2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 14,
1998
Crane Co.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-1657
13-1952290
(State or Other Juris- (Commission File (IRS
Employer
diction of Incorporation) Number)
Identification No.)
100 First Stamford Place, Stamford, CT
06902
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code (203) 363-7300
_________________________________________________________________
_____________
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On December 15, 1998, Crane Co. ("Crane") announced
that it is reaffirming its previous offers to Coltec Industries
Inc ("Coltec") to merge the two companies in a tax-free, stock-
for-stock transaction. Under the terms of Crane's merger
proposals, which were sent to Coltec on September 24, 1998 and
again on November 20, 1998, each outstanding Coltec share would
be exchanged for 0.80 shares of Crane for an aggregate equity
value of approximately $1.45 billion, or $22.40 per Coltec share,
representing a 34.2% premium over $16.69, the closing stock price
of Coltec on December 14, 1998, and a 21.2% premium over the
value of Coltec's merger with The B.F. Goodrich Company
("Goodrich"). A copy of the press release is filed herewith as
Exhibit 1.
Crane also announced that it has filed a complaint in
the U.S. District Court for the Southern District of New York
against Coltec and Goodrich to enforce Crane's rights under a
prior written agreement between Crane and Coltec. In its
lawsuit, Crane alleges, among other things, that the merger
negotiations between Coltec and Goodrich were conducted in breach
of a written agreement that was executed by both Crane and Coltec
on October 31, 1995. A copy of the complaint, and the exhibits
attached thereto, is filed herewith as Exhibit 2.
Crane sent letters to the Boards of Directors of both
Coltec and Goodrich, advising them of the breaches of Crane's
contractual rights and Crane's superior merger proposal. The
letters call upon the Boards to disavow the anti-shareholder
break-up fee and option lock-up in their merger agreement.
Copies of Crane's letters to the Coltec and Goodrich Boards are
attached as exhibits to the press release filed as Exhibit 1
hereto.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibit No. Description
(1) Crane Co. Press
Release, December 15, 1998.
(2) Civil Complaint,
Crane Co. v. Coltec Industries Inc.,
Runway Acquisition Corporation and The
B.F. Goodrich Company, in the United
States District Court for the Southern
District of New York.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
CRANE CO.
Date : December 15, 1998 By: \s\ Augustus I.
duPont
Name: Augustus I. duPont
Title: Vice President, General
Counsel and Secretary
EXHIBIT INDEX
(c) Exhibit No. Description
(1) Crane Co. Press
Release, December 15, 1998.
(2) Civil Complaint,
Crane Co. v. Coltec Industries Inc.,
Runway Acquisition Corporation and The
B.F. Goodrich Company, in the United
States District Court for the Southern
District of New York.
EXHIBIT 1
Contact: Joele Frank / Dan Katcher
Abernathy MacGregor Frank
(212) 371-5999
FOR IMMEDIATE RELEASE
CRANE CONFIRMS MERGER PROPOSAL FOR COLTEC
Commences Lawsuit Against Coltec and B.F. Goodrich for Breach of
Contract
STAMFORD, Conn., December 15, 1998 - Crane Co. (NYSE: CR)
announced today that it is reaffirming its previous offers to
Coltec Industries Inc (NYSE: COT) to merge the two companies in a
tax-free, stock-for-stock transaction. Under the terms of Crane's
merger proposals, which were sent to Coltec on September 24, 1998
and again on November 20, 1998, each outstanding Coltec share
would be exchanged for 0.80 shares of Crane for an aggregate
equity value of approximately $1.45 billion, or $22.40 per Coltec
share based upon the closing stock price of Crane on December 14,
1998. This represents a 34.2% premium over $16.69, the closing
stock price of Coltec on December 14, 1998, and a 21.2% premium
over the implied value of Coltec's merger with The B.F. Goodrich
Company ("Goodrich") (NYSE: GR). The transaction is expected to be
accretive to Crane's earnings per share and cash flow per share in
the first year after completion of the combination. The
transaction would be conditioned upon receipt of pooling of
interest accounting treatment, as well as customary regulatory and
shareholder approvals.
Crane also announced that it has filed a complaint in the U. S.
District Court for the Southern District of New York against
Coltec and Goodrich to enforce Crane's rights under a prior
written agreement between Crane and Coltec. In its lawsuit, Crane
alleges, among other things, that the merger negotiations between
Coltec and Goodrich were conducted in breach of a written
agreement that was executed by both Crane and Coltec on October
31, 1995.
Under that agreement, for a period of three years Coltec was
obligated to promptly notify Crane in the event that Coltec was
approached by any third party regarding a merger or other
business combination. Goodrich approached Coltec with its
proposal that Goodrich and Coltec enter into a business
combination transaction prior to the October 31, 1998 expiration
of the Crane-Coltec agreement. The right to be notified of the
details of a third party bid provided Crane the opportunity to
structure a competing proposal on a level playing field while
Coltec benefited from Crane's agreement to allow it to get the
best bid from all prospective bidders.
Goodrich's current financial advisor signed a supplement to the
Crane-Coltec agreement at a time when it was acting as financial
advisor to Coltec. In the supplement, the financial advisor
joined the Crane-Coltec agreement as a party and agreed not to be
engaged by any other party, such as Goodrich, with respect to any
business combination or merger transaction involving Crane or
Coltec until after October 31, 1998, without receiving prior
consent from Crane. Goodrich's financial advisor was formally
retained on October 22, 1998, but never sought, or received,
Crane's consent required by the supplement for it to represent
Goodrich in that transaction. In the Crane-Coltec agreement,
Coltec agreed to be responsible for any breach of the agreement
by its advisors.
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Robert S. Evans, Chairman and Chief Executive Officer of Crane,
said, "Coltec's failure to give Crane notice deprived Crane of
the valuable right to present fairly a competing proposal to the
Coltec Board of Directors - a right for which Crane bargained and
to which Coltec agreed. Our lawsuit is designed to put Crane
back on a level playing field without the anti-takeover
impediments erected by Coltec and Goodrich. This would allow
Crane's proposal to be properly considered by Coltec's Board.
"The transaction is an excellent opportunity for shareholders of
both Coltec and Crane," Mr. Evans continued. "Not only does our
offer represent a premium over Coltec's latest closing stock
price, but Coltec shareholders will also have the opportunity to
participate in upside potential represented in a combined Crane-
Coltec. Crane and Coltec together would create a well-balanced
industrial / aerospace company with a total equity market
capitalization of approximately $3.5 billion, pro forma sales of
over
$3.7 billion, and approximately $600 million in EBITDA."
Mr. Evans continued, "Crane has a proven track record for
delivering superior value to its shareholders. Since November 3,
1995, the approximate date of Crane's initial proposal to Coltec
to merge the two companies, an investment of $100 in Crane common
stock would have grown to approximately $184 today. The same
investment in Goodrich would be worth only $106 today.
Performance clearly speaks for itself."
"There is an outstanding fit between our two companies," said Mr.
Evans. "The industrial logic of a Crane-Coltec combination is
compelling, both in our respective aerospace and industrial
components operations. There are substantial - and realistic -
cost savings and revenue enhancements to be achieved in such a
combination. We believe the merits of a Crane-Coltec combination
are clear and that the Coltec Board should recognize the superior
benefits a combination of our two companies would bring,"
concluded Mr. Evans.
Crane noted that it has sent letters to the Boards of Directors
of both Coltec and Goodrich, advising them of the breaches of
Crane's contractual rights and Crane's superior merger proposal.
The letters call upon the Boards to disavow the anti-shareholder
break-up fee and option lock-up in their merger agreement.
Copies of Crane's letters to the Coltec and Goodrich Boards are
attached to this release.
Crane is a diversified manufacturer of engineered industrial
products.
# # #
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Following is the complete text of a letter that was sent from Mr.
Robert S. Evans to the Board of Directors of Coltec Industries:
December 14, 1998
Board of Directors
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Gentlemen:
We were shocked to first learn about Coltec's merger
agreement with B.F. Goodrich from press reports on November 23,
1998. We are compelled to report a serious failure to respect
our rights.
Crane's interest in a combination with Coltec goes back
several years to discussions we began in 1995. As recently as
September 24 and again on November 20, 1998, we expressed our
desire to combine with Coltec. Crane submitted written proposals
to Mr. John Guffey indicating a proposed exchange ratio of 0.80
Crane share for each Coltec share. The November 20 letter
emphasizes what was clear in our earlier letter and discussions,
the proposal was a ratio, not a dollar price. Between September
24 and November 20, 1998, Crane stock had appreciated in the
market in a proportionally greater amount than had Coltec stock.
At September 24, Crane stock was trading for $26 per share, while
Coltec was trading for $15.75 per share. The ratio valued a
Coltec share at $20.80. At November 20, our proposal was valued
at $24.70 per Coltec share. At all times our proposal was
substantially better than the final B.F. Goodrich offer, as it
still is today. Mr. Guffey's November 24, 1998 letter indicating
that Crane's November 20, 1998 letter was too late is
disingenuous and ignores our contacts, as well as an important
contractual commitment.
We call your attention to paragraph nine of the
Confidentiality Agreement between Crane and Coltec dated October
31, 1995, which is attached for your reference. The final
sentence of the ninth paragraph is a notification provision that
provides:
"If at any time during such [three year]
period either party hereto is approached by
any third party concerning its or their
participation in any of the types of matters
referred to in clause (i), (ii) or (iii)
above, such party will promptly inform the
other party of the nature of such contact and
the parties thereto." (Emphasis added).
Clause (i) of paragraph nine relates generally to any
business combination and specifically to merger transactions like
the one announced by Coltec and B.F. Goodrich. Additionally,
clauses (i), (ii) and (iii) relate to matters that affect the
continuity of either Coltec or Crane or either company's
management. This notice obligation survived until October 31,
1998. Coltec did not inform Crane of the discussions with B.F.
Goodrich, which discussions Coltec and B.F. Goodrich have
acknowledged publicly began well before the expiration of the
October 31, 1998 survival period.
In furtherance of the purpose of the Confidentiality
Agreement to foster a full and fair exchange of information, the
Confidentiality Agreement was supplemented on November 9, 1995 to
bind as well our respective financial advisors (Morgan Stanley
and Dillon Read). This supplement, accepted and agreed to by the
financial advisors, as well as by Coltec and Crane, was a broad
extension of the mutual commitment established by the
Confidentiality Agreement. In addition to agreeing to be bound
as if it were a party, Morgan Stanley agreed with Coltec and
Crane:
"not to provide advice to any party with
respect to any of the types of matters
referred to in the ninth full paragraph of
the Confidentiality [Agreement] for the
period set forth therein." (Emphasis added).
Notwithstanding its obligations under the supplemented
Confidentiality Agreement, Morgan Stanley's role as financial
advisor to B.F. Goodrich was formalized on October 22, 1998.
The Confidentiality Agreement required Coltec to inform
Crane about the identity of B.F. Goodrich as a potential bidder
and the nature of its proposals, as well as the fact that Morgan
Stanley was acting as financial advisor to B.F. Goodrich.
Additionally, Morgan Stanley had a contractual obligation until
October 31, 1998 to advise Crane if it were approached by any
third party about a merger with Coltec and an independent
obligation not to advise a third party such as B.F. Goodrich with
respect to a merger with Coltec without Crane's consent.
Furthermore, Coltec agreed that it would "be responsible for any
breach of [the Confidentiality Agreement by Morgan Stanley]".
Crane acquired these rights in exchange for agreeing not to
attempt to acquire Coltec on an unsolicited basis, engage in a
proxy solicitation of Coltec shareholders, seek to influence or
control the Coltec Board of Directors, force Coltec to make a
public announcement of any of the foregoing or combine with a
prospective bidder to limit competition for the acquisition of
Coltec.
Inherent in these notice rights is the acknowledgement of
Crane as an acceptable bidder for and potential partner with
Coltec. The right to be notified of the details of a third-party
bid provided Crane the opportunity to structure a competing
proposal on a level playing field while Coltec benefited from
Crane's agreement to allow it to get the best bid from all
prospective bidders. Coltec's failure to give notice and the
granting of the lock-up option to Goodrich deprived Crane of the
valuable right to present fairly a competing proposal to the
Coltec Board of Directors - a right for which Crane bargained and
to which Coltec agreed.
Crane's rights are prior in time and higher in equity to any
lock-up rights that B.F. Goodrich has under its merger agreement
with Coltec. We believe that the Coltec Board did not fully
appreciate the rights for which Crane bargained. Accordingly,
Crane's bid must be considered without giving effect to the B.F.
Goodrich lock-up options and other restrictions, which would
limit Coltec's Board from freely considering Crane's proposal.
We call upon the Board of Directors of Coltec to act promptly to
rectify this wrong and disavow the lock-up option and termination
fee entered into with B.F. Goodrich. The negotiation process
with B.F. Goodrich was tainted by the failure of Coltec to give
the required notice of the merger discussions to Crane and by
B.F. Goodrich's use of a financial advisor who was contractually
bound not to advise any third party in a merger with Coltec.
We are calling also upon the Board of Directors of
B.F. Goodrich to disavow its lock-up option and termination fee
as arising from the tainted and misinformed process we have
outlined. This would not preclude B.F. Goodrich as a bidder for
Coltec. It would only preclude B.F. Goodrich from using anti-
takeover techniques to erect impediments to Crane's bid. This
would merely serve to put Crane on a level playing field with
B.F. Goodrich, leaving the Coltec Board free to evaluate properly
Crane's offer.
Our interest in effecting a combination of Crane and Coltec
is based upon the outstanding fit between our two companies. As
agreed in discussions between our companies, the industrial logic
of a Crane-Coltec combination is sound, both in our respective
Aerospace operations and Industrial Components operations. We
believe that the merits of a Crane-Coltec merger are clear and
that there are substantial cost savings to be achieved in such a
combination. As expressed in our September 24 and November 20
letters, Crane is prepared to offer a share-for-share exchange on
the basis of 0.80 share of Crane common stock for each
outstanding share of Coltec common stock in a tax free merger
that qualifies for pooling of interests accounting treatment.
Our offer is not conditioned on due diligence. We would like,
however, access to confirmatory due diligence on Coltec
equivalent to that provided to B.F. Goodrich.
We believe that, given the economic power of Crane's
proposal, the Coltec shareholders will reject the lower valued
B.F. Goodrich merger. In order to vindicate Crane's rights, we
are today commencing a lawsuit against Coltec and B.F. Goodrich
in the Southern District of New York to enjoin any further
actions to complete the Coltec/B.F. Goodrich transaction until
the lock-up options and termination fee are disavowed. Crane
will vigorously prosecute this action to protect its rights. In
view of the impact that this proposal would have on the market
for our shares and our respective obligations under the
securities laws, I am sure that both companies will want to make
prompt disclosure of this proposal.
We are highly committed to a transaction with Coltec. In
that regard, I and Crane's advisors are ready to meet immediately
to discuss this proposal further and to answer any questions you
may have.
Sincerely,
cc: Board of Directors
The B.F. Goodrich Company
Philip J. Purcell
Chairman and Chief Executive Officer
Morgan Stanley, Dean Witter, Discover & Co.
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Following is the complete text of a letter that was sent from Mr.
Robert S. Evans to the Board of Directors of The B.F. Goodrich
Company:
December 14, 1998
Board of Directors
The B.F. Goodrich Company
4020 Kinross Lakes Parkway
Richfield, Ohio 44286-9368
Dear Ladies and Gentlemen:
I am writing this letter to call to your attention various
breaches of contract that arose from the merger discussions
between The B.F. Goodrich Company and Coltec Industries. You
will find that the facts speak for themselves.
Coltec and Crane were parties to a Confidentiality
Agreement, dated as of October 31, 1995, which required Coltec to
advise Crane in the event that Coltec was contacted regarding a
transaction such as the one agreed to by Goodrich and Coltec or
regarding other matters that affect the continuity of the company
or its management. This agreement, a copy of which is enclosed,
was effective through October 31, 1998. It was breached when
Goodrich and Coltec began discussing a merger at least six weeks
prior to the November 23, 1998 announcement.
Furthermore, your financial advisor, Morgan Stanley, signed,
along with Crane, Coltec and Dillon Read, a supplement to that
Confidentiality Agreement dated November 9, 1995, a copy of which
is enclosed. Pursuant to this supplement, in addition to being
bound as a signatory to the Confidentiality Agreement, Morgan
Stanley agreed:
"not to provide advice to any party with respect to any
of the types of matters referred to in the ninth full
paragraph of the Confidentiality Letter for the [three
year] period set forth therein." (Emphasis added.)
Very simply, our understanding was that Morgan Stanley agreed not
to be engaged by any other party with respect to any business
combination or merger transactions involving Crane or Coltec
until after October 31, 1998, unless, of course, Crane consented
prior to such engagement. Despite this agreement, Goodrich
formalized the retention of Morgan Stanley on October 22, 1998.
Morgan Stanley never sought, nor received, Crane's consent
required by the agreement for it to represent Goodrich in such
transaction.
It is noteworthy that Crane had, during the time of the
Coltec/Goodrich merger discussions, made an alternative proposal
for Coltec. By letters dated September 24, 1998 and November 20,
1998, Crane offered to acquire Coltec at an exchange ratio of
0.80 share of Crane for each share of Coltec, thus valuing each
Coltec share at $24.70 on November 20, 1998. This offer placed a
substantially higher value on Coltec shares than the eventual
agreement reached between Goodrich and Coltec. Moreover, if
Crane had been notified by Coltec of its discussions with
Goodrich, Crane would have been better informed to evaluate its
bid for Coltec and present its best proposal to Coltec's Board of
Directors. Crane was denied that opportunity, in disregard of
its rights.
In light of this letter, you will see that (i) Crane should
have been advised of the merger discussions between Coltec and
Goodrich and (ii) Morgan Stanley could not have represented you
in such merger discussions without first obtaining Crane's
consent, which consent would have required Crane to be fully
informed as to the competing party. In sum, by negotiating for
the notice rights and prohibitions on Morgan Stanley's actions
contained in the October 31, 1995 and November 9, 1995 letters,
Crane secured for itself a level playing field on which it would
have the same opportunity to bid for Coltec as any subsequent
bidder, i.e., Goodrich. We were denied these rights when Coltec
pursued the Goodrich/Coltec merger in contravention of those
agreements. We hope that you would agree that no deal is so
important that substantial rights of another party -- rights
which are analogous to the notification rights you negotiated in
the merger agreement -- should be disregarded.
I believe that the Board of Directors of Goodrich never
fully appreciated the significance of the prior agreements
between Crane and Coltec. That, however, does not change the
fact that Crane has legal rights prior to Goodrich. While Crane
and Goodrich are competitors in some respects and enjoy fruitful
commercial relationships in others, we have always understood
Goodrich to be an organization which honors the rights,
contractual and otherwise, of those in the common marketplace.
Therefore, we ask you to right this very wrong situation and
disavow the lock-up option and the break-up fee. This would
level the playing field consistent with Crane's prior rights, and
allow Crane's proposal to be properly considered by Coltec's
Board.
Sincerely,
cc: Philip J. Purcell
Chairman and Chief Executive Officer
Morgan Stanley, Dean Witter, Discover & Co.
Board of Directors
Coltec Industries Inc
# # #
EXHIBIT 2
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------------------x
x
CRANE CO., a Delaware corporation x
x
Plaintiff x
x
-against- x Civ. No.
________________
x
COLTEC INDUSTRIES INC and THE x
B.F. GOODRICH COMPANY, x
x
Defendants. x
x
- ---------------------------------------------------------------x
COMPLAINT
Plaintiff Crane Co. ("Crane"), by its undersigned
attorneys, as for its Complaint against the defendants herein,
alleges upon knowledge with respect to itself and its own acts,
and upon information and belief as to all other matters, as
follows:
1. This Complaint is for damages and injunctive relief to
enforce Crane's rights under a written confidentiality and
standstill agreement dated October 31, 1995, between Crane and
defendant Coltec Industries Inc. ("Coltec") (hereinafter, the
"Standstill Agreement") and a written agreement dated November
9, 1995 among Crane, Coltec, Dillon Read & Co., Inc. ("Dillon
Read") and Morgan Stanley & Co., Inc. ("Morgan Stanley") imposing
limitations on the conduct of the financial advisors to Crane and
Coltec (hereinafter, the "Advisor Limitation Agreement" and,
together with the Standstill Agreement, the "Agreements"). True
and correct copies of the Standstill Agreement and the Advisor
Limitation Agreement are attached hereto as Exhibit "A" and
Exhibit "B".
2. Pursuant to the Agreements, Crane sought to ensure that it
would enjoy a level playing field in connection with its
negotiations to acquire Coltec. Among other things, the
Agreements require Coltec to give Crane notice of any third party
expression of interest in acquiring Coltec, so that Crane can
formulate its best offer in response to such interest by a
competing bidder, and prohibit persons who were involved in the
negotiations between Crane and Coltec, including Coltec's
financial advisor, Morgan Stanley, from lending assistance to
such a competing bidder.
3. Defendants Coltec and The B.F. Goodrich Company ("Goodrich")
have, in derogation of Crane's aforesaid rights, entered into an
agreement (the "Merger Agreement") pursuant to which Goodrich
proposes to acquire Coltec. The Merger Agreement contains
provisions, including a Lock-up Option and a Termination Fee,
among others, which have economically punitive consequences for
any other bidder for Coltec and which are intended to make it
commercially impossible for Crane to pursue its own bid for
Coltec and was negotiated and executed without notice to Crane as
required by the Standstill Agreement. Moreover, Goodrich was
assisted in negotiating this agreement by Morgan Stanley, which
was prohibited from doing so by the Advisor Limitation Agreement.
4. At the time Goodrich and Coltec began the discussions that
culminated in the Merger Agreement, Crane was actively engaged in
merger discussions with Coltec. Pursuant thereto, Crane on
September 24, 1998, expressed its interest in concluding a merger
with Coltec in which Coltec's stockholders would receive .8
shares of Crane common stock for each share of Coltec stock they
held. Crane reconfirmed its interest in proceeding to merge with
Coltec on this basis, and made a written proposal, in a letter
dated November 20, 1998. On each of September 24, 1998, when it
was first suggested, and November 20, 1998, when it was
reconfirmed, the Crane offer would have yielded merger
consideration for Coltec's stockholders substantially in excess
of that offered by Goodrich in the subsequently executed Merger
Agreement.
5. Having itself abided by the provisions of the Standstill
Agreement that prevented it from, inter alia, enlarging its stake
in Coltec or making an offer directly to Coltec's stockholders,
Crane was blindsided when Coltec and Goodrich announced that they
had entered into the Merger Agreement on November 22, 1998 on
terms that effectively barred any offer by Crane. The
defendants' failure to honor the Agreements has thus caused grave
and irreparable injury to Crane, which injury can only be
redressed by the injunctive relief sought herein. Crane seeks an
order whereby the Court restores the parties to the position they
would have been in had these Agreements been honored, by allowing
Crane the opportunity to present its best offer to the Coltec
Board of Directors and have that offer considered by the Coltec
Board of Directors without interference from any Lock-up Option,
Termination Fee or other restrictions contained in the Merger
Agreement.
6. This court has subject matter jurisdiction over this action
pursuant to 28 U.S.C. 1332 and 2201 in that there is diversity
of citizenship between Crane and defendants Coltec and Goodrich,
and the amount in controversy exceeds $75,000, exclusive of
interest and costs.
7. The Agreements were made and executed by Coltec in this
district, and Coltec has had significant contacts within this
district, including numerous business meetings and business
communications, with Crane.
8. Venue is proper in this Court pursuant to 28 U.S.C. 1391(a)
because the claim arose in this district, Goodrich resides here,
Coltec maintained its executive offices here when it entered into
the Agreements, and a substantial part of the events giving rise
to this dispute occurred here.
9. The Agreements are governed by the laws of the State of New
York and this dispute, arising thereunder, is likewise to be
resolved in accordance with the laws of the State of New York.
THE PARTIES
10. Plaintiff Crane is a corporation organized and existing
under the laws of the State of Delaware, with its principal place
of business in the State of Connecticut. Crane is a diversified
manufacturer of aerospace products and industrial components and
is a distributor of doors, windows and millwork.
11. Defendant Coltec is a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania, with its
principal place of business in North Carolina. Coltec is a
manufacturer of aerospace products and industrial components.
12. Defendant Goodrich is a corporation organized under the laws
of the State of New York, with its principal place of business in
Ohio.
FACTUAL BACKGROUND
Relevant Terms of the Standstill Agreement
13. Crane and Coltec believed that there were substantial
benefits to be obtained from the combination of their industrial
and aerospace manufacturing operations. Crane and Coltec entered
into the Agreements to facilitate an exchange of information in
furtherance of their consideration of a possible negotiated
transaction between them.
14. Mutual due diligence was necessary because the parties
contemplated entering into a business combination to be accounted
for as a pooling of interests, in which control would not pass
and stockholders of Coltec would receive shares of Crane common
stock in a ratio that reflected a significant premium to the then-
current trading price of Coltec's common stock.
15. Both Crane and Coltec were aware that structuring their
business combination in such a manner as to allow for pooling of
interests accounting would maximize the consideration that Crane
could offer Coltec's stockholders for their shares of Coltec
common stock. In fact, Crane and Coltec were aware that no
business combination transaction between the two was commercially
feasible without utilizing pooling of interests accounting.
16. The Standstill Agreement was negotiated in the Southern
District of New York and was executed by Coltec in the Southern
District of New York at its offices at 430 Park Avenue, New York,
New York.
17. Under the Standstill Agreement, all information exchanged
between the companies (the "Evaluation Material") was to be held
confidential.
18. As part of the standstill provisions of the Standstill
Agreement, Crane and Coltec agreed that each would not engage in
certain types of conduct directed at the other and further agreed
that each would promptly notify the other if approached by a
third party regarding a merger or other business combination
including either Coltec or Crane. The ninth paragraph of the
Standstill Agreement provides, in pertinent part:
"As a further condition to the furnishing of the
Evaluation Material, unless specifically requested
in writing in advance by the Board of Directors of
one of the parties hereto ("the Subject Company"),
neither the other party hereto nor any of its
affiliates (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as
amended (the "1934 Act")) will, and such party and
its affiliates will not assist or encourage others
(including by providing financing) to, directly or
indirectly, for a period of three years from the
date of this agreement (i) acquire or agree,
offer, seek or propose (whether publicly or
otherwise) to acquire ownership (including but not
limited to beneficial ownership (as defined in
Rule 13d-3 under the 1934 Act)) of (x) the Subject
Company or any of its assets or businesses, (y)
any securities issued by the Subject Company or
(z) any rights or options to acquire such
ownership (including from a third party), whether
by means of a negotiated purchase of securities or
assets, tender or exchange offer, merger or other
business combination, recapitalization,
restructuring or other extraordinary transaction
(a "Business Combination Transaction"), (ii)
engage in an 'solicitation' of 'proxies' (as such
terms are used in the proxy rules promulgated
under the 1934 Act), or form, join or in any way
participate in a 'group' (as defined under the
1934 Act), with respect to any securities issued
by the Subject Company, (iii) otherwise seek or
propose to influence or control the Board of
Directors, management or policies of the Subject
Company, (iv) take any action that could
reasonably be expected to force the Subject
Company to make a public announcement regarding
any of the types of matters referred to in clause
(I), (ii) or (iii) above, or (v) enter into any
discussions, negotiations, agreements,
arrangements or understandings with any third
party with respect to any of the foregoing. . . .
If at any time during such period [three years]
either party hereto is approached by any third
party concerning its or their participation in any
of the types of matters referred to in clause (i),
(ii) or (iii) above, such party will promptly
inform the other party of the nature of such
contact and the parties thereto."
(Emphasis added.) The final sentence of this paragraph is
hereinafter sometimes referred to as the "Notification
Requirement".
19. The Standstill Agreement thus provided that Crane would
refrain from pursuing any steps to acquire Coltec unless invited
by Coltec to do so, and in return would be given notice of any
third party approach to Coltec. Such notification was intended
to and would in fact allow Crane to formulate and submit for
Coltec's evaluation an offer to merge with Coltec on terms
superior to those offered by another bidder.
20. The Standstill Agreement generally required each of Crane
and Coltec to cause its Representatives, as defined therein, to
abide by the terms of the Standstill Agreement, and further
provides that "Each of Crane and Coltec will be responsible for
any breach of this agreement by any of its Representatives".
21. As originally drafted, the obligations under the ninth
paragraph of the Standstill Agreement were to have a duration of
one year. Coltec redrafted the Standstill Agreement to extend
the duration of the obligations under the ninth paragraph to
three years. That amendment is reflected in a handwritten change
to the Standstill Agreement. The obligations under the ninth
paragraph of the Standstill Agreement thus were to remain in full
force and effect until October 31, 1998.
22. It is unusual for such standstill provisions to have a
duration as long as three years. Crane nevertheless was willing
to accept these limitations on its freedom to act because of the
degree of assurance and protection provided by the Notification
Requirement.
23. Crane and Coltec each recognized and agreed that "money
damages would not be a sufficient remedy for any breach of any
provision of this agreement by the other". Therefore, Crane and
Coltec specifically agreed that each party would have the right
to enforce the Standstill Agreement by "injunctive or other
equitable relief".
24. Crane and Coltec agreed that the Standstill Agreement "shall
be governed by and construed in accordance with the laws of the
State of New York without giving effect to the conflicts of law
principles thereof".
The Advisor Limitation Agreement
25. Crane retained Dillon Read as its financial advisor with
respect to its potential business combination with Coltec.
26. Morgan Stanley (collectively with Dillon Read, the
"Advisors") served as Coltec's financial advisor with respect to
a potential business combination with Crane.
27. On November 9, 1995, in furtherance of the parties' desire
to have a full and free exchange of confidential information
while ensuring that neither party would suffer any disadvantage
as a result of having made such disclosure of confidential
information, Crane, Coltec, Morgan Stanley and Dillon Read
entered into the Advisor Limitation Agreement.
28. Crane obtained the Advisor Limitation Agreement in
recognition of Morgan Stanley's history of influence in Coltec.
In June 1988, Morgan Stanley served as the investment banker for
the leveraged buy-out of Coltec by Coltec Holdings, Inc. ("Coltec
Holdings"), and for the next four years, Morgan Stanley employees
constituted all of the directors of Coltec Holdings, which owned
100% of the common stock of Coltec. In April 1992, Morgan
Stanley was the sole underwriter of a debt offering and one of
several underwriters of an equity offering of 44,275,000 shares
of Coltec common stock, whereby Coltec was recapitalized. Morgan
Stanley received over $47 million for its role in Coltec's
recapitalization. Until June 1994, Morgan Stanley held voting
and investment power over 27.3% of Coltec common shares and three
employees of Morgan Stanley were members of Coltec's Board of
Directors.
29. Crane was also aware that in the past Morgan Stanley had
successfully used confidential financial information obtained
while representing one party to merger discussions on behalf of,
and to facilitate a subsequent bid by a non-party to those
discussions to acquire one of the parties involved in the initial
merger discussions.
30. Based upon Morgan Stanley's history of involvement with
Coltec and its aggressive history of shopping companies, Crane
expected that, unless contractually barred from doing so, Morgan
Stanley would seek to be involved in any business combination
involving Coltec. Crane also believed that, if permitted to
assist a competing bidder for Coltec, Morgan Stanley's knowledge
of the Crane/Coltec merger discussions acquired as advisor to
Coltec would provide an unfair advantage to such a competing
bidder.
31. In the Advisor Limitation Agreement, which is in the form of
a letter addressed by Crane and Coltec to Dillon Read and Morgan
Stanley, Crane and Coltec wrote:
"Crane and Coltec each require that the
other's Advisor independently agree that it
will be bound by the terms of the [Standstill
Agreement], in the same manner and to the
same extent as the party for whom it is
acting as Advisor (Crane in the case of
Dillon Read and Coltec in the case of Morgan
Stanley), as though each Advisor were an
original signatory to the [Standstill
Agreement]. . . In addition, each of Crane
and Coltec requires that each Advisor also
agree not to provide advice to any party with
respect to any of the types of matters
referred to in the ninth full paragraph of
the [Standstill Agreement] for the period set
forth therein."
(Emphasis added.)
32. Dillon Read and Morgan Stanley both countersigned the
Advisor Limitation Agreement, thereby indicating their agreement
to be bound by and to observe the requirements above recited.
The Advisor Limitation Agreement thus gave Crane assurance that,
during the term of the Standstill Agreement, neither Dillon Read
nor Morgan Stanley could function as a "free agent" to assist a
third party in negotiating a business combination with Coltec.
Morgan Stanley or Dillon Read could do so only if both of Crane
and Coltec permitted.
33. The Advisor Limitation Agreement absolutely bars, without
the possibility of mitigation, Morgan Stanley (and for that
matter Dillon Read) from acting as financial advisor to any third
party, such as Goodrich, seeking to effect a business combination
with either Crane or Coltec absent notification to and the
consent of both Crane and Coltec. The Advisor Limitation
Agreement thus ensures the integrity of the process and serves as
a notification safeguard for Crane (and Coltec).
34. John W. Guffey, Jr., the Chairman and Chief Executive
Officer of Coltec, executed the Advisor Limitation Agreement on
behalf of Coltec. The Advisor Limitation Agreement was
negotiated and executed in New York, New York.
Crane's Proposals and Offers To Coltec
35. On or about October 31, 1995, Crane proposed a merger
transaction with Coltec whereby each share of Coltec common stock
would be exchanged for a ratio of shares of Crane that would have
provided Coltec shareholders with a significant premium over the
then-current trading price of Coltec's common stock.
36. Pursuant to the Agreements, Crane and Coltec exchanged non-
public financial information during the fall of 1995 to explore
the synergies that could be obtained by the two companies on a
combined basis.
37. Although discussions continued during 1996 and 1997, those
discussions did not lead to a final agreement between Crane and
Coltec.
38. During the late summer and early fall of 1998, well prior to
the October 31, 1998 expiration of the Standstill Agreement or
the Advisor Limitation Agreement, discussions between Crane and
Coltec of a possible business combination between the two picked
up again. Those discussions were conducted in accordance with
the Agreements. By this time, however, Morgan Stanley had ceased
functioning as Coltec's financial advisor.
39. At no time during these discussions, or at any point prior
to the public announcement of the Goodrich/Coltec merger on
November 23, 1998, did Coltec notify Crane that it had been
approached by Goodrich or any other potential bidder, much less
that the discussions with Goodrich had matured to a point where
Goodrich and Coltec were prepared to exchange confidential
information and had entered into a confidentiality agreement for
that purpose. Nor did Coltec inform Crane that Morgan Stanley
was serving as Goodrich's financial advisor.
40. Conversations between Crane and Coltec took place at the
highest level of management. R. S. Evans, the Chairman and Chief
Executive Officer of Crane, and John W. Guffey, Jr., Chairman and
Chief Executive Officer of Coltec, directly discussed a possible
business combination between the two companies.
41. At the suggestion of Mr. Guffey, on September 24, 1998, Mr.
Evans wrote a letter "to clarify for you the nature of [Crane's]
interest". A true and complete copy of that letter is attached
hereto as Exhibit "C".
42. In that letter, Crane suggested "a merger of Coltec into
Crane on the basis of approximately .80 shares of Crane for each
outstanding share of Coltec." That exchange ratio represented
"over a 30% premium to Coltec's current stock price." As of that
time, Crane stock was trading for $26 per share, while Coltec
stock was trading for $15.75 per share.
43. The expression of interest was explicitly based on the
premise that the transaction would be tax-free to both
shareholder groups and would qualify for pooling of interests
accounting treatment.
44. Between September 24 and November 20, 1998, Crane stock
appreciated in the market in a proportionally greater amount than
Coltec stock. As noted, on September 24, 1998, Crane stock
closed trading at $26 per share, while Coltec stock closed
trading at $15.75 per share. The value of Crane's September 24
proposal to Coltec's shareholders was $20.80 per Coltec share - a
premium of $5.05 per share. On November 20, 1998, Crane stock
closed trading at $30.88 per share, while Coltec stock closed
trading at $17.94. The value of Crane's November 20 proposal to
Coltec's shareholders was $24.70 per Coltec share - a premium of
$6.76 per share.
45. On November 20, 1998, Mr. Evans, on behalf of Crane, sent
Mr. Guffey, on behalf of Coltec, a formal proposal for a business
combination. "Reflecting our conviction that this combination
[of Crane and Coltec] can provide enormous benefits to each
shareholder group, we propose a share-for-share exchange on the
basis of 0.80 shares of Crane common stock for each outstanding
share of Coltec common stock in a merger which we believe would
qualify for pooling of interests accounting treatment and be tax-
free to Coltec shareholders. This exchange ratio provides more
than a 40% premium to Coltec's current stock price based on
current stock prices". A true and complete copy of that letter
is attached hereto as Exhibit "D". At the time it formulated and
sent its November 20, 1998 letter, Crane was not aware that
Coltec and Goodrich had been engaged in merger discussions which
began in October 1998, while the Agreements were still in force
and required that notification of those discussions be given to
Crane.
46. On November 24, 1998, Coltec, by a letter signed by Mr.
Guffey, rejected Crane's November 20 proposal on the grounds that
it had been received after Coltec had entered into the Merger
Agreement with Goodrich, which had been publicly announced on
November 23, 1998. Coltec's November 24 rejection letter makes
it clear that the Coltec Board of Directors never considered
Crane's November 20 offer. A true and complete copy of that
letter is attached hereto as Exhibit "E".
47. Neither Goodrich nor Coltec has filed an amended Form 8-K
with the Securities and Exchange Commission or otherwise informed
the investing public of Crane's superior November 20 proposal.
Nor has either Goodrich or Coltec disclosed the breaches of the
Standstill Agreement and the Advisor Limitation Agreement.
Coltec's Secret Breach Of The Agreements
48. No later than in or about early October, 1998, Goodrich
approached Coltec with the proposal that Goodrich and Coltec
enter into a business combination transaction. Coltec and
Goodrich then began the exploration of a merger, executing on
October 21, 1998 a Confidentiality Agreement to facilitate
exchange of non-public information on the operations of each
company. Coltec and Goodrich agreed not to inform any third
party about Goodrich's approach and negotiations and Coltec did
not provide Crane with notice of its negotiations with Goodrich.
In violation of the Standstill Agreement, Coltec did not provide
Crane notice of Goodrich's approach or these negotiations.
49. On October 22, 1998, Goodrich memorialized the engagement of
Morgan Stanley to act as its financial advisor for the
acquisition of Coltec. Prior to October 22, Goodrich engaged in
discussions with Morgan Stanley about a merger with Coltec.
Morgan Stanley provided Goodrich with advice when it was
precluded by the Advisor Limitation Agreement from doing so.
This occurrence was precisely what Crane sought to avoid by
entering into the Advisor Limitation Agreement.
50. Morgan Stanley's conduct in acting as financial advisor to
Goodrich was in violation of the Advisor Limitation Agreement.
In violation of the Advisor Limitation Agreement and the
Standstill Agreement, Coltec and Morgan Stanley did not notify
Crane that Morgan Stanley was acting as Goodrich's financial
advisor.
51. In violation of the Advisor Limitation Agreement, Coltec did
not seek the consent of Crane prior to permitting Morgan Stanley
to act as financial advisor to Goodrich. In so doing, Coltec
also induced and procured the violation of the Advisor Limitation
Agreement by Morgan Stanley.
52. In the ordinary course of due diligence investigation,
Coltec provided Goodrich with the Agreements to determine whether
there was information that contravened Coltec's ability to enter
into negotiations or participate in all matters preliminary to
the proposed Merger Agreement. Thus, Goodrich had knowledge that
the Standstill Agreement required Coltec to provide notice to
Crane of its negotiations with Goodrich and that the Advisor
Limitation Agreement precluded Morgan Stanley from serving as
Goodrich's financial advisor for a merger with Coltec, except
with approval of Crane. Goodrich induced and procured the
violation of the Agreements by Coltec and Morgan Stanley.
The Merger Agreement
Coltec Agrees To An Inferior Deal with Goodrich
53. Goodrich and Coltec announced on November 23, 1998 that they
had executed the Merger Agreement. A true and complete copy of
the Form 8-K Goodrich filed with the Securities and Exchange
Commission on November 23, 1998 and containing the Merger
Agreement is attached hereto as Exhibit "F".
54. The Merger Agreement provides for each share of Coltec to be
exchanged for .56 of a Goodrich share. Based on the then-current
Goodrich stock price of $35.94 per share, the Merger Agreement
represents an offer of $20.13 per share of Coltec stock.
55. The Merger Agreement, therefore, represented a premium to
Coltec's stockholders of approximately $4.50 per share. By
contrast, the premium of $6.76 per share offered under Crane's
November 20 proposal is approximately 50% greater.
The Measures Designed To Prevent Fair Consideration Of
Crane's Superior Proposal
56. Coltec and Goodrich attempted to ensure that no competing
bidder could obtain pooling of interests accounting treatment
without the acquiescence of Goodrich. Contemporaneously with the
Merger Agreement, Coltec and Goodrich executed an agreement that
provides Goodrich with an option to purchase 19.9% of Coltec's
stock at a price of $20.125 per share in the event that the
Merger Agreement was terminated under circumstances entitling
Goodrich to a break-up fee (the "Lock-up Option").
57. The effect of the Lock-up Option is to ensure that Goodrich
controls whether a competing bidder could benefit from pooling of
interests accounting treatment for a potential merger with
Coltec. Should the Lock-up Option become exercisable, under
prevailing accounting rules, no competing offer to acquire Coltec
could qualify for pooling of interests accounting. Once the Lock-
up Option was granted, absent judicial intervention, only
Goodrich could extinguish the Lock-up Option before it became
exercisable.
58. By granting Goodrich the Lock-up Option, Coltec's Board of
Directors surrendered to Goodrich control over its fiduciary
responsibilities to its shareholders. The Coltec Board of
Directors did so while violating Coltec's contractual duty to
provide prior notification to Crane of Goodrich's interest in
acquiring Coltec.
59. The Merger Agreement also employs additional mechanisms to
prevent any other bid from being made and considered on an equal
footing with Goodrich's. Among other things, the Merger
Agreement provides:
a. The payment of a $45 million termination fee by Coltec to
Goodrich, plus a $5 million expense reimbursement, in the event
that the Merger Agreement is terminated (the "Breakup Fee")
(Section 9.2(b) and (c));
b. A "no solicitation" provision that bars Coltec from
negotiating or entering into a competing proposal with any other
company unless presented with an unsolicited "Superior Offer," -
a term that is undefined (Section 7.9).
60. The provision of the Merger Agreement that purports to allow
Coltec's Board of Directors to pursue an unsolicited Superior
Offer is illusory because the Lock-up Option precludes any other
bid from utilizing pooling of interests accounting, making a
competing bid on financial terms equal to or better than those
offered by Goodrich in the Merger Agreement commercially
impossible.
61. Mr. Guffey, in the conference call that presented the Merger
Agreement to Coltec stockholders and the investing public at
large, specifically relied upon the defensive mechanisms
incorporated in the Merger Agreement as a reason to approve the
Merger Agreement.
IRREPARABLE INJURY
62. The Standstill Agreement provides valuable rights to Crane.
The Standstill Agreement was designed to ensure that Crane would
not have a competing offer for Coltec presented as a fait
accompli, but would in fact have sufficient notice of a competing
bidder's interest to be able to formulate and in light of the
competition to present its own best offer for a business
combination with Coltec and to have that bid considered on an
even footing with that of any other bidder - i.e., unburdened by
economically punitive break-up fees, lock-up options or other
devices intended to destroy the attractiveness of Crane's bid.
63. Absent judicial intervention, Coltec and Goodrich's
negotiation and adoption of the Merger Agreement without
providing notice to Crane destroys these valuable rights. The
Merger Agreement now presents serious and economically
insuperable impediments to Crane making a competing offer. As
noted, those impediments include: 1) precluding Crane from using
pooling of interests accounting; and 2) forcing Crane to account
for the $50 million Termination Fee in any competing offer to the
Coltec Board of Directors.
64. Crane also relied upon Morgan Stanley's obligations under
the Advisor Limitation Agreement to ensure that Morgan Stanley's
knowledge of Crane's discussion with Coltec, and Morgan Stanley's
historical and continuing influence over Coltec, would not be put
at the disposal of a competing bidder. Absent judicial
intervention, defendants' conduct in breaching their own
covenants to Crane regarding Morgan Stanley and/or in encouraging
Morgan Stanley's breach and seeking to benefit thereby deprives
Crane of the benefit of the Advisor Limitation Agreement and
taints the Goodrich/Coltec transaction.
65. The resulting injuries to Crane would not be adequately
compensable in money damages and, unless redressed through
appropriate injunctive relief as requested herein, would
constitute irreparable harm. In the Agreements, Crane, Coltec
and Morgan Stanley each recognized and agreed that "money damages
would not be a sufficient remedy for any breach of any provision
of this agreement by the other" and specifically agreed that
Crane and/or Coltec would have the right to enforce the
Agreements by "injunctive or other equitable relief".
COUNT ONE
Breach of the Standstill Agreement by Coltec
66. Plaintiff repeats and realleges the allegations in
paragraphs 1 through 65 as if fully set forth in this paragraph.
67. The Standstill Agreement was a valid and enforceable
contract between Coltec and Crane.
68. Crane performed its obligations under the Standstill
Agreement.
69. Under the Standstill Agreement, Coltec was required to
notify Crane promptly upon being approached by Goodrich about a
possible merger or business combination.
70. Coltec did not provide such notification.
71. By failing to provide such notification, Coltec breached the
Notification Provision of the Standstill Agreement.
72. The Advisor Limitation Agreement is a valid and enforceable
contract among Crane, Coltec and Morgan Stanley.
73. Crane performed its obligations under the Advisor Limitation
Agreement.
74. Under the Advisor Limitation Agreement, Morgan Stanley was
to be treated as a signatory to the Standstill Agreement, full
bound by the provisions thereof.
75. Morgan Stanley breached the Standstill Agreement by failing
to notify Crane of Goodrich's approach to Coltec.
76. Under the Standstill Agreement, Coltec is responsible for
any breach of the Standstill Agreement by its Representatives,
including Morgan Stanley. Thus, Coltec is liable for Morgan
Stanley's breach of the Standstill Agreement.
77. Coltec's breaches of the Standstill Agreement have
irreparably damaged Crane by depriving Crane of the opportunity
to make its best offer to acquire Coltec and have that offer
objectively heard and considered on its merits by the Coltec
Board of Directors.
78. Crane has no adequate remedy at law.
COUNT TWO
Tortious Interference with the Advisor Limitation Agreement by
Coltec
79. Plaintiff repeats and realleges the allegations in
paragraphs 1 through 78 as if fully set forth in this paragraph.
80. Under the Advisor Limitation Agreement, Morgan Stanley was
prohibited from acting as financial advisor to Goodrich in its
bid to acquire Coltec.
81. Morgan Stanley breached the Advisor Limitation Agreement by
acting as financial advisor to Goodrich in connection with its
planned merger with Coltec.
82. Coltec induced Morgan Stanley's breach of the Advisor
Limitation Agreement by releasing Morgan Stanley to act as
Goodrich's financial advisor and dealing with Morgan Stanley,
notwithstanding its knowledge that Crane had not released Morgan
Stanley to act as Goodrich's financial advisor. But for Coltec's
actions, Morgan Stanley could not and would not have acted as
Goodrich's financial advisor in violation of the Advisor
Limitation Agreement.
83. Coltec violated the implied covenant of good faith and fair
dealing in the Advisor Limitation Agreement by not informing
Crane that Morgan Stanley was acting as Goodrich's financial
advisor.
84. As a result of Coltec's conduct, Morgan Stanley's knowledge
of the discussions between Crane and Coltec and its influence
over Coltec were placed at the disposal of Goodrich, to Crane's
detriment.
85. Coltec's tortious interference with the Advisor Limitation
Agreement has irreparably damaged Crane.
86. Crane has no adequate remedy at law.
COUNT THREE
Breach of the Advisor Limitation Agreement by Coltec
87. Plaintiff repeats and realleges the allegations in
paragraphs 1 through 86 as if fully set forth in this paragraph.
88. Under the Advisor Limitation Agreement, Coltec agreed that
Morgan Stanley was not permitted to act as financial advisor to a
third party, such as Goodrich, in connection with a bid to
acquire Coltec.
89. Coltec breached the Advisor Limitation Agreement by
permitting Morgan Stanley to act as Goodrich's financial advisor.
90. As a result of Coltec's breach, Morgan Stanley's knowledge
of the discussions between Crane and Coltec and its influence
over Coltec were placed at the disposal of Goodrich, to Crane's
detriment.
91. Coltec's breach of the Advisor Limitation Agreement has
irreparably damaged Crane.
92. Crane has no adequate remedy at law.
COUNT FOUR
Breach of Implied Covenant of Good Faith and Fair Dealing
With Respect to Advisor Limitation Agreement by Coltec
93. Plaintiff repeats and realleges the allegations in
paragraphs 1 through 92 as if fully set forth in this paragraph.
94. As a signatory to the Advisor Limitation Agreement, Coltec
is bound by an implied covenant of good faith and fair dealing in
connection with its performance under that agreement.
95. This implied covenant imposed upon Coltec an obligation to
refrain from conduct which had the effect of depriving Crane of
the benefit of the bargain contained in the Advisor Limitation
Agreement.
96. In violation of the implied covenant, Coltec has acted in a
manner inimical to Crane's interest and intended to deprive and
in fact depriving Crane of the benefit of the bargain contained
in the Advisor Limitation Agreement. Among other things, Coltec
(i) has dealt with Morgan Stanley as the financial advisor to
Goodrich, and (ii) agreed with Goodrich and Morgan Stanley to
conceal from Crane the approach made by Goodrich to Crane, the
merger discussions between Goodrich and Crane, and Morgan
Stanley's role in connection therewith as financial advisor to
Goodrich. Such conduct constitutes a breach by Coltec of its
implied covenant of good faith and fair dealing.
97. Coltec's breaches of the implied covenant have irreparably
damaged Crane by depriving Crane of the opportunity to make its
best offer to acquire Coltec and have that offer objectively
heard and considered on its merits by the Coltec Board of
Directors, and by allowing Morgan Stanley's knowledge of the
discussions between Crane and Coltec and its influence over
Coltec to be placed at the disposal of Goodrich.
98. Crane has no adequate remedy at law.
COUNT FIVE
Tortious Interference With Contract By Goodrich
99. Plaintiff repeats and realleges each of the allegations in
paragraphs 1 through ___ as if fully set forth in this paragraph.
A. Interference with Crane's Agreement with Coltec
100. Plaintiff had a valid contract with Coltec, the Standstill
Agreement, which required Coltec to provide Crane notification of
its negotiations with Goodrich.
101. Defendant Goodrich was aware of the Standstill Agreement.
102. Defendant Goodrich intentionally and without justification
procured Coltec's breach of the Standstill Agreement by requiring
that Coltec not notify Crane of Goodrich's approach to Coltec.
103. Coltec breached the Standstill Agreement.
104. Crane has been irreparably damaged by the breach of the
Standstill Agreement by Coltec, in that it has been deprived of
the opportunity to make its best offer to acquire Coltec and have
that offer objectively heard and considered on its merits by the
Coltec Board of Directors.
B. Interference with Crane's Agreement with Morgan Stanley
105. Crane had a valid contract with Morgan Stanley, the Advisor
Limitation Agreement, which barred Morgan Stanley from acting as
a financial advisor to Goodrich in connection with a potential
acquisition of Coltec by Goodrich.
106. Defendant Goodrich was aware of the Advisor Limitation
Agreement and that its terms barred Morgan Stanley from acting as
financial advisor to any third party - including Goodrich - in
relation to a business combination with Coltec.
107. Defendant Goodrich intentionally and without justification
procured Morgan Stanley's breach of the Advisor Limitation
Agreement by retaining Morgan Stanley as its financial advisor
for the Merger Agreement with Coltec.
108. Crane has been damaged by the breach of the Advisor
Limitation Agreement by Morgan Stanley in that Morgan Stanley's
knowledge of the discussions between Crane and Coltec and its
influence over Coltec were placed at the disposal of Goodrich, to
Crane's detriment.
109. Crane has no adequate remedy at law for the foregoing
interference with its agreements with Coltec and Morgan Stanley.
PRAYER FOR RELIEF
110. WHEREFORE, plaintiff Crane prays for judgment against
defendants as follows:
A. Ordering Coltec and its directors to take all steps
necessary to place Crane in the position that it would have been
in had Coltec provided Crane with notice at the time that
Goodrich first approached Coltec about a possible business
combination;
B. Declaring and decreeing that the 19.9% Lock-up Option, the
$45 million Termination Fee, the $5 million expense reimbursement
and all other provisions of the Merger Agreement or the documents
executed in connection or in conjunction therewith which would
impose an economic penalty on an offer by Crane to the Coltec
Board of Directors to acquire Coltec or which would otherwise
inhibit or adversely affect Crane's ability to make an
economically attractive offer for consideration by the Coltec
Board of Directors (the "Defensive Measures") were entered into
in breach of the duties of Coltec under the Agreements and do not
bind Coltec's Board of Directors in its consideration of a
competing offer from Crane to merge or otherwise combine with
Coltec;
C. Declaring and decreeing that any rights pursuant to the
Defensive Measures purportedly acquired by Goodrich were procured
by Goodrich's tortious interference with the Agreements, and are
without force and effect as against any competing offer for
Coltec by Crane that Crane presents to the Coltec Board of
Directors for its consideration;
D. Enjoining defendants and those acting for or in concert with
them, temporarily, preliminarily, and permanently, from taking
any steps in performance of or to enforce the Defensive Measures
as against any competing offer for Coltec by Crane should the
Coltec Board of Directors determine to accept that offer;
E. Enjoining defendants and those acting for or in concert with
them from consummating the transaction envisioned by the Merger
Agreement until Crane has presented, and the Coltec Board of
Directors has considered, in accordance with the relief outlined
in paragraphs A. through D. hereof, the offer that Crane presents
for a merger with Coltec;
F. Awarding Crane the costs and disbursements of this action,
including reasonable attorneys' fees;
G. Granting such other and further relief as the Court deems
just and proper; and
H.
Retaining jurisdiction of this matter to ensure
compliance by defendants and those acting for or in concert
with them with any and all relief ordered.
Dated:New York, New York
December 14, 1998
MILBANK, TWEED, HADLEY & McCLOY
By: \s\ Michael L. Hirschfeld
Michael L. Hirschfeld (MH-6799)
Andrew E. Tomback (AT-9644)
Mitchell Epner (ME-8256)
1 Chase Manhattan Plaza
New York, New York 10005
(212) 530-5000
Attorneys for Plaintiff
Crane Co.
EXHIBIT A
TO COMPLAINT
This ninth paragraph of the Agreement is reproduced in full below
for the benefit of the Court, in recognition of the legibility of
the original.
As a further condition to the furnishing of the
Evaluation Material, unless specifically requested in writing in
advance by the Board of Directors of one of the parties hereto
(the "Subject Company"), neither the other party hereto nor any
of its affiliates (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"))
will, and such party and its affiliates will not assist or
encourage others (including by providing financing) to, directly
or indirectly, for a period of three years from the date of this
agreement (i) acquire or agree, offer, seek or propose (whether
publicly or otherwise) to acquire ownership (including but not
limited to beneficial ownership (as defined in Rule 13d-3 under
the 1934 Act)) of (x) the Subject Company or any of its assets or
businesses, (y) any securities issued by the Subject Company or
(z) any rights or options to acquire such ownership (including
from a third party), whether by means of a negotiated purchase of
securities or assets, tender or exchange offer, merger or other
business combination, recapitalization, restructuring or other
extraordinary transaction (a "Business Combination Transaction"),
(ii) engage in any "solicitation" of "proxies" (as such terms are
used in the proxy rules promulgated under the 1934 Act), or form,
join or in any way participate in a "group" (as defined under the
1934 Act), with respect to any securities issued by the Subject
Company, (iii) otherwise seek or propose to influence or control
the Board of Directors, management or policies of the Subject
Company, (iv) take any action that could reasonably be expected
to force the Subject Company to make a public announcement
regarding any of the types of matters referred to in clause (i),
(ii) or (iii) above, or (v) enter into any discussions,
negotiations, agreements, arrangements or understandings with any
third party with respect to any of the foregoing. Each party
hereto also agrees during such period not to request the other
party or any of its Representatives to amend or waive any
provision of this paragraph (including this sentence). If at any
time during such period either party hereto is approached by any
third party concerning its or their participation in any of the
types of matters referred to in clause (i), (ii) or (iii) above,
such party will promptly inform the other party of the nature of
such contact and the parties thereto.
October 31, 1995
Mr. John W. Guffey, Jr.
Chairman, President and
Chief Executive Officer
Coltec Industries
430 Park Avenue
New York, NY 10022
Dear Mr. Guffey:
We have agreed to exchange certain information
concerning our companies in connection with our consideration of
a possible negotiated transaction between Crane Co., a Delaware
corporation ("Crane"), and Coltec Industries, a Pennsylvania
corporation ("Coltec"), and our stockholders (a "Transaction").
As a condition to the furnishing of the requested
information we each agree that (i) all information relating to
Crane and its subsidiaries furnished by or on behalf Crane to
Coltec or its Representatives (as defined below), and all
information relating to Coltec and its subsidiaries furnished by
or on behalf of Coltec to Crane or its Representatives, in each
case whether prior to or after our execution of this letter and
irrespective of the form of communication, or learned in
connection with visits to our respective facilities, in
connection with our mutual consideration of a Transaction (such
information, together with notes, memoranda, summaries, analyses,
compilations and other writings relating thereto or based thereon
prepared by either of us or our respective Representatives being
referred to herein as the "Evaluation Material") will be kept
strictly confidential, and (ii) the Evaluation Material will be
used solely for the purpose of determining the desirability of a
Transaction; provided, however, that the Evaluation Material may
be disclosed to any of our Representatives who need to know such
information for the purpose of assisting in evaluating a
Transaction (it being understood that such Representatives will
be informed by us of the contents of this agreement and that, by
receiving such information, such Representatives are agreeing to
be bound by this agreement). The term "Evaluation Material" does
not include information which (i) is or becomes generally
available to the public other than as a result of disclosure in
violation of this Agreement or (ii) becomes available on a non-
confidential basis from a source (in the case of Evaluation
Material relating to Crane) other than Crane or its affiliates or
Representatives or (in the case of Evaluation Material relating
to Coltec) other than Coltec or its affiliates or
representatives, provided that neither Crane nor Coltec, as the
case may be, or any of our respective Representatives is aware
that such source is under an obligation (whether contractual,
legal or fiduciary) to the other party hereto to keep such
information confidential. For purposes hereof, the
"Representatives" of any entity means such entity's directors,
officers, employees, legal and financial advisors, accountants
and other agents and representatives. Each of Crane and Coltec
will be responsible for any breach of this agreement by any of
its Representatives and agrees to take all reasonable measures to
restrain its Representatives from prohibited or unauthorized
disclosure or use of Evaluation Material.
In addition, we each agree that, except with the prior
written consent of the other or as required or permitted by this
agreement, we will not, and will direct our respective
Representatives not to, make any release to the press or other
public disclosure concerning either (i) the existence of this
letter or that the Evaluation Material has been made available or
(ii) in the event that we or any of our Representatives engage in
discussions or negotiations concerning a Transaction, the fact
that such discussions or negotiations are taking place, or any of
the terms, conditions or other facts with respect to any such
possible Transaction, including the status thereof, except for
such public disclosure as may be necessary, in the written
opinion of our respective outside counsel, for either of us not
to be in violation of or default under any applicable law,
regulation or governmental order. If either of us proposes to
make any disclosure based upon such an opinion, such party will
deliver a copy of such opinion to the other party together with
the text of the proposed disclosure as far in advance of its
disclosure as is reasonably practicable, and will in good faith
consult with and consider the suggestions of the other party and
its Representatives concerning the nature and scope of the
information proposed to be disclosed.
If either of us or any of our Representatives is
requested in any judicial or administrative proceeding or by any
governmental or regulatory authority to disclose any Evaluation
Material, such party will (i) give the other party prompt notice
of such request so that the other party may seek an appropriate
protective order and (ii) consult with the other party as to the
advisability of taking legally available steps to resist or
narrow such a request. The party receiving any such request will
cooperate fully with the other party in obtaining such an order.
If in the absence of a protective order such party is nonetheless
compelled to disclose Evaluation Material, such disclosure may be
made without liability hereunder, provided that written notice of
the information to be disclosed is given as far in advance of its
disclosure as is practicable and best efforts are used to obtain
reasonable assurances that confidential treatment will be
accorded to such information.
If at any time either of us decides that we do not wish
to proceed with a Transaction or, if earlier, upon the request of
either of us, the other party will promptly (and in no event
later than five (5) business days after such request) redeliver
or cause to be redelivered to each other all copies of the
Evaluation Material furnished hereunder and destroy or cause to
be destroyed all Evaluation Material prepared by either of us or
any of our respective Representatives. Notwithstanding the
return or destruction of the Evaluation Material, each of us and
our respective Representatives will continue to be bound by our
obligations hereunder.
Although each of us has agreed to endeavor to include
in the Evaluation Material information it believes to be relevant
to the evaluation of a Transaction, we each hereby acknowledge
that neither Crane nor Coltec nor any of our affiliates or
Representatives makes any representation or warranty, express or
implied, as to the accuracy or completeness of any of the
Evaluation Material. We also agree that neither Crane nor Coltec
nor any of our affiliates or Representatives will have any
liability resulting from use of any of the Evaluation Material.
We each hereby acknowledge that we each are aware (and
that our Representatives who have been apprised of this agreement
and our consideration of a Transaction have been, or upon
becoming so apprised will be, advised) of the restrictions
imposed by federal and state securities laws on a person
possessing material nonpublic information about a company. In
this regard, we each hereby agree that while we are in possession
of material nonpublic information with respect to the other, we
will not purchase or sell any securities of the other, or
communicate such information to any third party, in violation of
any such laws.
In consideration for access to the Evaluation Material
which we have requested from each other, we each agree not to
initiate or maintain contact (other than in the ordinary course
of business) with any officer, director, employee or agent of the
other party or any of its subsidiaries regarding its business,
operations, prospects, finances or any other matter pertaining to
any proposed Transaction, other than the individuals listed on
Schedule I hereto. It is understood that such individuals will
arrange for appropriate contacts for due diligence purposes. It
is further understood that all (i) communications regarding a
possible Transaction, (ii) requests for additional information,
(iii) requests for facility tours or management meetings and (iv)
discussions or questions regarding procedures, will be submitted
or directed to one of the individuals listed on Schedule I
hereto.
As a further condition to the furnishing of the
Evaluation Material, unless specifically requested in writing in
advance by the Board of Directors of one of the parties hereto
(the "Subject Company"), neither the other party hereto nor any
of its affiliates (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"))
will, and such party and its affiliates will not assist or
encourage others (including by providing financing) to, directly
or indirectly, for a period of three years from the date of this
agreement (i) acquire or agree, offer, seek or propose (whether
publicly or otherwise) to acquire ownership (including but not
limited to beneficial ownership (as defined in Rule 13d-3 under
the 1934 Act)) of (x) the Subject Company or any of its assets or
businesses, (y) any securities issued by the Subject Company or
(z) any rights or options to acquire such ownership (including
from a third party), whether by means of a negotiated purchase of
securities or assets, tender or exchange offer, merger or other
business combination, recapitalization, restructuring or other
extraordinary transaction (a "Business Combination Transaction"),
(ii) engage in any "solicitation" of "proxies" (as such terms are
used in the proxy rules promulgated under the 1934 Act), or form,
join or in any way participate in a "group" (as defined under the
1934 Act), with respect to any securities issued by the Subject
Company, (iii) otherwise seek or propose to influence or control
the Board of Directors, management or policies of the Subject
Company, (iv) take any action that could reasonably be expected
to force the Subject Company to make a public announcement
regarding any of the types of matters referred to in clause (i),
(ii) or (iii) above, or (v) enter into any discussions,
negotiations, agreements, arrangements or understandings with any
third party with respect to any of the foregoing. Each party
hereto also agrees during such period not to request the other
party or any of its Representatives to amend or waive any
provision of this paragraph (including this sentence). If at any
time during such period either party hereto is approached by any
third party concerning its or their participation in any of the
types of matters referred to in clause (i), (ii) or (iii) above,
such party will promptly inform the other party of the nature of
such contact and the parties thereto.
Each party hereto further agrees that, for a period of
one year from the date hereof, neither it nor any of its
affiliates will solicit to employ any officer or employee of such
party or any of its subsidiaries, so long as they are employed by
the other party or any of its subsidiaries, without obtaining the
prior written consent of such party. The term "solicit to
employ" does not include general solicitations of employment not
specifically directed towards employees of either party and its
subsidiaries.
It is expressly understood by the parties hereto that
this agreement is not intended to, and does not, constitute an
agreement to consummate a Transaction or to enter into a
definitive Transaction agreement, and neither Crane nor Coltec
will have any rights or obligations of any kind whatsoever with
respect to a Transaction by virtue of this agreement or any other
written or oral expression by either party or its respective
Representatives unless and until a definitive agreement relating
thereto is executed and delivered, other than for the matters
specifically agreed to herein.
Each of Crane and Coltec acknowledges and agrees that
money damages would not be a sufficient remedy for any breach of
any provision of this agreement by the other, and that in
addition to all other remedies which any party hereto may have,
each party will be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such
breach. No failure or delay by either party hereto in exercising
any right, power or privilege hereunder will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.
This agreement contains the sole and entire agreement
between the parties with respect to the subject matter hereof,
may be amended, modified or waived only by a separate written
instrument duly executed by or on behalf of each party, and shall
be governed by and construed in accordance with the laws of the
State of New York without giving effect to the conflicts of laws
principles thereof. Except as otherwise expressly provided
herein, our respective obligations under this agreement will
expire one year from the date hereof.
If the foregoing correctly sets forth our agreement
with respect to the matters set forth herein, please so indicate
by signing two copies of this agreement and returning one of such
signed copies to Crane, whereupon this agreement will constitute
our binding agreement with respect to the matters set forth
herein.
Very truly yours,
CRANE CO.
By: \s\ R. S. Evans
Name: R. S. Evans
Title: Chairman and Chief Executive
Officer
Accepted and agreed to as of
the date first written above:
Coltec Industriues
By: R. J. Tubbs
Name: R.J. Tubbs
Title: Sr. Vice President, General Counsel and Secretary
Schedule 1
Contacts For Due Diligence, etc.
In the case of Coltec:
John W. Guffey Chairman, President and Chief Executive Officer
(212) 940-0487
Paul G. Schoen Executive Vice President, Finance, Treasurer
and Chief Financial Officer (212) 940-0444
Robert J. Tubbs Senior Vice
President, General Counsel
and Secretary (212) 940-0444
Laurence H. Polsky Executive Vice
President, Administration (212) 940-0575
SCHEDULE I
Contacts For Due Diligence, etc.
In the case of Crane:
R. S. (Shell) Evans Chairman and
Chief Executive Officer (203) 363-7200
Paul R. Hundt Vice President, General Counsel (203) 363-7220
David S. Smith VP Finance and Chief Financial Officer (203) 363-
7225
In the case of Coltec:
EXHIBIT B
TO COMPLAINT
CRANE CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902
R.S. EVANS
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
November 9, 1995
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
Gentlemen:
In connection with their consideration of a possible
negotiated transaction (a "Transaction") between Crane Co., a
Delaware corporation ("Crane"), and Coltec Industries Inc., a
Pennsylvania corporation ("Coltec"), and our stockholders, Crane
and Coltec have agreed to exchange certain information concerning
their companies, and have retained Dillon, Read & Co. Inc.
("Dillon Read") and Morgan Stanley & Co. Incorporated ("Morgan
Stanley" and, together with Dillon Read, the "Advisors"),
respectively, to provide them financial advice in connection with
the Transaction. In order for the Advisors to perform their
function, it will be necessary for Crane and Coltec to provide
such information to the Advisors.
Reference is made to the letter agreement dated
October 31, 1995 between Crane and Coltec, a copy of which is
appended hereto (the "Confidentiality Letter"). As a condition
to the furnishing of the requested information, Crane and Coltec
each requires that the other's Advisor independently agree that
it will be bound by the terms of the Confidentiality Letter, in
the same manner and to the same extent as the party for whom it
is acting as Advisor (Crane in the case of Dillon Read and Coltec
in the case of Morgan Stanley), as though each Advisor were an
original signatory to the Confidentiality Letter; provided that
nothing contained herein shall restrict either Advisor from
engaging in routine trading activities in the securities of Crane
or Coltec on behalf of themselves or their clients. In addition,
each of Crane and Coltec requires that each Advisor also agree
not to provide advice to any party with respect to any of the
types of matters referred to in the ninth full paragraph of the
Confidentiality Letter for the period set forth therein.
If the forgoing correctly sets forth our agreement with
respect to the matters set forth herein, please so indicate by
signing three copies of this agreement and returning one of such
signed copies to each of Crane and Coltec, whereupon this
agreement will constitute our binding agreement with respect to
the matters set forth herein.
Very truly yours,
CRANE CO.
By: \s\ R.S. Evans
Name: R. S. Evans
Title: Chairman and
Chief Executive Officer
COLTEC INDUSTRIES
By: \s\ John W. Guffey, Jr.
Name: John W. Guffey, Jr.
Title: Chairman, President &
Chief
Executive Officer
Accepted and agreed to as of
the date first written above:
MORGAN STANLEY & CO. INCORPORATED
By: \s\ Stephen R. Munger
Name: Stephen R. Munger
Title: Managing Director
Accepted and agreed to as of
the date first written above:
DILLON READE & CO. INC.
By: \s\ William Powell
Name: William Powell
Title: Managing Director
EXHIBIT C
TO COMPLAINT
CRANE CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902
R.S. EVANS
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
September 24, 1998
Mr. John W. Guffy, Jr.
Chairman & Chief Executive Officer
Coltec Industries, Inc.
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Dear John,
I enjoyed our conversation the other day and was pleased that you
appear to agree that the industrial logic of a merger of our two
companies is strong. At your suggestion, I am writing this
letter to clarify for you the nature of our interest, with the
expectation that both companies will want to proceed
expeditiously with further evaluation of the benefits of a
potential transaction.
Based upon our review of publicly available information and
subject to our further analysis of pertinent data, I would be
prepared at this time to discuss with you and, subject to the
support of your Board, recommend to my Board a merger of Coltec
into Crane on the basis of approximately 0.80 shares of Crane for
each outstanding share of Coltec. This exchange ratio represents
over a 30% premium to Coltec's current stock price. This
presumes the transaction would be tax-free to both shareholder
groups and should qualify for pooling of interests accounting
treatment. In effect, this proposal provides for Coltec's
shareholders both a substantial premium to the current stock
price and the benefits of a tax-free, pooling accounting "merger
of equals" transaction.
I should point out to you that this is not a formal offer, but
rather an outline of the basis for further discussions with you.
Any offer would require the approval of each of our respective
Boards of Directors. Neither this letter nor any contemplated
discussions between us are intended to create a need for Coltec
or Crane to make any public announcement.
We would like to meet with you soon to discuss further the
necessary next steps. I will plan to call you in the next few
days to discuss when we might be able to meet face to face.
Very Truly Yours,
/s/ R.S. Evans
EXHIBIT D
TO COMPLAINT
CRANE CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902
R.S. EVANS
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
November 20, 1998
Mr. John W. Guffy, Jr.
Chairman and Chief Executive Officer
Coltec Industries
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Dear John,
We remain keenly interested in combining Crane and Coltec to
create a company with even stronger positions in industrial and
aerospace components than either company enjoys on a stand-alone
basis. We are also excited about the financial strength which a
combination provides, especially to Coltec shareholders who
currently bear the economic risks of a somewhat leveraged balance
sheet. A combination of our companies effectively reduces that
risk to negligible levels.
Reflecting our conviction that this combination can provide
enormous benefits to each shareholder group, we propose a share-
for-share exchange on the basis of 0.80 shares of Crane common
stock for each outstanding share of Coltec common stock in a
merger which we believe would qualify for pooling of interests
accounting treatment and be tax-free to Coltec shareholders.
This exchange ratio provides more than a 40% premium to Coltec's
current stock price based on current stock prices. We are ready
and eager to meet as soon as practicable to discuss
organizational issues and board governance matters and to map out
a rapid due diligence on both sides.
I look forward to discussing your reaction to our continued
interest as reflected in this proposal. To the extent that you
feel it would be useful to have your investment bankers to
discuss this proposal with our investment bankers, they could
call Fred Lane of Donaldson, Lufkin & Jenrette (phone: 617-342-
8228).
Sincerely,
/s/ R.S. Evans
EXHIBIT E
TO COMPLAINT
Coltec Industries
Coltec Industries Inc.
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217
John W. Guffey, Jr.
Chairman
President
Chief Executive Officer
704/423-7001
Fax: 704/423-7002
November 24, 1998
Mr. R. S. Evans
Chairman and Chief Executive Officer
Crane Co.
100 First Stamford Place
Stamford, CT 06902
Dear Shell:
I received your letter of November 20, 1998 this morning. As you
are undoubtedly aware, yesterday morning we announced that Coltec
had signed an agreement and Plan of Merger with B.F. Goodrich.
A copy of that agreement is publicly available.
Sincerely,
/s/ John W. Guffey, Jr.
John W. Guffey, Jr.
JWG/je
EXHIBIT F
TO COMPLAINT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November
23, 1998
--------
- ----------
THE B.F.GOODRICH COMPANY
--------------------------------------------------
(Exact name of registrant as specified in charter)
New York 1-892
34-0252680
- -----------------------------------------------------------------
- --------------- (State or other (Commission
(IRS Employer jurisdiction of File Number)
Identification No.) incorporation)
4020 Kinross Lakes Parkway, Richfield, Ohio
44286-9368
-----------------------------------------------------
- ---------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 330-
659-7600
---
- ---------
Not Applicable
-------------------------------------------------------
- --------
(Former name or former address, if changed since last
report.)
Item 5. Other Events
- ------- ------------
On November 23, 1998, The B.F.Goodrich Company
("BFGoodrich") issued a press release announcing that BFGoodrich
and Coltec Industries Inc ("Coltec") have signed a definitive
agreement for Coltec to merge with BFGoodrich in a tax-free
stock-for-stock transaction. Reference is made to Exhibit 99.1
hereto which is a copy of the press release, Exhibit 99.2
which is a copy of the definitive agreement and Exhibit 99.3
which are copies of the cross stock option agreements.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
THE B.F.GOODRICH
COMPANY
By /s/Nicholas J.
Calise
-----------------
- ------------
Nicholas J.
Calise, Secretary
Dated: November 24, 1998
Exhibit 99.1 BFGOODRICH
FOR IMMEDIATE RELEASE
- ---------------------
BF GOODRICH AND COLTEC INDUSTRIES
TO MERGE IN $2.2 BILLION TRANSACTION
Merger Expected To Be Accretive To
BFGoodrich EPS And Margins In First Year
Company Will Have Approximately $5.5 Billion In
Revenues And Important Franchises In Aerospace,
Performance Materials and Engineered Industrial
Products
--------------------------------
Richfield, OH and Charlotte, NC, November 23, 1998 --
The BFGoodrich Company (NYSE: GR) and Coltec Industries (NYSE:
COT) announced today a strategic merger that will bring together
two strong, profitable companies to create an even stronger
company with important franchises in the aerospace, specialty
chemicals and engineered industrial products industries.
Under the terms of a definitive agreement, approved by
the Boards of both companies, Coltec shareholders will
receive 0.56 shares of BFGoodrich common stock for each Coltec
common share. Based on BFGoodrich's closing price of $35.94 on
Friday, November 20, the transaction is currently valued at
$20.13 per Coltec share, or a total of approximately $2.2
billion, including the assumption of Coltec debt. The
transaction will be accounted for as a pooling of interests and
will be tax free to Coltec shareholders.
The transaction is expected to be accretive to
BFGoodrich's 1999 earnings and operating margins. The companies
expect to achieve minimum annual cost savings of approximately
$60 million by 2001, with significant savings beginning in
1999. The transaction is expected to be completed by as early
as Spring 1999 and is subject to approval by shareholders
of both companies, applicable regulatory authorities, and other
customary conditions.
"This merger significantly enhances BFGoodrich's
aerospace business and -- with Coltec's high-margin engineered
industrial products business -- we are adding an important third
leg that balances our aerospace and performance materials
portfolio and enhances our excellent prospects for continued
growth," said David L. Burner, chairman and chief executive
officer of BFGoodrich. "In aerospace, the combination will
increase our ability to meet customers' increasing demand to
partner with suppliers who can offer more products and more fully
integrated systems. We expect also to achieve meaningful
synergies in serving the primary and aftermarket segments of the
industry."
Burner continued: "The engineered industrial
products business adds another platform for continued growth and
we are delighted that John W. Guffey Jr., Coltec's chairman and
chief executive officer, will become a member of our Board of
Directors, an executive vice president of BFGoodrich, and
president and chief operating officer of the industrial
business."
Burner added: "Our performance materials businesses
enjoy a strong position in the global markets they serve and we
remain committed to building these businesses as they
continue to make strong contributions to revenues and income."
Together, the companies have estimated 1998 pro
forma revenues of approximately $5.5 billion and a market
capitalization of approximately $4.0 billion. Current
BFGoodrich shareholders will own approximately two- thirds,
and Coltec shareholders one-third, of the combined company.
Headquarters of The BFGoodrich Company will relocate to
Charlotte, North Carolina.
Burner stated, "The decision to move our corporate
headquarters out of Northeast Ohio was extremely difficult.
Nevertheless, we believe it is the right decision at the right
time for our company, our shareholders and our customers."
John Guffey, Coltec's chairman and chief executive
officer said, "This is a great merger and one that we believe is
compelling for the shareholders and customers of both companies."
Guffey continued, "Both BFGoodrich and Coltec have excellent
track records in rapidly integrating acquired companies, and we
both understand what it will take to achieve the promise
of this merger. Together, the companies will have significantly
greater balance, resources and financial strength to pursue
an aggressive growth strategy and to deliver superior value
for our shareholders."
In addition to Burner and Guffey, other key operating
executives are Marshall Larsen, who will be president and
chief operating officer of the combined Aerospace segment,
and David Price, president and chief operating officer of
Performance Materials. Both Larsen and Price are also executive
vice presidents of BFGoodrich. Guffey and two other Coltec
directors will join the BFGoodrich Board, increasing its size
from 12 to 15 members.
Morgan Stanley Dean Witter is serving as financial
advisor to BFGoodrich and Credit Suisse First Boston is serving
as financial advisor to Coltec.
Coltec Industries is a leading producer of aerospace
and industrial products and is headquartered in Charlotte, NC.
BFGoodrich provides aircraft systems and services
and manufactures performance materials that are sold to
customers worldwide and used in thousands of consumer and
industrial products.
***
Part of this announcement contains forward looking statements
that involve risks and uncertainties, and actual results
could differ materially from those projected in the forward-
looking statements. The risks and uncertainties are detailed
from time to time in The BFGoodrich Company and Coltec
Industries reports filed with the Securities and Exchange
Commission, including but not limited to both companies' 1997
Annual Reports on Form 10-K.
Contacts:
For BFGoodrich For Coltec
Industries
Media, Rob Jewell, (330) 659-7999 David Harrison,
(704) 423-7010
Or Kevin Ramundo,
(704) 423-7024 Investors, John Bingle (330) 659-7788
Or
Sard Verbinnen &
Co.
Paul
Verbinnen/David Reno/
Debra Miller (212)
687-8080
NOTE TO EDITORS: B-roll footage from both companies will be fed
via satellite
at the following times and coordinates:
DAY/TIME: Monday, November 23, 1998, 8:00am - 8:15am
(EST)
COORDINATES: Galaxy 6, C-Band Transponder 11, Audio 6.2 &
6.8
DAY/TIME: Monday, November 23, 1998, 2:00pm - 2:15pm
(EST)
COORDINATES: Galaxy 6, C-Band Transponder 5, Audio 6.2 &
6.8
Exhibit 99.2
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
NOVEMBER 22, 1998
AMONG
THE B.F.GOODRICH COMPANY,
RUNWAY ACQUISITION CORPORATION
AND
COLTEC INDUSTRIES INC
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger
......................................1
Section 1.2 Effective Date of the
Merger.....................1
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation and By-
Laws............2
Section 2.2 Board of Directors;
Officers.....................2
Section 2.3 Effects of
Merger................................2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange
Ratio...................................2
Section 3.2 Stock
Options....................................2
Section 3.3 Parent to Make Certificates
Available............4
Section 3.4 Dividends; Transfer
Taxes........................4
Section 3.5 No Fractional
Shares.............................5
Section 3.6 Exchange
Agent...................................5
Section 3.7 Shareholders'
Meetings...........................6
Section 3.8 Closing of the Company's Transfer
Books..........6
Section 3.9 Assistance in Consummation of the
Merger.........6
Section 3.10
Closing..........................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization and
Qualification...................6
Section 4.2
Capitalization...................................7
Section 4.3
Subsidiaries.....................................7
Section 4.4 Authority Relative to this Merger
Agreement and
the Cross Stock Option
Agreements................8
Section 4.5 Reports and Financial
Statements.................9
Section 4.6 Absence of Certain Changes or
Events.............9
Section 4.7
Litigation.......................................9
Section 4.8 Takeover Provisions
Inapplicable................10
Section 4.9 Compliance with Applicable
Laws.................10
Section 4.10
Taxes...........................................10
Section 4.11 Product Liability;
Airworthiness................12
Section 4.12
Environment.....................................12
Section 4.13 Accounting; Tax
Matters.........................13
- 2 -
Section 4.14 Parent
Action...................................13
Section 4.15 Lack of Ownership of Company Common
Stock.......13
Section 4.16 Financial
Advisor...............................13
Section 4.17 Fairness
Opinion................................14
ARTICLE IV--A
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Section 4A.1
Organization....................................14
Section 4A.2
Capitalization..................................14
Section 4A.3 Authority Relative to this Merger
Agreement.....14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and
Qualification..................15
Section 5.2
Capitalization..................................15
Section 5.3
Subsidiaries....................................16
Section 5.4 Authority Relative to this Merger
Agreement
and the Cross Stock Option
Agreements...........16
Section 5.5 Reports and Financial
Statements................17
Section 5.6 Absence of Certain Changes or
Events............17
Section 5.7
Litigation......................................18
Section 5.8 Employee Benefit
Plans..........................18
Section 5.9 Plan
Compliance.................................18
Section 5.10 Takeover Provisions
Inapplicable................19
Section 5.11 Compliance with Applicable
Laws.................19
Section 5.12
Taxes...........................................19
Section 5.13 Certain
Contracts...............................21
Section 5.14 Patents, Trademark,
Etc.........................21
Section 5.15 Product Liability;
Airworthiness................22
Section 5.16
Environment.....................................22
Section 5.17 Accounting; Tax
Matters.........................22
Section 5.18 Company
Action..................................22
Section 5.19 Lack of Ownership of Parent Common
Stock........23
Section 5.20 Insurance
Coverage..............................23
Section 5.21 Year
2000.......................................23
Section 5.22 Financial
Advisor...............................23
Section 5.23 Fairness
Opinion................................23
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company
Pending
the
Merger......................................23
Section 6.2 Conduct of Business by Parent and Sub
Pending
the
Merger......................................26
Section 6.3 Notice of
Breach................................27
- 3 -
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and
Information..........................27
Section 7.2 Registration Statement/Proxy
Statement..........27
Section 7.3 Affiliates, Publication of Combined
Financial
Results...............................28
Section 7.4 Stock Exchange
Listing..........................29
Section 7.5 Employment
Arrangements.........................29
Section 7.6
Indemnification.................................29
Section 7.7
Consents........................................30
Section 7.8 Additional
Agreements...........................30
Section 7.9 No
Solicitation.................................31
Section 7.10 Accountants
Letters.............................32
Section 7.11 Pooling of
Interests............................33
Section 7.12 Trust Preferred
Securities......................33
Section 7.13 Parent Board of
Directors.......................33
Section 7.14 Post-Merger
Operations..........................33
Section 7.15 Tax Representation
Letters......................33
Section 7.16 Transfer
Taxes..................................33
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation
to
Effect the
Merger...............................33
Section 8.2 Conditions to Obligation of the
Company
to Effect the
Merger............................34
Section 8.3 Conditions to Obligations of Parent
and
Sub to Effect the
Merger........................35
Section 8.4 Frustration of Closing
Conditions...............35
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1
Termination.....................................35
Section 9.2 Effect of
Termination...........................37
Section 9.3
Amendment.......................................39
Section 9.4
Waiver..........................................39
ARTICLE X
GENERAL PROVISIONS
Section 10.1
Notices.........................................39
Section 10.2 Fees and
Expenses...............................40
Section 10.3
Publicity.......................................40
Section 10.4 Specific
Performance............................40
- 4 -
Section 10.5
Interpretation..................................41
Section 10.6 Third Party
Beneficiaries.......................41
Section 10.7
Miscellaneous...................................42
Section 10.8 Cure
Period.....................................42
Section 10.9 Non-Survival of Representations and
Warranties..42
Section 10.10
Validity........................................42
- 5 -
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Merger
Agreement"), dated as of November 22, 1998, is among The
B.F.Goodrich Company, a New York corporation ("Parent"), Runway
Acquisition Corporation, a Pennsylvania corporation and a
wholly owned subsidiary of Parent ("Sub"), and Coltec
Industries Inc, a Pennsylvania corporation (the "Company").
RECITALS:
--------
The Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent, to be
accomplished by the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions set
forth below and in accordance with the Business Corporation Law
of the Commonwealth of Pennsylvania ("PBCL"). It is intended for
federal income tax purposes that the Merger shall qualify as
a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that
this Merger Agreement shall be a plan of reorganization for
purposes of Section 368 of the Code and, for accounting
purposes, the Merger shall be a "pooling of interests".
As a condition and inducement to entering into this
Merger Agreement, Parent and the Company have entered into a
stock option agreement dated as of the date hereof pursuant to
which Parent has granted the Company an option with respect to
certain shares of Parent Common Stock (as defined in Section
3.1(b) below) (the "Parent Stock Option Agreement") and a stock
option agreement dated as of the date hereof pursuant to which
the Company has granted Parent an option with respect to certain
shares of Company Common Stock (as defined in Section 3.1(b)
below) (the "Company Stock Option Agreement" and, collectively
with the Parent Stock Option Agreement, the "Cross Stock Option
Agreements") on the terms and subject to the conditions set forth
therein.
NOW, THEREFORE, in consideration of the
foregoing and the representations, warranties and agreements
set forth below, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to
the conditions hereof, on the Effective Date (as defined below
in Section 1.2), Sub shall be merged into the Company, the
separate corporate existence of Sub shall thereupon cease, and
the Company shall continue its corporate existence as the
surviving corporation in the Merger (the "Surviving
Corporation").
Section 1.2 Effective Date of the Merger. The
Merger shall become effective when properly executed Articles of
Merger are duly filed with the Department of State of the
Commonwealth of Pennsylvania, which filing shall be made on the
date on which the closing of the transactions contemplated by
this Merger Agreement takes place in accordance with Section
3.10. When used in this Merger Agreement, the term "Effective
Date" shall mean the date and time at which such filing
shall have been made.
- 6 -
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation and By-Laws.
The Articles of Incorporation and the By-Laws of Sub in
effect immediately prior to the Effective Date shall be the
Articles of Incorporation and the By-Laws of the Surviving
Corporation until amended in accordance with their terms
and as provided by law.
Section 2.2 Board of Directors; Officers. The
directors of Sub immediately prior to the Effective Date shall
be the directors of the Surviving Corporation and the officers
of Sub immediately prior to the Effective Date shall be the
officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Section 2.3 Effects of Merger. The Merger shall have
the effects set forth in Section 1929 of the PBCL.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. As of the Effective Date,
by virtue of the Merger and without any action on the part of
any holder of any capital stock of the Company, Parent or Sub:
(a) All shares of capital stock of the Company which
are held by the Company, and any shares of capital stock of the
Company owned by Parent, Sub or any other subsidiary of Parent,
shall be canceled.
(b) Subject to Section 3.5, each remaining
outstanding share of common stock, par value $.01 per share, of
the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Date shall be converted
into .56 of a share (the "Exchange Ratio") of common stock, par
value $5 per share, of Parent ("Parent Common Stock"). One
preferred share purchase right issuable pursuant to the Rights
Agreement dated as of June 2, 1997 between Parent and The Bank
of New York or any other purchase right issued in
substitution thereof (the "Parent Rights") shall be issued
together with and shall attach to each share of Parent
Common Stock issued pursuant to this Section 3.1(b).
(c) In the event of any change in Parent Common
Stock by reason of stock dividends, splitups, mergers,
recapitalizations, combinations, exchange of shares or the like
after the date of this Merger Agreement and prior to the
Effective Date, the Exchange Ratio shall be adjusted
appropriately.
(d) Each issued and outstanding share of capital stock
of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
- 7 -
Section 3.2 Stock Options. (a) As soon as practicable
following the date of this Merger Agreement, the Board of
Directors of the Company (or, if appropriate, any committee
administering the Company Common Stock Plans (as defined
below)) shall adopt such resolutions or take such other actions
as may be required to effect the following in accordance with
the terms of the Company Common Stock Plans:
(i) adjust the terms of all
outstanding options to purchase shares of Company Common Stock
(the "Company Stock Options") granted under any plan or
arrangement providing for the grant of options to purchase
shares of Company Common Stock to current or former
directors, officers, employees or consultants of the Company
or its subsidiaries (the "Company Common Stock Plans"),
whether vested or unvested, as necessary to provide that, as of
the Effective Date, each Company Stock Option outstanding
immediately prior to the Effective Date shall be amended and
converted into an option to acquire, on the same terms and
conditions as were applicable under the Company Stock Option,
the number of shares of Parent Common Stock (rounded down to
the nearest whole share) determined by multiplying the number of
shares of Company Common Stock subject to such Company Stock
Option by the Exchange Ratio, at a price per share of Parent
Common Stock equal to (A) the exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such
Company Stock Option divided by (B) the Exchange Ratio
(each, as so adjusted, an "Adjusted Option"); provided that
such exercise price shall be rounded up to the nearest whole
cent; and
(ii) make such other changes to the
Company Common Stock Plans as Parent and the Company may agree
are appropriate to give effect to the Merger.
(b) The duration and other terms of each Adjusted
Option shall be the same as the original Company Stock Option
from which it was converted except that all references to the
Company in such original Company Stock Option shall be deemed to
be references to Parent.
(c) The adjustments provided herein with respect to
any Company Stock Options that are "incentive stock options" as
defined in Section 422 of the Code shall be and are intended to
be effected in a manner which is consistent with Section 424(a)
of the Code.
(d) No later than the Effective Date, Parent shall
prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-8 (or
another appropriate form), which shall include a re-offer
prospectus, registering a number of shares of Parent Common Stock
equal to the number of shares subject to the Adjusted
Options. Such registration statement shall be kept effective
(and the current status of the initial offering prospectus
or prospectuses required thereby shall be maintained) at least
for so long as any Adjusted Options remain outstanding.
(e) As soon as practicable after the Effective Date,
Parent shall deliver to the holders of Company Stock Options
appropriate notices setting forth such holders' rights pursuant
to the respective Company Common Stock Plans and the agreements
evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall be assumed by Parent
and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 3.2 after
giving effect to the Merger).
- 8 -
(f) A holder of an Adjusted Option may exercise such
Adjusted Option in whole or in part in accordance with its terms
by delivering a properly executed notice of exercise to Parent,
together with the consideration therefor and any required
federal withholding tax information and payment.
(g) Except as otherwise contemplated by this Section
3.2 and except to the extent required under the respective
terms of the Company Stock Options or other applicable
agreements, all restrictions or limitations on transfer and
vesting with respect to Company Stock Options awarded under the
Company Common Stock Plans or any other plan, program or
arrangement of the Company, to the extent that such
restrictions or limitations shall not have lapsed, shall remain
in full force and effect with respect to such options after
giving effect to the Merger and the assumption by Parent as set
forth above.
(h) Parent shall use all reasonable best efforts to
implement the provisions of this Section 3.2.
Section 3.3 Parent to Make Certificates Available.
Prior to the Effective Date, Parent shall select The Bank of
New York or such other person or persons reasonably
satisfactory to the Company to act as Exchange Agent for the
Merger (the "Exchange Agent"). As soon as practicable after the
Effective Date, Parent shall deposit, or cause to be deposited,
with the Exchange Agent, for the benefit of the holders of
certificates representing shares of Company Common Stock (each,
a "Certificate"), and each holder of Company Common Stock to be
converted pursuant to Section 3.1 (each, a "Company Holder") will
be entitled to receive, upon surrender to the Exchange Agent of
one or more Certificates for cancellation, certificates
representing the number of shares of Parent Common Stock and
cash in lieu of fractional shares into which such Company
Holder's shares of Company Common Stock have been converted
in the Merger, and any dividends or other distributions with
respect to such shares of Parent Common Stock with a record date
after the Effective Date. Such shares of Parent Common Stock
issued in the Merger shall each be deemed to have been
issued at the Effective Date.
Section 3.4 Dividends; Transfer Taxes. No
dividends or other distributions that are declared or made
on Parent Common Stock with a record date after the
Effective Date shall be paid to persons entitled to
receive certificates representing Parent Common Stock pursuant
to this Merger Agreement until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such Parent
Common Stock shall be issued any dividends or other
distributions which shall have become payable with respect to
such Parent Common Stock with a record date after the Effective
Date, and, at the appropriate payment date, there shall be
paid to such person the amount of any dividends or other
distributions payable with respect to such shares of Parent
Common Stock with a record date after the Effective Date and a
payment date occurring after such surrender. In no event
shall the person entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends
or other distributions. In the event that any certificates
for any shares of Parent Common Stock are to be issued in
a name other than that in which the Certificates
surrendered in exchange therefor are registered, it shall be
a condition of such exchange that the person requesting such
exchange shall pay
- 9 -
to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such
Certificate to have been lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in
such amount as Parent may determine is reasonably necessary
as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the
shares of Parent Common Stock, any cash in lieu of fractional
shares and any dividends or other distributions deliverable in
respect thereof pursuant to this Article III. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a Company Holder for any shares of Parent
Common Stock or dividends thereon delivered to a public official
pursuant to any applicable escheat laws.
Section 3.5 No Fractional Shares. No certificates or
scrip representing less than one whole share of Parent Common
Stock shall be issued pursuant to this Merger Agreement. In
lieu of any such fractional share, each Company Holder who would
otherwise have been entitled to a fraction of a share of Parent
Common Stock shall be paid cash (without interest) in an amount
equal to such Company Holder's proportionate interest in the
net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such Company Holders, of the
aggregate fractional shares of Parent Common Stock issued
pursuant to this Section 3.5. As soon as practicable following
the Effective Date, the Exchange Agent shall determine the
excess of (i) the number of shares of Parent Common Stock
delivered to the Exchange Agent by Parent over (ii) the aggregate
number of whole shares of Parent Common Stock to be distributed
to the Company Holders (such excess being herein called the
"Excess Shares"), and the Exchange Agent, as agent for the
Company Holders, shall sell the Excess Shares at the then-
prevailing prices on the New York Stock Exchange (the "NYSE").
The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the
NYSE and shall be executed in round lots to the extent
practicable. The Exchange Agent shall use its best efforts to
complete the sale of the Excess Shares as promptly following
the Effective Date as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such
sales in light of prevailing market conditions. Parent shall
pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of
the Exchange Agent, incurred in connection with such sale of
the Excess Shares. Until the net proceeds of such sale have
been distributed to the Company Holders, the Exchange Agent shall
hold such proceeds in trust for the Company Holders. As soon
as practicable after the determination of the amount of cash to
be paid to the Company Holders in lieu of any fractional share
interests, the Exchange Agent shall make available in
accordance with this Merger Agreement such amounts to such
Company Holders. The fractional Parent Common Stock interests
of each Company Holder will be aggregated, and no Company
Holder will receive cash in an amount equal to or greater than
the value of one whole share of Parent Common Stock.
- 10 -
Section 3.6 Exchange Agent. Parent shall use all
reasonable best efforts to cause the Exchange Agent to take
all steps and perform all actions necessary to fulfill the
Exchange Agent's responsibilities as set forth in this Article
III.
Section 3.7 Shareholders' Meetings. (a) Subject to
Sections 7.9(b), 7.9(c) and 9.1(j), the Company shall take
all action necessary, in accordance with applicable law and
its Amended and Restated Articles of Incorporation and
Amended and Restated By-Laws, to convene a meeting of the
holders of Company Common Stock (the "Company Meeting") as
promptly as practicable for the purpose of considering and taking
action upon this Merger Agreement. Subject to Sections 7.9(b),
7.9(c) and 9.1(j), the Board of Directors of the Company will
recommend that holders of Company Common Stock vote in favor of
and approve the Merger and the adoption of this Merger Agreement
at the Company Meeting.
(b) Subject to Sections 7.9(b), 7.9(c) and 9.1(k), Parent shall
take all action necessary, in accordance with applicable law
and its Restated Certificate of Incorporation and By-Laws, to
convene a meeting of the holders of Parent Common Stock (the
"Parent Meeting") as promptly as practicable for the purpose
of considering and acting upon a proposal (the "Stock
Issuance Proposal") to approve the issuance of shares of Parent
Common Stock as provided by this Merger Agreement. Subject to
Sections 7.9(b), 7.9(c) and 9.1(k), the Board of Directors of
Parent will recommend that holders of Parent Common Stock vote
in favor of and approve the Stock Issuance Proposal at the Parent
Meeting.
Section 3.8 Closing of the Company's Transfer Books. At the
Effective Date, the stock transfer books of the Company shall
be closed and no transfer of any shares of Company Common
Stock shall be made thereafter. In the event that, after the
Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for
the securities of Parent and/or cash as provided in Sections
3.1(b) and 3.5.
Section 3.9 Assistance in Consummation of the Merger.
Each of Parent, Sub and the Company shall provide all
reasonable assistance to, and shall cooperate with, each
other to bring about the consummation of the Merger as soon
as possible in accordance with the terms and conditions of this
Merger Agreement.
Section 3.10 Closing. The closing of the transactions
contemplated by this Merger Agreement shall take place (i) at
the offices of Squire, Sanders & Dempsey L.L.P., 4900 Key
Tower, 127 Public Square, Cleveland, Ohio 44114-1304, at 9:00
A.M. local time on the second business day after the day on
which the last of the conditions set forth in Article VIII is
fulfilled or waived or (ii) at such other time and place as
Parent and the Company shall agree in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, except as
set forth in a disclosure schedule delivered by Parent
concurrently herewith (the "Parent Disclosure Schedule"), as
follows:
- 11 -
Section 4.1 Organization and Qualification. Parent
is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has the
corporate power to carry on its business as it is now being
conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where
the failure to be so qualified would not have a Material
Adverse Effect (as defined in Section 10.5(b) below) on Parent.
Complete and correct copies of the Restated Certificate of
Incorporation and By-Laws of Parent as in effect on the date
hereof are included in the Parent SEC Reports (as defined in
Section 4.5 below).
Section 4.2 Capitalization. The authorized capital
stock of Parent consists of 200,000,000 shares of Parent
Common Stock and 10,000,000 shares of Series Preferred
Stock, par value $1 per share ("Parent Preferred Stock").
As of November 18, 1998, 74,334,732 shares of Parent Common
Stock were validly issued and outstanding, fully paid and
nonassessable and 1,845,919 shares of Parent Common Stock were
held in treasury. As of November 18, 1998, no shares of Parent
Preferred Stock were issued and outstanding. As of November 18,
1998, except for employee stock options to acquire 4,098,764
shares of Parent Common Stock at a weighted average exercise
price of $33.68 per share and the Parent Rights, there were no
options, warrants, calls or other rights, agreements or
commitments outstanding obligating Parent to issue, deliver or
sell shares of its capital stock or debt securities, or
obligating Parent to grant, extend or enter into any such
option, warrant, call or other such right, agreement or
commitment. Except for the issuance of shares of Parent Common
Stock pursuant to employee stock options to acquire Parent
Common Stock and as provided in the Parent Stock Option
Agreement, during the period from November 18, 1998 through
the date hereof, no shares of Parent Common Stock or Parent
Preferred Stock have been issued and Parent has not entered
into any options, warrants, calls or other rights, agreements
or commitments obligating Parent to issue, deliver or sell
shares of its capital stock or debt securities, or obligating
Parent to grant, extend or enter into any such option,
warrant, call or other such right, agreement or commitment.
All of the shares of Parent Common Stock issuable in accordance
with this Merger Agreement in exchange for Company Common Stock
as of the Effective Date are duly authorized and will be,
when so issued, validly issued, fully paid and nonassessable.
Section 4.3 Subsidiaries. Each "significant
subsidiary" (as such term is defined in Rule 1-02 of
Regulation S-X of the Commission) ("Significant Subsidiary")
of Parent is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its
business as it is now being conducted or currently proposed
to be conducted. Each Significant Subsidiary of Parent is duly
qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where
failure to be so qualified would not have a Material Adverse
Effect on Parent. All the outstanding shares of capital
stock of each Significant Subsidiary of Parent are validly
issued, fully paid and nonassessable and those owned by Parent
or by a subsidiary of Parent are owned free and clear of any
liens, claims or encumbrances. There are no existing options,
warrants, calls or
- 12 -
other rights, agreements or commitments of any character
relating to the issued or unissued capital stock or other
securities of any of the Significant Subsidiaries of Parent.
Except as set forth in Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, Parent does not
directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or
entity which is material to Parent and its subsidiaries taken
as a whole.
Section 4.4 Authority Relative to this Merger
Agreement and the Cross Stock Option Agreements. Parent has
the corporate power to enter into this Merger Agreement and
the Cross Stock Option Agreements and to carry out its
obligations hereunder and thereunder. The execution and
delivery of this Merger Agreement and the Cross Stock Option
Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by Parent's Board
of Directors. This Merger Agreement and the Cross Stock Option
Agreements each constitute a valid and binding obligation of
Parent enforceable in accordance with its terms except as the
same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity
or at law) and by an implied covenant of good faith and fair
dealing. No other corporate proceedings on the part of Parent are
necessary to authorize this Merger Agreement or the Cross Stock
Option Agreements and the transactions contemplated hereby or
thereby, other than the approval of the Stock Issuance
Proposal by the holders of Parent Common Stock, which, under
applicable rules and regulations of the NYSE currently in
effect, will require the Stock Issuance Proposal to receive
the approval of a majority of the votes cast thereon (provided
that the total vote cast thereon represents greater than 50% in
interest of all Parent securities entitled to vote thereon).
Parent is not subject to or obligated under (i) any charter or
by-law provision or (ii) any provision of any indenture or
other loan document or other contract, license, franchise,
permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation
applicable to Parent or any of its subsidiaries or their
respective properties or assets, which would be breached or
violated, or under which there would be a default (with or
without notice or lapse of time, or both), or under which there
would arise a right of termination, cancellation or
acceleration of any obligation or the loss of a material
benefit, by its executing and carrying out this Merger Agreement
or the Cross Stock Option Agreements other than, in the case of
clause (ii) only, (x) the laws and regulations referred to in the
next sentence and (y) such breaches, violations, defaults,
rights of termination, cancellations, accelerations or losses
of a material benefit which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Except as
referred to herein or in connection, or in compliance, with
the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the
Competition Act (Canada), the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and other governmental
approvals required under the applicable laws of any
foreign jurisdiction and the applicable environmental,
corporation, securities or blue sky laws or regulations of
the various states ("Applicable State Laws") (collectively,
the "Parent Required Consents"), no filing by Parent or
registration by Parent with any Governmental Entity (as defined
in Section 4.9 below) is necessary for, nor is any
authorization, consent or approval of any Governmental Entity
required to be obtained by Parent for, the consummation of
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the Merger or the other transactions contemplated by this Merger
Agreement or by the Cross Stock Option Agreements except for
such filings, registrations, authorizations, consents or
approvals, the failure of which to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent; provided that Parent makes no representation or
warranty with respect to such of the foregoing as are required by
reason of the regulatory status of the Company or any of its
subsidiaries or facts specifically pertaining to them.
Section 4.5 Reports and Financial Statements. Since December
31, 1996, Parent has timely filed all registration statements,
prospectuses, forms, reports and documents that Parent was
required to file with the Commission (collectively, the "Parent
SEC Reports"). As of their respective dates, the Parent SEC
Reports complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the Commission thereunder
applicable to such Parent SEC Reports. As of their
respective dates, the Parent SEC Reports did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements
of Parent included in the Parent SEC Reports comply in all
material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with
respect thereto, and the financial statements included in the
Parent SEC Reports have been prepared in accordance with
United States generally accepted accounting principles
("GAAP") applied on a consistent basis (except as may be
indicated therein or in the notes thereto or, in the case of
unaudited financial statements, as permitted by Form 10-Q under
the Exchange Act) and fairly present the financial position of
Parent and its subsidiaries as at the dates thereof and the
results of their operations and changes in financial position
for the periods then ended, subject, in the case of
unaudited interim financial statements, to normal year-end
audit adjustments and any other adjustments described therein.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports filed prior to the date of
this Merger Agreement ("Previously Filed Parent SEC Reports"),
since September 30, 1998, there has not been (i) any event,
condition, transaction, commitment, dispute or other
circumstance (financial or otherwise) of any character (whether
or not in the ordinary course of business), which,
individually or in the aggregate, has had a Material Adverse
Effect on Parent; (ii) any damage, destruction or loss, whether
or not covered by insurance, which, individually or in the
aggregate, has had a Material Adverse Effect on Parent;
(iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of Parent (except
for regularly scheduled cash dividends out of current earnings
at a rate not greater than the rate in effect on September 30,
1998); or (iv) any entry into any legally binding commitment
or transaction material to Parent and its subsidiaries taken as
a whole (including any material borrowing or material sale of
assets) other than this Merger Agreement, the Cross Stock
Option Agreements and the transactions contemplated hereby and
thereby.
Section 4.7 Litigation. Except as disclosed in the
Previously Filed Parent SEC Reports, there is no suit, action
or proceeding pending or, to the knowledge of Parent,
threatened against or affecting Parent or any of its
subsidiaries which would, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
Parent, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding
against Parent or any of its subsidiaries which would,
individually or in the aggregate, have a Material Adverse Effect
on Parent.
- 14 -
Section 4.8 Takeover Provisions Inapplicable. As of the date
hereof and at all times thereafter, until and including the
Effective Date, Section 912 of the New York Business Corporation
Law (the "NYBCL") and the Parent Rights are, and shall be,
inapplicable to the Merger and the transactions contemplated by
this Merger Agreement.
Section 4.9 Compliance with Applicable Laws. (i)
Parent and its subsidiaries hold all material permits, licenses,
variances, exemptions, orders and approvals (the "Parent
Permits") of all applicable courts, administrative agencies or
commissions or other governmental authorities or
instrumentalities, domestic or foreign (each, a "Governmental
Entity"), necessary in all material respects for the operation
of the businesses of Parent and its subsidiaries; (ii) Parent
and its subsidiaries are in compliance with the terms of the
Parent Permits in all material respects; (iii) except as
disclosed in the Previously Filed Parent SEC Reports, the
businesses of Parent and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation
of any Governmental Entity except for such violations that would
not, individually or in the aggregate, have a Material
Adverse Effect on Parent; and (iv) no investigation or
review by any Governmental Entity with respect to Parent or any
of its subsidiaries is pending, or, to the knowledge of Parent,
threatened, nor has any Governmental Entity indicated an
intention to conduct the same except for such investigations or
reviews that would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on Parent.
No representation or warranty is made in this Section 4.9 with
respect to Taxes (as defined in Section 4.10 below), product
liability and airworthiness or Environmental Laws (as defined
in Section 4.12 below), which matters are the subject of
Sections 4.10, 4.11 and 4.12, respectively.
Section 4.10 Taxes. (a) Parent and its subsidiaries have (i)
filed or caused to be filed all Tax Returns (as defined
below) required to be filed by any jurisdiction to which any
of them is subject, (ii) paid in full on a timely basis all
Taxes due and claimed to be due by each such jurisdiction, and
(iii) duly collected or withheld and timely paid all Taxes
required to be collected from others or deducted and withheld
from any amounts paid to employees or others, except to the
extent any failure to file, pay or withhold would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent. Such Tax Returns are accurate and complete in all
material respects and accurately reflect the Tax liabilities
for such periods, except to the extent any inaccuracies in
any such Tax Returns would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. No Tax
deficiency or penalty has been asserted or threatened by any
such jurisdiction against Parent or any of its subsidiaries,
except to the extent any such deficiencies or penalties,
individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Parent.
(b) To the knowledge of Parent, there is no audit of any
material Tax Return of Parent or any of its subsidiaries in
progress, there is no threatened action, suit, proceeding,
investigation, audit, or claim for or relating to material
Taxes, there are no matters under discussion with any
Governmental Entities with respect to material Taxes that could
result in an additional amount of material Taxes being payable
by Parent or any of its subsidiaries, and no Governmental
Entity has indicated that it intends to audit any material Tax
Return of Parent or any of its subsidiaries.
- 15 -
(c) Neither Parent nor any of its subsidiaries (i) has waived
any statute of limitations with respect to Tax obligations or
agreed to any extension of time with respect to a Tax assessment
or deficiency, except to the extent any such Tax obligation,
assessment or deficiency would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (ii) is a
party to any Tax allocation or sharing agreement, (iii) has been
a member of an affiliated group (other than the affiliated group
of which Parent is the common parent) filing a consolidated
federal income tax return, nor is liable for material Taxes of
an affiliated group (other than the affiliated group of which
Parent is the common parent) under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of state,
local or foreign law), including as a transferee or
successor, by contract or otherwise, or (iv) is currently the
beneficiary of any extensions of time within which to file any
Tax Return.
(d) The earliest taxable period of Parent and its subsidiaries
for which the statute of limitations for federal, state, local
and foreign Tax Returns filed by Parent is still open is the
calendar year 1986.
(e) Neither Parent nor any of its subsidiaries has been
a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) Neither Parent nor any of its subsidiaries (i)
has agreed or consented at any time under Section 341(f) of the
Code to have the provisions of Section 341(f)(2) of the Code
apply to any disposition of any assets, (ii) has agreed, or is
required, to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise
that will affect the liability of the Company or its
subsidiaries for Taxes, (iii) has made an election, or is
required, to treat any asset as owned by another person pursuant
to the provisions of Section 168(f) of the Code, (iv) has
made any of the foregoing elections or is required to apply any
of the foregoing rules under any comparable state or local tax
provision, or (v) owns any material assets that were financed
directly or indirectly with, or that directly or indirectly
secure, debt the interest on which is tax-exempt under Section
103(a) of the Code.
(g) The transaction contemplated herein, either by
itself or in conjunction with any other transactions that
Parent may have entered into or agreed to, will not give rise to
any federal income tax liability under section 355(e) of the
Code for which Parent may in any way be held liable.
(h) Parent is not a party to any "Gain Recognition
Agreements" as such term is used in the Treasury Regulations
promulgated under Section 367 of the Code.
(i) Neither Parent nor any of its subsidiaries has made or
become obligated to make, nor will the Company, Parent, Sub, or
any of Parent's other subsidiaries, as a result of any event
connected with any transaction contemplated herein and/or any
termination of employment related to any such transaction,
make or become obligated to make (with respect to any employee
of Parent or any of its subsidiaries), any "excess parachute
payment", as defined in Section 280G of the Code, to any employee
of Parent or any of its subsidiaries.
- 16 -
(j) There are no material liens for Taxes (other than for current
Taxes that are not yet due and payable or are being contested in
good faith) upon the assets of Parent or any of its subsidiaries.
(k) Parent has no excess loss account, as such term is
used in Section 1.1502-19 of the Treasury Regulations, with
respect to the stock of any subsidiary.
(l) The unpaid Taxes of Parent and its subsidiaries did not,
as of the most recent fiscal month end prior to the date
hereof, exceed the reserve for Tax liability (not including any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face
of the most recent balance sheet (other than in any notes
thereto) that has been made available to the Company.
(m) For purposes of this Merger Agreement, the term "Tax"
shall include all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise and other taxes, duties and
assessments of any nature whatsoever together with all
interest, penalties and additions imposed with respect to such
amounts.
(n) For purposes of this Merger Agreement, the term "Tax
Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment, and including any amendment
thereof.
Section 4.11 Product Liability; Airworthiness. (a) Parent has
no knowledge of any claim, or the basis for any claim, against
Parent or any of its subsidiaries for injury to person or
property of employees or any third parties suffered as a result
of the sale of any product or performance of any service by
Parent or any of its subsidiaries, including claims arising
out of the defective or unsafe nature of its products or
services, which claim would, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
Parent.
(b) To the knowledge of Parent, all goods and services designed,
manufactured or sold by Parent or any of its subsidiaries
comply with all laws, requirements, specifications, rules and
regulations related to airworthiness of all applicable
Governmental Entities and none of such products or services
contain any defects in manufacturing, design or performance
or other defect which renders such products or services or
any component thereof defective, deficient, nonconforming
or unsuitable for their intended use except to the extent that
such failures to comply or defects would not, individually or in
the aggregate, have a Material Adverse Effect on Parent. There
is no publicly and formally announced rule or regulation by any
Governmental Entity of the United States or any state thereof
that could reasonably be expected to affect the various
airworthiness approvals, licenses, permits or certifications
applicable to the goods, services, assets, facilities or
operations of Parent and its subsidiaries except to the extent
that such rules or regulations would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
- 17 -
Section 4.12 Environment. (a) As used herein, the term
"Environmental Laws" means all applicable federal, state,
local or foreign laws and common law relating to pollution
or protection of health, safety, or the environment
(including pollution or protection of ambient air, surface
water, groundwater, land surface, subsurface strata, natural
resources, humans and other life and ecosystems), including
laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants,
or toxic or hazardous substances or wastes into the
environment, or otherwise relating to the manufacture, import,
processing, distribution, use, treatment, storage, disposal,
transport or handling of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (including the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (CERCLA), 42 U.S.C. ss.ss.
9601 et seq., the Resource Conservation and Recovery Act, as
amended (RCRA), 42 U.S.C. ss.ss. 6901 et seq., the Clean Air Act,
as amended, 42 U.S.C. ss.ss. 7401 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. ss.ss. 1251 et
seq., and the Toxic Substances Control Act, as amended (TSCA),
15 U.S.C. ss.ss. 2601 et seq.), as well as all
regulations, requirements, authorizations, codes, standards,
demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, decrees, permits, or plans
issued, entered, promulgated or approved thereunder.
(b) To the knowledge of Parent, except as disclosed in the
Previously Filed Parent SEC Reports, there are, with
respect to Parent or any of its subsidiaries, no past or
present violations of Environmental Laws, releases or threatened
releases of any material into the environment or
contractual obligations which may reasonably be expected to give
rise to any liability under any Environmental Laws and which
would, individually or in the aggregate, have a Material Adverse
Effect on Parent.
Section 4.13 Accounting; Tax Matters. Neither Parent nor, to its
knowledge, any of its affiliates, has, through the date
hereof, taken or agreed to take any action nor do they have
any knowledge of any fact or circumstance that is reasonably
likely to prevent (i) Parent from accounting for the
business combination to be effected by the Merger as a "pooling
of interests" or (ii) the Merger from qualifying for federal
income tax purposes as a "reorganization" within the meaning of
Section 368 (a) of the Code.
Section 4.14 Parent Action. The Board of Directors of Parent (at
a meeting duly called and held) has by the requisite vote of
directors determined to recommend the approval of the Stock
Issuance Proposal by the holders of Parent Common Stock and
directed that the Stock Issuance Proposal be submitted
for consideration by Parent's shareholders entitled to vote
thereon at the Parent Meeting.
Section 4.15 Lack of Ownership of Company Common Stock.
Neither Parent nor any of its subsidiaries owns any shares of
Company Common Stock or other securities convertible into
shares of Company Common Stock (exclusive of any shares owned
by any Parent Benefit Plan).
- 18 -
Section 4.16 Financial Advisor. Except for Morgan Stanley & Co.
Incorporated, financial advisor to Parent, no broker, finder or
investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the
transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of Parent, and the fees and
other amounts payable to Morgan Stanley & Co. Incorporated as
contemplated by this Section 4.16 will be as provided in that
certain letter agreement, dated October 22, 1998, from Morgan
Stanley & Co. Incorporated to Parent.
Section 4.17 Fairness Opinion. Parent has received the opinion of
Morgan Stanley & Co. Incorporated, financial advisor to Parent,
dated the date hereof, to the effect that, as of the date hereof,
the Exchange Ratio pursuant to the Merger Agreement is fair
from a financial point of view to Parent.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES RELATING TO SUB
Parent and Sub, jointly and severally, represent and warrant to
the Company as follows:
Section 4A.1 Organization. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Sub has not engaged in any business
(other than certain organizational matters) since it was
incorporated.
Section 4A.2 Capitalization. The authorized capital stock of
Sub consists of 1,000 shares of common stock, par value $1 per
share, 1,000 shares of which are validly issued and outstanding,
fully paid and nonassessable and are owned by Parent free and
clear of all liens, claims and encumbrances.
Section 4A.3 Authority Relative to this Merger Agreement. Sub
has the corporate power to enter into this Merger Agreement
and to carry out its obligations hereunder. The execution
and delivery of this Merger Agreement and the consummation
of the transactions contemplated hereby have been duly
authorized by Sub's Board of Directors and sole
shareholder, and no other corporate proceedings on the part of
Sub are necessary to authorize this Merger Agreement and the
transactions contemplated hereby. Sub is not subject to or
obligated under (i) any charter or by-law provision or (ii) any
provision of any indenture or other loan document or other
contract, license, franchise, permit, order, decree,
concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to Sub or its
properties or assets, which would be breached or violated, or
under which there would arise a right of termination,
cancellation or acceleration of any obligation or the loss
of a material benefit, by its executing and carrying out this
Merger Agreement other than, in the case of clause (ii) only,
(x) the Parent Required Consents and (y) such breaches,
violations, defaults, rights of termination,
cancellations, accelerations or losses of a material benefit
which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Except for the Parent
Required Consents, no filing or registration with, or
authorization, consent or approval of, any Governmental Entity
is necessary for, nor is any authorization, consent, or
approval of any Governmental Entity required to be obtained by
Sub for, the consummation by Sub of the Merger or the
transactions contemplated by this Merger Agreement, except for
such filings, registrations, authorizations, consents or
approvals, the failure of which to obtain or make
- 19 -
would not, individually or in the aggregate, have a Material
Adverse Effect on Parent; provided that neither Parent nor Sub
make any representation or warranty with respect to such of
the foregoing as are required by reason of the regulatory
status of the Company or any of its subsidiaries or
facts specifically pertaining to them. This Merger Agreement
constitutes a valid and binding obligation of Sub enforceable in
accordance with its terms except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to
or affecting the enforcement of creditors' rights generally,
by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, except as
set forth in a disclosure schedule delivered by the Company
concurrently herewith (the "Company Disclosure Schedule"), as
follows:
Section 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania
and has the corporate power to carry on its business as it
is now being conducted or currently proposed to be conducted. The
Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the
nature of its activities makes such qualification necessary,
except where failure to be so qualified would not have a
Material Adverse Effect on the Company. Complete and correct
copies of the Amended and Restated Articles of Incorporation
and Amended and Restated By-Laws of the Company as in effect
on the date hereof are included in the Company SEC Reports (as
defined in Section 5.5 below).
Section 5.2 Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock
and 2,500,000 shares of Preferred Stock, par value $.01 per share
("Company Preferred Stock"). As of November 20, 1998,
63,068,535 shares of Company Common Stock (excluding 25,000,000
shares of Company Common Stock held by a subsidiary of the
Company) were validly issued and outstanding, fully paid and
nonassessable, 7,526,960 shares of Company Common Stock were
held in treasury, no shares of Company Preferred Stock have
been issued, and there have been no material changes in such
numbers of shares through the date hereof. As of November 20,
1998, except for (x) Company Stock Options granted under the
Company Common Stock Plans to acquire 5,502,000 shares of Company
Common Stock, (y) pursuant to the conversion terms of the 5
1/4% Convertible Preferred Securities, liquidation amount $50
per security, Term Income Deferrable Equity Securities
(TIDES)SM of Coltec Capital Trust (the "Trust Preferred
Securities") and of the Company's 5 1/4% Convertible Junior
Subordinated Deferrable Interest Debentures due 2028, there
were no options, warrants, calls or other rights,
agreements or commitments outstanding obligating the Company
to issue, deliver or sell shares of its capital stock or debt
securities, or obligating the Company to grant, extend or enter
into any such option, warrant, call or other such right,
agreement or commitment. Except
- 20 -
for the issuance of shares of Company Common Stock pursuant to
Company Stock Options and as provided in the Company Stock
Option Agreement, during the period from November 20, 1998
through the date hereof, no shares of Company Common Stock or
Company Preferred Stock have been issued and the Company
has not entered into any options, warrants, calls or other
rights, agreements or commitments obligating the Company to
issue, deliver or sell shares of its capital stock or debt
securities, or obligating the Company to grant, extend or enter
into any such option, warrant, call or other such right,
agreement or commitment.
Section 5.3 Subsidiaries. Each Significant Subsidiary of
the Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its
business as it is now being conducted or currently proposed to
be conducted. Each Significant Subsidiary of the Company is
duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where
failure to be so qualified would not have a Material Adverse
Effect on the Company. All the outstanding shares of capital
stock of each Significant Subsidiary of the Company are
validly issued, fully paid and nonassessable and those owned by
the Company or by a subsidiary of the Company are owned free and
clear of any liens, claims or encumbrances. There are no
existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the issued or unissued
capital stock or other securities of any of the
Significant Subsidiaries of the Company. Except as set forth in
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company does not directly or indirectly
own any interest in any other corporation, partnership, joint
venture or other business association or entity which is material
to the Company and its subsidiaries taken as a whole.
Section 5.4 Authority Relative to this Merger Agreement and
the Cross Stock Option Agreements. The Company has the corporate
power to enter into this Merger Agreement and the Cross Stock
Option Agreements and, subject to the requisite approval of
this Merger Agreement by the holders of Company Common Stock,
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Merger Agreement and the
Cross Stock Option Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors. This Merger
Agreement and the Cross Stock Option Agreements each constitute a
valid and binding obligation of the Company enforceable in
accordance with its terms except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws relating to
or affecting the enforcement of creditors' rights generally,
by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing.
Except for the receipt of the affirmative vote of a majority
of the votes cast by all shareholders entitled to vote
thereon in the case of this Merger Agreement, no other
corporate proceedings on the part of the Company are necessary to
authorize this Merger Agreement or the Cross Stock Option
Agreements and the transactions contemplated hereby or thereby.
The Company is not subject to or obligated under (i) any charter
or by-law provision or (ii) any provision of any indenture or
other loan document or other contract, license, franchise,
permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule
- 21 -
or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets, which
would be breached or violated, or under which there would be a
default (with or without notice or lapse of time, or both), or
under which there would arise a right of termination,
cancellation or acceleration of any obligation or the loss
of a material benefit, by its executing and carrying out
this Merger Agreement or the Cross Stock Option Agreements,
other than, in the case of clause (ii) only, (x) the laws
and regulations referred to in the next sentence and (y) such
breaches, violations, defaults, rights of termination,
cancellations, accelerations or losses of a material benefit
which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Except as referred
to herein or in connection, or in compliance, with the
provisions of the HSR Act, the Competition Act (Canada),
the Securities Act, the Exchange Act, and other governmental
approvals required under the applicable laws of any
foreign jurisdiction and Applicable State Laws (collectively,
the "Company Required Consents"), no filing by the Company or
registration by the Company with any Governmental Entity is
necessary for, nor is any authorization, consent or approval
of any Governmental Entity required to be obtained by the
Company for, the consummation of the Merger or the other
transactions contemplated by this Merger Agreement or by the
Cross Stock Option Agreements except for such filings,
registrations, authorizations, consents or approvals, the
failure of which to obtain or make would not, individually or
in the aggregate, have a Material Adverse Effect on the
Company; provided that the Company makes no representation or
warranty with respect to such of the foregoing as are required by
reason of the regulatory status of Parent or any of its
subsidiaries or facts specifically pertaining to them.
Section 5.5 Reports and Financial Statements. Since December
31, 1996, the Company has timely filed all registration
statements, prospectuses, forms, reports and documents that
the Company was required to file with the Commission
(collectively, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports complied in all
material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such
Company SEC Reports. As of their respective dates, the Company
SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included
in the Company SEC Reports comply as to form in all material
respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect
thereto, and the financial statements included in the Company
SEC Reports have been prepared in accordance with GAAP applied on
a consistent basis (except as may be indicated therein or in
the notes thereto or, in the case of unaudited financial
statements, as permitted by Form 10-Q under the Exchange Act)
and fairly present the financial position of the Company and
its subsidiaries as at the dates thereof and the results of
their operations and changes in financial position for the
periods then ended, subject, in the case of unaudited interim
financial statements, to normal year-end audit adjustments and
any other adjustments described therein.
- 22 -
Section 5.6 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports filed prior to the
date of this Merger Agreement ("Previously Filed Company
SEC Reports"), since September 30, 1998, there has not been (i)
any event, condition, transaction, commitment, dispute or
other circumstance (financial or otherwise) of any character
(whether or not in the ordinary course of business), which,
individually or in the aggregate, has had a Material Adverse
Effect on the Company; (ii) any damage, destruction or loss,
whether or not covered by insurance, which, individually or in
the aggregate, has had a Material Adverse Effect on the Company;
(iii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to the capital stock of the Company; or (iv) any entry
into any legally binding commitment or transaction material to
the Company and its subsidiaries taken as a whole (including any
material borrowing or material sale of assets), other than this
Merger Agreement, the Cross Stock Option Agreements and the
transactions contemplated hereby and thereby.
Section 5.7 Litigation. Except as disclosed in the Previously
Filed Company SEC Reports, there is no suit, action or
proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
subsidiaries which would, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
the Company, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries
which would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 5.8 Employee Benefit Plans. Section 5.8 of the
Company Disclosure Schedule lists (i) each employee pension
benefit plan as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a
"Company Pension Plan"); (ii) each material employee welfare
benefit plan as defined in Section 3(1) of ERISA (a "Company
Welfare Plan"); (iii) each material employment agreement and each
material supplemental executive compensation plan (a "Company
Executive Benefit Arrangement"); and (iv) each multiemployer plan
as defined in Section 3(37) of ERISA which is maintained by
the Company or any subsidiary, or trade or business that is
part of the same controlled group, or under common control with,
or part of an affiliated service group that includes the Company
within the meaning of Sections 414(b), (c), (m), or (o) of the
Code (a "Company ERISA Affiliate") for directors, former
directors, employees or former employees, or to which the
Company or any Company ERISA Affiliate makes contributions with
respect to directors, former directors, employees, or former
employees. The Company has made available to Parent correct and
complete copies of the plan documents and material employment
agreements (or in the case of any unwritten Company Executive
Benefit Arrangement, a description thereof), summary plan
descriptions, participant informational material, the
most recent determination letter received from the Internal
Revenue Service, the two most recent Form 5500 annual
reports (including all schedules and attachments thereto),
the two most recent audited financial statements for any plan
for which audited financial statements are required, the two
most recent actuarial reports for any plan for which actuarial
reports have been prepared, and all related trust agreements,
insurance contracts and other funding agreements relating to
such Company Pension Plans, Company Welfare Plans and
Company Executive Benefit Arrangements (together, "Company
Benefit Plans").
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Section 5.9 Plan Compliance. Each Company Benefit Plan has been
administered in compliance with its terms and any applicable
provision of ERISA, the Code and any other applicable law
except for any instances of noncompliance that would not,
individually or in the aggregate, have a Material Adverse
Effect on the Company. Each Company Pension Plan which is
intended to meet the requirements of Section 401(a) of the Code
has been determined within the remedial amendment period under
Section 401(b) of the Code by the Internal Revenue Service to
be qualified under said Section 401(a) and each trust
maintained in conjunction with any such Company Pension Plan has
been determined by the Internal Revenue Service to be exempt
from taxation under Section 501(a) of the Code and the
Company has not amended any such Company Pension Plan or
related trust in a manner that would result in the
disqualification thereof. No Company Pension Plan which is
subject to the provisions of Section 412 of the Code has
incurred an accumulated funding deficiency. Neither the
Company nor any Company ERISA Affiliate has any unsatisfied
liability under Title IV of ERISA, or knows of any fact which
would give rise to liability under Title IV of ERISA, in an
amount that would, individually or in the aggregate, have a
Material Adverse Effect on the Company. No reportable event,
within the meaning of Section 4043(c) of ERISA for which the 30-
day notice requirement of ERISA has not been waived, has
occurred with respect to any Company Pension Plan. Except as
set forth in the Previously Filed Company SEC Reports, there are
no pending, filed, or threatened disputes, lawsuits, claims
(other than routine benefit claims), investigations, or audits
by any person or Governmental Entity with respect to any
Company Benefit Plan that would, individually or in the
aggregate, be reasonably expected to have a Material Adverse
Effect on the Company and no condition exists which could
reasonably be expected to subject the Company or any Company
ERISA Affiliate to any liability (other than for routine
benefit claims and other than pursuant to the current terms
of any Company Benefit Plan) with respect to any Company
Benefit Plan in an amount that would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.10 Takeover Provisions Inapplicable. As of the date
hereof and at all times thereafter, until and including the
Effective Date, Subchapters D (Section 2538), E, F, G, H, I and
J of Chapter 25 of the PBCL, are, and shall be,
inapplicable to the Merger and the transactions contemplated
by this Merger Agreement.
Section 5.11 Compliance with Applicable Laws. (i) The
Company and its subsidiaries hold all material permits,
licenses, variances, exemptions, orders and approvals (the
"Company Permits") of all Governmental Entities necessary in all
material respects for the operation of the businesses of the
Company and its subsidiaries; (ii) the Company and its
subsidiaries are in compliance with the terms of the Company
Permits in all material respects; (iii) except as disclosed in
the Previously Filed Company SEC Reports, the businesses of the
Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any
Governmental Entity except for such violations that would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company; and (iv) no investigation or review by any
Governmental Entity with respect to the Company or any of its
subsidiaries is pending, or, to the knowledge of the Company,
threatened, nor has any Governmental Entity indicated an
intention to conduct the same except for such investigations
or reviews that would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
the Company. No representation or warranty is made in this
Section 5.11 with respect to employee benefit plans, Taxes,
product liability and airworthiness or Environmental Laws,
which matters are the subject of Sections 5.8 and 5.9, 5.12,
5.15 and 5.16, respectively.
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Section 5.12 Taxes.
(a) The Company and its subsidiaries have (i) filed
or caused to be filed all Tax Returns required to be filed by
any jurisdiction to which any of them is subject, (ii) paid in
full on a timely basis all Taxes due and claimed to be due by
each such jurisdiction, and (iii) duly collected or withheld
and timely paid all Taxes required to be collected from
others or deducted and withheld from any amounts paid to
employees or others, except to the extent any failure to file,
pay or withhold would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Such Tax Returns
are accurate and complete in all material respects and accurately
reflect the Tax liabilities for such periods, except to the
extent any inaccuracies in any such Tax Returns would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. No Tax deficiency or penalty has been asserted or
threatened by any such jurisdiction against the Company or any of
its subsidiaries, except to the extent any such deficiencies
or penalties, individually or in the aggregate, have not had
and would not have a Material Adverse Effect on the Company.
(b) To the knowledge of the Company, there is no audit of any
material Tax Return of the Company or any of its
subsidiaries in progress, there is no threatened action,
suit, proceeding, investigation, audit, or claim for or
relating to material Taxes, there are no matters under
discussion with any Governmental Entities with respect to
material Taxes that could result in an additional amount of
material Taxes being payable by the Company or any of its
subsidiaries, and no Governmental Entity has indicated that it
intends to audit any material Tax Return of the Company or any of
its subsidiaries.
(c) Neither the Company nor any of its subsidiaries (i)
has waived any statute of limitations with respect to Tax
obligations or agreed to any extension of time with respect to
a Tax assessment or deficiency, except to the extent any such
Tax obligation, assessment or deficiency would not, individually
or in the aggregate, have a Material Adverse Effect on the
Company, (ii) is a party to any Tax allocation or sharing
agreement, (iii) has been a member of an affiliated group
(other than the affiliated group of which the Company is the
common parent) filing a consolidated federal income tax return,
nor is liable for material Taxes of an affiliated group (other
than the affiliated group of which the Company is the common
parent) under Section 1.1502-6 of the Treasury Regulations (or
any similar provision of state, local, or foreign law),
including as a transferee or successor, by contract, or
otherwise, or (iv) is currently the beneficiary of any
extensions of time within which to file any Tax Return.
(d) The earliest taxable period of the
Company and its subsidiaries for which the statute of
limitations for federal, state, local and foreign Tax Returns
filed by the Company is still open is the calendar year 1987.
(e) Neither the Company nor any of its subsidiaries
has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
- 25 -
(f) Neither the Company nor any of its subsidiaries
(i) has agreed or consented at any time under Section 341(f) of
the Code to have the provisions of Section 341(f)(2) of the Code
apply to any disposition of any assets, (ii) has agreed, or is
required, to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise
that will affect the liability of the Company or its
subsidiaries for Taxes, (iii) has made an election, or is
required, to treat any asset as owned by another person pursuant
to the provisions of Section 168(f) of the Code or as tax-exempt
bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code, (iv) has made any of the
foregoing elections or is required to apply any of the foregoing
rules under any comparable state or local tax provision, or (v)
owns any material assets that were financed directly or
indirectly with, or that directly or indirectly secure, debt
the interest on which is tax-exempt under Section 103(a) of the
Code.
(g) The transaction contemplated herein, either by
itself or in conjunction with any other transaction that the
Company may have entered into or agreed to, will not give rise to
any federal income tax liability under section 355(e) of the
Code for which the Company may in any way be held liable.
(h) The Company is not a party to any "Gain Recognition
Agreements" as such term is used in the Treasury Regulations
promulgated under Section 367 of the Code.
(i) Neither the Company nor any of its subsidiaries has
made or become obligated to make, nor will Parent, Sub,
the Company, or any of its subsidiaries, as a result of
any event connected with any transaction contemplated
herein and/or any termination of employment related to any
such transaction, make or become obligated to make (with
respect to any employee of the Company or any of its
subsidiaries), any "excess parachute payment", as defined in
Section 280G of the Code to any employee of the Company or any of
its subsidiaries.
(j) There are no material liens for Taxes (other than
for current Taxes that are not yet due and payable or are being
contested in good faith) upon the assets of the Company or any of
the subsidiaries.
(k) The Company has no excess loss account, as such
term is used in Section 1.1502-19 of the Treasury Regulations,
with respect to the stock of any subsidiary.
(l) The unpaid Taxes of the Company and its subsidiaries did not,
as of the most recent fiscal month end prior to the date
hereof, exceed the reserve for Tax Liability (not including any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face
of the most recent balance sheet (other than in any notes
thereto) that has been made available to Parent.
Section 5.13 Certain Contracts. Except as filed as an exhibit to
the Company SEC Reports, neither the Company nor any of its
subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (i) which, as of the date hereof, is a "material contract"
(as defined in Item 601(b)(10) of Regulation S-K of the
Commission) or has been filed with the Commission to be performed
after the date of this Merger Agreement or (ii) which materially
restricts the conduct of any line of business of the Company.
- 26 -
Section 5.14 Patents, Trademarks, Etc. The Company and its
subsidiaries have all patents, trademarks, trade names, service
marks, trade secrets, copyrights and licenses and other
proprietary intellectual property rights and licenses
("Company Intellectual Property") as are necessary in
connection with the businesses of the Company and its
subsidiaries, and the Company does not have any knowledge of
any conflict between the rights of the Company and its
subsidiaries and the rights of others therein, except to the
extent that the failure of the Company to have, or any
conflicts with respect to, the Company Intellectual Property
would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 5.15 Product Liability; Airworthiness. (a) The Company
has no knowledge of any claim, or the basis for any claim,
against the Company or any of its subsidiaries for injury to
person or property of employees or any third parties suffered as
a result of the sale of any product or performance of any service
by the Company or any of its subsidiaries, including claims
arising out of the defective or unsafe nature of its products
or services, which claim would, individually or in the
aggregate, be reasonably expected to have a Material Adverse
Effect on the Company.
(b) To the knowledge of the Company, all goods and
services designed, manufactured or sold by the Company or any of
its subsidiaries comply with all laws, requirements,
specifications, rules and regulations related to
airworthiness of all applicable Governmental Entities and none
of such products or services contain any defects in
manufacturing, design or performance or other defect which
renders such products or services or any component thereof
defective, deficient, nonconforming or unsuitable for their
intended use, except to the extent that such failure to comply or
defects would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. There is no publicly
and formally announced rule or regulation by any Governmental
Entity of the United States or any state thereof that could
reasonably be expected to affect the various airworthiness
approvals, licenses, permits or certifications applicable to
the goods, services, assets, facilities or operations of the
Company and its subsidiaries, except to the extent that
such rules or regulations would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.16 Environment. To the knowledge of the Company,
except as disclosed in the Previously Filed Company SEC
Reports, there are, with respect to the Company or any of
its subsidiaries, no past or present violations of
Environmental Laws, releases or threatened releases of any
material into the environment or contractual obligations which
may reasonably be expected to give rise to any liability under
any Environmental Laws and which would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.17 Accounting; Tax Matters. Neither the Company nor, to
its knowledge, any of its affiliates, has, through the date
hereof, taken or agreed to take any action nor do they have
knowledge of any fact or circumstance that is reasonably likely
to prevent (i) Parent from accounting for the business
combination to be effected by the Merger as a "pooling of
interests," or (ii) the Merger qualifying for federal
income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Code.
- 27 -
Section 5.18 Company Action. The Board of Directors of the
Company (at a meeting duly called and held) has by the requisite
vote of directors (a) determined that the Merger is in the best
interests of the Company and its shareholders, (b) approved
this Merger Agreement in accordance with the provisions of
Section 1922 of the PBCL, and (c) determined to recommend
the approval of this Merger Agreement and the Merger by the
holders of the Company Common Stock.
Section 5.19 Lack of Ownership of Parent Common Stock. Neither
the Company nor any of its subsidiaries owns any shares of
Parent Common Stock or other securities convertible into
shares of Parent Common Stock (exclusive of any shares owned
by any Company Benefit Plan).
Section 5.20 Insurance Coverage. The Company believes that as of
the date hereof it has adequate insurance coverage from
solvent, viable insurance carriers in accordance with current
industry practices except where the failure to have such
insurance coverage would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
Section 5.21 Year 2000. Except as disclosed in the Previously
Filed Company SEC Reports, the Company's products and
information systems are Year 2000 Compliant except to the extent
that their failure to be Year 2000 Compliant would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. For purposes of this Merger Agreement, Year
2000 Compliant shall mean that the Company's products and
information systems accurately process date/time data
(including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-
first centuries, and the years 1999 and 2000 and leap year
calculations.
Section 5.22 Financial Advisor. Except for Credit Suisse
First Boston Corporation, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions
contemplated by this Merger Agreement based upon arrangements
made by or on behalf of the Company, and the fees and
commissions payable to Credit Suisse First Boston Corporation as
contemplated by this Section 5.22 will be the amount set forth in
that certain letter, dated November 11, 1998, from Credit
Suisse First Boston Corporation to the Company.
Section 5.23 Fairness Opinion. The Company has received the
opinion of Credit Suisse First Boston Corporation, financial
advisor to the Company, dated the date hereof, to the effect
that the Exchange Ratio is fair from a financial point of view
to the holders of shares of Company Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the
Merger. (a) Prior to the Effective Date, unless Parent shall
otherwise consent in writing (such consent not to be
unreasonably withheld, delayed or conditioned) and except as
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specifically provided herein (including Section 6.1(b)) or as
set forth in the Company Disclosure Schedule, from and after the
date hereof, the Company shall, and shall cause its subsidiaries
to, carry on their respective businesses in the usual, regular
and ordinary course in the same manner as heretofore conducted,
and shall, and shall cause its subsidiaries to, use their
reasonable best efforts to preserve intact their present
business organizations, keep available the services of their
present officers and employees and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Date.
The Company shall, and shall cause its subsidiaries to, in the
ordinary course of business (A) maintain insurance coverages
and its books, accounts and records in the usual manner
consistent with prior practices; (B) comply with all material
laws, ordinances and regulations of Governmental Entities
applicable to the Company and its subsidiaries; (C) maintain and
keep its properties and equipment in good repair, working
order and condition, ordinary wear and tear excepted; and (D)
perform in all material respects its obligations under all
contracts and commitments to which it is a party or by which it
is bound.
(b) Without limiting the generality of Section
6.1(a), prior to the Effective Date, unless Parent shall
otherwise consent in writing (such consent not to be
unreasonably withheld, delayed or conditioned) and except as set
forth in the Company Disclosure Schedule, from and after the date
hereof:
(i) the Company shall not and shall not propose to (A)
except as required pursuant to any indenture, loan documents
or contract in effect as of the date hereof, sell or pledge or
agree to sell or pledge any capital stock owned by it in any of
its Significant Subsidiaries (unless already pledged as of the
date hereof), (B) amend its Amended and Restated Articles of
Incorporation or Amended and Restated By-Laws, (C) split,
combine or reclassify its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of
capital stock of the Company, or declare, set aside or pay any
dividend or other distribution payable in cash, stock or
property, or (D) except as required pursuant to any Company
Benefit Plan, directly or indirectly redeem, purchase or
otherwise acquire or agree to redeem, purchase or otherwise
acquire any shares of Company capital stock;
(ii) the Company shall not, nor shall it permit any of its
subsidiaries to, (A) other than pursuant to the exercise of
Company Stock Options outstanding on the date hereof or
otherwise in accordance with the present terms of any Company
Benefit Plan and except as permitted by Section 6.1(b)(iii)
or by the Cross Stock Option Agreements, issue, deliver or sell
or agree to issue, deliver or sell any additional shares of,
or rights of any kind to acquire any shares of, its capital stock
of any class, or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock (other than,
in each case, to the Company or direct or indirect wholly-owned
subsidiaries of the Company); (B) acquire, lease or dispose or
agree to acquire, lease or dispose of any capital assets or
any other assets other than in the ordinary course of
business, (C) incur additional indebtedness or encumber or
grant a security interest in any asset or enter into any
other material transaction other
- 29 -
than in each case in the ordinary course of business; (D)
acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof;
or (E) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing which is
binding;
(iii) the Company shall not, nor shall it permit any of its
subsidiaries to, except as required to comply with
applicable law, and except for (w) compensation payments
and changes or benefit adjustments made in the ordinary course
of business (which shall include (1) normal periodic
performance reviews and related compensation and benefit
increases and (2) the provision of individual Company Benefit
Plans consistent with past practice for promoted or newly hired
officers and employees) and which do not involve the grant of any
actual or phantom equity interests in the Company, (x)
awards under the Company's 1994 Long-Term Incentive Plan and
CAP Plus Plan, in each case in the ordinary course of business,
(y) grants of options with respect to Company Common Stock
in the ordinary course of business to newly-hired or promoted
officers and employees and (z) (following notice to Parent)
grants of options with respect to no more than 200,000 shares
of Company Common Stock in the aggregate in the ordinary
course of business, (A)(1) adopt, enter into, terminate or
(2) in any way that would materially increase the cost thereof
to the Company or expand the applicability of, or amend,
any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred
compensation, employment or other Company Benefit Plan,
agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe
benefit of any director, officer or employee, (C) pay any benefit
not provided under any existing plan or arrangement, (D)
grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Company Benefit
Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance
units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or
awards made thereunder), (E) take any action to fund or in any
other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or
Company Benefit Plan other than in the ordinary course of
business consistent with past practice or as required under
the present terms of any Company Benefit Plan, or (F) adopt,
enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing which
is binding;
(iv) except as required by or in connection with the Trust
Preferred Securities, the Company shall not, nor shall it permit
any of its subsidiaries to, make any investments in non-
investment grade debt securities (other than non-investment
grade debt securities issued by the Company or any of its
subsidiaries);
(v) the Company shall not, nor shall it permit any of its
subsidiaries to, take or cause to be taken any action, whether
before or after the Effective Date, which would disqualify
the Merger as a "pooling of interests" for accounting purposes
or as a "reorganization" within the meaning of Section 368 (a)
of the Code; and
- 30 -
(vi) neither the Company, nor any subsidiary of the Company,
shall make or amend any material Tax election, agree to waive or
extend any statute of limitations, or resolve or agree to resolve
any audit or proceeding relating to any material Tax liability
other than in the ordinary course of business consistent with
past practice; provided, however, that the Company and its
subsidiaries shall be permitted to make any Tax election and
take any action in connection with the settling of its and
their federal tax liabilities for the 1992, 1993, 1994, 1995 and
1996 tax years so long as such elections or actions do not
result in aggregate additional Tax liabilities to the Company
and its subsidiaries in excess of the reserve established
therefor on the most recent audited consolidated financial
statements of the Company, and provided that any settling of such
audit and liabilities shall require the consent of Parent, which
consent shall not unreasonably be withheld. The Company and
its subsidiaries shall, prior to the Closing Date, terminate
all tax allocation agreements and tax sharing agreements (if
any) with respect to the Company and its subsidiaries (other
than the Tax Sharing Agreement dated September 13, 1996, by and
between the Company, Garrison Litigation Management Group, Ltd.,
and The Anchor Packing Company) and shall ensure that such
agreements are of no further force or effect as to the Company
and its subsidiaries on and after the Closing Date and there
shall be no further liability of the Company or its subsidiaries
under any such agreements.
Section 6.2. Conduct of Business by Parent and Sub
Pending the Merger. (a) Parent. Prior to the Effective Date,
unless the Company shall otherwise consent in writing (such
consent not to be unreasonably withheld, delayed or
conditioned) and except as specifically provided herein
including as set forth in the Parent Disclosure Schedule, from
and after the date hereof Parent shall, and shall cause its
subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in the same manner as
heretofore conducted, and shall, and shall cause its
subsidiaries to, use their reasonable best efforts to preserve
intact their present business organizations, keep available the
services of their present officers and employees and
preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the
Effective Date. Subject to Section 6.2(b), the foregoing
shall not prevent Parent from acquiring or agreeing
to acquire by merging or consolidating with, or by purchasing
a substantial equity interest in, or by any other manner, any
assets, business or any corporation, partnership, association or
other business organization or division thereof, for such
aggregate consideration in cash, Parent Common Stock or a
combination thereof, as Parent may deem appropriate from time
to time.
(b) Prior to the Effective Date, neither Parent nor
its subsidiaries shall, unless the Company shall otherwise
consent in writing (such consent not to be unreasonably withheld,
delayed or conditioned), acquire, merge or agree to acquire or be
acquired, by merging or consolidating with, or by purchasing
a substantial equity interest in or by selling 50% or more of
the outstanding Parent Common Stock (or securities convertible
into Parent Common Stock) to, or by any other manner, any
business or any corporation, partnership, association, or other
business organization or division thereof, in each case
participating
- 31 -
in a line of business or related business of the Company
or any of its subsidiaries, which transaction, either alone
or in conjunction with the transactions contemplated by this
Merger Agreement, is reasonably likely to raise antitrust,
competition law or trade regulatory issues that are reasonably
likely to materially delay, impede or prohibit the consummation
of the Merger.
(c) Without limiting the generality of Section
6.2(a), prior to the Effective Date, unless the Company shall
otherwise consent in writing (such consent not to be
unreasonably withheld, delayed or conditioned) and except as
set forth in the Parent Disclosure Schedule, from after the
date hereof: (i) Parent shall not, nor shall it permit any of
its subsidiaries to, take or cause to be taken any action,
whether before or after the Effective Date, which would
disqualify or would be reasonably likely to disqualify the
Merger as a "pooling of interests" for accounting purposes
or as a "reorganization" within the meaning of Section 368(a)
of the Code and (ii) Parent shall not enter into any contract,
agreement, commitment or arrangement with respect to any of
the foregoing which is binding.
(d) Sub. During the period from the date of this Merger
Agreement to the Effective Date, Sub shall not engage in any
activities of any nature except as provided in or contemplated by
this Merger Agreement.
Section 6.3 Notice of Breach. Each party shall promptly give
written notice to the other party upon becoming aware of the
occurrence or, to its knowledge, impending or threatened
occurrence, of any event which would cause or constitute a breach
of any of its covenants contained in this Merger Agreement, or
would cause any of its representations or warranties
contained in this Merger Agreement to be inaccurate, and
shall use its best efforts to prevent or promptly remedy the
same. No such notification shall be deemed an amendment of the
Company Disclosure Schedule or the Parent Disclosure Schedule.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and
Parent and their respective subsidiaries shall afford to
the other and to the other's accountants, counsel and
other representatives full access during normal business
hours (and at such other times as the parties may mutually
agree) throughout the period prior to the Effective Date to
all of its properties, books, contracts, commitments, records
and personnel and, during such period, each shall furnish
promptly to the other (i) a copy of each report, schedule and
other document filed or received by it pursuant to the
requirements of federal or state securities laws, and (ii)
subject to applicable law, all other information concerning
its business, properties and personnel as the other may
reasonably request. Each of the Company and Parent shall hold,
and shall cause their respective employees and agents to
hold, in confidence all such information in accordance with
the terms of the Confidentiality Agreement dated as of October
21, 1998 between Parent and the Company (the
"Confidentiality Agreement").
Section 7.2 Registration Statement/Proxy Statement. (a)
As promptly as practicable after the execution of this Merger
Agreement, the Company and Parent shall prepare and file with the
Commission a joint proxy statement (the "Proxy
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Statement") in preliminary form for use at the Company Meeting
and the Parent Meeting. As promptly as practicable after
comments are received from the Commission with respect to the
preliminary form of the Proxy Statement and after the furnishing
by the Company and Parent of all information required to be
contained therein, the Company and Parent shall file with the
Commission the Proxy Statement in definitive form for use at
their respective shareholder meetings and Parent shall file
with the Commission a registration statement on Form S-4 under
the Securities Act for the purpose of registering the shares of
Parent Common Stock to be issued in the Merger (the
"Registration Statement"). Parent and the Company shall use
all reasonable best efforts to cause the Registration
Statement to become effective as soon thereafter as
practicable. None of the information furnished by the Company
or its subsidiaries (in the case of the Company) or by Parent
or its subsidiaries (in the case of Parent) for inclusion or
incorporation by reference in (i) the Registration Statement or
(ii) the Proxy Statement will, in the case of the Proxy
Statement or any amendments or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments
or supplements thereto, and at the time of the Company Meeting
and Parent Meeting to be held in connection with the Merger, or,
in the case of the Registration Statement, at the time it
becomes effective and at the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. No representation, covenant or
agreement is made by any party hereto with respect to
information supplied by any other party for inclusion in the
Proxy Statement or the Registration Statement. No filing of, or
amendment or supplement to, the Proxy Statement or Registration
Statement shall be made by Parent or the Company without
providing the other with the opportunity to review and
comment thereon. If at any time prior to the Effective Date any
information relating to Parent or the Company, or any of
their respective affiliates, directors or officers, should be
discovered by Parent or the Company which should be set forth in
an amendment or supplement to the Proxy Statement or Registration
Statement so that the Proxy Statement or Registration Statement
would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such
information shall be promptly filed with the Commission
and, to the extent required by law, disseminated to the
shareholders of Parent and the Company.
(b) The Company and Parent shall make all necessary
filings with respect to the Merger under the Securities Act
and the Exchange Act and the rules and regulations
thereunder, and under applicable blue sky or similar
securities laws and shall each use its reasonable best
efforts to obtain required approvals and clearances with
respect thereto.
Section 7.3 Affiliates, Publication of Combined Financial
Results. (a) Not less than 45 days prior to the Effective Date,
each of Parent and the Company shall deliver to the other a list
of names or addresses of each person who, in its reasonable
judgment, is an affiliate of Parent or the Company,
respectively, within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act or otherwise
applicable Commission accounting releases with respect to
"pooling of interests" accounting treatment (each such
person, a "Pooling Affiliate") of Parent or the Company,
respectively. Each such party shall provide the other with such
information and documents as the other shall reasonably request
for purposes of reviewing such list.
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(b) Each of the Company and Parent shall use its reasonable
best efforts to cause each of its respective Pooling
Affiliates, as soon as practicable after the date of this Merger
Agreement, and no less than 30 days prior to the date of the
Company Meeting and the Parent Meeting, respectively, to
deliver to the other party an affiliate letter in customary
form. Parent shall be entitled to place legends as specified
in such affiliate letters on the certificates evidencing any
of the Parent Common Stock to be received by such Pooling
Affiliates pursuant to the terms of this Merger Agreement,
and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the
terms of such letters.
(c) Parent shall publish combined sales and net income figures
reflecting at least 30 days of post-Merger combined operations
as contemplated by and in accordance with the terms of
Commission Accounting Series Release No. 135, no later than 20
days after the end of the first fiscal quarter of Parent
ending after the Effective Date in which there are at least 30
days of such post-Merger combined operations.
Section 7.4 Stock Exchange Listing. Parent shall use its
reasonable best efforts to list on the NYSE, upon official
notice of issuance, the shares of Parent Common Stock to be
issued pursuant to the Merger.
Section 7.5 Employment Arrangements. (a) After the
Effective Date, Parent shall, or shall cause the Surviving
Corporation to, honor in accordance with their terms, all
Company Benefit Plans, including all employment, severance,
consulting and other compensation contracts between the Company
or any of its subsidiaries and any current or former director,
officer or employee thereof, and all provisions for vested or
unvested benefits or other vested or unvested amounts earned or
accrued through the Effective Date and all provisions under any
Company Benefit Plan (as amended in compliance herewith or as
modified by Section 7.5 of the Company Disclosure Schedule)
except for changes thereto which are (i) set forth on Section 7.5
of the Company Disclosure Schedule, (ii) required under the
present terms of any Company Benefit Plan, or (iii) otherwise
agreed to by the parties hereto and, if applicable, the affected
individual.
(b) From and after the Effective Date and for a period of one
year thereafter, employees of the Company and its subsidiaries
shall receive compensation and benefits from the Surviving
Corporation (or any successor thereto) that, in the aggregate,
are no less favorable than either (i) the compensation and
benefits provided to similarly situated employees of Parent or
its subsidiaries or (ii) the compensation and benefits
provided to such employees as of the Effective Date by the
Company and its subsidiaries.
(c) The Company and, if applicable, Parent agree (i) to take
all actions set forth on Section 7.5 of the Company Disclosure
Schedule and (ii) that any such action shall not be deemed to
violate any other provision of this Merger Agreement.
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Section 7.6 Indemnification. (a) From and after the Effective
Date, Parent shall indemnify, defend and hold harmless the
officers, directors and employees of the Company and its
subsidiaries (the "Indemnified Parties") against all losses,
expenses, claims, damages or liabilities arising prior to the
Effective Date to the fullest extent permitted or required
under (A) applicable law, (B) any indemnification agreements
between the Company and any such person or (C) the Company's
Amended and Restated Articles of Incorporation and Amended
and Restated By-Laws.
(b) Parent shall use its best efforts to cause the Indemnified
Parties to be covered for a period of six (6) years from the
Effective Date (or the period of the applicable statute of
limitations, if longer) by the directors' and officers'
liability insurance policy maintained by the Company (provided
that Parent may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions
which are not less advantageous to the Indemnified Parties
than such policy) with respect to acts or omissions
occurring prior to the Effective Date which were committed by
such Indemnified Parties in their capacity as such; provided,
however, that in no event shall Parent be required to expend
on an annual basis more than $730,000 (the "Insurance
Amount") to maintain or procure insurance coverage pursuant
hereto and provided further that if Parent is unable to
maintain or obtain the insurance called for by this Section
7.6(b), Parent shall use its reasonable best efforts to
obtain as much comparable insurance as available for the
Insurance Amount.
(c) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions
contemplated by this Merger Agreement is commenced, whether
before or after the Effective Date, the parties hereto agree to
cooperate and use their respective reasonable best efforts to
vigorously defend against and respond thereto.
Section 7.7 Consents. (a) Each of the parties shall use its
reasonable best efforts to obtain as promptly as practicable
all consents of any Governmental Entity or any other person
required in connection with, and waivers of any violations or
rights of termination that may be caused by, the consummation
of the transactions contemplated by this Merger Agreement.
(b) In furtherance and not in limitation of the
foregoing, each of the parties shall use its reasonable best
efforts to resolve as promptly as practicable such
objections, if any, as may be asserted with respect to the
transactions contemplated by this Merger Agreement under
any antitrust, competition or trade regulatory laws, rules or
regulations of any Governmental Entity; provided however, that
nothing in this Merger Agreement shall require Parent to agree to
hold separate or to divest any of the business, product lines or
assets of Parent or the Company or any of their respective
subsidiaries or take any other action, if such holding
separate, divestiture or other action would have a Material
Adverse Effect on Parent or the Company.
(c) Each of the parties shall promptly inform the
others of any material communication from any Governmental
Entity regarding any of the transactions contemplated by
this Merger Agreement. If any party or any affiliate
thereof receives a request for additional information or
documentary material from any such Governmental Entity with
respect to the transactions contemplated by this Merger
Agreement, then such party shall make, or cause to
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be made, as soon as reasonably practicable and after consultation
with the other party, an appropriate response in compliance with
such request. Parent and the Company shall consult and cooperate
with one another with respect to (and prior to) any
understandings, undertakings or agreements (oral or written)
which are proposed to be made or entered into with any
Governmental Entity in connection with the transactions
contemplated by this Merger Agreement and the Cross Stock Option
Agreements.
Section 7.8 Additional Agreements. (a) Subject to
the terms and conditions herein provided (including Section
7.7), each of the parties hereto agrees to use its reasonable
best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this
Merger Agreement as promptly as practicable, including using
its reasonable best efforts to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations
and filings (including, but not limited to, filings with all
applicable Governmental Entities) and defending any lawsuits
or other legal proceedings, whether judicial or
administrative, challenging this Merger Agreement or the
Merger, including seeking to lift any injunction, temporary
restraining order or, subject to any required vote of the
shareholders of the Company, other legal bar to the Merger (and,
in such case, to proceed with the Merger as expeditiously as
possible) and the transactions contemplated hereby.
Notwithstanding the foregoing, but subject to Section 7.7,
there shall be no action required to be taken and no action will
be taken in order to consummate and make effective the
transactions contemplated by this Merger Agreement if such
action would, individually or in the aggregate, have a
Material Adverse Effect on Parent or the Company.
(b) In case at any time after the Effective Date any
further action is necessary or desirable to carry out the
purposes of this Merger Agreement, the proper officers and/or
directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
Section 7.9 No Solicitation. (a) Neither the Company nor Parent
shall, directly or indirectly, take (nor shall the Company or
Parent instruct its subsidiaries, directors, officers, employees,
representatives, investment bankers, attorneys, accountants or
other agents or affiliates, (collectively, "Representatives")) to
take any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal (as defined below) with
respect to such party, (ii) enter into any agreement with
respect to any Acquisition Proposal with respect to such party or
(iii) participate in any way in discussions or negotiations
with, or furnish any information to, any person in connection
with, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal with
respect to such party. Each of the Company and Parent will
promptly communicate to the other that such a solicitation has
been received by it, or that any such information has been
requested from it or that such negotiations or discussions have
been sought to be initiated with it or that it has received a
written communication with respect to an Acquisition Proposal
with respect to it. For purposes of this Merger Agreement,
the term "Acquisition Proposal" means, with respect to each of
the Company and Parent, any proposed (A) merger, consolidation
or similar transaction involving the Company (in the case of
the Company) or merger, consolidation or similar transaction
involving Parent upon consummation of which the holders of
Parent Common Stock will not own at least
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50% of the common stock of Parent or, if Parent is not the
surviving entity, the combined entity (in the case of Parent),
(B) sale, lease or other disposition directly or indirectly by
merger, consolidation, share exchange or otherwise of assets of
the Company (in the case of the Company) or Parent (in the
case of Parent) or its subsidiaries representing 15% or more of
the consolidated assets of the Company and its subsidiaries (in
the case of the Company) or 50% or more of the consolidated
assets of Parent and its subsidiaries (in the case of
Parent), (C) issue, sale, or other disposition of (including by
way of merger, consolidation, share exchange or any similar
transaction), or acquisition of, securities (or options,
rights or warrants to purchase, or securities convertible
into, such securities) representing 15% or more of the voting
power of the Company (in the case of the Company) or 50% or more
of the voting power of Parent (in the case of Parent).
(b) Notwithstanding anything in this Merger Agreement
to the contrary (including clause (a) of this Section 7.9), to
the extent the Company or Parent or its respective
Representatives receive a communication with respect to an
Acquisition Proposal with respect to it, which its Board
of Directors determines, after consultation with its financial
advisors, may be reasonably likely to result in a Superior
Proposal (as defined below) or, in the case of Parent, a
transaction that would not otherwise conflict with this
Merger Agreement, including Section 6.2(b), such party and its
Representatives may engage in any negotiations concerning, or
provide any confidential information or data to, or have any
discussions with, any person relating to such Acquisition
Proposal, or otherwise facilitate any effort or attempt to make
or implement such Acquisition Proposal; provided, however,
that upon engaging in such negotiations or discussions,
providing such information or otherwise facilitating any
effort or attempt to make or implement such Acquisition
Proposal, the Company or Parent (as the case may be) shall give
notice to the other of its engagement in such activities.
For purposes of this Merger Agreement, the term "Superior
Proposal" means, with respect to each of Parent and the Company,
any Acquisition Proposal with respect to it (and for purposes of
this definition of the term "Superior Proposal", the term
"Acquisition Proposal" with respect to the Company shall
have the meaning set forth in Section 7.9(a) except that the
references to "15%" in such Section 7.9(a) shall be deemed
references to "50%") that is more favorable to its shareholders
than the Merger (taking into account the nature of the
Acquisition Proposal, the nature and amount of the
consideration, the likelihood of completion and any other
factors deemed appropriate by the Board of Directors). Prior to
furnishing nonpublic information to, or entering into discussions
or negotiations with, any other persons or entities, the
Company or Parent (as the case may be) shall enter into a
customary confidentiality agreement with such person or entity,
it being understood that such confidentiality agreement (x)
shall not include any provision calling for an exclusive right
to negotiate with such party, (y) need not contain "standstill"
or similar provisions and such party shall advise the other of
the nature of such nonpublic information delivered to such
person reasonably promptly following its delivery to the
requesting party.
(c) Nothing contained herein, including this
Section 7.9, shall prohibit Parent or the Company from taking
and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to its shareholders if in the good faith judgment
of its Board of Directors, after consultation with outside
counsel, failure so to disclose would be inconsistent with
its obligations under applicable law; provided, however,
that neither Parent nor the Company, as the case may be, nor
- 37 -
its Board of Directors nor any committee thereof shall withdraw
or modify, or propose publicly to withdraw or modify, its
position with respect to this Merger Agreement, or approve or
recommend, or propose publicly to approve or recommend, an
Acquisition Proposal with respect to it. This Section
7.9(c) does not prohibit the termination of this Merger
Agreement as specified in Section 9.1(j) in the case of the
Company or Section 9.1(k) in the case of Parent.
Section 7.10 Accountants' Letters. (a) The Company shall use its
reasonable best efforts to cause to be delivered to Parent a
letter from Arthur Andersen LLP, dated within two business
days before the date on which the Registration Statement
shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in
scope and substance for comfort letters delivered by
independent public accountants in connection with registration
statements similar to the Registration Statement.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a letter from Ernst & Young LLP, dated
within two business days before the date on which the
Registration Statement shall become effective and addressed
to the Company, in form and substance reasonably satisfactory
to the Company and customary in scope and substance for comfort
letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement.
Section 7.11 Pooling of Interests. Each of Parent and the
Company shall use its reasonable best efforts to cause the Merger
to be accounted for as a "pooling of interests", and such
accounting treatment to be accepted by each of the
Company's and Parent's independent certified public
accountants, and by the Commission, respectively, and each of
Parent and the Company agrees that it shall voluntarily take
no action that would cause such accounting treatment not to be
obtained.
Section 7.12 Trust Preferred Securities. Parent shall take all
actions required in connection with the transactions
contemplated by this Merger Agreement to provide for the
compliance by the Company with Section 13.04 of the Indenture,
dated as of April 14, 1998, between the Company and The Bank
of New York, as Trustee, governing the Trust Preferred
Securities.
Section 7.13 Parent Board of Directors. The Board of
Directors of Parent shall take such action as may be necessary
(including increasing the size of the Board of Directors of
Parent) to appoint to the Board of Directors of Parent as of
the Effective Date John W. Guffey, Jr. and two other directors
of the Company selected by the Board of Directors of Parent.
Section 7.14 Post-Merger Operations. Following the Effective
Date, Parent and the Surviving Corporation's principal
executive offices shall be located in Charlotte, North Carolina.
Section 7.15 Tax Representation Letters. For
purposes of the tax opinions described in Sections 8.2(b) and
8.3(b) of this Merger Agreement, each of Parent and the Company
shall provide representation letters, substantially in the form
of Exhibits E and F, each dated on or about the date that
is two business days prior to the date the Proxy
Statement is mailed to the shareholders of the Company and
reissued as of the Effective Date.
- 38 -
Section 7.16 Transfer Taxes. All state,
local, foreign or provincial sales, use, real property transfer,
stock transfer or similar taxes, including any interest or
penalties with respect thereto, attributable to the Merger
shall be paid by the Company.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect
the Merger shall be subject to the fulfillment or waiver by each
party at or prior to the Effective Date of the following
conditions:
(a) This Merger Agreement shall have been adopted by the
requisite vote of the holders of the Company Common Stock.
(b) The Stock Issuance Proposal shall have been approved by the
requisite vote of the holders of Parent Common Stock.
(c) The Parent Common Stock issuable in the Merger shall have
been authorized for listing on the NYSE upon official notice of
issuance.
(d) The waiting periods applicable to the consummation of the
Merger under the HSR Act and the Competition Act (Canada) shall
have expired or been terminated and all other Company Required
Consents and Parent Required Consents in each case required to
be obtained prior to consummation of the Merger shall have been
obtained, except where the failure to obtain such other
Company Required Consents or Parent Required Consents would not
have a Material Adverse Effect on the Company or Parent, as the
case may be.
(e) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and
no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the
Commission and remain in effect.
(f) No preliminary or permanent injunction or other order by any
court or other Governmental Entity of competent jurisdiction
(collectively, "Restraints") (i) prohibiting or preventing
the consummation of the Merger or (ii) requiring Parent or the
Company to hold separate or to divest any of the business,
product lines or assets of Parent or the Company or any of their
respective subsidiaries or take any other action, if such holding
separate, divestiture or other action would have a Material
Adverse Effect on Parent or the Company, shall have been issued
and remain in effect; provided, however, that each of the
parties shall have used its best efforts to prevent the entry of
any such Restraints and to appeal as promptly as possible any
such Restraints that may be entered
- 39 -
(g) Parent and the Company shall have received letters from
Ernst & Young LLP and Arthur Andersen LLP, respectively, dated
as of the Effective Date to the effect that such firm concurs
with management's conclusion that, as of the Effective Date,
no conditions exist that would preclude such party from being a
party to a business combination for which "pooling of
interests" accounting treatment would be available if
consummated in accordance with this Merger Agreement.
Section 8.2 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to
the Effective Date of the additional following conditions,
unless waived by the Company:
(a) (i) Parent and Sub shall have performed in all material
respects their agreements contained in this Merger Agreement
required to be performed on or prior to the Effective Date and
(ii) the representations and warranties of Parent and Sub
contained in this Merger Agreement shall be true in all respects
when made and on and as of the Effective Date as if made on and
as of such date, except for representations and warranties which
are by their express provisions made as of a specific date or
dates, which were or will be true in all respects at such time
or times as stated therein (provided that, in each case,
the condition set forth in this Section 8.2(a)(ii) shall be
deemed satisfied so long as any failures of such representations
and warranties to be true and correct, taken together, would
not have a Material Adverse Effect on Parent), and the Company
shall have received a certificate of the President or Chief
Executive Officer or a Vice President of Parent and Sub,
respectively, to that effect.
(b) The Company shall have received an opinion substantially
in the form of Exhibit C of Cravath, Swaine & Moore, counsel
to the Company, dated the Effective Date, to the effect that
the Merger will constitute a "reorganization" for federal income
tax purposes within the meaning of Section 368(a) of the
Code. In rendering such opinion, such counsel shall be
entitled to rely upon representations provided by the parties
hereto substantially in the form of Exhibits E and F.
Section 8.3 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect
the Merger shall be subject to the fulfillment at or prior to
the Effective Date of the additional following conditions,
unless waived by Parent:
(a) (i) The Company shall have performed in all material respects
its agreements contained in this Merger Agreement required to
be performed on or prior to the Effective Date and (ii) the
representations and warranties of the Company contained in
this Merger Agreement shall be true in all respects when made
and on and as of the Effective Date as if made on and as of
such date, except for representations and warranties which are
by their express provisions made as of a specific date or dates
which were or will be true in all respects at such date or dates
(provided that, in each case, the condition set forth in this
Section 8.3(a)(ii) shall be deemed satisfied so long as
any failures of such representations and warranties to be true
and correct, taken together, would not have a Material Adverse
Effect on the Company), and Parent and Sub shall have received a
certificate of the President or Chief Executive Officer or a
Vice President of the Company to that effect.
- 40 -
(b) The Parent shall have received an opinion substantially
in the form of Exhibit D of Squire, Sanders & Dempsey L.L.P.,
counsel to Parent, dated the Effective Date, to the effect that
the Merger will constitute a "reorganization" for federal income
tax purposes within the meaning of Section 368(a) of the
Code. In rendering such opinion, such counsel shall be
entitled to rely upon representations provided by the parties
hereto substantially in the form of Exhibits E and F.
8.4 Frustration of Closing Conditions. No party may rely on the
failure of any condition set forth in Section 8.1, 8.2 or
8.3, as the case may be, to be satisfied if such failure
results from such party's breach of any provision of this Merger
Agreement or the failure of such party to use its reasonable
best efforts to cause the Merger to be consummated.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Merger Agreement may be
terminated at any time prior to the Effective Date, whether
before or after approval by the shareholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall
not have been consummated on or before March 31, 2000;
provided, that the terminating party is not otherwise in
material breach of its covenants hereunder and none of such
terminating party's representations and warranties contained
herein, which are qualified as to materiality, shall be
inaccurate in any respect, and none of such terminating party's
representations and warranties contained herein, which are not so
qualified, shall be inaccurate in any material respect, in each
case, as if made as of the date of such purported
termination (except for representations and warranties that
by their express provisions are or shall have been made as of
a specific date or dates, which shall only be deemed
inaccurate to the extent that they were inaccurate at such
times as stated therein);
(c) by either Parent or the Company if the adoption by the
shareholders of the Company of this Merger Agreement shall
not have been obtained at the Company Meeting or at any
adjournment or postponement thereof;
(d) by either Parent or the Company if the approval by the
shareholders of Parent of the Stock Issuance Proposal shall not
have been obtained at the Parent Meeting or at any adjournment or
postponement thereof;
(e) by the Company if any of the conditions specified in
Sections 8.1 and 8.2 have not been met or waived by the Company
at such time as such condition is no longer capable of
satisfaction;
(f) by Parent if any of the conditions specified in Sections
8.1 and 8.3 have not been met or waived by Parent at such time
as such condition is no longer capable of satisfaction;
- 41 -
(g) by Parent if the Company's Board of Directors shall have
(i) accepted or resolved to accept a Superior Proposal
(provided that the Company shall not accept or resolve to
accept a Superior Proposal unless (x) it provides Parent with
notice of the material terms of such proposal at least two
days prior to such acceptance and (y) at the time of such
acceptance the Board of Directors of the Company determines in
good faith that such proposal continues to be a Superior
Proposal after taking into account any amendments Parent and
Sub may have offered to make to this Merger Agreement) or (ii)
refused to affirm its recommendation concerning the Merger
referred to in Section 3.7(a) hereof within 10 business days
after receipt of any written request from Parent to do so at
any time when an Acquisition Proposal with respect to the
Company shall have been made and not rejected by the Company's
Board of Directors;
(h) by Parent or the Company if any Restraint having any of
the effects set forth in Section 8.1(f) shall be in effect
and shall have become final and nonappealable; provided,
however, that the party seeking to terminate this Merger
Agreement pursuant to this Section 9.1(h) shall have used its
reasonable best efforts to prevent the entry of and to remove
such Restraint;
(i) by the Company if Parent's Board of Directors shall have
(i) accepted or resolved to accept a Superior Proposal
contemplating the termination of this Merger Agreement
(provided that Parent shall not accept or resolve to accept a
Superior Proposal unless (x) it provides the Company with notice
of the material terms of such proposal at least two days prior to
such acceptance and (y) at the time of such acceptance the
Board of Directors of Parent determines in good faith that
such proposal continues to be a Superior Proposal after taking
into account any amendments the Company may have offered to
make to this Merger Agreement) or (ii) refused to affirm its
recommendation concerning the Stock Issuance Proposal
referred to in Section 3.7(b) hereof within 10 business days
after receipt of any written request from the Company to do so
at any time when an Acquisition Proposal with respect to
Parent shall have been made and not rejected by Parent's Board
of Directors;
(j) by the Company if the Board of Directors of the Company
has accepted or resolved to accept a Superior Proposal;
provided that the Company shall not accept or resolve to
accept a Superior Proposal unless (i) it provides Parent with
notice of the material terms of such proposal at least two
days prior to such acceptance and (ii) at the time of such
acceptance the Board of Directors of the Company determines in
good faith that such proposal continues to be a Superior
Proposal after taking into account any amendments Parent and
Sub may have offered to make to this Merger Agreement; or
(k) by Parent if the Board of Directors of Parent has accepted
or resolved to accept a Superior Proposal; provided that Parent
shall not accept or resolve to accept a Superior Proposal unless
(i) it provides the Company with notice of the material terms of
such proposal at least two days prior to such acceptance and
(ii) at the time of such acceptance the Board of Directors of
Parent determines in good faith that such proposal continues
to be a Superior Proposal after taking into account any
amendments the Company may have offered to make to this Merger
Agreement.
- 42 -
Section 9.2 Effect of Termination. (a) In the event of
termination of this Merger Agreement by either Parent or the
Company, as provided above, this Merger Agreement shall forthwith
become void and (except (x) for the willful breach of this Merger
Agreement by, or fraud of, any party hereto and (y) as provided
in the proviso to Section 9.2(c) or 9.2(e), respectively)
there shall be no liability on the part of either the Company,
Parent or Sub or their respective directors or officers;
provided that the last sentence of Section 7.1, and Sections
9.2 and 10.2 shall survive the termination.
(b) Unless (x) any of the representations and
warranties of Parent contained herein, which are qualified
as to materiality, were or shall be inaccurate in any respect,
or any of the representations and warranties of Parent
contained herein, which are not so qualified, were or shall be
inaccurate in any material respect, in each case, when made
and as of the date of any termination of this Merger
Agreement, as if made as of the date of such termination
(except for representations and warranties that by their
express provisions are made as of a specific date or dates,
which shall only be deemed inaccurate to the extent that they
were or shall have been inaccurate at such times as stated
therein), respectively, or (y) at the time of such termination,
Parent is in material breach of any covenant contained herein,
the Company shall make a payment to Parent (by wire transfer or
cashiers check) of a breakup fee in the amount of $45 million
(the "Termination Fee") (i) in the event this Merger
Agreement is terminated pursuant to Section 9.1(g) or Section
9.1(j) or (ii) in the event this Merger Agreement is
terminated following the Company Meeting pursuant to Section
9.1(c) and an Acquisition Proposal with respect to the Company
shall have been publicly disclosed to the shareholders of
the Company (and not withdrawn or terminated) prior to the
Company Meeting and, within 12 months after such termination of
this Merger Agreement, the Company shall have entered into an
agreement providing for the consummation of an Acquisition
Proposal with respect to the Company (it being understood that
no confidentiality agreement with respect to an
Acquisition Proposal shall constitute such an agreement) or
an Acquisition Proposal with respect to the Company shall have
been consummated. For purposes of this Section 9.2(b), the
term Acquisition Proposal shall have the meaning set forth in
Section 7.9(a) except that the references to "15%" in such
Section 7.9(a) shall be deemed references to "50%".
(c) The Company shall make a payment to Parent (by
wire transfer or cashiers check) of an expense reimbursement
fee in the amount of $5 million (i) in the event the Termination
Fee becomes due and payable pursuant to Section 9.2(b) or (ii)
in the event this Merger Agreement is terminated pursuant to
Section 9.1(f) and at the time of such termination the Company
is in material breach of any representation, warranty or
material covenant of the Company contained herein; provided,
that, in the event the expense reimbursement fee is payable
pursuant to the foregoing clause (ii) of this Section
9.2(c), notwithstanding Section 9.2(a) or the termination of this
Merger Agreement, the Company shall remain liable for, and no
payment pursuant to the foregoing clause (ii) of this Section
9.2(c) shall release the Company from, any liability or damage
suffered or incurred by Parent to the extent any such liability
or damage exceeds the amount of such expense reimbursement fee.
(d) Unless (x) any of the representations and warranties
of the Company contained herein, which are qualified as to
materiality, were or shall be inaccurate in any respect, or any
of the representations and warranties of the Company contained
herein, which are not so qualified, were or shall be
inaccurate in any material respect, in each case, when made and
as of the date
- 43 -
of any termination of this Merger Agreement, as if made as of
the date of such termination (except for representations and
warranties that by their express provisions are made as of a
specific date or dates, which shall only be deemed inaccurate
to the extent that they were or shall have been inaccurate at
such times as stated therein), respectively, or (y) at the time
of such termination, the Company is in material breach of any
covenant contained herein, Parent shall make a payment to
Company (by wire transfer or cashiers check) of the
Termination Fee (i) in the event this Merger Agreement is
terminated pursuant to Section 9.1(i) or Section 9.1(k) or (ii)
in the event this Merger Agreement is terminated following the
Parent Meeting pursuant to Section 9.1(d) and an Acquisition
Proposal with respect to Parent shall have been publicly
disclosed to the shareholders of Parent (and not withdrawn or
terminated) prior to the Parent Meeting and, within 12 months
after such termination of this Merger Agreement, Parent shall
have entered into an agreement providing for the
consummation of an Acquisition Proposal with respect to
Parent (it being understood that no confidentiality agreement
with respect to an Acquisition Proposal shall constitute such
an agreement) or an Acquisition Proposal with respect to Parent
shall have been consummated.
(e) Parent shall make a payment to Company (by
wire transfer or cashiers check) of an expense reimbursement
fee in the amount of $5 million (i) in the event the Termination
Fee becomes due and payable pursuant to Section 9.2(d) or (ii)
in the event this Merger Agreement is terminated pursuant to
Section 9.1(e) and at the time of such termination Parent is in
material breach of any representation, warranty or material
covenant contained herein; provided, that, in the event the
expense reimbursement fee is payable pursuant to the foregoing
clause (ii) of this Section 9.2(e), notwithstanding Section
9.2(a) or the termination of this Merger Agreement, Parent shall
remain liable for, and no payment pursuant to the foregoing
clause (ii) of this Section 9.2(e) shall release Parent from,
any liability or damage suffered or incurred by the Company to
the extent any such liability or damage exceeds the amount of
such expense reimbursement fee.
Section 9.3 Amendment. This Merger Agreement may be amended
by the parties hereto at any time before or after approval
hereof by the shareholders of the Company or Parent, but, after
such approval, no amendment shall be made which by law requires
further approval by the shareholders of the Company or Parent
without such further approval. This Merger Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Date, the
parties hereto may (i) extend the time for the performance of
any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein or in any documents delivered
pursuant hereto or (iii) waive compliance with any of the
agreements or conditions contained herein; provided, however,
that no such waiver shall be given that by law requires further
approval by the shareholders of the Company or Parent without
such further approval having been obtained. No agreement on
the part of a party hereto to any such extension or waiver shall
be valid unless set forth in an instrument in writing signed on
behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices or other communications
under this Merger Agreement shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt)
by delivery in person, by overnight courier, telecopy, or by
registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
With copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq. and Allen
Finkelson, Esq.
Fax: (212) 474-3700
If to Parent or Sub:
The B.F.Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General Counsel
Fax: (330) 659-7737
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
or to such other address as any party may have furnished to the
other parties in writing in accordance with this Section.
- 45 -
Section 10.2 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection
with this Merger Agreement and the transactions contemplated
by this Merger Agreement shall be paid by the party incurring
such expenses, except that Parent and Company agree to each pay
50% of all printing, mailing and delivery expenses incurred by
the parties hereto in connection with the Proxy Statement.
Section 10.3 Publicity. So long as this Merger Agreement is in
effect, Parent, Sub and the Company agree to consult with
each other in issuing any press release or otherwise
making any public statement with respect to the
transactions contemplated by this Merger Agreement, and none of
them shall issue any press release or make any public
statement prior to such consultation, except as may be required
by law.
Section 10.4 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of
the provisions of this Merger Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto
shall be entitled to an injunction or injunctions to prevent
breaches of this Merger Agreement and to enforce specifically
the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or
in equity.
Section 10.5 Interpretation. (a) When a reference is made
in this Merger Agreement to subsidiaries of Parent or the
Company, the word "subsidiaries" means corporations more than
50% of whose outstanding voting securities are directly or
indirectly owned by Parent or the Company, as the case may be.
The table of contents and headings contained in this Merger
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Merger Agreement. When reference is made in this Merger
Agreement to Articles, Sections, Schedules or Exhibits, such
reference shall be to an Article, Section, Schedule or Exhibit
of this Merger Agreement, as the case may be, unless
otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Merger Agreement and
are not followed by the words "without limitation", they shall
be deemed to be followed by the words "without limitation." The
words "hereof", "herein" and "hereunder" and words of similar
import when used in this Merger Agreement shall refer to this
Merger Agreement as a whole and not to any particular provision
of this Merger Agreement. Whenever "or" is used in this Merger
Agreement it shall be construed in the nonexclusive sense. The
phrases "transactions contemplated by this Merger Agreement" and
"transactions contemplated hereby" shall include transactions
contemplated by the Cross Stock Option Agreements.
(b) As used in this Merger Agreement, any reference
to any state of facts, event, change or effect having a
"Material Adverse Effect" on or with respect to any party, as
the case may be, shall mean such state of facts, event, change or
effect that has had, or would reasonably be expected to
have, a material adverse effect on the business, properties,
financial condition, or results of operations of such party
and its subsidiaries taken as a whole (excluding any state of
facts, event, change or effect relating to (i) the economy
or securities markets in general, (ii) this Merger Agreement
or the transactions contemplated hereby or the announcement
thereof or (iii) the aerospace industry in general).
(c) As used in this Merger Agreement, "knowledge"
shall mean, with respect to the matter in question, the
actual knowledge of such matter by any executive officer of
Parent or the Company, as applicable.
- 46 -
(d) The inclusion of an item on any schedule to this
Merger Agreement shall not be deemed to be indicative of the
materiality of such item.
Section 10.6 Parties in Interest; No Assignment; Third Party
Beneficiaries. (a) This Merger Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and their
respective successors and permitted assigns. Except as expressly
provided for in this Merger Agreement, neither this Merger
Agreement nor the rights or obligations of any party hereto
are assignable, except by operation of law or with the
written consent of the other party. Except as expressly
provided in Section 10.6(b), nothing in this Merger
Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective
permitted assigns any rights or remedies hereunder.
(b) The provisions of Sections 3.2, 7.5(a), 7.5(c) and
7.6 hereof and Section 7.5 of the Company Disclosure Schedule
(i) are intended to be for the benefit of, and will be
enforceable by, each individual benefitted thereunder, his or
her heirs and his or her representatives and (ii) are in addition
to, and not in substitution for, any other rights, including
rights to indemnification or contribution, that any such person
may have by contract or otherwise.
Section 10.7 Miscellaneous. This Merger Agreement (including
the documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject
matter hereof (other than the Confidentiality Agreement, as the
same may be amended); and (b) shall be governed in all
respects, including validity, interpretation and effect, by
the laws of the Commonwealth of Pennsylvania (without giving
effect to the provisions thereof relating to conflicts of law
to the extent that the application of the laws of another
jurisdiction would be required thereby). This Merger Agreement
may be executed in two or more counterparts which together
shall constitute a single agreement and each of which
shall only become effective when one or more counterparts
have been signed by each party and delivered to the other
parties.
Section 10.8 Cure Period. No party shall have any rights
under this Merger Agreement for any actual or threatened
breach of a representation, warranty, covenant or agreement
contained herein, if such breach is capable of being cured,
until (i) the non-breaching party has notified the breaching
party of its determination of the existence (or threatened
existence) of a basis for termination, and (ii) the
breaching party shall have a reasonable time (considering
the nature of the breach and the actions required for cure, but
in no event longer than 60 days) to cure such breach.
Section 10.9 Non-Survival of Representations and Warranties. No
representations or warranties in this Merger Agreement shall
survive the Effective Date.
Section 10.10 Validity. (a) The invalidity or unenforceability
of any provision of this Merger Agreement shall not affect the
validity or enforceability of the other provisions of this
Merger Agreement, which shall remain in full force and effect.
- 47 -
(b) In the event any court of competent jurisdiction holds any
provision of this Merger Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Merger
Agreement in order, as nearly as possible, to effectuate, to
the extent permitted by law, the intent of the parties
hereto with respect to such provision and the economic effects
thereof.
(c) Each party agrees that, should any court of competent
jurisdiction hold any provision of this Merger Agreement or
part hereof to be null, void or unenforceable, or order any
party to take any action inconsistent herewith, or not take any
action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to
any other remedy, including but not limited to money damages,
for breach thereof or of any other provision of this Merger
Agreement or part hereof as the result of such holding or order.
IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be signed by their respective officers thereunder
duly authorized all as of the date first written above.
THE B.F.GOODRICH COMPANY
By:
Name: David L. Burner
Title: Chairman and Chief
Executive Officer
RUNWAY ACQUISITION CORPORATION
By:
Name: Terrence G. Linnert
Title: Vice President
COLTEC INDUSTRIES INC
By:
Name: John W. Guffey, Jr.
Title: Chairman and Chief
Executive Officer
- 48 -
Exhibit 99.3
COMPANY STOCK OPTION AGREEMENT
This COMPANY STOCK OPTION AGREEMENT, dated as of
November 22, 1998 (the "Company Stock Option Agreement") is
between THE B.F.GOODRICH COMPANY, a corporation formed under
the laws of the State of New York ("Parent") and COLTEC
INDUSTRIES INC, a corporation formed under the laws of the
Commonwealth of Pennsylvania (the "Company").
RECITALS
Parent and the Company are entering into an
Agreement and Plan of Merger (the "Merger Agreement"). As a
condition and inducement to entering into the Merger Agreement,
the Company and Parent are entering into certain stock option
agreements dated as of the date hereof (of which this Company
Stock Option Agreement is one) pursuant to which the parties
grant each other an option with respect to certain shares of
each other's common stock on the terms and subject to the
conditions set forth therein (referred to collectively as the
"Cross Stock Option Agreements").
NOW, THEREFORE, to induce Parent to enter into the
Merger Agreement, and in consideration of the
representations, warranties, covenants and agreements set
forth in the Merger Agreement and the Cross Stock Option
Agreements, the parties agree as follows:
1. GRANT OF OPTION.
(a) Subject to the terms and conditions set forth
herein, the Company hereby grants to Parent an irrevocable
option (the "Option") to purchase up to 12,550,638 shares,
subject to adjustment as provided in Section 11 (the
"Company Shares"), of common stock, $.01 par value per share,
of the Company (the "Company Common Stock ") (being 19.9% of
the number of shares of the Company Common Stock (excluding
any shares of Company Common Stock held by a subsidiary of the
Company) outstanding as of November 20, 1998 in the manner set
forth below, at a price per Company Share of $20.125, subject
to adjustment as provided in Section 11 (the "Exercise
Price"). The Exercise Price shall be payable in cash in
accordance with Section 4.
(b) Notwithstanding the foregoing, in no event shall the number
of the Company Shares for which the Option is exercisable exceed
19.9% of the number of issued and outstanding shares of Company
Common Stock (excluding any shares of Company Common Stock held
by a subsidiary of the Company).
(c) Capitalized terms used herein but not defined herein shall
have the meanings set forth in the Merger Agreement. "Acquisition
Proposal" shall have the meaning set forth in Section 9.2(b) of
the Merger Agreement.
2. EXERCISE OF OPTION.
(a) The Option may be exercised by Parent, in whole,
but not in part, at any time after the Merger Agreement is
terminated and the Company has become obligated to pay the
Termination Fee ("Trigger Event").
(b) (i) The Company shall notify Parent promptly in writing of
the occurrence of any Trigger Event, it being understood that
the giving of such notice by the Company shall not be a condition
to the right of Parent to exercise the Option.
(ii) In the event Parent wishes to exercise the Option, Parent
shall deliver to the Company written notice thereof (the
"Exercise Notice").
(iii) Upon the giving by Parent to the Company of the Exercise
Notice and the tender of the aggregate Exercise Price, Parent,
provided that the conditions to the Company's obligation to
issue the Company Shares to Parent hereunder set forth in
Section 3 have been satisfied or waived, shall be deemed to
be the holder of record of the Company Shares issuable
upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that
certificates representing the Company Shares shall not then be
actually delivered to Parent.
(iv) The closing of the purchase of Company Shares (the
"Closing") shall occur at a place, on a date, and at a time
designated by Parent in the Exercise Notice delivered at least
two business days prior to the date of the Closing.
(c) The Option shall terminate upon the earliest to
occur of:
(i) the Effective Date of the Merger;
(ii) the termination of the Merger Agreement pursuant to
Section 9.1 thereof other than pursuant to (x) Section 9.1(g)
thereof, (y) 9.1(j) thereof or (z) if an Acquisition Proposal
with respect to the Company has been publicly disclosed to the
shareholders of the Company (and not withdrawn or terminated)
prior to the Company Meeting, Section 9.1(c) thereof;
(iii) to the extent that (x) an Acquisition Proposal with respect
to the Company has been publicly disclosed to the
shareholders of the Company (and not withdrawn or terminated)
prior to the Company Meeting, (y) the Merger Agreement is
terminated pursuant to Section 9.1(c) thereof and (z) the
Company does not enter into any agreement providing for the
consummation of an Acquisition Proposal with respect to
the Company (it being understood that no confidentiality
agreement with respect to an Acquisition Proposal shall
constitute such an agreement) and no Acquisition Proposal with
respect to the Company shall have been consummated, in each
case, during the twelve month period following the termination
of the Merger Agreement, twelve months after the date of such
termination; and
- 2 -
(iv) 30 days following a Trigger Event (or if, at the expiration
of such 30 day period, the Option cannot be exercised by reason
of any applicable judgment, decree, order, law or regulation,
ten business days after such impediment to exercise shall have
been removed or shall have become final and not subject to
appeal, but in no event under this clause (iv) later than 180
days following such Trigger Event).
(d) Notwithstanding the foregoing, the Option may not be
exercised and shall terminate if (x) any of the representations
and warranties of Parent contained in this Company Stock
Option Agreement or the Merger Agreement, which are qualified
as to materiality, were or shall be inaccurate in any respect,
or any of the representations and warranties of Parent
contained herein or therein, which are not so qualified, were or
shall be inaccurate in any material respect, in each case, (1)
when made, (2) as of the date of any termination of the Merger
Agreement and (3) as of the date of any purported exercise of the
Option, in the case of clauses (2) and (3), as if made as of the
date of such termination or purported exercise, respectively
(except for representations and warranties that by their express
provisions are made as of a specific date or dates, which shall
only be deemed inaccurate to the extent that they were or
shall have been inaccurate at such times as stated therein),
or (y) at the time of termination of the Merger Agreement or any
purported exercise of the Option, Parent is in material breach
of any of its covenants contained in the Merger Agreement or in
this Company Stock Option Agreement.
3. CONDITIONS TO CLOSING. The obligation of the
Company to issue the Company Shares to Parent hereunder is
subject to the conditions that:
(a) the waiting periods, if any, applicable to the
issuance of the Company Shares under the HSR Act and the
Competition Act (Canada) shall have expired or been terminated
and all other Company Required Consents and Parent Required
Consents in each case relating to this Company Stock Option
Agreement and required to be obtained prior to issuance of the
Company Shares shall have been obtained, except where the
failure to obtain such other Company Required Consents or Parent
Required Consents would not have a Material Adverse Effect on the
Company or Parent, as the case may be;
(b) the Company Shares shall have been authorized for
listing on the NYSE upon official notice of issuance; and
(c) no preliminary or permanent injunction or other
order by any court or other Governmental Entity of competent
jurisdiction (i) prohibiting or preventing such issuance or
(ii) having any of the effects set forth in Section 8.1(f)(ii) of
the Merger Agreement shall have been issued and remain in effect.
The condition set forth in paragraph (b) above may be waived
by Parent in its sole discretion.
4. CLOSING. At the Closing,
(a) The Company shall deliver to Parent a single
certificate in definitive form representing the Company
Shares, such certificate to be registered in the name of
Parent and to bear the legend set forth in Section 12; and
- 3 -
(b) Parent shall deliver to the Company the aggregate
Exercise Price for the Company Shares by wire transfer of
immediately available funds to an account to be designated in
writing by the Company.
(c) The Company shall pay all expenses that may be
payable in respect of the preparation, issuance and delivery
of stock certificates under this Section 4.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent that:
(a) the Company has taken all necessary corporate
action to authorize and reserve for issuance and (subject to the
satisfaction of the conditions set forth in Section 3) to permit
it to issue, upon exercise of the Option, and, at all times from
the date hereof through the expiration of the Option will have
reserved, authorized and unissued shares of Company Common Stock
sufficient for the exercise of the Option and the Company
Shares, upon issuance pursuant hereto, will be duly and
validly issued, fully paid and nonassessable; and
(b) upon delivery of the Company Shares to Parent upon
the exercise of the Option, Parent will acquire the Company
Shares free and clear of all claims, liens, charges, encumbrances
and security interests of any nature whatsoever.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent
represents and warrants to the Company that:
(a) any Company Shares acquired by Parent upon
exercise of the Option will be acquired for Parent's own account,
for investment purposes only and will not be, and the Option is
not being, acquired by Parent with a view to the public
distribution of the Company Shares, in violation of any
applicable provision of the Securities Act; and
(b) any Company Shares acquired by Parent upon
exercise of the Option will not be transferred or otherwise
disposed of except in a transaction registered, or exempt
from registration, under the Securities Act and otherwise in
accordance with this Company Stock Option Agreement.
7. CERTAIN REPURCHASES.
(a) At the request of Parent by written notice (the
"Cash-Out Notice") at any time during which the Option is
exercisable pursuant to Section 2, the Company (or any successor
entity thereof) shall, to the extent permitted by applicable
law and subject to the receipt by it of any consent or
waiver required by it under the terms of any indenture,
loan document or other contract, pay to Parent, in
consideration of the redelivery and cancellation without
exercise of the Option (in whole and not in part), an amount
in cash (the "Cash-Out Amount") equal to the difference between
the "Market/Offer Price" (as defined below) for shares of the
Company Common Stock as of the date Parent delivers the Cash-Out
Notice and the Exercise Price, multiplied by the total
- 4 -
number of the Company Shares, but only if the Market/Offer Price
is greater than the Exercise Price. For purposes of this
Section 7, the "Market/Offer Price" shall mean, as of any date,
the higher of (x) the price per share offered as of such date
pursuant to any tender or exchange offer or other public offer
with respect to the highest Acquisition Proposal with respect
to the Company which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer Price") and
(y) Fair Market Value (as defined below) as of such date. As used
herein, "Fair Market Value" shall be the average of the daily
closing sales price for a share of the Company Common Stock on
the NYSE during the ten NYSE trading days prior to the fifth NYSE
trading day immediately preceding the date such Fair Market
Value is to be determined. In the event that the consideration
offered pursuant to any Acquisition Proposal includes any
consideration other than cash, such consideration shall be
valued as follows for purposes of calculating the Offer
Price: (i) any securities that are either listed on a
national securities exchange (as defined under the Securities
Act) or on any designated offshore securities market (as
defined in Regulation S under the Securities Act) or included
in a national securities quotation system (as defined in the
Securities Act) (collectively, "Listed Securities") shall be
valued based on the average of the daily closing sale price
of such Listed Securities for the ten trading days on such
national securities exchange, designated offshore securities
market or national securities quotation system prior to the
fifth trading day immediately preceding the date of delivery of
the Cash-Out Notice; and (ii) any consideration other than cash
or Listed Securities shall be valued based on the written
opinion of an investment banking firm of nationally recognized
reputation selected by Parent, which firm is reasonably
acceptable to the Company. The costs and fees of such investment
banking firm in connection with such valuation shall be borne
equally by Parent and the Company.
(b) In the event Parent exercises its right under this
Section 7, the Company shall, within ten business days
thereafter, pay the required amount to Parent in immediately
available funds and Parent shall surrender to the Company the
Option, and Parent shall warrant that it owns the Option and that
the Option is then free and clear of all liens, claims, damages,
charges and encumbrances of any kind or nature whatsoever.
8. VOTING OF SHARES. Following the date hereof and
prior to the fifth anniversary of the date hereof (the
"Expiration Date"), Parent shall vote any shares of capital
stock of the Company acquired by Parent pursuant to this
Company Stock Option Agreement or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), by Parent on each matter submitted to a vote of
shareholders of the Company for and against such matter in the
same proportion as the vote of all other shareholders of the
Company are voted (whether by proxy or otherwise) for and against
such matter.
9. RESTRICTIONS ON TRANSFER.
(a) The Company Shares shall not be directly or
indirectly, by operation of law or otherwise, sold, assigned,
pledged, or otherwise disposed of or transferred, other than in
accordance with Section 9(b) or Section 10.
- 5 -
(b) Parent shall be permitted to sell, assign,
transfer or dispose of any Company Shares beneficially owned by
it if such sale is made (i) pursuant to a transaction that has
been approved or recommended, or otherwise determined to be fair
to and in the best interests of the shareholders of the
Company, by a majority of the members of the Board of Directors
of the Company, which majority shall include a majority of
directors who were directors prior to the announcement of
such transaction or (ii) to any purchaser or transferee who
would not, to Parent's knowledge after reasonable inquiry,
immediately following such sale, assignment, transfer or disposal
beneficially own more than 1% of the Company Common Stock on a
fully diluted basis (excluding any shares of Company Common
Stock held by a subsidiary of the Company).
10. REGISTRATION RIGHTS.
(a) On or prior to the second anniversary of the
exercise of the Option, Parent may by written notice (the
"Registration Notice") to the Company request the Company to
register under the Securities Act all or any part of the Company
Shares beneficially owned by Parent (the "Registrable
Securities") pursuant to a bona fide firm commitment
underwritten public offering, in which Parent and the
underwriters shall effect as wide a distribution of such
Registrable Securities as is reasonably practicable and shall
use their best efforts to prevent any person (including any
group (as used in Rule 13d-5 under the Exchange Act)) and its
affiliates from purchasing through such offering Company
Shares representing more than 1% of the outstanding shares of
Company Common Stock on a fully diluted basis (excluding any
shares of Company Common Stock held by a subsidiary of the
Company) (a "Permitted Offering").
(b) The Registration Notice shall include a
certificate executed by Parent and its proposed managing
underwriter, which underwriter shall be an investment banking
firm of nationally recognized standing (the "Manager"),
stating that
(i) they have a good faith intention to commence promptly a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the
then-prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least
80% of the then Fair Market Value of such shares.
(c) The Company (and/or any person designated by the
Company) shall thereupon have the option exercisable by written
notice delivered to the Parent within ten business days after
the receipt of the Registration Notice, irrevocably to agree
to purchase all or any part of the Registrable Securities
proposed to be so sold for cash at a price (the "Option
Price") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Company and (ii) the then
Fair Market Value of such shares.
(d) Any purchase of Registrable Securities by the
Company (or its designee) under Section 10(c) shall take place
at a closing to be held at the principal executive offices of
the Company or at the offices of its counsel at any reasonable
date and time designated by the Company and/or such designee in
such notice within twenty business days after delivery of such
notice, and any payment for the shares to be so purchased shall
be made by delivery at the time of such closing in immediately
available funds.
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(e) If the Company does not elect to exercise its
option pursuant to this Section 10 with respect to all
Registrable Securities, it shall use its reasonable efforts
to effect, as promptly as reasonably practicable, the
registration under the Securities Act of the unpurchased
Registrable Securities proposed to be so sold; provided, however,
that
(i) Parent shall not be entitled to more than an aggregate
of two effective registration statements hereunder, and
(ii) the Company will not be required to file any such
registration statement during any period of time (not to exceed
180 days after such request) when:
(A) the Company is in possession of material non-public
information which it reasonably believes would be detrimental
to be disclosed at such time and, in the opinion of counsel
to the Company, such information would have to be disclosed
if a registration statement were filed at that time;
(B) the Company is required under the Securities Act to
include audited financial statements for any period in such
registration statement and such financial statements are not
yet available for inclusion in such registration statement; or
(C) the Company determines, in its reasonable judgment, that
such registration would interfere with any financing,
acquisition or other material transaction involving the Company
or any of its affiliates.
(f) The Company shall use its reasonable best
efforts to cause any Registrable Securities registered
pursuant to this Section 10 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as Parent may
reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided,
however, that the Company shall not be required to qualify to do
business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10
are subject to the condition that Parent shall provide the
Company with such information with respect to its Registrable
Securities, the plans for the distribution thereof, and such
other information with respect to such holder as, in the
reasonable judgment of counsel for the Company, is necessary
to enable the Company to include in such registration
statement all material facts required to be disclosed with
respect to a registration thereunder.
(h) A registration effected under this Section 10 shall
be effected at the Company's expense, except for underwriting
discounts and commissions and the fees and the expenses of
counsel to Parent, and the Company shall provide to the
underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as is customary
in connection with underwritten public offerings as such
underwriters may reasonably require.
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(i) In connection with any registration effected under
this Section 10, the parties agree
(i) to indemnify each other and the underwriters in the
customary manner,
(ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the
Manager and the other underwriters participating in such
offering, and
(iii) to take further reasonable actions which are necessary
to effect such registration and sale.
(j) The Company shall be entitled to include (at
its expense) additional shares of its common stock in a
registration effected pursuant to this Section 10 only if and
to the extent the Manager determines that such inclusion will
not adversely affect the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without
limitation to any restriction on the Company contained in this
Company Stock Option Agreement or in the Merger Agreement, in
the event of any change in Company Common Stock by reason of
stock dividends, splitups, mergers (other than the Merger),
recapitalizations, combinations, exchange of shares or the
like, the type and number of shares or securities subject to
the Option and the Exercise Price shall be adjusted
appropriately and proper provision will be made in the
agreements governing such transaction, so that Parent will
receive upon exercise of the Option the number and class of
shares or other securities or property that Parent would have
received in respect of Company Common Stock if the Option had
been exercised immediately prior to such event or the record
date therefor, as applicable. Subject to Section 1, and without
limiting the parties' relative rights and obligations under the
Merger Agreement, if any additional shares of Company Common
Stock are issued after the date of this Company Stock Option
Agreement (other than pursuant to an event described in the
first sentence of this Section 11(a)), the number of Company
Shares will be adjusted so that, after such issuance, it
equals 19.9% of the number of shares of Company Common Stock
(excluding any shares of Company Common Stock held by a
subsidiary of the Company) then issued and outstanding,
without giving effect to any shares subject to the Option.
12. RESTRICTIVE LEGENDS. Each certificate
representing shares of the Company Common Stock issued to
Parent hereunder shall include a legend in substantially the
following form:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE COMPANY
STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY
OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities
Act and state securities or Blue Sky laws in the above legend
shall be removed by delivery of substitute certificate(s) without
such reference, if Parent shall have delivered to the Company a
copy of a letter from the staff of the Commission, or an
opinion of counsel, in form and substance satisfactory to the
Company, to the effect that such legend is not required for
purposes of the Securities Act or such laws;
(ii) the reference to the provisions to this Company Stock
Option Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with
the provisions of this Company Stock Option Agreement
and under circumstances that do not require the retention of
such reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied.
In addition, such certificates shall bear any other legend as may
be required by law. Certificates representing shares sold in a
registered public offering pursuant to Section 10 shall not
be required to bear the legend set forth in this Section 12.
13. BINDING EFFECT: NO ASSIGNMENT: NO THIRD PARTY
BENEFICIARIES. (a) This Company Stock Option Agreement shall
be binding upon and inure solely to the benefit of each party
hereto and their respective successors and permitted assigns.
(b) Except as expressly provided for in this Company
Stock Option Agreement, neither this Company Stock Option
Agreement nor the rights or obligations of either party
hereto are assignable except with the written consent of the
other party.
(c) Nothing contained in this Company Stock Option
Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective
permitted assigns any rights or remedies hereunder.
- 9 -
(d) Any Company Shares sold by Parent in compliance with
the provisions of Section 10 shall, upon consummation of such
sale, be free of the restrictions imposed with respect to such
shares by this Company Stock Option Agreement.
14. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable harm would occur in the event that any of the
provisions of this Company Stock Option Agreement were not
performed in accordance with their specified terms or were
otherwise breached. It is accordingly agreed that the parties
hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Company Stock Option Agreement and to
enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are
entitled at law or in equity.
15. VALIDITY. (a) The invalidity or unenforceability
of any provision of this Company Stock Option Agreement
shall not affect the validity or enforceability of the other
provisions of this Company Stock Option Agreement, which shall
remain in full force and effect.
(b) In the event any court or other competent
authority holds any provision of this Company Stock Option
Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery
of an amendment to this Company Stock Option Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by
law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) Each party agrees that, should any court or
other competent authority hold any provision of this Company
Stock Option Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein,
the other party shall not be entitled to specific performance
of such provision or part hereof or to any other remedy,
including but not limited to money damages, for breach hereof or
of any other provision of this Company Stock Option Agreement or
part hereof as the result of such holding or order.
16. NOTICES. All notices and other communications
under this Company Stock Option Agreement shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, if (a) delivered
personally, by overnight courier, telecopy or by registered
or certified mail, postage prepaid, return receipt requested
addressed as follows:
A. If to Parent, to:
The B.F.Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General
Counsel
Fax: (330) 659-7737
- 10 -
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
B. If to the Company, to:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: George W. Bilicic, Jr., Esq. and
Allen Finkelson, Esq.
Fax: (212) 474-3700
or to such other address as either party may have furnished to
the other party in writing in accordance with this Section.
17. GOVERNING LAW: CHOICE OF FORUM. This Company Stock
Option Agreement shall be governed in all respects, including
validity, interpretation and effect by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to the provisions thereof relating to
conflicts of law to the extent that the application of the laws
of another jurisdiction would be required thereby.
18. INTERPRETATION.
(a) When reference is made in this Company Stock
Option Agreement to Articles, Sections, Schedules or
Exhibits, such reference shall be to an Article, Section,
Schedule or Exhibit of this Company Stock Option Agreement, as
the case may be, unless otherwise indicated.
- 11 -
(b) The headings contained in this Company Stock Option
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of the Company
Stock Option Agreement.
(c) Whenever the words "include," "includes," or
"including" are used in this Company Stock Option Agreement
and are not followed by the words "without limitation", they
shall be deemed to be followed by the words "without limitation."
The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Company Stock Option
Agreement shall refer to this Company Stock Option Agreement as
a whole and not to any particular provision of this Company Stock
Option Agreement.
(d) Whenever "or" is used in this Company Stock
Option Agreement it shall be construed in the nonexclusive
sense.
19. COUNTERPARTS; EFFECT. This Company Stock Option
Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall
constitute one and the same agreement and each of which shall
only become effective when one or more counterparts have been
signed by each party and delivered to the other party.
20. AMENDMENTS; WAIVER. This Company Stock Option
Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived but, in the case of an
amendment, only by an instrument in writing signed on behalf
of each of the parties hereto, or, in the case of a waiver,
by an instrument signed on behalf of the party waiving
compliance.
21. LOSS OR MUTILATION. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Company Stock Option
Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Company Stock Option Agreement, if
mutilated, the Company will execute and deliver a new Company
Stock Option Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused
this Company Stock Option Agreement to be executed by their
respective duly authorized officers as of the date first above
written.
THE B.F.GOODRICH COMPANY
By:
Name: David L. Burner
Title: Chairman and Chief
Executive Officer
COLTEC INDUSTRIES INC
By:
Name: John W. Guffey, Jr.
Title: Chairman and Chief
Executive Officer
- 12 -
PARENT STOCK OPTION AGREEMENT
This PARENT STOCK OPTION AGREEMENT, dated as of
November 22, 1998 (the "Parent Stock Option Agreement") is
between THE B.F.GOODRICH COMPANY, a corporation formed under
the laws of the State of New York ("Parent") and COLTEC
INDUSTRIES INC, a corporation formed under the laws of the
Commonwealth of Pennsylvania (the "Company").
RECITALS
Parent and the Company are entering into an
Agreement and Plan of Merger (the "Merger Agreement"). As a
condition and inducement to entering into the Merger Agreement,
the Company and Parent are entering into certain stock option
agreements dated as of the date hereof (of which this Parent
Stock Option Agreement is one) pursuant to which the parties
grant each other an option with respect to certain shares of
each other's common stock on the terms and subject to the
conditions set forth therein (referred to collectively as the
"Cross Stock Option Agreements").
NOW, THEREFORE, to induce the Company to enter
into the Merger Agreement, and in consideration of the
representations, warranties, covenants and agreements set
forth in the Merger Agreement and the Cross Stock Option
Agreements, the parties agree as follows:
1. GRANT OF OPTION.
(a) Subject to the terms and conditions set forth
herein, Parent hereby grants to the Company an irrevocable
option (the "Option") to purchase up to 14,792,612 shares,
subject to adjustment as provided in Section 11 (the
"Parent Shares"), of common stock, $5 par value per share,
of Parent (the "Parent Common Stock") (being 19.9% of the
number of shares of Parent Common Stock outstanding as of
November 18, 1998 in the manner set forth below, at a price
per Parent Share of $35.9375, subject to adjustment as provided
in Section 11 (the "Exercise Price"). The Exercise Price shall
be payable in cash in accordance with Section 4.
(b) Notwithstanding the foregoing, in no event shall the
number of the Parent Shares for which the Option is exercisable
exceed 19.9% of the number of issued and outstanding shares of
Parent Common Stock.
(c) Capitalized terms used herein but not defined herein shall
have the meanings set forth in the Merger Agreement.
2. EXERCISE OF OPTION.
(a) The Option may be exercised by the Company, in
whole, but not in part, at any time after the Merger Agreement
is terminated and Parent has become obligated to pay the
Termination Fee ("Trigger Event").
(b) (i) Parent shall notify the Company promptly in writing of
the occurrence of any Trigger Event, it being understood that
the giving of such notice by Parent shall not be a condition to
the right of the Company to exercise the Option.
(ii) In the event the Company wishes to exercise the Option,
the Company shall deliver to Parent written notice thereof (the
"Exercise Notice").
(iii) Upon the giving by the Company to Parent of the Exercise
Notice and the tender of the aggregate Exercise Price, the
Company, provided that the conditions to Parent's
obligation to issue the Parent Shares to the Company hereunder
set forth in Section 3 have been satisfied or waived, shall be
deemed to be the holder of record of the Parent Shares issuable
upon such exercise, notwithstanding that the stock transfer
books of Parent shall then be closed or that certificates
representing the Parent Shares shall not then be actually
delivered to the Company.
(iv) The closing of the purchase of Parent Shares (the "Closing")
shall occur at a place, on a date, and at a time designated
by the Company in the Exercise Notice delivered at least two
business days prior to the date of the Closing.
(c) The Option shall terminate upon the earliest to
occur of:
(i) the Effective Date of the Merger;
(ii) the termination of the Merger Agreement pursuant to
Section 9.1 thereof other than pursuant to (x) Section 9.1(i)
thereof, (y) 9.1(k) thereof or (z) if an Acquisition Proposal
with respect to Parent has been publicly disclosed to the
shareholders of Parent (and not withdrawn or terminated) prior to
the Parent Meeting, Section 9.1(d) thereof;
(iii) to the extent that (x) an Acquisition Proposal with
respect to Parent has been publicly disclosed to the
shareholders of Parent (and not withdrawn or terminated) prior
to the Parent Meeting, (y) the Merger Agreement is terminated
pursuant to Section 9.1(d) thereof and (z) Parent does not
enter into any agreement providing for the consummation of an
Acquisition Proposal with respect to Parent (it being understood
that no confidentiality agreement with respect to an Acquisition
Proposal shall constitute such an agreement) and no Acquisition
Proposal with respect to Parent shall have been consummated,
in each case, during the twelve month period following the
termination of the Merger Agreement, twelve months after the
date of such termination; and
(iv) 30 days following a Trigger Event (or if, at the expiration
of such 30 day period, the Option cannot be exercised by reason
of any applicable judgment, decree, order, law or regulation,
ten business days after such impediment to exercise shall have
been removed or shall have become final and not subject to
appeal, but in no event under this clause (iv) later than 180
days following such Trigger Event).
- 2 -
(d) Notwithstanding the foregoing, the Option may not be
exercised and shall terminate if (x) any of the
representations and warranties of the Company contained in
this Parent Stock Option Agreement or the Merger Agreement,
which are qualified as to materiality, were or shall be
inaccurate in any respect, or any of the representations and
warranties of the Company contained herein or therein, which
are not so qualified, were or shall be inaccurate in any material
respect, in each case, (1) when made, (2) as of the date of any
termination of the Merger Agreement and (3) as of the date of
any purported exercise of the Option, in the case of clauses
(2) and (3), as if made as of the date of such termination or
purported exercise, respectively (except for representations and
warranties that by their express provisions are made as of a
specific date or dates, which shall only be deemed inaccurate
to the extent that they were or shall have been inaccurate at
such times as stated therein), or (y) at the time of termination
of the Merger Agreement or any purported exercise of the Option,
the Company is in material breach of any of its covenants
contained in the Merger Agreement or in this Parent Stock Option
Agreement.
3. CONDITIONS TO CLOSING. The obligation of Parent to
issue the Parent Shares to the Company hereunder is subject to
the conditions that:
(a) the waiting periods, if any, applicable to the
issuance of the Parent Shares under the HSR Act and the
Competition Act (Canada) shall have expired or been
terminated and all other Company Required Consents and the
Parent Required Consents in each case relating to this Parent
Stock Option Agreement and required to be obtained prior to
issuance of the Parent Shares shall have been obtained, except
where the failure to obtain such other Company Required Consents
or the Parent Required Consents would not have a Material
Adverse Effect on the Company or Parent, as the case may be;
(b) the Parent Shares shall have been authorized for
listing on the NYSE upon official notice of issuance; and
(c) no preliminary or permanent injunction or other
order by any court or other Governmental Entity of competent
jurisdiction (i) prohibiting or preventing such issuance or
(ii) having any of the effects set forth in Section 8.1(f)(ii) of
the Merger Agreement shall have been issued and remain in effect.
The condition set forth in paragraph (b) above may be waived by
the Company in its sole discretion.
4. CLOSING. At the Closing,
(a) Parent shall deliver to the Company a single
certificate in definitive form representing the Parent
Shares, such certificate to be registered in the name of
the Company and to bear the legend set forth in Section 12;
and
- 3 -
(b) The Company shall deliver to Parent the aggregate
Exercise Price for the Parent Shares by wire transfer of
immediately available funds to an account to be designated in
writing by Parent.
(c) Parent shall pay all expenses that may be payable in
respect of the preparation, issuance and delivery of stock
certificates under this Section 4.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent
represents and warrants to the Company that:
(a) Parent has taken all necessary corporate action
to authorize and reserve for issuance and (subject to the
satisfaction of the conditions set forth in Section 3) to
permit it to issue, upon exercise of the Option, and, at all
times from the date hereof through the expiration of the
Option will have reserved, authorized and unissued shares of
Parent Common Stock sufficient for the exercise of the Option
and the Parent Shares, upon issuance pursuant hereto, will be
duly and validly issued, fully paid and nonassessable; and
(b) upon delivery of the Parent Shares to the Company
upon the exercise of the Option, the Company will acquire the
Parent Shares free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent that:
(a) any Parent Shares acquired by the Company upon
exercise of the Option will be acquired for the Company's own
account, for investment purposes only and will not be, and the
Option is not being, acquired by the Company with a view to the
public distribution of the Parent Shares, in violation of
any applicable provision of the Securities Act; and
(b) any Parent Shares acquired by the Company upon
exercise of the Option will not be transferred or otherwise
disposed of except in a transaction registered, or exempt from
registration, under the Securities Act and otherwise in
accordance with this Parent Stock Option Agreement.
7. CERTAIN REPURCHASES.
(a) At the request of the Company by written notice
(the "Cash-Out Notice") at any time during which the Option is
exercisable pursuant to Section 2, Parent (or any successor
entity thereof) shall, to the extent permitted by applicable
law and subject to the receipt by it of any consent or
waiver required by it under the terms of any indenture,
loan document or other contract, pay to the Company, in
consideration of the redelivery and cancellation without
exercise of the Option (in whole and not in part), an amount
in cash (the "Cash-Out Amount") equal to the difference
between the "Market/Offer Price" (as defined below) for shares
of Parent Common Stock as of the date the Company delivers the
Cash-Out Notice and the Exercise Price, multiplied by the
total number of the Parent Shares, but only if the
- 4 -
Market/Offer Price is greater than the Exercise Price. For
purposes of this Section 7, the "Market/Offer Price" shall
mean, as of any date, the higher of (x) the price per share
offered as of such date pursuant to any tender or exchange
offer or other public offer with respect to the highest
Acquisition Proposal with respect to Parent which was made
prior to such date and not terminated or withdrawn as of such
date (the "Offer Price") and (y) Fair Market Value (as defined
below) as of such date. As used herein, "Fair Market Value"
shall be the average of the daily closing sales price for a
share of Parent Common Stock on the NYSE during the ten NYSE
trading days prior to the fifth NYSE trading day immediately
preceding the date such Fair Market Value is to be determined.
In the event that the consideration offered pursuant to
any Acquisition Proposal includes any consideration other
than cash, such consideration shall be valued as follows for
purposes of calculating the Offer Price: (i) any securities
that are either listed on a national securities exchange (as
defined under the Securities Act) or on any designated
offshore securities market (as defined in Regulation S under
the Securities Act) or included in a national securities
quotation system (as defined in the Securities Act)
(collectively, "Listed Securities") shall be valued based on the
average of the daily closing sale price of such Listed
Securities for the ten trading days on such national securities
exchange, designated offshore securities market or national
securities quotation system prior to the fifth trading day
immediately preceding the date of delivery of the Cash-Out
Notice; and (ii) any consideration other than cash or Listed
Securities shall be valued based on the written opinion of an
investment banking firm of nationally recognized reputation
selected by the Company, which firm is reasonably acceptable
to Parent. The costs and fees of such investment banking firm
in connection with such valuation shall be borne equally by
Parent and the Company.
(b) In the event the Company exercises its right under
this Section 7, Parent shall, within ten business days
thereafter, pay the required amount to the Company in
immediately available funds and the Company shall surrender to
Parent the Option, and the Company shall warrant that it owns
the Option and that the Option is then free and clear of all
liens, claims, damages, charges and encumbrances of any kind
or nature whatsoever.
8. VOTING OF SHARES. Following the date hereof and
prior to the fifth anniversary of the date hereof (the
"Expiration Date"), the Company shall vote any shares of
capital stock of Parent acquired by the Company pursuant to
this Parent Stock Option Agreement or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), by the Company on each matter submitted to a vote of
shareholders of Parent for and against such matter in the same
proportion as the vote of all other shareholders of Parent are
voted (whether by proxy or otherwise) for and against such
matter.
9. RESTRICTIONS ON TRANSFER.
(a) The Parent Shares shall not be directly or
indirectly, by operation of law or otherwise, sold, assigned,
pledged, or otherwise disposed of or transferred, other than
in accordance with Section 9(b) or Section 10.
- 5 -
(b) The Company shall be permitted to sell, assign,
transfer or dispose of any Parent Shares beneficially owned by
it if such sale is made (i) pursuant to a transaction that has
been approved or recommended, or otherwise determined to be fair
to and in the best interests of the shareholders of Parent,
by a majority of the members of the Board of Directors of
Parent, which majority shall include a majority of
directors who were directors prior to the announcement of
such transaction or (ii) to any purchaser or transferee who
would not, to the Company's knowledge after reasonable
inquiry, immediately following such sale, assignment, transfer
or disposal beneficially own more than 1% of Parent Common Stock
on a fully diluted basis.
10. REGISTRATION RIGHTS.
(a) On or prior to the second anniversary of the
exercise of the Option, the Company may by written notice (the
"Registration Notice") to Parent request Parent to register
under the Securities Act all or any part of the Parent Shares
beneficially owned by the Company (the "Registrable Securities")
pursuant to a bona fide firm commitment underwritten public
offering, in which the Company and the underwriters shall
effect as wide a distribution of such Registrable Securities
as is reasonably practicable and shall use their best efforts
to prevent any person (including any group (as used in Rule 13d-
5 under the Exchange Act)) and its affiliates from purchasing
through such offering Parent Shares representing more than 1%
of the outstanding shares of Parent Common Stock on a fully
diluted basis (a "Permitted Offering").
(b) The Registration Notice shall include a certificate
executed by the Company and its proposed managing underwriter,
which underwriter shall be an investment banking firm of
nationally recognized standing (the "Manager"), stating that
(i) they have a good faith intention to commence promptly a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the
then-prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price equal to at least
80% of the then Fair Market Value of such shares.
(c) Parent (and/or any person designated by the Parent)
shall thereupon have the option exercisable by written notice
delivered to the Company within ten business days after the
receipt of the Registration Notice, irrevocably to agree to
purchase all or any part of the Registrable Securities proposed
to be so sold for cash at a price (the "Option Price") equal to
the product of (i) the number of Registrable Securities to be so
purchased by Parent and (ii) the then Fair Market Value of such
shares.
(d) Any purchase of Registrable Securities by Parent
(or its designee) under Section 10(c) shall take place at a
closing to be held at the principal executive offices of Parent
or at the offices of its counsel at any reasonable date and time
designated by Parent and/or such designee in such notice within
twenty business days after delivery of such notice, and any
payment for the shares to be so purchased shall be made by
delivery at the time of such closing in immediately available
funds.
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(e) If Parent does not elect to exercise its option
pursuant to this Section 10 with respect to all Registrable
Securities, it shall use its reasonable efforts to effect,
as promptly as reasonably practicable, the registration
under the Securities Act of the unpurchased Registrable
Securities proposed to be so sold; provided, however, that
(i) The Company shall not be entitled to more than an aggregate
of two effective registration statements hereunder, and
(ii) Parent will not be required to file any such registration
statement during any period of time (not to exceed 180 days after
such request) when:
(A) Parent is in possession of material non-public
information which it reasonably believes would be
detrimental to be disclosed at such time and, in the opinion of
counsel to Parent, such information would have to be disclosed if
a registration statement were filed at that time;
(B) Parent is required under the Securities Act to include
audited financial statements for any period in such
registration statement and such financial statements are not
yet available for inclusion in such registration statement; or
(C) Parent determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition
or other material transaction involving Parent or any of its
affiliates.
(f) Parent shall use its reasonable best efforts
to cause any Registrable Securities registered pursuant to
this Section 10 to be qualified for sale under the securities
or Blue Sky laws of such jurisdictions as the Company may
reasonably request and shall continue such registration
or qualification in effect in such jurisdiction; provided,
however, that Parent shall not be required to qualify to do
business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10
are subject to the condition that the Company shall provide
Parent with such information with respect to its Registrable
Securities, the plans for the distribution thereof, and such
other information with respect to such holder as, in the
reasonable judgment of counsel for Parent, is necessary to enable
Parent to include in such registration statement all material
facts required to be disclosed with respect to a registration
thereunder.
(h) A registration effected under this Section 10 shall
be effected at Parent's expense, except for underwriting
discounts and commissions and the fees and the expenses of
counsel to the Company, and Parent shall provide to the
underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as is customary
in connection with underwritten public offerings as such
underwriters may reasonably require.
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(i) In connection with any registration effected under
this Section 10, the parties agree
(i) to indemnify each other and the underwriters in the
customary manner,
(ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the
Manager and the other underwriters participating in such
offering, and
(iii) to take further reasonable actions which are necessary
to effect such registration and sale.
(j) Parent shall be entitled to include (at its
expense) additional shares of its common stock in a registration
effected pursuant to this Section 10 only if and to the extent
the Manager determines that such inclusion will not adversely
affect the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without
limitation to any restriction on Parent contained in this Parent
Stock Option Agreement or in the Merger Agreement, in the
event of any change in Parent Common Stock by reason of
stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or
the like, the type and number of shares or securities subject
to the Option and the Exercise Price shall be adjusted
appropriately and proper provision will be made in the
agreements governing such transaction, so that the Company
will receive upon exercise of the Option the number and class
of shares or other securities or property that the Company
would have received in respect of Parent Common Stock if the
Option had been exercised immediately prior to such event or
the record date therefor, as applicable. Subject to Section 1,
and without limiting the parties' relative rights and
obligations under the Merger Agreement, if any additional
shares of Parent Common Stock are issued after the date of
this Parent Stock Option Agreement (other than pursuant to an
event described in the first sentence of this Section 11(a)),
the number of Parent Shares will be adjusted so that, after
such issuance, it equals 19.9% of the number of shares of Parent
Common Stock then issued and outstanding, without giving effect
to any shares subject to the Option.
12. RESTRICTIVE LEGENDS. Each certificate representing
shares of Parent Common Stock issued to the Company
hereunder shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE PARENT
STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY
OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
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It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities
Act and state securities or Blue Sky laws in the above legend
shall be removed by delivery of substitute certificate(s)
without such reference, if the Company shall have delivered to
Parent a copy of a letter from the staff of the Commission, or
an opinion of counsel, in form and substance satisfactory to
Parent, to the effect that such legend is not required for
purposes of the Securities Act or such laws;
(ii) the reference to the provisions to this Parent Stock
Option Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with
the provisions of this Parent Stock Option Agreement
and under circumstances that do not require the retention of
such reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied.
In addition, such certificates shall bear any other legend as may
be required by law. Certificates representing shares sold in a
registered public offering pursuant to Section 10 shall not
be required to bear the legend set forth in this Section 12.
13. BINDING EFFECT: NO ASSIGNMENT: NO THIRD PARTY
BENEFICIARIES. (a) This Parent Stock Option Agreement shall be
binding upon and inure solely to the benefit of each party
hereto and their respective successors and permitted assigns.
(b) Except as expressly provided for in this Parent
Stock Option Agreement, neither this Parent Stock Option
Agreement nor the rights or obligations of either party
hereto are assignable except with the written consent of the
other party.
(c) Nothing contained in this Parent Stock Option
Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective
permitted assigns any rights or remedies hereunder.
(d) Any Parent Shares sold by the Company in
compliance with the provisions of Section 10 shall, upon
consummation of such sale, be free of the restrictions imposed
with respect to such shares by this Parent Stock Option
Agreement.
14. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable harm would occur in the event that any of the
provisions of this Parent Stock Option Agreement were not
performed in accordance with their specified terms or were
otherwise breached. It is accordingly agreed that the parties
hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Parent Stock Option Agreement and to
enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are
entitled at law or in equity.
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15. VALIDITY. (a) The invalidity or unenforceability
of any provision of this Parent Stock Option Agreement shall
not affect the validity or enforceability of the other
provisions of this Parent Stock Option Agreement, which shall
remain in full force and effect.
(b) In the event any court or other competent
authority holds any provision of this Parent Stock Option
Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery
of an amendment to this Parent Stock Option Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by
law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) Each party agrees that, should any court or
other competent authority hold any provision of this Parent
Stock Option Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein,
the other party shall not be entitled to specific performance
of such provision or part hereof or to any other remedy,
including but not limited to money damages, for breach hereof or
of any other provision of this Parent Stock Option Agreement or
part hereof as the result of such holding or order.
16. NOTICES. All notices and other communications
under this Parent Stock Option Agreement shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, if (a) delivered
personally, by overnight courier, telecopy or by registered
or certified mail, postage prepaid, return receipt requested
addressed as follows:
A. If to Parent, to:
The B.F.Goodrich Company
4020 Kinross Lakes Pkwy.
Richfield, OH 44286-9368
Attention: Terrence G. Linnert
Sr. Vice President and General
Counsel
Fax: (330) 659-7737
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Gordon S. Kaiser, Esq.
Fax: (216) 479-8780
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B. If to the Company, to:
Coltec Industries Inc
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, NC 28217
Attention: Corporate Secretary
Fax: (704) 423-7011
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: George W. Bilicic, Jr., Esq. and
Allen Finkelson, Esq.
Fax: (212) 474-3700
or to such other address as either party may have furnished to
the other party in writing in accordance with this Section.
17. GOVERNING LAW: CHOICE OF FORUM. This Parent Stock
Option Agreement shall be governed in all respects, including
validity, interpretation and effect by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to the provisions thereof relating to
conflicts of law to the extent that the application of the laws
of another jurisdiction would be required thereby.
18. INTERPRETATION.
(a) When reference is made in this Parent Stock
Option Agreement to Articles, Sections, Schedules or
Exhibits, such reference shall be to an Article, Section,
Schedule or Exhibit of this Parent Stock Option Agreement, as the
case may be, unless otherwise indicated.
(b) The headings contained in this Parent Stock Option
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of the Parent
Stock Option Agreement.
(c) Whenever the words "include," "includes," or
"including" are used in this Parent Stock Option Agreement and
are not followed by the words "without limitation", they shall
be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Parent Stock Option
Agreement shall refer to this Parent Stock Option Agreement as a
whole and not to any particular provision of this Parent Stock
Option Agreement.
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(d) Whenever "or" is used in this Parent Stock
Option Agreement it shall be construed in the nonexclusive
sense.
19. COUNTERPARTS; EFFECT. This Parent Stock Option
Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall
constitute one and the same agreement and each of which shall
only become effective when one or more counterparts have been
signed by each party and delivered to the other party.
20. AMENDMENTS; WAIVER. This Parent Stock Option
Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived but, in the case of an
amendment, only by an instrument in writing signed on behalf
of each of the parties hereto, or, in the case of a waiver,
by an instrument signed on behalf of the party waiving
compliance.
21. LOSS OR MUTILATION. Upon receipt b y Parent of
evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Parent Stock Option
Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Parent Stock Option Agreement, if
mutilated, Parent will execute and deliver a new Parent Stock
Option Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused
this Parent Stock Option Agreement to be executed by their
respective duly authorized officers as of the date first above
written.
THE B.F.GOODRICH COMPANY
By:
Name: David L. Burner
Title: Chairman and Chief
Executive Officer
COLTEC INDUSTRIES INC
By:
Name: John W. Guffey, Jr.
Title: Chairman and Chief
Executive Officer
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