
EXHIBIT 4.11
SECOND AMENDMENT
TO
RECEIVABLES TRANSFER AND ADMINISTRATION AGREEMENT
THIS SECOND AMENDMENT TO RECEIVABLES TRANSFER AND ADMINISTRATION AGREEMENT,
dated as of January 26, 1998 (this "Amendment"), is to that Receivables Transfer
and Administration Agreement, dated as of September 19, 1997 (as amended and
modified hereby and as amended by the First Amendment thereto, dated as of
December 15, 1997 and as further amended and modified from time to time
hereafter, the "Transfer Agreement"), by and among COLTEC INDUSTRIES INC, a
Pennsylvania corporation, as agent for the Sellers (the "Sellers' Agent"), as
collection agent (the "Collection Agent") and as a Seller, the entities listed
on the signature pages thereof (each a "Seller" and, collectively, the
"Sellers") and COLTEC NORTH CAROLINA INC, a North Carolina corporation, as
Purchaser (the "Purchaser"). Terms used and not otherwise defined in this
Amendment shall have the meanings set forth in the Transfer Agreement.
WITNESSETH:
WHEREAS, the parties hereto desire to amend the Transfer Agreement to reflect
the removal of Holley Performance Products Inc ("Holley") as a Seller under that
Agreement.
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Amendment and Termination.
a. Holley desires to withdraw, and terminate its rights and
obligations, as a Seller under the Transfer Agreement, including, without
limitation, under the Sale Assignment, dated as of September 22, 1997 (the "Sale
Assignment") by and between Holley and the Purchaser, effective as of the date
of this Amendment. As of the date of this Amendment, the parties hereto agree
that Holley will no longer sell, transfer, absolutely assign, set over or convey
Receivables, Related Security and the proceeds thereof to the Purchaser under
the Agreement or under the Sale Assignment (which Sale Assignment is hereby
terminated as of the date hereof). 711e withdrawal of Holley as a Seller does
not affect the Receivables, Related Security and the proceeds thereof that were
transferred and assigned by Holley prior to the date of this Amendment. The
Purchaser will retain as its property the Receivables, Related Security and
proceeds thereof that were previously transferred by Holley to it.
b. Schedule 4.01(n) referred to in, and attached to, the Transfer
Agreement, is hereby deleted and replaced in its entirety with the revised
Schedule 4.01(n) attached hereto.
2. No Other Changes.
Except as modified by this Amendment, all of the terms and provisions of the
Transfer Agreement remain in full force and effect.
<PAGE> 2
3. Counterparts.
This Amendment may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original. It shall not be necessary
in making proof of this Amendment to produce or account for more than one such
counterpart.
4. Governing Law.
This Amendment shall be construed and enforced in accordance with the laws of
the State of North Carolina without regard to its rules with respect to
conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
The undersigned have caused this SECOND AMENDMENT TO RECEIVABLES TRANSFER AND
ADMINISTRATION AGREEMENT to be duly executed and delivered by their proper duly
authorized representatives as of the 26th day of January, 1998.
COLTEC INDUSTRIES INC,
as Sellers' Agent
By: /s/ Thomas B. Jones, Jr.
----------------------------
Name: Thomas B. Jones, Jr.
Title: Vice President
COLTEC NORTH CAROLINA INC,
as Purchaser
By: /s/ Thomas B. Jones, Jr.
----------------------------
Name: Thomas B. Jones, Jr.
Title: Vice President
HOLLEY PERFORMANCE PRODUCTS
INC, as Seller
By: /s/ Robert J. Tubbs
----------------------------
Name: Robert J. Tubbs
Title: Vice President
<PAGE> 4
APPENDIX 1
Schedule 4.01(n)
LIST OF TRADENAMES
<TABLE>
<CAPTION>
Subsidiaries Tradenames
- ------------ ----------
<S> <C>
1. Coltec Industries Inc Chandler Evans Control Systems
Delavan Process Instrumentation
Fairbanks Morse Engine
Haber Tool
Lewis Engineering Company
Menasco Aerosystems
Quincy Compressor
Sterling Die
2. AMI Industries, Inc. Aircraft Seating Systems
3. Coltec Canada Inc None
4. Coltec Industrial Products France Compressor Products
Ortman Fluid Power
Plastomer Products
5. Delavan-Delta Inc Delavan Commercial Products
6. Delavan Inc Delavan Fuel Metering Products
Delavan Gas Turbine Products
7. Garlock Bearings Inc None
8. Garlock Inc Garlock Metallic Gaskets
Garlock Sealing Technologies
9. Menasco Aerosystems Inc None
10. Stemco Inc Stemco Truck Products
11. Walbar Inc Walbar Arizona
Walbar Metals
</TABLE>
<PAGE> 1
EXHIBIT 12.1
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600
Add [(deduct):
Income taxes:
Federal and foreign ............... 12,993 11,072 48,875 28,111 17,616 27,251 13,684
State and local ................... 471 1,487 6,241 5,121 2,601 2,105 1,877
Portion of rents representative
of Interest factor (1) ............ 879 751 2,983 3,321 2,868 3,979 4,078
Interest Expense .................... 15,080 12,364 54,613 78,182 91,208 90,337 111,497
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings from continuing
operations before
extraordinary Item,
as adjusted ....................... $ 54,644 $ 47,166 $ 207,586 $ 167,305 $ 148,813 $ 172,118 $ 155,736
========== ========== ========== ========== ========== ========== ==========
Fixed charges:
Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497
Capitalized interest .............. 225 225 1,455 1,139 997 689 1,140
Portion of rents representative
of Interest factor(1) ............ 879 751 2,983 3,321 2,868 2,979 3,678
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fixed charges ....................... $ 16,184 $ 13,340 $ 59,051 $ 80,642 $ 95,073 $ 94,005 $ 116,315
========== ========== ========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges ...................... 3.4 3.5 3.5 2.1 1.6 1.8 1.3
========== ========== ========== ========== ========== ========== ==========
</TABLE>
Note:
(1) Estimated to be 1/3 of total rent expenses.
<PAGE> 2
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EBITDA TO INTEREST EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600
Interest expense .................... 15,080 12,364 54,043 78,182 89,886 89,472 110,190
Income taxes: ....................... 12,993 11,072 48,875 28,111 17,615 27,251 13,684
Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before interest,
taxes, depreciation and
authorization (EBITDA) ............ $ 65,710 $ 53,439 $ 236,207 $ 193,589 $ 164,108 $ 207,300 $ 197,496
========== ========== ========== ========== ========== ========== ==========
Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497
========== ========== ========== ========== ========== ========== ==========
Ratio of EBITDA to interest
Expense ............................ 4.4 4.3 4.3 2.5 2.0 2.3 1.8
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 3
EXHIBIT 12.1
COLTEC INDUSTRIES INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF TOTAL DEBT TO EBITDA
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
------------------------ Year Ended December 31,
March 29 March 30 ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before
extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 94,570 $ 34,521 $ 45,446 $ 24,600
Interest expense .................... 15,080 12,364 54,813 74,894 89,886 89,462 110,190
Income taxes ........................ 12,993 11,072 48,875 28,111 17,615 27,251 13,684
Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before interest,
taxes, depreciation and
amortization (EBITDA) ............. $ 65,710 $ 53,439 $ 239,207 $ 193,589 $ 184,108 $ 207,300 $ 197,486
========== ========== ========== ========== ========== ========== ==========
Ratio of EBITDA to
interest expense ................... 13.1 13.7 3.2 3.7 5.1 4.7 5.2
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 1
Exhibit 23.2
As independent public accountants, we hereby consent to the use of our report
included in this Registration Statement and to the incorporation by reference in
this Registration Statement of our report dated February 2, 1998 (except with
respect to information discussed in Note 20 as to which the date is April 16,
1998) included in Coltec Industries Inc's Form 10-K for the year ended December
31, 1997 and to all references to our Firm included in this Registration
Statement.
Arthur Andersen LLP
Charlotte, North Carolina
May 15, 1998
<PAGE> 1
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ___________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
COLTEC INDUSTRIES, INC
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 13-1846375
(State or other jurisdiction (I.R.S. employer
Incorporation or organization Identification no.)
3 COLISEUM CENTRE
2550 WEST TYVOLA ROAD
CHARLOTTE, NC 28217
(Address, including zip code of
Principal executive offices)
7.5% SENIOR EXCHANGE NOTES DUE 2008
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. Furnish the following information as to the
trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
NAME ADDRESS
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August_7, 1990, Certificate of
Amendment of the Organization Certificate of Bankers
Trust Company dated June 21, 1995 - Incorporated
herein by reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171, Certificate of
Amendment of the Organization Certificate of Bankers
Trust Company dated March 20, 1996, incorporate by
referenced to Exhibit 1 filed with Form T-1
Statement, Registration No. 333-25843 and Certificate
of Amendment of the Organization Certificate of
Bankers Trust Company dated June 19, 1997, copy
attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended
on November 18, 1997. Copy attached.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust
Company dated as of December_31, 1997. Copy
attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 7th day
of May, 1998.
BANKERS TRUST COMPANY
By: /s/ Sandra J. Shaffer
-------------------------------------
Sandra J. Shaffer
Assistant Vice President
-4-
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
$300,000,000 AGGREGATE PRINCIPAL AMOUNT OF
7 1/2% SENIOR NOTES DUE 2008
OF
COLTEC INDUSTRIES INC
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED. TENDERED
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR
TO THE EXPIRATION DATE OF THE EXCHANGE OFFER.
To: Bankers Trust Company, The Exchange Agent
By Overnight Courier or Hand By Registered or Certified Mail:
Delivery:
Bankers Trust Company
Bankers Trust Company Corporate Trust & Agency Group
Corporate Trust & Agency Group Receipt & Delivery Window
P.O. Box 1458 123 Washington Street, 1st Floor
Church Street Station New York, NY 10006
New York, NY 10008-1458
By Facsimile:
(212) 250-6275/3290
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated , 1998 (the "Prospectus"), of Coltec Industries Inc (the
"Issuer") a Pennsylvania corporation, and this Letter of Transmittal (the
"Letter"), which together constitute the Issuer's offer (the "Exchange Offer")
to exchange up to $300,000,000 aggregate principal amount of the Issuer's 7 1/2%
Series B Senior Notes Due 2008 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Issuer's issued and outstanding 7 1/2% Senior
Notes Due 2008 (the "Outstanding Notes"). The terms of the Exchange Notes are
identical in all material respects to the Outstanding Notes except for certain
transfer restrictions and registration rights relating to the Outstanding Notes
and except that, if the Exchange Offer is not consummated by October 13, 1998,
the interest rate borne by the Outstanding Notes will increase by amounts
specified in the Prospectus until the Exchange Offer is consummated. The
Exchange Notes will evidence the same indebtedness as
<PAGE> 2
the Outstanding Notes and will be issued under and entitled to the same benefits
as the Outstanding Notes under the Indenture under which the Outstanding Notes
were, and the Exchange Notes will be, issued (the "Indenture"). In addition, the
Exchange Notes and the Outstanding Notes will be treated as one series of
securities under the Indenture.
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on , 1998, unless the Issuer, in its sole discretion, extends the
Exchange Offer. The Issuer reserves the right to extend the Exchange Offer at
its discretion, in which event the term "Expiration Date" shall mean the time
and date when the Exchange Offer as so extended shall expire. The Issuer shall
notify the holders of the Outstanding Notes of any extension by oral or written
notice prior to 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
The Exchange Notes will bear interest from the last interest payment date
on which interest was paid on the Outstanding Note surrendered in exchange
thereof or, if no such interest payment has occurred, from the date interest
begins to accrue on such Outstanding Note.
The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions. Please see the Prospectus under the section
entitled "The Exchange Offer--Certain Conditions to the Exchange Offer".
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Outstanding Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
This Letter is to be completed by a holder of Outstanding Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Outstanding Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering
Outstanding Notes". Holders of Outstanding Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and deliver all other documents required by this Letter to the
Exchange Agent on or prior to the Expiration Date, may tender their Outstanding
Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the section entitled "The Exchange Offer--Guaranteed Delivery
Procedures".
Holders who wish to tender their Outstanding Notes must complete this
Letter of Transmittal in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
<PAGE> 3
3
List below the Outstanding Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Outstanding Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES
(SEE INSTRUCTIONS 2, 3, AND 8)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3
------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF OUTSTANDING
NOTES TENDERED(2) (MUST BE IN
TITLE OF SECURITIES AND AGGREGATE PRINCIPAL DENOMINATIONS OF $1,000 OR
CERTIFICATE NUMBER(S)(1) AMOUNT OF OUTSTANDING NOTES INTEGRAL MULTIPLES THEREOF)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Outstanding Notes are being
tendered by book-entry transfer.
(2) Unless otherwise indicated, a holder will be deemed to have tendered
ALL of the Outstanding Notes represented in column 2.
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------
Account Number:
--------------------------------------------------------
Transaction Code Number:
-----------------------------------------------
<PAGE> 4
4
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-------------------------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
If delivered by book-entry transfer, complete the following:
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
---------------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Outstanding Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE> 5
5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of
Outstanding Notes indicated above. The undersigned has completed, executed and
delivered this Letter to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the
Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to such Outstanding Notes as are being tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer) with respect to the tendered Outstanding Notes with full
power of substitution to (i) deliver certificates for such Outstanding Notes to
the Issuer and deliver all accompanying evidences of transfer and authenticity
to, or upon the order of, the Issuer, (ii) present such Outstanding Notes for
transfer on the books of the Issuer and (iii) receive for the account of the
Issuer all benefits and otherwise exercise all rights of the beneficial
ownership of such Outstanding Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Issuer will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim when the same are accepted by
the Issuer. The undersigned hereby further represents that (i) any Exchange
Notes acquired in exchange for Outstanding Notes tendered hereby will have been
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the undersigned, (ii) neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and (iii)
neither the holder nor any such other person is an "affiliate", as described in
Rule 405 under the Securities Act of 1933 (the "Securities Act"), of the Issuer.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes, it represents that
the Outstanding Notes to be exchanged for Exchange Notes were acquired by it as
a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes pursuant to
the Exchange Offer; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent and the Issuer to be necessary or
desirable to complete the assignment, transfer and sale of the Outstanding Notes
tendered hereby. All authority conferred or agreed to be conferred in this
Letter and every obligation of the undersigned hereunder shall be binding upon
the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of, the undersigned.
This tender may be withdrawn only in accordance with the procedures set forth in
the instructions contained in this Letter.
For the purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Issuer has given
oral and written notice thereof to the Exchange Agent.
If any tendered Outstanding Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted
Outstanding Notes will be returned (or, in the case of Outstanding Notes
tendered by book-entry number through the Book-Entry Transfer Facility, will be
promptly credited to an account maintained at the Book-Entry Transfer Facility),
without expense, to the undersigned at the address shown below or
<PAGE> 6
6
at a different address as may be indicated herein under the "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Outstanding Notes pursuant to
the procedures described under the section entitled "The Exchange
Offer--Procedures for Tendering Outstanding Notes" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuer upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding Notes
not exchanged) in the name(s) of the undersigned or, in the case of a book-entry
delivery of Outstanding Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the Exchange Notes (and, if applicable, substitute certificates
representing Outstanding Notes for any Outstanding Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of
Outstanding Notes". In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Outstanding Notes
accepted for exchange in the name(s) of, and return any certificates for
Outstanding Notes not tendered or not exchanged to, the person(s) so indicated.
The undersigned understands that the Issuer shall have no obligation pursuant to
the "Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Outstanding Notes from the name of the registered holder(s) thereof
if the Issuer do not accept for exchange any of the Outstanding Notes so
tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 7
7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
I hereby TENDER the Outstanding Notes described above in the box entitled
"Description of Outstanding Notes" pursuant to the terms of the Exchange Offer.
X
---------------------------------- ----------------------------------
X
---------------------------------- ----------------------------------
X
---------------------------------- ----------------------------------
SIGNATURE(S) OF OWNER(S) DATE
If a holder is tendering any Outstanding Notes, this Letter must be signed
by the registered holder(s) as the name(s) appear(s) on the certificate(s) for
the Outstanding Notes or on a security position listing or by any person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative
capacity, please set forth full title. See Instruction 4.
Name(s):
------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated:
------------------------------
<PAGE> 8
8
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Outstanding Notes not exchanged and/or
Exchange Notes are to be issued in the name of and sent to someone other than
the person or persons whose signature(s) appear(s) on this Letter above, or if
Outstanding Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above. Issue: Exchange Notes
and/or Outstanding Notes to:
Name
(PLEASE TYPE OR PRINT)
---------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
---------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
EMPLOYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Outstanding Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below.
- --------------------------------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER,
IF APPLICABLE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Outstanding Notes not exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Outstanding Notes"
on this Letter above.
Mail: Exchange Notes and/or Outstanding Notes
to:
Name
(PLEASE TYPE OR PRINT)
---------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
---------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
<PAGE> 9
9
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
This Letter must be used to forward, and must accompany, all certificates
for Outstanding Notes tendered pursuant to the Exchange Offer.
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES.
This Letter is to be completed by holders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in the Prospectus under the caption
"The Exchange Offer--Procedures for Tendering Outstanding Notes". Certificates
for all physically tendered Outstanding Notes, or Book-Entry Confirmation, as
the case may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile hereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth herein
on or prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Outstanding Notes tendered
hereby must be in denominations of $1,000 and integral multiples thereof.
The method of delivery of this Letter, the Outstanding Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Outstanding Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. No Letter or Outstanding Notes should be sent to the Issuer.
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, (ii) who cannot deliver their
Outstanding Notes, this Letter or any other documents required hereby to the
Exchange Agent prior to the Expiration Date or (iii) who cannot comply with the
procedures for book-entry tender on a timely basis, may tender their Outstanding
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedures: (i) such tender must be made through an
Eligible Institution (as defined below); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by mail, hand
delivery or facsimile transmission (immediately followed by mail or hand
delivery)) setting forth the name and address of the holder, the certificate
number(s) of such Outstanding Notes (except in the case of book-entry tenders)
and the principal amount of Outstanding Notes tendered, stating that the tender
is being made thereby and guaranteeing that, within three business days after
the Expiration Date, this Letter (or a facsimile hereof) together with the
certificate(s) representing the Outstanding Notes (except in the case of
book-entry tenders) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter (or facsimile hereof), as well as all other documents
required by this Letter and the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer or a Book-Entry Confirmation with
respect to such Outstanding Notes, must be received by the Exchange Agent within
three business days after the Expiration Date, all as provided in the Prospectus
under the section entitled "The Exchange Offer--Guaranteed Delivery Procedures".
Any holder who wishes to tender his Outstanding Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the
Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Outstanding Notes
according to the guaranteed delivery procedures set forth above. As used in this
Letter, "Eligible Institution" shall mean a firm which is a member of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States or which is otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
<PAGE> 10
10
All questions as to the validity, eligibility (including time of receipt),
acceptance and withdrawal of tendered Outstanding Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Outstanding Notes must be cured within such time as the Issuer shall
determine. Neither the Issuer, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Outstanding Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Outstanding Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Outstanding Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in this Letter, as soon as practicable following the
Expiration Date.
See "The Exchange Offer" in the Prospectus.
2. TENDER BY HOLDER.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. Any beneficial owner whose Outstanding Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on behalf of such beneficial owner. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing this Letter and delivering such owner's
Outstanding Notes, either make appropriate arrangements to register ownership of
the Outstanding Notes in such owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
3. PARTIAL TENDERS AND WITHDRAWALS.
Tenders of Outstanding Notes will be accepted only in denominations of
$1,000 or integral multiples thereof. If less than all of the Outstanding Notes
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Outstanding Notes to be tendered in the box above entitled
"Description of Outstanding Notes--Principal Amount of Outstanding Notes
Tendered". A reissued certificate representing the balance of nontendered
Outstanding Notes will be sent to such tendering holder (except in the case of
book-entry tenders), unless otherwise provided in the appropriate box on this
Letter, promptly after the Expiration Date. ALL OF THE OUTSTANDING NOTES
DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS
OTHERWISE INDICATED.
Any holder who has tendered Outstanding Notes may withdraw the tender by
delivering written notice of withdrawal to the Issuer prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at its
address set forth on the first page of this Letter. Any such notice of
withdrawal must (i) specify the name of the person having deposited the
Outstanding Notes to be withdrawn (the "Depositor"); (ii) include a statement
that the Depositor is withdrawing its election to have Outstanding Notes
exchanged and identify the Outstanding Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Outstanding Notes
(except in the case of book-entry tenders)); (iii) be signed by the holder in
the same manner as the original signature on this Letter by which such
Outstanding Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee (as
defined in the Prospectus) register the transfer of such Outstanding Notes into
the name of the person withdrawing the tender; and (iv) where certificates for
Outstanding Notes have been transmitted, specify the name in which such
Outstanding Notes are to be registered, if different from that of the Depositor.
If Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, the name of the registered holder and the certificate numbers of the
particular Outstanding Notes withdrawn must also be furnished to the Exchange
Agent as aforesaid prior to the physical release of the withdrawn Outstanding
Notes. If the Outstanding Notes have been tendered pursuant to the procedures
for book-entry tender set forth in the Prospectus, a notice of withdrawal must
specify, in lieu of certificate numbers, the name and account number at the
Book-Entry
<PAGE> 11
11
Transfer Facility to be credited with the withdrawn Outstanding Notes.
Outstanding Notes properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that withdrawn
Outstanding Notes may be retendered by again following one of the procedures
herein at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. All questions as to the validity, form and eligibility (including time of
receipt) of notice of withdrawal will be determined by the Issuer, whose
determinations will be final and binding on all parties. Neither the Issuer, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. See "The Exchange
Offer--Withdrawal of Tenders" in the Prospectus.
4. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURE.
If this Letter is signed by the registered holder of the Outstanding Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates (if applicable) without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Outstanding Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Outstanding Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder(s) appear(s) on the
certificate(s).
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Issuer,
proper evidence satisfactory to the Issuer of their authority to so act must be
submitted.
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by an Eligible
Institution.
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Outstanding Notes are tendered: (i) by a registered
holder of such Outstanding Notes (which term, for purposes of the Exchange
Offer, includes any participant in the Book-Entry Transfer Facility system whose
name appears on a security position listing as the holder of such Outstanding
Notes) who has not completed the box entitled "Special Issuance Instructions" on
this Letter, or (ii) for the account of an Eligible Institution.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Outstanding Notes should indicate in the applicable
box the name and address in or to which Exchange Notes issued pursuant to the
Exchange Offer and/or substitute certificates evidencing Outstanding Notes not
exchanged are to be issued or sent, if different from the name or address of the
person signing this Letter. In the case of issuance in a different name, the
employer identification or social security number of the person named must also
be indicated. Holders tendering Outstanding Notes by book-entry transfer may
request that Outstanding Notes not exchanged be credited to such amount
maintained at the Book-Entry Transfer Facility as such holder may designate
hereon. If no such instructions are given, such Outstanding Notes not exchanged
will be returned to the name or address of the person signing this Letter.
<PAGE> 12
12
6. TRANSFER TAXES.
The Issuer will pay all transfer taxes, if any, applicable to the transfer
of Outstanding Notes to them or their order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Outstanding Notes not exchanged are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Outstanding Notes tendered hereby, or if
tendered Outstanding Notes are registered in the name of any person other than
the person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Outstanding Notes to the Issuer or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted herewith, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter.
7. WAIVER OF CONDITIONS.
Subject to the terms and conditions set forth in the Prospectus, the Issuer
reserves the absolute right to waive satisfaction of any or all conditions
enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Outstanding Notes, by execution of this
Letter, shall waive any right to receive notice of the acceptance of their
Outstanding Notes for exchange.
Neither the Issuer nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES.
Any holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING, AS WELL AS REQUESTS FOR
ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER, MAY BE DIRECTED TO THE
EXCHANGE AGENT, AT THE ADDRESS INDICATED ON THE FIRST PAGE OF THIS LETTER OR BY
TELEPHONE AT (212) 250-2500.
<PAGE> 13
13
IMPORTANT TAX INFORMATION
Under federal income tax laws, a registered holder of Outstanding Notes or
Exchange Notes is required to provide the Trustee (as payor) with such holder's
correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or
otherwise establish a basis for exemption from backup withholding. If such
holder is an individual, the TIN is his social security number. If the Trustee
is not provided with the correct TIN or an adequate basis for an exemption, a
$50 penalty may be imposed by the Internal Revenue Service, and payments made to
such holder with respect to Outstanding Notes or Exchange Notes may be subject
to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the holder or other payee. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Outstanding
Notes or Exchange Notes the holder is required to provide the Trustee with: (i)
the holder's correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (A) such holder is exempt from backup withholding, (B) the holder
has not been notified by the Internal Revenue Service that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (C) the Internal Revenue Service has notified the holder that the holder is
no longer subject to backup withholding; and (ii) if applicable, an adequate
basis for exemption. If the holder is awaiting a TIN, such holder should check
the box in Part 3 of the Substitute Form W-9. In such case, the Trustee shall
retain 31% of any payments made to such holder with respect to the Outstanding
Notes or Exchange Notes until such holder furnishes its TIN to the Trustee.
<PAGE> 14
14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE "IMPORTANT TAX INFORMATION" ABOVE)
PAYOR'S NAME: [ ]
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU UNDER THE SENIOR NOTES OR THE EXCHANGE NOTES.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN Social Security Number
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY OR____________________________
SIGNING AND DATING BELOW Employer Identification Number
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEPARTMENT OF THE TREASURY PART 2--Certification--Under penalties of PART 3
perjury I certify that:
INTERNAL REVENUE SERVICE (1) The number shown on this form
is my correct Taxpayer Identification
Number (or I am waiting for a number to be
issued to me) and Awaiting TIN [ ]
(2) I am not subject to backup withholding
because (i) I am exempt from backup
withholding, (ii) I have not been
notified by the Internal Revenue Service
("IRS") that I am subject to backup
withholding as a result of failure to
report all interest or dividends, or (iii)
the IRS has notified me that I am no
longer subject to backup withholding.
-------------------------------------------------------------------------------------
Payer's Request for Taxpayer Certificate instructions:--You must cross out item (2) in Part 2 above if you have
Identification Number ("TIN") been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE
------------------------------------------
DATE
------------------------------------------
NAME
------------------------------------------
(Please Print)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. It is understood
that 31% of all reportable payments made to me will be withheld until I provide
a taxpayer identification number.
- ---------------------------------
- ---------------------------------
Signature and Date
- ---------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
SENIOR NOTES (IF APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
OF
COLTEC INDUSTRIES INC
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED. TENDERED
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Coltec Industries Inc (the "Company") made pursuant to the
Prospectus, dated [ ] , 1997 (the "Prospectus"), if certificates for
Outstanding Notes of the Company are not immediately available or if the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Company prior to midnight,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by facsimile transmission, mail or hand delivery to
Bankers Trust Company (the "Exchange Agent") as set forth below. Capitalized
terms not defined herein are defined in the Prospectus.
Main Delivery To: Bankers Trust Company, Exchange Agent
By Overnight Courier or Hand By Registered or Certified Mail:
Delivery:
Bankers Trust Company
Bankers Trust Company Corporate Trust & Agency Group
Corporate Trust & Agency Group Receipt & Delivery Window
P.O. Box 1458 123 Washington Street, 1st Floor
Church Street Station New York, NY 10006
New York, NY 10008-1458
By Facsimile:
(212) 250-6275/3290
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Outstanding Notes set forth below, pursuant to
the guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
<PAGE> 2
3
DESCRIPTION OF OUTSTANDING NOTES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 3
------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF OUTSTANDING
NOTES TENDERED(2) (MUST BE IN
TITLE OF SECURITIES AND AGGREGATE PRINCIPAL DENOMINATIONS OF $1,000 OR
CERTIFICATE NUMBER(S)(1) AMOUNT OF OUTSTANDING NOTES INTEGRAL MULTIPLES THEREOF)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Outstanding Notes are being tendered by
book-entry transfer.
(2) Unless otherwise indicated, a holder will be deemed to have tendered ALL of
the Outstanding Notes represented in column 2.
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
----------------------------------------------------------- -----------------------------------------------------------
X
----------------------------------------------------------- -----------------------------------------------------------
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY DATE
</TABLE>
----------------------------------
AREA CODE AND TELEPHONE NUMBER
Must be signed by the registered holder(s) as the name(s) appear(s) on
the certificate(s) for the Outstanding Notes or on a security position listing
or by any person(s) authorized to become registered holder(s) by endorsements
and documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, please set forth full title.
Name(s):
------------------------------------------------------------------------
(Please Type or Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(Include Zip Code)
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
<PAGE> 3
4
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the certificates representing the principal amount of
Outstanding Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures"
section of the Prospectus, together with one ore more properly completed and
duly executed Letters of Transmittal (or facsimile thereof or Agent's Message in
lieu thereof) and any required signature guarantee and any other documents
required by the Letter of Transmittal, will be received by the Exchange Agent at
the address set forth above, no later than three business days after the
Expiration Date.
<TABLE>
<S> <C>
----------------------------------------------------------- -----------------------------------------------------------
Name of Firm Authorized Signature
----------------------------------------------------------- -----------------------------------------------------------
Address Title
Name:
----------------------------------------------------------- ------------------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Date:
------------------------------------------ ------------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE> 1
Exhibit 99.3
COLTEC INDUSTRIES INC
OF
COLTEC INDUSTRIES INC
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED. TENDERED
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER.
To: BROKERS, DEALERS COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES
Coltec Industries Inc (the "Company") is offering, upon and subject to
the terms and conditions set forth in the Prospectus dated , 1998 (the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 7 1/2% Series B Senior
Notes Due 2008 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended, for its outstanding 7 1/2% Senior Notes Due
2008 (the "Outstanding Notes"). The Exchange Offer is being made in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement dated as of April 16, 1998, among the Company and the other
signatories thereto.
We are requesting that you contact your clients for whom you hold
Outstanding Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Outstanding Notes registered in
your name or in the name of your nominee, or who hold Outstanding Notes
registered in their own names, we are enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Outstanding Notes are not immediately available or
time will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Outstanding Notes registered in your name or the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
5. Return envelopes addressed to Bankers Trust Company, the Exchange
Agent for the Outstanding Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY THE
COMPANY (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED PURSUANT TO THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
<PAGE> 2
Exchange Agent and certificates representing the Outstanding Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Outstanding Notes wish to tender, but it is impracticable
for them to forward their certificates for Outstanding Notes prior to the
expiration of the Exchange Offer or to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Outstanding Notes" and "The Exchange
Offer--Guaranteed Delivery Procedures".
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Outstanding Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all transfer taxes applicable
to the exchange of Outstanding Notes pursuant to the Exchange Offer, except as
set forth in Instruction 5 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
Bankers Trust Company, the Exchange Agent for the Outstanding Notes, at the
address set forth on the front of the Letter of Transmittal.
Very truly yours,
COLTEC INDUSTRIES INC
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE> 1
Exhibit 99.4
$300,000,000 AGGREGATE PRINCIPAL AMOUNT OF
7 1/2% SENIOR NOTES DUE 2008
OF
COLTEC INDUSTRIES INC
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED. TENDERED
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER.
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus dated , 1998 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Coltec Industries
Inc (the "Company") to exchange its 7 1/2% Series B Senior Notes Due 2008 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended, for its outstanding 7 1/2% Senior Notes Due 2008 (the "Outstanding
Notes"), upon the terms and subject to the conditions described in the
Prospectus and the Letter of Transmittal. The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated as of April 16, 1998, among the Company and
the other signatories thereto.
This material is being forwarded to you as the beneficial owner of the
Outstanding Notes carried by us in your account but not registered in your name.
A TENDER OF SUCH OUTSTANDING NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Outstanding Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Outstanding Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on , 1998, unless extended by the Company
(the "Expiration Date"). Any Outstanding Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Outstanding Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions to
the Exchange Offer".
3. Any transfer taxes incident to the transfer of Outstanding Notes from
the holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
<PAGE> 2
4. The Exchange Offer expires at 5:00 p.m., New York City time, on ,
1998, unless extended by the Company.
If you wish to have us tender your Outstanding Notes, please so instruct us
by completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OUTSTANDING NOTES.
<PAGE> 3
3
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Coltec
Industries Inc with respect to its Outstanding Notes.
This will instruct you to tender the Outstanding Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Outstanding Notes held by you for my account as indicated
below:
<TABLE>
<S> <C>
Aggregate Principal Amount of Outstanding Notes
7 1/2% Senior Notes Due 2008 ............... -------------------------------------------------
[ ] Please do not tender any Outstanding Notes
held by you for my account.
-------------------------------------------------
Signature(s)
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Please print name(s) here
-------------------------------------------------
-------------------------------------------------
Address(es)
-------------------------------------------------
Area Code and Telephone Number
Dated:
---------------------------------------------- -------------------------------------------------
Tax Identification or Social Security No(s).
</TABLE>
None of the Outstanding Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Outstanding Notes held
by us for your account.
