-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GXSSiPsEzcaH5OztNw7J+bt8MLlJTt5PCS/nxho8Dt+FtFylBZLs6VL/7ovQh9Xo Upb8hwVrWFPX6pHJN7bX/Q== 0000950123-98-005278.txt : 19980520 0000950123-98-005278.hdr.sgml : 19980520 ACCESSION NUMBER: 0000950123-98-005278 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19980519 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC INDUSTRIES INC CENTRAL INDEX KEY: 0000201493 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 131846375 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005 FILM NUMBER: 98627764 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: (704) 423 7000 MAIL ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 FORMER COMPANY: FORMER CONFORMED NAME: COLT INDUSTRIES INC DATE OF NAME CHANGE: 19900913 FORMER COMPANY: FORMER CONFORMED NAME: PENN TEXAS CORP DATE OF NAME CHANGE: 19680318 FORMER COMPANY: FORMER CONFORMED NAME: FAIRBANKS WHITNEY CORP DATE OF NAME CHANGE: 19680318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMI INDUSTRIES INC CENTRAL INDEX KEY: 0000006113 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-01 FILM NUMBER: 98627765 BUSINESS ADDRESS: STREET 1: 3200 NORTH NEVADA AVENUE CITY: COLORADO SPRINGS STATE: CO ZIP: 80907 BUSINESS PHONE: 0000000000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXOTICO INC CENTRAL INDEX KEY: 0000034051 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-02 FILM NUMBER: 98627766 BUSINESS ADDRESS: STREET 1: 0 BUSINESS PHONE: 0000000000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALBAR INC CENTRAL INDEX KEY: 0000311975 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT & PARTS [3720] IRS NUMBER: 042133530 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-03 FILM NUMBER: 98627767 BUSINESS ADDRESS: STREET 1: PEABODY INDUSTRIAL CTR STREET 2: PO BOX 3369 CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 6175322700 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC HOLDINGS INC CENTRAL INDEX KEY: 0000832369 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 521571834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-04 FILM NUMBER: 98627768 BUSINESS ADDRESS: STREET 1: 1105 N MARKET ST STE 1300 CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 3026547539 MAIL ADDRESS: STREET 1: 1105 NORTH MARKET S STREET 2: SUITE 1300 CITY: WILMINGTON STATE: DE ZIP: 19801 FORMER COMPANY: FORMER CONFORMED NAME: COLT HOLDINGS INC DATE OF NAME CHANGE: 19900913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CII HOLDINGS CENTRAL INDEX KEY: 0001061994 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-05 FILM NUMBER: 98627769 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC CANADA INC CENTRAL INDEX KEY: 0001061996 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-06 FILM NUMBER: 98627770 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC INDUSTRIAL PRODUCTS INC CENTRAL INDEX KEY: 0001061997 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-07 FILM NUMBER: 98627771 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC INTERNATIONAL SERVICES CO CENTRAL INDEX KEY: 0001061998 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-08 FILM NUMBER: 98627772 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC NORTH CAROLINA INC CENTRAL INDEX KEY: 0001061999 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-09 FILM NUMBER: 98627773 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLTEC TECHNICAL SERVICES INC CENTRAL INDEX KEY: 0001062001 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-10 FILM NUMBER: 98627774 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAVAN INC CENTRAL INDEX KEY: 0001062002 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-11 FILM NUMBER: 98627775 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARLOCK INC CENTRAL INDEX KEY: 0001062003 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-12 FILM NUMBER: 98627776 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARLOCK INTERNATIONAL INC CENTRAL INDEX KEY: 0001062004 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-13 FILM NUMBER: 98627777 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARLOCK OVERSEAS CORP CENTRAL INDEX KEY: 0001062005 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-14 FILM NUMBER: 98627778 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HABER TOOL INC CENTRAL INDEX KEY: 0001062031 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-15 FILM NUMBER: 98627779 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JAMCO PRODUCTS LLC CENTRAL INDEX KEY: 0001062033 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-16 FILM NUMBER: 98627780 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENASCO AEROSYSTEMS INC CENTRAL INDEX KEY: 0001062034 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53005-17 FILM NUMBER: 98627781 BUSINESS ADDRESS: STREET 1: 3 COLISEUM CENTRE STREET 2: 2550 WEST TYVOLA ROAD CITY: CHARLOTTE STATE: NC ZIP: 28217 BUSINESS PHONE: 7044237000 S-4 1 FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ Form S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------------ 3590 (Primary Standard Industrial Classification Code Number)
(Exact name of registrant as (State or other jurisdiction of (I.R.S. Employer specified in its charter) incorporation or organization) Identification No.) Coltec Industries Inc Pennsylvania 13-1846375 AMI Industries, Inc. Colorado 84-1045236 CII Holdings Inc Delaware 13-3314412 Coltec Canada Inc Delaware 13-3887111 Coltec Holdings Inc Delaware 52-1571894 Coltec Industrial Products Inc Delaware 23-2825769 Coltec International Services Co Delaware 13-3895074 Coltec North Carolina Inc North Carolina 58-2043890 Coltec Technical Services Inc Delaware 13-3314406
(Exact name of registrant as (State or other jurisdiction of (I.R.S. Employer specified in its charter) incorporation or organization) Identification No.) Delavan Inc Delaware 42-1467902 Garlock Inc Ohio 13-2838953 Garlock International Inc Delaware 13-3035538 Garlock Overseas Corporation Delaware 16-1010822 Haber Tool Inc Michigan 38-3147840 Jamco Products LLC Texas 76-0559044 Menasco Aerosystems Inc Delaware 13-3799120 Stemco Inc Texas 06-0943080 Walbar Inc Delaware 04-2895576
ROBERT J. TUBBS, ESQ. 3 COLISEUM CENTRE 2550 WEST TYVOLA ROAD CHARLOTTE, N.C. 28217 (704) 423-7000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy to: GEORGE W. BILICIC, JR., ESQ. CRAVATH, SWAINE & MOORE WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NY 10019 (212) 474-1000 ------------------------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ].......................... If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ].......................... ------------------------------------ CALCULATION OF REGISTRATION FEE
================================================================================================================================= PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION OF SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT(1) OFFERING PRICE FEE(2) - --------------------------------------------------------------------------------------------------------------------------------- 7 1/2% Senior Exchange Notes Due 2008........ $300,000,000 100% $300,000,000 $88,500 - --------------------------------------------------------------------------------------------------------------------------------- Guarantees of 7 1/2% Series B Senior Notes Due 2008(3)................................ $300,000,000 N/A N/A N/A - --------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee. (2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933, as amended (the "Securities Act"). (3) The subsidiaries of Coltec Industries Inc listed above will guarantee the 7 1/2% Series B Senior Notes Due 2008 being registered hereby. (4) Pursuant to Rule 457(n), no separate fee is required to be paid in respect of the guarantees of the 7 1/2% Series B Senior Notes Due 2008 being registered hereby. ------------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 18, 1998 $300,000,000 Offer for all Outstanding 7 1/2% Senior Notes Due 2008 of COLTEC INDUSTRIES INC THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME ON , 1998, UNLESS EXTENDED. ------------------ Coltec Industries Inc ("Coltec" or the "Company") hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange up to $300.0 million aggregate principal amount of its 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein) of which this Prospectus, constitutes a part, for a like principal amount of its 7 1/2% Senior Notes Due 2008 (the "Outstanding Notes" and, together with the Exchange Notes, the "Senior Notes") with the holders thereof. The terms of the Exchange Notes are identical in all material respects to the Outstanding Notes except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except that, if the Exchange Offer is not consummated by October 13, 1998, the interest rate borne by the Outstanding Notes will increase by amounts specified herein until the Exchange Offer is consummated. The Exchange Notes will evidence the same indebtedness as the Outstanding Notes and will be issued under and entitled to the same benefits under the Indenture (as defined herein) as the Outstanding Notes. In addition, the Exchange Notes and the Outstanding Notes will be treated as one series of securities under the Indenture. The Outstanding Notes were issued on April 16, 1998 (the "Issue Date"), pursuant to an offering (the "Original Senior Notes Offering") exempt from registration under the Securities Act. Interest on the Exchange Notes will be payable on April 15 and October 15 of each year, commencing October 15, 1998. The Exchange Notes will be redeemable at any time, in whole or in part, at the option of the Company at the redemption price set forth herein and will not be entitled to the benefit of any sinking fund. The Exchange Notes will be senior obligations of the Company and will rank pari passu in right of payment with all existing and future senior obligations of the Company (including indebtedness under the Amended Credit Agreement (as defined herein)) and will rank senior in right of payment to all subordinated obligations of the Company. As of December 31, 1997, on a pro forma basis after giving effect to the Original Senior Notes Offering and the concurrent TIDES Offering (as defined herein) (collectively the "Offerings") and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Company would have had approximately $323.9 million of other senior indebtedness ($262.0 million of which would have been indebtedness outstanding under the Amended Credit Agreement). The Exchange Notes will be unconditionally guaranteed, jointly and severally, on a senior basis, by the Subsidiary Guarantors (as defined herein). The Subsidiary Guarantees (as defined herein) will be senior obligations of the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future senior obligations of the Subsidiary Guarantors (including guarantees of indebtedness under the Amended Credit Agreement) and will rank senior to all subordinated obligations of such Subsidiary Guarantors. The Subsidiary Guarantees may be released without action on the part of the holders of Senior Notes in certain circumstances. See "Description of the Senior Notes -- Guarantees". As of December 31, 1997, after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Subsidiary Guarantors would have had approximately $262.0 million of other senior indebtedness (all of which would have been guarantees of indebtedness under the Amended Credit Agreement). The Indenture does not contain any limitation on the incurrence of additional indebtedness by the Company or its subsidiaries. The Exchange Notes and the Subsidiary Guarantees will be secured, subject to the provisions of the Amended Collateral Documents (as defined herein), equally and ratably with the indebtedness of the Company and the Subsidiary Guarantors under the Amended Credit Agreement and related documents and liability in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement, by a security interest in the Collateral (as defined herein). The Collateral may be released without action on the part of the holders of Senior Notes in certain circumstances. See "Description of the Senior Notes -- Collateral". As of December 31, 1997, on a pro forma basis after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Company and its subsidiaries would have had approximately $262.0 million of other secured indebtedness outstanding (all of which would have been indebtedness outstanding under the Amended Credit Agreement). See "Description of the Senior Notes". The Company will accept for exchange any and all Outstanding Notes that are validly tendered and not withdrawn on or prior to midnight, New York City time, on the date the Exchange Offer expires (the "Expiration Date"), which will be , 1998 (20 business days following the commencement of the Exchange Offer), unless the Exchange Offer is extended. Tenders of Outstanding Notes may be withdrawn at any time prior to midnight, New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Outstanding Notes being tendered for exchange. Outstanding Notes may be tendered only in integral multiples of $1,000. See "The Exchange Offer". For each Outstanding Note accepted for exchange, the holder of such Outstanding Notes will receive an Exchange Note having a principal amount equal to that of the surrendered Outstanding Note. Interest on the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Outstanding Notes surrendered in exchange therefor, or if no interest has been paid on the Outstanding Notes surrendered in exchange therefor, or if no interest has been paid on the Outstanding Notes, from the Issue Date. Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange will not receive any interest payment in respect of interest on such Outstanding Notes otherwise payable on any interest payment date the record date for which occurs on or after the consummation of the Exchange Offer. Consequently, holders who exchange their Outstanding Notes for Exchange Notes will receive the same interest payment on October 15, 1998 (the first interest payment date with respect to the Outstanding Notes and the Exchange Notes) that they would have received had they not accepted the Exchange Offer. See "the Exchange Offer -- Interest on the Exchange Notes". (Cover continued on next page) ------------------ FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OUTSTANDING NOTES FOR EXCHANGE NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 11. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1997 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. 3 (Cover continued from previous page) The Exchange Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement (as defined herein). See "The Exchange Offer -- Consequences of Exchanging Outstanding Senior Notes" for a discussion of the Company's belief, based on interpretations by the staff of the Securities and Exchange Commission (the "SEC" or the "Commission") as set forth in no-action letters issued to third parties, as to the transferability of the Exchange Notes upon satisfaction of certain conditions. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any resale of Exchange Notes. See "Plan of Distribution". There is no established trading market for the Exchange Notes, and there can be no assurance regarding the future development of a market for the Exchange Notes, or the ability of the holders of the Exchange Notes to sell their Exchange Notes or the price at which such holders may be able to sell their Exchange Notes. The Company does not currently intend to list the Exchange Notes on any securities exchange or to seek approval for quotation of the Exchange Notes on any securities exchange or to seek approval for quotation of the Exchange Notes through any automated quotation system. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. The Company will not receive any proceeds for the Exchange Offer. The Company will pay all of the expenses incident to the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Outstanding Notes, the Company will promptly return the Outstanding Notes to the holders thereof. See "The Exchange Offer". 4 AVAILABLE INFORMATION Coltec is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC" or the "Commission"). Such reports, proxy statements and other information filed by Coltec with the Commission may be inspected and copied at the public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7 World Trade Center, 13th floor, New York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. Such reports and other information may also be inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005 and the Pacific Exchange Incorporated (the "PSE"), 301 Pine Street, Suite 1104, San Francisco, California 94104. This Prospectus constitutes a part of a registration statement on form S-4 (the "Registration Statement") filed by the Company with the Commission under the Securities Act. As permitted by the rules and regulations of the Commission, this Prospectus does not contain all of the information contained in the Registration Statement and the exhibits and schedules thereto and reference is hereby made to the Registration Statement and exhibits and schedules thereto for further information with respect to the Company and the securities offered hereby. Statements contained herein concerning the provisions of any documents filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by Coltec pursuant to the Exchange Act are incorporated in this Prospectus by reference: (i) Annual Report on Form 10-K for the year ended December 31, 1997; (ii) Quarterly Report on Form 10-Q for the period ended March 29, 1998; (iii) Current Report on Form 8-K, dated March 30, 1998; (iv) Current Report on Form 8-K, dated April 8, 1998; (v) Current Report on Form 8-K, dated April 14, 1998; and (vi) Current Report on Form 8-K, dated May 15, 1998. All documents filed by the Company with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the Exchange Offer shall be deemed to be incorporated by reference in this Prospectus and to be a part of this Prospectus from the date of filing of such documents. Any statement contained in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, or contained in this Prospectus, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, on the written or oral request of any such person, a copy of any or all of the above documents incorporated or deemed to be incorporated herein by reference (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the documents that this Prospectus incorporates) and any other information requested thereby as described above under "Available Information". Written or oral requests should be directed to the Company's principal executive office at: Coltec Industries Inc, 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina 28217, Attention: Corporate Secretary (telephone (704) 423-7000). i 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Certain capitalized terms used but not defined are used as defined elsewhere in this Prospectus. THE COMPANY Coltec and its consolidated subsidiaries manufacture and sell a diversified range of highly engineered aerospace and industrial products primarily in the United States, Canada and Europe. Coltec's operations are conducted through its two principal segments -- Aerospace and Industrial. Through its Aerospace segment, which in 1997 accounted for approximately 42% of total Company sales and approximately 37% of total Company operating profit, Coltec is a leading manufacturer of landing gear systems, engine fuel controls, flight attendant and cockpit seats, turbine blades, fuel injectors, nozzles and related components for commercial and military aircraft. Through its Industrial segment, which in 1997 accounted for approximately 58% of total Company sales and approximately 63% of total Company operating profit, Coltec is a leading manufacturer of industrial seals, gaskets, packing products, self-lubricating bearings and oil seals and hubodometers for trucks and trailers and is a producer of technologically advanced spray nozzles for agricultural, home heating and industrial applications. Coltec also produces high-horsepower diesel engines for naval ships and diesel, gas and dual-fuel engines for electric power plants and produces air compressors and tooling for industrial applications. The Company derived approximately 50% of sales in 1997 from its aftermarket, or parts and services, business. Aftermarket sales tend to generate significantly higher margins and tend to be less affected by general economic cycles than the Company's sales of products to original equipment manufacturers ("OEMs"). In addition, management believes the Company is benefiting from several other industry trends which will help the Company achieve its growth and operating goals. These trends include strong growth in world airline fleets, preference by OEMs to source complex integrated systems rather than component parts, an increased preference to consolidate purchasing of consumable products from a single full line supplier and customer demand for integrated sales and service providers. In 1997, Coltec had sales and EBITDA (as defined herein) of $1,314.9 million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from 1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3 million at year end 1996. Coltec's common stock is listed on the NYSE, and based on the closing price of $23 1/2 per share on May 15, 1998, the Company had a total equity market capitalization of approximately $1,553.4 million. BUSINESS STRATEGY The Company's strategy is to develop and maintain market leading positions and attractive margins for its products through technological innovation, cost efficiencies, product differentiation and superior quality and service. The Company emphasizes targeted development of highly engineered, value-added products designed to meet specific customer requirements. This emphasis enables the Company to maintain close, interactive relationships with major aircraft manufacturers as well as the Company's principal industrial customers and to develop new products in response to customer needs. Coltec views its superior customer responsiveness as one of its key competitive strengths. Successful introduction of new products, cost reductions, productivity improvements and selected divestitures have helped the Company maintain operating margins averaging more than 12.5% over the last five years. Through "Coltec 2000", the Company's three-year growth and operating plan, the Company has set specific growth and operating targets focused on achieving annual revenues of $2 billion by the year 2000 while maintaining the quality of earnings. The plan calls for substantial growth internally, complemented by strategic acquisitions which extend product offerings of the Company's existing businesses and leverage the Company's existing distribution network. The key elements of the plan are as follows: 1 6 - Focus on Aftermarket -- For the year ended December 31, 1997, approximately 50% of the Company's sales were derived from the aftermarket. The Company's products sold in the aftermarket include industrial seals, hub systems and a variety of aftermarket parts used in the maintenance of engines, compressors, pumps and gas turbines. A broad and fragmented buyer base coupled with the critical nature of replacement parts generates sales with generally higher margins than sales to original equipment manufacturers. In addition, because the products are consumable in nature and are replaced over time, the aftermarket provides a stable source of income. - Develop New Products -- The Company believes that responsiveness to customer demands is a critical success factor in both its Aerospace and Industrial markets. As a result, the Company has undertaken a number of initiatives to reduce the time and cost of bringing new products to market and has established a long term objective of generating 50% of sales from products introduced within the prior five years. Recent new product and application introductions have included (i) landing gear systems for the Boeing 777, (ii) Power$ync II computerized controls for compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM) industrial sealing products, (iv) the Raindrop Ultra agricultural spray nozzle, (v) new versions of FADEC electronic fuel controls for aircraft, (vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company to enter the large jet engine market and (vii) the Company's Chandler Evans Control Systems Division's agreement to develop and utilize its advanced Variable Displacement Vane Pump technology in aircraft engine applications. - Focus on Globalization -- For the year ended December 31, 1997, approximately 10% of the Company's revenues were generated from outside of the United States and Canada. As part of its Coltec 2000 strategy, the Company seeks to grow its international operations, through a mix of internal growth and acquisitions. Given the global nature of many of the markets in which the Company competes, management believes that an increased global presence will lead to substantial operating efficiencies, as fixed development and operating costs can be amortized over a greater sales base. In terms of internal growth, the Company will emphasize the development and expansion of its international customer base, through the sale of products such as the fuel injectors to Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has established sales and distribution capabilities in Asian and South American countries and will pursue international growth through complementary acquisitions such as its recent acquisition of Groupe Carbone Lorraine's sealing products business. - Total Systems Sourcing -- Management believes that many of the Company's largest customers, including The Boeing Company ("Boeing"), are placing increased emphasis on suppliers which are capable of providing integrated systems rather than component parts. The Company believes that its design and engineering competencies and cellular manufacturing processes provide a competitive advantage in the design and manufacture of integrated systems and are areas in which the Company will continue to invest. For example, in 1995 the Company supplied Boeing with non-integrated landing gear systems. However, in 1996 with the Boeing 737 and 757, Coltec began providing fully integrated landing gear which includes the installation of wheels, tires, brakes, hydraulics, electrical harnesses, lights and sensing systems on the base landing gear. In 1997, the Company began providing fully integrated landing gear for the Boeing 777 aircraft thereby increasing revenue by more than 20% per unit. The Company will begin providing fully integrated landing gear for the Boeing 767 in 1998. - Productivity Initiatives -- A number of productivity initiatives have been implemented which have been designed to reduce lead times, curtail scrap and enhance throughput, which are expected among other things, to improve inventory turns. Such initiatives have included the consolidation of multiple product lines into common production facilities and the relocation of the Company's Delavan Spray Technologies Division to new state-of-the-art facilities near major transportation hubs. Cycle time reductions have reduced required inventory levels while improving customer responsiveness. For example, during 1997, Walbar Arizona reduced cycle times on damper seal production by approximately 70%, while the Company's Menasco Division reduced production time for Boeing 737 landing gear main cylinders from 20 weeks to 12. The Company intends to continue to enhance its production processes through optimization of workflow, investment in upgraded manufacturing technologies and robotics, and related initiatives. In addition, all of the Company's major divisions are in the late stages of implementing new 2 7 enterprise reporting systems. The new systems are enhancing shop floor reporting, materials management, order entry and cost evaluation and control. Management believes that these programs are leading to productivity and efficiency improvements and are having a positive impact on operating performance. The new enterprise systems have the added benefit of addressing year 2000 systems issues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Coltec is a Pennsylvania corporation with its principal executive offices located at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina 28217. The telephone number of Coltec is (704) 423-7000. TIDES OFFERING Concurrently with the Original Senior Notes Offering, Coltec Capital Trust (the "Trust") offered and sold, by means of a separate offering circular (the "TIDES Offering"), 3,000,000 5 1/4% Convertible Preferred Securities (the "Convertible Preferred Securities"), liquidation preference $50 per Convertible Preferred Security, which are guaranteed to the extent set forth therein by, and convertible into common stock of, the Company. The Company issued to the Trust 5 1/4% Convertible Subordinated Deferrable Interest Debentures Due 2028 (the "TIDES Debentures"), which have an aggregate principal amount, interest, conversion and other terms substantially similar or analogous to those of the Convertible Preferred Securities. Indebtedness under the TIDES Debentures is unsecured and subordinated to the Senior Notes and all other Senior Debt (as defined in the Indenture relating to the TIDES Debentures) of the Company. RECENT DEVELOPMENT On May 15, 1998, the Company completed the previously-announced sale of the capital stock of its Holley Performance Products subsidiary ("Holley") to Kohlberg & Co., L.L.C., a private merchant banking firm located in Mount Kisco, New York, for $100 million in cash. The proceeds from this acquisition were applied toward reducing debt. For 1997, Holley had gross revenues and operating income of approximately $99.0 million and $8.0 million, respectively. 3 8 THE EXCHANGE OFFER The Exchange Offer relates to the exchange of up to $300.0 million aggregate principal amount of Outstanding Notes for an equal aggregate principal amount of Exchange Notes. The Exchange Notes will evidence the same indebtedness as the Outstanding Notes and will be issued under and entitled to the same benefits as the Outstanding Notes under the Indenture (the "Indenture"), dated as of April 16, 1998 among the Company, the Subsidiary Guarantors and Bankers Trust Company, as Trustee (the "Trustee"). In addition, the Exchange Notes and the Outstanding Notes will be treated as one series of securities under the Indenture. Securities Offered......... Up to $300.0 million aggregate principal amount of 7 1/2% Senior Exchange Notes Due 2008, which have been registered under the Securities Act. The terms of the Exchange Notes are identical in all material respects to the Outstanding Notes except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except that, if the Exchange Offer is not consummated on or prior to October 13, 1998, the interest rate borne by the Outstanding Notes will increase by amounts specified herein until the Exchange Offer is consummated. See "Description of the Senior Notes -- Registered Exchange Offer; Registration Rights". The Exchange Offer......... The Exchange Notes are being offered in exchange for a like principal amount of Outstanding Notes validly tendered pursuant to the Exchange Offer. As of the date hereof, $300.0 million in aggregate principal amount of Outstanding Notes are outstanding. The Company will issue the Exchange Notes to tendering holders of Outstanding Notes on or promptly after the Expiration Date. The issuance of the Exchange Notes is intended to satisfy the obligations of the Company contained in the Registration Rights Agreement. For procedures on tendering, see "The Exchange Offer" and "Description of the Senior Notes -- Registered Exchange Offer; Registration Rights". Expiration of the Exchange Offer........... Midnight, New York City time, on , 1998, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer -- Terms of the Exchange Offer; Period of Tendering Outstanding Notes". Tenders; Withdrawal........ The tender of Outstanding Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Conditions to the Exchange Offer........... The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the Commission. There can be no assurance that any such condition will not occur. Holders of Outstanding Notes will have certain rights under the Registration Rights Agreement should the Company fail to consummate the Exchange Offer. See "The Exchange Offer -- Certain Conditions to the Exchange Offer". United States Taxation Considerations........... The exchange pursuant to the Exchange Offer should not be a taxable event for Federal income tax purposes. See "United States Taxation". 4 9 Exchange Agent............. Bankers Trust Company, the Trustee under the Indenture, is serving as the exchange agent (the "Exchange Agent") in connection with the Exchange Offer. Use of Proceeds............ There will be no cash proceeds payable to the Company from the issuance of the Exchange Notes pursuant to the Exchange Offer. See "Use of Proceeds" for a description of the use of proceeds from the issuance of the Outstanding Notes. 5 10 CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the provisions of the Indenture regarding transfer and exchange of the Outstanding Notes and the restrictions on transfer of such Outstanding Notes as set forth in the legend thereon as a consequence of the issuance of the Outstanding Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register Outstanding Notes under the Securities Act. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Notes. However, the Company does not intend to request the Commission to consider, and the Commission has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that (i) the Exchange Notes received by such holder will be acquired in the ordinary course of its business, (ii) at the time of the consummation of the Exchange Offer such holder will have not engaged in, and does not intend to engage in, a distribution of Exchange Notes and has no arrangement or understanding to participate in a distribution of Exchange Notes and (iii) such holder is not an affiliate of the Company within the meaning of Rule 405 of the Securities Act or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. If any holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". However, to comply with state securities laws, the Exchange Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the Exchange Notes to "qualified institutional buyers" (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under state securities laws. The Company currently does not intend to register or qualify the sale of the Exchange Notes in any state where an exemption from registration or qualification is required and not available. See "The Exchange Offer -- Consequences of Failure to Exchange and Requirements for Transfer of Exchange Notes". 6 11 SUMMARY DESCRIPTION OF EXCHANGE NOTES Securities Offered......... $300.0 million aggregate principal amount of 7 1/2% Series B Senior Notes Due April 15, 2008 of Coltec Industries Inc. Maturity Date.............. April 15, 2008. Interest Payment Dates..... April 15 and October 15 of each year, commencing October 15, 1998. Interest on the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Outstanding Notes surrendered in exchange therefor, or if no interest has been paid on the Outstanding Notes, from the Issue Date. Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange will not receive any payment in respect of interest on such Outstanding Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. Consequently, holders who exchange their Outstanding Notes for Exchange Notes will receive the same interest payment on October 15, 1998 (the first interest payment date with respect to the Senior Notes) that they would have received had they not accepted the Exchange Offer. See "The Exchange Offer -- Interest on the Exchange Notes". Optional Redemption........ The Senior Notes are redeemable, in whole or in part, at any time, at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of such Senior Notes and (ii) the sum of the present value of the remaining scheduled payments of principal and interest thereon from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the date of redemption. The Senior Notes are not entitled to the benefit of any sinking fund. Ranking.................... The Senior Notes are senior obligations of the Company and will rank pari passu in right of payment with all existing and future senior obligations of the Company (including indebtedness under the Amended Credit Agreement) and will rank senior in right of payment to all subordinated obligations of the Company. As of December 31, 1997, on a pro forma basis after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Company would have had approximately $323.9 million of other senior indebtedness ($262.0 million of which would have been indebtedness outstanding under the Amended Credit Agreement). The Indenture does not contain any limitation on the incurrence of additional indebtedness by the Company. Guarantees................. The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior basis, by the Subsidiary Guarantors. The Subsidiary Guarantees will be senior obligations of the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future senior obligations of the Subsidiary Guarantors (including guarantees of indebtedness under the Amended Credit Agreement) and will rank senior to all subordinated obligations of such Subsidiary Guarantors. The Subsidiary Guarantees may be released without action on the part of the holders of Senior Notes in certain circumstances. As of December 31, 1997, on a pro forma basis after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Subsidiary Guarantors would have had approximately 7 12 $262.0 million of other senior indebtedness (all of which would have been guarantees of indebtedness under the Amended Credit Agreement). The Indenture relating to the Senior Notes does not contain any limitation on the incurrence of additional indebtedness by the Company's subsidiaries. Security................... The Senior Notes and the Subsidiary Guarantees are secured, subject to the provisions of the Amended Collateral Documents, equally and ratably with the indebtedness of the Company and the Subsidiary Guarantors under the Amended Credit Agreement and related documents and liabilities in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement, by a security interest in the Collateral. The Collateral may be released without action on the part of the holders of Senior Notes in certain circumstances. As of December 31, 1997, after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Company and its subsidiaries would have had approximately $262.0 million of other secured indebtedness outstanding (all of which would have been indebtedness outstanding under the Amended Credit Agreement). For a description of the Collateral and the Amended Collateral Documents, see "Description of Other Indebtedness" and "Description of the Senior Notes". Restrictive Covenants...... The Indenture contains certain covenants that limit (i) the granting of certain additional liens without securing the Senior Notes equally and ratably, (ii) the entering into of certain sale and leaseback transactions and (iii) certain consolidations, mergers and transfers of assets. However, these limitations are subject to a number of important qualifications. See "Description of the Senior Notes -- Certain Covenants" and "-- Merger, Consolidation or Sale of Assets". Use of Proceeds............ There will be no cash proceeds to the Company from the Exchange Offer. 8 13 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth summary consolidated financial and other data of Coltec for the five years ended December 31, 1997 and for three months ended March 30, 1998 and March 29, 1998. The information should be read in conjunction with Coltec's consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus and incorporated by reference herein. The statement of earnings data and other financial data for 1993, 1994 and 1995 have been restated to reflect the sale of the Company's automotive original equipment components business in 1996, which was accounted for as a discontinued operation. The summary consolidated financial and other data, with the exception of order backlog, at and for the years ended December 31, 1993 through 1997, were derived from the consolidated financial statements of Coltec which have been audited by Arthur Andersen LLP, independent public accountants. The selected consolidated financial and other data, with the exception of order backlog, at and for the three months ended March 30, 1997 and March 29, 1998 were derived from the unaudited consolidated financial statements of Coltec which are incorporated by reference herein.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, --------------------- ---------------------------------------------------- MARCH 30, MARCH 29, 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- --------- --------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENT OF EARNINGS DATA: Net sales....................................... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $1,314.9 $ 309.2 $ 374.4 Cost of goods sold.............................. 703.9 648.3 744.2 811.1 898.3 211.7 260.1 -------- -------- -------- -------- -------- -------- -------- Gross profit.................................... 357.5 351.9 355.4 348.6 416.6 97.5 114.3 Selling and administrative...................... 183.8 186.7 186.4 191.0 218.8 52.6 61.0 Special charge(a)............................... 25.2 -- 27.0 -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Operating income(b)............................. 148.5 165.2 142.0 157.6 197.8 44.9 53.3 Interest expense and other, net................. 110.2 89.5 89.9 74.9 54.0 12.4 15.1 Income taxes.................................... 13.7 27.2 17.6 28.1 48.9 11.0 13.0 -------- -------- -------- -------- -------- -------- -------- Earnings from continuing operations before extraordinary item(b)......................... 24.6 48.5 34.5 54.6 94.9 21.5 25.2 Discontinued operations(c)...................... 40.6 45.5 36.7 57.1 -- -- -- Extraordinary item(d)........................... (17.8) (1.5) (.3) (30.6) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings.................................... $ 47.4 $ 92.5 $ 70.9 $ 81.1 $ 94.9 $ 21.5 $ 25.2 ======== ======== ======== ======== ======== ======== ======== Earnings (loss) per common share:(e) Before extraordinary item..................... $ .35 $ .70 $ .49 $ .79 $ 1.42 $ .32 $ .38 Discontinued operations....................... .59 .65 .53 .82 -- -- -- Extraordinary item............................ (.26) (.02) -- (.44) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings per share.......................... $ .68 $ 1.33 $ 1.02 $ 1.17 $ 1.42 $ .32 $ .38 ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT END OF PERIOD): Working capital................................. $ 163.1 $ 189.6 $ 208.9 $ 215.6 $ 187.9 $ 217.2 $ 228.4 Total assets.................................... 796.5 847.5 894.5 849.5 933.0 851.9 1,076.1 Total debt...................................... 1,033.6 970.1 945.8 720.3 759.4 731.3 860.0 Shareholders' equity............................ (625.5) (525.6) (453.8) (417.0) (359.2) (413.7) (335.2) OTHER FINANCIAL DATA: EBITDA(f)....................................... $ 197.5 $ 207.3 $ 184.1 $ 193.6 $ 236.2 $ 53.4 $ 65.7 Capital expenditures............................ 38.6 38.2 42.5 44.6 81.2 13.6 15.0 Order backlog (at end of period)(g)............. 598.6 594.2 657.1 678.3 875.6 805.9 968.2 Ratio of earnings to fixed charges(h)........... 1.3x 1.8x 1.6x 2.1x 3.5x 3.5x 3.4x Ratio of EBITDA to interest expense(i).......... 1.8x 2.3x 2.0x 2.6x 4.4x 4.3x 4.4x Ratio of total debt to EBITDA(j)................ 5.2x 4.7x 5.1x 3.7x 3.2x 13.7x 13.1x
- --------------- (a) In 1997, Coltec incurred a special charge of $10.0 million for the restructuring of its Industrial segment. In 1997, the remaining $10.0 million accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a special charge of $27.0 million primarily to cover the costs of closing the Walbar compressor blade facility in Canada. The charge also covered selected workforce reductions throughout the Company. In 1993, Coltec incurred a special charge of $25.2 million to cover the cost of consolidation and rearrangement of certain manufacturing facilities and related workforce reductions primarily in the Aerospace segment. 9 14 (b) Operating income for 1996 included a charge of $14.2 million related to the bankruptcy of Fokker Aircraft B.V. ("Fokker"), a major aerospace customer of Coltec. (c) See note 2 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. (d) See note 3 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. Extraordinary charges relate to either early retirement of debt or debt refinancings. (e) Represents diluted earnings per common share. See note 5 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. The Company's reported earnings per common share for 1996, 1995, 1994 and 1993 equaled diluted earnings per share as set forth in Statement of Financial Accounting Standards No. 128. (f) "EBITDA" as used herein means earnings from continuing operations before extraordinary item plus interest expense, taxes, depreciation and amortization. EBITDA is presented because the Company believes that it is a widely accepted indicator of cash flow and a company's ability to incur and service indebtedness. However, EBITDA should not be considered as a measure of operating performance or as an alternative to, or more meaningful than, operating income, net income or cash flows from operations (as measured by U.S. generally accepted accounting principles). EBITDA for 1993 would have been $222.7 million excluding the special charge of $25.2 million described in note (a) above. EBITDA for 1995 would have been $211.1 million excluding the $27.0 million special charge described in note (a) above. (g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was scheduled to be shipped after 1998. (h) For purposes of calculating the ratio of earnings to fixed charges, earnings are determined by adding fixed charges (excluding capitalized interest) and income taxes to earnings from continuing operations before extraordinary item. Fixed charges consist of interest expense, capitalized interest and that portion of rental expense deemed to be representative of the interest factor. (i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA of $222.7 million and $211.1 million, respectively, as described in note (f) above, would have been 2.0x and 2.3x, respectively. (j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of $222.7 million and $211.1 million, respectively, as described in note (f) above, would have been 4.6x and 4.5x, respectively. 10 15 RISK FACTORS Prospective holders of the Exchange Notes should carefully review the information contained elsewhere in this Prospectus and should particularly consider the following factors. This Prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact included in this Prospectus, including, without limitation, the statements under "Prospectus Summary", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and located elsewhere herein regarding industry prospects, the Company's prospects and the Company's financial position are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations (the "Cautionary Statements") are disclosed in this Prospectus, including, without limitation, those factors described below. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. SUBSTANTIAL LEVERAGE; SHAREHOLDERS' DEFICIT As of December 31, 1997, Coltec's total indebtedness was $759.4 million. At such date, Coltec had total assets of $933.0 million and a shareholders' deficit of $359.2 million. As of December 31, 1997 after giving effect to the Offerings and use the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, Coltec's indebtedness would have been $623.9 million. The degree to which Coltec is leveraged could have important consequences to the holders of Senior Notes. Coltec's substantial indebtedness could materially adversely limit its capacity to respond to changing business and economic conditions. Insofar as changing business and economic conditions may affect the financial condition and financing requirements of Coltec, they could impose significant risks to the holders of the securities offered hereby. Furthermore, the ability of Coltec to satisfy its obligations and to service, repay or refinance its debt will be dependent upon the future performance of Coltec, which will be subject to prevailing economic conditions and to financial, business and other factors, including factors beyond the control of Coltec, affecting the business and operations of Coltec. RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS The Amended Credit Agreement imposes significant operating and financial restrictions on Coltec. Such restrictions affect, and in many respects significantly limit or prohibit, among other things, the ability of Coltec to incur additional indebtedness, create liens, sell assets, engage in mergers and acquisitions, make certain capital expenditures or pay dividends. These restrictions, in combination with the highly leveraged nature of Coltec, could limit the ability of Coltec to effect future financings and otherwise limit future business activities, which, in each case, could have a material adverse effect on Coltec. See "Description of Other Indebtedness". CYCLICAL BUSINESS; GOVERNMENT CONTRACTS The Aerospace, Industrial and other business sectors to which Coltec sells its products are, to varying degrees, cyclical and have historically experienced periodic downturns, which often have had a negative effect on demand for Coltec's products. Prior downturns have resulted in negative effects on Coltec's net sales, gross margin and net income. Although Coltec believes that, by concentrating on products with strong aftermarket demand, it has reduced its exposure to such business downturns, any future material weakness in demand in any of these industries could have a material adverse effect on the business, financial condition and results of operations of Coltec. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Additionally, many of Coltec's competitors have substantially greater financial resources than Coltec and may be better able to withstand the effects of such periodic downturns. Certain of the contracts under which Coltec is a supplier, including those with commercial aviation manufacturers and the United States government, contain provisions allowing for early termination, including 11 16 termination due to lack of congressional appropriation or for convenience. In addition, substantially all of Coltec's government contracts are fixed-price contracts under which Coltec agrees to perform the work for a fixed price and, accordingly, realizes all the benefit or detriment occasioned by decreased or increased costs of performing the contracts. From time to time, Coltec accepts fixed-price contracts for products that have not been previously developed. In such cases, Coltec is subject to the risk of delays and cost overruns. See "Business -- Contract Risks". ASBESTOS LITIGATION The historical business operations of Coltec have resulted in a substantial volume of asbestos litigation, in which plaintiffs have alleged personal injury or death as a result of exposure to asbestos fibers in a number of products which were manufactured or distributed by two of the Company's subsidiaries. While the Company believes that several factors, including agreed upon funding agreements with its insurance carriers, will provide resources sufficient to meet the vast majority of the currently anticipated costs and expenses associated with this litigation, the large volume of current and potential future asbestos claims, the depletion of insurance coverage of a small non-operating subsidiary, the payment of some non-insured litigation costs and the unavailability of insurance for claims alleging first exposure to asbestos after July 1, 1984 may result in liabilities to the Company in the future that could have a material adverse effect on the Company's business, financial condition and results of operations. See "-- Potential Exposure to Environmental Liabilities" below and "Business -- Legal Proceedings -- Asbestos Litigation". POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES Coltec is subject to various federal, state and local environmental laws, ordinances and regulations, including those governing discharges of pollutants into the air and water, the storage, handling and disposal of solid wastes, hazardous wastes and hazardous substances and the health and safety of employees ("Environmental Laws"). Violations of Environmental Laws could result in liability for government penalties, claims by third parties for personal injury and property damage, costs of investigation and remediation of contamination and the cost of natural resource damage. Agencies responsible for enforcing Environmental Laws have authority to impose significant civil or criminal penalties for non-compliance. Coltec believes it is currently in material compliance with all applicable requirements of Environmental Laws, but there can be no assurance that some future non-compliance will not result in the imposition of significant liabilities. Future events, such as new information concerning past releases of hazardous substances, changes in existing Environmental Laws or their interpretation, and more rigorous enforcement by regulatory authorities, may give rise to additional expenditures, compliance requirements or liabilities that could have a material adverse effect on the business, financial condition and results of the operations of Coltec. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Environmental Matters" and "Business -- Environmental Matters". COLLATERAL The Senior Notes are secured, equally and ratably, with indebtedness under the Amended Credit Agreement and related documents and liabilities in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement, by a security interest in the Collateral pursuant to the Amended Collateral Documents. The Amended Collateral Documents may be amended to, among other things, secure additional extensions of credit or add additional secured creditors without the consent of the Senior Noteholders or the Trustee under the Indenture. See "Description of Other Indebtedness -- The Amended Credit Agreement -- Collateral" for a description of the Collateral and the Amended Collateral Documents. In the event of foreclosure on the Collateral, the proceeds from the sale of the Collateral may not be sufficient to satisfy the Company's obligations under the Senior Notes and the Amended Credit Agreement in full. The amount to be received upon such a sale would be dependent upon numerous factors including the timing and the manner of the sale. In addition, the book value of the Collateral should not be relied upon as a measure of realizable value. By its nature, the Collateral will be illiquid and may have no readily ascertainable market value. 12 17 Accordingly, there can be no assurance that the Collateral can be sold in a short period of time. A significant portion of the Collateral includes assets which may only be usable as part of the existing operating businesses of the Company. Accordingly, any such sale of the Collateral, including the real property portion thereof, separate from the sale of certain of the Company's operating businesses, may not be feasible or of significant value. To the extent that third parties enjoy Permitted Liens (as defined herein) or liens otherwise permitted under the Indenture, such third parties may have rights and remedies with respect to the property subject to such permitted Liens that, if exercised, could adversely affect the value or availability of the Collateral. In addition, the ability of the holders of Senior Notes to realize upon any of the Collateral may be subject to certain bankruptcy law limitations in the event of a bankruptcy. Under the Amended Collateral Documents, the control of foreclosure proceedings, the enforcement and amendment of the Amended Collateral Documents and the right to take other actions with respect to the Collateral belong solely to the Collateral Agent and the lenders under the Amended Credit Agreement. The lenders under the Amended Credit Agreement may release Collateral, in whole or in part, from time to time, and in such event, the Collateral so released will be automatically released as security for the Senior Notes without any action on the part of the Trustee or the Senior Noteholders. In addition, all Collateral under the Amended Credit Agreement and the Amended Collateral Documents will be automatically released upon the Company's long-term indebtedness being rated BBB- by Standard & Poor's Ratings Group and Baa3 by Moody's Investors Service, Inc., and in such event, all Collateral securing the Senior Notes will also be automatically released without any action on the part of the Trustee or the Senior Noteholders. See "Description of Other Indebtedness -- The Amended Credit Agreement -- Collateral". CERTAIN SUBSIDIARIES NOT INCLUDED AS SUBSIDIARY GUARANTORS The Subsidiary Guarantors include only the domestic subsidiaries of the Company that have guaranteed the Company's obligations under the Amended Credit Agreement. However, the consolidated financial information included in this Offering Circular is presented on a consolidated basis, including both domestic and foreign subsidiaries of the Company. See note 20 to the Company's consolidated financial statements included elsewhere in this Prospectus for Subsidiary Guarantor financial information. LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES The Outstanding Notes are currently owned by a small number of beneficial owners. The Outstanding Notes have not been registered under the Securities Act and are subject to significant restrictions on resale. The Exchange Notes will be a new issue of securities for which there is currently no trading market. There can be no assurance regarding the future development of a market for the Exchange Notes, or the ability of holders of the Exchange Notes to sell their Exchange Notes or the price at which holders may be able to sell their Exchange Notes. If the Exchange Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities and other factors, including general economic conditions and the financial condition and performance of, and prospects for, the Company. To the extent that Outstanding Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Outstanding Notes could be adversely affected. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange, or for quotation of the Exchange Notes on any automated quotation system. Historically, the market for non-investment grade debt securities has from time to time been subject to disruptions that have caused substantial volatility in the prices of such securities. There can be no assurance that the market for the Senior Notes will not be subject to similar disruptions. Any such disruptions may have an adverse effect on the holders of the Senior Notes and the Exchange Notes. EXCHANGE OFFER PROCEDURES Issuance of the Exchange Notes in exchange for Outstanding Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Company of Outstanding Notes, a properly completed and duly executed Letter of Transmittal or an Agent's Message (as defined herein) in lieu thereof and all other required documents. 13 18 Therefore, holders of the Outstanding Notes desiring to tender their Outstanding Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Outstanding Notes for exchange. Outstanding Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions on transfer thereof. See "The Exchange Offer". CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE NOTES Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Outstanding Notes and the restrictions on transfer of such Outstanding Notes as set forth in the legend thereon as a consequence of the issuance of the Outstanding Notes pursuant to exemptions from or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register Outstanding Notes under the Securities Act. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Notes. However, the Company does not intend to request the Commission to consider, and the Commission has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that (i) the Exchange Notes received by such holder will be acquired in the ordinary course of its business, (ii) at the time of the consummation of the Exchange Offer such holder will have not engaged in, and does not intend to engage in, a distribution of Exchange Notes and has no arrangement or understanding to participate in a distribution of Exchange Notes and (iii) such holder is not an affiliate of the Company within the meaning of Rule 405 of the Securities Act or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. If any holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirement of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". However, to comply with state securities laws, the Exchange Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the Exchange Notes to "qualified institutional buyers" (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under state securities laws. The Company currently does not intend to register or qualify the sale of the Exchange Notes in any state where an exemption from registration or qualification is required and not available. See "The Exchange Offer -- Consequences of Failure to Exchange and Requirements for Transfer for Exchange Notes". 14 19 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, the Company will accept for exchange Outstanding Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means midnight, New York City time, on , 1998; provided, however, that if the Company, in its sole discretion, has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $300.0 million aggregate principal amount of the Outstanding Notes is outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about , 1998, to all holders of Outstanding Notes known to the Company. The Company's obligation to accept Outstanding Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth below under "-- Certain Conditions to the Exchange Offer". The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer remains open, and thereby delay acceptance for exchange of any Outstanding Notes, by giving oral or written notice of such extension in the manner described below. During any such extension, all Outstanding Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by the Company. Any Outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Outstanding Notes tendered in the Exchange Offer must be in denominations of principal amounts of $1,000 and any integral multiples thereof. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Outstanding Notes not theretofore accepted for exchange, upon the occurrence of any of the events specified below under "-- Certain Conditions to the Exchange Offer". The Company will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the Outstanding Notes as promptly as practicable, such notice in the case of any extension to be issued by means of press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. PROCEDURES FOR TENDERING OUTSTANDING NOTES The tender to the Company of Outstanding Notes by a holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Outstanding Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal or (in the case of a book-entry transfer) an Agent's Message in lieu of such Letter of Transmittal, to the Exchange Agent at the address set forth below under "-- Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Outstanding Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Outstanding Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date with the Letter of Transmittal or Agent's Message in lieu of such Letter of Transmittal, or (iii) the holder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by, and makes the representations and warranties contained in, 15 20 the Letter of Transmittal and that the Company may enforce such Letter of Transmittal against such participant. THE METHOD OF DELIVERY OF THE OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or a firm which is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"), unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a registered holder of the Outstanding Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If Outstanding Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Outstanding Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by, the registered holder with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal is signed by a person other than the registered holder or holders of any Outstanding Notes listed therein, such Outstanding Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name of the registered holder or holders appears on the Outstanding Notes. If the Letter of Transmittal or any Outstanding Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered Outstanding Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Outstanding Notes not properly tendered or to not accept any particular Outstanding Notes the Company's acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Outstanding Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Outstanding Notes in the Exchange Offer). The Company's interpretation of the terms and conditions of the Exchange Offer as to any particular Outstanding Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions therein) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Notes nor shall any of them incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering holder of such Outstanding Notes unless otherwise provided in the Letter of Transmittal as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion to (a) purchase or make offers for any Outstanding Notes that remain outstanding subsequent to the Expiration Date, or, as set forth under "-- Certain 16 21 Conditions to the Exchange Offer", to terminate the Exchange Offer and (b) to the extent permitted by applicable law, purchase Outstanding Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the Exchange Offer. By tendering, each holder of Outstanding Notes will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, and that neither the holder nor any other person has any arrangement or understanding with any person to participate in the distribution of the Exchange Notes. In the case of a holder that is not a broker-dealer, each such holder, by tendering, will also represent to the Company that such holder is not engaged in, or intends to engage in, a distribution of the Exchange Notes. If any holder or any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company, or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such Exchange Notes to be acquired pursuant to the Exchange Offer, such holder or any such other person (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution". The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Outstanding Notes properly tendered and will issue the Exchange Notes promptly after acceptance of the Outstanding Notes. See "--Certain Conditions to the Exchange Offer". For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Outstanding Notes for exchange when, as and if the Company has given oral or written notice thereof to the Exchange Agent, with written confirmation of any oral notice to be given promptly thereafter. For each Outstanding Note accepted for exchange, the holder of such Outstanding Note will receive an Exchange Note having a principal amount equal to that of the surrendered Outstanding Note. Interest on the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Outstanding Notes surrendered in exchange therefor, or if no interest has been paid on the Outstanding Notes, from the Issue Date. Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on such Outstanding Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. Consequently, holders who exchange their Outstanding Notes for Exchange Notes will receive the same interest payment on October 15, 1998 (the first interest payment date with respect to the Outstanding Notes and the Exchange Notes) that they would have received had they not accepted the Exchange Offer. In all cases, issuance of Exchange Notes for Outstanding Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) certificates for such Outstanding Notes or a timely Book-Entry Confirmation of such Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, (ii) a properly completed and duly executed Letter of Transmittal or an Agent's Message in lieu thereof and (iii) all other required documents. If any tendered Outstanding Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Outstanding Notes are submitted for a greater principal amount that the holder desired to exchange, such unaccepted or non-exchanged Outstanding Notes will be returned without expense to the tendering holder thereof (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry procedures described below, such non-exchanged Outstanding Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. 17 22 BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Outstanding Notes by causing the Book-Entry Transfer Facility to transfer such Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Outstanding Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below, under "-- Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES Any registered holder who desires to tender its Outstanding Notes (i) whose Outstanding Notes are not immediately available, (ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal, or any other required documents to the Exchange Agent prior to the Expiration Date, or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Outstanding Notes, the certificate number or numbers of such Outstanding Notes and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within three business days after the Expiration Date, the certificates for all physically tendered Outstanding Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) The certificates for all physically tendered outstanding Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof) with any required signature guarantees, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three business days after the Expiration Date. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Outstanding Notes may be withdrawn at any time prior to midnight, New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to midnight, New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Outstanding Notes to be withdrawn (the "Depositor"), (ii) include a statement that the Depositor is withdrawing its election to have Outstanding Notes exchanged, and identify the Outstanding Notes to be withdrawn (including the certificate number or numbers and principal amount of such Outstanding Notes), and (iii) where certificates for Outstanding Notes have been transmitted, specify the name in which such Outstanding Notes are registered, if different from that of the Depositor. If certificates for Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Outstanding Notes have been tendered pursuant 18 23 to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Outstanding Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Outstanding Notes so withdrawn are validly retendered. Any Outstanding Notes which have been tendered but which are not accepted for exchange for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Outstanding Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering Outstanding Notes" at any time prior to midnight, New York City time, on the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER The Exchange Offer is not subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the Commission. There can be no assurance that any such condition will not occur. Holders of Outstanding Notes will have certain rights under the Registration Rights Agreement should the Company fail to consummate the Exchange Offer. If the Company determines that it may terminate the Exchange Offer, as set forth above, the Company may (i) refuse to accept any Outstanding Notes and return any Outstanding Notes that have been tendered to the holders thereof, (ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior to the Expiration Date, subject to the rights of such holders of tendered Outstanding Notes to withdraw their tendered Outstanding Notes, or (iii) waive such termination event with respect to the Exchange Offer and accept all properly tendered Outstanding Notes that have not been withdrawn. If such waiver constitutes a material change in the Exchange Offer, the Company will disclose such change by means of a supplement to this Prospectus that will be distributed to each registered holder of Outstanding Notes, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders of the Outstanding Notes, if the Exchange Offer would otherwise expire during such period. EXCHANGE AGENT The Trustee under the Indenture, has been appointed as Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail or Overnight Courier By Hand Bankers Trust Company Bankers Trust Company 4 Albany Street, 4th Floor 4 Albany Street, 4th Floor New York, NY 10006 New York, NY 10006 Attention: Corporate Trust Services Attention: Corporate Trust Services Confirm by Telephone (212) 250-2500
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET 19 24 FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL. FEES AND EXPENSES The Company will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The estimated cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated to be $100,000. TRANSFER TAXES Holders who tender their Outstanding Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register Exchange Notes in the name of, or request that Outstanding Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Outstanding Notes and the restrictions on transfer of such Outstanding Notes as set forth in the legend thereon as a consequence of the issuance of the Outstanding Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register Outstanding Notes under the Securities Act. See "Description of the Senior Notes -- Registered Exchange Offer; Registration Rights". Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Notes. However, the Company does not intend to request the Commission to consider, and the Commission has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that (i) the Exchange Notes received by such holder will be acquired in the ordinary course of its business, (ii) at the time of the consummation of the Exchange Offer such holder will have not engaged in, and does not intend to engage in, a distribution of Exchange Notes and has no arrangement or understanding to participate in a distribution of Exchange Notes and (iii) such holder is not an affiliate of the Company within the meaning of Rule 405 of the Securities Act or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. If any holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirement of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes must acknowledge that such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of 20 25 Exchange Notes received in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." In addition, to comply with state securities laws, the Exchange Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the Exchange Notes to "qualified institutional buyers" (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under state securities laws. The Company currently does not intend to register or qualify the sale of the Exchange Notes in any state where an exemption from registration or qualification is required and not available. 21 26 USE OF PROCEEDS There will be no cash proceeds payable to the Company from the Exchange Offer. The Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement. The Company will not receive any proceeds from the issuance of the Exchange Notes offered hereby. In consideration for issuing the Exchange Notes contemplated in this Prospectus, the Company will receive Outstanding Notes in like principal amount, the form and terms of which are the same as the form and terms of the Exchange Notes (which they replace), except as otherwise described herein. The Outstanding Notes surrendered in exchange for Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, the issuance of the Exchange Notes will not result in any increase or decrease in the indebtedness of the Company. The aggregate net proceeds to the Company from the Original Offering were approximately $262.0 million. The net proceeds from the Original Offering were used by the Company to reduce indebtedness under the Amended Credit Agreement. CAPITALIZATION The following table sets forth the consolidated capitalization of Coltec as of December 31, 1997 and as of March 29, 1998 on a historical basis, and as adjusted to give effect to the Offerings and the use of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, as if such transactions had occurred on December 31, 1997 and on March 29, 1998, respectively. The table should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Prospectus and incorporated by reference. See "Selected Consolidated Financial and Other Data".
DECEMBER 31, 1997 MARCH 29, 1998 ----------------------- ----------------------- ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED --------- ----------- --------- ----------- (DOLLARS IN THOUSANDS) Cash and cash equivalents......................... $ 14,693 $ 14,693 $ 21,075 $ 21,075 ========= ========= ========= ========= Current maturities of long-term debt.............. $ 1,811 $ 1,811 $ 4,184 $ 4,184 Long-term debt (excluding current maturities): Amended Credit Agreement........................ 697,500 262,000 808,000 372,500 Senior Notes due 2008........................... -- 300,000 -- 300,000 Other debt due 1999-2010........................ 60,078 60,078 47,854 47,854 --------- --------- --------- --------- Total long-term debt.................... 759,389 623,889 860,038 724,538 --------- --------- --------- --------- Company-obligated mandatorily redeemable convertible preferred securities of Coltec Capital Trust................................... -- 150,000 -- 150,000 --------- --------- --------- --------- Shareholders' equity: Preferred Stock, $.01 par value, 2,500,000 shares authorized; no shares outstanding..... -- -- -- -- Common Stock, $.01 par value, 100,000,000 shares authorized, 70,517,363 shares issued at March 29, 1998 and 70,501,948 shares issued at December 31, 1997 (excluding 25,000,000 shares held by a wholly owned subsidiary).... 705 705 705 705 Capital surplus................................... 642,828 642,828 641,815 641,815 Retained deficit.................................. (912,029) (912,029) (886,808) (886,808) Other equity...................................... (11,112) (11,112) (13,495) (13,495) Less cost of 4,542,000 shares at March 31, 1998 and 4,666,406 shares at December 31, 1997 of Common Stock in treasury........................ (79,553) (79,553) (77,445) (77,445) --------- --------- --------- --------- Total shareholders' equity.............. (359,161) (359,161) (335,228) (335,228) --------- --------- --------- --------- Total capitalization.................... $ 400,228 $ 414,728 $ 524,810 $ 539,310 ========= ========= ========= =========
22 27 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth selected consolidated financial and other data of Coltec for the five years ended December 31, 1997 and for the three months ended March 30, 1997 and March 29, 1998. The information should be read in conjunction with Coltec's consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus and incorporated by reference herein. The statement of earnings data and other financial data for 1993, 1994 and 1995 have been restated to reflect the sale of the Company's automotive original equipment components business in 1996, which was accounted for as a discontinued operation. The selected consolidated financial and other data, with the exception of order backlog, at and for the years ended December 31, 1993 through 1997, were derived from the consolidated financial statements of Coltec which have been audited by Arthur Andersen LLP, independent public accountants. The selected consolidated financial and other data, with the exception of order backlog, at and for the three months ended March 30, 1997 and March 29, 1998 were derived from the unaudited consolidated financial statements of Coltec which are incorporated by reference herein.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, --------------------- ---------------------------------------------------- MARCH 30, MARCH 29, 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- --------- --------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENT OF EARNINGS DATA: Net sales....................................... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $1,314.9 $ 309.2 $ 374.4 Cost of goods sold.............................. 703.9 648.3 744.2 811.1 898.3 211.7 260.1 -------- -------- -------- -------- -------- -------- -------- Gross profit.................................... 357.5 351.9 355.4 348.6 416.6 97.5 114.3 Selling and administrative...................... 183.8 186.7 186.4 191.0 218.8 52.6 61.0 Special charge(a)............................... 25.2 -- 27.0 -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Operating income(b)............................. 148.5 165.2 142.0 157.6 197.8 44.9 53.3 Interest expense and other, net................. 110.2 89.5 89.9 74.9 54.0 12.4 15.1 Income taxes.................................... 13.7 27.2 17.6 28.1 48.9 11.0 13.0 -------- -------- -------- -------- -------- -------- -------- Earnings from continuing operations before extraordinary item(b)......................... 24.6 48.5 34.5 54.6 94.9 21.5 25.2 Discontinued operations(c)...................... 40.6 45.5 36.7 57.1 -- -- -- Extraordinary item(d)........................... (17.8) (1.5) (.3) (30.6) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings.................................... $ 47.4 $ 92.5 $ 70.9 $ 81.1 $ 94.9 $ 21.5 $ 25.2 ======== ======== ======== ======== ======== ======== ======== Earnings (loss) per common share:(e) Before extraordinary item..................... $ .35 $ .70 $ .49 $ .79 $ 1.42 $ .32 $ .38 Discontinued operations....................... .59 .65 .53 .82 -- -- -- Extraordinary item............................ (.26) (.02) -- (.44) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings per share.......................... $ .68 $ 1.33 $ 1.02 $ 1.17 $ 1.42 $ .32 $ .38 ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT END OF PERIOD): Working capital................................. $ 163.1 $ 189.6 $ 208.9 $ 215.6 $ 187.9 $ 217.2 $ 228.4 Total assets.................................... 796.5 847.5 894.5 849.5 933.0 851.9 1,076.1 Total debt...................................... 1,033.6 970.1 945.8 720.3 759.4 731.3 860.0 Shareholders' equity............................ (625.5) (525.6) (453.8) (417.0) (359.2) (413.7) (335.2) OTHER FINANCIAL DATA: EBITDA(f)....................................... $ 197.5 $ 207.3 $ 184.1 $ 193.6 $ 236.2 $ 53.4 $ 65.7 Capital expenditures............................ 38.6 38.2 42.5 44.6 81.2 13.6 15.0 Order backlog (at end of period)(g)............. 598.6 594.2 657.1 678.3 875.6 805.9 968.2 Ratio of earnings to fixed charges(h)........... 1.3x 1.8x 1.6x 2.1x 3.5x 3.5x 3.4x Ratio of EBITDA to interest expense(i).......... 1.8x 2.3x 2.0x 2.6x 4.4x 4.3x 4.4x Ratio of total debt to EBITDA(j)................ 5.2x 4.7x 5.1x 3.7x 3.2x 13.7x 13.1x
- --------------- (a) In 1997, Coltec incurred a special charge of $10.0 million for the restructuring of its Industrial segment. In 1997, the remaining $10.0 million accrual for the 1995 special charge was reversed. In 1995, Coltec incurred a special charge of $27.0 million primarily to cover the costs of closing the Walbar compressor blade facility in Canada. The charge also covered selected workforce reductions throughout the Company. In 1993, Coltec incurred a special charge of $25.2 million to cover the cost of consolidation and rearrangement of certain manufacturing facilities and related workforce reductions primarily in the Aerospace segment. (b) Operating income for 1996 included a charge of $14.2 million related to the bankruptcy of Fokker, a major aerospace customer of Coltec. 23 28 (c) See note 2 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. (d) See note 3 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. Extraordinary charges relate to either early retirement of debt or debt refinancings. (e) Represents diluted earnings per common share. See note 5 to the consolidated financial statements of Coltec included elsewhere in this Prospectus. The Company's reported earnings per common share for 1996, 1995, 1994 and 1993 equaled diluted earnings per share as set forth in Statement of Financial Accounting Standards No. 128. (f) "EBITDA" as used herein means earnings from continuing operations before extraordinary item plus interest expense, taxes, depreciation and amortization. EBITDA is presented because the Company believes that it is a widely accepted indicator of cash flow and a company's ability to incur and service indebtedness. However, EBITDA should not be considered as a measure of operating performance or as an alternative to, or more meaningful than, operating income, net income or cash flows from operations (as measured by U.S. generally accepted accounting principles). EBITDA for 1993 would have been $222.7 million excluding the special charge of $25.2 million described in note (a) above. EBITDA for 1995 would have been $211.1 million excluding the $27.0 million special charge described in note (a) above. (g) Of the $875.6 million backlog at December 31, 1997, $267.2 million was scheduled to be shipped after 1998. (h) For purposes of calculating the ratio of earnings to fixed charges, earnings are determined by adding fixed charges (excluding capitalized interest) and income taxes to earnings from continuing operations before extraordinary item. Fixed charges consist of interest expense, capitalized interest and that portion of rental expense deemed to be representative of the interest factor. (i) The ratio of EBITDA to interest expense for 1993 and 1995, based upon EBITDA of $222.7 million and $211.1 million, respectively, as described in note (f) above, would have been 2.0x and 2.3x, respectively. (j) The ratio of total debt to EBITDA for 1993 and 1995, based upon EBITDA of $222.7 million and $211.1 million, respectively, as described in note (f) above, would have been 4.6x and 4.5x, respectively. 24 29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW In conjunction with the divestitures of the Company's automotive OEM components operations during 1996 (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus), the Company was realigned into two operating segments. The following are the major products in each industry segment: Aerospace: Menasco landing gear and flight control actuation systems; Walbar blades, vanes and discs for jet and other gas turbine engines; Chandler Evans fuel pumps and control systems; Delavan gas turbine products; Lewis Engineering cockpit instrumentation and sensors; AMI flight attendant seats. Industrial: Garlock seals, gaskets, packings, bearings, valves and tape; Quincy air compressors; Delavan spray nozzles; France compressor products; FM Engine large diesel and dual-fuel engines; Haber and Sterling dies; Ortman Fluid Power cylinders. In January 1998, Coltec acquired Marine & Petroleum Mfg., Inc.,'s ("M&P") manufacturing facilities based in Texas for approximately $17.0 million and Tex-o-Lon and Repro-Lon for approximately $25.0 million. The M&P facilities produce flexible graphite and PTFE fluid sealing products used in the petrochemical business. Tex-o-Lon manufactures, machines and distributes PTFE products, primarily for the semiconductor industry. Repro-Lon reprocesses PTFE compounds for the chemical and semiconductor industries. These acquisitions were combined into one division, Coltec Specialty Products. See note 19 to the Company's consolidated financial statements included elsewhere in this Prospectus. In February 1998, Coltec purchased the Sealing Division of Groupe Carbone Lorraine which will be segregated into two divisions. Cefilac, based in Saint Etienne and Montbrison, France, produces seals, gaskets and packings, metal o-rings and spiral-wound gaskets used in the chemical, power and refining industries. Helicoflex, based in Columbia, South Carolina, produces metal o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products are specifically designed for equipment and processes exposed to high temperatures, cryogenic temperatures, high pressures, vacuum conditions, radioactive environments or corrosive applications. See note 19 to the Company's consolidated financial statements included elsewhere in this Prospectus. On May 15, 1998, the Company completed the previously-announced sale of the capital stock of its Holley Performance Products subsidiary to Kohlberg & Co., L.L.C., a private merchant banking firm located in Mount Kisco, New York, for $100 million in cash. The proceeds from this acquisition were applied toward reducing debt. For 1997, Holley had gross revenues and operating income of approximately $99.0 million and $8.0 million, respectively. The financial review that follows is based on continuing operations, excluding the impact of the 1996 discontinued operations discussed in note 2 to the consolidated financial statements of Coltec included elsewhere in this Prospectus, and Coltec's two operating segments, Aerospace and Industrial. The 1995 information has been restated to reflect the discontinued operations and Coltec's two realigned operating segments. Earnings per share information represents diluted earnings per common share (see note 5 to the Company's consolidated financial statements included elsewhere in this Prospectus). The following discussion of operating results has been structured to provide an analysis from the perspective of Coltec as a whole, followed by a more detailed analysis for each operating segment. 25 30 INDUSTRY SEGMENT INFORMATION The following table shows financial information by industry segment for the five years ended December 31, 1997 and the three months ended March 30, 1997 and March 29, 1998.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, ---------------------- --------------------------------------------------------- MARCH 30, MARCH 29, 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- --------- --------- --------- (DOLLARS IN MILLIONS) Net sales: Aerospace............. $ 356.9 $ 339.2 $ 378.3 $ 433.5 $ 558.3 $ 119.1 $ 166.2 Industrial............ 705.4 662.7 722.6 726.9 757.6 190.1 209.2 Intersegment elimination(a)...... (.9) (1.7) (1.3) (.7) (1.0) -- (1.0) -------- -------- -------- -------- --------- --------- -------- Total............... $1,061.4 $1,000.2 $1,099.6 $1,159.7 $ 1,314.9 $ 309.2 $ 374.4 ======== ======== ======== ======== ========= ========= ======== Operating income: Aerospace............. $ 44.5(c) $ 51.0 $ 32.4(d) $ 51.6(e) $ 87.7(f) $ 18.3 26.1 Industrial............ 135.6(c) 145.4 146.6 147.1 149.8(f) 36.3 37.3 -------- -------- -------- -------- --------- --------- -------- Total segments........ 180.1 196.4 179.0 198.7 237.5 54.6 63.4 Corporate unallocated(b)...... (31.6) (31.2) (37.0)(d) (41.1) (39.7) (9.7) (10.1) -------- -------- -------- -------- --------- --------- -------- Total............... $ 148.5(c) $ 165.2 $ 142.0(d) $ 157.6(e) $ 197.8(f) $ 44.9 $ 53.3 ======== ======== ======== ======== ========= ========= ======== Operating margin: Aerospace............. 12.5% 15.0% 8.6% 11.9% 15.7% 15.4% 15.7% Industrial............ 19.2 21.9 20.3 20.2 19.8 19.1 17.9 Total............... 14.0% 16.5% 12.9% 13.6% 15.0% 14.5% 14.2% Return on total assets:(g) Aerospace............. 12.7% 14.3% 8.3% 12.4% 20.1% 17.2% 19.0% Industrial............ 49.8 53.3 49.1 51.2 48.2 46.7 32.6 Total............... 18.6% 19.5% 15.9% 18.5% 21.2% 21.1% 19.8% Backlog:(h) Aerospace............. $ 475.1 $ 445.7 $ 538.0 $ 560.7 $ 734.3 $ 674.2 $ 804.9 Industrial............ 124.0 148.5 119.5 117.8 142.0 132.6 163.3 Intersegment elimination......... (.5) -- (.4) (.2) (.7) (.9) -- -------- -------- -------- -------- --------- --------- -------- Total............... $ 598.6 $ 594.2 $ 657.1 $ 678.3 $ 875.6 $ 805.9 $ 968.2 ======== ======== ======== ======== ========= ========= ========
- --------------- (a) Reflects elimination of intercompany sales between divisions in different segments. (b) Represents corporate selling and administrative expense, including other income and expense, that is not allocable to individual industry segments. (c) Operating income for 1993 included a special charge of $25.2 million as follows: $17.2 million in the Aerospace Segment and $8.0 million in the Industrial Segment. Excluding the special charge, operating income, operating margin and return on total assets for 1993 would have been $61.7 million, 17.3% and 17.6%, respectively, for Aerospace, and $143.6 million, 20.4% and 52.7%, respectively, for Industrial. (d) Operating income for 1995 included a special charge of $27.0 million as follows: $23.4 million in the Aerospace Segment and $3.6 million in Corporate Unallocated. Excluding the special charge, operating income, operating margin and return on total assets for 1995 would have been $55.8 million, 14.7% and 13.4%, respectively, for Aerospace. (e) Operating income for 1996 included a charge of $14.2 million related to the bankruptcy of a major aerospace customer (Fokker). Excluding this charge, operating income, operating margin and return on total assets for 1996 would have been $65.8 million, 15.2% and 18.1%, respectively, for Aerospace and $171.8 million, 15.9% and 22.0%, respectively, for the Company. (f) Operating income for 1997 included a special charge of $10.0 million for the restructuring of its Industrial Segment. In 1997 the remaining $10.0 million accrual for the 1995 special charge was reversed. (g) Return on total assets is calculated for each segment by dividing annualized segment operating income by segment total assets at end of applicable period, and for total Company by dividing total Company annualized operating income by total assets at end of applicable period. (h) Of the $875.6 million backlog at December 31, 1997, $267.2 million was scheduled to be shipped after 1998. 26 31 RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997 COMPANY REVIEW Net sales for first quarter 1998 increased 21.1% to $374.4 million from $309.2 million for first quarter 1997 primarily driven by increases in the Aerospace Segment. Gross profit increased to $114.3 million for first quarter 1998 from $97.5 million in first quarter 1997. The gross profit margin decreased slightly to 30.5% in first quarter 1998 from 31.5% in first quarter 1997 as a result of slightly lower gross profit margins in the Industrial Segment. Selling and administrative expenses totaled $61.0 million, or 16.3% of sales, in first quarter 1998 compared to $52.6 million, or 17.0% of sales in first quarter 1997. Operating income increased to $53.3 million in first quarter 1998 from $44.9 million in first quarter 1997. Operating margin for first quarter 1998 was 14.2% compared to 14.5% for first quarter 1997. The margin decrease related to a slight decrease in operating margin in the Industrial Segment. Interest expense increased to $15.1 million in first quarter 1998 from $12.4 million for first quarter 1997. This increase was a result of increased outstanding amounts under the credit facility due to acquisitions discussed below under Liquidity and Capital Resources. The effective tax rate was 34% in the first quarter of 1998 and 1997. As a result of the foregoing, net earnings were $25.2 million in first quarter 1998, or $0.38 per share, compared to net earnings of $21.5 million, or $0.32 per share, in first quarter 1997. SEGMENT REVIEW -- AEROSPACE Sales in first quarter 1998 for the Aerospace Segment totaled $166.2 million increasing 39.5% from $119.1 million in first quarter 1997. At Menasco, sales increased significantly due to rising commercial aircraft production as well as improved military sales. Menasco deliveries of main landing gear systems for the Boeing 737 increased from 33 shipsets in first quarter 1997 to 69 shipsets in first quarter 1998, while military sales benefited primarily from higher shipset deliveries for the F-15 and F-16 programs. At Walbar, significantly higher sales were primarily due to increased customer demand and expanding product lines. Aerospace Segment sales were also favorably impacted by the acquisition of AMI Seating Systems in July 1997. Operating income for the Aerospace Segment increased to $26.1 million in first quarter 1998 from $18.3 million in first quarter 1997. Operating margin for first quarter 1998 was 15.7% compared to 15.4% for first quarter 1997. At Menasco's Aerospace Division, operating margin was impacted by a favorable mix of landing gear systems for certain commercial airline programs as well as improved manufacturing efficiencies due to higher production. Walbar also yielded improved manufacturing efficiencies as a result of its higher production levels. The increased margin was also driven by higher sales volumes and improved margins for the Segment's other businesses. SEGMENT REVIEW -- INDUSTRIAL Industrial sales increased to $209.1 million in first quarter 1998 from $190.1 million in first quarter 1997. The Stemco and Quincy Compressor Divisions experienced solid sales volume increases. Sales for Garlock Sealing Technologies increased primarily due to the acquisition of the sheet rubber and conveyor belt business of Dana Corporation's Boston Weatherhead division. Holley sales decreased due to curtailed orders by two major customers. Industrial sales increased as a result of first quarter 1998 Industrial Segment acquisitions, Tex-o-Lon, and Repro-Lon and the Sealing Division of Group Carbone Lorraine. Operating income for the Industrial Segment increased slightly at $37.3 million in first quarter 1998 compared to $36.3 million in first quarter 1997. Operating income increased for Garlock Sealing Technologies and Quincy Compressor Divisions due to higher sales volumes. Operating results at Holley were lower due to decreased sales volumes. Excluding Holley, operating income in the Industrial Segment increased 6% on a 14% sales increase. On May 15, 1998 the Company completed its previously-announced sale of Holley for $100 million. See "-- Overview". 27 32 LIQUIDITY AND CAPITAL RESOURCES The Company generated $10.1 million of operating cash flows in first quarter 1998 compared with $12.7 million for first quarter 1997. The lower operating cash flows in 1998 were primarily due to negative cash flow generated by working capital requirements primarily from the increase in accounts receivable. The change in assets and liabilities generated negative cash flow of $28.8 million in first quarter 1998 compared to negative cash flow of $1.7 million in first quarter 1997. This negative cash flow impact was offset by increased net earnings and decreased payments related to liabilities of discontinued operations and asbestos claims. The current ratio of current assets to current liabilities at March 29, 1998 was 1.91, increasing from 1.78 at December 31, 1997. Cash and cash equivalents increased to $21.1 million at March 29, 1998 from $14.7 million at December 31, 1997. In the first quarter of 1998 the Company invested $15.0 million in capital expenditures compared to $13.6 million during the same prior year period. Debt increased by $100.6 million at March 29, 1998 compared to December 31, 1997 through additional borrowings under the Company's revolving credit facility primarily for first quarter 1998 acquisitions. In January 1998, the Company acquired certain M&P manufacturing facilities based in Texas for approximately $17.0 million. Combined annual sales for these facilities are expected to approximate $18.0 million. The Company also acquired Tex-o-Lon and Repro-Lon for approximately $25.0 million. These two Texas businesses have combined annual sales of $15.0 million. The acquisitions were accounted for as purchases; accordingly, the purchase prices, which were financed through available cash resources, were allocated to the acquired assets based upon their fair markets values. See "-- Overview". In February 1998, the Company purchased the Sealing Division of Groupe Carbone Lorraine for $45.6 million. Sales for this division in 1998 are expected to approximate $38.0 million. This acquisition was accounted for as a purchase and the purchase price, also financed through available cash resources, was allocated to the acquired assets based upon their fair market values. See "-- Overview". RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996 COMPANY REVIEW Net sales for 1997 increased 12.9% to $1.31 billion from $1.16 billion in 1996 primarily driven by increases in the Aerospace Segment. Gross profit increased to $416.6 million in 1997 from $348.6 million in 1996. The gross profit margin increase in 1997 to 31.7% from 30.1% in 1996 primarily resulted from the 1996 bankruptcy of a major aerospace customer (Fokker). Selling and administrative expenses totaled $218.8 million, or 16.6%, of sales in 1997 compared to $191.0 million, or 16.5%, of sales (15.9% excluding the Fokker impact) in 1996. The increase resulted from costs associated with expanding Coltec's businesses, both domestically and internationally. Operating income amounted to $197.8 million in 1997 compared to $157.6 million for 1996. The 1996 amount includes the effect of the $14.2 million charge related to the bankruptcy of Fokker. Operating margin for 1997 was 15.0% and was 13.6% (14.8% excluding the effect of the charge related to Fokker) for 1996. Interest expense decreased 27.8% from $74.9 million in 1996 to $54.0 million in 1997, a result of lower interest rates primarily from refinancing high-cost, fixed-rate debt with lower-cost, variable-rate bank debt, and a full year impact of applying a substantial portion of the proceeds from the 1996 second quarter sale of Coltec's automotive original equipment ("OE") components operations to debt reduction. The effective tax rate was 34.0% in 1997 and 1996. The 1996 results of discontinued operations reflect the aforementioned 1996 second quarter sale of the automotive OE components operations as well as the 1996 fourth quarter sale of Farnam Sealing Systems. Note 2 to the Company's consolidated financial statements describes these transactions. The 1996 extraordinary charge of $30.6 million relates to the refinancing of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In January and December 1996, Coltec redeemed $605.8 million of such high-cost debt. 28 33 Net earnings and earnings from continuing operations were $94.9 million, or $1.42 per share, in 1997 while 1996 net earnings amounted to $81.1 million, or $1.17 per share, with earnings from continuing operations for 1996 of $54.6 million, or $0.79 per share. The 1996 charge related to Fokker impacted earnings by $0.13 per share. The reduction in interest expense increased earnings by $0.20 per share in 1997. SEGMENT REVIEW -- AEROSPACE Sales in 1997 for the Aerospace Segment aggregated $558.3 million, a 28.8% increase over 1996 sales of $433.5 million. At Menasco, sales increased significantly due to rising commercial aircraft production as well as improved military sales. Menasco deliveries of main landing gear systems for the Boeing 737 increased to 196 shipsets in 1997 from 72 shipsets in 1996, while military sales benefited primarily from higher shipset deliveries for the F-15 and F-16 programs (151 shipsets in 1997 versus 83 shipsets in 1996). At Chandler Evans, higher sales were primarily due to increased sales of spare parts while original equipment sales also improved. Aerospace Segment sales were favorably impacted by the acquisition of AMI Industries Inc. ("AMI") in July 1997 (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus). Sales in 1997 for the other aerospace businesses increased due to increased sales volumes resulting from the continued strengthening of the commercial aircraft market and regional airlines. Operating income for the Aerospace Segment increased 33.3% to $87.7 million in 1997 from $65.8 million in 1996, excluding the 1996 charge for the Fokker bankruptcy. The Segment's operating margin for 1997 was 15.7% versus 15.2% in 1996 excluding the Fokker bankruptcy charge. At the Menasco Aerospace division, operating margin was impacted by improved manufacturing efficiencies due to higher production. Chandler Evans realized higher margins due to higher after-market sales and selling price increases for certain products. The increase was also driven by higher sales volumes and improved margins for the other engine components businesses. SEGMENT REVIEW -- INDUSTRIAL Industrial Segment sales increased to $757.6 million in 1997 from $726.9 million in 1996. During 1997, Quincy Compressor and Fairbanks Morse Engine (FM Engine) divisions had significant sales volume increases. The FM Engine increase was due to increased orders and the recovery from a ten-week strike in 1996. Garlock Sealing Technologies (Garlock) also experienced sales increases in part as a result of Coltec's acquisition of the sheet rubber and conveyor belt business from Dana Corporation's Boston Weatherhead division (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus). The above increases were partially offset by lower sales volumes at Holley Performance Products (Holley). Operating income for the Industrial Segment was $149.8 million in 1997 compared to $147.1 million in 1996. The Segment's operating margin for 1997 was 19.8% compared to 20.2% in 1996. Operating income increased for Quincy Compressor and FM Engine due to the higher sales volumes as mentioned above while Garlock was impacted by increased costs related to international initiatives. Holley's operating income was lower as a result of decreased sales volumes. RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995 COMPANY REVIEW Net sales for 1996 increased 5.5% to $1.16 billion from $1.10 billion in 1995 primarily due to increases in the Aerospace Segment. Gross profit decreased to $348.6 million in 1996 from $355.4 million in 1995. The gross profit decline in 1996 to 30.1% from 32.3% in 1995 stemmed from the impact of the bankruptcy of a major aerospace customer (Fokker), increased spending related to asbestos (see note 16 to the Company's consolidated financial statements included elsewhere in this Prospectus) and higher other manufacturing costs. Selling and administrative expenses totaled $191.0 million, or 16.5% of sales (15.9% excluding the Fokker impact), in 1996 compared to $186.4 million, or 17.0% of sales, in 1995. Operating income amounted to $157.6 million in 1996 compared to $142.0 million for 1995. These amounts include the effect of the $14.2 million charge in 1996 related to the bankruptcy of Fokker and the 1995 special 29 34 charge of $27.0 million. Operating margin for 1996 was 13.6% (14.8% excluding the effect of the charge related to Fokker) and 1995 was 12.9% (15.4% excluding the special charge). The operating margin decrease to 14.8% from 15.4% related to the same reasons as those explaining the decrease in overall gross profit margin (excluding Fokker). Interest expense decreased 16.7% from $89.9 million in 1995 to $74.9 million in 1996, a direct result of applying a substantial portion of the proceeds from the second quarter sale of the Company's automotive OE components operations to debt reduction. The Company also benefited from the January 1996 redemption of $46.4 million of 11 1/4% debentures which was funded with lower-cost, variable-rate bank debt. The effective tax rate was 34.0% in 1996 and 33.8% in 1995. The results of discontinued operations reflect the aforementioned second quarter sale of the automotive OE components operations as well as the fourth quarter sale of Farnam Sealing Systems. Note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus describes these transactions. The 1996 extraordinary charge of $30.6 million relates to the refinancing of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. In January and December 1996, the Company redeemed $605.8 million of such high-cost debt. As a result of the foregoing, net earnings were $81.1 million, or $1.17 per share, in 1996 while 1995 net earnings amounted to $70.9 million, or $1.02 per share. Earnings from continuing operations in 1996 were $54.6 million, or $0.79 per share, compared to 1995 earnings from continuing operations of $34.5 million, or $0.49 per share. The 1996 charge related to Fokker impacted earnings by $0.13 per share while the 1995 special charge affected earnings by $0.25 per share. The aforementioned reduction in interest expense increased earnings by $0.14 per share in 1996. SEGMENT REVIEW -- AEROSPACE Sales in 1996 for the Aerospace Segment aggregated $433.5 million, a 14.6% increase over 1995 sales of $378.3 million. At Menasco, deliveries doubled in 1996 (41 versus 20) for shipsets of landing gear systems for the Boeing 777 while shipset deliveries for the McDonnell Douglas MD-80 increased more than 50%. These increases more than offset the lost business for the F-70 and F-100 programs due to the bankruptcy of Fokker. Sales for Walbar increased significantly due to a change in the billing practices for consigned inventory at its Arizona facility although profitability levels were not affected. Sales in 1996 for the other aerospace businesses increased due to higher sales volumes resulting from the continued strength of the commercial and regional airline markets, as well as higher selling prices for certain products and new product sales. Operating income for the Aerospace Segment increased 18.0% to $65.8 million in 1996 from $55.8 million in 1995, excluding the 1996 charge for the Fokker bankruptcy and the 1995 special charge. Excluding such charges, the Segment's operating margin for 1996 was 15.2% versus 14.7% in 1995. Contributing to this increase were the significant improvement in 1996 operating results of Walbar's Canadian operations due to the closing of the compressor blade facility, as well as higher margins which were achieved at its turbine blade business. The increase was also driven by higher sales volumes and improved margins for the other engine components businesses. At Menasco, operating results were flat compared to 1995 with the improvement from the Boeing 777 and MD-80 programs offsetting the loss of the Fokker business. Menasco was also impacted by a less favorable mix of landing gear systems for certain commercial airline programs. SEGMENT REVIEW -- INDUSTRIAL Industrial Segment sales increased slightly to $726.9 million in 1996 from $722.6 million in 1995. During 1996, Garlock realized the full year benefit of its December 1995 acquisition of certain assets of Furon Company's metallic gasket business. Garlock's sales were also favorably impacted by continued volume increases for KLOZURE oil seals, cut gaskets and GYLON gasketing products. Moderate sales increases were registered by the Holley and France Compressor Products (France Compressor) divisions. FM Engine sales were unfavorably affected by lower shipments of commercial, government and Alco engines due to the effects of a ten week strike. The Stemco division also experienced a downturn in sales due to lower trailer production levels. 30 35 Operating income for the Industrial Segment was essentially unchanged at $147.1 million in 1996 compared to $146.6 million in 1995. The Segment's operating margin for 1996 was 20.2% compared to 20.3% in 1995. Operating income increased for Garlock, Holley and France Compressor primarily due to higher sales volumes. The negative impact of the strike at FM Engine was offset by the gain on the sale of Stemco's truck exhaust business (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus). LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS The Company generated cash from operations of $61.4 million in 1997 compared to $49.5 million in 1996. The increase in operating cash flows stemmed from the increase in net earnings. The increase in inventory in response to the ramp-up for certain aircraft was offset by the increase in accounts payable. Working capital at December 31, 1997 of $187.9 million was $27.7 million lower than year-end 1996 as a result of the sale of $82.5 million of trade accounts receivable (see note 6 to the Company's consolidated financial statements included elsewhere in this Prospectus) partially offset by a $12.5 million increase of accounts receivable prior to sale and a $52.5 million increase of inventories. The 1997 ratio of current assets to current liabilities was 1.78 compared to 1.95 in 1996. Cash and cash equivalents decreased to $14.7 million in 1997 from $15.0 million in 1996. Net cash used in investing activities in 1997 included $81.2 million of capital expenditures and $60.7 million for business acquisitions (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus). Net cash provided by investing activities of $284.6 million in 1996 consisted of proceeds from divestitures amounting to $329.1 million (see note 2 to the Company's consolidated financial statements included elsewhere in this Prospectus) with capital expenditures totaling $44.6 million in 1996. Financing activities in 1997 generated $80.2 million primarily from the $82.5 million proceeds from sale of accounts receivable (see note 6 to the Company's consolidated financial statements included elsewhere in this Prospectus). The purchase of $42.7 million of treasury stock was offset by a $39.5 million net increase in the Company's revolving facility. Financing activities in 1996 used cash of $323.0 million. A substantial portion of the proceeds from the 1996 second quarter sale of the Company's automotive OE components operations was applied to debt reduction. During 1996, Coltec refinanced $617.0 million of high-cost, fixed-rate debt with lower-cost, variable-rate bank debt. Coltec also purchased treasury stock with a cost of $46.4 million in 1996. CAPITAL EXPENDITURES Capital expenditures increased to $81.2 million in 1997 from $44.6 million in 1996 and $42.5 million in 1995, as Coltec continued to invest in capital improvements to increase efficiency, reduce costs, pursue new opportunities, expand production capacity and improve facilities. The level of capital expenditures has and will vary from year to year, affected by the timing of capital spending for production equipment for new products, periodic plant and facility expansion, and cost reduction and labor efficiency programs. Capital expenditures during 1997 included amounts for the construction of and equipment purchases for significant production expansions at Menasco's original equipment facilities. Coltec estimates capital expenditures for 1998 to approximate $60.0 million, including amounts for equipment purchases related to capacity expansions and upgrades. ENVIRONMENTAL MATTERS Coltec's policy is to accrue environmental remediation costs when it is both probable that a liability was incurred and the amount can be reasonably estimated. Coltec currently estimates its future non-capital expenditures related to environmental matters to range between $27.0 million and $50.0 million. In connection with these environmental expenditures, Coltec had accrued $31.7 million at December 31, 1997 representing management's best estimate of probable non-capital expenditures. These non-capital expenditures are estimated to be incurred over the next 10 to 20 years. In addition, capital expenditures aggregating $5.0 million may be required during the next two years related to environmental matters. Although Coltec is pursuing insurance recovery in connection with certain of these matters, no receivable has been recorded with respect to any potential recovery of costs in connection with any environmental matter. During 1997, costs associated with environmental 31 36 remediation and ongoing assessment were not significant. See "Risk Factors -- Potential Exposure to Environmental Liabilities" and "Business -- Environmental Matters". ASBESTOS LITIGATION The Company and certain of its subsidiaries are defendants in various lawsuits involving asbestos-containing products. See "Risk Factors -- Potential Exposure to Environmental Liabilities", "Business -- Legal Proceedings -- Asbestos Litigation" and note 16 to the Company's consolidated financial statements included elsewhere in this Prospectus. OTHER COMMITMENTS Liabilities of discontinued operations at December 31, 1997 of $159.9 million relate to contingent contractual obligations, reserves for postretirement benefits and other future estimated costs for various discontinued operations. The Company expects future cash payments will extend at least over the next five to ten years. As is the case with most other companies, the Company recognizes the need to ensure its operations will not be adversely impacted by the Year 2000 date transition and is faced with the task of addressing related issues. The Company is evaluating whether the effect of the Year 2000 transition issues resulting from relationships with customers, suppliers and other constituents will have an impact on the Company's results of operations or financial condition. At December 31, 1997, the Company estimates that expenditures over the next two years for the cost of modifying its existing software for the Year 2000 date transition will have an immaterial impact on consolidated operating results. FINANCIAL RESOURCES At December 31, 1997, total debt was $759.4 million compared with $720.3 million at year-end 1996. In December 1996, the Company amended the Amended Credit Agreement increasing the total commitment to $850.0 million from $465.0 million and extending the maturity date to December 15, 2001. The additional commitment was used to redeem substantially all of the Company's outstanding high-cost, fixed-rate debt. The Amended Credit Agreement also provides for a maximum issuance of $125.0 million for letters of credit and reductions in the total commitment of $75.0 million and $100 million at December 15, 1999 and 2000, respectively. In December 1997, the Company amended the Amended Credit Agreement to establish an $80.0 million sublimit for Canadian borrowings under the existing facility. At December 31, 1997, $697.5 million of borrowings and $40.1 million of letters of credit were outstanding under the credit facility, leaving availability of $112.4 million. In February 1998, the Company amended the Amended Credit Agreement to increase the commitment thereunder from $850 million to $900 million. In connection with the Offerings, the Amended Credit Agreement was further amended, among other things, to permit the TIDES Offering and the Original Offering, to provide that the Senior Notes would be secured equally and ratably with the lenders under the Amended Credit Agreement and to provide that the total commitment thereunder would be reduced by two-thirds of the gross proceeds to the Company from the Offerings in lieu of the $75.0 million and $100.0 million reductions described above. On a pro forma basis after giving effect to such amendment and the completion of the Offerings (assuming gross proceeds therefrom of $450 million), as of December 31, 1997, the Company would have had $262.0 million of borrowings and $40.1 million of letters of credit outstanding and $297.9 million available for borrowing under the Amended Credit Agreement. The Company believes that internally generated funds and borrowings available under the Amended Credit Agreement will be sufficient to meet its foreseeable working capital, capital expenditure and debt service requirements. During 1997, Coltec entered into interest rate swaps to reduce (hedge) the impact of interest rate changes for variable rate borrowings under its credit facility. The agreements include an aggregate notional amount of $405.0 million, fixed interest rates ranging from 5.78% to 6.40% and maturity dates ranging from April 1998 to October 2002. 32 37 BUSINESS Coltec and its consolidated subsidiaries manufacture and sell a diversified range of highly engineered aerospace and industrial products primarily in the United States, Canada and Europe. Coltec's operations are conducted through its two principal segments -- Aerospace and Industrial. Through its Aerospace segment, which in 1997 accounted for approximately 42% of total Company sales and approximately 37% of total Company operating profit, Coltec is a leading manufacturer of landing gear systems, engine fuel controls, flight attendant and cockpit seats, turbine blades, fuel injectors, nozzles and related components for commercial and military aircraft. Through its Industrial segment, which in 1997 accounted for approximately 58% of total Company sales and approximately 63% of total Company operating profit, Coltec is a leading manufacturer of industrial seals, gaskets, packing products, self-lubricating bearings and oil seals and hubodometers for trucks and trailers and is a producer of technologically advanced spray nozzles for agricultural, home heating and industrial applications. Coltec also produces high-horsepower diesel engines for naval ships and diesel, gas and dual-fuel engines for electric power plants and produces air compressors and tooling for industrial applications. The Company derived approximately 50% of sales in 1997 from its aftermarket, or parts and services, business. Aftermarket sales tend to generate significantly higher margins and tend to be less affected by general economic cycles than the Company's sales of products to OEMs. In addition, management believes the Company is benefiting from several other industry trends which will help the Company achieve its growth and operating goals. These trends include strong growth in world airline fleets, preference by OEMs to source complex integrated systems rather than component parts, an increased preference to consolidate purchasing of consumable products from a single full line supplier and customer demand for integrated sales and service providers. In 1997, Coltec had sales and EBITDA of $1,314.9 million and $236.2 million, an increase of 13.4% and 22.0%, respectively, from 1996. Year end 1997 backlog increased 29.1% to $875.6 million from $678.3 million at year end 1996. Coltec's common stock is listed on the NYSE, and based on the closing price of $23 1/2 per share on May 15, 1998, the Company had a total equity market capitalization of approximately $1,553.4 million. BUSINESS STRATEGY The Company's strategy is to develop and maintain market leading positions and attractive margins for its products through technological innovation, cost efficiencies, product differentiation and superior quality and service. The Company emphasizes targeted development of highly engineered, value-added products designed to meet specific customer requirements. This emphasis enables the Company to maintain close, interactive relationships with major aircraft manufacturers as well as the Company's principal industrial customers and to develop new products in response to customer needs. Coltec views its superior customer responsiveness as one of its key competitive strengths. Successful introduction of new products, cost reductions, productivity improvements and selected divestitures have helped the Company maintain operating margins averaging more than 12.5% over the last five years. Through "Coltec 2000", the Company's three-year growth and operating plan, the Company has set specific growth and operating targets focused on achieving annual revenues of $2 billion by the year 2000 while maintaining the quality of earnings. The plan calls for substantial growth internally, complemented by strategic acquisitions which extend product offerings of the Company's existing businesses and leverage the Company's existing distribution network. The key elements of the plan are as follows: - Focus on Aftermarket -- For the year ended December 31, 1997, approximately 50% of the Company's sales were derived from the aftermarket. The Company's products sold in the aftermarket include industrial seals, hub systems and a variety of aftermarket parts used in the maintenance of engines, compressors, pumps and gas turbines. A broad and fragmented buyer base coupled with the critical nature of replacement parts generates sales with generally higher margins than sales to original equipment manufacturers. In addition, because the products are consumable in nature and are replaced over time, the aftermarket provides a stable source of income. - Develop New Products -- The Company believes that responsiveness to customer demands is a critical success factor in both its Aerospace and Industrial markets. As a result, the Company has undertaken a number of initiatives to reduce the time and cost of bringing new products to market and has established 33 38 a long term objective of generating 50% of sales from products introduced within the prior five years. Recent new product and application introductions have included (i) landing gear systems for the Boeing 777, (ii)Power$ync II computerized controls for compressors, (iii) QuickSet(TM) 9001 packing systems and Tandem Seal(TM) industrial sealing products, (iv) the Raindrop Ultra agricultural spray nozzle, (v) new versions of FADEC electronic fuel controls for aircraft, (vi) fuel injectors for the Rolls-Royce RB211 which allowed the Company to enter the large jet engine market and (vii) the Company's Chandler Evans Control Systems Division's agreement to develop and utilize its advanced Variable Displacement Vane Pump technology in aircraft engine applications. - Focus on Globalization -- For the year ended December 31, 1997, approximately 10% of the Company's revenues were generated from outside of the United States and Canada. As part of its Coltec 2000 strategy, the Company seeks to grow its international operations, through a mix of internal growth and acquisitions. Given the global nature of many of the markets in which the Company competes, management believes that an increased global presence will lead to substantial operating efficiencies, as fixed development and operating costs can be amortized over a greater sales base. In terms of internal growth, the Company will emphasize the development and expansion of its international customer base, through the sale of products such as the fuel injectors to Rolls-Royce for the RB211 and the BMW aircraft engines. The Company has established sales and distribution capabilities in Asian and South American countries and will pursue international growth through complementary acquisitions such as its recent acquisition of Groupe Carbone Lorraine's sealing products business. - Total Systems Sourcing -- Management believes that many of the Company's largest customers, including Boeing, are placing increased emphasis on suppliers which are capable of providing integrated systems rather than component parts. The Company believes that its design and engineering competencies and cellular manufacturing processes provide a competitive advantage in the design and manufacture of integrated systems and are areas in which the Company will continue to invest. For example, in 1995 the Company supplied Boeing with non-integrated landing gear systems. However, in 1996 with the Boeing 737 and 757, Coltec began providing fully integrated landing gear which includes the installation of wheels, tires, brakes, hydraulics, electrical harnesses, lights and sensing systems on the base landing gear. In 1997, the Company began providing fully integrated landing gear for the Boeing 777 aircraft thereby increasing revenue by more than 20% per unit. The Company will begin providing fully integrated landing gear for the Boeing 767 in 1998. - Productivity Initiatives -- A number of productivity initiatives have been implemented which have been designed to reduce lead times, curtail scrap and enhance throughput, which are expected among other things, to improve inventory turns. Such initiatives have included the consolidation of multiple product lines into common production facilities and the relocation of the Company's Delavan Spray Technologies Division to new state-of-the-art facilities near major transportation hubs. Cycle time reductions have reduced required inventory levels while improving customer responsiveness. For example, during 1997, Walbar Arizona reduced cycle times on damper seal production by approximately 70%, while the Company's Menasco Division reduced production time for Boeing 737 landing gear main cylinders from 20 weeks to 12. The Company intends to continue to enhance its production processes through optimization of workflow, investment in upgraded manufacturing technologies and robotics, and related initiatives. In addition, all of the Company's major divisions are in the late stages of implementing new enterprise reporting systems. The new systems are enhancing shop floor reporting, materials management, order entry and cost evaluation and control. Management believes that these programs are leading to productivity and efficiency improvements and are having a positive impact on operating performance. The new enterprise systems have the added benefit of addressing year 2000 systems issues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". AEROSPACE Through its Aerospace segment, Coltec is a leading manufacturer of landing gear systems, engine fuel controls, flight attendant and cockpit seats, turbine blades, fuel injectors, nozzles and related components for 34 39 commercial and military aircraft. The operating units and principal products, markets and competitors of the Aerospace segment are as follows:
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS --------------- ------------------ ----------------- --------------------- Menasco............... Aircraft landing gear Commercial and B.F. Goodrich, and flight control military aircraft Messier- Dowty actuators, landing manufacturers, gear parts, repairs airlines, U.S. Gov- and overhaul ernment Walbar................ Aircraft and Aircraft and Chromalloy, Howmet industrial gas turbine stationary gas turbine engine and services, engine manufacturers, turbocharger rotating diesel engine assemblies manufacturers Chandler Evans Aircraft fuel pump and Aircraft engine Argotech, Hamilton Control............. control systems manufacturers, U.S. Standard, Sundstrand, Government and AlliedSignal Controls aftermarket and Accessories Delavan Gas Turbine Products............ Aircraft engine fuel Aircraft engine Parker-Hannifin, nozzles, valves and manufacturers, U.S. Textron afterburner spray bars Government and aftermarket Lewis Engineering..... Aircraft Commercial and Ametek, Rogerson, instrumentation, military aircraft, Rosemont, Norwich temperature sensors, engine manufacturers Aerospace and level control and process industries products and electrical harnesses AMI Industries, Aircraft flight Commercial aircraft IPECO, Sicma Inc................. attendant and cockpit manufacturers, and seats airlines
Menasco. Menasco is one of the leading suppliers of landing gear systems for medium-to-heavy commercial and military aircraft. The design, manufacture and test of aircraft landing gear and components, and related overhaul and repair, comprise 90% of Menasco's sales volume. Landing gear and precision components are highly engineered and manufactured to customer specifications and sold to aircraft manufacturers, aircraft operators and to the United States Government ("U.S. Government"), both as original equipment and as spare parts for existing aircraft. Menasco's historical concentration of landing gear sales among a limited number of companies reflects the relatively small number of medium and heavy aircraft manufacturers. Landing gear systems generally account for up to 2% of the total cost of an aircraft. Menasco also provides spare parts for landing gear and landing gear overhaul services. Aftermarket business represented 22% of Menasco's total sales in 1997. The remaining 10% of Menasco's sales are primarily flight control actuators. Menasco produces large hydraulic and mechanical actuators and has the capability to produce shock mitigation equipment for both military and commercial applications. Walbar. Walbar is an original equipment manufacturer and coating and repair service center for aircraft and industrial gas turbine engine components. Its product base ranges from complex precision machined turbine parts to high-technology protective coatings. Its primary machined products are turbine blades, vanes and other related turbine airfoil components. Walbar also manufactures disks, integrally bladed rotors and complex impellers, as well as complete rotating assemblies for flight and auxiliary power engines and locomotive turbochargers. Following the reduction in U.S. Government appropriation for military aircraft engines, Walbar has successfully increased its focus on non-aerospace applications, and now enjoys significant market share in the locomotive turbocharger market and the gas turbine power generation market. Chandler Evans. Chandler Evans Control Systems Division ("CECO") produces gas turbine engine fuel controls and pumps, and pneumatic and hydraulic components for use in aircraft and helicopter engines and 35 40 aircraft systems. CECO has carved a niche market in the area of small engine fuel pumps and controls for both commercial and military applications. CECO also supplies small turbine engines with Full Authority Digital Electronic Control ("FADEC") systems. Computerized electronics in a FADEC system make aircraft safer and less expensive to operate. In 1997, a CECO FADEC was successfully operated in the first flight test of the U.S. Army's Boeing/Sikorsky Rah-66 Comanche helicopter. CECO continues to supply the military market with fuel pump technology. Its combination main and afterburner centrifugal fuel pump for the Boeing F/A-18 E/F fighter was successfully flight tested in 1997. Additionally in 1997, CECO's latest metering fuel pump, the Variable Displacement Vane Pump, was selected as a fueldraulic pump to be used for multinational advanced vectoring exhaust nozzle applications. During 1997, CECO's aftermarket sector contributed 49% of its revenues compared to 42% during 1996. This was due, in part, to increased Company focus on this market coupled with the recovery in the worldwide airline and general aviation market, and also an increase in U.S. Government contracts. Delavan Gas Turbine Products. Delavan Gas Turbine Products Division ("Delavan") is a custom designer and manufacturer of fuel injectors, flow control valves, fuel manifolds, afterburner spray bars and other accessories for commercial and military gas turbine engines. Product applications in the aerospace industry include products for engines powering large commercial and regional airliners, business aircraft, military and commercial helicopters, military fighters and transports and auxiliary power units. In the industrial sector, Delavan fuel injectors and valves are utilized in large land-based gas turbines found in electrical power generation plants and natural gas pipeline installations. Lewis Engineering. Lewis Engineering designs, develops and produces electromechanical and electronic instrumentation for aircraft cockpits, landing gear electrical harnesses and temperature sensors for aircraft and engine systems. These products are used in commercial transport, general aviation and military markets. AMI Industries, Inc. AMI, a Colorado-based company, was acquired in the third quarter of 1997. AMI is a leading designer and manufacturer of flight attendant and cockpit seats and is recognized for supplying high comfort cabin attendant seats. One customer (Boeing) in the Aerospace segment represented approximately 14% of Coltec's 1997 total sales. INDUSTRIAL Through its Industrial segment, Coltec is a leading manufacturer of industrial seals, gaskets, packing products, self-lubricating bearings and oil seals and hubodometers for trucks and trailers. The Industrial segment also produces spray nozzles for agricultural, home heating and industrial applications, as well as high-horsepower diesel engines for naval ships and diesel, gas and dual-fuel engines for electric power plants. Coltec also produces air compressors and automotive products. The operating units and principal products, markets and competitors of the Industrial segment are as follows:
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS --------------- ------------------ ----------------- --------------------- Garlock Sealing Seals, gaskets, Chemical, pulp and Applied Industrial Technologies........ packings and expansion paper, refining, Technologies, CR joints, butterfly utilities, industrial Industries, A.W. valves, PTFE sheet and and electronics Chesterton, Richard film, OEM parts and Klinger, AMRI, Durco, gaskets Neotecha, Dewal, W. Gore, Durametallic, John Crane Fairbanks Morse Diesel, gas and U.S. Navy, marine, Caterpiller, Cooper Engine.............. dual-fuel engines locomotive and Industries, General stationary power Motors markets
36 41
OPERATING UNITS PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL COMPETITORS --------------- ------------------ ----------------- --------------------- Quincy Compressor..... Air compressors and Manufacturing, climate Gardner-Denver, vacuum pumps control, oil and gas Sullair, industries Ingersoll-Rand, Cham- pion Garlock Bearings...... Self-lubricated Automotive and equip- Kolbenschmidt, Rexnord bearings ment manufacturers Stemco................ Heavy duty wheel-end Fleet truck operators, CR Industries, Federal systems, oil seals, truck parts Mogul, Nelson, Donald- hubcaps and distributors and son hubodometers, hubnuts vehicle assemblers Delavan Spray Spray nozzles, Home heating, Spraying Systems, Technologies........ accessories, pumps and industrial and Danfoss systems agriculture France Compressor Compressor valves and Compressor manufactur- Hoerbiger, C. Lee Cook Products............ seals ers and end users Haber Tool............ Cold-forming dies Fastener and Form Flow automotive manufacturers Plastomer Products.... PTFE tape Industrial Fluoroglas, W. Gore manufacturers Sterling Die.......... Thread-rolling dies Fastener manufacturers Reed Rico Ortman Fluid Power.... Hydraulic and Fluid power market Parker-Hannifin, pneumatic cylinders Miller Fluid Power Garlock Rubber Sheet rubber products Steel mills, chemical B.F. Goodrich Technologies........ processors, refineries and paper mills Danti Tool............ Details, jigs, Machinery builders, Uclid, Burdette fixtures, precision automotive parts machining manufacturers, other production facilities Coltec Specialty Prod- Engineered polytetra- Semiconductor, pe- Furon, EGC ucts(1)............. fluoroethylene (PTFE) trochemical refining products plants Cefilac(1)............ Seals, gaskets and Chemical, power, pe- John Crane, Laddy packing, metal o-rings trochemical refining and spiral wound plants gaskets Helicoflex(1)......... Metal o-rings; spring Power generation, pe- Advanced Products loaded seals trochemical refining plants
- --------------- (1) Purchased in early 1998. The more significant operating units in the Industrial segment are discussed below. Garlock Sealing Technologies. Garlock Sealing Technologies ("Garlock") produces and markets fluid sealing devices that prevent leakage and exclude contaminants from rotating and reciprocating machinery. Garlock also produces seal joints for high temperature and corrosive environment applications. The newest Garlock products are positioned to meet current emission standards for valves, pumps and flanges. To assist customers in complying with more stringent global regulations for fugitive volatile organic compound emissions, Garlock has developed a variety of products using traditional and newly developed materials. Garlock products include compression packings, gaskets and gasketing materials, hydraulic, oil and mechanical seals, elastomeric expansion joints, industrial textiles, metallic gaskets and other specialized industrial products. 37 42 Sophisticated Garlock products protect equipment in industry applications where performance is vital to safety and environmental concerns. These applications include natural resource recovery, petroleum refining, chemicals, primary metals, food and pharmaceuticals, power generation, mining, pulp and paper, water and waste treatment, construction and transportation. In October 1997, Coltec acquired the assets of the sheet rubber and conveyor belt business of Dana Corporation's Boston Weatherhead Division. This division, now known as Garlock Rubber Technologies manufactures high-quality rubber sheet products used for gasketing and other applications in steel mills, chemical processing, refineries and paper production including conveyor belts. All of Garlock Rubber Technologies' products are consumable. Although the products are also purchased for use in original equipment, in 1997 the maintenance and replacement aftermarket accounted for approximately 80% of Garlock's total sales. Quincy Compressor. The Quincy Compressor Division ("Quincy") is a manufacturer of a wide range of helical screw and reciprocating air compressors and vacuum pumps. Quincy products vary in size from one-third to 350 horsepower and are used in a variety of industrial applications, including industrial base load, pneumatic temperature and instrument control, diesel and gas engine starting, paint spraying and emergency standby service. Much of Quincy's business is in the highly competitive industrial and climate control compressor markets. Garlock Bearings. Garlock Bearings is a leading producer of specialized self-lubricating bearings, which consist of either steel or reinforced epoxy composite backings with non-metallic bearing surfaces of polytetrafluoroethylene ("PTFE") fibers or a mixture that includes PTFE. PTFE provides maintenance-free performance and reduced friction. Garlock Bearings' products typically perform as sleeve bearings or thrust washers under conditions of no lubrication, minimal lubrication or pre-lubrication. Garlock Bearings has a major share of the self-lubricating bearing market in North America. In 1997, approximately 80% of sales were to original equipment manufacturers, with major competition coming from companies in Japan and Germany. Fairbanks Morse. The Fairbanks Morse Engine Division ("Fairbanks Morse") offers a broad range of heavy-duty diesel engines. Fairbanks Morse has the capacity to provide diesel engines from 640 to 29,320 horsepower. In addition, Fairbanks Morse manufactures dual-fuel, gas and diesel engines ranging in size from four to 18 cylinders. Engines are offered in both conventional "V" and in-line, four-cycle versions as well as in-line, two-cycle opposed-piston configurations. They are used for marine propulsion and marine power generation and in pump, compressor and electrical power generation applications. In September 1997, Fairbanks Morse acquired the assets related to the Alco locomotive business of General Electric Company ("GE"). The assets pertain to the manufacture and sale of Alco locomotive engines and turbochargers and Alco locomotive chassis components. Fairbanks Morse can now sell FM/ALCO locomotive products throughout the world except India, where GE has retained rights to manufacture and sell such products. Stemco. The Stemco Division is a developer and producer of unitized hub systems, hub oil seals, hubcaps, axle nuts and distance-measuring devices for medium and heavy-duty trucks. Delavan Spray Technologies. The Delavan Spray Technologies Division (formerly Delavan Commercial Products Division) is a designer and producer of atomizers for combustion and industrial applications and atomizers, pumps and accessories for agricultural, industrial and oil burner metering applications. Danti Tool. In September 1997, Coltec acquired DM&T, Inc., doing business as Danti Tool, which makes many of the tooling products utilized by Haber Tool's existing customer base. SUBSEQUENT ACQUISITIONS In January 1998, Coltec purchased Tex-o-Lon and Repro-Lon and certain assets of Marine & Petroleum Mfg., Inc., Texas-based businesses. The acquisitions were combined into one division, Coltec Specialty Products. Coltec Specialty Products manufactures PTFE fluid sealing products for the semiconductor industry and reprocesses PTFE compounds for the chemical and semiconductor industry. In February 1998, Coltec purchased the Sealing Division of Groupe Carbone Lorraine which will be segregated into two divisions. Cefilac, based in Saint Etienne and Montbrison, France, produces seals, gaskets and packings, metal-o-rings and spiral-wound gaskets used in the chemical, power and refining industries. 38 43 Helicoflex, based in Columbia, South Carolina, produces metal-o-rings and spring-loaded seals and metal c-rings. Helicoflex sealing products are specifically designed for equipment and processes exposed to high temperatures, cryogenic temperatures, high pressures, vacuum conditions, radioactive environments or corrosive applications. See note 19 to the Company's consolidated financial statements included elsewhere in this Prospectus. INTERNATIONAL OPERATIONS Coltec's international operations, mainly in Canada and France, are conducted through foreign-based manufacturing or sales subsidiaries, or both, and include export sales of domestic divisions to unrelated foreign customers. Export sales of diesel engines are made either directly or through foreign representatives. Compressors are sold through foreign distributors. Certain products of Coltec's Industrial segment are sold in foreign countries through salesmen and sales representatives or sales agents. Coltec's Canadian operations include the manufacture of landing gear systems and aircraft flight controls, the provision of overhaul services for these systems and controls for Canadian and other customers and the manufacture of turbine components and turbine and compressor rotating parts primarily for aircraft gas turbine engines. The Canadian operations also manufacture and market seals, gasketing material, packings and truck products, and market parts for Fairbanks Morse diesel engines and accessories and other products for use in Canada and other countries. Coltec operates 18 plants in Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In addition, Coltec occupies leased office and warehouse space in various foreign countries. Devaluations or fluctuations relative to the United States dollar in the exchange rates of the currency of any country where Coltec has foreign operations could adversely affect the profitability of such operations in the future. For financial information on operations by geographic segments, see note 17 to the Company's consolidated financial statements included elsewhere in this Prospectus. Coltec's contracts with foreign nations for delivery of military equipment, including components, are subject to deferral or cancelation by U.S. Government regulation or orders regulating sales of military equipment abroad. Any such action on the part of the U.S. Government could have an adverse effect on Coltec. SALES BY CLASS OF PRODUCTS During the last three fiscal years, landing gear systems was the only class of similar products that accounted for at least 10% of total Coltec sales. In 1997, 1996 and 1995, sales of landing gear systems constituted 18%, 15% and 14%, respectively, of Coltec's total sales. BACKLOG At December 31, 1997, Coltec's backlog of firm unfilled orders was $875.6 million compared with $678.3 million at December 31, 1996. Approximately $267.2 million of the 1997 year-end backlog is scheduled to be shipped after 1998. CONTRACT RISKS Coltec, through its various operating units, primarily Menasco, Chandler Evans, Walbar and Delavan, Gas Turbine Products produces products for manufacturers of commercial aircraft pursuant to contracts that generally call for deliveries at predetermined prices over varying periods of time and that provide for termination payments intended to compensate for certain costs incurred in the event of cancelation. In addition, certain commercial aviation contracts contain provisions for termination for convenience similar to those contained in U.S. Government contracts described below. Longer-term agreements normally provide for price adjustments intended to compensate for deferral of delivery depending upon market conditions. A portion of the business of Coltec's Menasco, Chandler Evans, Walbar and Delavan Gas Turbine Products divisions has been as a subcontractor and as a prime contractor in supplying products in connection with military 39 44 programs. Substantially all of Coltec's U.S. Government contracts are firm fixed-price contracts. Under firm fixed-price contracts, Coltec agrees to perform certain work for a fixed price and, accordingly, realizes all the benefit or detriment occasioned by decreased or increased costs of performing the contracts. From time to time, Coltec accepts fixed-price contracts for products that have not been previously developed. In such cases, Coltec is subject to the risk of delays and cost overruns. Under U.S. Government regulations, certain costs, including certain financing costs, portions of research and development costs, and certain marketing expenses related to the preparation of competitive bids and proposals, are not allowable. The U.S. Government also regulates the methods under which costs are allocated to U.S. Government contracts. With respect to U.S. Government contracts that are obtained pursuant to an open bid process and therefore result in a firm fixed price, the U.S. Government has no right to renegotiate any profits earned thereunder. In U.S. Government contracts where the price is negotiated at a fixed price rather than on a cost-plus basis, as long as the financial and pricing information supplied to the U.S. Government is current, accurate and complete, the U.S. Government similarly has no right to renegotiate any profits earned thereunder. If the U.S. Government later conducts an audit of the contractor and determines that such data was inaccurate or incomplete and that the contractor thereby made an excessive profit, the U.S. Government may take action to recoup the amount of such excessive profit, plus treble damages, and take other enforcement actions. U.S. Government contracts are, by their terms, subject to termination by the U.S. Government either for its convenience or for default of the contractor. Fixed-price type contracts provide for payment upon termination for items delivered to and accepted by the U.S. Government, and, if the termination is for convenience, for payment of the contractor's costs incurred plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses, and a reasonable profit on its costs incurred. However, if a contract termination is for default by the contractor (a) the contractor is paid such amount as may be agreed upon for completed and partially-completed products and services accepted by the U.S. Government, (b) the U.S. Government is not liable for the contractor's costs with respect to unaccepted items, and is entitled to repayment of advance payments and progress payments, if any, related to the terminated portions of the contracts, and (c) the contractor may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. In addition to the right of the U.S. Government to terminate, U.S. Government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal- year basis even though contract performance may take many years. Consequently, at the outset of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. See "Risk Factors -- Cyclical Business; Government Contracts". RESEARCH AND PATENTS Most divisions of Coltec maintain staffs of manufacturing and product engineers whose activities are directed at improving the products and processes of Coltec's operations. Manufactured and development products are subject to extensive tests at various divisional plants. Total research and development cost, including product development, was $46.5 million for 1997, $44.1 million for 1996 and $45.1 million for 1995. Coltec owns a number of United States and other patents and trademarks and has granted licenses under some of such trademarks. Management does not consider the business of Coltec as a whole to be materially dependent upon any patent, patent right or trademark. EMPLOYEE RELATIONS As of December 31, 1997, Coltec had approximately 9,100 employees, of whom approximately 3,700 were salaried. Approximately 41% of the hourly employees are represented by unions for collective bargaining purposes. Union agreements relate, among other things, to wages, hours and conditions of employment, and the wages and benefits finished are generally comparable to industry and area practices. In 1997, three collective bargaining agreements covering approximately 350 hourly employees were renegotiated. Coltec considers the labor relations of Coltec to be satisfactory, although it has experienced work 40 45 stoppages from time to time in the past. One collective bargaining agreement covering approximately 200 employees was due to expire in 1998 and has been renegotiated for a five-year term. Coltec is subject to extensive U.S. Government regulations with respect to many aspects of its employee relations, including increasingly important occupational health and safety and equal employment opportunity matters. Failure to comply with certain of these requirements could result in ineligibility to receive U.S. Government contracts. These conditions are common to the various industries in which Coltec participates and entail risks of financial and other exposure. PROPERTIES Coltec operates 62 manufacturing plants in 22 states in the U.S. and in Canada, Mexico, France, the United Kingdom, Australia, Germany and Poland. In addition, Coltec has other facilities throughout the United States and in various foreign countries, which include sales offices, repair and service shops, light manufacturing and assembly facilities, administrative offices and warehouses. Certain information with respect to Coltec's significant manufacturing plants that are owned in fee, all of which (other than the Palmyra, New York and Ontario Facilities) are encumbered pursuant to a certain credit agreement between Coltec and certain banks and related security documents, is set forth below:
APPROXIMATE NUMBER APPROXIMATE SEGMENT LOCATION OF SQUARE FEET ACREAGE - ------- ------------------------------ ------------------ ----------- Aerospace................ West Hartford, Connecticut(a) 538,000 71 Euless, Texas 442,000 42 Oakville, Ontario 280,000 14 Mississauga, Ontario 141,000 7 Industrial............... Palmyra, New York 677,000 137 Beloit, Wisconsin 856,000 73 Longview, Texas 265,000 52
- --------------- (a) Approximately 239,000 square feet are utilized by the Aerospace Segment with the balance leased to third parties. In addition to the owned facilities, certain manufacturing activities of some industry segments are conducted within leased premises, the largest of which is in the Industrial segment, located in Quincy, Illinois, and covers approximately 173,000 square feet. Some of these leases provide for options to purchase or to renew the lease with respect to the leased premises. Coltec's total manufacturing facilities presently being utilized aggregate approximately 4,902,000 square feet of floor area of which approximately 4,230,000 square feet of area are owned in fee and the balance is leased from third parties. Coltec leases approximately 35,000 square feet at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, North Carolina, for its executive offices, and has renewal options under such lease through 2011. In the opinion of management, Coltec's principal properties, whether owned or leased, are suitable and adequate for the purposes for which they are used and are suitably maintained for such purposes. ENVIRONMENTAL MATTERS The Company's operations are subject to extensive Environmental Laws. The Company takes a proactive approach in addressing the applicability of all Environmental Laws as they relate to its manufacturing operations and in proposing and implementing any remedial plans that may be necessary. The Company believes it is either in material compliance with all currently applicable regulations or is operating in accordance with the appropriate variances and compliance schedules or similar arrangements. The Company has identified certain situations that will require future capital and non-capital expenditures to maintain or improve compliance with current 41 46 Environmental Laws. The majority of the identified situations relate to remediation projects at former operating sites which have been sold or closed and primarily deal with soil and groundwater remediation. The Company has been notified that it is among the potentially responsible parties under Environmental Laws, for the costs of investigating and, in some cases, remediating contamination by hazardous materials at approximately 28 sites. Such laws can impose joint and several liability for the costs of investigating and remediating properties contaminated by hazardous materials. Liability for these costs can be imposed on present and former owners or operators of the properties or on parties who generated the wastes that contributed to the contamination. The Company's policy is to accrue environmental remediation costs when both it is probable that a liability has been incurred and the amount can be reasonably estimated. The measurement of liability is based on an evaluation of currently available facts with respect to each individual situation and takes into consideration factors such as existing technology, presently enacted laws and regulations and prior experience in remediation of contaminated sites. As assessments and remediation progress at individual sites, these liabilities are reviewed periodically and adjusted to reflect additional technical and legal information. The Company currently estimates that its future non-capital expenditures related to environmental matters will range between $27.0 million and $50.0 million, representing management's best estimate of probable non-capital expenditures. At December 31, 1997, Coltec had accrued $31.7 million for expenditures which will be incurred over the next 10 to 20 years. In addition, capital expenditures aggregating $5.0 million related to environmental matters, may be required during the next two years. Although the Company is pursuing insurance recovery in connection with certain of the underlying matters, no receivable has been recorded with respect to any potential recovery of costs in connection with any environmental matter. During 1997, costs associated with environmental remediation and ongoing assessment were not significant. Actual costs to be incurred for identified situations in future periods may vary from estimates, given inherent uncertainties in evaluating environmental exposures due to unknown conditions, changing government regulations and legal standards regarding liability and evolving related technologies. Subject to the imprecision in estimating future environmental costs, the Company believes that compliance with current Environmental Laws will not require significant capital expenditures or have a material adverse effect on its consolidated results of operations or financial position. See "Risk Factors -- Potential Exposure to Environmental Liabilities". LEGAL PROCEEDINGS ASBESTOS LITIGATION As of December 31, 1997 and 1996, two subsidiaries of Coltec were among a number of defendants (typically 15 to 40) in approximately 110,000 and 94,700 actions, respectively (including approximately 2,400 and 5,100 actions, respectively, in advanced stages of processing), filed in various states by plaintiffs alleging injury or death as a result of exposure to asbestos fibers. During 1997, 1996 and 1995, these two subsidiaries of Coltec were named defendants in approximately 38,200, 39,900 and 44,000 new actions, respectively. Through December 31, 1997, approximately 199,000 of the approximately 309,000 total actions brought have been settled or otherwise disposed of. The damages claimed for personal injury or death vary from case to case and in many cases plaintiffs seek $1 million or more in compensatory damages and $2 million or more in punitive damages. Although the law in each state differs to some extent, it appears, based on advice of counsel, that liability for compensatory damages would be shared among all responsible defendants, thus limiting the potential monetary impact of such judgments on any individual defendant. Following a decision of the Pennsylvania Supreme Court, in a case in which neither Coltec nor any of its subsidiaries were parties, that held insurance carriers are obligated to cover asbestos-related bodily injury actions if any injury or disease process, from first exposure through manifestation, occurred during a covered policy period (the "continuous trigger theory of coverage"), Coltec settled litigation with its primary and most of its first-level excess insurance carriers, substantially on the basis of the Pennsylvania Supreme Court's ruling. Coltec has negotiated a final agreement with most of its excess carriers that are in the layers of coverage immediately 42 47 above its first layer. Coltec is currently receiving payments pursuant to this agreement. Coltec believes that, with respect to the remaining carriers, a final agreement can be achieved without litigation and on substantially the same basis that it has resolved the issues with its other carriers. Settlements are generally made on a group basis with payments made to individual claimants over periods of one to four years. Payments were made by the Company with respect to asbestos liability and related costs aggregating $59.2 million in 1997, $71.3 million in 1996 and $56.7 million in 1995, substantially all of which were covered by insurance. Related to payments not covered by insurance, Coltec recorded charges to operations amounting to $8.0 million in 1997, $8.0 million in 1996 and $5.0 million in 1995. In accordance with Coltec's internal procedures for the processing of asbestos product liability actions and due to the proximity to trial or settlement, certain outstanding actions have progressed to a stage where Coltec can reasonably estimate the cost to dispose of these actions. As of December 31, 1997, Coltec estimates that the aggregate remaining cost of the disposition of the settled actions for which payments remain to be made and actions in advanced stages of processing, including associated legal costs, is approximately $47.3 million and Coltec expects that this cost will be substantially covered by insurance. With respect to the 107,600 outstanding actions as of December 31, 1997 which are in preliminary procedural stages, Coltec lacks sufficient information upon which judgments can be made as to the validity or ultimate disposition of such actions, thereby making it difficult to estimate with reasonable certainty the potential liability or costs to Coltec. When asbestos actions are received they are typically forwarded to local counsel to ensure that the appropriate preliminary procedural response is taken. The complaints typically do not contain sufficient information to permit a reasonable evaluation as to their merits at the time of receipt, and in jurisdictions encompassing a majority of the outstanding actions, the practice has been that little or no discovery or other action is taken until several months prior to the date set for trial. Accordingly, Coltec generally does not have the information necessary to analyze the actions in sufficient detail to estimate the ultimate liability or costs to Coltec, if any, until the actions appear on a trial calendar. A determination to seek dismissal, to attempt to settle or to proceed to trial is typically not made prior to the receipt of such information. It is also difficult to predict the number of asbestos lawsuits that Coltec's subsidiaries will receive in the future. Coltec has noted that, with respect to recently settled actions or actions in advanced stages of processing, the mix of the injuries alleged and the mix of the occupations of the plaintiffs have been changing from those traditionally associated with Coltec's asbestos-related actions. Coltec is not able to determine with reasonable certainty whether this trend will continue. Based upon the foregoing, and due to the unique factors inherent in each of the actions, including the nature of the disease, the occupation of the plaintiff, the presence or absence of other possible causes of a plaintiff's illness, the availability of legal defenses, such as the statute of limitations or state of the art, and whether the lawsuit is an individual one or part of a group, management is unable to estimate with reasonable certainty the cost of disposing of outstanding actions in preliminary procedural stages or of actions that may be filed in the future. However, Coltec believes that its subsidiaries are in a favorable position compared to many other defendants because, among other things, the asbestos fibers in its asbestos-containing products were encapsulated. Insurance coverage of a small nonoperating subsidiary formerly distributing asbestos-bearing products is nearly depleted. Considering the foregoing, as well as the experience of Coltec's subsidiaries and other defendants, and given the substantial amount of other insurance coverage that Coltec expects to be available from its solvent carriers to cover the majority of its exposure, Coltec believes that pending and reasonably anticipated future actions are not likely to have a materially adverse effect on Coltec's results of operations and financial condition. Although the insurance coverage which Coltec has is substantial, it should be noted that insurance coverage for asbestos claims is not available to cover exposures initially occurring on and after July 1, 1984. Coltec's subsidiaries continue to be named as defendants in new cases, some of which allege initial exposure after July 1, 1984. In addition to claims for personal injury, Coltec's subsidiaries have been involved in an insignificant number of property damage claims based upon asbestos-containing materials found in schools, public facilities and private commercial buildings. Based upon the proceedings to date, the overwhelming majority of these claims have been resolved without a material adverse impact on Coltec. Likewise, the insignificant number of claims to 43 48 be resolved are not expected to have a materially adverse effect on Coltec's results of operations and financial condition. Coltec has recorded an accrual for its liabilities for asbestos-related matters that are deemed probable and can be reasonably estimated (settled actions and actions in advanced states of processing), and has separately recorded an asset equal to the amount of such liabilities that is expected to be recovered by insurance. In addition, Coltec has recorded a receivable for that portion of payments previously made for asbestos product liability actions and related litigation costs that is recoverable from its insurance carriers. Liabilities for asbestos-related matters and the receivable from insurance carriers included in the consolidated balance sheets of Coltec were as follows at December 31, 1997 and 1996 (in thousands):
1997 1996 ------- ------- Accounts and notes receivable............................... $56,039 $67,012 Other assets................................................ 16,249 18,728 Accrued expenses............................................ 50,688 60,659 Other liabilities........................................... 2,682 10,879
See "Risk Factors -- Asbestos Litigation". OTHER LITIGATION In September 1983, the local employees' union at Menasco Canada Ltee. (now Coltec Aerospace Canada Ltd.) ("Menasco Canada"), a federation of trade unions and several member-employees filed a complaint in the Province of Quebec Superior Court against Menasco Canada, alleging, among other things, an illegal lock-out, failure to negotiate in good faith, interference with the affairs of the union and various violations of local law. The plaintiffs are collectively seeking approximately Cdn. $14.0 million in damages, and Menasco Canada has filed a cross-claim for Cdn. $21.0 million and has closed its operations in Quebec Province. Coltec does not believe that this action will have a material effect on Coltec's consolidated results of operations and financial condition. On September 24, 1986, approximately 150 former salaried employees of Crucible Inc (a former subsidiary of Coltec) commenced an action claiming benefits under a corporate employment policy that had been established in 1962 and was terminated in 1972 by the corporation's Board of Directors. (George W. Henglein, et al. v. Colt Industries Operating Corporation Informal Plan for Plant Shutdown Benefits for Salaried Employees, et al., U.S. District Court for the Western District of Pennsylvania, 86-cv-2021). Plaintiffs alleged that the policy continued after the Board of Directors' action by reason of the Company's failure to notify them of elimination of the employment policy. As a result of that failure to notify, the policy was converted into a welfare or pension benefit plan upon the passage of the Employee Retirement Income Security Act in 1974. Based upon the occurrence of this conversion, the plaintiffs were entitled to benefits in 1982 when Crucible Inc's Midland operations closed. Following a non-jury trial in the U.S. District Court for the Western District of Pennsylvania, defendant's motion to dismiss was granted and the plaintiffs appealed. The Court of Appeals for the Third Circuit remanded the case to the District Court directing it to make specific findings of fact and conclusions of law and also found for the defendant on the jurisdiction of the District Court. The defendant again moved for dismissal and again defendant's motion to dismiss was granted by the District Court. This second decision of the District Court was appealed to the Court of Appeals for the Third Circuit and the case was again remanded to the District Court for additional findings as to the application of the law. On February 10, 1994, the District Court for the third time dismissed the plaintiffs' complaint and the plaintiffs appealed to the Third Circuit Court of Appeals. On September 26, 1994, the Third Circuit Court of Appeals for the third time remanded the case to the District Court. The Circuit Court held the record established by plaintiffs in the District Court was insufficient to allow the Court the ability to apply the appropriate legal standard. On November 4, 1994 the Court of Appeals for the Third Circuit denied the defendant's request for a rehearing. The defendant petitioned the U.S. Supreme Court for a writ of Certiorari; its petition was denied in 1995. The defendant again moved for dismissal before the District Court based upon the holding of the Circuit Court that plaintiffs had failed to establish their case at trial. The District Court denied the motion and sua sponte ordered a new trial de novo. A trial was held during July 1996 with both parties introducing evidence. A decision was rendered in 1997 finding the existence of an informal 44 49 plan. The District Court remanded to the administrator of Coltec's employee benefit plans the duties of calculating the benefits due to those plaintiffs entitled. The District Court held that all but six of the named plaintiffs' claims were time barred. Both the defendants and plaintiffs filed timely notices of appeal. Notwithstanding its filing of a notice of appeal, defendant has claimed and so notified the Circuit Court that it was of the opinion that the District Court's order was not final and thus not now appealable. As of December 1997, plaintiffs have concurred in defendant's position. Coltec does not believe that this action will have a material effect on Coltec's consolidated results of operations and financial condition. In addition to the litigation described above, there are various pending legal proceedings involving Coltec which are routine in nature and incidental to the business of Coltec. Coltec does not believe that these proceedings will have a material effect on Coltec's consolidated results of operations and financial condition. The U.S. Government conducts investigations into procurement of defense contracts as a part of a continuing process. Under current federal law, if such investigations establish the existence of improper activities, among other matters, debarment or suspension of a company from participating in the procurement of defense contracts could result. These conditions are common to the aerospace and government industries in which Coltec participates and entail the risk of financial and other exposure. See "-- Contract Risks" above. Coltec is not aware of any such investigation, nor is Coltec aware of any facts which, if known to investigators, might prompt any investigation. PRODUCT LIABILITY INSURANCE Coltec has product liability insurance coverage for liabilities arising from aircraft products which management believes to be adequate. In addition, with respect to other products (exclusive of liability for exposure to asbestos products), Coltec has product liability insurance in amounts exceeding $2.5 million per occurrence, which management believes to be adequate. Coltec is self-insured (for claims arising after July 1984) with respect to liability for exposure to asbestos products since third party insurance became unavailable in July 1984. EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS Inflation and foreign currency fluctuations have not had a material impact on the operating results and financial position of Coltec during the past three years. Coltec generally has been able to offset the effects of inflation with price increases, cost-reduction programs and operating efficiencies. Coltec's foreign operations, which are primarily located in Canada and France, do not operate in hyper-inflationary economies, except for Mexico, which Coltec does not believe will have a material effect on Coltec's consolidated results of operations and financial condition. 45 50 MANAGEMENT The directors and executive officers of Coltec are set forth below.
NAME AGE POSITION - ---- --- -------- John W. Guffey, Jr................................. 60 Chairman, Chief Executive Officer and Director. Nishan Teshoian.................................... 56 President, Chief Operating Officer and Director. David D. Harrison.................................. 51 Executive Vice President, Chief Financial Officer and Director. Laurence H. Polsky................................. 54 Executive Vice President, Administration. Robert J. Tubbs.................................... 51 Executive Vice President, General Counsel and Secretary. Michael J. Burdulis................................ 52 Senior Vice President, Group Operations. Richard L. Dashnaw................................. 61 Senior Vice President, Group Operations and President of the Fairbanks Morse Engine Division. Paul R. Kuhn....................................... 56 Senior Vice President, Group Operations. Joseph F. Andolino................................. 45 Group President and Vice President, Taxes. John N. Maier...................................... 46 Vice President and Controller. Joseph R. Coppola.................................. 67 Director. William H. Grigg................................... 65 Director. David I. Margolis.................................. 68 Director. Joel Moses......................................... 56 Director. Richard A. Stuckey................................. 66 Director.
Mr. Guffey has been Chairman of the Board and Chief Executive Officer of Coltec since January 1998. Chairman of the Board, Chief Executive Officer and President of Coltec from February 1995 to December 1997. Member of the Executive Committee and member of the Nominating Committee of Coltec. President and Chief Operating Officer of Coltec from prior to 1993 to January 1995. Director of Gleason Corp., a manufacturer of machine tools. Mr. Teshoian, President and Chief Operating Officer since January 1998. Chairman of the Board and Chief Executive Officer of Keystone from August 1995 to December 1997. Executive Vice President of Operations of the Tools and Hardware Division of Cooper Industries from June 1993 to July 1995. President of the Belden Division of Cooper Industries from prior to 1993 to August 1993. Mr. Harrison, Executive Vice President and Chief Financial Officer of Coltec since January 1997. Executive Vice President, Chief Financial Officer and Treasurer of Coltec from October 1996 to January 1997. Executive Vice President and Chief Financial Officer of Pentair Inc., a diversified manufacturing company, from February 1994 to August 1996. From prior to 1993 to February 1994 Vice President, Finance of General Electric Appliances Canada, a manufacturing company from February 1994 to August 1996. From prior to 1992 to February 1994 Vice President, Finance of General Electric Appliances Canada (CAMCO). Mr. Polsky, Executive Vice President, Administration since January 1994. Senior Vice President, Administration from April 1992 to December 1993. Mr. Tubbs, Executive Vice President, General Counsel and Secretary since January 1997. Senior Vice President, General Counsel and Secretary from November 1995 to January 1997. Senior Vice President and General Counsel from March 1995 to November 1995. General Counsel-Operations of Olin Corporation ("Olin"), a chemical and metals manufacturing company, from May 1993 to February 1995. Deputy General Counsel of Olin from prior to 1993 to May 1993. 46 51 Mr. Burdulis, Senior Vice President, Group Operations since June 1996. Group President from January 1995 to May 1996. President of the Garlock Sealing Technologies Division from February 1994 to December 1994. President of the Central Moloney Transformer Division from prior to 1993 to January 1994. Mr. Dashnaw, Senior Vice President, Group Operations and President of the Fairbanks Morse Engine Division since January 1994. Group President and President of the Fairbanks Morse Engine Division from prior to 1993 to December 1993. Mr. Kuhn, Senior Vice President, Group Operations since January 1998, Group President and President of Chandler Evans Control Systems Division from January 1993 to December 1997. Mr. Andolino, Group President and Vice President, Taxes since July 1997. Vice President, Taxes from March 1997 to June 1997. Staff Vice President, Taxes from June 1995 to March 1997. Senior Tax Counsel of AlliedSignal Inc., a diversified manufacturing company, from prior to 1993 to May 1995. Mr. Maier, Vice President and Controller since March 1997. Staff Vice President and Controller from March 1995 to March 1997. Vice President and Controller of Lukens, Inc., a speciality steel and industrial products company, from prior to 1993 to February 1995. Mr. Coppola, Member of the Audit Committee, member of the Stock Option and Compensation Committee (the "Compensation Committee") and Chairman of the Nominating and Corporate Governance Committee (the "Nominating Committee") of Coltec. Chairman, Chief Executive Officer and President of Giddings & Lewis, Inc. ("Giddings & Lewis"), a machine tool manufacturing company from July 1993 to retirement from Giddings & Lewis in July 1997. From prior to 1993 to July 1993 he was Senior Vice President, Manufacturing Services of Cooper Industries, Inc. ("Cooper Industries"), a diversified manufacturing company. Director of Belden Inc., a manufacturer of electrical wire and cable. Mr. Grigg, Chairman of the Audit Committee and member of the Nominating Committee of Coltec. Chairman and Chief Executive Officer of Duke Power Company, now Duke Energy Corporation, ("Duke"), a public utility company, from April 1994 to June 1997. Mr. Grigg retired from Duke in December 1997. Vice Chairman of Duke from prior to 1993 to April 1994. Director of Duke and the following mutual funds: Hatteras Income Securities Inc., Nations Fund Inc., Nations Fund Trust, Nations Fund Portfolios Inc., Nations LifeGoal Portfolios Inc., Nations Institutional Reserves Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target Maturity Inc. Director of Shaw Group, Inc. a designer, manufacturer and service provider of complex piping systems. Mr. Margolis, Chairman of the Executive Committee of Coltec since October 1994. Chairman of the Board and Chief Executive Officer of Coltec from prior to 1993 to retirement from Coltec in January 1995. Director of Burlington Industries, Inc., a manufacturer of textiles. Mr. Moses, Chairman of the Compensation Committee and member of the Executive Committee of Coltec. Provost, Massachusetts Institute of Technology ("MIT"), since June 1995. D.C. Jackson Professor of Computer Science and Engineering, MIT since June 1995. Dean, School of Engineering, MIT, from prior to 1993 to June 1995. Director of Analog Devices, Inc., a manufacturer of integrated circuits. Mr. Stuckey, member of the Audit Committee and member of the Compensation Committee of Coltec. Chief Economist, E.I. du Pont de Nemours and Company, Inc., a diversified chemical manufacturing company, from prior to 1993 to retirement from du Pont in December 1994. Economic consultant since January 1995. Certain of the Company's officers are participants in or parties to certain employee benefit and compensation plans and agreements which provide for accelerated or increased benefits upon a change of control of the Company. Such plans and agreements are described in more detail in the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders, the relevant part of which is incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 1997. See "Available Information". 47 52 DESCRIPTION OF THE SENIOR NOTES GENERAL The Senior Notes were, and the Exchange Notes will be, issued under the Indenture among the Company, the Subsidiary Guarantors and Bankers Trust Company, as Trustee. The following is a summary of certain provisions of the Indenture, the Amended Collateral Documents, and the Senior Notes, a copy of each of which, together with the form of Senior Notes, is available upon request to the Company at the address set forth under "Available Information". The following summary of certain provisions of the Indenture and such documents and instruments does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture and such documents and instruments, including the definitions of certain terms therein and those terms made a part thereof by the TIA. Capitalized terms used herein and not otherwise defined have the meanings set forth under "-- Certain Definitions". For purposes of this summary, the term "Company" refers only to Coltec Industries Inc and not to any Subsidiary of the Company. Principal of, premium, if any, and interest on the Senior Notes will be payable, and the Senior Notes may be exchanged or transferred, at the office or agency of the Company in the Borough of Manhattan, The City of New York (which initially shall be the corporate trust office of the Trustee, in New York, New York), except that, at the option of the Company, payment of interest may be made by check mailed to the registered holders of the Senior Notes at their registered addresses. The Senior Notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. No service charge will be made for any registration of transfer or exchange of Senior Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. For each Outstanding Note accepted for exchange, the Holder thereof will receive an Exchange Note having a principal amount equal to that of the surrendered Outstanding Note. The terms of the Exchange Notes are identical in all material respects to the terms of the Outstanding Notes, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except that, if the Exchange Offer is not consummated on or prior by October 13, 1998, the rate per annum at with the Outstanding Notes bear interest will be increased by amounts specified herein. See "-- Registered Exchange Offer; Registration Rights." The Exchange Notes will evidence the same indebtedness as the Outstanding Notes and will be issued under and entitled to the same benefits under the Indenture as the Outstanding Notes. In addition, the Exchange Notes and the Outstanding Notes will be treated as one series of securities under the Indenture. TERMS OF THE SENIOR NOTES The Senior Notes are senior obligations of the Company, limited to $300 million aggregate principal amount, and will mature on April 15, 2008. The Senior Notes are secured to the extent set forth below under "-- Collateral" and are guaranteed by the Subsidiary Guarantors to the extent set forth below under "-- Guarantees". Each Senior Note will bear interest at a rate per annum shown on the front cover of this Prospectus from April 16, 1998 or from the most recent date to which interest has been paid or provided for, payable semiannually to Senior Noteholders of record at the close of business on the April 1 or October 1 immediately preceding the interest payment date on April 15 and October 15 of each year, commencing October 15, 1998. Interest on the Senior Notes will be computed on the basis of a 360-day year of twelve 30-day months. OPTIONAL REDEMPTION The Senior Notes are redeemable, in whole or in part, at any time, at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of such Senior Notes and (ii) the sum of the present value of the remaining scheduled payments of principal and interest thereon from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year 48 53 consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the date of redemption. "Treasury Rate" means, with respect to any redemption date for the Senior Notes, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Maturity Date, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated on the third Business Day preceding the redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Senior Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Senior Notes. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means with respect to any redemption date for the Senior Notes (i) the average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations. "Reference Treasury Dealer" means each of Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government securities dealers in New York City (each, a "Primary Treasury Dealer") appointed by the Trustee in consultation with the Company; provided, however, that if any of the foregoing shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. Notice of any redemption will be mailed at least 30 days but no more than 60 days before the redemption date to each holder of Senior Notes to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date interest will cease to accrue on the Senior Notes or portions thereof called for redemption. Except as set forth above, the Senior Notes are not redeemable by the Company prior to maturity and are not entitled to the benefit of any sinking fund. RANKING The Senior Notes are senior obligations of the Company and will rank pari passu in right of payment with all existing and future senior obligations of the Company (including indebtedness under the Amended Credit Agreement) and will rank senior in right of payment to all subordinated obligations of the Company, including the TIDES Debentures issued by the Company. The Senior Notes are secured to the extent set forth below under "-- Collateral" and guaranteed by the Subsidiary Guarantors to the extent set forth below under "-- Guarantees". 49 54 As of December 31, 1997, on a pro forma basis after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, the Company would have had approximately $623.9 million of total consolidated long-term indebtedness, including (i) approximately $323.9 million of other senior indebtedness ($281.5 million of which would have been indebtedness outstanding under the Amended Credit Agreement) and (ii) $281.5 million of other secured indebtedness (all of which would have been indebtedness outstanding under the Amended Credit Agreement). The Indenture does not contain limitations on the amount of additional indebtedness which the Company may incur. GUARANTEES Each Subsidiary Guarantor will fully and unconditionally guarantee, jointly and severally, to each Holder and the Trustee, on a senior basis, the full and prompt payment of principal of and interest on the Senior Notes, and of all other obligations of the Company under the Indenture. The Subsidiary Guarantees (including the payment of principal of, premium, if any, and interest on the Senior Notes) are senior obligations of such Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future senior obligations of the Subsidiary Guarantors and will rank senior to all subordinated obligations of such Subsidiary Guarantors. The Subsidiary Guarantees are secured to the extent set forth below under "-- Collateral". As of December 31, 1997, on a pro forma basis after giving effect to the Offerings and the application of the estimated net proceeds therefrom to reduce indebtedness under the Amended Credit Agreement, such Subsidiary Guarantors would have had approximately $262.0 million of other senior indebtedness (all of which would have been guarantees of indebtedness under the Amended Credit Agreement) and $262.0 million of other secured indebtedness (all of which would have been guarantees of indebtedness outstanding under the Amended Credit Agreement). The Indenture does not contain any limitation on the amount of additional indebtedness that the Company's Subsidiaries, including the Subsidiary Guarantors, may incur. See note 20 to the Company's consolidated financial statements included elsewhere in this Prospectus. The obligations of each Subsidiary Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor (including any guarantees of indebtedness under the Amended Credit Agreement) and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. The Indenture provides that any Subsidiary Guarantor may, without the consent of the holders of any outstanding Senior Notes, consolidate with or sell or lease as, or substantially as, an entirety its assets to, or merge with or into, any other Person; provided that (i) immediately after giving effect to such transaction, no Event of Default under the Indenture, and no event which, after notice or the lapse of time, or both, would become such an Event of Default shall have occurred and be continuing and (ii) an officers' certificate and legal opinion covering such condition shall be delivered to the Trustee. Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor. Upon the sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor, then, in each case in accordance with the preceding paragraph, such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all the Capital Stock of such Subsidiary Guarantor) shall be automatically released from all its obligations under the Indenture and the Subsidiary Guarantee without any action on the part of the Trustee or the Holders. Until such time as all Guarantees by the Subsidiary Guarantors under the Indenture shall have been released in accordance with the next succeeding sentence, the Company shall cause each Subsidiary that Guarantees the Company's obligations under the Credit Agreement (other than Foreign Subsidiaries) to become a Subsidiary Guarantor under the Indenture and thereby Guarantee the Senior Notes on the terms and conditions set forth in the Indenture. Upon the release of a Guarantee by a Subsidiary of the Company's obligations under the Credit Agreement, the Subsidiary Guarantee of such Subsidiary under the Indenture will be released and discharged at 50 55 such time and will not be reinstated or renewed in the event any such Subsidiary thereafter Guarantees obligations of the Company under the Credit Agreement, so long as the Guarantee by such Subsidiary under the Credit Agreement remains released (i) until the next succeeding refinancing, restatement, renewal, extension or replacement of the Credit Agreement or amendment to increase the available principal amount thereunder, or (ii) for a period of 90 consecutive days, whichever is later. COLLATERAL The Senior Notes and the Subsidiary Guarantees are secured, subject to the terms of the Collateral Documents, equally and ratably with the indebtedness of the Company under the Amended Credit Agreement and related documents and liabilities in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement, by a security interest in the collateral (the "Collateral") under the Amended Collateral Documents described under "Description of Other Indebtedness -- The Amended Credit Agreement -- Collateral". In the event of foreclosure on the Collateral, the proceeds from the sale of the Collateral may not be sufficient to satisfy the Company's obligations under the Senior Notes and the Amended Credit Agreement in full. The amount to be received upon such a sale would be dependent upon numerous factors including the timing and the manner of the sale. In addition, the book value of the Collateral should not be relied upon as a measure of realizable value. By its nature, the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral can be sold in a short period of time. A significant portion of the Collateral, including the real property portion thereof, includes tangible and intangible assets which may only be usable as part of the existing operating businesses of the Company. Accordingly, any such sale of the Collateral, including the real property portion thereof, separate from the sale of certain of the Company's operating businesses, may not be feasible or of significant value. To the extent that third parties enjoy Permitted Liens or Liens otherwise permitted by the covenant described under "-- Certain Covenants -- Limitations on Liens", such third parties may have rights and remedies with respect to the property subject to such Liens that, if exercised, could adversely affect the value of the Collateral. In addition, the ability of the Senior Noteholders to realize upon any of the Collateral may be subject to certain bankruptcy law limitations in the event of a bankruptcy. See "Risk Factors -- Collateral". Upon the termination of all obligations under the Amended Credit Agreement or the release by the lenders under the Amended Credit Agreement of all Collateral, the Amended Collateral Documents will terminate and the Collateral will be released. Under the Amended Collateral Documents, the control of foreclosure proceedings, the enforcement and amendment of the Amended Collateral Documents and the right to take other actions with respect to the Collateral belong solely to the Collateral Agent and the lenders under the Amended Credit Agreement. The lenders under the Amended Credit Agreement may release Collateral, in whole or in part, from time to time, and in such event, the Collateral so released will be automatically released as security for the Senior Notes without any action on the part of the Trustee or the Senior Noteholders. In addition, all Collateral under the Amended Credit Agreement and the Amended Collateral Documents will be automatically released upon the Company's long-term indebtedness being rated BBB- by Standard & Poor's and Baa3 by Moody's, and in such event, all Collateral securing the Senior Notes will also be automatically released without any action on the part of the Trustee or the Senior Noteholders. For a further description of the Amended Collateral Documents, see "Description of Other Indebtedness -- The Amended Credit Agreement -- Collateral". CERTAIN COVENANTS The Indenture contains covenants, including, among others, the following: LIMITATION ON LIENS. The Indenture provides that, with respect to the Senior Notes, neither the Company nor any Subsidiary Guarantor will, nor will they permit any of their Subsidiaries (excluding Foreign Subsidiaries) to, create, incur, or permit to exist, any Lien on any of their respective assets, whether now owned or hereafter acquired, in order to secure any Indebtedness of either of the Company or any Subsidiary Guarantor, without effectively providing that the Senior Notes shall be equally and ratably secured until such time as such Indebtedness is no longer secured by such Lien, except: (i) Liens securing Indebtedness arising under the Credit Agreement, so long as such Liens also secure the Senior Notes, equally and ratably; (ii) Liens on cash and cash equivalents securing obligations in respect of letters of credit 51 56 in accordance with the terms of the Credit Agreement, (iii) Liens existing as of the closing date of the Senior Notes Offering (the "Closing Date"); (iv) Liens existing as of the Closing Date or granted after the Closing Date on any assets of the Company or any Subsidiary Guarantor or any of their Subsidiaries securing Indebtedness of the Company or any Subsidiary Guarantor created in favor of the Holders of the Senior Notes; (v) Liens securing Indebtedness of the Company or any Subsidiary which is incurred to extend, renew or refinance Indebtedness which is secured by Liens permitted to be incurred under the Indenture; provided that such Liens do not extend to or cover any assets of the Company or any Subsidiary other than the assets securing the Indebtedness being extended, renewed or refinanced and that the principal amount of such Indebtedness does not exceed the principal amount of the Indebtedness being extended, renewed or refinanced at the time of such extension, renewal or replacement, or at the time the Lien was issued, created or assumed or otherwise permitted; (vi) Permitted Liens; and (vii) Liens created in substitution of or as replacements for any Liens permitted by the preceding clauses (i) through (vi) or this clause (vii), provided that, based on a good faith determination of an officer of the Company, the asset encumbered under any such substitute or replacement Lien is substantially similar in nature to the asset encumbered by the otherwise permitted Lien which is being replaced. Notwithstanding the foregoing and the covenant described under "-- Limitation on Sale and Lease-Back Transactions" below, the Company and any Subsidiary may, without securing any of the Senior Notes, create, incur or permit to exist Liens which would otherwise be subject to the restrictions set forth in the preceding paragraph, if after giving effect thereto and at the time of determination, the aggregate amount of Exempted Debt does not exceed the greater of (x) $100 million and (y) 15% of Consolidated Net Assets. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Indenture provides that neither the Company nor any Subsidiary Guarantor will, nor will they permit any of their Subsidiaries (excluding Foreign Subsidiaries) to, enter into any sale and lease-back transaction for the sale and leasing back of any property or asset, whether now owned or hereafter acquired, of the Company or any Subsidiary (except such transactions (i) entered into prior to the Closing Date, (ii) for the sale and leasing back of any property or asset by a Subsidiary to the Company or to another Subsidiary Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary), (iii) involving leases for less than three years or (iv) in which the lease for the property or asset is entered into within 180 days after the later of the date of acquisition, completion of construction or commencement or full operations of such property or asset) unless (a) the Company or any such Subsidiary would be entitled under the first paragraph of the "Limitation on Liens" covenant described above to create, incur or permit to exist a Lien on the assets to be leased securing Indebtedness in an amount at least equal to the Attributable Debt in respect of such transaction without equally and ratably securing the Senior Notes, (b) the Company or any Subsidiary would be entitled under the second paragraph of the "Limitations on Liens" covenant described above to create, incur or permit to exist a Lien on the assets to be leased securing Indebtedness in an amount at least equal to the Attributable Debt in respect of such transaction without equally and ratably securing the Senior Notes or (c) the proceeds of the sale of the assets to be leased are at least equal to their fair market value and the proceeds are applied to the purchase or acquisition (or in the case of real property, the construction) of assets or to the repayment of Indebtedness of the Company or any Subsidiary Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary). MERGER, CONSOLIDATION OR SALE OF ASSETS The Indenture provides that the Company may, without the consent of the holders of any outstanding Senior Notes, consolidate with or sell or lease its assets as, or substantially as, an entirety, to, or merge with or into, any other entity, provided that (i) the Company shall be the continuing entity, or the successor entity formed by or resulting from any such consolidation or merger or which shall have received the transfer of such assets is organized under the laws of any domestic jurisdiction and expressly assumes the Company's obligations to pay principal of (and premium, if any) and interest on all the Senior Notes and the due and punctual performance and observance of all the covenants and conditions contained in the Indenture; (ii) immediately after giving effect to such transaction, no Event of Default under the Indenture, and no event which, after notice or the lapse of time, or both, would become such an Event of Default shall have occurred and be continuing; and (iii) an officers' certificate and legal opinion covering certain of such conditions shall be delivered to the Trustee. 52 57 Upon any consolidation or merger, or any sale or lease of the assets of the Company as, or substantially as, an entirety in accordance with the provisions of the Indenture, the entity formed by such consolidation or into which the Company shall have been merged or to which such sale or lease shall have been made shall succeed to and be substituted for the Company with the same effect as if it had been named in the Indenture as a party thereto and thereafter from time to time such successor entity may exercise each and every right and power of the Company under the Indenture in the name of the Company or in its own name; and any act or proceeding by any provision of the Indenture required or permitted to be done by the Board of Directors or any officer of the Company may be done with like force and effect by the like board or officer of any entity that shall at the time be the successor of the Company hereunder. In the event of the sale by the Company of its assets as, or substantially as, an entirety upon the terms and conditions of the Indenture, the Company shall be released from all its liabilities and obligations under the Indenture and the Senior Notes. DEFAULTS An Event of Default is defined in the Indenture as (i) a default in any payment of interest on any Senior Note when due, that continues for 30 days, (ii) a default in the payment of principal of any Senior Note when due at its Stated Maturity, upon declaration or otherwise, (iii) the failure by the Company to comply with its obligations under the covenant described under "-- Merger, Consolidation or Sale of Assets", (iv) the failure by the Company or a Subsidiary Guarantor to comply for 60 days after notice with any of its obligations under the covenants described under "-- Certain Covenants", (v) the failure by the Company or any Subsidiary Guarantor to comply for 60 days after notice with its other agreements contained in the Indenture (other than those referred to in (i), (ii), (iii) or (iv) above), (vi) the failure by the Company, any Subsidiary Guarantor or any Subsidiary of the Company to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $30 million or its foreign currency equivalent (the "cross acceleration provision"), (vii) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or decree for the payment of money in excess of $30 million is rendered against the Company or any Significant Subsidiary remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed within 30 days after notice (the "judgment default provision"), (ix) except as permitted by the Indenture, a Subsidiary Guarantee ceases to be in full force and effect for 30 days after notice or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee (the "subsidiary guarantee provision") or (x) except as permitted by the Amended Collateral Documents, the Credit Agreement and the Indenture or any amendments thereto, any of the Collateral Documents ceases to be in full force and effect or ceases to be effective, in all material respects, to create a Lien on the Collateral in favor of the Senior Noteholders for 30 days after notice (the "collateral provision"). The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (iv), (v), (viii), (ix) and (x) will not constitute an Event of Default until the Trustee or the Holders of 25% in aggregate principal amount of the outstanding Senior Notes notify the Company as provided in the Indenture of the default and the Company does not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Senior Noteholders of at least 25% in aggregate principal amount of the outstanding Senior Notes by notice to the Company may declare the principal of and accrued but unpaid interest on all the Senior Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and accrued interest on all the Senior Notes will ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Senior Noteholders. Under certain circumstances, the Senior Noteholders of a majority in aggregate principal amount of the outstanding Senior Notes may rescind any such acceleration with respect to the Senior Notes and its consequences. 53 58 Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Senior Notes unless (i) such Holder shall have previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in aggregate principal amount of the outstanding Senior Notes shall have requested the Trustee to pursue the remedy, (iii) such Holders shall have offered the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense, (iv) the Trustee shall not have complied with such request within 60 days after the receipt of the request and the offer of such reasonable security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Senior Notes shall not have given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Senior Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within 30 days after it is known to a Trust officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Senior Note, the Trustee may withhold notice if and so long as a committee of its Trust officers in good faith determines that withholding notice is not opposed to the interests of the Senior Noteholders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, (i) a certificate indicating whether the signers thereof know of any Default that occurred during the previous year and (ii) an opinion of counsel either stating that action has been taken with respect to any filing, refiling, recording or re-recording with respect to the Collateral as is necessary to maintain the Lien on the Collateral in favor of the Senior Noteholders or that no such action is necessary to maintain such Lien. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Senior Notes then outstanding and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Senior Notes then outstanding. However, without the consent of each Holder of an outstanding Senior Note affected, no amendment may, among other things, (i) reduce the amount of Senior Notes whose Holders must consent to an amendment, (ii) reduce the rate of or extend the time for payment of interest on any Senior Note, (iii) reduce the principal of or extend the Stated Maturity of any Senior Note, (iv) reduce the premium payable upon any redemption of any Senior Note or change the time at which any Senior Note may be redeemed, (v) make any Senior Note payable in money other than that stated in the Senior Note, (vi) impair the right of any Holder to receive payment of principal of and interest on such Holder's Senior Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Senior Notes, (vii) make any changes that would affect the ranking of the Senior Notes or, except (a) in accordance with the terms of the Collateral Documents or the Indenture, (b) as permitted by the following paragraph or (c) in order to give effect to amendments to any of the Amended Collateral Documents, the security for the Senior Notes in a manner material and adverse to the Senior Noteholders or (viii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions. Without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency whether wholly within the Indenture or as compared to any of the Amended Collateral Documents, or to make such other provisions in regard to matters or questions arising under the Indenture as the Board of Directors of the Company may deem necessary or desirable 54 59 and which shall not materially and adversely affect the rights of the Holders, to provide for the assumption by a successor corporation of the obligations the Company under the Indenture, to provide for uncertificated Senior Notes in addition to or in place of certificated Senior Notes (provided that the uncertificated Senior Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Senior Notes are as described in Section 163(f)(2)(B) of the Code), to add additional Guarantees with respect to the Senior Notes, to add additional security for the Senior Notes, to add to the covenants of the Company for the benefit of the Senior Noteholders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder in any material respect, to comply with, or allow for compliance with, any requirement of the SEC in connection with qualifying the Indenture under the TIA or giving effect to the security arrangements contemplated by the Indenture, to give effect to the provisions of the Amended Collateral Documents and the Indenture, including with regard to the release of all or a portion of the Collateral in accordance with such provisions and to give effect to the release of any Subsidiary Guarantee in accordance with the terms of the Indenture. The consent of the Senior Noteholders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Senior Noteholders a notice briefly describing such amendment. However, the failure to give such notice to all Senior Noteholders, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER AND EXCHANGE A Senior Noteholder may transfer or exchange Senior Notes in accordance with the Indenture. Upon any transfer or exchange, the registrar and the Trustee may require a Senior Noteholder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Senior Noteholder to pay any taxes required by law or permitted by the Indenture, including any transfer tax or other similar governmental charge payable in connection therewith. The Company is not required to transfer or exchange any Senior Note selected for redemption or to transfer or exchange any Senior Note for a period of 15 days prior to a selection of Senior Notes to be redeemed. The Senior Notes will be issued in registered form and the registered holder of a Senior Note will be treated as the owner of such Senior Note for all purposes. DEFEASANCE GENERAL The Company at any time may terminate all its obligations under the Senior Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Senior Notes, to replace mutilated, destroyed, lost or stolen Senior Notes and to maintain a registrar and paying agent in respect of the Senior Notes. The Company at any time may terminate its obligations under the covenants described under "Certain Covenants", (other than the covenant described under "-- Merger, Consolidation or Sale of Assets") and the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision, the subsidiary guarantee provision or the collateral provision described under "-- Defaults" ("covenant defeasance"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Senior Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Senior Notes may not be accelerated because of an Event of Default specified in clause (iv), (v), (vi), (vii) (with respect only to Significant Subsidiaries), (viii), (ix) or (x) under "-- Defaults" above. In order to exercise either defeasance option, the Company must irrevocably deposit or cause to be deposited in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Senior 55 60 Notes (except lost, stolen or destroyed Senior Notes which have been replaced or repaid) to maturity or redemption, as the case may be, and must comply with certain other conditions. TAX CONSEQUENCES Under current law such deposit and discharge would, in the case of legal defeasance, and could, in the case of covenant defeasance, constitute a taxable exchange of the related Senior Notes. If the defeasance of such Senior Notes is considered to be a taxable exchange, each Holder of such Senior Notes would be required to recognize gain or loss equal to the difference between the Holder's tax basis in such Senior Notes and the value of the Holder's interest in the defeasance trust. In addition, such Holders thereafter might be required to include in income a different amount than would be includable in the absence of the discharge. Prospective investors are urged to consult their own tax advisers as to the specific consequences of such a deposit and discharge, including the applicability and effect of tax laws other than the federal income tax law. CONCERNING THE TRUSTEE Bankers Trust Company is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Senior Notes. The Indenture contains certain limitations on the rights of the Trustee, if it is a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign. Bankers Trust Company is also the Administrative Agent under the Amended Credit Agreement and will act as Collateral Agent on behalf of all the secured creditors under the Amended Collateral Documents (including, without limitations, the Holders of the Senior Notes and the lenders under the Amended Credit Agreement). The Holders of a majority in principal amount of the outstanding Senior Notes have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that if an Event of Default occurs (and is not cured) the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Senior Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture. GOVERNING LAW The Indenture provides that it and the Senior Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS "Attributable Debt" means in connection with a sale and lease-back transaction, the lesser of (i) the fair market value of the assets subject to such transaction and (ii) the present value (discounted at a rate per annum equal to the average interest borne by all outstanding securities issued under the Indenture (which may include securities in addition to the Senior Notes) determined on a weighted average basis and compounded semiannually) of the obligations of the lessee for rental payments during the term of the related lease. "Capital Lease" means any Indebtedness represented by a lease obligation of a person incurred with respect to real property or equipment acquired or leased by such person and used in its business that is required to be recorded as a capital lease in accordance with GAAP. "Capital Stock" of any Person means any and all shares, interests, participations, rights to purchase, warrants, options or other equivalents (however designated) of corporate stock or other equity of such Person. "Code" means the Internal Revenue Code of 1986, as amended. 56 61 "Consolidated Net Assets" means as of any particular time the aggregate amount of assets after deducting therefrom all current liabilities except for (i) notes and loans payable, (ii) current maturities of long-term debt and (iii) current maturities of obligations under capital leases, all as set forth on the most recent consolidated balance sheet of the Company and its consolidated Subsidiaries and computed in accordance with GAAP. "Credit Agreement" means the Amended and Restated Credit Agreement as amended and restated as of December 18, 1996, as amended by the Fifth Amendment thereto, dated March 16, 1998, among the Company, Coltec Aerospace Canada Limited, a Subsidiary of the Company, Bankers Trust Company, as Administrative Agent, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bank of Montreal, as Canadian Paying Agent, and the various lenders party thereto, as such agreement may be amended (including any amendment, restatement and successors thereof), supplemented, refinanced, renewed, extended, replaced, in whole or in part, or otherwise modified from time to time, including any increase in the principal amount of the obligations thereunder. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Exempted Debt" means the sum of the following as of the date of determination: (i) Indebtedness of the Company and its Subsidiaries (other than Foreign Subsidiaries) incurred after the Closing Date and secured by Liens not otherwise permitted by the covenant described under "-- Limitation on Liens" above and (ii) Attributable Debt of the Company and its Subsidiaries in respect of sale and lease-back transactions entered into after the Closing Date, other than sale and lease-back transactions permitted by clauses (a) and (c) of the covenant described under the "-- Limitation on Sale and Lease-Back Transactions" above. "Foreign Subsidiary" means any Subsidiary which is incorporated or otherwise organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia and any Subsidiary thereof. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Guarantee" means a guarantee, direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" or "Senior Noteholder" means the Person in whose name a Senior Note is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, without duplication, (i) principal of, and premium, if any, and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not such claim for post-petition interest is allowed in such proceeding) on any indebtedness of such Person (a) for borrowed money (whether or not the recourse of the lender is to the whole of the assets, of such person or only to a portion thereof), (b) evidenced by notes, debentures or similar instruments (including purchase money obligations) given in connection with the acquisition of any property or assets (other than trade accounts payable for inventory or similar property acquired in the ordinary course of business), including securities, for the payment of which such Person is liable, directly or indirectly, or the payment of which is secured by a lien, charge or encumbrance on property or assets of such Person, (c) for goods, materials or services purchased in the ordinary course of business (other than trade accounts payable arising in the ordinary course of business which are due less than three months after the acceptance of such goods, materials or services), (d) with respect to letters of credit or bankers acceptances issued for the account of such Person or performance, surety or similar bonds, (e) for the payment of money relating to a 57 62 Capital Lease obligation or (f) under interest rate swaps, caps or similar agreements and foreign exchange contracts, currency swaps or similar agreements; (ii) any liability of any other Person of the kind described in the preceding clause (i), which such Person has Guaranteed or which is otherwise its legal liability; and (iii) any and all deferrals, renewals, extensions and refunding of, or amendments, modifications or supplements to, any indebtedness of the kind described in any of the preceding clauses (i) or (ii). "Lien" means any lien, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Permitted Liens" means (i) Liens on any asset of the Company or any Subsidiary created solely to secure obligations incurred to finance the refurbishment, improvement or construction of such asset, which obligations are incurred no later than 180 days after completion of such refurbishment, improvement or construction, and all renewals, extensions, refinancings, replacements or refundings of such obligations, or to secure all or part of the cost of such refurbishment, improvement or construction; (ii) (a) Liens to secure the payment of the purchase price incurred in connection with the acquisition (including acquisition through merger or consolidation) of any asset (including shares of stock), including Capital Lease transactions in connection with any such acquisition and (b) Liens existing on any asset at the time of acquisition thereof or at the time of acquisition by the Company or any Subsidiary of any Person then owning such asset, directly or indirectly, whether or not such existing Liens were given to secure the payment of the purchase price of the property to which they attach; provided that, with respect to clause (a), such Liens shall be given within one year after such acquisition and shall attach solely to the assets acquired or purchased and any improvements then or thereafter placed thereon; (iii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (iv) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (v) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (vi) Liens encumbering customary initial deposits and margin deposits and other Liens, in each case securing Indebtedness of the Company or any Subsidiary under interest rate and currency hedging instruments and forward contract, option, futures contracts, futures options or similar agreements or arrangements designed to protect the Company or any Subsidiary from fluctuations in interest rates, currencies or the price of commodities or any combination of the foregoing; (vii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Subsidiary in the ordinary course of business, (viii) Liens in favor of the Company or any Subsidiary; (ix) Liens for taxes, assessments or governmental charges or levies on the assets of the Company or any Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings or Liens for the excess of the amount of any past due taxes for which a final assessment has not been received over the amount of such taxes as estimated and paid; (x) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens and other similar Liens on the assets of the Company or any Subsidiary arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (xi) Liens on the assets of the Company or any Subsidiary incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and incurred in a manner consistent with industry practice; (xii) Liens on the assets of a Receivables Subsidiary in a Qualified Receivables Transaction; (xiii) Liens in respect of any judgment rendered which is being contested diligently and in good faith by appropriate proceedings by the Company or any of its Subsidiaries and which does not have a material adverse effect on the ability of the Company and its Subsidiaries to operate the business or operations of the Company or its Subsidiaries taken as a whole; and (xiv) Liens in favor of the United States or any state or territory or possession thereof, or any foreign country, or any department, agency, instrumentality or political subdivision of any of such domestic or foreign governmental entity, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any liability incurred for the purpose of financing all or part of the purchase price or the cost of constructing the asset subject to such Liens. 58 63 "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by the Company or a Subsidiary) and (ii) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which, in each case, are customarily and regularly transferred, or in respect of which security interests are customarily granted, in connection with asset securitization transactions involving accounts receivable. "Receivables Subsidiary" means a Subsidiary of the Company which engages in no activities other than in connection with the financing of accounts receivable and which is designated by or pursuant to the authority of the Board of Directors as a Receivables Subsidiary (a) no portion of the Indebtedness of which (i) is guaranteed by the Company or any Subsidiary, (ii) is recourse to or obligates the Company or any Subsidiary in any manner other than pursuant to customary representations, warranties, covenants and indemnities entered into in connection with a Qualified Receivables Transactions or (iii) subjects any assets of the Company or any Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to the representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction and other than in respect of the related pledge of the financed accounts receivable and (b) with which neither the Company nor any Subsidiary has any obligation to maintain or preserve such Subsidiary's financial condition or cause such Subsidiary to achieve certain levels of operating results. "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" means a Person (other than an individual), a majority of the outstanding voting stock, partnership interests, membership interests or other equity interest, as the case may be, of which is owned or controlled, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company. For the purposes of this definition, "voting stock" means stock having voting power for the election of directors, trustees or managers, as the case may be, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Senior Notes. "Subsidiary Guarantor" means each Subsidiary of the Company existing on the Closing Date and each new Subsidiary created after the Closing Date (in each case other than Foreign Subsidiaries), in each case, that Guarantees the Company's obligations under the Credit Agreement; provided that, if such Subsidiary's Guarantee of the Company's obligations under the Credit Agreement is released or ceases to be in effect, such Subsidiary shall no longer be a Subsidiary Guarantor. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the Closing Date. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the 59 64 payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. BOOK-ENTRY; DELIVERY AND FORM The Exchange Notes will be issued in the form of a Global Exchange Note. The Global Exchange Note will be deposited with, or on behalf of, the Depository and registered in the name of the Depository or its nominee. Except as set forth below, the Global Exchange Note may be transferred, in whole and not in part, only to the Depository or another nominee of the Depository. Investors may hold their beneficial interests in the Global Exchange Note directly through the Depository if they have an account with the Depository or indirectly through organizations which have accounts with the Depository. Exchange Notes that are issued as described below under "-- Certificated Exchange Notes" will be issued in definitive form. Upon the transfer of an Exchange Note in definitive form, such Exchange Note will, unless the Global Exchange Note has previously been exchanged for Exchange Notes in definitive form, be exchanged for an interest in the Global Exchange Note representing the principal amount of Exchange Notes being transferred. The Depository has advised the Company as follows: The Depository is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depository was created to hold securities of institutions that have accounts with the Depository ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (which may include the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depository's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. Upon the issuance of the Global Exchange Note, the Depository will credit, on its book-entry registration and transfer system, the principal amount of the Exchange Notes represented by such Global Exchange Note to the accounts of participants. Ownership of beneficial interests in the Global Exchange Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Exchange Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depository (with respect to participants' interest) and such participants (with respect to the owners of beneficial interests in the Global Exchange Note other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Exchange Note. So long as the Depository, or its nominee, is the registered holder and owner of the Global Exchange Note, the Depository or such nominee, as the case may be, will be considered the sole legal owner and holder of the related Exchange Notes for all purposes of such Exchange Notes and the Indenture. Except as set forth below, owners of beneficial interests in the Global Exchange Note will not be entitled to have the Exchange Notes represented by the Global Exchange Note registered in their names, will not receive or be entitled to receive physical delivery of certificated Exchange Notes in definitive form and will not be considered to be the owners or holders of any Exchange Notes under the Global Exchange Note. The Company understands that under existing industry practice, in the event an owner of a beneficial interest in the Global Exchange Note desires to take any action that the Depository, as the holder of the Global Exchange Note, is entitled to take, the Depository would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal of and interest on Exchange Notes represented by the Global Exchange Note registered in the name of and held by the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner and holder of the Global Exchange Note. 60 65 The Company expects that the Depository or its nominee, upon receipt of any payment of principal of or interest on the Global Exchange Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Exchange Note as shown on the records of the Depository or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Exchange Note held through such participants will be governed by standing instructions and customary practices and will be the responsibility of such participants. The Company will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Exchange Note for any Exchange Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depository and its participants or the relationship between such participants and the owners of beneficial interests in the Global Exchange Note owning through such participants. Unless and until it is exchanged in whole or in part for certificated Exchange Notes in definitive form, the Global Exchange Note may not be transferred except as a whole by the Depository to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository. Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Exchange Note among participants of the Depository, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility for the performance by the Depository or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED EXCHANGE NOTES The Exchange Notes represented by the Global Exchange Note are exchangeable for certificated Exchange Notes in definitive form of like tenor as such Exchange Notes in denominations of U.S. $1,000 and integral multiples thereof if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository of the Global Exchange Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act and a successor Depository is not appointed by the Company within 90 days, (ii) the Company in its discretion at any time determines not to have all of the Exchange Notes represented by the Global Exchange Note or (iii) an Event of Default has occurred and is continuing. Any Exchange Note that is exchangeable pursuant to the preceding sentence is exchangeable for certificated Exchange Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Subject to the foregoing, the Global Exchange Note is not exchangeable, except for a Global Exchange Note of the same aggregate denomination to be registered in the name of the Depository or its nominee. REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS Holders of Exchange Notes are not entitled to any registration rights with respect to the Exchange Notes. The Company and the Subsidiary Guarantors have agreed pursuant to a registration rights agreement (the "Registration Rights Agreement") with the Initial Purchasers, for the benefit of the holders of the Senior Notes, that the Company will, at its cost, (i) within 90 days after the Issue Date, file a Registration Statement with the SEC with respect to the Exchange Offer to exchange the Outstanding Notes for Exchange Notes having terms substantially identical in all material respects to the Outstanding Notes except that such notes will not contain terms with respect to transfer restrictions and (ii) use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act within 150 days after the Issue Date. Upon the effectiveness of the Registration Statement, the Company will offer the Exchange Notes in exchange for surrender of the Outstanding Notes. The Company will keep the Exchange Offer open for not less than 20 days (or longer if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the holders of the Senior Notes. For each Outstanding Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Outstanding Note will receive an Exchange Note having a principal amount at maturity equal to that of the surrendered Outstanding Note at maturity. Interest on each Exchange Note will accrue from the last interest payment date on which interest was paid on the Outstanding Note surrendered in exchange thereof or, if no interest has been paid on such Outstanding Note, from the date interest begins to accrue on such Outstanding Note. In the event that applicable interpretations of the staff of the SEC do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 180 days of the 61 66 Closing Date, or if the Initial Purchasers so request with respect to Outstanding Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer, or if any holder of Outstanding Notes is not eligible to participate in the Exchange Offer or does not receive freely tradeable Exchange Notes in the Exchange Offer, the Company, will, at its cost, (a) as promptly as practicable, file a shelf registration statement (the "Shelf Registration Statement") with the SEC covering resales of the Outstanding Notes or the Exchange Notes, as the case may be, (b) use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) keep the Shelf Registration Statement effective until the earlier of (i) the time when the Senior Notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h) of Rule 144 and (ii) two years from the Issue Date; provided that the Company will be permitted to suspend the use of the prospectus which forms a part of the Shelf Registration Statement for a period not to exceed 45 days in any three-month period or three periods not to exceed an aggregate of 90 days in any 12-month period under certain circumstances relating to pending corporate developments, public filings with the Commission and similar events. The Company will, in the event a Shelf Registration Statement is filed, among other things, provide to each holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Senior Notes. A holder selling such Senior Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such holder (including certain indemnification obligations). If (i) within 90 days after the Issue Date, neither the Registration Statement nor the Shelf Registration Statement has been filed with the SEC; (ii) within 180 days after the Issue Date, neither the Exchange Offer is consummated nor the Shelf Registration Statement is declared effective; or (iii) after either the Registration Statement or the Shelf Registration Statement is declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions, including the blackout provisions described above) in connection with resales of Outstanding Notes or Exchange Notes in accordance with and during the periods specified in the Registration Rights Agreement (each such event referred to in clause (i) through (iii) being herein called a "Registration Default"), additional cash interest will accrue on the Outstanding Notes and the Exchange Notes at the rate of 0.50% per annum from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, calculated on the principal amount of the Senior Notes as of the date on which such interest is payable. Such interest is payable in addition to any other interest payable from time to time with respect to the Senior Notes. If the Company effects the Exchange Offer, it will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof provided that it has accepted all Senior Notes theretofore validly tendered in accordance with the terms of the Exchange Offer. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which is available upon request to the Company. 62 67 DESCRIPTION OF OTHER INDEBTEDNESS The following summaries of certain indebtedness of the Company do not purport to be complete and are subject to, and qualified in their entirety by reference to, the definitive agreements governing such indebtedness, copies of which are available upon request to the Company. THE AMENDED CREDIT AGREEMENT GENERAL The Company and Coltec Aerospace Canada Limited, a Canadian subsidiary of the Company (the "Canadian Borrower"), are parties to the Amended Credit Agreement with various lenders (collectively, the "Lenders"), Bankers Trust Company, as Administrative Agent, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, and Bank of Montreal, as Canadian Paying Agent. Capitalized terms used but not defined in this summary have the meanings assigned thereto in the Amended Credit Agreement. The Amended Credit Agreement provides for revolving borrowings by the Company and the Canadian Borrower of up to $900 million, which will be reduced by 66 2/3% of the gross proceeds to the Company from the TIDES Offering and the Senior Notes Offering (the "Total Commitment") and which expires on December 15, 2001. The Canadian Borrower may borrow up to $80 million under the Amended Credit Agreement with the remainder of the Total Commitment available only to the Company. The Amended Credit Agreement also provides for the issuance of certain standby letters of credit and trade letters of credit (collectively, the "Letters of Credit") for the account of the Company; provided that the outstanding amount of all Letters of Credit does not exceed, (x) when added to the outstanding amount of letters of credit not issued under the Amended Credit Agreement, $125 million or (y) when added to all loans outstanding under the Amended Credit Agreement, the Total Commitment. GUARANTEES The obligations of the Company under the Amended Credit Agreement are guaranteed by each existing domestic subsidiary of the Company and will be guaranteed by each subsequently acquired domestic subsidiary (excluding the trust that will issue the Convertible Preferred Securities in the TIDES Offering and certain other subsidiaries) of the Company (the "Credit Agreement Subsidiary Guarantees"). The obligations of the Canadian Borrower under the Amended Credit Agreement are guaranteed by the Company and by each existing Canadian subsidiary of the Canadian Borrower and will be guaranteed by each subsequently acquired subsidiary of the Canadian Borrower. COLLATERAL Pledged Securities. Pursuant to a pledge agreement, dated as of March 24, 1992 and as amended and restated as of December 18, 1996 and as further amended as of April 16, 1998, made by the Company to Bankers Trust Company, as Collateral Agent (the "Company Pledge Agreement"), the obligations of the Company under the Amended Credit Agreement and the Senior Notes are secured by pledges of all the capital stock of the Company's direct domestic subsidiaries and 66% of the capital stock of the Company's direct foreign subsidiaries and any promissory notes held by the Company. Pursuant to a pledge agreement, dated as of March 24, 1992 and as amended and restated as of December 18, 1996 and as further amended as of April 16, 1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral Agent (the "Subsidiaries Pledge Agreement"), the obligations of each domestic subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary Guarantees of the Senior Notes are secured by pledges of all the capital stock of such subsidiary's direct domestic subsidiaries and 66% of all the capital stock of such subsidiary's direct foreign subsidiaries and any promissory notes held by such subsidiary. The securities pledged pursuant to the Company Pledge Agreement and the Subsidiaries Pledge Agreement are referred to herein as the "Pledged Securities". 63 68 Other Security. Pursuant to a security agreement, dated as of March 24, 1992 and as amended and restated as of December 18, 1996 and as further amended as of April 16, 1998, made by the Company to Bankers Trust Company, as Collateral Agent (the "Company Security Agreement"), the obligations of the Company and loans to the Canadian Borrower under the Amended Credit Agreement and the Senior Notes are secured by a security interest in substantially all inventory, accounts receivable, a cash collateral account, intellectual property rights, computer programs, contracts, goods, general intangibles, chattel paper, documents and instruments of the Company and all proceeds of the foregoing. Pursuant to a security agreement, dated as of March 24, 1992 and as amended and restated as of December 18, 1996 and as further amended as of April 16, 1998, made by the Company's subsidiaries to Bankers Trust Company, as Collateral Agent (the "Subsidiaries Security Agreement"), the obligations of each domestic subsidiary of the Company under the Subsidiaries Guarantee and the Subsidiary Guarantees of the Senior Notes are secured by a security interest in substantially all inventory, accounts receivable, a cash collateral account, intellectual property rights, computer programs, contracts, goods, general intangibles, chattel paper, documents and instruments of such subsidiary and all proceeds of the foregoing. Real Property. The obligations of the Company under the Amended Credit Agreement and the Senior Notes are secured by first mortgages or deeds of trust on certain of the manufacturing plants owned by the Company and its subsidiaries, including the plants in West Hartford, Connecticut, Euless, Texas, Beloit, Wisconsin, and Longview, Texas (collectively, the "Mortgages"). See "Business -- Properties". The Company Pledge Agreement, the Subsidiaries Pledge Agreement, the Company Security Agreement, the Subsidiaries Security Agreement and the Mortgages are hereinafter referred to as the "Amended Collateral Documents". The following is a summary of the material provisions of the Amended Collateral Documents pertaining to the Collateral. Collateral Agent. Bankers Trust Company will be the Collateral Agent under each of the Amended Collateral Documents. Bankers Trust Company is also the Administrative Agent under the Amended Credit Agreement. The Collateral Agent is not a fiduciary to any of the secured creditors, including, without limitation, the holders of the Senior Notes. However, any enforcement of the provisions of the Amended Collateral Documents by the Collateral Agent will be made for the benefit of all the secured creditors under the Amended Collateral Documents, including for the benefit of the holders of the Senior Notes. Obligations Secured by the Collateral. The obligations which are secured by the Collateral include (i) payments of principal of and interest on the loans under the Amended Credit Agreement, all reimbursement obligations and unpaid drawings with respect to letters of credit under the Amended Credit Agreement and all other obligations owing to the lenders in connection with the Amended Credit Agreement and related documents, (ii) all liabilities in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement and (iii) payments of principal of and interest on the Senior Notes and the Exchange Notes and all other obligations of the Company under the Indenture and the Senior Notes and the Exchange Notes (items (i), (ii) and (iii) above, together with certain expenses of, and amounts paid by, the Collateral Agent or any secured creditor, are hereinafter referred to as the "Obligations"). Enforcement of Collateral Provisions. The Amended Collateral Documents may be enforced only by the Collateral Agent, in each case acting upon instructions from the "Required Secured Creditors", which is defined to mean the "Required Banks", which, in turn, is defined to mean the lenders holding a majority of the obligations (or of all the obligations in certain cases) under the Amended Credit Agreement. Because the holders of the Senior Notes are not included in the definition of "Required Secured Creditors", neither the holders of the Senior Notes nor the Trustee under the Indenture relating to the Senior Notes will have the ability to enforce the provisions of any of the Amended Collateral Documents. Generally, upon an acceleration of the obligations under the Amended Credit Agreement, an acceleration of indebtedness under third-party debt agreements in excess of $10 million, a voluntary, involuntary or court-declared bankruptcy or certain other events, in each case as set forth in the Amended Credit Agreement, or upon an Event of Default under the Indenture, the Required Secured Creditors may direct the Collateral Agent to 64 69 enforce the provisions of the Amended Collateral Documents. In such an event, the Collateral Agent may exercise any of its rights as a secured creditor under the Uniform Commercial Code and the Amended Collateral Documents (such as foreclosing upon and selling portions of the Collateral and voting the Pledged Securities). The occurrence of an Event of Default under the Indenture will not give the holders of the Senior Notes or the Trustee under the Indenture relating to the Senior Notes the right at any time to direct the Collateral Agent to exercise any of its rights or to enforce any provisions under the Amended Collateral Documents. Notwithstanding the foregoing, in the event that (i) the principal of any secured Obligations has been accelerated or the final maturity thereof has occurred and there exists a payment Event of Default where the aggregate principal amount of such Obligations is at least $100 million and where such payment Event of Default has continued for 90 days and (ii) the Required Secured Creditors have not directed the Collateral Agent to enforce the provisions of any of the Amended Collateral Documents, then a majority of the "Secured Creditors" (defined to mean a majority of all the secured Obligations, including the Senior Notes) may cause the Collateral Agent to enforce such provisions. The Required Secured Creditors, however, would continue to have the right to direct the manner and method of such enforcement. Upon the occurrence of an event of default under the Amended Credit Agreement, the Administrative Agent may notify the Company and the Canadian Borrower of its election to terminate the Amended Credit Agreement and, upon such notice, the obligations of the Company and the Canadian Borrower will be accelerated and be immediately due and payable except that, upon the occurrence of certain bankruptcy-related events of default, such termination and acceleration will be deemed to occur immediately without notice. Upon such acceleration, in addition to such other rights as are permitted by the Amended Credit Agreement or by law, the Collateral Agent has the right to enforce all of the liens and security interests created pursuant to the Amended Credit Agreement and the Amended Collateral Documents. Application of Proceeds. All moneys collected by the Collateral Agent upon any sale or other disposition of the Collateral shall be applied as follows: (i) first, to the payment of all amounts owing to the Collateral Agent; (ii) second, to the payment of the "Primary Obligations," which is defined to include all of (i) the obligations under the Amended Credit Agreement, (ii) the Senior Notes and (iii) the obligations in connection with interest rate protection and other hedging agreements contemplated by the Amended Credit Agreement; (iii) third, to the payment of the "Secondary Obligations," which is defined to mean all Obligations other than the Primary Obligations; and (iv) fourth, to the Company or its subsidiaries, as the case may be. All actions required or permitted to be taken by the Senior Noteholders will be taken only by the Trustee as directed by the Senior Noteholders and all payments required to be made with respect to the Senior Notes will be paid to the Trustee on behalf of the Senior Noteholders. Amendments and Waivers. The Amended Collateral Documents may be amended or waived by the Required Banks; provided that any change, waiver or modification materially adversely affecting the rights and benefits of a single "Class" of secured creditors (and not all secured creditors in a like or similar manner) will require the written consent of the "Requisite Class Creditors" of such Class, which is defined to mean a majority of such affected Class; provided further that any Class will not be considered to be affected differently from any other Class due to the Obligations of any such other Class being paid, repaid, refinanced, renewed or extended and the Collateral being released, in whole or in part (whether by action of such other Class or otherwise), as security for such Class and such other Class. Each of the lenders under the Amended Credit Agreement, the interest rate protection creditors and the holders of the Senior Notes will constitute a separate Class. Notwithstanding the foregoing, the Required Banks may at any time agree to amendments to the Amended Collateral Documents in order to, among other things, (i) secure additional extensions of credit or (ii) add 65 70 additional Secured Creditors to a specified Class, in each case, without the consent of the other Secured Creditors. Release of Collateral. Pursuant to the terms of the Amended Collateral Documents, any Collateral representing less than all or substantially all of the Collateral may be released upon the direction of the Required Banks, which in this context means Lenders representing holders of a majority of the Obligations under the Amended Credit Agreement. The approval of all the Lenders under the Amended Credit Agreement is required for releases of all or substantially all of the Collateral, except as set forth in the following paragraph. Upon such direction by the applicable Required Banks, the applicable Collateral will be released whether or not the Senior Notes remain outstanding and without regard to the ratings of the Company's Rated Indebtedness. Notwithstanding the foregoing, in the event the Trustee notifies the Collateral Agent in writing that the Senior Notes have been accelerated, the Collateral Agent will not release any Collateral or terminate any Amended Collateral Documents, except with the prior written consent of the holders of the Senior Notes holding a majority of the then-outstanding Senior Notes. In addition, all Collateral under the Amended Collateral Documents shall be automatically released and all such Amended Collateral Documents shall be terminated and of no further force or effect at such time as (x) no default or event of default under the Amended Credit Agreement is in existence and (y) the Company has then outstanding Rated Indebtedness which is at such time rated at least BBB- by Standard & Poor's and Baa3 by Moody's; provided that the Rated Indebtedness described above shall be required to be unsecured or, if secured, both Standard & Poor's and Moody's shall have stated to the Company and the Administrative Agent in writing that, assuming that neither the Amended Credit Agreement nor the Senior Notes were secured, the long-term unsecured Debt pursuant to the Amended Credit Agreement and the Senior Notes would be rated at least BBB-by Standard & Poor's and Baa3 by Moody's at such time; provided further that such release shall not be effected until the tenth Business Day after the Company delivers to the Administrative Agent written notice of the attainment of such rating and, if required, a copy of the written statements specified above. Notwithstanding anything to the contrary contained in the immediately preceding sentence or the proviso thereto, if the Company at any time requests in writing that the Administrative Agent cause the release of all Collateral under all the Amended Collateral Documents and establishes to the satisfaction of the Administrative Agent that (x) no default or event of default under the Amended Credit Agreement is in existence (and no default or event of default shall be in existence after the release described below) and (y) at the time of the release of all Collateral under all the Amended Collateral Documents (and after giving effect thereto), the Company's Rated Indebtedness (which shall be unsecured Debt after the release of Collateral contemplated by this paragraph, and shall include the Debt under the Amended Credit Agreement and the Senior Notes, to the extent then outstanding) shall be rated at least BBB-by Standard & Poor's and Baa3 by Moody's (and the Company shall have furnished to the Administrative Agent a written statement from each of Standard & Poor's and Moody's to the effect that, if neither the Amended Credit Agreement nor the Senior Notes were secured, the long term unsecured Debt pursuant to the Amended Credit Agreement and the Senior Notes would be rated at least BBB- by Standard & Poor's and Baa3 by Moody's at such time), then all Collateral under all the Amended Collateral Documents shall be released and all such Amended Collateral Documents shall be terminated and of no further force or effect. Upon the disposition of Holley, Holley was released under the Amended Credit Agreement and the Indenture as a Subsidiary Guarantor and its assets and its capital stock was released under the Amended Collateral Documents as security for borrowings under the Amended Credit Agreement and the Senior Notes. See "Prospectus Summary -- Recent Development". Termination. Each of the Amended Collateral Documents will terminate on the date on which all Obligations under the Amended Credit Agreement have been paid. In addition, the Amended Collateral Documents may be terminated upon the direction of the Required Banks, which in this context means Lenders representing all the Obligations under the Amended Credit Agreement. Upon such termination of the Amended Collateral Documents, the Collateral will be released whether or not the Senior Notes remain outstanding. 66 71 COVENANTS The Amended Credit Agreement includes certain financial covenants that require the Company to maintain (i) a ratio of Consolidated Current Assets to Consolidated Current Liabilities at all times of greater than 1.25 to 1.0, (ii) an Interest Coverage Ratio for any period of four consecutive fiscal quarters of greater than 3.0 to 1.0, (iii) a Leverage Ratio at all times prior to and including June 30, 1998 of less than 4.25 to 1.0, from July 1, 1998 to and including December 31, 1999 of less than 3.75 to 1.0, and thereafter of less than 3.25 to 1.0. The Company has also agreed that the Company and its subsidiaries will not make capital expenditures which in the aggregate exceed $90 million for the fiscal year ending December 31, 1997, $75 million for the fiscal year ending December 31, 1998, $65 million for each of the fiscal years ending December 31, 1999 and December 31, 2000, and $70 million for the fiscal year ending December 31, 2001. The Amended Credit Agreement also includes covenants that prohibit the Company and its subsidiaries from, among other things and subject to certain exceptions, (i) incurring certain liens on the property and assets of the Company and its subsidiaries, (ii) winding up, liquidating or dissolving its affairs or entering into any transaction of merger or consolidation, or conveying, selling, leasing or otherwise disposing of property or assets, (iii) authorizing, declaring or paying any dividends (other than, among other things, distributions on the Common Stock or Convertible Preferred Securities) or repurchasing Common Stock or Convertible Preferred Securities, except, in any fiscal year, subject to certain limitations, the Company may pay dividends or repurchase Common Stock or Convertible Preferred Securities in an amount equal to the greater of $7.5 million or 30% of Consolidated Net Income for the preceding fiscal year, (iv) incurring Debt, other than Debt outstanding under the Amended Credit Agreement and certain other existing Debt, accrued expenses, the Senior Notes, the TIDES Debentures, Debt incurred to pay all or a portion of the purchase price of equipment or machinery secured by liens placed upon equipment or machinery used in the ordinary course of the business of the Company, Debt incurred with respect to certain lease obligations, Debt under interest rate protection agreements, certain permitted acquired Debt, Debt of foreign subsidiaries of the Company not to exceed $100 million, and other Debt not otherwise permitted under the Amended Credit Agreement up to the aggregate amount of $100 million, (v) lending money or extending credit or making advances to any person or purchasing or acquiring any stock, obligations or securities of any person, (vi) entering into transactions with affiliates, except in the ordinary course of business and on terms and conditions substantially as favorable to the Company or such subsidiary as would be obtainable in a comparable arm's-length transaction with an unaffiliated entity, (vii) prepaying or redeeming the Senior Notes in an amount greater than $100 million, (viii) restricting the ability of its subsidiaries to pay dividends or other distributions on its capital stock, make loans or advances to the Company or other subsidiaries or transfer assets to the Company, (ix) making certain issuances of capital stock or securities convertible into or exercisable for capital stock and (x) certain other restrictions. CERTAIN DEFINITIONS "Backstopped Letters of Credit" means certain existing Letters of Credit described in the Amended Credit Agreement with respect to which standby Letters of Credit serve as support for the reimbursement obligations of the Company and its subsidiaries to the issuers of such Backstopped Letters of Credit. "Capitalized Lease Obligations" of any person means all rental obligations which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles. "Consolidated Current Assets" means the consolidated current assets of the Company and its subsidiaries plus the Total Unutilized Commitment less the aggregate amount of Non-Facility Letter of Credit Outstandings at such time. "Consolidated Current Liabilities" means the consolidated current liabilities of the Company and its subsidiaries, but excluding the current portion of any long-term Debt which would otherwise be included therein. "Consolidated EBITDA" means for any period Consolidated EBIT, adjusted by adding thereto the amount of all amortization of intangibles and depreciation that were deducted in arriving at Consolidated EBIT for such period. 67 72 "Consolidated EBIT" means for any period the consolidated net income of the Company and its subsidiaries before interest income, consolidated interest expense and provision for taxes and without giving effect to any extraordinary gains or gains from sales of assets other than inventory sold in the ordinary course of business (determined after taking into account losses from sales of such assets). "Credit Documents" means the Amended Credit Agreement, and all documents executed in connection therewith, including each of the promissory notes required to be executed by the Company, any subsidiary of the Company or the Canadian Borrower under the Amended Credit Agreement, the Credit Guarantees and each Security Document. "Debt" means, as to any person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such person for borrowed money or for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business), (ii) the maximum amount available to be drawn under all letters of credit (excluding Backstopped Letters of Credit so long as (x) fully supported by one or more Letters of Credit issued under the Amended Credit Agreement and (y) no unreimbursed drawing has been made under the respective Backstopped Letter of Credit) issued for the account of such person and with respect to which such person has a reimbursement obligation and all unpaid drawings in respect of such letters of credit, (iii) all Debt of the types described in clause (i) (other than certain trade payables), (ii), (iv), (v), (vi) or (vii) secured by liens on property of such person, (iv) all Capitalized Lease Obligations of such person, (v) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all contingent obligations of such persons and (vii) all obligations under any interest rate protection or other hedging agreement or under any similar type of agreement entered into with a person not a Lender; provided that the aggregate outstanding amount of any Debt described in clause (iii) above shall equal the lesser of (x) the aggregate outstanding amount of all Debt secured by such lien and (y) the fair market value of all property subject to such lien; provided further that on and after the date on which any other Debt for borrowed money (the "Defeased Debt") shall have been permanently defeased or otherwise satisfied and discharged in the manner provided in the documentation governing such Defeased Debt, and so long as the Company and its subsidiaries are permanently relieved as a result thereof of all monetary obligations, and obligations to comply with covenants, with respect thereto (which defeasances, satisfactions and discharges are subject to the limitations set forth in the Amended Credit Agreement), such Defeased Debt shall not be considered outstanding Debt for purposes of the Amended Credit Agreement. "Interest Coverage Ratio" means for any period the ratio of Consolidated EBITDA for such period to consolidated interest expense for such period. "Letter of Credit Outstandings" means, at any time, the sum of (i) the aggregated stated amount of all then outstanding Letters of Credit and (ii) the aggregate amount of all unpaid drawings at such time. "Leverage Ratio" means, at any date of determination, the ratio of (i) consolidated indebtedness on such date to (ii) Consolidated EBITDA for the period of four consecutive quarters most recently ended on or prior to such date, in each case taken as one accounting period. "Moody's" means Moody's Investors Service, Inc. "Non-Facility Letters of Credit" means each letter of credit (other than any Letter of Credit issued pursuant to the Amended Credit Agreement) issued for the account of the Company and its subsidiaries. "Rated Indebtedness" means long-term unsecured Debt of the Company which is rated by both Standard & Poor's and Moody's, or if no such Debt of the Company shall be rated, Debt under the Amended Credit Agreement or Debt of the Company which is equally and ratably secured with Debt under the Amended Credit Agreement, to the extent such Debt shall be rated by either Standard & Poor's or Moody's. "Security Documents" means each pledge agreement, each security agreement, each mortgage and each additional security document. "Standard & Poor's" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. 68 73 "Total Unutilized Commitment" means, at any time, an amount equal to the remainder of (x) the then Total Commitment, less (y) the sum of (I) the aggregate principal amount of revolving borrowings then outstanding plus (II) the then aggregate amount of Letter of Credit Outstandings. OTHER INDEBTEDNESS As of December 31, 1997, the Company had outstanding $7.5 million of 9 3/4% senior notes due 1999, $7.4 million of 9 3/4% senior notes due 2000 and $48.8 million of other indebtedness due between 1998 and 2010. In 1996, the Company conducted a tender offer and consent solicitation for the 9 3/4% senior notes due 1999 and 9 3/4% senior notes due 2000, pursuant to which all restrictive covenants were removed and all notes other than the amounts set forth in the preceding sentence were repurchased. UNITED STATES TAXATION GENERAL The following is a general discussion of the material U.S. Federal income tax consequences of a holder's rights under the Registration Rights Agreement. This discussion assumes that a holder of Senior Notes will hold such Senior Notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This discussion does not deal with all U.S. Federal income tax consequences that may be relevant to particular investors in light of their personal investment circumstances, including persons holding Senior Notes as part of a conversion or constructive sale transaction or as part of a hedge or hedging transaction, or as a position in a straddle for tax purposes, nor does it discuss U.S. Federal income tax consequences applicable to certain types of investors subject to special treatment under U.S. Federal income tax laws, including insurance companies, tax-exempt organizations, financial institutions or broker-dealers, persons that have a functional currency other than the U.S. dollar, investors in pass-through entities and foreign persons, including foreign corporations, partnerships and individuals. In addition, this discussion does not consider the effect of any foreign, state, local, gift, estate or other tax laws that may be applicable to a particular investor. This discussion is based upon current provisions of the Code, Treasury regulations promulgated thereunder, administrative rulings and pronouncements of the Internal Revenue Service ("IRS") and judicial decisions currently in effect, all of which are subject to change, possibly with retroactive effect. The Company has not and will not seek any rulings or opinions from the IRS with respect to the matters discussed herein, and as a result, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions set forth in this discussion. EXCHANGE OFFER The Company will be required to pay additional cash interest on the Senior Notes if it fails to comply with certain of its obligations under the Registration Rights Agreement. Such additional interest should be taxable to a holder as ordinary interest income at the time it accrues or is received in accordance with each such holder's usual method of tax accounting. It is possible, however, that the IRS may take a different position, in which case holders might be required to include such additional interest in income as it accrues or becomes fixed (regardless of their usual method of tax accounting). The exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will not constitute a taxable event for U.S. Federal income tax purposes. As a result, (i) a holder of Outstanding Notes will not recognize taxable gain or loss as a result of the exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange Offer, (ii) the holding period of the Exchange Notes will include the holding period of the Outstanding Notes surrendered in exchange therefor and (iii) a holder's adjusted tax basis in the Exchange Notes will be the same as such holder's adjusted tax basis in the Outstanding Notes immediately prior to the surrender of such Outstanding Notes pursuant to the Exchange Offer. UNITED STATES ALIEN HOLDERS OF NOTES For purposes of this discussion, a "United States Alien Holder" is any beneficial owner of a Senior Note that is a corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership or a nonresident fiduciary of a foreign estate or trust. 69 74 Under present United States Federal income and estate tax law, and subject to the discussion below concerning backup withholding: (a) payment of principal and interest on the Senior Notes by the Company or any paying agent to any United States Alien Holder will not be subject to United States Federal withholding tax, provided that, in the case of interest, (i) such Holder does not own, actually or constructively, ten percent or more of the total combined voting power of all classes of stock of the Company entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to the Company through stock ownership, and is not a bank receiving interest described in Section 881(c)(3)(A) of the Code and (ii) either (A) the beneficial owner of the Senior Note certifies to the Company or its agent, under penalties of perjury, that it is not a United States holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the Senior Notes in such capacity, certifies to the Company or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes the Company or its agent with a copy thereof. (b) a United States Alien Holder of a Senior Note will not be subject to United States Federal income tax on gain realized on the sale, exchange or other disposition of such Senior Note unless (i) subject to certain exceptions, such Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and certain other requirements are met; (ii) such gain is effectively connected with the conduct by such Holder of a trade or business in the United States; or (iii) the United States Alien Holder is subject to tax pursuant to the provisions of the Code applicable to certain former citizens and residents of the United States; and (c) a Senior Note or coupon held by an individual who is not a citizen or resident of the United States at the time of his death will not be subject to United States Federal estate tax as a result of such individual's death, provided that the individual does not own, actually or constructively, ten percent or more of the total combined voting power of all classes of stock of the Company entitled to vote and, at the time of the individual's death, payments with respect to such Senior Note would not have been effectively connected to the conduct by such individual of a trade or business in the United States. If a United States Alien Holder is engaged in a trade or business in the United States and interest paid with respect to the Notes is effectively connected with the conduct of such trade or business, the United States Alien Holder, although exempt from the withholding tax discussed in clause (a) above, will be subject to United States federal income tax on such interest on a net income basis in the same manner as if it were a United States person. In addition, if such United States Alien Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to adjustments. INFORMATION REPORTING AND BACKUP WITHHOLDING Annual information reporting will apply to interest income on the Senior Notes and payments made on, and proceeds from the sale of, the Senior Notes may be subject to a backup withholding tax of 31% unless the holder complies with certain identification requirements. Any amounts withheld from payment to a United States Alien Holder under the backup withholding rules will be allowed as a credit against such Holder's United States Federal income tax liability and may entitle such Holder to a refund, provided that the required information is furnished to the United States Internal Revenue Service. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE SENIOR NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS. 70 75 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Senior Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the issuance and sale of the Exchange Notes offered hereby will be passed upon for the Company by Robert J. Tubbs, Executive Vice President, General Counsel and Secretary of the Company. INDEPENDENT PUBLIC ACCOUNTANTS The consolidated financial statements included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report with respect thereto, and is included herein. 71 76 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Statements of Earnings for Years Ended December 31, 1997, 1996 and 1995................................... F-3 Consolidated Balance Sheets at December 31, 1997 and 1996... F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.......................... F-5 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1996 and 1995.............. F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 77 COLTEC INDUSTRIES INC REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Coltec Industries Inc: We have audited the accompanying consolidated balance sheets of Coltec Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coltec Industries Inc and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Charlotte, North Carolina February 2, 1998 (except with respect to information discussed in Note 20, as to which the date is April 16, 1998) F-2 78 COLTEC INDUSTRIES INC CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales............................................... $1,314,869 $1,159,691 $1,099,624 Cost of sales........................................... 898,269 811,123 744,201 ---------- ---------- ---------- Gross profit............................................ 416,600 348,568 355,423 Selling and administrative.............................. 218,808 190,993 186,401 Special charges......................................... -- -- 27,000 ---------- ---------- ---------- Operating income........................................ 197,792 157,575 142,022 Interest expense and other, net......................... 54,043 74,894 89,886 ---------- ---------- ---------- Earnings from continuing operations before income taxes and extraordinary item................................ 143,749 82,681 52,136 Income taxes............................................ 48,875 28,111 17,615 ---------- ---------- ---------- Earnings from continuing operations before extraordinary item.................................................. 94,874 54,570 34,521 ---------- ---------- ---------- Discontinued operations (net of tax) Income from operations................................ -- 19,252 36,639 Gain on sale.......................................... -- 37,931 -- ---------- ---------- ---------- Total discontinued operations.................... -- 57,183 36,639 ---------- ---------- ---------- Extraordinary item (net of tax)......................... -- (30,614) (254) ---------- ---------- ---------- Net earnings............................................ $ 94,874 $ 81,139 $ 70,906 ========== ========== ========== Basic earnings per common share Before extraordinary item............................. $ 1.44 $ .79 $ .49 ---------- ---------- ---------- Discontinued operations Income from operations............................. -- .28 .53 Gain on sale....................................... -- .55 -- ---------- ---------- ---------- Total discontinued operations.................... -- .83 .53 ---------- ---------- ---------- Extraordinary item.................................... -- (.44) -- ---------- ---------- ---------- Net earnings.......................................... $ 1.44 $ 1.18 $ 1.02 ========== ========== ========== Weighted-average common shares.......................... 65,896 69,091 69,839 ========== ========== ========== Diluted earnings per common share Before extraordinary item............................. $ 1.42 $ .79 $ .49 ---------- ---------- ---------- Discontinued operations Income from operations............................. -- .28 .53 Gain on sale....................................... -- .54 -- ---------- ---------- ---------- Total discontinued operations.................... -- .82 .53 ---------- ---------- ---------- Extraordinary item.................................... -- (.44) -- ---------- ---------- ---------- Net earnings.......................................... $ 1.42 $ 1.17 $ 1.02 ========== ========== ========== Diluted weighted-average common shares.................. 66,911 69,376 69,839 ========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-3 79 COLTEC INDUSTRIES INC CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------ 1997 1996 ---------- ---------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS CURRENT ASSETS Cash and cash equivalents................................... $ 14,693 $ 15,029 Accounts and notes receivable, net of allowance of $2,894 in 1997 and $2,007 in 1996................................... 120,311 190,325 Inventory, net.............................................. 256,736 204,198 Deferred income taxes....................................... 15,195 10,524 Other current assets........................................ 20,508 22,895 ---------- ---------- Total current assets................................... 427,443 442,971 Property, plant and equipment, net.......................... 287,619 214,790 Costs in excess of net assets acquired, net................. 157,751 132,872 Other assets................................................ 60,221 58,869 ---------- ---------- $ 933,034 $ 849,502 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt........................... $ 1,811 $ 2,528 Accounts payable............................................ 93,799 55,410 Accrued expenses............................................ 138,969 155,229 Current portion of liabilities of discontinued operations... 4,999 14,229 ---------- ---------- Total current liabilities.............................. 239,578 227,396 Long-term debt.............................................. 757,578 717,722 Deferred income taxes....................................... 79,229 50,646 Other liabilities........................................... 60,892 100,005 Liabilities of discontinued operations...................... 154,918 170,740 Commitments and contingencies SHAREHOLDERS' EQUITY Preferred stock -- $.01 par value, 2,500,000 shares authorized, issued and outstanding -- none Common stock -- $.01 par value, 100,000,000 shares authorized, 70,501,948 and 70,398,661 shares issued at December 31, 1997 and 1996, respectively (excluding 25,000,000 shares held by a wholly owned subsidiary)...... 705 704 Capital surplus............................................. 642,828 643,221 Retained deficit............................................ (912,029) (1,006,903) Unearned compensation....................................... (2,721) (2,136) Minimum pension liability................................... (1,646) (3,200) Foreign currency translation adjustments.................... (6,745) (1,151) ---------- ---------- (279,608) (369,465) Less cost of 4,666,406 and 3,182,822 shares of common stock in treasury at December 31, 1997 and 1996, respectively... (79,553) (47,542) ---------- ---------- (359,161) (417,007) ---------- ---------- $ 933,034 $ 849,502 ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-4 80 COLTEC INDUSTRIES INC CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------- 1997 1996 1995 --------- --------- --------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings........................................... $ 94,874 $ 81,139 $ 70,906 Adjustments to reconcile net earnings to cash provided by operating activities Gain on divestitures................................. -- (66,791) -- Extraordinary item................................... -- 51,001 390 Special charge provision............................. -- -- 27,000 Depreciation and amortization........................ 38,415 36,014 42,086 Deferred income taxes................................ 24,791 39,146 5,665 Payments of liabilities of discontinued operations... (25,052) (19,563) (2,504) Special charge payments.............................. (11,746) (6,309) (8,945) Foreign currency translation adjustment.............. (5,594) 665 (1,135) Other operating items................................ (6,951) (4,370) 19,791 Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts and notes receivable..................... (4,263) (42,602) (6,632) Inventories....................................... (42,508) 2,704 (32,373) Other current assets.............................. 3,455 (617) 3,762 Accounts payable.................................. 35,963 (55) (4,283) Accrued expenses.................................. (18,972) (21,302) (21,071) Accrued pension liability......................... (20,993) 443 (1,649) --------- --------- --------- Cash provided by operating activities................ 61,419 49,503 91,008 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from divestitures............................. -- 329,113 -- Capital expenditures................................... (81,218) (44,550) (42,496) Acquisition of businesses.............................. (60,711) -- (21,750) Other.................................................. -- -- (2,512) --------- --------- --------- Cash provided by (used in) investing activities...... (141,929) 284,563 (66,758) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt refinancing......................... -- 542,000 -- Issuance of long-term debt............................. 813 -- 19,070 Repayment of long-term debt............................ (8,113) (622,582) (13,537) Increase (decrease) in revolving facility, net......... 39,500 (196,000) (30,000) Purchase of treasury stock............................. (42,695) (46,426) -- Proceeds from sale of accounts receivable.............. 82,500 -- -- Proceeds from exercise of stock options................ 8,169 -- -- --------- --------- --------- Cash provided by (used in) financing activities...... 80,174 (323,008) (24,467) --------- --------- --------- Increase (decrease) in cash and cash equivalents....... (336) 11,058 (217) Cash and cash equivalents -- beginning of year......... 15,029 3,971 4,188 --------- --------- --------- Cash and cash equivalents -- end of year............... $ 14,693 $ 15,029 $ 3,971 ========= ========= ========= Supplemental cash flow data: Cash paid for: Interest.......................................... $ 50,207 $ 74,870 $ 92,292 Income taxes...................................... 19,327 27,667 41,685
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 81 COLTEC INDUSTRIES INC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOREIGN COMMON STOCK MINIMUM CURRENCY --------------- CAPITAL RETAINED UNEARNED PENSION TRANSLATION SHARES AMOUNT SURPLUS DEFICIT COMPENSATION LIABILITY ADJUSTMENTS ------ ------ -------- ----------- ------------ --------- ----------- (IN THOUSANDS) Balance, December 31, 1994... 70,016 $700 $638,407 $(1,158,948) $(3,480) $ -- $ (681) Net earnings................. 70,906 Issuance of restricted stock, net........................ 61 1 1,006 1,072 Exercise of stock options.... (30) Tax benefit from stock option and incentive plan......... 36 Foreign currency translation adjustments................ (1,135) ------ ---- -------- ----------- ------- ------- ------- Balance, December 31, 1995... 70,077 701 639,419 (1,088,042) (2,408) -- (1,816) Net earnings................. 81,139 Repurchase of common stock... Issuance of restricted stock, net........................ 322 3 3,941 272 Exercise of stock options.... Tax benefit from stock option and incentive plan......... (139) Minimum pension liability.... (3,200) Foreign currency translation adjustments................ 665 ------ ---- -------- ----------- ------- ------- ------- Balance, December 31, 1996... 70,399 704 643,221 (1,006,903) (2,136) (3,200) (1,151) Net earnings................. 94,874 Repurchase of common stock... Issuance of restricted stock, net........................ 103 1 2,173 (585) Exercise of stock options.... (2,566) Minimum pension liability.... 1,554 Foreign currency translation adjustments................ (5,594) ------ ---- -------- ----------- ------- ------- ------- Balance, December 31, 1997... 70,502 $705 $642,828 $(912,029) $(2,721) $(1,646) $(6,745) ====== ==== ======== =========== ======= ======= ======= TREASURY STOCK ----------------- SHARES AMOUNT TOTAL ------ -------- --------- Balance, December 31, 1994... (99) $ (1,599) $(525,601) Net earnings................. 70,906 Issuance of restricted stock, net........................ (26) (422) 1,657 Exercise of stock options.... 25 405 375 Tax benefit from stock option and incentive plan......... 36 Foreign currency translation adjustments................ (1,135) ------ -------- --------- Balance, December 31, 1995... (100) (1,616) (453,762) Net earnings................. 81,139 Repurchase of common stock... (3,129) (46,426) (46,426) Issuance of restricted stock, net........................ (10) (142) 4,074 Exercise of stock options.... 56 642 642 Tax benefit from stock option and incentive plan......... (139) Minimum pension liability.... (3,200) Foreign currency translation adjustments................ 665 ------ -------- --------- Balance, December 31, 1996... (3,183) (47,542) (417,007) Net earnings................. 94,874 Repurchase of common stock... (2,160) (42,695) (42,695) Issuance of restricted stock, net........................ (4) (51) 1,538 Exercise of stock options.... 681 10,735 8,169 Minimum pension liability.... 1,554 Foreign currency translation adjustments................ (5,594) ------ -------- --------- Balance, December 31, 1997... (4,666) $(79,553) $(359,161) ====== ======== =========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 82 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 1. SUMMARY OF ACCOUNTING POLICIES Organization: Coltec Industries Inc (the Company) is a diversified manufacturing company serving the aerospace and general industrial markets primarily in the United States, Canada and Europe. Basis of Presentation: Investments in which the Company has ownership of 50% or more of the voting common stock are consolidated in the financial statements. Intercompany accounts and transactions are eliminated. Certain 1996 and 1995 amounts have been reclassified to conform to the 1997 presentation. Accounting Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Revenue Recognition: Revenue, including revenue under long-term commercial and government contracts and programs, is recorded at the time deliveries or customer acceptances are made and the Company has the contractual right to bill. Inventories: Inventories, including inventories under long-term commercial and government contracts and programs, are valued at the lower of cost or market. Cost elements included in inventory are material, labor and factory overhead, primarily using standard cost, which approximates actual cost. Cost on approximately 50% of the domestic inventory at December 31, 1997 and 1996 was determined on the last-in first-out basis. Cost on the remainder of the inventory is generally determined on the first-in first-out basis. Property, Plant and Equipment: Property, plant and equipment is carried at cost. Depreciation of plant and equipment is provided generally by using the straight-line method, based on estimated useful lives of the assets. The ranges of estimated useful lives used in computing depreciation for financial reporting are as follows:
YEARS ----- Land improvements........................................... 5-40 Buildings and equipment..................................... 10-45 Machinery and equipment..................................... 3-20
For leasehold improvements, the estimated useful life is the lesser of the asset life or the lease term. Renewals and betterments are capitalized by additions to the related asset accounts, while repair and maintenance costs are charged against earnings. Costs in Excess of Net Assets Acquired: It is the Company's policy to amortize the excess costs arising from acquisitions on a straight-line basis over periods not to exceed 40 years. In evaluating the value and future benefits of the excess costs arising from acquisitions, the recoverability from operating income is measured. Under this approach, the carrying value would be reduced if it is probable that management's best estimate of future operating income from related F-7 83 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) operations before amortization will be less than the carrying amount of the excess costs arising from acquisitions over the remaining amortization period. At December 31, 1997 and 1996, accumulated amortization related to all completed acquisitions was $74,013 and $68,045, respectively. Income Taxes: Income taxes are provided using the liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between the financial statement and tax bases of assets and liabilities using presently enacted tax rates. Environmental Expenditures: Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are accrued when it is probable that an obligation has been incurred and the amount can be reasonably estimated. Expenditures incurred for environmental compliance with respect to pollution prevention and ongoing monitoring programs are expensed as incurred. Expenditures that increase the value of the property are capitalized. Start-up Costs: Start-up costs related to new operations and new product lines are expensed as incurred. Cash and Cash Equivalents: The Company considers all short-term investments purchased with a maturity of three months or less to be cash equivalents. Foreign Currency Translation: The financial statements of foreign subsidiaries were prepared in their respective local currencies and were translated into U.S. dollars at year-end rates for assets and liabilities and at monthly weighted-average rates for income and expenses. Translation adjustments are included in shareholders' equity in the Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in net earnings. For 1997, 1996 and 1995, such gains and losses were not significant. 2. ACQUISITIONS AND DIVESTITURES On June 30, 1997, the Company acquired the assets of AMI Industries Inc. (AMI), a Colarado-based manufacturer of flight attendant and cockpit seats for commercial aircraft, for approximately $25,000. The purchase agreement also includes contingent payments based on earning levels for the years ended December 31, 1997-2000. These contingent payments will be recorded as additional purchase price and amortized over the remaining life of goodwill. For financial statement purposes, the acquisition was accounted for as a purchase and, accordingly, AMI's results are included in the Company's consolidated financial statements since the date of acquisition. The purchase price, which was financed through available cash resources, has been allocated to the acquired assets based upon their fair market values. The $12,200 excess of the purchase price over net assets is being amortized over 25 years. AMI expects annual sales to approximate $40,000. On October 7, 1997, the Company acquired the assets of the sheet rubber and conveyor belt business of Dana Corporation's Boston Weatherhead division for $28,000. Annualized sales are expected to approximate $35,000. The acquisition was accounted for as a purchase and its results are included in the Company's consolidated financial statements since the date of acquisition. The purchase price, which was also financed through available cash resources, has been allocated to the acquired assets based upon their fair market values. The $6,900 excess of the purchase price over net assets is being amortized over 25 years. The impact of these acquisitions was not material in relation to the Company's results of operations. Consequently, pro forma information is not presented. The Company also had several small acquisitions during 1997, which were not material to the Company's financial position or results of operations. F-8 84 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) In June 1996, the Company sold Holley Automotive, Coltec Automotive and Performance Friction Products to Borg-Warner Automotive, Inc. for $296,522 in cash. In December 1996, Coltec sold Farnam Sealing Systems division to Meillor SA for $20,728 in cash and a note receivable for $3,000. The sale of these automotive original equipment (OE) components businesses resulted in an after-tax gain of $37,931 (net of income taxes of $25,332), net of liabilities retained, transaction costs and obligations relating to the sales. The sale of the automotive OE components businesses represented a disposal of the Company's Automotive Segment. Accordingly, the 1996 and 1995 Consolidated Statements of Earnings were restated to reflect the operations of the automotive OE components businesses as a discontinued operation. Net sales of the discontinued automotive OE components businesses were $182,599 and $302,260 in 1996 and 1995, respectively. In December 1996, the Company also sold the exhaust systems and components business of its Stemco division for $11,863 resulting in a pre-tax gain of $3,528. Such gain is reflected in the 1996 Consolidated Statement of Earnings in continuing operations. Net sales of the exhaust systems and components business were $18,085 and $20,503 in 1996 and 1995, respectively. 3. EXTRAORDINARY ITEM In 1996, the Company redeemed all of its outstanding 11 1/4% debentures and substantially all of its outstanding 9 3/4% and 10 1/4% senior notes at redemption prices ranging from 105.125% to 106.987% of par. The redemption of these notes including consent payments resulted in an extraordinary charge of $30,614, net of income taxes of $20,387. The Company incurred extraordinary charges of $254, net of income taxes of $136, in 1995 in connection with early retirement of debt. 4. SPECIAL CHARGES In the third quarter of 1995, the Company recorded a special charge of $27,000, primarily to cover the costs of closing the Walbar compressor blade facility in Canada. The facility was closed during 1996. The charge also covered selected workforce reductions throughout the Company. The special charge included costs to cover the cancellation of contractual obligations resulting from the decision to close the Walbar facility, asset write-downs, severance and employee-related costs and other costs necessary to implement the shutdown of the Walbar facility and selected workforce reductions throughout the Company. At December 31, 1997 all related costs had been charged and the remaining accrual was reversed. The activity in the related reserve through December 31, 1997 was as follows:
CONTRACTUAL ASSET OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL ----------- ---------- --------- ------- -------- 1995 charge........................ $ 9,065 $ 7,845 $ 5,084 $ 5,006 $ 27,000 1995 activity...................... (65) (4,549) (1,778) (2,553) (8,945) ------- ------- ------- ------- -------- December 31, 1995.................. 9,000 3,296 3,306 2,453 18,055 1996 activity...................... (961) (1,875) (1,876) (1,597) (6,309) ------- ------- ------- ------- -------- December 31, 1996.................. 8,039 1,421 1,430 856 11,746 1997 activity...................... (1,200) -- (517) (29) (1,746) Reversal........................... (6,839) (1,421) (913) (827) (10,000) ------- ------- ------- ------- -------- December 31, 1997.................. $ -- $ -- $ -- $ -- $ -- ======= ======= ======= ======= ========
F-9 85 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) In the third quarter of 1997, the Company recorded a special charge of $10,000, to cover the restructuring of its Industrial Segment. This special charge included the costs of closing its FMD Electronics operations in Roscoe, Illinois and its Ortman Fluid Power operations in Hammond, Indiana. The special charge also included the costs to restructure the Company's Industrial Segment businesses in Canada and Germany and certain termination costs related to the relocation of the Delavan Commercial divisional headquarters to North Carolina. The third quarter 1997 charge included costs resulting from cancellation of contractual obligations, asset writedowns, severance and employee-related costs and other costs to shut down these facilities that will not benefit future operations. The related reserve activity for the year ended December 31, 1997 was as follows:
CONTRACTUAL ASSET OBLIGATIONS WRITEDOWNS SEVERANCE OTHER TOTAL ----------- ---------- --------- ------- -------- 1997 charge........................ $ 641 $ 1,049 $ 5,425 $ 2,885 $ 10,000 1997 activity...................... 641 1,049 5,425 2,885 10,000 ------- ------- ------- ------- -------- December 31, 1997.................. $ -- $ -- $ -- $ -- $ -- ======= ======= ======= ======= ========
5. EARNINGS PER SHARE In 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, effective December 15, 1997. The Company's reported earnings per common share for 1996 and 1995 equaled diluted earnings per share as set forth in SFAS No. 128. As a result, the Company's reported earnings per share for 1996 and 1995 were not restated. Basic earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per common share is computed by using the treasury stock method to determine shares related to stock options and restricted stock.
1997 1996 1995 ------ ------ ------ (IN THOUSANDS) Weighted-average common shares.............................. 65,896 69,091 69,839 Stock options and restricted stock issued................... 1,015 285 -- ------ ------ ------ Diluted weighted-average common shares...................... 66,911 69,376 69,839 ====== ====== ======
6. SALE OF ACCOUNTS RECEIVABLE In September 1997, the Company and certain of its subsidiaries sold their U.S. and Canadian customer trade receivables to CNC Finance LLC (CNC Finance), a wholly-owned bankruptcy remote subsidiary of the Company. CNC Finance entered into a three-year agreement to sell without recourse, on a revolving basis, an undivided fractional ownership interest in the receivables, based on the level of eligible receivables, up to a maximum of $85,000 to a special purpose entity of a financial institution. At December 31, 1997, $82,500 of the Company's receivables were sold under this agreement and the sale was reflected as a reduction of accounts receivable in the 1997 Consolidated Balance Sheet. The undivided interests were sold at a discount which was included in Interest expense and other, net in the 1997 Consolidated Statement of Earnings. F-10 86 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) 7. INVENTORY Inventories consisted of the following at December 31, 1997 and 1996:
1997 1996 -------- -------- Finished goods.............................................. $ 53,748 $ 48,813 Work in process and finished parts.......................... 158,937 122,817 Raw materials and supplies.................................. 44,051 32,568 -------- -------- Total.................................................. $256,736 $204,198 ======== ========
At December 31, 1997 and 1996, $54,441 and $45,371, respectively, of contract advances were offset against inventories under long-term commercial and government contracts and programs in the Consolidated Balance Sheets. Losses on commercial and government contracts and programs are recognized in full when identified. The excess of current cost over last-in, first-out cost at December 31, 1997 and 1996 was $22,022 and $20,152, respectively. 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at December 31, 1997 and 1996:
1997 1996 -------- -------- Land and improvements....................................... $ 14,517 $ 16,182 Buildings and equipment..................................... 135,173 121,515 Machinery and equipment..................................... 486,335 415,749 Leasehold improvements...................................... 12,209 11,239 Construction in progress.................................... 30,535 23,010 -------- -------- Total.................................................. 678,769 587,695 Less accumulated depreciation............................... 391,150 372,905 -------- -------- Total.................................................. $287,619 $214,790 ======== ========
9. ACCRUED LIABILITIES Accrued liabilities consisted of the following at December 31, 1997 and 1996:
1997 1996 -------- -------- Salaries, wages and employee benefits....................... $ 34,603 $ 37,979 Taxes....................................................... 13,728 18,995 Interest.................................................... 7,115 3,032 Asbestos.................................................... 50,688 60,659 Other....................................................... 32,835 34,564 -------- -------- Total.................................................. $138,969 $155,229 ======== ========
F-11 87 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) 10. INCOME TAXES Domestic and foreign components of earnings from operations before income taxes and extraordinary item were as follows for the years ended December 31, 1997, 1996 and 1995:
1997 1996 1995 -------- -------- -------- Domestic................................................. $114,517 $ 68,199 $ 25,426 Foreign.................................................. 29,232 14,482 26,710 -------- -------- -------- Total............................................... $143,749 $ 82,681 $ 52,136 ======== ======== ========
Income taxes on earnings from continuing operations were as follows for the years ended December 31, 1997, 1996 and 1995:
1997 1996 1995 -------- -------- -------- Current Domestic............................................... $ 18,094 $ (2,912) $ 4,717 Foreign................................................ 6,872 13,634 7,638 -------- -------- -------- 24,966 10,722 12,355 -------- -------- -------- Deferred Domestic............................................... 17,706 24,126 3,836 Foreign................................................ 6,203 (6,737) 1,424 -------- -------- -------- 23,909 17,389 5,260 -------- -------- -------- Total............................................... $ 48,875 $ 28,111 $ 17,615 ======== ======== ========
As discussed in note 2 to consolidated financial statements, the Company sold its original equipment components businesses in 1996 resulting in income tax on the gain of the sale of $25,332. As discussed in note 3 to consolidated financial statements, the Company incurred extraordinary charges related to early retirement of debt resulting in income taxes of $20,387 in 1996 and $136 in 1995. Reconciliation of tax at the U.S. statutory income tax rate of 35% for the years ended December 31, 1997, 1996 and 1995 to income taxes on earnings from continuing operations was as follows:
1997 1996 1995 ------- ------- ------- Tax at U.S. statutory rate.................................. $50,312 $28,938 $18,248 Repatriation of non-U.S. earnings......................... (1,195) 1,900 2,692 Non-U.S. rate differential................................ 2,844 1,828 (287) Utilization of tax credits................................ (997) (1,104) (960) Adjustment of reserves.................................... (2,736) (6,979) (6,172) Other..................................................... 647 3,528 4,094 ------- ------- ------- Income taxes.............................................. $48,875 $28,111 $17,615 ------- ------- ------- Effective tax rate.......................................... 34.0% 34.0% 33.8% ======= ======= =======
F-12 88 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The significant components of deferred tax assets and liabilities at December 31, 1997 and 1996 were as follows:
1997 1996 ----------------------- ----------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX TAX TAX TAX ASSETS LIABILITIES ASSETS LIABILITIES -------- ----------- -------- ----------- Excess tax over book depreciation............... $ -- $(21,828) $ -- $(26,754) Book/tax differences on contract income......... -- (24,230) -- (27,154) Employee benefit plans.......................... 7,747 -- 19,749 -- Accrued expenses and liabilities................ 5,375 -- 10,625 -- Foreign tax credit carryforwards................ 3,700 -- 6,600 -- Capital transactions, net....................... -- (27,901) -- (28,127) Other........................................... -- (3,194) 11,538 -- ------- -------- ------- -------- 16,822 (77,153) 48,512 (82,035) Less valuation allowance........................ (3,700) -- (6,600) -- ------- -------- ------- -------- Total........................................... $13,122 $(77,153) $41,912 $(82,035) ======= ======== ======= ========
The valuation allowance is attributable to foreign tax credit carryforwards, which expire in 1998 through 2002. 11. LONG-TERM DEBT Long-term debt consisted of the following at December 31, 1997 and 1996:
1997 1996 -------- -------- Credit Agreement 6.7%*(a)................................... $697,500 $658,000 9 3/4% senior notes due 1999(b)............................. 7,507 7,507 9 3/4% senior notes due 2000(c)............................. 7,405 7,405 10 1/4% senior subordinated notes due 2002(d)............... -- 3,909 Other due 1998-2010......................................... 46,977 43,429 -------- -------- 759,389 720,250 Less current portion........................................ 1,811 2,528 -------- -------- $757,578 $717,722 ======== ========
- --------------- * Indicates average interest rate for 1997 and 1996. (a) In 1996, the reducing revolving credit facility (the Credit Agreement), entered into with a syndicate of banks, was amended to expire December 15, 2001 with the total commitment increased to $850,000 from $465,000 (see note 3 to consolidated financial statements). The facility will be reduced by $75,000 on December 15, 1999 and an additional $100,000 on December 15, 2000. The Credit Agreement provides up to $125,000 for the issuance of letters of credit. At December 31, 1997, $40,089 of letters of credit had been issued under the Credit Agreement. Obligations under the facility are secured by substantially all of the Company's assets. Borrowings under the facility bear interest, at the Company's option, at an annual rate equal to the base rate or the Eurodollar rate plus 0.875%. The base rate is the higher of 0.50% in excess of the Federal Reserve reported certificate of deposit rate and the prime lending rate. Letter of credit fees of 0.875% are payable on outstanding letters of credit and a commitment fee of 0.375% is payable on the unutilized facility. During 1997, the Company entered into interest rate swaps to reduce (hedge) the impact of interest rate changes for variable rate borrowings under its credit facility. The agreements include an aggregate notional amount of $405,000, fixed interest rates ranging from 5.78% to 6.40% and maturity dates ranging from April 1998 to October 2002. (b) The 9 3/4% senior notes due 1999 are not redeemable prior to maturity on November 1, 1999. (c) The 9 3/4% senior notes due 2000 are not redeemable prior to maturity on April 1, 2000. (d) The 10 1/4% senior subordinated notes were redeemed on April 1, 1997 at 105.125% of par. F-13 89 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Minimum payments on long-term debt due within five years from December 31, 1997 are as follows: 1998........................................................ $ 1,811 1999........................................................ 23,797 2000........................................................ 9,180 2001........................................................ 699,831 2002........................................................ 1,361 Thereafter.................................................. 23,409 -------- Total....................................................... $759,389 ========
12. PENSION PLANS The Company and certain of its subsidiaries have in effect, for substantially all U.S. employees, pension plans under which funds are deposited with trustees. The benefits under these plans are based primarily on years of service and either final average salary or fixed amounts for each year of service. The Company's policy is to fund amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements. Plan assets consist principally of publicly traded equity and fixed-income securities. Pension coverage for employees of non-U.S. subsidiaries is provided in accordance with local requirements and customary practices. For certain pension plans, the plan assets exceed the accumulated benefit obligations (overfunded plans); and in the remainder of the plans, the accumulated benefit obligations exceed the plan assets (underfunded plans). During 1997, the Company merged several of its underfunded plans with its overfunded plans. As of December 31, 1997 and 1996, the funded status of the Company's pension plans was as follows:
1997 1996 -------------------------- -------------------------- OVER-FUNDED UNDER-FUNDED OVER-FUNDED UNDER-FUNDED PLANS PLANS PLANS PLANS ----------- ------------ ----------- ------------ Actuarial present value of benefit obligations: Vested benefit obligations............... $396,189 $ 30,604 $259,200 $119,158 -------- -------- -------- -------- Accumulated benefit obligations.......... $406,385 $ 30,878 $265,396 $124,022 -------- -------- -------- -------- Projected benefit obligations............ $427,737 $ 34,039 $289,973 $127,234 Plan assets at fair value.................. 568,094 1,551 408,979 79,735 -------- -------- -------- -------- Funded status.............................. 140,357 (32,488) 119,006 (47,499) Unrecognized net (gain) loss............... (120,839) 6,889 (89,702) (205) Unrecognized transition (asset) obligations.............................. (2,192) 1,525 (1,389) 628 Unrecognized prior service cost............ 15,255 2,571 2,837 15,033 Minimum liability adjustment............... -- (7,824) -- (12,200) -------- -------- -------- -------- (Accrued) prepaid pension cost............. $ 32,581 $(29,327) $ 30,752 $(44,243) ======== ======== ======== ========
Included in the underfunded plans are amounts for unfunded, non-qualified defined benefit plans. At December 31, 1997 and 1996, the Company recorded a minimum liability of $7,824 and $12,200, respectively, for underfunded plans with a partial offset to other assets of $5,292 and $7,300, respectively, and an after-tax charge to shareholders' equity of $1,646 and $3,200, respectively. F-14 90 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Assumptions as of December 31 used to develop the net periodic pension cost for U.S. plans were:
1997 1996 1995 ----- ----- ----- Discount rate for benefit obligations....................... 7.25% 7.75% 7.50% Expected long-term rate of return on assets................. 9.00% 9.00% 9.00% Rate of increase in compensation levels..................... 4.75% 5.00% 5.00%
For non-U.S. plans, which were not material, similar economic assumptions were used. The components of net periodic pension cost for the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995 -------- -------- -------- Service cost............................................. $ 8,404 $ 9,377 $ 7,618 Interest cost on projected benefit obligations........... 31,996 31,142 30,317 Actual return on assets.................................. (95,430) (52,049) (91,611) Amortization and deferral, net........................... 47,782 11,443 52,953 -------- -------- -------- Net periodic pension cost................................ $ (7,248) $ (87) $ (723) ======== ======== ========
For discontinued operations, the total projected benefit obligations at December 31, 1997 and 1996 were $203,737 and $214,822, respectively, and are fully funded. Interest cost on the projected benefit obligations for 1997, 1996 and 1995 was $16,097, $16,502 and $19,609, respectively, and was fully offset by return on assets resulting in no net periodic pension cost. 13. POSTRETIREMENT BENEFITS The Company provides certain health care and life insurance benefits to its eligible retired employees, principally in the United States, with some of these retirees paying a portion of the related costs. The Company's accumulated postretirement benefit obligations, none of which are funded, and the accrued postretirement benefit cost at December 31, 1997 and 1996 were as follows:
1997 1996 -------- -------- Actuarial present value of accumulated postretirement benefit obligations: Retirees.................................................. $ 16,980 $ 13,493 Fully eligible plan participants.......................... 1,925 2,416 Other plan participants................................... 3,113 3,053 -------- -------- Total..................................................... 22,018 18,962 Unrecognized transition obligations......................... (15,330) (16,614) Unrecognized net loss....................................... (4,611) (561) Unrecognized prior service cost............................. 1,964 2,495 -------- -------- Accrued postretirement benefit cost......................... $ 4,041 $ 4,282 ======== ========
F-15 91 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The components of postretirement benefit cost for the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995 -------- -------- -------- Service cost............................................. $ 187 $ 395 $ 198 Interest cost on accumulated postretirement benefit obligations............................................ 1,433 1,951 1,927 Amortization of transition obligations................... 1,022 1,107 1,373 Amortization and deferral, net........................... (756) (124) (63) -------- -------- -------- Postretirement benefit cost.............................. $ 1,886 $ 3,329 $ 3,435 ======== ======== ========
Discount rates of 7.25% and 7.75% were used in determining the accumulated postretirement benefit obligations at December 31, 1997 and 1996, respectively. The health care cost trend rates used in determining the accumulated postretirement benefit obligations at December 31, 1997 were 8.7% in 1998 gradually declining to 5.0% by 2005. The effect of a 1% increase in the health care cost trend rates in each year would increase the total service and interest cost components of the postretirement benefit cost for 1997 by approximately $142 and increase the accumulated postretirement benefit obligations at December 31, 1997 by approximately $1,400. 14. FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of the Company's financial instruments. Cash and cash equivalents, accounts and notes receivable and accounts payable: The carrying amount approximates fair value due to the short-term nature of these items. Long-term receivables and investments: The fair value is based on quoted market prices for similar publicly-traded securities or on the present value of estimated future cash flows. Long-term debt: The fair value of variable-rate long-term debt approximates carrying value. Forward exchange contracts and interest rate hedges: The fair value is based on quoted market prices of similar contracts. The estimated fair value of the Company's financial instruments at December 31, 1997 and 1996 was as follows:
1997 1996 -------------------- -------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE -------- -------- -------- -------- Long-term receivables and investments......... $ 35,017 $ 42,737 $ 32,427 $ 39,817 Long-term debt................................ 759,389 760,609 720,250 720,824 Forward exchange contracts.................... -- (8,384) -- 87 Interest rate hedges.......................... -- (3,555) -- --
The Company utilizes forward exchange contracts to hedge U.S. dollar-denominated sales, under long-term contracts, of certain foreign subsidiaries. The Company does not engage in speculation. The Company's forward exchange contracts do not subject the Company to risk due to exchange rate movements because gains and losses F-16 92 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) on these contracts offset gains and losses on the sales and related receivables being hedged. At December 31, 1997 and 1996, the Company had $162,000 and $216,000, respectively, of forward exchange contracts, denominated in Canadian dollars, which had a fair value of $153,616 and $216,087, respectively. The contracts have varying maturities with none exceeding five years. Gains and losses on forward exchange contracts are deferred and recognized over the life of the underlying long-term contract being hedged. The Company has an outstanding contingent liability for guaranteed debt and lease payments of $30,772, and for letters of credit $55,969. It was not practical to obtain independent estimates of the fair values for the contingent liability for guaranteed debt and lease payments and for letters of credit without incurring excessive costs. In the opinion of management, non-performance by the other parties to the contingent liabilities will not have a material effect on the Company's results of operations and financial condition. 15. STOCK OPTION AND INCENTIVE PLANS Pursuant to the Company's stock option plans, stock options and shares of restricted stock have been granted to officers and key employees and stock options to directors. Under the stock option plans, 7,468,000 shares of common stock may be issued. Stock options outstanding under the stock option plans were granted at a price equal to 100% of the market price on the date of grant and are exercisable in annual installments of 20% or 33%, commencing one year from date of grant and expiring ten years from date of grant. The Company applies Accounting Principles Board Opinion #25, Accounting for Stock Issued to Employees, in accounting for its stock option plans. Accordingly, no compensation expense has been recognized for these plans. Had compensation expense for the Company's stock option plans been determined based on the fair value at the grant dates for awards under these plans consistent with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's pro forma net earnings would have been $92,137 for 1997, $79,425 for 1996 and $69,487 for 1995 and earnings per share would have been $1.38 in 1997, $1.15 in 1996 and $1.00 in 1995. The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: risk-free interest rate of 6.75% for 1997 and 7.0% for 1996 and 1995, no dividends paid, expected life of 3.7 years for 1997 and five years for 1996 and 1995, and volatility of 21% for 1997 and 23% for 1996 and 1995. The weighted-average fair value of options granted was $5.75 for 1997, $4.76 for 1996 and $4.00 for 1995. F-17 93 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) A summary of the status of the Company's fixed stock option plans as of December 31, 1997, 1996 and 1995 was follows:
WEIGHTED- NUMBER OPTION AVERAGE OF SHARES PRICE RANGE EXERCISE (000S) PER SHARE PRICE --------- ------------ --------- December 31, 1994....................................... 2,317 $15.00-21.25 N/A Granted................................................. 2,960 10.75-18.08 Exercised............................................... (25) 15.00 Canceled................................................ (64) 15.00-18.25 ------ ------------ ------ December 31, 1995....................................... 5,188 10.75-21.25 $13.16 Granted................................................. 516 11.00-15.75 13.43 Exercised............................................... (56) 10.75-11.63 11.37 Canceled................................................ (236) 10.75-21.25 12.82 ------ ------------ ------ December 31, 1996....................................... 5,412 10.75-21.25 13.22 Granted................................................. 1,069 18.88-22.88 21.09 Exercised............................................... (1,004) 10.75-18.75 14.64 Canceled................................................ (217) 10.75-18.75 12.08 ------ ------------ ------ December 31, 1997....................................... 5,260 $10.75-22.88 $14.59 ------ ------------ ------
Stock options exercisable were 2,156,000, 2,103,000 and 1,188,000 at December 31, 1997, 1996 and 1995, respectively. The following summarizes information about the Company's stock options outstanding as of December 31, 1997:
OPTIONS OUTSTANDING ------------------------------------- WEIGHTED- WEIGHTED- NUMBER AVERAGE AVERAGE OUTSTANDING REMAINING EXERCISE (000S) LIFE PRICE RANGE OF EXERCISE PRICES ----------- --------- --------- $10.75 to $15.75......................................... 3,559 7.1 years $12.05 $16.25 to $20.13......................................... 744 6.9 years 18.02 $21.19 to $22.88......................................... 957 9.6 years 21.35 ----- --------- ------ $10.75 to $22.88......................................... 5,260 7.6 years $14.59 ----- --------- ------
OPTIONS EXERCISABLE ------------------------ WEIGHTED- NUMBER AVERAGE OUTSTANDING EXERCISE (000S) PRICE RANGE OF EXERCISE PRICES ----------- --------- $10.75 to $15.75............................................ 1,755 $12.79 $16.25 to $20.13............................................ 383 17.91 $21.19 to $22.88............................................ 18 21.25 ----- ------ $10.75 to $22.88............................................ 2,156 $13.77 ----- ------
In addition to the granting of stock options, the Company has granted shares of restricted stock. Restrictions on certain shares lapse 100% three years from the date of grant. Restrictions on the remaining shares lapse in annual installments of 33% commencing one year from date of grant. The unearned compensation resulting from F-18 94 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) the grant of restricted shares is reported as a reduction to shareholders' equity in the Consolidated Balance Sheets and is being charged to earnings over the period the restricted shares vest. Shares available for grant at December 31, 1997 under the stock option plans were 138,569. 16. COMMITMENTS AND CONTINGENCIES The Company and certain of its subsidiaries are liable for lease payments and are defendants in various lawsuits, including actions involving asbestos-containing products and certain environmental proceedings. With respect to asbestos product liability and related litigation costs, as of December 31, 1997 and 1996, two subsidiaries of the Company were among a number of defendants (typically 15 to 40) in approximately 110,000 and 94,700 actions, respectively (including approximately 2,400 and 5,100 actions, respectively, in advanced stages of processing), filed in various states by plaintiffs alleging injury or death as a result of exposure to asbestos fibers. During 1997, 1996 and 1995, two subsidiaries of the Company received approximately 38,200, 39,900 and 44,000 new actions, respectively. Through December 31, 1997, approximately 199,000 of the approximately 309,000 total actions brought have been settled or otherwise disposed of. The damages claimed for personal injury or death vary from case to case and in many cases plaintiffs seek $1,000 or more in compensatory damages and $2,000 or more in punitive damages. Although the law in each state differs to some extent, it appears, based on advice of counsel, that liability for compensatory damages would be shared among all responsible defendants, thus limiting the potential monetary impact of such judgments on any individual defendant. Following a decision of the Pennsylvania Supreme Court, in a case in which neither the Company nor any of its subsidiaries were parties, that held insurance carriers are obligated to cover asbestos-related bodily injury actions if any injury or disease process, from first exposure through manifestation, occurred during a covered policy period (the "continuous trigger theory of coverage"), the Company settled litigation with its primary and most of its first-level excess insurance carriers, substantially on the basis of the Court's ruling. The Company has negotiated a final agreement with most of its excess carriers that are in the layers of coverage immediately above its first layer. The Company is currently receiving payments pursuant to this agreement. The Company believes that, with respect to the remaining carriers, a final agreement can be achieved without litigation and on substantially the same basis that it has resolved the issues with its other carriers. Settlements are generally made on a group basis with payments made to individual claimants over periods of one to four years. Payments were made with respect to asbestos liability and related costs aggregating $59,247 in 1997, $71,354 in 1996 and $56,739 in 1995, substantially all of which were covered by insurance. Related to payments not covered by insurance, the Company recorded charges to operations amounting to $8,000 in 1997, $8,000 in 1996 and $5,000 in 1995. In accordance with the Company's internal procedures for the processing of asbestos product liability actions and due to the proximity to trial or settlement, certain outstanding actions have progressed to a stage where the Company can reasonably estimate the cost to dispose of these actions. As of December 31, 1997, the Company estimates that the aggregate remaining cost of the disposition of the settled actions for which payments remain to be made and actions in advanced stages of processing, including associated legal costs, is approximately $47,350, and the Company expects that this cost will be substantially covered by insurance. With respect to the 107,600 outstanding actions as of December 31, 1997, which are in preliminary procedural stages, the Company lacks sufficient information upon which judgments can be made as to the validity or ultimate disposition of such actions, thereby making it difficult to estimate with reasonable certainty the potential liability or costs to the Company. When asbestos actions are received they are typically forwarded to local counsel to ensure that the appropriate preliminary procedural response is taken. The complaints typically do F-19 95 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) not contain sufficient information to permit a reasonable evaluation as to their merits at the time of receipt, and in jurisdictions encompassing a majority of the outstanding actions, the practice has been that little or no discovery or other action is taken until several months prior to the date set for trial. Accordingly, the Company generally does not have the information necessary to analyze the actions in sufficient detail to estimate the ultimate liability or costs to the Company, if any, until the actions appear on a trial calendar. A determination to seek dismissal, to attempt to settle or to proceed to trial is typically not made prior to the receipt of such information. It is also difficult to predict the number of asbestos lawsuits that the Company's subsidiaries will receive in the future. The Company has noted that, with respect to recently settled actions or actions in advanced stages of processing, the mix of the injuries alleged and the mix of the occupations of the plaintiffs have been changing from those traditionally associated with the Company's asbestos-related actions. The Company is not able to determine with reasonable certainty whether this trend will continue. Based upon the foregoing, and due to the unique factors inherent in each of the actions, including the nature of the disease, the occupation of the plaintiff, the presence or absence of other possible causes of a plaintiff's illness, the availability of legal defenses, such as the statute of limitations or state of the art, and whether the lawsuit is an individual one or part of a group, management is unable to estimate with reasonable certainty the cost of disposing of outstanding actions in preliminary procedural stages or of actions that may be filed in the future. However, the Company believes that its subsidiaries are in a favorable position compared to many other defendants because, among other things, the asbestos fibers in its asbestos-containing products were encapsulated. Considering the foregoing, as well as the experience of the Company's subsidiaries and other defendants in asbestos litigation, the likely sharing of judgments among multiple responsible defendants, and the substantial amount of insurance coverage that the Company expects to be available from its solvent carriers, the Company believes that pending and reasonably anticipated future actions are not likely to have a material effect on the Company's results of operations and financial condition. Although the insurance coverage which the Company has is substantial, it should be noted that insurance coverage for asbestos claims is not available to cover exposures initially occurring on and after July 1, 1984. The Company's subsidiaries continue to be named as defendants in new cases, some of which allege initial exposure after July 1, 1984. In addition to claims for personal injury, the Company's subsidiaries have been involved in an insignificant number of property damage claims based upon asbestos-containing materials found in schools, public facilities and private commercial buildings. Based upon proceedings to date, the overwhelming majority of these claims have been resolved without a material adverse impact on the Company. Likewise, the insignificant number of claims remaining to be resolved are not expected to have a material effect on the Company's results of operations and financial condition. F-20 96 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The Company has recorded an accrual for its liabilities for asbestos-related matters that are deemed probable and can be reasonably estimated (settled actions and actions in advanced stages of processing), and has separately recorded an asset equal to the amount of such liabilities that is expected to be recovered by insurance. In addition, the Company has recorded a receivable for that portion of payments previously made for asbestos product liability actions and related litigation costs that is recoverable from its insurance carriers. Liabilities for asbestos-related matters and the receivable from insurance carriers included in the Consolidated Balance Sheets were as follows at December 31, 1997 and 1996:
1997 1996 ------- ------- Accounts and notes receivable............................... $56,039 $67,012 Other assets................................................ 16,249 18,728 Accrued expenses............................................ 50,688 60,659 Other liabilities........................................... 2,682 10,879
With respect to environmental proceedings, the Company has been notified that it is among the Potentially Responsible Parties under federal environmental laws, or similar state laws, relative to the costs of investigating and in some cases remediating contamination by hazardous materials at several sites. Such laws impose joint and several liability for the costs of investigating and remediating properties contaminated by hazardous materials. Liability for these costs can be imposed on present and former owners or operators of the properties or on parties who generated the wastes that contributed to the contamination. The Company's policy is to accrue environmental remediation costs when it is both probable that a liability has been incurred and the amount can be reasonably estimated. While it is often difficult to reasonably quantify future environmental-related expenditures, the Company currently estimates its future non-capital expenditures related to environmental matters to range between $27,000 and $50,000. In connection with these expenditures, the Company has accrued $31,716 at December 31, 1997 representing management's best estimate of probable non-capital environmental expenditures. These non-capital expenditures are estimated to be incurred over the next 10 to 20 years. In addition, capital expenditures aggregating $5,000 may be required during the next two years related to environmental matters. Although the Company is pursuing insurance recovery in connection with certain of these matters, no receivable has been recorded with respect to any potential recovery of costs in connection with any environmental matters. Under operating lease commitments, expiring on various dates after December 31, 1997, the Company and certain of its subsidiaries are obligated as of December 31, 1997, to pay rentals totaling $30,658 as follows: $5,482 in 1998, $4,970 in 1999, $3,573 in 2000, $2,673 in 2001, $1,973 in 2002 and $11,987 in later years. At December 31, 1997, the Company had committed to a minimum employer contribution of $15,806 to the Company's 401K plans. 17. SEGMENT INFORMATION As discussed in note 2 to consolidated financial statements, the Company divested all of its automotive OE components businesses in 1996. As a result of the divestitures, the Company is now reporting the results of its business units in two operating segments, Aerospace and Industrial. F-21 97 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Information on total assets, depreciation of property, plant and equipment and capital expenditures by industry segment was as follows for the years ended December 31, 1997, 1996 and 1995:
1997 1996 1995 ------ ------ ------ (IN MILLIONS) Total assets: Aerospace................................................. $437.3 $415.5 $391.3 Industrial................................................ 310.6 287.2 298.3 Corporate unallocated..................................... 185.1 146.8 134.3 ------ ------ ------ Subtotal............................................... 933.0 849.5 823.9 Discontinued operations................................... -- -- 70.6 ------ ------ ------ Total.................................................. $933.0 $849.5 $894.5 ====== ====== ====== Depreciation of property, plant and equipment: Aerospace................................................. $ 13.4 $ 12.2 $ 12.3 Industrial................................................ 14.0 12.9 12.9 Corporate unallocated..................................... 2.3 1.9 1.6 ------ ------ ------ Subtotal............................................... 29.7 27.0 26.8 Discontinued operations................................... -- 3.5 5.7 ------ ------ ------ Total.................................................. $ 29.7 $ 30.5 $ 32.5 ====== ====== ====== Capital expenditures: Aerospace................................................. $ 46.9 $ 26.9 $ 17.6 Industrial................................................ 31.4 13.7 13.7 Corporate unallocated..................................... 2.9 4.0 2.6 ------ ------ ------ Subtotal............................................... 81.2 44.6 33.9 Discontinued operations................................... -- 5.4 8.6 ------ ------ ------ Total.................................................. $ 81.2 $ 50.0 $ 42.5 ====== ====== ======
F-22 98 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Information by geographic segment was as follows for the years ended December 31, 1997, 1996 and 1995:
OPERATING TOTAL SALES INCOME ASSETS -------- --------- ------ (IN MILLIONS) 1997 Domestic operations......................................... $1,027.2 $198.4 $590.1 Foreign operations.......................................... 287.7 39.1 157.8 -------- ------ ------ Total segments.............................................. 1,314.9 237.5 747.9 Corporate unallocated....................................... -- (39.7) 185.1 -------- ------ ------ Total.................................................. $1,314.9 $197.8 $933.0 ======== ====== ====== 1996 Domestic operations......................................... $ 888.6 $182.5 $554.2 Foreign operations.......................................... 271.1 16.2 148.5 -------- ------ ------ Total segments.............................................. 1,159.7 198.7 702.7 Corporate unallocated....................................... -- (41.1) 146.8 -------- ------ ------ Total.................................................. $1,159.7 $157.6 $849.5 ======== ====== ====== 1995 Domestic operations*........................................ $ 854.0 $168.7 $554.8 Foreign operations.......................................... 245.6 10.3 205.4 -------- ------ ------ Total segments.............................................. 1,099.6 179.0 760.2 Corporate unallocated....................................... -- (37.0) 134.3 -------- ------ ------ Total.................................................. $1,099.6 $142.0 $894.5 ======== ====== ======
- --------------- * Includes total assets from discontinued operations. 18. SUPPLEMENTARY EARNINGS INFORMATION The following expenses were included in the Consolidated Statements of Earnings for the years ended December 31, 1997, 1996 and 1995.
1997 1996 1995 ------- ------- ------- Maintenance................................................. $24,000 $22,816 $22,633 Taxes, other than federal income taxes Payroll................................................... 30,025 24,633 24,379 Property.................................................. 4,928 4,626 4,226 State and local........................................... 6,241 5,121 2,601 Rent........................................................ 8,950 9,965 8,604 Research and developments costs............................. 46,548 44,125 45,730
19. SUBSEQUENT EVENTS On January 30, 1998, the Company acquired Marine and Petroleum Mfg. Inc.'s manufacturing facilities based in Texas for approximately $17,000. The plants acquired produce flexible graphite and Teflon sealing products used in the petrochemical industry. Combined annual sales for these facilities are expected to approximate $18,000. The Company also acquired Tex-o-Lon and Repro-Lon for approximately $25,000. These F-23 99 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) two Texas businesses have combined annual sales of $15,000. Tex-o-Lon manufactures, machines and distributes Teflon products, primarily for the semiconductor industry. Repro-Lon reprocesses Teflon compounds for the chemical and semiconductor industries. The acquisitions were accounted for as purchases; accordingly, the purchase price, which was financed through available cash resources, was allocated to the acquired assets based upon their fair market values. On February 2, 1998, the Company purchased the Sealing Division of Groupe Carbone Lorraine for $45,600. This division, with facilities in France and South Carolina, produces high-technology metallic gaskets used in the nuclear, petroleum and chemical industries. Sales for 1998 are expected to approximate $38,000. This acquisition will be accounted for as a purchase and the purchase price, also financed through available cash resources, will be allocated to the acquired assets based upon their fair market values. In February 1998, the Company amended its existing credit facility increasing the total commitment to $900,000 from $850,000. 20. SUPPLEMENTAL GUARANTOR INFORMATION Substantially all the Company's subsidiaries incorporated in the United States (the "Subsidiary Guarantors") have fully and unconditionally guaranteed the Company's obligations to pay principal and interest with respect to the Company's 7 1/2% Senior Notes Due 2008. The subsidiaries of the Company that are not Subsidiary Guarantors are referred to in this note as the "Non-Guarantor Subsidiaries". The following supplemental consolidating condensed financial statements present balance sheets as of December 31, 1997 and 1996 and statements of earnings and of cash flows for the years ended December 31, 1997, 1996 and 1995. In the consolidating financial statements, Coltec Industries Inc ("Parent") accounts for its investments in wholly-owned subsidiaries using the equity method and the Subsidiary Guarantors account for their investments in Non-Subsidiary Guarantors using the equity method. Interest expense related to the indebtedness under the Company's credit agreement and its three series of senior notes is allocated to United States subsidiaries based on net sales. F-24 100 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
DECEMBER 31, 1997 --------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ Net sales....................... $430,206 $586,901 $340,833 $(43,071) $1,314,869 Cost of sales................... 295,466 394,948 250,926 (43,071) 898,269 -------- -------- -------- -------- ---------- Gross profit.................... 134,740 191,953 89,907 -- 416,600 Selling and administrative...... 49,854 122,251 46,703 -- 218,808 -------- -------- -------- -------- ---------- Operating income................ 84,886 69,702 43,204 -- 197,792 Equity earnings of subsidiaries.................. 55,570 22,156 -- (77,726) -- Interest expense and other, net........................... (30,505) (54,975) 31,437 -- (54,043) -------- -------- -------- -------- ---------- Earnings before income taxes.... 109,951 36,883 74,641 (77,726) 143,749 Income taxes.................... 15,077 8,630 25,168 -- 48,875 -------- -------- -------- -------- ---------- Net earnings.................... $ 94,874 $ 28,253 $ 49,473 $(77,726) $ 94,874 ======== ======== ======== ======== ==========
F-25 101 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
DECEMBER 31, 1996 --------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ Net sales....................... $363,743 $530,876 $285,875 $(20,803) $1,159,691 Cost of sales................... 253,345 360,074 218,507 (20,803) 811,123 -------- -------- -------- -------- ---------- Gross profit.................... 110,398 170,802 67,368 -- 348,568 Selling and administrative...... 32,749 82,812 75,432 190,993 -------- -------- -------- -------- ---------- Operating income................ 77,649 87,990 (8,064) -- 157,575 Equity earnings of subsidiaries.................. 43,755 12,820 -- (56,575) -- Interest expense and other, net........................... (66,891) (16,676) 8,673 (74,894) -------- -------- -------- -------- ---------- Earnings from continuing operations before income taxes and extraordinary item........ 54,513 84,134 609 (56,575) 82,681 Income taxes.................... (19,309) 24,672 22,748 28,111 -------- -------- -------- -------- ---------- Earnings from continuing operations before extraordinary item............ 73,822 59,462 (22,139) (56,575) 54,570 Discontinued operations (net of tax).......................... 37,931 -- 19,252 57,183 Extraordinary item (net of tax).......................... (30,614) -- -- (30,614) -------- -------- -------- -------- ---------- Net earnings.................... $ 81,139 $ 59,462 $ (2,887) $(56,575) $ 81,139 ======== ======== ======== ======== ==========
F-26 102 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
DECEMBER 31, 1995 --------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ Net sales........................ $472,806 $379,419 $253,071 $ (5,672) $1,099,624 Cost of sales.................... 317,612 242,777 189,484 (5,672) 744,201 -------- -------- -------- -------- ---------- Gross profit..................... 155,194 136,642 63,587 -- 355,423 Selling and administrative....... 89,562 77,614 19,225 186,401 Special charges.................. 27,000 -- -- 27,000 -------- -------- -------- -------- ---------- Operating income................. 38,632 59,028 44,362 -- 142,022 Equity earnings in subsidiaries................... 58,100 12,820 -- (70,920) -- Interest expense and other, net............................ (79,910) (9,264) (712) (89,886) -------- -------- -------- -------- ---------- Earnings from continuing operations before income taxes and extraordinary item......... 16,822 62,584 43,650 (70,920) 52,136 Income taxes..................... (18,850) 21,827 14,638 17,615 -------- -------- -------- -------- ---------- Earnings from continuing operations before extraordinary item........................... 35,672 40,757 29,012 (70,920) 34,521 Discontinued operations (net of tax)........................... 35,488 1,151 -- 36,639 Extraordinary item (net of tax)........................... (254) -- (254) -------- -------- -------- -------- ---------- Net earnings..................... $ 70,906 $ 41,908 $ 29,012 $(70,920) $ 70,906 ======== ======== ======== ======== ==========
F-27 103 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1997 ----------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------- ------------ ------------- ------------ ------------ Cash and cash equivalents..... $ 9,912 $ 722 $ 4,059 $ 14,693 Accounts and notes receivable, net......................... -- 60,881 59,430 120,311 Inventory, net................ 99,100 71,958 85,678 256,736 Deferred income taxes......... 4,535 10,689 (29) 15,195 Other current assets.......... 4,540 10,406 5,562 20,508 ---------- -------- -------- ----------- -------- Total current assets........ 118,087 154,656 154,700 -- 427,443 Intercompany, net............. (741,897) 10,933 730,964 -- Investments in affiliates..... 1,057,890 355,399 2,688 $(1,415,977) -- Property, plant and equipment................... 89,488 118,405 79,726 287,619 Cost in excess of net assets acquired, net............... 21,820 133,441 2,490 157,751 Other assets.................. 40,266 3,490 16,465 60,221 ---------- -------- -------- ----------- -------- Total assets................ $ 585,654 $776,324 $987,033 $(1,415,977) $933,034 ========== ======== ======== =========== ======== Total current liabilities..... $ 93,669 $ 49,494 $ 96,415 $239,578 Long term debt................ 689,302 1,611 66,665 757,578 Deferred income taxes......... (32,780) 101,871 10,138 79,229 Other liabilities............. 39,706 12,844 10,544 $ (2,202) 60,892 Liabilities of discontinued operations.................. 154,918 -- -- 154,918 Shareholders' equity.......... (359,161) 610,504 803,271 (1,413,775) (359,161) ---------- -------- -------- ----------- -------- Total liabilities and shareholders' equity..... $ 585,654 $776,324 $987,033 $(1,415,977) $933,034 ========== ======== ======== =========== ========
F-28 104 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED BALANCE SHEET
DECEMBER 31, 1996 ---------------------------------------------------------------------- NON- GUARANTOR GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------- ------------ ------------ ------------ ------------ Cash and cash equivalents....... $ 5,475 $ 570 $ 8,984 $ 15,029 Accounts and notes receivable, net........................... 38,773 49,556 101,996 190,325 Inventory, net.................. 77,816 54,269 72,113 204,198 Deferred income taxes........... 5,566 8,830 (3,872) 10,524 Other current assets............ 14,417 5,583 2,895 22,895 ---------- -------- -------- ----------- --------- Total current assets.......... 142,047 118,808 182,116 -- 442,971 Intercompany, net............... (955,038) 274,177 680,861 -- Investments in affiliates....... 1,159,429 97,481 -- $(1,256,910) -- Property, plant and equipment... 72,933 75,166 66,691 214,790 Cost in excess of net assets acquired, net................. 14,728 115,525 2,619 132,872 Other assets.................... 39,025 954 18,890 58,869 ---------- -------- -------- ----------- --------- Total assets.................. $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502 ========== ======== ======== =========== ========= Total current liabilities....... $ 11,341 $ 7,541 $208,514 $ 227,396 Long term debt.................. 689,116 -- 28,606 717,722 Deferred income taxes........... (49,402) 92,120 7,928 50,646 Other liabilities............... 68,337 6,989 24,679 100,005 Liabilities of discontinued operations.................... 170,740 -- -- 170,740 Shareholders' equity............ (417,008) 575,461 681,450 $(1,256,910) (417,007) ---------- -------- -------- ----------- --------- Total liabilities and shareholders' equity....... $ 473,124 $682,111 $951,177 $(1,256,910) $ 849,502 ========== ======== ======== =========== =========
F-29 105 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------------------------- NON-GUARANTOR PARENT GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- --------- ------------- ------------ ------------ Cash from operating activities... $ 66,192 $ 152 $ (4,925) -- $ 61,419 --------- -------- --------- -------- --------- Cash flows from investing activities: Capital expenditures........... (28,720) (29,542) (22,956) (81,218) Acquisition of businesses...... (32,716) (27,995) -- (60,711) Cash from (to) Parent.......... (80,493) 57,537 22,956 -- --------- -------- --------- -------- --------- Cash used in investing activities................ (141,929) -- -- -- (141,929) --------- -------- --------- -------- --------- Cash flows from financing activities: Issuance of long-term debt..... 813 -- -- 813 Repayment of long-term debt.... (4,929) (133) (3,051) (8,113) Increase (decrease) in revolving facility, net..... (500) -- 40,000 39,500 Purchase of treasury stock..... (42,695) -- -- (42,695) Proceeds from sale of accounts receivable.................. -- -- 82,500 82,500 Proceeds from exercise of stock options............... 8,169 -- -- 8,169 Cash from (to) Parent.......... 119,316 133 (119,449) -- --------- -------- --------- -------- --------- Cash provided by financing activities................ 80,174 -- -- -- 80,174 --------- -------- --------- -------- --------- Increase (decrease) in cash and cash equivalents............... 4,437 152 (4,925) (336) Cash and cash equivalents -- beginning of period............ 5,475 570 8,984 15,029 --------- -------- --------- -------- --------- Cash and cash equivalents -- end of period.................. $ 9,912 $ 722 $ 4,059 -- $ 14,693 ========= ======== ========= ======== =========
F-30 106 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 ---------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ------------ ------------- ------------ ------------ Cash from operating activities.................... $ 43,920 $ (179) $ 5,762 -- $ 49,503 --------- ------- -------- -------- --------- Cash flows from investing activities: Capital expenditures.......... (20,799) (8,376) (15,375) (44,550) Proceeds from divestitures.... 329,113 -- -- 329,113 Cash from (to) Parent......... (23,751) 8,376 15,375 -- --------- ------- -------- -------- --------- Cash provided by investing activities............... 284,563 -- -- -- 284,563 --------- ------- -------- -------- --------- Cash flows from financing activities: Proceeds from debt refinancing................ 542,000 -- -- 542,000 Repayment of long-term debt... (622,582) -- -- (622,582) Decrease in revolving facility, net.............. (196,000) -- -- (196,000) Purchase of treasury stock.... (46,426) -- -- (46,426) --------- ------- -------- -------- --------- Cash used in financing activities............... (323,008) -- -- -- (323,008) --------- ------- -------- -------- --------- Increase (decrease) in cash and cash equivalents.............. 5,475 (179) 5,762 11,058 Cash and cash equivalents -- beginning of period........... -- 749 3,222 3,971 --------- ------- -------- -------- --------- Cash and cash equivalents -- end of period..................... $ 5,475 $ 570 $ 8,984 -- $ 15,029 ========= ======= ======== ======== =========
F-31 107 COLTEC INDUSTRIES INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
DECEMBER 31, 1995 --------------------------------------------------------------------- GUARANTOR NON-GUARANTOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ Cash from operating activities.................... $ 89,825 $ (485) $ 1,668 -- $ 91,008 -------- ------- -------- -------- -------- Cash flows from investing activities: Capital expenditures.......... (25,559) (8,900) (8,037) (42,496) Acquisition of business....... (21,750) -- -- (21,750) Other......................... (2,512) -- -- (2,512) Cash from (to) Parent......... (16,937) 8,900 8,037 -- -------- ------- -------- -------- -------- Cash used in investing activities............... (66,758) -- -- -- (66,758) -------- ------- -------- -------- -------- Cash flows from financing activities: Issuance of long-term debt.... -- -- 19,070 19,070 Repayment of long-term debt... (11,084) -- (2,453) (13,537) Decrease in revolving facility, net.............. (30,000) -- -- (30,000) Cash from (to) Parent......... 16,617 -- (16,617) -- -------- ------- -------- -------- -------- Cash used in financing activities............... (24,467) -- -- -- (24,467) -------- ------- -------- -------- -------- Increase (decrease) in cash and cash equivalents....... (1,400) (485) 1,668 (217) Cash and cash equivalents -- beginning of period........ 1,400 1,234 1,554 4,188 -------- ------- -------- -------- -------- Cash and cash equivalents -- end of period.............. -- $ 749 $ 3,222 -- $ 3,971 ======== ======= ======== ======== ========
F-32 108 - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS CONFIDENTIAL OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL PURCHASER. THIS CONFIDENTIAL OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS CONFIDENTIAL OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Available Information................. i Incorporation of Certain Documents by Reference........................... i Prospectus Summary.................... 1 Risk Factors.......................... 11 The Exchange Offer.................... 15 Use of Proceeds....................... 22 Capitalization........................ 22 Selected Consolidated Financial and Other Data.......................... 23 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 25 Business.............................. 33 Management............................ 46 Description of the Senior Notes....... 48 Description of Other Indebtedness..... 63 United States Taxation................ 69 Plan of Distribution.................. 71 Legal Matters......................... 71 Independent Public Accountants........ 71 Index to Consolidated Financial Statements.......................... F-1
====================================================== COLTEC INDUSTRIES INC $300,000,000 7 1/2% Series B Senior Notes Due 2008 PROSPECTUS - ------------------------------------------------------ 109 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Reference is made to Sections 1741 and 1742 of the 1988 Business Corporation Law of the Commonwealth of Pennsylvania, which provide for indemnification of directors and officers in certain circumstances. In addition, Article VIII of the By-laws of Coltec provides that, except as prohibited by law, any director, officer or employee of Coltec is entitled to be indemnified in any action or proceeding in which he or she may be involved by virtue of holding such position. In addition, Coltec maintains a directors' and officers' liability insurance policy and has entered into indemnification agreements with each of its executive officers and directors. The indemnification referred to above will not limit the liability of any director or officer of Coltec for violation of any of the federal securities laws. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits *4.1 Indenture dated April 16, 1998, between Coltec and Bankers Trust Company as trustee, relating to the 7 1/2% Senior Secured Notes. *4.2 Form of 7 1/2% Series B Senior Secured Notes (included in Exhibit 4.1 above). *4.3 Registration Rights Agreement, dated as of April 16, 1998, between Coltec and the Initial Purchasers named therein. *4.4 Fifth Amendment to the Credit Agreement, dated as of March 16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.5 Consent and Agreement, dated as of March 31, 1998, with respect to the Credit Agreement among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.6 Modification to Fifth Amendment to Credit Agreement, dated as of April 20, 1998, among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.7 The Amended and Restated Company Pledge Agreement, dated as of March 24, 1998, made by Coltec in favor of Bankers Trust Company as collateral agent. *4.8 The Amended and Restated Company Security Agreement, dated as of March 24, 1998, made by Coltec in favor of Bankers Trust Company as collateral agent. **4.9 The Amended and Restated Subsidiary Pledge Agreement, dated March 24, 1998, made by the Subsidiary named therein in favor of Bankers Trust Company as collateral agent. *4.10 The Amended and Restated Subsidiary Security Agreement, dated March 24, 1998, made by the Subsidiary named therein in favor of Bankers Trust Company as collateral agent.
II-1 110 *4.11 Second Amendment to Receivables Transfer and Administration Agreement, dated January 26, 1998, between Coltec and Coltec North Carolina Inc. **5.1 Opinion of Robert J. Tubbs, Executive Vice President, General Counsel and Secretary of Coltec. *12.1 Computation of Ratio of Earnings to Fixed Charges and other Ratios. **23.1 Consent of Robert J. Tubbs (included in Item 5.1). *23.2 Consent of Arthur Andersen LLP. *24.1 Power of Attorney (contained on the signature page) *25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of Bankers Trust Company on Form T-1. *99.1 Form of Letter of Transmittal. *99.2 Form of Notice of Guaranteed Delivery. *99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. *99.4 Form of Letter to Clients.
- --------------- * Filed herewith. ** To be filed by amendment. ITEM 22. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement. (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (b) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (c) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (d) that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered II-2 111 therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (e) to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities and Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. (f) insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue; (g) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request; and (h) to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-3 112 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina on the 14th day of May, 1998. COLTEC INDUSTRIES, INC by /s/ JOHN W. GUFFEY, JR. ------------------------------------ Name: John W. Guffey, Jr. Title:Chairman and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ JOHN W. GUFFEY, JR. Chairman, Chief Executive Officer - --------------------------------------------- and Director John W. Guffey, Jr. /s/ NISHAN TESHOIAN President, Chief Operating Officer - --------------------------------------------- and Director Nishan Teshoian /s/ DAVID D. HARRISON Executive Vice President, - --------------------------------------------- Chief Financial Officer and David D. Harrison Director /s/ JOHN N. MAIER Vice President and Controller - --------------------------------------------- John N. Maier /s/ WILLIAM H. GRIGG Director - --------------------------------------------- William H. Grigg
II-4 113
SIGNATURE POSITION --------- -------- /s/ JOEL MOSES Director - --------------------------------------------- Joel Moses /s/ RICHARD A. STUCKEY Director - --------------------------------------------- Richard A. Stuckey /s/ DAVID I. MARGOLIS Director - --------------------------------------------- David I. Margolis /s/ JOSEPH R. COPPOLA Director - --------------------------------------------- Joseph R. Coppola
II-5 114 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina on the 14th day of May, 1998. AMI INDUSTRIES, INC. by /s/ JOHN M. CYBULSKI ------------------------------------ Name: John M. Cybulski Title: Chairman and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ JOHN M. CYBULSKI Chairman and Director - ----------------------------------------------------- John M. Cybulski /s/ THOMAS C. EKLE Vice President and Treasurer - ----------------------------------------------------- Thomas C. Ekle /s/ ROBERT J. TUBBS Vice President, Secretary and - ----------------------------------------------------- Director Robert J. Tubbs /s/ DAVID D. HARRISON Director - ----------------------------------------------------- David D. Harrison
II-6 115 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina on the 14th day of May, 1998. CII HOLDINGS INC. by /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ ROBERT J. TUBBS President and Director - ----------------------------------------------------- Robert J. Tubbs /s/ DAVID D. HARRISON Vice President and Treasurer - ----------------------------------------------------- David D. Harrison
II-7 116 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina on the 14th day of May, 1998. COLTEC CANADA INC by /s/ JOHN M. CYBULSKI ------------------------------------ Name: John M. Cybulski Title: Chairman and President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ JOHN M. CYBULSKI Chairman, President and Director - ----------------------------------------------------- John M Cybulski /s/ DAVID D. HARRISON Vice President, Treasurer and Director - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs
II-8 117 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Ewless, Texas, on the 14th day of May, 1998. COLTEC INDUSTRIAL PRODUCTS INC by /s/ KLEMENS B. SCHOENFELDER ------------------------------------ Name: Klemens B. Schoenfelder Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ KLEMENS B. SCHOENFELDER President and Director - ----------------------------------------------------- Klemens B. Schoenfelder /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs
II-9 118 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina on the 14th day of May, 1998. COLTEC INTERNATIONAL SERVICES CO by /s/ MICHAEL J. BURDULIS ------------------------------------ Name: Michael J. Burdulis Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs, and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ MICHAEL J. BURDULIS President - ----------------------------------------------------- Michael J. Burdulis /s/ DAVID D. HARRISON Vice President and Treasurer - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs /s/ LAWRENCE H. POLSKY Director - ----------------------------------------------------- Lawrence H. Polsky
II-10 119 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. COLTEC NORTH CAROLINA INC by /s/ DAVID D. HARRISON ------------------------------------ Name: David D. Harrison Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ DAVID D. HARRISON President and Director - ----------------------------------------------------- David D. Harrison /s/ THOMAS B. JONES, JR. Vice President and Treasurer - ----------------------------------------------------- Thomas B. Jones, Jr. /s/ ROBERT J. TUBBS Vice President , Secretary and - ----------------------------------------------------- Director Robert J. Tubbs
II-11 120 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. COLTEC TECHNICAL SERVICES INC by /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ ROBERT J. TUBBS President and Director - ----------------------------------------------------- Robert J. Tubbs /s/ DAVID D. HARRISON Vice President and Treasurer - ----------------------------------------------------- David D. Harrison
II-12 121 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. DELAVAN INC by /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ ROBERT J. TUBBS President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs /s/ DAVID D. HARRISON Vice President, Treasurer and Director - ----------------------------------------------------- David D. Harrison
II-13 122 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. GARLOCK INC by /s/ MICHAEL J. BURDULIS ------------------------------------ Name: Michael J. Burdulis Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ MICHAEL J. BURDULIS President - ----------------------------------------------------- Michael J. Burdulis /s/ DAVID D. HARRISON Vice President, Treasurer and - ----------------------------------------------------- Director David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and - ----------------------------------------------------- Director Robert J. Tubbs
II-14 123 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. GARLOCK INTERNATIONAL INC by /s/ MICHAEL J. BURDULIS ------------------------------------ Name: Michael J. Burdulis Title:President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ MICHAEL J. BURDULIS President - ----------------------------------------------------- Michael J. Burdulis /s/ DAVID D. HARRISON Vice President, Treasurer and Director - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs
II-15 124 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. GARLOCK OVERSEAS CORPORATION by /s/ MICHAEL J. BUSDULIS ------------------------------------ Name: Michael J. Burdulis Title:Chairman and President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ MICHAEL J. BUSDULIS President - ----------------------------------------------------- Michael J. Burdulis /s/ DAVID D. HARRISON Vice President, Treasurer and - ----------------------------------------------------- Director David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and - ----------------------------------------------------- Director Robert J. Tubbs
II-16 125 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Beloit, Wisconsin on the 14th day of May, 1998. HABER TOOL COMPANY INC by /s/ RICHARD L. DASHNAW ------------------------------------ Name: Richard L. Dashnaw Title:President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ RICHARD L. DASHNAW President - ----------------------------------------------------- Richard L. Dashnaw /s/ DAVID D. HARRISON Vice President, Treasurer and Director - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs
II-17 126 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. JAMCO PRODUCTS LLC by /s/ THOMAS C. JOHNS ------------------------------------ Name: Thomas C. Johns Title:President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ THOMAS C. JOHNS President and Manager - ----------------------------------------------------- Thomas C. Johns /s/ DAVID D. HARRISON Manager - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Manager - ----------------------------------------------------- Robert J. Tubbs
II-18 127 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Charlotte, North Carolina, on the 14th day of May, 1998. MENASCO AEROSYSTEMS INC by /s/ JOHN M. CYBULSKI ------------------------------------ Name: John M. Cybulski Title: Chairman POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ JOHN M. CYBULSKI Chairman - ----------------------------------------------------- John M. Cybulski /s/ JOHN J. ORCT Vice President, Finance and Director - ----------------------------------------------------- John J. Orct /s/ DAVID D. HARRISON Vice President and Treasurer - ----------------------------------------------------- David D. Harrison
II-19 128 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Longview, Texas on the 14th day of May, 1998. STEMCO INC by /s/ MICHAEL J. LESLIE ------------------------------------ Name: Michael J. Leslie Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ MICHAEL J. LESLIE President - ----------------------------------------------------- Michael J. Leslie /s/ DAVID D. HARRISON Vice President, Treasurer and - ----------------------------------------------------- Director David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and - ----------------------------------------------------- Director Robert J. Tubbs
II-20 129 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Euless, Texas on the 14th day of May, 1998. WALBAR INC by /s/ PETER CHALLINOR ------------------------------------ Name: Peter Challinor Title: President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Robert J. Tubbs and Thomas B. Jones, Jr., and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE POSITION --------- -------- /s/ PETER CHALLINOR President - ----------------------------------------------------- Peter Challinor /s/ DAVID D. HARRISON Vice President and Treasurer - ----------------------------------------------------- David D. Harrison /s/ ROBERT J. TUBBS Vice President, Secretary and Director - ----------------------------------------------------- Robert J. Tubbs
II-21 130 EXHIBIT INDEX ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS PAGE - -------- ---- *4.1 Indenture dated April 16, 1998, between Coltec and Bankers Trust Company as trustee, relating to the 7 1/2% Senior Secured Notes. *4.2 Form of 7 1/2% Series B Senior Secured Notes (included in Exhibit 4.1 above). *4.3 Registration Rights Agreement, dated as of April 16, 1998, between Coltec and the Initial Purchasers named therein. *4.4 Fifth Amendment to the Credit Agreement, dated as of March 16, 1998 among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, the Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.5 Consent and Agreement, dated as of March 31, 1998, with respect to the Credit Agreement among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, the Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.6 Modification to Fifth Amendment to Credit Agreement, dated as of April 20, 1998, among Coltec, Coltec Aerospace Canada Ltd., the Subsidiary Guarantors named therein, the financial institutions party thereto from time to time, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bankers Trust Company, as Administrative Agent, and Bank of Montreal, as Canadian Paying Agent. *4.7 The Amended and Restated Company Pledge Agreement, dated as of March 24, 1998, made by Coltec in favor of Bankers Trust Company as collateral agent. *4.8 The Amended and Restated Company Security Agreement, dated as of March 24, 1998, made by Coltec in favor of Bankers Trust Company as collateral agent. **4.9 The Amended and Restated Subsidiary Pledge Agreement, dated March 24, 1998, made by the Subsidiary named therein in favor of Bankers Trust Company as collateral agent. *4.10 The Amended and Restated Subsidiary Security Agreement, dated March 24, 1998, made by the Subsidiary named therein in favor of Bankers Trust Company as collateral agent. *4.11 Second Amendment to Receivables Transfer and Administration Agreement, dated January 26, 1998, between Coltec and Coltec North Carolina Inc. **5.1 Opinion of Robert J. Tubbs, Executive Vice President, General Counsel and Secretary of Coltec. *12.1 Computation of Ratio of Earnings to Fixed Charges and other Ratios. **23.1 Consent of Robert J. Tubbs (included in Item 5.1). *23.2 Consent of Arthur Andersen LLP. *24.1 Power of Attorney (contained on the signature page) *25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of Bankers Trust Company on Form T-1.
II-22 131
EXHIBITS PAGE - -------- ---- *99.1 Form of Letter of Transmittal. *99.2 Form of Notice of Guaranteed Delivery. *99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. *99.4 Form of Letter to Clients.
- --------------- * Filed herewith. ** To be filed by amendment. II-23 EX-4.1 2 INDENTURE DATED APRIL 16, 1998 1 EXHIBIT 4.1 ================================================================================ COLTEC INDUSTRIES INC ISSUER 7 1/2% Senior Notes Due 2008 ------------------------------------ INDENTURE Dated as of April 16, 1998 ------------------------------------ BANKERS TRUST COMPANY TRUSTEE ================================================================================ 2 CROSS-REFERENCE TABLE
INDENTURE TIA SECTION SECTION ----------- ---------- 310 (a) (1) ....................................................... 7.10 (a) (2) ....................................................... 7.10 (a) (3) ....................................................... N.A. (a) (4) ....................................................... N.A. (b) ............................................................ 7.8; 7.10 (c) ............................................................ N.A. 311 (a) ............................................................ 7.11 (b) ............................................................ 7.11 (c) ............................................................ N.A. 312 (a) ............................................................ 2.5 (b) ............................................................ 12.3 (c) ............................................................ 12.3 313 (a) ............................................................ 7.6 (b) (1) ....................................................... N.A. (b) (2) ....................................................... 7.6 (c) ............................................................ 7.6 (d) ............................................................ 7.6 314 (a) ............................................................ 4.10 4.4; 12.2 (b) ............................................................ 11.2 (c) (1) ....................................................... 12.4 (c) (2) ....................................................... 12.4 (c) (3) ....................................................... N.A. (d) ............................................................ 11.2; 11.3 (e) ............................................................ 12.5 (f) ............................................................ 4.10 315 (a) ............................................................ 7.1 (b) ............................................................ 7.5; 12.2 (c) ............................................................ 7.1 (d) ............................................................ 7.1 (e) ............................................................ 6.11 316 (a) (last sentence) ........................................... 12.6 (a) (1) (A) ................................................... 6.5 (a) (1) (B) ................................................... 6.4 (a) (2)......................................................... N.A. (b) ............................................................ 6.7 317 (a) (1) ....................................................... 6.8 (a) (2) ....................................................... 6.9 (b) ............................................................ 2.4 318 (a) ............................................................ 12.1 N.A. means Not Applicable.
- --------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. 3 TABLE OF CONTENTS ARTICLE I Definitions and Incorporation by Reference.................. SECTION 1.1. Definitions................................................. SECTION 1.2. Other Definitions........................................... SECTION 1.3. Incorporation by Reference of Trust Indenture Act........... SECTION 1.4. Rules of Construction....................................... SECTION 1.5. One Class of Securities..................................... ARTICLE II The Securities.............................................. SECTION 2.1. Form and Dating............................................. SECTION 2.2. Execution and Authentication................................ SECTION 2.3. Registrar and Paying Agent.................................. SECTION 2.4. Paying Agent To Hold Money in Trust......................... SECTION 2.5. Securityholder Lists........................................ SECTION 2.6. [Intentionally Omitted]..................................... SECTION 2.7. Replacement Securities...................................... SECTION 2.8. Outstanding Securities...................................... SECTION 2.9. Temporary Securities........................................ SECTION 2.10. Cancellation................................................ SECTION 2.11. Defaulted Interest.......................................... SECTION 2.12. CUSIP Numbers............................................... ARTICLE III Redemption.................................................. SECTION 3.1. Notices to Trustee.......................................... SECTION 3.2. Selection of Securities To Be Redeemed...................... SECTION 3.3. Notice of Redemption........................................ SECTION 3.4. Effect of Notice of Redemption.............................. SECTION 3.5. Deposit of Redemption Price................................. SECTION 3.6. Securities Redeemed in Part................................. ARTICLE IV Covenants................................................... SECTION 4.1. Payment of Securities....................................... SECTION 4.2. Limitations on Liens........................................ SECTION 4.3. Limitation on Sale and Lease-Back Transactions.............. SECTION 4.4. Compliance Certificate...................................... SECTION 4.5. Further Instruments and Acts................................ SECTION 4.6. Maintenance of Office or Agency............................. SECTION 4.7. SEC Reports................................................. ARTICLE V Successor Company........................................... SECTION 5.1. When the Company May Merge or Transfer Assets............... ARTICLE VI Defaults and Remedies....................................... SECTION 6.1. Events of Default...........................................
- i - 4 SECTION 6.2. Acceleration................................................ SECTION 6.3. Other Remedies.............................................. SECTION 6.4. Waiver of Past Defaults..................................... SECTION 6.5. Control by Majority......................................... SECTION 6.6 Limitation on Suits......................................... SECTION 6.7. Rights of Holders To Receive Payment........................ SECTION 6.8. Collection Suit by Trustee.................................. SECTION 6.9. Trustee May File Proofs of Claim............................ SECTION 6.10. Priorities.................................................. SECTION 6.11. Undertaking for Costs....................................... SECTION 6.12. Waiver of Stay or Extension Laws............................ ARTICLE VII Trustee..................................................... SECTION 7.1. Duties of Trustee........................................... SECTION 7.2. Rights of Trustee........................................... SECTION 7.3. Individual Rights of Trustee................................ SECTION 7.4 Trustee's Disclaimer........................................ SECTION 7.5. Notice of Defaults.......................................... SECTION 7.6. Reports by Trustee to Holders............................... SECTION 7.7. Compensation and Indemnity.................................. SECTION 7.8. Replacement of Trustee...................................... SECTION 7.9. Successor Trustee by Merger................................. SECTION 7.10. Eligibility; Disqualification............................... SECTION 7.11. Preferential Collection of Claims Against Company........... ARTICLE VIII Discharge of Indenture; Defeasance.......................... SECTION 8.1 Discharge of Liability on Securities; Defeasance............ SECTION 8.2 Conditions to Defeasance.................................... SECTION 8.3 Application of Trust Money.................................. SECTION 8.4 Repayment to Company........................................ SECTION 8.5 Indemnity for Government Obligations........................ SECTION 8.6 Reinstatement............................................... ARTICLE IX Amendments.................................................. SECTION 9.1 Without Consent of Holders.................................. SECTION 9.2 With Consent of Holders..................................... SECTION 9.3 Compliance with Trust Indenture Act......................... SECTION 9.4 Revocation and Effect of Consents and Waivers............... SECTION 9.5 Notation on or Exchange of Securities....................... SECTION 9.6 Trustee To Sign Amendments.................................. SECTION 9.7 Payment for Consent......................................... ARTICLE X Subsidiary Guarantee........................................ SECTION 10.1 Subsidiary Guarantee........................................ SECTION 10.2 Limitation on Liability..................................... SECTION 10.3 Successors and Assigns...................................... SECTION 10.4 No Waiver...................................................
- ii - 5 SECTION 10.5 Right of Contribution....................................... SECTION 10.6 No Subrogation.............................................. SECTION 10.7 Additional Subsidiary Guarantors............................ SECTION 10.8 Modification................................................ SECTION 10.9 Release of Subsidiary Guarantor............................. SECTION 10.10 Merger, Consolidation and Sale of Assets of a Subsidiary Guarantor................................................... ARTICLE XI Collateral and Security..................................... SECTION 11.1 Collateral Documents........................................ SECTION 11.2 Opinions.................................................... SECTION 11.3 Release and Substitution of Collateral; Amendment of Collateral Documents........................................ SECTION 11.4 Certificates of the Company................................. SECTION 11.5. Authorization of Actions to be Taken by the Trustee Under the Collateral.............................................. SECTION 11.6. Authorization of Receipt of Funds by the Trustee Under the Collateral Documents........................................ SECTION 11.7 Release Upon Termination of the Company's Obligations....... SECTION 11.8. Security Agreement Collateral............................... ARTICLE XII Miscellaneous............................................... SECTION 12.1. Trust Indenture Act Controls................................ SECTION 12.2. Notices..................................................... SECTION 12.3. Communication by Holders with other Holders................. SECTION 12.4. Certificate and Opinion as to Conditions Precedent.......... SECTION 12.5. Statements Required in Certificate or Opinion............... SECTION 12.6. When Securities Disregarded................................. SECTION 12.7. Rules by Trustee, Paying Agent and Registrar................ SECTION 12.8. Legal Holidays.............................................. SECTION 12.9. Governing Law............................................... SECTION 12.10. No Recourse Against Others.................................. SECTION 12.11. Successors.................................................. SECTION 12.12. Multiple Originals.......................................... SECTION 12.13. Qualification of Indenture.................................. SECTION 12.14. Table of Contents; Headings................................. Rule 144A/Regulation S Appendix............................................. Exhibit A -- Form of Exchange Security and Private Exchange Security........ Exhibit B -- Form of Collateral Agent Acknowledgment........................ Exhibit C -- Form of Company Pledge Agreement............................... Exhibit D -- Form of Subsidiaries Pledge Agreement.......................... Exhibit E -- Form of Company Security Agreement............................. Exhibit F -- Form of Subsidiaries Security Agreement........................ Exhibit G -- Form of Mortgage Amendment..................................... Exhibit H -- Form of Guarantor Supplement...................................
- iii - 6 INDENTURE, dated as of April 16, 1998, among COLTEC INDUSTRIES INC, a Pennsylvania corporation (as further defined below, the "Company"), the Subsidiary Guarantors (as defined herein) and Bankers Trust Company, a New York banking corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 7 1/2% Senior Notes Due 2008 (the "Initial Securities") and, if and when issued in exchange for Initial Securities as provided in the Registration Rights Agreement (as hereinafter defined in the Rule 144A/Regulation S Appendix), the Company's Series B 7 1/2% Senior Notes Due 2008 (the "Exchange Securities") and if and when issued pursuant to a private exchange for Initial Securities, the Company's Series C 7 1/2% Senior Notes Due 2008 (the "Private Exchange Securities" and, together with the Initial Securities and the Exchange Securities, the "Securities"): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS. "ATTRIBUTABLE DEBT" means in connection with a sale and lease-back transaction, the lesser of (a) the fair market value of the assets subject to such transaction and (b) the present value (discounted at a rate per annum equal to the average interest borne by all outstanding securities issued under this Indenture determined on a weighted average basis and compounded semiannually) of the obligations of the lessee for rental payments during the term of the related lease. "BOARD OF DIRECTORS" means, with respect to any Person, the Board of Directors of such Person or any committee thereof duly authorized to act on behalf of such Board of Directors. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which banking institutions in New York City are authorized or required by law to close. "CAPITAL LEASE" means any Indebtedness represented by a lease obligation of a person incurred with respect to real property or equipment acquired or leased by such person and used in its business that is required to be recorded as a capital lease in accordance with GAAP. "CAPITAL STOCK" of any Person means any and all shares, interests, participations, rights to purchase, warrants, options or other equivalents (however designated) of corporate stock or other equity of such Person. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the collective reference to all of the property and assets that are from time to time subject to the Liens of the Collateral Documents. "COLLATERAL AGENT" means Bankers Trust Company, acting in its capacity as agent with respect to the Collateral for the secured creditors under the Collateral Documents, including, without limitation, the Holders of the Securities and the lenders under the Credit Agreement, or any successor thereto. "COLLATERAL AGENT ACKNOWLEDGMENT" means the agreement, dated as of March 16, 1998, between the Trustee, on behalf of the Holders of the Securities, and Bankers Trust Company, acting in its capacity as Collateral Agent, substantially in the form of Exhibit B, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "COLLATERAL DOCUMENTS" means the collective reference to the Company Pledge Agreement, the Subsidiaries Pledge Agreement, the Company Security Agreement, the Subsidiaries Security Agreement, the Mortgages, and any other security agreement, pledge agreement, mortgage, deed of trust or other agreement, instrument or document which may be entered into or delivered after the date of this Indenture in favor of the Collateral Agent to secure the obligations thereunder and any other instruments, agreements or documents entered into or delivered in connection with any of the foregoing, as such agreements, instruments or documents may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. 7 "COMPANY PLEDGE AGREEMENT" means the pledge agreement, dated as of March 24, 1992, as amended and restated as of December 18, 1996, and as further amended and restated as of March 16, 1998 in connection with the offering of the Securities, made by the Company to Bankers Trust Company, as Collateral Agent, substantially in the form of Exhibit C, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "COMPANY SECURITY AGREEMENT" means the security agreement, dated as of March 24, 1992, as amended and restated as of December 18, 1996, and as further amended and restated as of March 16, 1998 in connection with the offering of the Securities, made by the Company to Bankers Trust Company, as Collateral Agent, substantially in the form of Exhibit E, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "CONSOLIDATED NET ASSETS" means as of any particular time the aggregate amount of assets after deducting therefrom all current liabilities except for (a) notes and loans payable, (b) current maturities of long-term debt and (c) current maturities of obligations under capital leases, all as set forth on the most recent consolidated balance sheet of the Company and its consolidated Subsidiaries and computed in accordance with GAAP. "CORPORATE TRUST OFFICE" shall mean the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group or at any other time at time such other address as the Trustee may designate from time to time by notice to the Holders. "CREDIT AGREEMENT" means the Amended and Restated Credit Agreement, dated as of March 24, 1992, as amended and restated as of January 11, 1994 and further as amended and restated as of December 18, 1996, as amended by the Fifth Amendment thereto, dated as of March 16, 1998, among the Company, Coltec Aerospace Canada Limited, a Subsidiary of the Company, Bankers Trust Company, as Administrative Agent, Bank of America National Trust and Savings Association, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, Bank of Montreal, as Canadian Paying Agent, and the various lenders party thereto, as such agreement may be amended (including any amendment, restatement and successors thereof), supplemented, refinanced, renewed, extended, replaced, in whole or in part, or otherwise modified from time to time, including any increase in the principal amount of the obligations thereunder. "DEFAULT" means any event as defined in Section 6.1 herein which is, or after notice or passage of time or both would be, an Event of Default. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXEMPTED DEBT" means the sum of the following as of the date of determination: (i) Indebtedness of the Company and its Subsidiaries (other than Foreign Subsidiaries) incurred after the Issue Date and secured by Liens not otherwise permitted by Section 4.2 and (ii) Attributable Debt of the Company and its Subsidiaries in respect of sale and lease-back transactions entered into after the Issue Date, other than sale and lease-back transactions permitted by clauses (a) and (c) of Section 4.3. "FOREIGN SUBSIDIARY" means any Subsidiary which is incorporated or otherwise organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia and any Subsidiary thereof. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "GUARANTEE" means a guarantee, direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness; provided, 2 8 however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "HOLDER" or "SENIOR NOTEHOLDER" or "SECURITYHOLDER" means the Person in whose name a Senior Note is registered on the Registrar's books. "INDEBTEDNESS" means, with respect to any Person, without duplication, (i) principal of, and premium, if any, and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person, whether or not a claim for such post-petition interest is allowed in such proceeding) on any indebtedness of such Person (A) for borrowed money (whether or not the recourse of the lender is to the whole of the assets, of such person or only to a portion thereof), (B) evidenced by notes, debentures or similar instruments (including purchase money obligations) given in connection with the acquisition of any property or assets (other than trade accounts payable for inventory or similar property acquired in the ordinary course of business), including securities, for the payment of which such Person is liable, directly or indirectly, or the payment of which is secured by a lien, charge or encumbrance on property or assets of such Person, (C) for goods, materials or services purchased in the ordinary course of business (other than trade accounts payable arising in the ordinary course of business), (D) with respect to letters of credit or bankers acceptances issued for the account of such Person or performance, surety or similar bonds, (E) for the payment of money relating to a Capital Lease obligation or (F) under interest rate swaps, caps or similar agreements and foreign exchange contracts, currency swaps or similar agreements; (ii) any liability of any other Person of the kind described in the preceding clause (i), which such Person has Guaranteed or which is otherwise its legal liability; and (iii) any and all deferrals, renewals, extensions and refunding of, or amendments, modifications or supplements to, any indebtedness of the kind described in any of the preceding clauses (i) or (ii). "INDENTURE" means this Indenture, as amended or supplemented from time to time. "ISSUE DATE" means the date on which the Initial Securities are originally issued. "LEGAL HOLIDAY" has the meaning ascribed in Section 12.8. "LIEN" means any lien, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "MORTGAGES" means each of the mortgages or deeds of trust, in each case dated as of March 24, 1992, as amended and restated as of January 11, 1994, as further amended and restated as of December 18, 1996, and as further amended as of March 16, 1998 which amendment shall be substantially in the form of Exhibit G in connection with the offering of the Securities, made by the Company or by the Company's Subsidiaries, as the case may be, to Bankers Trust Company, as Collateral Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "OFFERING CIRCULAR" means the Offering Circular dated April 8, 1998 relating to the Initial Securities; provided that after the issuance of Exchange Securities, all references herein to "Offering Circular" shall be deemed references to the prospectus contained in the registration statement relating to the Exchange Securities. "OFFICER" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company, and Guarantor as applicable. "OFFICERS' CERTIFICATE" means a certificate signed by any two Officers of the Company. "OPINION OF COUNSEL" means an executed written opinion complying with Section 12.5 herein from Robert J. Tubbs, Esq. or any other legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "PERMITTED LIENS" means (i) Liens on any asset of the Company or any Subsidiary created solely to secure obligations incurred to finance the refurbishment, improvement or construction of such asset, which obligations are incurred no later than 180 days after completion of such refurbishment, improvement or construction, and all renewals, extensions, refinancings, replacements or refundings of such obligations, or to secure all or part of the cost of such refurbishment, improvement or construction; (ii) (a) Liens to secure the payment of the purchase price incurred in connection with the acquisition (including acquisition through merger or consolidation) of any 3 9 asset (including shares of stock), including Capital Lease transactions in connection with any such acquisition and (b) Liens existing on any asset at the time of acquisition thereof or at the time of acquisition by the Company or any Subsidiary of any Person then owning such asset, directly or indirectly, whether or not such existing Liens were given to secure the payment of the purchase price of the property to which they attach; provided that, with respect to clause (a), such Liens shall be given within one year after such acquisition and shall attach solely to the assets acquired or purchased and any improvements then or thereafter placed thereon; (iii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (iv) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (v) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (vi) Liens encumbering customary initial deposits and margin deposits and other Liens, in each case securing Indebtedness of the Company or any Subsidiary under interest rate and currency hedging instruments and forward contract, option, futures contracts, futures options or similar agreements or arrangements designed to protect the Company or any Subsidiary from fluctuations in interest rates, currencies or the price of commodities; (vii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Subsidiary in the ordinary course of business; (viii) Liens in favor of the Company or any Subsidiary; (ix) Liens for taxes, assessments or governmental charges or levies on the assets of the Company or any Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings or Liens for the excess of the amount of any past due taxes for which a final assessment has not been received over the amount of such taxes as estimated and paid; (x) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens and other similar Liens on the assets of the Company or any Subsidiary arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (xi) Liens on the assets of the Company or any Subsidiary incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and incurred in a manner consistent with industry practice; (xii) Liens on the assets of a Receivables Subsidiary in a Qualified Receivables Transaction; (xiii) Liens in respect of any judgment (other than any judgment which constitutes an Event of Default or which, after the passage of time may constitute an Event of Default) rendered which is being contested diligently and in good faith by appropriate proceedings by the Company or any of its Subsidiaries and which does not have a material adverse effect on the ability of the Company and its Subsidiaries to operate the business or operations of the Company or its Subsidiaries taken as a whole; and (xiv) Liens in favor of the United States or any state or territory or possession thereof, or any foreign country, or any department, agency, instrumentality or political subdivision of any of such domestic or foreign governmental entity, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any liability incurred for the purpose of financing all or part of the purchase price or the cost of constructing the asset subject to such Liens; "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PRINCIPAL" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time; provided, however, that for purposes of calculating any such premium, the term "principal" shall not include the premium with respect to which such calculation is being made. "QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by the Company or a Subsidiary) and (ii) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including all collateral securing such accounts receivable, all 4 10 contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which, in each case, are customarily and regularly transferred, or in respect of which security interests are customarily granted, in connection with asset securitization transactions involving accounts receivable. "RECEIVABLES SUBSIDIARY" means a Subsidiary of the Company which engages in no activities other than in connection with the financing of accounts receivable and which is designated by or pursuant to the authority of the Board of Directors as a Receivables Subsidiary (a) no portion of the Indebtedness of which (i) is Guaranteed by the Company or any Subsidiary, (ii) is recourse to or obligates the Company or any Subsidiary in any manner other than pursuant to customary representations, warranties, covenants and indemnities entered into in connection with a Qualified Receivables Transaction or (iii) subjects any assets of the Company or any Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to the representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction and other than in respect of the related pledge of the financed accounts receivable and (b) with which neither the Company nor any Subsidiary has any obligation to maintain or preserve such Subsidiary's financial condition or cause such Subsidiary to achieve certain levels of operating results. "SEC" means the U.S. Securities and Exchange Commission, or any successor agency. "SECURITIES" means the Initial Securities, the Exchange Securities and the Private Exchange Securities issued or to be issued under this Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "STATED MATURITY" means, with respect to any Security, the date specified in such Security as the fixed date on which the payment of Principal of such Security is due and payable, including pursuant to any mandatory redemption provision. "SUBSIDIARIES PLEDGE AGREEMENT" means the pledge agreement, dated as of March 24, 1992, as amended and restated as of December 18, 1996, and as further amended and restated as of March 16, 1998 in connection with the offering of the Securities, made by the Company's Subsidiaries to Bankers Trust Company, as Collateral Agent, substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "SUBSIDIARIES SECURITY AGREEMENT" means the security agreement, dated as of March 24, 1992, as amended and restated as of January 11, 1994, as further amended and restated as of December 18, 1996, and as further amended and restated as of March 16, 1998 in connection with the offering of the Securities, made by the Company's Subsidiaries to Bankers Trust Company, as Collateral Agent, substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "SUBSIDIARY" means a Person (other than an individual), a majority of the outstanding voting stock, partnership interests, membership interests or other equity interest, as the case may be, of which is owned or controlled, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company. For the purposes of this definition, "voting stock" means stock having voting power for the election of directors, trustees or managers, as the case may be, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "SUBSIDIARY GUARANTEE" means the Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Securities. "SUBSIDIARY GUARANTOR" means each Subsidiary of the Company existing on the Issue Date and each new Subsidiary created after the Issue Date (in each case, other than Foreign Subsidiaries), in each case that Guarantees the Company's obligations under the Credit Agreement; provided that, if such Subsidiary's Guarantee 5 11 of the Company's obligations under the Credit Agreement is released or ceases to be in effect, such Subsidiary shall no longer be a Subsidiary Guarantor. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, that, in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendments, the Trust Indenture Act of 1939 as so amended. "TRUSTEE" means the party named as such in this Indenture until a successor replaces it and, thereafter, means such successor. "TRUST OFFICER" means any officer within the Corporate Trust Office including any Vice President, Managing Director, Assistant Vice President, Secretary, Assistant Secretary Treasurer or Assistant Treasurer or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge and familiarity with the particular subject. "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. SECTION 1.2. OTHER DEFINITIONS.
DEFINED IN TERM SECTION ---- ---------- "Appendix".................................................. 2.1 "Authenticating Agent"...................................... 2.2 "Bankruptcy Law"............................................ 6.1 "covenant defeasance option"................................ 8.1(b) "Custodian"................................................. 6.1 "Event of Default".......................................... 6.1 "Obligations"............................................... 10.1 "legal defeasance option"................................... 8.1(b) "Paying Agent".............................................. 2.3 "Registrar"................................................. 2.3 "Successor Company"......................................... 5.1
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, the Guarantor and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by the TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. 6 12 SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any preferred stock shall be (i) the maximum liquidation preference of such preferred stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such preferred stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the date the Initial Securities were originally issued. SECTION 1.5. ONE CLASS OF SECURITIES. The Initial Securities, the Private Exchange Securities and the Exchange Securities shall vote and consent together on all matters as one class and none of the Initial Securities, the Private Exchange Securities or the Exchange Securities shall have the right to vote or consent as a separate class on any matter. ARTICLE II THE SECURITIES SECTION 2.1. FORM AND DATING. Certain provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix"), which is hereby incorporated in and expressly made a part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated by reference and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, rule of any securities exchange or over-the-counter market on which such Securities are then listed or quoted, or usage, in addition to those set forth on the Appendix and Exhibit A. The Company and the Trustee shall approve the forms of the Securities and any notation, endorsement or legend on them. Each Security shall be dated the date of its authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture and, to the extent applicable, the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms. SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Securities for the Company by manual or facsimile signature and may be imprinted or otherwise reproduced. 7 13 If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. The Trustee may appoint an agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. The Trustee shall authenticate Securities for original issue up to the aggregate principal amount stated in Section 2.2 of the Appendix to this Indenture upon a written order of the Company signed by two Officers. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.7. SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any such additional paying agent. In the event the Company shall retain any Person not a party to this Indenture as an agent hereunder, the Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any of its domestically incorporated wholly owned Subsidiaries may act as Paying Agent. The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. By at least 11:00 a.m. (New York City time) on the date on which any Principal or interest (including any Additional Interest) on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient to pay such Principal or interest (including any Additional Interest) when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by such Paying Agent for the payment of Principal of or interest (including any Additional Interest) on the Securities and shall promptly notify the Trustee in writing of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.5. SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause the Registrar to furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. 8 14 SECTION 2.6. [INTENTIONALLY OMITTED] SECTION 2.7. REPLACEMENT SECURITIES. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security shall provide the Company and the Trustee with evidence to their satisfaction that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of the Trustee and the Company are met. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar or other agent from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Company. SECTION 2.8. OUTSTANDING SECURITIES. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled, those delivered for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all Principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.9. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may execute and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the Trustee shall authenticate and deliver in exchange therefor, one or more definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a Holder of definitive Securities. SECTION 2.10. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee for cancellation any Securities surrendered to them for registration of transfer or exchange or payment. The Trustee and no one else shall cancel and destroy all Securities surrendered for registration of transfer or exchange, payment or cancellation in accordance with its customary practices and procedures in effect from time to time. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the rate specified therefor in the Securities in any lawful manner. The Company may pay the defaulted interest to the Persons who are Securityholders on a 9 15 subsequent special record date. The Company shall fix or cause to be fixed (or upon the Company's failure to do so the Trustee shall fix) any such special record date and payment date to the reasonable satisfaction of the Trustee which specified record date shall not be less than 10 days prior to the payment date for such defaulted interest and shall promptly mail or cause to be mailed to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when so deposited to be held in trust for the benefit of the Person entitled to such defaulted interest as provided in this Section 2.11. SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders, provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE III REDEMPTION SECTION 3.1. NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Company shall give each notice to the Trustee provided for in this Section at least 30 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all the Securities then outstanding are to be redeemed, the Trustee shall select the Securities to be redeemed by a method that the Trustee in its sole discretion considers to be fair and appropriate. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. Upon request of the Company, the Trustee shall notify the Company of the Securities or portions of Securities to be redeemed. SECTION 3.3. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a date for redemption of Securities, the Trustee at the expense of the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price if such price is calculable at the time such notice is sent or, if not, the formula for calculating such price; 10 16 (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued and unpaid interest, if any; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the CUSIP number, if any, printed on the Securities being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. The Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall compute and provide the Trustee with the information required by this Section 3.3. SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Securities called for redemption shall become due and payable on the redemption date and at the redemption price stated or calculable as set forth in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest, if any, to the redemption date; provided that the Company shall have deposited the redemption price and accrued interest, if any, with the Paying Agent or the Trustee on or before 11:00 a.m. (New York City time) on the date of redemption; provided, further, that if the redemption date is on an interest payment date, any accrued and unpaid interest shall be payable to the Securityholder of the redeemed Securities registered on the relevant record date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. By at least 11:00 a.m. (New York City time) on the date on which any Principal of or interest on any Security is due and payable, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which are owned by the Company or an affiliate and have been delivered by the Company or such Subsidiary to the Trustee for cancellation. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such redemption price, interest on the Securities to be redeemed will cease to accrue on and after the applicable redemption date, whether or not such Securities are presented for payment. SECTION 3.6. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in a principal amount to the unredeemed portion of the Security surrendered. 11 17 ARTICLE IV COVENANTS SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly pay the Principal of and interest (including Additional Interest) on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest (including Additional Interest) shall be considered paid on the date due if on or before 11:00 a.m. (New York City time) on such date the Trustee or the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, the segregated account or separate trust fund maintained by the Company or such Subsidiary pursuant to Section 2.4) holds in accordance with this Indenture money sufficient to pay all Principal and interest (including Additional Interest) then due and the Trustee or the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, the Company or such Subsidiary), as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful as provided in Section 2.11. Notwithstanding anything to the contrary contained in this Indenture, the Company or the Paying Agent may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America or other domestic or foreign taxing authorities from Principal or interest payments hereunder. SECTION 4.2. LIMITATIONS ON LIENS. (a) Neither the Company nor any Subsidiary Guarantor will, nor will they permit any of their Subsidiaries (excluding Foreign Subsidiaries) to create, incur, or permit to exist, any Lien on any of their respective assets, whether now owned or hereafter acquired, in order to secure any Indebtedness of either of the Company or any Subsidiary Guarantor, without effectively providing that the Securities shall be equally and ratably secured until such time as such Indebtedness is no longer secured by such Lien, except: (i) Liens securing Indebtedness arising under the Credit Agreement so long as such Liens also secure the Securities, equally and ratably; (ii) Liens on cash and cash equivalents securing obligations in respect of letters of credit in accordance with the terms of the Credit Agreement; (iii) Liens existing as of the Issue Date; (iv) Liens existing on the Issue Date or granted after the Issue Date on any assets of the Company or any Subsidiary Guarantor or any of their Subsidiaries securing Indebtedness of the Company or any Subsidiary created in favor of the Holders of the Securities; (v) Liens securing Indebtedness of the Company or any Subsidiary Guarantor which is incurred to extend, renew or refinance Indebtedness which is secured by Liens permitted to be incurred under this Indenture; provided that such Liens do not extend to or cover any assets of the Company or any Subsidiary other than the assets securing the Indebtedness being extended, renewed or refinanced and that the principal amount of such Indebtedness does not exceed the principal amount of the Indebtedness being extended, renewed or refinanced at the time of such extension, renewal or replacement, or at the time the Lien was issued, created or assumed or otherwise permitted; (vi) Permitted Liens; and (vii) Liens created in substitution of or as replacements for any Liens permitted by the preceding clauses (i) through (vi) or this clause (vii), provided that, based on a good faith determination of an officer of the Company, the asset encumbered under any such substitute or replacement Lien is substantially similar in nature to the asset encumbered by the otherwise permitted Lien which is being replaced. (b) Notwithstanding the foregoing and Section 4.3, the Company and any Subsidiary may, without securing any of the Securities, create, incur or permit to exist Liens which would otherwise be subject to the restrictions set forth in the preceding paragraph, if after giving effect thereto and at the time of determination, the aggregate amount of Exempted Debt does not exceed the greater of (x) $100 million and (y) 15% of Consolidated Net Assets. 12 18 SECTION 4.3. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Neither the Company nor any Subsidiary Guarantor will, nor will they permit any of their Subsidiaries (excluding Foreign Subsidiaries) to, enter into any sale and lease-back transaction for the sale and leasing back of any property or asset, whether now owned or hereafter acquired, of the Company or any Subsidiary (except such transactions (i) entered into prior to the Issue Date, (ii) for the sale and leasing back of any property or asset by a Subsidiary to the Company or to another Subsidiary Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary), (iii) involving leases for less than three years or (iv) in which the lease for the property or asset is entered into within 180 days after the later of the date of acquisition, completion of construction or commencement or full operations of such property or asset) unless (a) the Company or any such Subsidiary would be entitled under Section 4.2(a) to create, incur or permit to exist a Lien on the assets to be leased securing Indebtedness in an amount at least equal to the Attributable Debt in respect of such transaction without equally and ratably securing the Securities, (b) the Company or any Subsidiary would be entitled under Section 4.2(b) to create, incur or permit to exist a Lien on the assets to be leased securing Indebtedness in an amount at least equal to the Attributable Debt in respect of such transaction without equally and ratably securing the Securities or (c) the proceeds of the sale of the assets to be leased are at least equal to their fair market value and the proceeds are applied to the purchase or acquisition (or in the case of real property, the construction) of assets or to the repayment of Indebtedness of the Company or any Subsidiary Guarantor (or, if there are no Subsidiary Guarantors, another Subsidiary). SECTION 4.4. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company and each of the Subsidiary Guarantors also shall, to the extent required, comply with TIA sec. 314(a)(4). SECTION 4.5. FURTHER INSTRUMENTS AND ACTS. Upon reasonable request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.6. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain the office or agency required under Section 2.3. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.2. SECTION 4.7. SEC REPORTS. The Company and each Subsidiary Guarantor will comply, to the extent required, with all the applicable provisions of TIA sec. 314(a) and, for so long as the Company is not required to file reports under Sections 13 or 15(d) of the Exchange Act, the Company will comply with the applicable provisions of Rule 144A(d)(4) under the Securities Act. 13 19 ARTICLE V SUCCESSOR COMPANY SECTION 5.1. WHEN THE COMPANY MAY MERGE OR TRANSFER ASSETS. The Company will not consolidate with or sell or lease its assets as, or substantially as, an entirety, to, or merge with or into, in one transaction or a series of transactions, any other Person, unless: (i) the Company shall be the continuing entity, or the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture, as set forth in this Indenture. Upon any consolidation or merger, or any sale or lease of the assets of the Company as, or substantially as, an entirety in accordance with this Section 5.1, the entity formed by such consolidation or into which the Company shall have been merged or to which such sale or lease shall have been made shall succeed to and be substituted for the Company with the same effect as if it had been named in this Indenture as a party hereto and thereafter from time to time such successor entity may exercise each and every right and power of the Company under this Indenture in the name of the Company or in its own name; and any act or proceeding by any provision of this Indenture required or permitted to be done by the Board of Directors or any Officer of the Company may be done with like force and effect by the like board or officer of any entity that shall at the time be the successor of the Company hereunder. In the event of the sale by the Company of its assets as, or substantially as, an entirety upon the terms and conditions of this Section 5.1, the Company shall be released from all its liabilities and obligations under this Indenture and the Securities, but the predecessor Company in the case of a lease of all its assets or substantially all its assets will not be released from the obligation to pay the Principal of and interest on the Securities. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the Principal of any Security when the same becomes due and payable at its Stated Maturity, upon declaration or otherwise; (3) the Company fails to comply with Article V; (4) a Subsidiary Guarantor or the Company fails to comply with Section 4.2 or 4.3 and such failure continues for 60 days after the notice specified below; (5) the Company or a Subsidiary Guarantor fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below; 14 20 (6) the Company or the Subsidiary Guarantors or any Subsidiary of the Company fails to pay any interest or Principal on any Indebtedness within any applicable grace period provided in such Indebtedness after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $30 million or its foreign currency equivalent; (7) the Company or a Significant Subsidiary of the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary of the Company in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any assets that constitute a substantial part of the assets of the Company or that constitute all or substantially all of the assets of a Significant Subsidiary; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary of the Company; (or any similar relief is granted under any foreign laws) and the order, decree or relief remains unstayed and in effect for 60 days; (9) any judgment or decree by a court of competent jurisdiction for the payment of money in excess of $30 million or its foreign currency equivalent at the time is rendered against the Company or any Significant Subsidiary of the Company and such judgment or decree remains unpaid and outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed within 30 days after notice; (10) except as permitted under this Indenture, a Subsidiary Guarantee ceases to be in full force and effect for 30 days after notice or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee; or (11) except as permitted by the Collateral Documents, the Credit Agreement and this Indenture or any amendments hereto or thereto, any of the Collateral Documents ceases to be in full force and effect or ceases to be effective, in all material respects, to create a Lien on the Collateral in favor of the Senior Noteholders for 30 days after notice. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4), (5), (9), (10) and (11) of this Section 6.1 is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities gives notice to the Company of the Default and the Company does not cure such Default within the time specified in said 15 21 clause (4), (5), (9), (10) and (11) after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (6) of this Section 6.1 and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (9), (10) and (11) of this Section 6.1 and what action the Company is taking or proposes to take with respect thereto. SECTION 6.2. ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 6.1(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the Principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such Principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.1(7) or (8) with respect to the Company or a Significant Subsidiary occurs and is continuing, the Principal of and accrued interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of Principal or interest that has become due solely because of acceleration and the Trustee has been paid all amounts due to it pursuant to Section 7.7. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of Principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are, to the extent permitted by law, cumulative. SECTION 6.4. WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive any past or existing Default and its consequences except (i) a Default in the payment of the Principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, and any Event of Default arising therefrom shall be deemed to have been cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.5. CONTROL BY MAJORITY. Upon provision of reasonable indemnity to the Trustee satisfactory to the Trustee, the Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee, which shall be entitled to receive and may conclusively rely on Opinions of Counsel, may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.1, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. 16 22 SECTION 6.6. LIMITATION ON SUITS. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (i) the Holder gives to the Trustee previous written notice stating that an Event of Default is continuing; (ii) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (v) the Holders of a majority in aggregate principal amount of the Securities then outstanding do not give the Trustee a direction inconsistent with the written request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of Principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.7. SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.7. SECTION 6.10. PRIORITIES. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.7; SECOND: to Securityholders for amounts due and unpaid on the Securities for Principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for Principal and interest, respectively; and THIRD: to the Company. 17 23 The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Securities. SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII TRUSTEE SECTION 7.1. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.1; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. 18 24 (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.1 and to the provisions of the TIA. (h) The Trustee shall not be bound to make any investigation into facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine books, records and premises of the Company, personally or by agent or attorney. (i) Any request or direction of the Company mentioned in the Indenture shall be sufficiently evidenced by a written request or order of the Company and any resolution of the Board of Directors may be sufficiently evidenced by a copy of the resolution certified by the Secretary or Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. (j) The Trustee shall not be responsible for the recording, rerecording, filing of UCC Statements or UCC Continuation Statements. (k) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its gross negligence or willful misconduct. SECTION 7.2. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it shall be entitled to and may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence or supervision of any agent, attorney, custodian or nominee appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. 19 25 (g) The Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Securities unless either (1) a Trust Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Securities or by any Holder of the Securities. (h) If the Trustee is acting as Paying Agent or Registrar hereunder, the rights and protections of the Trustee under this Article VII shall also apply to the Trustee as Paying Agent or Registrar. SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its respective Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.4. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or any Subsidiary Guarantor in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.5. NOTICE OF DEFAULTS. If a Default or an Event of Default occurs and is continuing and if it is actually known to a Trust Officer of the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in payment of Principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is not opposed to the interests of Securityholders. SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. As promptly as practicable after each April 15 beginning with the April 15, 1999 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such April 15 that complies with TIA sec. 313(a). The Trustee also shall comply with TIA sec. 313(b). The Trustee shall promptly deliver to the Company a copy of any report it delivers to Holders pursuant to this Section 7.6. A copy of each report at the time of its mailing to Securityholders shall be filed by the Trustee with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.7. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time such compensation for its services as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances, incurred or made by it, including costs of collection, in addition to such compensation for its services, except any such expense, disbursement or advance as may arise from its negligence, wilful misconduct or bad faith, unless the Trustee shall have complied with the applicable standard of care required by the TIA. Such expenses shall include the reasonable compensation and reasonable expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Trustee shall provide the Company reasonable notice of any expenditure not in the ordinary course of business; provided that prior approval by the Company of any such expenditure shall not be a requirement for the making 20 26 of such expenditure nor for reimbursement by the Company thereof. The Company shall indemnify each of the Trustee and any predecessor Trustees and their officers, directors, employees and agents against any and all loss, damage, claim, liability or expense (including reasonable attorneys' fees and expenses) including taxes (other than taxes applicable to the Trustee's compensation hereunder) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. At the sole discretion of the Trustee, the Company shall defend the claim and the Trustee may have separate counsel, and the Company will pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith, unless the Trustee shall have complied with the applicable standard of care required by the TIA. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay Principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section 7.7 shall survive the resignation or removal of the Trustee and discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time with 30 days notice to the Company. The Holders of a majority in principal amount of the Securities then outstanding, may remove the Trustee with 30 days written notice to the Trustee and the Company and may appoint a successor Trustee. The Company shall remove the Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. 21 27 SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee, provided that such corporation shall be eligible under this Article VII and TIA Section 310(a). In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA sec. 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA sec. 310(b); provided, however, that there shall be excluded from the operation of TIA sec. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA sec. 310(b)(1) are met. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA sec. 311(a), excluding any creditor relationship listed in TIA sec. 311(b). A Trustee who has resigned or been removed shall be subject to TIA sec. 311(a) to the extent indicated. ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. (a) Discharge. When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III hereof or the Securities will become due and payable at their Stated Maturity within 91 days, or the Securities are to be called for redemption within 91 days under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and, in each case of this clause (ii), the Company irrevocably deposits or causes to be deposited with the Trustee funds sufficient to pay at Stated Maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.7 or delivered to the Trustee for cancellation), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.1(c), cease to be of further effect and all the Subsidiary Guarantees shall be discharged and released and all rights of the Trustee or the Holders under any of the Collateral Documents shall terminate. The Trustee shall acknowledge satisfaction and discharge of this Indenture and the discharge and release of the Subsidiary Guarantees and the termination of such rights under the Collateral Documents on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent provided for herein relating to satisfaction and discharge of this Indenture have been complied with. (b) Defeasance. Subject to Sections 8.1(c) and 8.2, the Company at any time may terminate (i) all of its obligations and the obligations of all Subsidiary Guarantors under the Securities and this Indenture and, upon 22 28 such termination, all the Subsidiary Guarantees shall be discharged and released and all rights of the Trustee or the Holders under any of the Collateral Documents shall terminate ("legal defeasance option") or (ii) its obligations and the obligations of all Subsidiary Guarantors under Sections 4.2 and 4.3 and the operation of Sections 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect to a Significant Subsidiary), 6.1(8) (but only with respect to a Significant Subsidiary), 6.1(9), 6.1(10) and 6.1(11) and, upon such termination, all the Subsidiary Guarantees shall be discharged and released and all rights of the Trustee or the Holders under any of the Collateral Documents shall terminate ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect to a Significant Subsidiary), 6.1(8) (but only with respect to a Significant Subsidiary) 6.1(9), 6.1(10) or 6.1(11). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations of the Company and the Subsidiary Guarantors that are terminated. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.3, 2.4, 2.5, 2.7, 4.1, 4,6, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive. SECTION 8.2. CONDITIONS TO DEFEASANCE. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (i) the Company irrevocably deposits or causes to be deposited in trust with the Trustee money or U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide cash at such times and in such amounts as will be sufficient to pay Principal and interest when due on all outstanding Securities (except Securities replaced pursuant to Section 2.7 or delivered to the Trustee for cancellation) to maturity or redemption, as the case may be; (ii) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their view that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay Principal and interest when due on all outstanding Securities (except Securities replaced pursuant to Section 2.7 or delivered to the Trustee for cancellation) to maturity or redemption, as the case may be; (iii) no Default specified in Section 6.1(7) or (8) with respect to the Company shall have occurred which is continuing at the time of the deposit described in clause (i) of this Section 8.2; (iv) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.3. APPLICATION OF TRUST MONEY. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations either directly or through the Paying Agent as the Trustee may determine and in accordance with this Indenture to the payment of Principal of and interest on the Securities. 23 29 SECTION 8.4. REPAYMENT TO COMPANY. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of Principal or interest that remains unclaimed for two years after the Stated Maturity or full redemption of the Securities, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.5. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations other than any such tax, fee or other charge which by law is for the account of the Holders of the defeased Securities; provided that the Trustee shall be entitled to charge any such tax, fee or other charge to such Holder's account. SECTION 8.6. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, (a) if the Company has made any payment of interest on or Principal of any Securities following the reinstatement of their obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent and (b) unless otherwise required by any legal proceeding or any order or judgment of any court or governmental authority, the Trustee or Paying Agent shall return all such money and U.S. Government Obligations to the Company promptly after receiving a written request therefor at any time, if such reinstatement of the Company's obligations has occurred and continues to be in effect. ARTICLE IX AMENDMENTS SECTION 9.1. WITHOUT CONSENT OF HOLDERS. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (i) to cure any ambiguity, omission, defect or inconsistency, whether wholly within this Indenture or as compared to any of the Collateral Documents; or to make such other provisions in regard to matters or questions arising under this Indenture as the Board of Directors may deem necessary or desirable and which shall not materially and adversely affect the rights of the Securityholders; (ii) to comply with Article V; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are as described in Section 163(f)(2)(B) of the Code; (iv) to add additional Guarantees with respect to the Securities; (v) to add additional security for the Securities; 24 30 (vi) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (vii) to make any change that does not adversely affect the rights of any Securityholder in any material respect; (viii) to comply with, or allow for compliance with, any requirements of the SEC in connection with qualifying this Indenture under the TIA or giving effect to the security arrangements contemplated hereby; (ix) to give effect to the provisions of the Collateral Documents and this Indenture, including with regard to the release of all or a portion of the Collateral in accordance with such provisions; (x) to give effect to the release of any Subsidiary Guarantor in accordance with the terms of this Indenture; and (xi) to evidence the acceptance of the appointment of any successor Trustee. After an amendment under this Section 9.1 becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.1. SECTION 9.2. WITH CONSENT OF HOLDERS. The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for Securities). However, without the consent of each Securityholder affected, an amendment to this Indenture may not: (i) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the rate of or extend the time for payment of interest on any Security; (iii) reduce the principal of or extend the Stated Maturity of any Security; (iv) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article III; (v) make any Security payable in money other than that stated in the Security; (vi) impair the right of any Holder to receive payment of Principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; (vii) make any changes that would affect the ranking of the Securities or (except (a) in accordance with the terms of the Collateral Documents or this Indenture, (b) as permitted by Section 9.1 or (c) any changes to give effect to amendments to any of the Collateral Documents) the security for the Securities in a manner adverse to the Holders; or (viii) make any change in the second sentence of this Section 9.2. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.2 becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.2. SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. 25 31 SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. After an amendment or waiver becomes effective, it shall bind every Securityholder. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity satisfactory to it and to receive, and shall be fully protected in relying upon, in addition to the documents required by Section 12.4, an Officers' Certificate and an Opinion of Counsel stating that such amendment complies with the provisions of this Article IX. SECTION 9.7. PAYMENT FOR CONSENT. Neither the Company nor any affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for, or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X SUBSIDIARY GUARANTEE SECTION 10.1. SUBSIDIARY GUARANTEE. The Subsidiary Guarantors hereby, jointly and severally, unconditionally and irrevocably, Guarantee to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of Principal of, interest on and Additional Interest, if any, with respect to the Securities when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). The Subsidiary Guarantors further agree that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from the Subsidiary Guarantors, and that the Subsidiary Guarantors will remain bound under this Article X notwithstanding any extension or renewal of any Obligation. 26 32 The Subsidiary Guarantors waive presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waive notice of protest for nonpayment. The Subsidiary Guarantors waive notice of any default under the Securities or the Obligations. The obligations of the Subsidiary Guarantors under this Section 10.1 shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any Obligation; (c) any rescission, waiver, amendment, modification or supplement of any of the terms or provisions of this Indenture (other than this Article X), the Securities or any other agreement, unless such rescission, waiver, amendment, modification or supplement expressly affects the obligations of any Subsidiary Guarantor under this Section 10.1; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of the Company. The Subsidiary Guarantors further agree that their Guarantees herein constitute a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waive any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Except as set forth in this Indenture, the obligations of the Subsidiary Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense, setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, except as set forth in this Indenture, the obligations of the Subsidiary Guarantors herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Subsidiary Guarantors or would otherwise operate as a discharge of the Subsidiary Guarantors as a matter of law or equity. The Subsidiary Guarantors further agree that their Guarantees herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise, unless such Guarantee has been released in accordance with Section 10.9. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has or may have at law or in equity against the Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay any Obligation when and as the same shall become due, whether at Stated Maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, the Subsidiary Guarantors hereby promise to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. The Subsidiary Guarantors agree that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of the Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purposes of this Section. The Subsidiary Guarantors also agree to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section. 27 33 SECTION 10.2. LIMITATION ON LIABILITY. Any term or provision of this Indenture to the contrary notwithstanding, the obligations of each Subsidiary Guarantor are limited to the maximum amount as will result in the Obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. SECTION 10.3. SUCCESSORS AND ASSIGNS. This Article X shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 10.4. NO WAIVER. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article X shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article X at law, in equity, by statute or otherwise. SECTION 10.5. RIGHT OF CONTRIBUTION. Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Subsidiary Guarantor hereunder who has not paid its proportionate share of such payment. Each Subsidiary Guarantor's right of contribution shall be subject to the terms and conditions of Section 10.6. The provisions of this Section shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Trustee and the Securityholders and each Subsidiary Guarantor shall remain liable to the Trustee and the Securityholders for the full amount guaranteed by such Subsidiary Guarantor hereunder. SECTION 10.6. NO SUBROGATION. Notwithstanding any payment or payments made by any of the Subsidiary Guarantors hereunder, no Subsidiary Guarantor shall be entitled to be subrogated to any of the rights of the Trustee or any Securityholder against the Company or any other Subsidiary Guarantor or any collateral security or guarantee or right of offset held by the Trustee or any Securityholder for the payment of the Obligations, nor shall any Subsidiary Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Subsidiary Guarantor in respect of payments made by such Subsidiary Guarantor hereunder, until all amounts owing to the Trustee and the Securityholders by the Company on account of the Obligations are paid in full. If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Subsidiary Guarantor in trust for the Trustee and the Securityholders, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to the Trustee in the exact form received by such Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee, if required), to be applied against the Obligations. SECTION 10.7. ADDITIONAL SUBSIDIARY GUARANTORS. Until such time as all Guarantees by the Subsidiary Guarantors under this Indenture shall have been released in accordance with Section 10.9, the Company shall cause each Subsidiary that Guarantees the Company's obligations under the Credit Agreement (other than a Foreign Subsidiary) to execute and deliver a supplement to this Indenture providing that such Subsidiary will be a Subsidiary Guarantor hereunder. Each such supplement shall be substantially in the form of Exhibit H attached hereto. Subsidiaries that are Subsidiary Guarantors on the 28 34 date any such supplement is executed by an additional Subsidiary shall not be required to become parties to such supplement and hereby agree to the execution and delivery by any additional Subsidiary of any such supplement. SECTION 10.8. MODIFICATION. No modification, amendment or waiver of any provision of this Article X, nor the consent to any departure by the Subsidiary Guarantors therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; it being understood that the release of the Guarantees of Subsidiary Guarantors pursuant to Section 10.9 shall not be an amendment or waiver of any provision of this Article X and shall not require any action on the part of the Trustee. No notice to or demand on the Subsidiary Guarantors in any case shall entitle the Subsidiary Guarantors to any other or further notice or demand in the same, similar or other circumstances. SECTION 10.9. RELEASE OF SUBSIDIARY GUARANTOR. (a) Upon the sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor, in each case in accordance with the terms of Section 10.10, such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise of all the Capital Stock of such Subsidiary Guarantor) shall be automatically released from all its obligations under the Indenture and the Subsidiary Guarantee without any action on the part of the Trustee or the Holders. The Trustee shall receive written notice of the release of any Subsidiary Guarantor if such release is effected other than under Section 10.10. (b) Upon the release of a Guarantee by a Subsidiary of the Company's obligations under the Credit Agreement, the Subsidiary Guarantee of such Subsidiary under this Indenture will be released and discharged at such time and will not be reinstated or renewed in the event any such Subsidiary thereafter Guarantees obligations of the Company under the Credit Agreement, so long as the Guarantee by such Subsidiary under the Credit Agreement remains released (i) until the next succeeding refinancing, restatement, renewal, extension or replacement of the Credit Agreement or amendment to increase the available principal amount thereunder, or (ii) for a period of 90 consecutive days, whichever is later. SECTION 10.10. MERGER, CONSOLIDATION AND SALE OF ASSETS OF A SUBSIDIARY GUARANTOR. No Subsidiary Guarantor may consolidate with or sell or lease its assets as, or substantially as, an entirety, to, or merge with or into, in one transaction or a series of transactions, any other Person, unless: (i) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (ii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, sale, lease, or merger complies with the foregoing clause (i). Notwithstanding the foregoing, each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor. ARTICLE XI COLLATERAL AND SECURITY SECTION 11.1. COLLATERAL DOCUMENTS. The due and punctual payment of the Principal and premium, if any, of, and interest on (including Additional Interest), the Securities when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, interest on the overdue principal of and interest (to the extent permitted by law), if any, on the Securities and performance of all other obligations under this Indenture, including, without limitation, the obligations of the Company set forth in Section 7.7 herein, and the Securities, shall be secured as provided in the Collateral Documents. The Trustee, the Company and each 29 35 Subsidiary Guarantor hereby agree that the Collateral Agent shall hold the Collateral in trust for the equal and ratable benefit of all of the secured creditors under the Collateral Documents, including, without limitation, the Holders and the Trustee and the lenders under the Credit Agreement, in each case pursuant to the terms of the Collateral Documents. Each Holder of the Securities, by its acceptance thereof, consents and agrees to the terms of the Collateral Documents and the Collateral Agent Acknowledgment (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs (i) the Collateral Agent, with respect to each of the Collateral Documents to which it is a party and the Collateral Agent Acknowledgment, and (ii) the Trustee, with respect to the Collateral Agent Acknowledgment, to perform their respective obligations and exercise their respective rights thereunder in accordance therewith: provided, however, that upon qualification of this Indenture with the TIA, if any provisions of the Collateral Agent Acknowledgment limits, qualifies or conflicts with the duties imposed by the provisions of the TIA, the TIA shall control. The Trustee and each Holder, by accepting the Securities, acknowledges that, as more fully set forth in the Collateral Documents, the Collateral as now or hereafter constituted shall be held for the equal and ratable benefit of all the secured creditors under the Collateral Documents, including, without limitation, the lenders under the Credit Agreement and that the Lien of this Indenture and the Collateral Documents in respect of the Trustee and the Holders is subject to and qualified and limited in all respects by the Collateral Documents and actions that may be taken thereunder. As amongst the Holders, the Collateral as now or hereafter constituted shall be held for the equal and ratable benefit of the Holders without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance, sale or otherwise, as security for the Securities. SECTION 11.2. OPINIONS. Promptly after the execution and delivery of this Indenture, the Company shall deliver the opinion(s) required by Section 314(b)(1) of the TIA. Subsequent to the execution and delivery of this Indenture, to the extent required by the TIA, the Company shall furnish to the Trustee within three months after each anniversary of the Issue Date, an Opinion of Counsel, dated as of such date, stating either that (i) in the opinion of such counsel, all action has been taken with respect to any filing, re-filing, recording or re-recording with respect to the Collateral as is necessary to maintain the Lien on the Collateral in favor of the Holders or (ii) in the opinion of such counsel, that no such action is necessary to maintain such Lien. SECTION 11.3. RELEASE AND SUBSTITUTION OF COLLATERAL; AMENDMENT OF COLLATERAL DOCUMENTS. (a) The parties hereto hereby agree and acknowledge that the Collateral may be released by the Collateral Agent at any time in accordance with the provisions of the Collateral Documents and the Credit Agreement or upon the termination of the Credit Agreement and, in any such case, the Collateral so released shall automatically be released as Collateral for the Securities without any action on the part of the Trustee or the Securityholders. For purposes of the TIA, the release of any Collateral from the terms of the Collateral Documents will not be deemed to impair the security under this Indenture in contravention of the provisions hereof or affect the Lien of this Indenture or the Collateral Documents if and to the extent the Collateral is released pursuant to the Collateral Documents or upon the termination of the Credit Agreement. To the extent applicable, the Company shall cause TIA Section 314(d) relating to the release of property or securities from the lien of the Collateral Documents and relating to the substitution therefor of any property or securities to be subjected to the lien of the Collateral Documents to be complied with. (b) Notwithstanding the foregoing, the Company and each Subsidiary, as the case may be, pursuant to the terms of the Credit Agreement and the Collateral Documents, may (i) sell, lease or otherwise dispose of in the ordinary course of business free from the Liens of the Collateral Documents, any machinery, equipment, furniture, apparatus, tools or implements, materials or supplies or other similar property ("Subject Property") which, in its reasonable opinion, may have become 30 36 obsolete or unfair for use in the conduct of its businesses or the operation of the Collateral upon replacing the same with, or substituting for the same, new Subject Property constituting Collateral not necessarily of the same character but being of a least equal value as the Subject Property so disposed of as long as such new Subject Property becomes subject to the Liens of the Collateral Documents; (ii) abandon, sell, assign, transfer, license or otherwise dispose of in the ordinary course of business any personal property the use of which is no longer necessary or desirable in the proper conduct of the business of the Company and is not material to the conduct of the business of the Company and its Subsidiaries taken as a whole; (iii) grant in the ordinary course of business, rights-of-way and easements over or in respect of any of the Company's or such Subsidiary's real property, provided that such grant will not, in the reasonable opinion of the Company's Board of Directors, impair the usefulness of such property in the conduct of the Company's business; (iv) sell, transfer or otherwise dispose of inventory in the ordinary course of business; (v) sell, collect, liquidate, factor or otherwise dispose of accounts receivable in the ordinary course of business; (vi) make cash payments (including for the scheduled repayment of Indebtedness) from cash that is at any time part of the Collateral in the ordinary course of business that are not otherwise prohibited by this Indenture and the Collateral Documents; and [(vii) release any Collateral in accordance with the terms of the Credit Agreement and the Collateral Documents or as otherwise permitted by the lenders under the Credit Agreement,] in each case, without the delivery of any opinions or certificates upon any such release; provided that the Company shall deliver to the Trustee, within 15 days after each of the six-month periods ended April 15 and October 15 in each year an Officers' Certificate to the effect that all releases of Collateral pursuant to this Section 11.3(b) by the Company or any Subsidiary, as the case may be, during the preceding six-month period were in the ordinary course of the Company's or such Subsidiary's business and that all proceeds therefrom were used by the Company or such Subsidiary as permitted herein. (c) The fair value of Collateral released from the Liens of the Collateral Documents pursuant to Section 11.3(b) hereof shall not be considered in determining whether the aggregate fair value of Collateral released from the Liens of the Collateral Documents in any calendar year exceeds the 10% threshold specified in Section 314(d)(l) of the TIA; provided that the Company's right to rely on this sentence at any time is conditioned upon the Company having furnished to the Trustee the certificates described in Section 11.3(b) hereof that were required to be furnished to the Trustee at or prior to such time. It is expressly understood that Section 11.3(b) and this Section 11.3(c) relate only to the Company's obligations under the TIA and shall not restrict or otherwise affect the Company's and its Subsidiaries' rights or abilities to release Collateral pursuant to the terms of the Credit Agreement and the Collateral Documents or as otherwise permitted by the lenders under the Credit Agreement. SECTION 11.4. CERTIFICATES OF THE COMPANY. Subject to Section 11.3(b) the Company shall furnish to the Trustee prior to each proposed release of Collateral all documents required by TIA sec. 314(d), if any. The Trustee may, to the extent permitted by Sections 7.1 and 7.2 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents. Any certificate or opinion required by TIA sec. 314(d), if applicable, may be made by an Officer of the Company except in cases where TIA sec. 314(d) requires that such certificate or opinion be made by an independent engineer, appraiser or other expert within the meaning of TIA sec. 314(d). 31 37 SECTION 11.5. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS. The Trustee shall be the Representative (as such term is defined in the Collateral Documents) on behalf of the Holders and shall act upon the written direction of the Holders with regard to all voting, consent and other rights granted to the Holders under the Collateral Documents. Subject to the provisions of the Collateral Documents and the Collateral Agent Acknowledgment, the Trustee may, in its sole discretion and without the consent of the Holders, on behalf of the Holders, take all actions it deems necessary or appropriate in order to (a) enforce any of its rights or any of the rights of the Holders under the Collateral Documents and (b) receive any and all amounts payable from the Collateral in respect of the obligations of the Company and the Subsidiary Guarantors hereunder. Subject to the provisions of the Collateral Documents and the Collateral Agent Acknowledgment, the Trustee shall have the power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Collateral Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interest and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or the Trustee). SECTION 11.6. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS. The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Collateral Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the Collateral Documents. SECTION 11.7. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS. (a) If (i) the Company delivers an Officer's Certificate and an Opinion of Counsel certifying that all of its obligations under this Indenture have been satisfied and discharged by complying with the provisions of Article VIII hereof, (ii) all outstanding Securities issued under this Indenture shall be surrendered to the Trustee for cancellation, (iii) upon the release of the Collateral in accordance with the terms of the Collateral Documents or (iv) any other release of the Collateral as security for obligations of the Company or a Subsidiary under the Credit Agreement, the Trustee shall deliver to the Collateral Agent a notice stating that the Trustee, for itself and on behalf of the Holders, disclaims and has given up any and all rights it has in or to the Collateral, and any rights it has under the Collateral Documents, and, upon and after the receipt by the Collateral Agent of such notice, the Collateral Agent shall no longer be deemed to hold the Lien in the Collateral on behalf of the Trustee for the benefit of the Holders. Notwithstanding the foregoing, the conditions set forth in the foregoing sentence shall not be required to be satisfied in connection with, and nothing contained in this Indenture shall limit or otherwise affect, the release of the Collateral as security for the Senior Notes, or any part of it, pursuant to the Collateral Documents or action of the lenders under the Credit Agreement. (b) Any release of Collateral made in compliance with this Section 11.7 shall not be deemed to impair the Lien under the Collateral Documents or the Collateral thereunder in contravention of the provisions of this Indenture or the Collateral Documents. SECTION 11.8. SECURITY AGREEMENT COLLATERAL. Notwithstanding anything to the contrary contained in this Indenture, the Credit Agreement or the Collateral Documents, to the extent that the representations, warranties and covenants contained in this Indenture, in the Credit Agreement or in the Collateral Documents with respect to Collateral are at any time incorrect (in the case of representations or warranties) or not complied with (in the case of covenants), then in each case so long as the aggregate fair market value of all Collateral under the Collateral Documents with respect to which such representations or warranties are incorrect, or covenants are not complied with, does not exceed $10,000,000 the existence of such circumstances shall be deemed not to be a violation of this Indenture or constitute a Default under Article VI. 32 38 ARTICLE XII MISCELLANEOUS SECTION 12.1. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. SECTION 12.2. NOTICES. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company or the Subsidiary Guarantors: Coltec Industries Inc. 3 Coliseum Center 2550 West Tyvola Road Charlotte, NC 28219 Attention: Corporate Secretary if to the Trustee: Bankers Trust Company Four Albany Street Corporate Trust & Agency Services New York, New York 10006 Attention: Corporate Market Services Facsimile: 212-250-6961 The Company, the Subsidiary Guarantors, or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA sec. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA sec. 312(c). SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 33 39 SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (i) a statement that the individual making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 12.6. WHEN SECURITIES DISREGARDED. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or an affiliate or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 12.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 12.8. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 12.9. GOVERNING LAW. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 12.10. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company or the Subsidiary Guarantors shall not have any liability for any obligations of the Company or the Subsidiary Guarantors under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. 34 40 SECTION 12.11. SUCCESSORS. All agreements of the Company and the Subsidiary Guarantors in this Indenture and the Securities shall bind their respective successors in accordance with the terms hereof. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.12. MULTIPLE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 12.13. QUALIFICATION OF INDENTURE. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all reasonable costs and expenses (including reasonable attorneys' fees for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Securities and printing this Indenture and the Securities. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA. Notwithstanding anything else herein, any obligations imposed on the parties hereto by the TIA (except for the opinion(s) contemplated in Section 11.2 hereof) shall not be effective until such time as the Indenture becomes qualified under the TIA. 35 41 SECTION 12.14. TABLE OF CONTENTS; HEADINGS. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. COLTEC INDUSTRIES INC By: /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title:Executive Vice President, General Counsel and Secretary AMI Industries Inc. CII Holdings Inc Coltec Canada Inc Coltec Industrial Products Inc Coltec International Services Co Coltec North Carolina Inc. Coltec Technical Services Inc Delavan Inc (F/K/A Delavan Newco Inc.) Garlock Inc Garlock International Inc Garlock Overseas Corporation Haber Tool Company Inc Holley Performance Products Inc Jamco Products, LLC Menasco Aerosystems Inc Stemco Inc Walbar Inc On behalf of each of the above Subsidiary Guarantors By: /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title:Executive Vice President, General Counsel and Secretary BANKERS TRUST COMPANY, as Trustee By: /s/ SANDRA J. SCHAFFER ------------------------------------ Name: Sandra J. Schaffer Title:Assist Vice President 36 42 RULE 144A/REGULATION S APPENDIX FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S. PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES 1. DEFINITIONS. 1.1 DEFINITIONS. For the purposes of this Appendix the following terms shall have the meanings indicated below: "ADDITIONAL INTEREST" shall have the meaning set forth in the Registration Rights Agreement. "DEPOSITARY" means The Depository Trust Company, its nominees and their respective successors and assigns. "EXCHANGE SECURITIES" means the 7 1/2% Series B Senior Notes Due 2008 to be issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement. "INITIAL PURCHASERS" means Credit Suisse First Boston Corporation, BT Alex.Brown Incorporated, BancAmerica Robertson Stephens Inc. and NationsBanc Montgomery Securities LLC. "INITIAL SECURITIES" means the 7 1/2% Senior Notes Due 2008, issued under the Indenture on the date hereof. "PRIVATE EXCHANGE" means the offer by the Company, pursuant to the Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. "PRIVATE EXCHANGE SECURITIES" means the 7 1/2% Series C Senior Notes Due 2008, if any, to be issued pursuant to the Indenture to the Initial Purchasers in a Private Exchange. "PURCHASE AGREEMENT" means the Purchase Agreement dated April 8, 1998, among the Company, the Subsidiary Guarantors and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "REGISTERED EXCHANGE OFFER" means the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated April 16, 1998 among the Company, the Subsidiary Guarantors and the Initial Purchasers. "SECURITIES" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES CUSTODIAN" means the custodian with respect to a Global Security (as appointed by the Depositary), or any successor person thereto and shall initially be the Trustee. "SHELF REGISTRATION STATEMENT" means the registration statement issued by the Company, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement. 43 "TRANSFER RESTRICTED SECURITIES" means Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. 1.2 OTHER DEFINITIONS
DEFINED IN TERM SECTION: ---- ---------- "Agent Members"............................................. 2.1(b) "Global Security"........................................... 2.1(a) "Regulation S".............................................. 2.1(a) "Rule 144A"................................................. 2.1(a)
2. THE SECURITIES. 2.1 FORM AND DATING. The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement. (a) Global Securities. Initial Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation S under the Securities Act ("Regulation S"), in each case as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Trustee as custodian for the Depositary (or with such other custodian as the Depositary may direct), and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under the Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2 44 2.2 AUTHENTICATION. The Trustee shall authenticate and deliver: (1) Initial Securities for original issue in an aggregate principal amount of U.S.$300.0 million and (2) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities and shall also specify delivery instructions for such securities. The aggregate principal amount of Securities outstanding at any time may not exceed U.S.$300.0 million except as provided in Section 2.7 of the Indenture. 2.3 TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions, instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred. (ii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary of another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 of this Appendix or Section 2.9 of the Indenture, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. 3 45 THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Securities or such Private Exchange Securities will cease to apply, but the requirements requiring such Initial Securities or such Private Exchange Securities issued to certain Holders be issued in global form will continue to apply, and Initial Securities or Private Exchange Securities in global form without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's Initial Securities or Private Exchange Securities or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will continue to apply and Initial Securities in global form with the restricted securities legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply, and Private Exchange Securities in global form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (c) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depositary for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities 4 46 Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (d) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities and Global Securities at the Registrar's or any co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.6 and Section 9.5. (iii) The Registrar or any co-registrar shall not be required to register the transfer of or exchange of (a) any certificated Security selected for redemption in whole or in part pursuant to Article III of the Indenture, except the unredeemed portion of any certificated Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of redemption of Securities. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of Principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of the Indenture shall evidence the same debt and shall be entitled to the same benefits under the Indenture as the Securities surrendered upon such transfer or exchange. (e) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under the Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 5 47 2.4 CERTIFICATED SECURITIES. (a) A Global Security deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under the Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Securities. (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. 6 48 EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF INITIAL SECURITY] [GLOBAL SECURITIES LEGEND] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [RESTRICTED SECURITIES LEGEND] THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. 49 COLTEC INDUSTRIES INC No. 1 Principal Amount $ ___________________ CUSIP NO. ___________________ 7 1/2% SENIOR NOTE DUE 2008 Coltec Industries Inc., a Pennsylvania corporation, promises to pay to CEDE & Co., or registered assigns, the principal sum of ____________________________ Dollars on April 15, 2008. Interest Payment Dates: April 15 and October 15. Record Dates: April 1 and October 1. Additional provisions of this Security are set forth on the other side of this Security. Dated: April 16, 1998 COLTEC INDUSTRIES INC by by TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the Indenture. BANKERS TRUST COMPANY as Trustee by Authorized Signatory 50 [FORM OF REVERSE SIDE OF INITIAL SECURITY] (REVERSE OF SECURITY) 7 1/2% SENIOR NOTE DUE 2008 1. INTEREST Coltec Industries Inc, a Pennsylvania corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional cash interest will accrue on this Security at a rate of 0.50% per annum from and including the date on which any such Registration Default shall occur (subject to the terms of the Registration Rights Agreement) to but excluding the date on which all Registration Defaults have been cured, calculated on the principal amount of this Security as of the date on which such interest is payable. Such interest is payable in addition to any other interest payable from time to time with respect to this Security. The Trustee will not be deemed to have notice of a Registration Default until it shall have received actual notice of such Registration Default. The Company will pay interest semiannually on April 15 and October 15 of each year, commencing October 15, 1998. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from April 16, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT By at least 11:00 a.m. (New York City time) on the date on which any Principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such Principal and/or interest. The Company will pay interest (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the April 1 or October 1 next preceding the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay Principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay Principal and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR Initially, Bankers Trust Company, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its domestically incorporated wholly owned Subsidiaries may act as Paying Agent. 4. INDENTURE The Company issued the Securities under an Indenture dated as of April 16, 1998 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), among the Company, the Subsidiary Guarantors and the Trustee. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture for a statement of those terms. The Securities are senior obligations of the Company limited to $300.0 million aggregate principal amount (subject to Section 2.7 of the Indenture). The Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Private Exchange Securities and Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture and the Registration Rights Agreement. The Initial Securities, the Private Exchange Securities and the Exchange Securities are treated as a single class of securities 51 under the Indenture. The Indenture imposes certain limitations on the ability of the Company to create liens, enter into sale and leaseback transactions and enter into mergers and consolidations. To guarantee the due and punctual payment of the Principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors, as primary obligors and not merely as surety, have unconditionally and irrevocably guaranteed, on a joint and several basis, such obligations on a senior basis pursuant to the terms of Article X of the Indenture. The Securities are secured to the extent set forth in the Collateral Documents and Article XI of the Indenture. 5. OPTIONAL REDEMPTION The Securities will be redeemable, in whole or in part, at any time, at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities and (ii) the sum of the present value of the remaining scheduled payments of principal and interest thereon from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the date of redemption. "TREASURY RATE" means, with respect to any redemption date for the Securities, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Maturity Date, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated on the third Business Day preceding the redemption date. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "COMPARABLE TREASURY PRICE" means with respect to any redemption date for the Securities (i) the average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations. "REFERENCE TREASURY DEALER" means each of Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government securities dealers in New York City (each, a "Primary Treasury Dealer") appointed by the Trustee in consultation with the Company; provided, however, that if any of the foregoing shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer. 2 52 "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. Except as set forth above, the Securities will not be redeemable by the Company prior to maturity and will not be entitled to the benefit of any sinking fund. 6. NOTICE OF REDEMPTION Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date by first-class mail to each Holder of Securities to be redeemed at his registered address. Securities in denominations of principal amount larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. REGISTRATION RIGHTS The Company is party to a Registration Rights Agreement, dated as of April 16, 1998, among the Company, the Subsidiary Guarantors, Credit Suisse First Boston Corporation, BT Alex.Brown Incorporated, BancAmerica Robertson Stephens Inc. and NationsBanc Montgomery Securities LLC pursuant to which it is obligated to pay Additional Interest (as defined therein) upon the occurrence of certain Registration Defaults (as defined therein). 8. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may register, transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) for a period beginning 15 days before a selection of Securities to be redeemed and ending on the date of such selection or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 9. PERSONS DEEMED OWNERS The registered holder of this Security may be treated as the owner of it for all purposes. 10. UNCLAIMED MONEY Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of Principal or interest that remains unclaimed for two years after the Stated Maturity or full redemption of the Securities, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. 11. DEFEASANCE Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations and the obligations of the Subsidiary Guarantors under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of Principal of and interest on the Securities to redemption or maturity, as the case may be. 3 53 12. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency whether wholly within the Indenture or as compared to any of the Collateral Documents, or to make such other provisions in regard to matters or questions arising under the Indenture as the Board of Directors of the Company may deem necessary or desirable and which shall not materially and adversely affect the rights of the Holders, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add additional guarantees with respect to the Securities or to add additional security for the Securities, or to add additional covenants of or surrender rights and powers conferred on the Company, or to comply, or allow compliance with, any requirement of the SEC in connection with qualifying the Indenture under the Act or giving effect to the security arrangements contemplated by the Indenture, or to make any change that does not adversely affect the rights of any Securityholder in any material respect or to give effect to the provisions of the Collateral Documents and the Indenture, including with regard to the release of all or a portion of the Collateral in accordance with such provisions and to give effect to the release of any Subsidiary Guarantee in accordance with the terms of the Indenture. 13. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in any payment of interest on the Securities when due, that continues for 30 days; (ii) default in payment of Principal on the Securities when due at its Stated Maturity, upon declaration or otherwise; (iii) failure by the Company or the Subsidiary Guarantors to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other indebtedness of the Company, the Subsidiary Guarantors or any of the Company's Subsidiaries if the amount accelerated (or so unpaid) exceeds $30 million; (v) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $30 million against the Company or any Significant Subsidiary; (vii) except as permitted under the Indenture, a Subsidiary Guarantee ceases to be in full force and effect for 30 days after notice or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee; or (viii) except as permitted by the Collateral Documents, the Credit Agreement and the Indenture or any amendment thereto, any of the Collateral Documents ceases to be in full force and effect or ceases to be effective, in all material respects, to create a Lien on the Collateral in favor of the Senior Noteholders for 30 days after notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of Principal or interest) if it determines that withholding notice is not opposed to their interest. 4 54 14. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. 15. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company or the Subsidiary Guarantors shall not have any liability for any obligations of the Company or the Subsidiary Guarantors under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 17. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). 18. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. GOVERNING LAW This Security shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Coltec Industries Inc, 3 Coliseum Center, 2550 West Tyvola Road, Charlotte, NC 28217 Attention: Chief Financial Officer. 5 55 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: Signature Guarantee: ___________________________________________ (Signature must be guaranteed by a participant in a recognized Signature Guarantee Medallion Program or other signature guarantor program reasonably acceptable to the Trustee) - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred: CHECK ONE BOX BELOW: (1)[ ] to the Company; or (2)[ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3)[ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4)[ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5)[ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. -------- Signature Guarantee: Signature - ------------------------------------------------------ -------- (Signature must be guaranteed by a participant in a Signature recognized Signature Guarantee Medallion Program or other signature guarantor program reasonably acceptable to the Trustee) - -------------------------------------------------------------------------------- 56 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------------------------------------ --------------------------------------------------- NOTICE: To be executed by an executive officer
57 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
AMOUNT OF DECREASE AMOUNT OF INCREASE PRINCIPAL AMOUNT OF SIGNATURE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT THIS GLOBAL SECURITY AUTHORIZED OFFICER DATE OF OF THIS GLOBAL OF THIS GLOBAL FOLLOWING SUCH OF TRUSTEE OR EXCHANGE SECURITY SECURITY DECREASE OR INCREASE SECURITIES CUSTODIAN -------- ------------------- ------------------- -------------------- --------------------
58 EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY [OR PRIVATE EXCHANGE SECURITY]] */ **/ COLTEC INDUSTRIES INC. No. ____ Principal Amount $ ___________________ CUSIP NO. ___________________ 7 1/2% SENIOR NOTE DUE 2008 Coltec Industries Inc., a Pennsylvania corporation, promises to pay to CEDE & Co., or registered assigns, the principal sum of ___________________ Dollars on April 15, 2008. Interest Payment Dates: April 15 and October 15. Record Dates: April 1 and October 1. Additional provisions of this Security are set forth on the other side of this Security. Dated: _____________________ COLTEC INDUSTRIES INC by by TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the Indenture. BANKERS TRUST COMPANY by Authorized Signatory - --------------- */ [If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 Captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] -- SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".] **/ [If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in such Exhibit 1.] 59 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY [OR PRIVATE EXCHANGE SECURITY]] 7 1/2% SENIOR NOTE DUE 2008 1. INTEREST Coltec Industries Inc., a Pennsylvania corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above[; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional cash interest will accrue on this Security at a rate of 0.50% per annum from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, calculated on the principal amount of this Security as of the date on which such interest is payable. Such interest is payable in addition to any other interest payable from time to time with respect to this Security. The Trustee will not be deemed to have notice of a Registration Default until it shall have received actual notice of such Registration Default].***/ The Company will pay interest semiannually on April 15 and October 15 of each year, commencing October 15, 1998 Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from April 16, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT By at least 11:00 a.m. (New York City time) on the date on which any Principal of or interest on any Security is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such Principal and/or interest. The Company will pay interest (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the April 1 or October 1 next preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay Principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay Principal and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR Initially, Bankers Trust Company, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Securityholder. The Company or any of its domestically incorporated wholly owned Subsidiaries may act as Paying Agent. 4. INDENTURE The Company issued the Securities under an Indenture dated as of April 16, 1998 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the "Indenture"), among the Company Subsidiary, the Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized terms used - --------------- ***/ Insert if at the time of issuance of the Exchange Security or Private Exchange Security (as the case may be) neither the Registered Exchange Offer has been consummated nor a Shelf Registration Statement has been declared effective in accordance with the Registration Rights Agreement. 60 herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are senior obligations of the Company limited to $300.0 million aggregate principal amount (subject to Section 2.7 of the Indenture). The Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Private Exchange Securities and Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture and the Registration Rights Agreement. The Initial Securities, the Private Exchange Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company to create liens, enter into sale and leaseback transactions and enter into mergers and consolidations. To guarantee the due and punctual payment of the Principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors, as primary obligors and not merely as surety, have unconditionally and irrevocably guaranteed, on a joint and several basis, such obligations on a senior basis pursuant to the terms of Article X of the Indenture. The Securities are secured to the extent set forth in Article XI of the Indenture. 5. OPTIONAL REDEMPTION The Securities will be redeemable, in whole or in part, at any time, at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities and (ii) the sum of the present value of the remaining scheduled payments of principal and interest thereon from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 37.5 basis points, plus accrued interest thereon to the date of redemption. "TREASURY RATE" means, with respect to any redemption date for the Securities, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Maturity Date, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated on the third Business Day preceding the redemption date. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "COMPARABLE TREASURY PRICE" means with respect to any redemption date for the Securities (i) the average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations. 2 61 "REFERENCE TREASURY DEALER" means each of Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated and two other primary U.S. Government securities dealers in New York City (each, a "Primary Treasury Dealer") appointed by the Trustee in consultation with the Company; provided, however, that if any of the foregoing shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. Except as set forth above, the Securities will not be redeemable by the Company prior to maturity and will not be entitled to the benefit of any sinking fund. 6. NOTICE OF REDEMPTION Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date by first-class mail to each Holder of Securities to be redeemed at his registered address. Securities in denominations of principal amount larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of principal amount of $1,000 and whole multiples of $1,000. A Holder may register transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) for a period beginning 15 days before a selection of Securities to be redeemed and ending on the date of such selection or (ii) any Securities for a period beginning 15 days before an interest payment date and ending on such interest payment date. 8. PERSONS DEEMED OWNERS The registered holder of this Security may be treated as the owner of it for all purposes. 9. UNCLAIMED MONEY If money for the payment of Principal or interest remains unclaimed for two years after the date of payment of Principal and interest, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 10. DEFEASANCE Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of Principal of and interest on the Securities to redemption or maturity, as the case may be. 3 62 11. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add additional guarantees with respect to the Securities or to add additional security for the Securities, or to add additional covenants of or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder or to give effect to the provisions of the Collateral Documents and the Indenture with regard to the release of all or a portion of the Collateral in accordance with such provisions. 12. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon required repurchase, upon declaration or otherwise; (iii) failure by the Company or the Subsidiary Guarantors to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other indebtedness of the Company, the Subsidiary Guarantors or any of the Company's Subsidiaries if the amount accelerated (or so unpaid) exceeds $30 million; (v) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $30 million against the Company or any Significant Subsidiary; (vii) except as permitted under the Indenture, a Subsidiary Guarantee ceases to be in full force and effect for 30 days after notice or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee; or (viii) except as permitted by the Collateral Documents, the Credit Agreement and the Indenture or any amendment thereto, any of the Collateral Documents ceases to be in full force and effect or ceases to be effective, in all material respects, to create a Lien on the Collateral in favor of the Senior Noteholders for 30 days after notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of Principal or interest) if it determines that withholding notice is not opposed to their interest. 13. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. 4 63 14. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company or the Subsidiary Guarantors shall not have any liability for any obligations of the Company or the Subsidiary Guarantors under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Security. 16. ABBREVIATIONS Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act). 17. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 18. GOVERNING LAW This Security shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Coltec Industries Inc., 3 Coliseum Center, 2550 West Tyvola Road, Charlotte, NC 28217 Attention: Chief Financial Officer. 5 64 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: Your Signature: Signature Guarantee: ___________________________________________ (Signature must be guaranteed by a participant in a recognized Signature Guarantee Medallion Program or other signature guarantor program reasonably acceptable to the Trustee) - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. 65 EXHIBIT H [FORM OF GUARANTOR SUPPLEMENT] GUARANTOR SUPPLEMENT, dated as of ----------------------------- -----------, among Coltec Industries Inc, a Pennsylvania corporation (the "Company"), [NEW SUBSIDIARY GUARANTOR], a - ------------------------corporation (the "New Subsidiary Guarantor") and Bankers Trust Company, a New York banking corporation, as trustee (the "Trustee") to the Indenture dated as of April 16, 1998 (as amended to the date hereof, the "Indenture") among the Company, the Subsidiary Guarantors named therein and the Trustee. W I T N E S S E T H : WHEREAS, Section 9.1 of the Indenture provides that the Company and the Trustee may, among other things, amend the Indenture or the Securities without notice to or consent of any Securityholder to add Guarantees with respect to the Securities or to secure the Securities; WHEREAS, Section 10.7 of the Indenture provides that until such time as all Guarantees by the Subsidiary Guarantors under the Indenture shall have been released in accordance with Section 10.9 of the Indenture, the Company shall cause each Subsidiary that Guarantees the Company's obligations under the Credit Agreement (other than a Foreign Subsidiary) to execute and deliver this Guarantor Supplement pursuant to which such Subsidiary shall agree to be bound by the provisions of Article X of the Indenture; and WHEREAS, the New Subsidiary Guarantor shall execute and deliver to the Trustee this Guarantor Supplement. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used and not defined herein shall have the meaning specified in or pursuant to the Indenture. 2. Guarantee. The New Subsidiary Guarantor hereby agrees to unconditionally assume all the obligations of a Subsidiary Guarantor under the Indenture as described therein. 3. Trustee. The Trustee accepts the modification of the Indenture effected by this Guarantor Supplement, but only upon the terms and conditions set forth in the Indenture. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals herein contained. The Trustee makes no representation and shall have no responsibility as to the validity and sufficiency of this Guarantor Supplement. 4. Effect on Indenture. As supplemented by this Guarantor Supplement, the Indenture is hereby ratified and confirmed in all aspects. 5. Counterparts. This Guarantor Supplement may be executed in counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 6. Governing Law. This Guarantor Supplement shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another Jurisdiction would be required thereby. 66 IN WITNESS WHEREOF, the parties hereto have caused this Guarantor Supplement to be duly executed as of the day and year first above written. [NEW SUBSIDIARY GUARANTOR] By: ------------------------------------ Name: Title: BANKERS TRUST COMPANY, as Trustee By: ------------------------------------ Name: Title: COLTEC INDUSTRIES INC By: ------------------------------------ Name: Title: EX-4.3 3 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.3 $300,000,000 COLTEC INDUSTRIES INC 7 1/2% SENIOR NOTES DUE 2008 REGISTRATION RIGHTS AGREEMENT April 16, 1998 CREDIT SUISSE FIRST BOSTON CORPORATION BT ALEX. BROWN INCORPORATED BANCAMERICA ROBERTSON STEPHENS INC. NATIONSBANC MONTGOMERY SECURITIES LLC c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: Coltec Industries Inc, a Pennsylvania corporation (the "Issuer"), proposes to issue and sell to Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated, BancAmerica Robertson Stephens Inc. and NationsBanc Montgomery Securities LLC (collectively, the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $300,000,000 aggregate principal amount of its 7 1/2% Senior Notes Due 2008 (the "Initial Securities") to be unconditionally guaranteed (the "Guaranties") by the parties listed on the signature page hereto (the "Guarantors" and together with the Issuer, the "Company"). The Initial Securities will be issued pursuant to an Indenture, dated as of April 16, 1998 (the "Indenture") among the Issuer, the Guarantors named therein and Bankers Trust Company (the "Trustee"). As an inducement to the Initial Purchasers, the Company agrees with the Initial Purchasers, for the benefit of the holders of the Initial Securities (including, without limitation, the Initial Purchasers), the Exchange Securities (as defined below) and the Private Exchange Securities (as defined below) (collectively the "Holders"), as follows: 1. Registered Exchange Offer. The Company shall, at its own cost, prepare and, within 90 days after (or if the 90th day is not a business day, the first business day thereafter) the date of original issue of the Initial Securities (the "Issue Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof) who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities (the "Exchange Securities") of the Company issued under the Indenture and identical in all material respects to the Initial Securities (except for the transfer restrictions relating to the Initial Securities and the provisions relating to the matters described in Section 6 hereof) that would be registered under the Securities Act. The Company shall use its reasonable best efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 150 days (or if the 150th day is not a business day, the first business day thereafter) after the Issue Date of the Initial Securities and shall keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Company effects the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. 2 Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Securities acquired in exchange for Securities constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States, but excluding provisions relating to the matters described in Section 6 hereof) to the Initial Securities (the "Private Exchange Securities"). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) except as provided elsewhere herein, keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; 2 3 (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply with all applicable laws. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange. The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker- dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any Initial Purchaser so requests with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging 3 4 Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Securities on the date of the exchange, the Company shall take the following actions: (a) The Company shall, at its cost, as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 2) file with the Commission and thereafter shall use its reasonable best efforts to cause to be declared effective a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to this paragraph (b) or to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof); provided, however, the Company shall not be obligated to keep the Shelf Registration Statement continuously effective to the extent set forth above if (i) the Company determines, in its reasonable judgment, upon advice of counsel, as authorized by a resolution of its Board of Directors, that the continued effectiveness and usability of the Shelf Registration Statement would (x) require the disclosure of material information, which the Company has a bona fide business reason for preserving as confidential, or (y) interfere with any financing, acquisition, corporate reorganization or other material transaction or development involving the Company or any of its subsidiaries or its parent or the contemplated timing thereof, provided that the failure to keep the Shelf Registration Statement effective and usable for offers and sales of Securities for such reason shall last no longer than 45 days in any three-month period or three periods not to exceed an aggregate of 90 days in any 12-month period (whereafter Additional Interest (as defined in Section 6(a)) shall accrue and be payable), and (ii) the Company promptly thereafter complies with the requirements of Section 3(j) hereof, if applicable; provided further that the number of days of any actual Suspension Period (as defined below) shall be added on to the end of the two-year period specified above. Any such period during which the Company is excused from keeping the Shelf Registration Statement effective and usable for offers and sales of Securities is referred to herein as a "Suspension Period." A Suspension Period shall commence on and include the date that the Company gives notice that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Securities and shall end on the earlier to occur of (1) the date on which each seller of Securities covered by the Shelf Registration Statement either receives the copies of the supplemented or amended prospectus contemplated by Section 3(j) hereof or is advised in writing by the Company that the use of the prospectus may be resumed and (2) the expiration of 45 days in any three-month period or three periods not to exceed an aggregate of 90 days in any 12-month period during which one or more Suspension Periods has been in effect. Except as provided above, the Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 4 5 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders, who propose to sell Securities pursuant to the Shelf Registration Statement, as selling securityholders. (b) The Company shall give written notice to the Initial Purchasers and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective. After the effectiveness of the Registration Statement, the Company shall give written notice to the Initial Purchasers, the Holders and any such Participating Broker-Dealer (which notice pursuant to clauses (i)-(iv) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iv) of the happening of any event (including, without limitation, of any event resulting in a Suspension Period) that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. 5 6 (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event (other than an event resulting in a Suspension Period) contemplated by paragraphs (i) through (iv) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (i) through (iv) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have 6 7 been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days (without duplication of any extension under Section 2(b)) from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement of the Company satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of four quarterly periods (or 90 days, if such period is a fiscal year) beginning with the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such four quarterly periods. (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof. Each Holder of Securities or any underwriter, attorney, accountant or agent conducting an inspection under this Section 3(p) will be required, as a condition to conducting such investigation, to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such information is generally available to the public. 7 8 (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel (which may include internal counsel) to deliver an opinion and updates thereof relating to the Securities in customary form and substance addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement covering the matters customarily covered in opinions requested in underwritten offerings; (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with public underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in substantially the form set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) and (f) of the Purchase Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied. (t) The Company will use its reasonable best efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, in each case, if so requested prior to the effectiveness of the Registration Statement by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will reasonably assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. (v) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. The Initial Purchasers agree to provide any reasonable assistance requested by the Company in complying with its 8 9 obligations pursuant to this Section 3, including, without limitation, identifying and contacting Holders entitled to participate in the Registered Exchange Offer. 4. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses, if any, of Simpson Thacher & Bartlett, counsel for the Initial Purchasers, incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Initial Securities covered thereby to act as counsel for the Holders of the Initial Securities in connection therewith; provided that such Holders shall be responsible for any and all underwriting discounts and commissions and all other costs and expenses customarily borne by securityholders in similar circumstances; provided further that prior to employing counsel in connection with a Registered Exchange Offer, the Initial Purchasers will consult with the Company and the Company's counsel to determine if separate counsel is necessary. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer, such controlling persons and their respective affiliates, directors, officers, employees, representatives and agents are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and, subject to the limitation set forth in the immediately preceding clause, shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company, its subsidiaries, affiliates, directors, officers, employees, representatives and agents and any such controlling person and each person, if any, who controls the Company within the meaning of the Securities Act or the 9 10 Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company, its subsidiaries, affiliates, directors, officers, employees, representatives and agents and any such controlling person or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by them in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to 10 11 contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Initial Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below a "Registration Default": (i) If within 90 days of April 16, 1998, neither the Exchange Offer Registration Statement nor a Shelf Registration Statement has been filed with the Commission; (ii) If within 180 days of April 16, 1998, neither the Registered Exchange Offer is consummated nor, if required in lieu thereof, the Shelf Registration Statement is declared effective by the Commission; or (iii) If after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraph (b)) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Subject to paragraph (b) below, Additional Interest shall accrue on the Initial Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.50% per annum, calculated on the principal amount of the Notes as of the day on which such interest is payable. (b) A Registration Default referred to in Section 6(a)(iii)(B) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus, (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus or (z) a Suspension Period not to exceed 45 days in any three-month period or three periods not to exceed an aggregate of 90 days in any 12-month period pursuant to Section 2(b) and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured or until the Company is no longer required to keep such Registration Statement effective or such prospectus useable pursuant to the terms of this Agreement. (c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii) of Section 6(a) above will be payable in cash on the regular interest payment dates with respect to the Initial Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal 11 12 amount of the Initial Securities, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "Transfer Restricted Securities" means each Security until (i) the date on which such Transfer Restricted Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such brokerdealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Initial Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further reasonable action as any Holder of Initial Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Initial Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group 12 13 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Attention: Vincent Pagano, Jr., Esq. (3) if to the Company, at its address as follows: Coltec Industries Inc 3 Coliseum Center 2550 West Tyvola Road Charlotte, NC 28217 Attention: Corporate Secretary with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 Attention: George W. Bilicic, Jr., Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (c) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (d) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (h) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 13 14 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers, the Issuer and the Guarantors in accordance with its terms. Very truly yours, COLTEC INDUSTRIES INC By: /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title: Executive Vice President, General Counsel and Secretary AMI Industries Inc. CII Holdings Inc Coltec Canada Inc Coltec Industrial Products Inc Coltec International Services Co Coltec North Carolina Inc. Coltec Technical Services Inc Delavan Inc Garlock Inc Garlock International Inc Garlock Overseas Corporation Haber Tool Company Inc Holley Performance Products Inc Jamco Products, LLC Menasco Aerosystems Inc Stemco Inc Walbar Inc On behalf of each of the above Guarantors By: /s/ ROBERT J. TUBBS ------------------------------------ Name: Robert J. Tubbs Title: Vice President The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION BT ALEX. BROWN INCORPORATED BANCAMERICA ROBERTSON STEPHENS INC. NATIONSBANC MONTGOMERY SECURITIES LLC by: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ ROBERT MALKANI ---------------------------------- Name: Robert Malkani Title: Associate 14 EX-4.4 4 FIFTH AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.4 FIFTH AMENDMENT TO CREDIT AGREEMENT FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of March 16, 1998, among COLTEC INDUSTRIES INC, a corporation organized and existing under the laws of the State of Pennsylvania (the "Company"), Coltec Aerospace Canada Ltd., an Ontario corporation (the "Canadian Borrower"), the various Subsidiaries of the Company that are Credit Parties on the date of this Amendment, the various Banks party to the Credit Agreement referred to below, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent, the Syndication Agent and the Administrative Agent are parties to a Credit Agreement, dated as of March 24, 1992, amended and restated as of January 11, 1994 and further amended and restated as of December 18, 1996, (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the parties hereto have agreed to amend the Credit Agreement as herein provided; NOW, THEREFORE, it is agreed: Amendments to Credit Agreement. Section 3.03 of the Credit Agreement is hereby amended by (1) deleting in its entirety in clause (c) thereof and inserting in lieu thereof the following new text: "(c) [intentionally omitted]"; (2) inserting immediately after the phrase "is in effect on the Restatement Effective Date" appearing in clause (d) thereof the phrase ", or of TIDES, New Senior Notes or New Senior Exchange Notes"; (3) inserting at the end of clause (d) the following new proviso: "provided that notwithstanding the foregoing, on each date upon which New Senior Notes or TIDES are issued, the Total Commitment shall be reduced by an amount equal to 66-2/3% of the gross cash proceeds received by the Company and its Subsidiaries (including the Trust, without duplication) from the respective issuance"; and (4) inserting in clause (e) thereof the following new clauses (ii)(D) and (E), in appropriate order, in the second parenthetical appearing in said clause (e): 2 "and (D) the proceeds of the sale of 100% of the capital stock of, or all or substantially all of the assets of, Holley Automotive pursuant to Section 9.02(xxiii) and (E) the proceeds of the issuance of TIDES, New Senior Notes or New Senior Exchange Notes, as the case may be". Section 7.14 of the Credit Agreement is hereby amended by adding the following phrase immediately at the end of the third sentence thereof: "and except that TIDES and TIDES Mirror Debentures shall be convertible into common stock of the Company in accordance with the terms thereof (and of the documentation relating thereto)". Section 7.17 of the Credit Agreement is hereby amended by inserting immediately following the phrase "any of its Subsidiaries" therein the phrase "(other than the Trust)". Section 7.23 of the Credit Agreement is hereby amended by (x) deleting the word "and" immediately preceding clause (iv) thereof and by inserting in lieu thereof a comma and (y) inserting the following phrase at the end thereof: "and (v) following the issuance of TIDES, the Trust may be subject to restrictions as provided in the documentation relating to the TIDES and the TIDES Mirror Debentures". Section 8.04 of the Credit Agreement is hereby amended by deleting the phrase "or (iii)" appearing therein and inserting in lieu thereof the following phrase: ", (iii) the dissolution or liquidation of the Trust pursuant to, or other compliance by the Trust with, the documentation relating to the TIDES and the TIDES Mirror Debentures or (iv)". Section 8.12 of the Credit Agreement is hereby amended by adding the following new phrase immediately at the end thereof : "and (z) the Trust so long as same would be a Wholly Owned Subsidiary of the Company but for its issuance of TIDES which are then outstanding". Section 8.15 of the Credit Agreement is hereby amended by adding the following new clause (i) immediately at the end thereof: "(i) Notwithstanding anything to the contrary contained in this Section 8.15, elsewhere in this Agreement or in any other Credit Document, the Trust (so long as same issues TIDES within a reasonable period of 3 time after the establishment of the Trust) shall not be required to become a Guarantor or to execute any Credit Documents, and the equity interests in the Trust owned by the Company shall not be required to be pledged pursuant to any Pledge Agreement." Section 9.01 of the Credit Agreement is hereby amended by (x) deleting the word "and" at the end of clause (xxii) thereof, (y) deleting the period at the end of clause (xxiii) thereof and inserting "; and" in lieu thereof and (z) inserting in appropriate order the following new clause (xxiv): "(xxiv) after the issuance of the New Senior Notes, Liens on Collateral securing the New Senior Notes and, after the issuance thereof, the New Senior Exchange Notes on an equal and ratable basis with the obligations otherwise secured pursuant to the Security Documents to the extent permitted by Section 9.04(xxi); provided that such Liens may not continue in existence at any time, and for so long as, the Liens on the respective items of Collateral have been released pursuant to the Security Documents or as contemplated by Section 26 of Part I of the Fifth Amendment to this Agreement." Section 9.02 of the Credit Agreement is hereby amended by (x) deleting the word "and" at the end of clause (xxi) thereof, (y) deleting the period at the end of clause (xxii) thereof and inserting a semi-colon in lieu thereof and (z) inserting in appropriate order the following new clauses: "(xxiii) so long as there shall exist no Default or Event of Default (both before and after giving effect thereto), the Company shall be permitted to sell 100% of the capital stock of, or all or substantially all of the assets of, Holley Automotive, so long as (A) such sale is for fair market value (as determined in good faith by the Board of Directors of the Company), (B) the business and assets of Holley Automotive shall not have materially changed from the business and assets, respectively, of Holley Automotive on the Fifth Amendment Effective Date and (C) such sale results in consideration consisting at least 75% (for this purpose, taking the amount of cash and the fair market value of all non-cash consideration, as determined in good faith by the Company) of cash; (xxiv) New Senior Notes and/or New Senior Exchange Notes may be repurchased (so long as retired by the Company) in accordance with the provisions of clause (iv) of Section 9.11; and (xxv) the activities of the Trust and the Company in connection with its issuance of TIDES, and any dissolution of the Trust and distribution of TIDES Mirror Debentures, any conversions of TIDES Mirror Debentures into common stock of the Company, repurchases or 4 redemptions of TIDES by the Trust in accordance with the provisions of Section 9.03 and corresponding repurchases or redemptions of TIDES Mirror Debentures by the Company in each case as contemplated by the documentation relating to the TIDES and the TIDES Mirror Debentures shall be permitted without causing a violation of this Section 9.02." Section 9.03 of the Credit Agreement is hereby amended by (x) in clause (iii)(A) thereof, inserting the phrase "and/or, after the issuance thereof, the Trust shall be permitted to purchase TIDES (and in the case any outstanding TIDES are so purchased, the Company shall, and shall be permitted to, repay, or the Trust shall cancel, a like principal of amount of TIDES Mirror Debentures, with the Trust using the proceeds thereof to repurchase the TIDES, which TIDES so purchased shall be retired)" immediately after the phrase "shares of Company Common Stock" appearing therein and (y) adding the following new sentence immediately at the end thereof: "Notwithstanding anything to the contrary contained in this Section 9.03 or elsewhere in this Agreement, following the issuance of TIDES in accordance with the provisions of Section 9.13(a)(viii), no payments or distributions (except payments made to purchase TIDES pursuant to clause (iii)(A) of the first sentence of this Section 9.03) may be made with respect to the TIDES or the TIDES Mirror Debentures except that (x) any TIDES and/or TIDES Mirror Debentures, as the case may be, from time to time outstanding may, in accordance with the terms of the relevant documentation therefor, be converted into common stock of the Company, (y) cash interest may be paid on the TIDES Mirror Debentures so long as the Trust in turn utilizes all cash interest payments so received by it to pay accrued dividends (which shall be permitted to be paid by the Trust with proceeds of such cash interest payments received by it) owing with respect to TIDES then outstanding, provided that (i) the cash interest payments made from time to time to the Trust shall not exceed the amounts needed by it to make dividend payments owing with respect to outstanding TIDES and costs and expenses of the Trust in accordance with the indenture for the TIDES Mirror Debentures, (ii) no such payments shall be made at any time when the payment of cash interest on the TIDES Mirror Debentures is not permitted to be made pursuant to the subordination provisions applicable thereto and (iii) no such payments shall be made at any time following the occurrence and during the continuance of any Default or Event of Default or if a Default or Event of Default would exist immediately after giving effect to such payment, and (z) to the limited extent provided in the documentation relating to the TIDES, TIDES Mirror Debentures may be issued by the Trust to the holders of the TIDES in exchange therefor." 5 Section 9.04 of the Credit Agreement is hereby amended by (x) deleting the word "and" at the end of clause (xix) thereof, (y) deleting the period at the end of clause (xx) thereof and inserting a semicolon in lieu thereof and (z) inserting in appropriate order the following new clauses (xxi) and (xxii): "(xxi) Indebtedness of the Company evidenced by its senior notes (the "New Senior Notes") and by its senior notes issued in a registered exchange offer for the New Senior Notes (the "New Senior Exchange Notes"), so long as (v) the New Senior Notes are issued at par (subject to a de minimus discount not to exceed in any event 1%) and the aggregate principal amount of New Senior Notes so issued does not exceed $300,000,000, (w) the terms and conditions of the New Senior Notes shall be consistent with the term sheet therefor delivered to the Administrative Agent prior to the Fifth Amendment Effective Date and otherwise in form and substance reasonably satisfactory to the Agents and the Required Banks, (x) the aggregate principal amount of New Senior Exchange Notes so issued shall not exceed the aggregate principal amount of New Senior Notes surrendered in exchange for the New Senior Exchange Notes so issued, (y) the terms and conditions of the New Senior Exchange Notes shall be substantially identical (with exceptions regarding registration requirements, the requirement to conduct an exchange offer and other differences not adverse to the Banks which are approved by the Administrative Agent) to the terms of the New Senior Notes (except that the New Senior Exchange Notes shall be registered under the Securities Act of 1933, as amended) and (z) all documentation evidencing the New Senior Notes and the New Senior Exchange Notes shall be satisfactory to each Agent and the Required Banks; provided that the New Senior Notes and the New Senior Exchange Notes shall be permitted to be (i) guaranteed by any Subsidiary of the Company which is a Guarantor (for so long as such Subsidiary remains a Guarantor) and (ii) secured on a pari passu basis by the Collateral (or any portion thereof) on terms satisfactory to the Agents and the Required Banks (which security interests shall be granted pursuant to the Security Documents, by amendments thereto satisfactory to the Agents and the Required Banks); provided further that if any Guarantor or Collateral, as the case may be, is released pursuant to the Credit Documents, such Guarantor or Collateral shall also be automatically released as guarantor of or security for, as the case may be, obligations pursuant to the New Senior Notes and the New Senior Exchange Notes. At the time of the issuance of the New Senior Notes and the New Senior Exchange Notes, if same are secured as contemplated above, all actions reasonably deemed necessary or desirable by the Administrative Agent, the Collateral Agent or the Required Banks (including, without limitation, the filing of additional UCC financing statements, mortgage amendments, etc.) to 6 protect and preserve the security interests granted (and intended to be granted) pursuant to the Security Documents (as same may be amended as contemplated above) shall be taken by the Company and its Subsidiaries at their own expense. All intercreditor arrangements, if any, in connection with any securing of the New Senior Notes and/or the New Senior Exchange Notes shall be required to be satisfactory to the Agents and the Required Banks. To the extent the foregoing provisions of this clause (xxi) require that any documentation or terms relating to the New Senior Notes (excluding amendments to Credit Documents) be satisfactory or approved by the Required Banks, such documentation or terms shall be deemed satisfactory and approved by the Required Banks so long as (i) the relevant documentation (in substantially final form excluding pricing information and in form satisfactory to the Administrative Agent) and a term sheet containing a range of pricing information for the New Senior Notes is distributed to the Banks at least five Business Days prior to pricing of the New Senior Notes, (ii) the Required Banks do not object thereto within such five Business Day period, (iii) the final economic terms of the New Senior Notes are within the range of pricing information contained in the term sheet distributed to the Banks and (iv) the Administrative Agent approves the final form of the documentation relating to the New Senior Notes. To the extent the foregoing provisions of this clause (xxi) require that any documentation or terms relating to the New Senior Exchange Notes (excluding amendments to Credit Documents) be satisfactory or approved by the Required Banks, such documentation or terms shall be deemed satisfactory and approved by the Required Banks so long as the relevant documentation and terms are substantially identical (with modifications of the type described in clause (y) of the first sentence of this clause (xxi)) to the documentation and terms of the New Senior Notes and satisfactory to the Administrative Agent. To the extent the Credit Documents are to be amended (including any amendments and restatements thereof) as contemplated above to provide for the sharing of security with the New Senior Notes and the New Senior Exchange Notes, (i) such amendments (or amendments and restatements) to the Pledge Agreements and Security Agreements shall be distributed to the Banks and shall require the affirmative approval of the Required Banks (with each Bank which executes and delivers a copy of the Fifth Amendment hereby agreeing that it will not unreasonably withhold or delay its consent) and (ii) such amendments (or amendments and restatements) to Mortgages or any other Security Documents (excluding the Pledge Agreements and Security Agreements) shall be deemed satisfactory to the Required Banks so long as same are in form approved by the Administrative Agent and are reasonably consistent with the changes made pursuant to the Pledge Agreements and Security Agreements; and 7 (xxii) at the time of the issuance of TIDES by the Trust pursuant to Section 9.13(a)(viii), (x) the Company shall be permitted to issue to the Trust, and, upon liquidation or dissolution of the Trust in accordance with the terms of the documentation for the TIDES and the TIDES Mirror Debentures, the Trust shall be permitted to issue to the public, convertible junior subordinated deferrable interest debentures ("TIDES Mirror Debentures") which (i) will constitute unsecured and unguaranteed obligations of the Company, (ii) shall at no time exceed, in aggregate principal amount outstanding, 102% of the aggregate liquidation preference of TIDES then outstanding (except to the extent TIDES Mirror Debentures are issued by the Trust to holders of TIDES in exchange therefor in the circumstances contemplated by the relevant documentation therefor), (iii) will mature not sooner than 15 years from the date of the issuance thereof, (iv) will pay interest at a rate per annum not to exceed the stated dividend rate on the TIDES, (v) will allow the Company to defer interest payments for periods of up to 20 consecutive quarters and (vi) will have provisions with respect to optional redemption and conversion into common stock of the Company which are substantially similar to those of the TIDES and (y) the Company shall be permitted to irrevocably guarantee, on a subordinated basis, the Trust's payment of (i) all declared and unpaid distributions on the TIDES to the extent of funds of the Trust available therefor, (ii) all payments in the event of redemption of TIDES to the extent of funds of the Trust available therefor and (iii) the liquidation preference of the TIDES to the extent of the assets of the Trust available for distribution to TIDES holders (the "TIDES Guarantee"); provided that all documentation as described above in this clause (xxii) shall be required to be reasonably satisfactory to the Agents and the Required Banks. To the extent the foregoing provisions of this clause (xxii) require that any documentation or terms relating to the TIDES, the TIDES Guarantee and the TIDES Mirror Debentures be satisfactory or approved by the Required Banks, such documentation or terms shall be deemed satisfactory and approved by the Required Banks so long as (i) the relevant documentation (in substantially final form excluding pricing information and in form satisfactory to the Administrative Agent) and a term sheet containing a range of pricing information for the TIDES is distributed to the Banks at least five Business Days prior to pricing of the TIDES, (ii) the Required Banks do not object thereto within such five Business Day period, (iii) the final economic terms of the TIDES are within the range of pricing information contained in the term sheet distributed to the Banks and (iv) the Administrative Agent approves the final form of the documentation relating to the TIDES." Section 9.05 of the Credit Agreement is modified by (x) deleting the word "and" at the end of 8 clause (xx) thereof, (y) deleting the period at the end of clause (xxi) thereof and inserting in lieu thereof "; and" and (z) inserting the following new clause (xxii) immediately at the end thereof: "(xxii) the Company shall be permitted to establish the Trust and acquire common equity interests therein, the Company shall be permitted to issue and the Trust shall be permitted to acquire the TIDES Mirror Debentures issued in accordance with Section 9.04(xxii) and the Company may issue the TIDES Guarantee in accordance with the provisions of Section 9.04(xxii)." Section 9.06 of the Credit Agreement is amended by adding the following immediately at the end thereof: "Notwithstanding anything to the contrary contained in this Section 9.06, the Company and the Trust shall be permitted to enter into the transactions with each other contemplated by the documentation for the TIDES, the TIDES Mirror Debentures and the TIDES Guarantee." Section 9.11 of the Credit Agreement is hereby modified by (x) deleting the word "or" immediately before clause (iii) thereof and (y) inserting in appropriate order the following new clauses (iv) and (v): ", (iv) after the issuance of New Senior Notes, New Senior Exchange Notes, TIDES or TIDES Mirror Debentures, as the case may be, make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any change of control or similar event of, including, in each case without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due, any New Senior Notes, New Senior Exchange Notes, TIDES or TIDES Mirror Debentures; provided that, so long as no Default or Event of Default is in existence at the time of the taking of any actions pursuant to this proviso or immediately after giving effect thereto, the Company may from time to time (A) purchase, repay or prepay New Senior Notes or New Senior Exchange Notes so long as the aggregate amount of cash expended by the Company and its Subsidiaries pursuant to this clause (A) after the Fifth Amendment Effective Date does not exceed $100,000,000, (B) the Company may issue New Senior Exchange Notes in exchange for New Senior Notes, (C) in the circumstances contemplated by the documentation relating to the TIDES and TIDES Mirror Debentures, the Trust may dissolve and the TIDES Mirror Debentures may be distributed to the holders of TIDES in accordance with the documentation therefor and (D) to the extent permitted by Section 9.03(iii)(A), TIDES may be purchased or redeemed and the correlating payments may be made with respect to the TIDES Mirror Debentures, or (v) after the issuance of New Senior Notes, New Senior 9 Exchange Notes, TIDES or TIDES Mirror Debentures, as the case may be, amend or modify, or permit the amendment or modification of, any provision of the New Senior Notes, the New Senior Exchange Notes, the TIDES or the TIDES Mirror Debentures or any agreement (including without limitation, any certificate of designations, purchase agreement, indenture or loan agreement) related thereto other than amendments not adverse to the interest of Banks". Section 9.12 of the Credit Agreement is hereby amended by (x) deleting the word "and" immediately at the end of clause (iv) thereof and by inserting a comma in lieu thereof and (y) inserting the new phrase immediately at the end thereof: "and (vi) applicable to the Trust and the Company under or by reason of the TIDES, the TIDES Mirror Debentures, the TIDES Guarantee or the documentation relating thereto as approved pursuant to Section 9.13(a)(viii) and/or 9.04(xxii), as the case may be". Section 9.13(a) of the Credit Agreement is hereby amended by inserting in appropriate order the following new clause (viii): "and (viii) for the issuance by a newly-created Wholly-Owned Subsidiary of the Company, which shall be a grantor trust (the "Trust"), of term income deferrable equity securities ("TIDES") and trust common securities to the Company so long as (x) the gross proceeds (which shall include the proceeds received from any exercise of the underwriters' over-allotment option) received from such issuance shall not exceed $150,000,000, (y) the terms and conditions thereof shall be consistent with the term sheet therefor delivered to the Administrative Agent prior to the Fifth Amendment Effective Date and otherwise in form and substance reasonably satisfactory to the Agents and the Required Banks and (z) all documentation evidencing the TIDES shall be reasonably satisfactory to each Agent and the Required Banks. To the extent the foregoing provisions of this clause (viii) require that any documentation or terms relating to the TIDES, the TIDES Guarantee and the TIDES Mirror Debentures be satisfactory or approved by the Required Banks, such documentation or terms shall be deemed satisfactory and approved by the Required Banks so long as (i) the relevant documentation (in substantially final form excluding pricing information and in form satisfactory to the Administrative Agent) and a term sheet containing a range of pricing information for the TIDES is distributed to the Banks at least five Business Days prior to pricing of the TIDES, (ii) the Required Banks do not object thereto within such five Business Day period, (iii) the final economic terms of the TIDES are within the range of pricing information contained in the term sheet distributed to the Banks and (iv) the Administrative 10 Agent approves the final form of the documentation relating to the TIDES." Section 9.15 of the Credit Agreement is hereby amended by adding the following new sentence immediately at the end thereof: "Notwithstanding anything to the contrary contained above, the Trust may be established by the Company so long as all equity interests therein (excluding equity interest represented by the TIDES) are owned by the Company and, as contemplated by Section 8.15(i), the Trust shall not be required to become a Guarantor or otherwise execute and deliver Credit Documents." Section 9 of the Credit Agreement is hereby amended by inserting the following new Section 9.17 immediately at the end thereof: "9.17 Trust. Following the issuance of any TIDES, the Trust (x) shall not engage in any business other than its holding of TIDES Mirror Debentures and its issuance of TIDES, or engage in any activities other than those that are incidental or related to the foregoing and (y) shall not transfer any TIDES Mirror Debentures, except in connection with an exchange therefor into common stock of the Company or to the extent same are required to be distributed in exchange for outstanding TIDES in accordance with the terms of the relevant documentation therefor." Section 10.07 of the Credit Agreement is hereby amended by adding immediately following the phrase "any of the Security Documents" each place it appears therein the phrase "(other than such Security Documents, if any, that have been superseded or replaced in accordance with the terms hereof by new Security Documents to effect the security of the New Senior Notes and/or New Senior Exchange Notes as permitted by Section 9.04(xxi) hereof, which new Security Documents shall instead be included)". The definition of Consolidated EBIT appearing in Section 11 of the Credit Agreement is hereby amended by adding, immediately after the phrase "income, Consolidated Interest Expense and provision for taxes" appearing therein, the phrase "(in each case to the extent same were deducted in determining Consolidated Net Income for such period)". The definition of Consolidated Interest Expense appearing in Section 11 of the Credit Agreement is hereby amended by inserting at the end thereof the following new sentence: "Notwithstanding the foregoing, Consolidated Interest Expense shall not include any amounts relating to interest or dividends accruing on the TIDES Mirror 11 Debentures (so long as held by the Trust) or the TIDES, except that an amount equal to all cash payments made to holders of TIDES or, after any exchange of same for TIDES Mirror Debentures, in respect of TIDES Mirror Debentures shall be treated as a component of Consolidated Interest Expense. The definition of Leverage Ratio appearing in Section 11 is hereby amended by inserting at the end thereof the following new sentence: "Notwithstanding the foregoing, for purposes of calculating Leverage Ratio, Consolidated Indebtedness shall not include the TIDES, the TIDES Guarantee or the TIDES Mirror Debentures." The definition of Secured Creditors appearing in Section 11 is hereby amended by inserting at the end thereof the following new sentence: "After the date of issuance of New Senior Notes in accordance with Section 9.04(xxi), to the extent the New Senior Notes and the New Senior Exchange Notes are secured pursuant to the Security Documents (as a result of the amendments to the Security Documents as contemplated by Section 9.04(xxi)), then the term "Secured Creditors" shall also include the holders of the New Senior Notes and the New Senior Exchange Notes and any trustee therefor, in each case to the extent same constitute Secured Creditors pursuant to the Security Documents as so amended." The definition of Security Documents in Section 11 is hereby amended by adding immediately preceding the semi-colon therein the phrase ", as each shall be amended (including as amended and restated), modified or supplemented from time to time, including without limitation to secure the New Senior Notes and the New Senior Exchange Notes as permitted by Section 9.04(xxi)". Section 11 of the Credit Agreement is hereby further amended by inserting in appropriate order the following new definitions: "'Fifth Amendment' shall mean the Fifth Amendment to this Agreement, dated as of March 16, 1998. 'Fifth Amendment Effective Date' shall mean the date the Fifth Amendment becomes effective in accordance with its terms. 'New Senior Exchange Notes' shall have the meaning provided in Section 9.04(xxi). 'New Senior Notes' shall have the meaning provided in Section 9.04(xxi). 12 'TIDES' shall have the meaning provided in Section 9.13(a)(viii). 'TIDES Guarantee' shall have the meaning provided in Section 9.04(xxii). 'TIDES Mirror Debentures' shall have the meaning provided in Section 9.04(a)(xxii). 'Trust' shall have the meaning provided in Section 9.13(a)(viii)." As contemplated by Section 13.12(a) of the Credit Agreement, the Banks hereby agree that all Collateral under all of the Security Documents shall be automatically released and all such Security Documents shall be terminated and of no further force or effect on the first date after the Fifth Amendment Effective Date upon which (x) no Default or Event of Default shall be in existence and (y) the Company has then outstanding Rated Indebtedness which is at such time rated at least BBB- by S&P and Baa3 by Moody's, provided that the Rated Indebtedness described above shall be required to be unsecured or, if secured, both S&P and Moody's shall have stated to the Company and the Administrative Agent in writing that, assuming that neither the Credit Agreement nor the New Senior Notes were secured, the long-term unsecured Indebtedness pursuant to the Credit Agreement and the New Senior Notes would be rated at least BBB- by S&P and Baa3 by Moody's at such time, provided further that such release shall not be effected until the tenth Business Day after the Company delivers to the Administrative Agent written notice of the attainment of such rating and, if required above, a copy of the written statements specified above. Notwithstanding anything to the contrary contained in the immediately preceding sentence or the proviso thereto, the Required Banks hereby agree that if the Company at any time requests in writing that the Administrative Agent cause the release of all Collateral under all the Security Documents and establishes to the satisfaction of the Administrative Agent that (x) no Default or Event of Default is in existence (and no Default or Event of Default shall be in existence after the release described below) and (y) at the time of the release of all Collateral under all the Security Documents (and after giving effect thereto), the Company's Rated Indebtedness (which shall be unsecured Indebtedness after the release of Collateral contemplated hereby, and shall include the Indebtedness under the Credit Agreement and the New Senior Notes or the New Senior Exchange Notes, as the case may be, to the extent then outstanding) shall be rated at least BBB- by S&P and Baa3 by Moody's (and the Company shall have furnished to the Administrative Agent a written statement from each of S&P and Moody's to the effect that, if neither the Credit Agreement nor the New Senior Notes or the New Senior Exchange Notes, as the case may be, were secured, the 13 long term unsecured Indebtedness pursuant to the Credit Agreement and the New Senior Notes would be rated at least BBB- by S&P and Baa3 by Moody's at such time), then the Administrative Agent is hereby authorized and directed by the Banks to release (and direct the Collateral Agent to release) all Collateral under all the Security Documents, in which case all Collateral under all the Security Documents shall be so released and all such Security Documents shall be terminated and of no further force or effect. The Administrative Agent and the Collateral Agent shall be entitled (but not required), as a condition to granting any releases as described above, to request such officer's certificates and opinions of counsel from the Company as it may reasonably deem necessary or desirable. The Banks hereby authorize and direct the Administrative Agent and the Collateral Agent to take all actions as may be reasonably requested by the Company in effectuating the intent of the foregoing provisions of this Section 26, and the Banks further agree that neither the Administrative Agent nor the Collateral Agent shall have any liability for any actions taken by the Administrative Agent or Collateral Agent in good faith in accordance with the provisions of this Section 26 or in furtherance thereof. In addition to the express terms of this Amendment and notwithstanding anything to the contrary contained in the Credit Documents, the parties hereto acknowledge and agree that this Amendment is intended to permit, and nothing contained in the Credit Documents shall prohibit (except as expressly set forth in this Amendment), the creation of the Trust, the issuance of the TIDES, the TIDES Mirror Debentures, the TIDES Guarantee, the New Senior Notes and the New Senior Exchange Notes (subject to the requirements therefor contained in this Amendment) and the compliance by the Company and the Trust with the documentation related thereto once such documentation has been approved in accordance with Sections 9.04 and 9.13(a) to the Credit Agreement (as amended hereby). By executing and delivering this Amendment, each Bank which is a signatory hereto agrees (x) that it will not unreasonably withhold or delay its consent to any modifications to the Pledge Agreements or Security Agreements as contemplated by the provisions of clause (i) of the last sentence of Section 9.04(xxi) to the Credit Agreement and (y) that such Bank hereby consents to any amendments (or amendments and restatements) to other Security Documents effected in accordance with the provisions of clause (ii) of the last sentence of Section 9.04(xxi) to the Credit Agreement. Miscellaneous. In order to induce the Banks to enter into this Amendment, the Company and the Canadian Borrower hereby 14 represent and warrant that (i) all representations and warranties contained in Section 7 of the Credit Agreement (as amended by this Amendment) are true and correct in all material respects on and as of the Fifth Amendment Effective Date and after giving effect to the Amendment (unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (ii) there exists no Default or Event of Default on the Fifth Amendment Effective Date after giving effect to this Amendment. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Administrative Agent. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment shall become effective on the date (the "Fifth Amendment Effective Date") when each Credit Party (including without limitation, the Company, the Canadian Borrower and each Subsidiary Guarantor) and the Required Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by usage of facsimile transmission) the same to the Administrative Agent at its Notice Office. This Amendment and the agreements contained herein (including without limitation the agreements contained in Section 26 of Part I hereof) shall be binding on the successors and assigns of the parties hereto. From and after the Fifth Amendment Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as amended hereby. To induce the Banks to enter into this Amendment, the Company hereby agrees to pay to each Bank which executes and delivers to the Administrative Agent a copy of this Amendment and consents to any modifications or amendment to the Pledge Agreements and Security Agreements contemplated by Section 9.04(xxi) a fee in the amount equal to 1/5 of 1% of the Commitment of such Bank as same is in effect on the date which occurs 15 10 days after the first date after the execution of this Amendment upon which New Senior Notes or TIDES are issued (which Commitment shall be determined after giving effect to any reduction on or prior to such date to the Commitment of such Bank as a result of any reductions to the Total Commitment on or prior to such date pursuant to the proviso of Section 3.03(d) of the Credit Agreement as added by this Amendment), which fee shall be payable on the date which occurs 10 days after the first date after the Fifth Amendment Effective Date upon which New Senior Notes or TIDES are issued. Notwithstanding anything to the contrary contained above, the fee described above shall not be payable (i) if the Required Banks shall not have executed and delivered this Amendment or (ii) to any Bank if such Bank refuses to consent to any documentation which requires the approval of the Required Banks pursuant to Section 9.04(xxi), 9.04(xxii) or 9.13(a)(viii); provided that a Bank shall not be deemed to have withheld its consent to any documentation which is deemed approved by the Required Banks if not objected to by them, so long as the respective Bank has not objected in writing to the Administrative Agent to the terms of the respective documentation. * * * 16 IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. COLTEC INDUSTRIES INC By_______________________ Title: COLTEC AEROSPACE CANADA LTD. By_______________________ Title: BANKERS TRUST COMPANY, Individually and as Administrative Agent By_______________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Individually and as Documentation Agent 17 By____________________________ Title: THE CHASE MANHATTAN BANK, Individually and as Syndication Agent By____________________________ Title: BANK OF MONTREAL, Individually and as Canadian Paying Agent and Canadian Documentation Agent By____________________________ Title: ALLIED IRISH BANK, PLC, CAYMAN ISLANDS BRANCH 18 By____________________________ Title: BANK OF IRELAND By____________________________ Title: BANK COMMERCIALE ITALIANA NEW YORK BRANCH By____________________________ Title: By____________________________ Title: BANK LEUMI TRUST COMPANY OF NEW YORK By____________________________ Title: 19 THE BANK OF NEW YORK By____________________________ Title: BANK OF SCOTLAND By____________________________ Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By____________________________ Title: NATEXIS BANQUE BFCE, formerly BANQUE FRANCAISE DU COMMERCE EXTERIEUR By____________________________ Title: CIBC INC. 20 By____________________________ Title: THE YASUDA TRUST & BANKING COMPANY, LTD. COMMERCIAL LOAN FUNDING TRUST I By Lehman Commercial Paper Inc., not in its individual capacity but solely as administrative agent. By___________________________ Title: CORESTATES BANK By___________________________ Title: CREDIT LYONNAIS ATLANTA AGENCY By___________________________ Title: 21 CREDIT LYONNAIS NEW YORK BRANCH By___________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By___________________________ Title: FIRST UNION NATIONAL BANK (f/k/a First Union National Bank of North Carolina) By___________________________ Title: THE FUJI BANK, LIMITED, ATLANTA AGENCY By___________________________ Title: 22 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG (f/k/a Girocredit Bank AG Der Sparkassen, Grand Cayman Island Branch) By___________________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By___________________________ Title: LEHMAN COMMERCIAL PAPER INC. By___________________________ Title: LLOYDS BANK PLC 23 By___________________________ Title: MELLON BANK, N.A. By___________________________ Title: NATIONSBANK, N.A. By___________________________ Title: THE SAKURA BANK, LTD. By___________________________ Title: THE SANWA BANK, LIMITED By___________________________ Title: SOCIETE GENERALE By___________________________ 24 Title: THE SUMITOMO BANK, LIMITED By___________________________ Title: THE TOKAI BANK, LIMITED NEW YORK BRANCH By___________________________ Title: WACHOVIA BANK, N.A. By___________________________ Title: BT BANK OF CANADA By___________________________ Title: BANK OF AMERICA CANADA By___________________________ 25 Title: THE CHASE MANHATTAN BANK OF CANADA By___________________________ Title: CREDIT LYONNAIS CANADA By___________________________ Title: CANADIAN IMPERIAL BANK OF COMMERCE By___________________________ Title: MELLON BANK CANADA By___________________________ Title: Acknowledged and agreed: AMI INDUSTRIES INC. 26 CII HOLDINGS INC COLTEC CANADA INC COLTEC INDUSTRIAL PRODUCTS INC COLTEC INTERNATIONAL SERVICES CO COLTEC NORTH CAROLINA INC. COLTEC TECHNICAL SERVICES INC DELAVAN INC (F/K/A DELAVAN NEWCO INC.) GARLOCK INC GARLOCK INTERNATIONAL INC GARLOCK OVERSEAS CORPORATION HABER TOOL COMPANY INC HOLLEY PERFORMANCE PRODUCTS INC JAMCO PRODUCTS, LLC MENASCO AEROSYSTEMS INC STEMCO INC WALBAR INC By__________________________ Title: On behalf of each of the above Subsidiary Guarantors EX-4.5 5 CONSENT AND AGREEMENT 1 EXHIBIT 4.5 CONSENT AND AGREEMENT WITH RESPECT TO CREDIT AGREEMENT CONSENT AND AGREEMENT WITH RESPECT TO CREDIT AGREEMENT (this "Consent"), dated as of March_31, 1998, among COLTEC INDUSTRIES INC, a corporation organized and existing under the laws of the State of Pennsylvania (the "Company"), Coltec Aerospace Canada Ltd., an Ontario corporation (the "Canadian Borrower"), the various Subsidiaries of the Company that are Credit Parties on the date of this Consent, the various Banks party to the Credit Agreement referred to below, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent, the Syndication Agent and the Administrative Agent are parties to a Credit Agreement, dated as of March 24, 1992, amended and restated as of January 11, 1994 and further amended and restated as of December 18, 1996, (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent, the Syndication Agent and the Administrative Agent have previously entered into the Fifth Amendment to Credit Agreement to provide, among other things, for the issuance of the New Senior Notes, the New Senior Exchange Notes, the TIDES and the TIDES Mirror Debentures and the extension of the TIDES Guarantee, all in accordance with the terms and subject to the conditions set forth in the Credit Agreement; WHEREAS, the Credit Agreement requires the approval of the Required Banks with respect to the (i) terms of the respective issuances of New Senior Notes and TIDES and (ii) certain amendments (including amendments and restatements) of certain Credit Documents to provide for the sharing of security with the New Senior Notes and the New Senior Exchange Notes; WHEREAS, subject to the terms and conditions set forth below, the parties hereto have agreed as follows; NOW, THEREFORE, it is agreed: New Senior Notes and New Senior Exchange Notes. The Banks hereby acknowledge that they have received (x) a preliminary Offering Memorandum, dated March 31, 1998, with respect to the New Senior Notes (the "New Senior Notes Preliminary Offering Memorandum") and (y) a term sheet containing a range of pricing information for the New Senior Notes (the "New Senior Notes Term Sheet"). Notwithstanding anything to the contrary contained in the Credit Agreement or the Fifth Amendment to Credit Agreement, the Banks hereby approve such documentation and agree that, so long as the 2 final documentation for the New Senior Notes is substantially consistent with the New Senior Notes Preliminary Offering Memorandum and the New Senior Notes Term Sheet, such documentation shall require no further approval of the Required Banks (although the Administrative Agent shall retain the right to approve the final form of any documentation relating to the New Senior Notes). So long as the requirements of the immediately preceding sentence are satisfied, no further approval on the part of the Required Banks (whether pursuant to Section 9.04(xxi) of the Credit Agreement or otherwise) shall be required with respect to the issuance of or documentation for the New Senior Notes. TIDES, TIDES Mirror Debentures and TIDES Guarantee. The Banks hereby acknowledge that they have received (x) a preliminary Offering Memorandum, dated March 31, 1998, with respect to the TIDES (the "TIDES Preliminary Offering Memorandum") and (y) a term sheet containing a range of pricing information for the TIDES (the "TIDES Term Sheet"). Notwithstanding anything to the contrary contained in the Credit Agreement or the Fifth Amendment to Credit Agreement, the Banks hereby approve such documentation and agree that, so long as the final documentation for the TIDES, the TIDES Mirror Debentures and the TIDES Guarantee is substantially consistent with the TIDES Preliminary Offering Memorandum and the TIDES Term Sheet, such documentation shall require no further approval of the Required Banks (although the Administrative Agent shall retain the right to approve the final form of any documentation relating to the TIDES, the TIDES Mirror Debentures and the TIDES Guarantee). So long as the requirements of the immediately preceding sentence are satisfied, no further approval on the part of the Required Banks (whether pursuant to Section 9.04(xxii) or 9.13 of the Credit Agreement or otherwise) shall be required with respect to the issuance of or documentation for the TIDES, the TIDES Mirror Debentures or the TIDES Guarantee. 2. Notwithstanding anything to the contrary set forth in the Credit Agreement, the Trust may issue TIDES and trust common securities to the Company so long as the gross proceeds (which shall include the proceeds received from any exercise of the underwriters' over-allotment option) received from such issuance shall not exceed $200,000,000 (it being expressly understood and agreed that such gross proceeds are to be applied in the manner provided in the Credit Agreement (including without limitation Section 3.03)). In furtherance of the foregoing, it is hereby agreed that the amount "$150,000,000" appearing in Section 9.13(a)(viii) of the Credit Agreement is hereby changed to "$200,000,000". Security Documents. The Banks hereby acknowledge that they have received the form of Amended and Restated Company Pledge Agreement (in substantially final form) providing for the sharing of security with the New Senior Notes and the New Senior Exchange 3 Notes and certain intercreditor arrangements relating thereto. The Banks hereby consent to the execution and delivery by the Collateral Agent of the Amended and Restated Company Pledge Agreement in the form furnished to the Banks prior to the Consent Effective Date (with such changes, which are not adverse to the Banks in any material respect, as may be agreed to by the Administrative Agent and Collateral Agent). The Banks hereby further agree that the Administrative Agent and/or Collateral Agent, as appropriate, may enter into such amendments and restatements of, or amendments to, the other Security Documents so long as same are in form approved by the Administrative Agent and are reasonably consistent with the changes made in the Amended and Restated Company Pledge Agreement in the form furnished to the Banks prior to the Consent Effective Date. The Banks further consent to the Administrative Agent and Collateral Agent taking all such other actions as may be deemed necessary or desirable by them in furtherance of the foregoing (which shall include, without limitation, executing such ancillary documentation or agreements as may be deemed necessary or desirable by the Administrative Agent and/or Collateral Agent). So long as the foregoing requirements are satisfied, the Banks hereby acknowledge and agree that no further consent of the Banks shall be required in connection with the amendments (including amendments and restatements) to the various Security Documents and the taking of the related actions described above, in each case in connection with the modifications thereto to be effected in connection with the issuance of New Senior Notes and New Senior Exchange Notes. Without limiting the foregoing, the requirements of Section 9.04(xxi) shall be deemed satisfied with respect to any amended (including any amended and restated) Security Documents executed and delivered in accordance with the foregoing provision. Miscellaneous. In order to induce the Banks to enter into this Consent, each of the Company and the Canadian Borrower hereby represent and warrant that (i) all representations and warranties contained in Section 7 of the Credit Agreement are true and correct in all material respects on and as of the Consent Effective Date (as defined below) after giving effect to the Consent (unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (ii) there exists no Default or Event of Default on the Consent Effective Date after giving effect to this Consent. This Consent is limited to the approvals and other matters as specified herein and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. This Consent may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and 4 delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Administrative Agent. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Consent shall become effective on the date (the "Consent Effective Date") when each Credit Party (including without limitation, the Company, the Canadian Borrower and each Subsidiary Guarantor) and the Required Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by usage of facsimile transmission) the same to the Administrative Agent at its Notice Office. From and after the Consent Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. * * * 5 IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. COLTEC INDUSTRIES INC By_______________________ Title: COLTEC AEROSPACE CANADA LTD. By_______________________ Title: BANKERS TRUST COMPANY, Individually and as Administrative Agent By_______________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Individually and as Documentation Agent 6 By____________________________ Title: THE CHASE MANHATTAN BANK, Individually and as Syndication Agent By____________________________ Title: BANK OF MONTREAL, Individually and as Canadian Paying Agent and Canadian Documentation Agent By____________________________ Title: ALLIED IRISH BANK, PLC, CAYMAN ISLANDS BRANCH 7 By____________________________ Title: BANK OF IRELAND By____________________________ Title: BANK COMMERCIALE ITALIANA NEW YORK BRANCH By____________________________ Title: By____________________________ Title: BANK LEUMI TRUST COMPANY OF NEW YORK By____________________________ Title: 8 THE BANK OF NEW YORK By____________________________ Title: BANK OF SCOTLAND By____________________________ Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By____________________________ Title: NATEXIS BANQUE BFCE, formerly BANQUE FRANCAISE DU COMMERCE EXTERIEUR By____________________________ Title: CIBC INC. 9 By____________________________ Title: THE YASUDA TRUST & BANKING COMPANY, LTD. COMMERCIAL LOAN FUNDING TRUST I By Lehman Commercial Paper Inc., not in its individual capacity but solely as administrative agent. By___________________________ Title: CORESTATES BANK By___________________________ Title: CREDIT LYONNAIS ATLANTA AGENCY By___________________________ Title: 10 CREDIT LYONNAIS NEW YORK BRANCH By___________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By___________________________ Title: FIRST UNION NATIONAL BANK (f/k/a First Union National Bank of North Carolina) By___________________________ Title: THE FUJI BANK, LIMITED, ATLANTA AGENCY By___________________________ Title: 11 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG (f/k/a Girocredit Bank AG Der Sparkassen, Grand Cayman Island Branch) By___________________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By___________________________ Title: LEHMAN COMMERCIAL PAPER INC. By___________________________ Title: LLOYDS BANK PLC 12 By___________________________ Title: MELLON BANK, N.A. By___________________________ Title: NATIONSBANK, N.A. By___________________________ Title: THE SAKURA BANK, LTD. By___________________________ Title: THE SANWA BANK, LIMITED By___________________________ Title: SOCIETE GENERALE By___________________________ 13 Title: THE SUMITOMO BANK, LIMITED By___________________________ Title: THE TOKAI BANK, LIMITED NEW YORK BRANCH By___________________________ Title: WACHOVIA BANK, N.A. By___________________________ Title: BT BANK OF CANADA By___________________________ Title: BANK OF AMERICA CANADA By___________________________ 14 Title: THE CHASE MANHATTAN BANK OF CANADA By___________________________ Title: CREDIT LYONNAIS CANADA By___________________________ Title: CANADIAN IMPERIAL BANK OF COMMERCE By___________________________ Title: MELLON BANK CANADA By___________________________ Title: Acknowledged and agreed: AMI INDUSTRIES INC. 15 CII HOLDINGS INC COLTEC CANADA INC COLTEC INDUSTRIAL PRODUCTS INC COLTEC INTERNATIONAL SERVICES CO COLTEC NORTH CAROLINA INC. COLTEC TECHNICAL SERVICES INC DELAVAN INC (F/K/A DELAVAN NEWCO INC.) GARLOCK INC GARLOCK INTERNATIONAL INC GARLOCK OVERSEAS CORPORATION HABER TOOL COMPANY INC HOLLEY PERFORMANCE PRODUCTS INC JAMCO PRODUCTS, LLC MENASCO AEROSYSTEMS INC STEMCO INC WALBAR INC By__________________________ Title: On behalf of each of the above Subsidiary Guarantors EX-4.6 6 MODIFICATION TO FIFTH AMENDMENT 1 EXHIBIT 4.6 MODIFICATION TO FIFTH AMENDMENT TO CREDIT AGREEMENT MODIFICATION TO FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Modification"), dated as of April 20, 1998, among COLTEC INDUSTRIES INC, a corporation organized and existing under the laws of the State of Pennsylvania (the "Company"), Coltec Aerospace Canada Ltd., an Ontario corporation (the "Canadian Borrower"), the various Subsidiaries of the Company that are Credit Parties on the date of this Modification, the various Banks party to the Credit Agreement referred to below, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the Administrative Agent are parties to a Credit Agreement, dated as of March 24, 1992, amended and restated as of January 11, 1994 and further amended and restated as of December 18, 1996, (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the Company, the Canadian Borrower, the Banks, the Documentation Agent, the Syndication Agent and the Administrative Agent have previously entered into the Fifth Amendment to Credit Agreement to provide, among other things, for the sale by the Company of a Subsidiary thereof and the application of the proceeds of such sale, all in accordance with the terms and subject to the conditions set forth in the Fifth Amendment to Credit Agreement; WHEREAS, the parties hereto have agreed to modify the Fifth Amendment to Credit Agreement as herein provided; NOW, THEREFORE, it is agreed: I. Modifications to Fifth Amendment to Credit Agreement. 1. Subclause (4) of Section 1 of Part I of the Fifth Amendment to Credit Agreement is hereby amended in its entirety to read as follows: "(4) inserting in clause (e) thereof the following new clauses (ii)(D) and (E), in appropriate order, in the second parenthetical appearing in said clause (e): 2 'and (D) the proceeds of the Holley Performance Disposition pursuant to Section 9.02(xxiii) and (E) the proceeds of the issuance of TIDES, New Senior Notes or New Senior Exchange Notes, as the case may be.'" 2. Section 9 of Part I of the Fifth Amendment to Credit Agreement is hereby amended in its entirety to read as follows: "Section 9.02 of the Credit Agreement is hereby amended by (x) deleting the word "and" at the end of clause (xxi) thereof, (y) deleting the period at the end of clause (xxii) thereof and inserting a semi-colon in lieu thereof and (z) inserting in appropriate order the following new clauses: '(xxiii) so long as there shall exist no Default or Event of Default (both before and after giving effect thereto), the Company shall be permitted to dispose of the business of Holley Performance by the sale of 100% of the capital stock of, or all or substantially all of the assets of, Holley Performance, which sale transaction may include the sale of those assets of the Company or a Subsidiary thereof utilized solely by Holley Performance in its business, and the lease (and any subsequent sale) of certain industrial development facilities owned or utilized by Holley Performance financed by City of Bowling Green, Kentucky industrial revenue refunding bonds in the original aggregate principal amount of $1,000,000 maturing on March 1, 2009 (collectively, the "Holley Performance Disposition"), so long as (A) such sale transaction is for fair market value (as determined in good faith by the Board of Directors of the Company), (B) the business and assets of Holley Performance shall not have materially changed from the business and assets, respectively, of Holley Performance on the Fifth Amendment Effective Date and (C) such sale transaction results in consideration consisting of at least 75% (for this purpose, taking the amount of cash and the fair market value of all non-cash consideration, as determined in good faith by the Company) of cash; (xxiv) New Senior Notes and/or New Senior Exchange Notes may be repurchased (so long as retired by the Company) in accordance with the provisions of clause (iv) of Section 9.11; and (xxv) the activities of the Trust and the Company in connection with its issuance of TIDES, and any dissolution of the Trust and distribution of TIDES Mirror Debentures, any conversions of TIDES Mirror Debentures into common stock of the Company, repurchases or redemptions of TIDES by the Trust in accordance with the provisions of Section 9.03 and corresponding repurchases or redemptions of TIDES Mirror Debentures by the Company in each case as contemplated by the documentation relating to the TIDES and the TIDES Mirror Debentures shall be permitted without causing a violation of this Section 9.02.'" 3. Section 25 of Part I of the Fifth Amendment to Credit Agreement is hereby amended in its entirety to read as follows: -2- 3 "Section 11 of the Credit Agreement is hereby further amended by inserting in appropriate order the following new definitions: ''Fifth Amendment' shall mean the Fifth Amendment to this Agreement, dated as of March 16, 1998. 'Fifth Amendment Effective Date' shall mean the date the Fifth Amendment becomes effective in accordance with its terms. 'Holley Performance' shall mean Holley Performance Products Inc, a Delaware corporation. 'Holley Performance Disposition' shall have the meaning provided in Section 9.02(xxiii). 'New Senior Exchange Notes' shall have the meaning provided in Section 9.04(xxi). 'New Senior Notes' shall have the meaning provided in Section 9.04(xxi). 'TIDES' shall have the meaning provided in Section 9.13(a)(viii). 'TIDES Guarantee' shall have the meaning provided in Section 9.04(xxii). 'TIDES Mirror Debentures' shall have the meaning provided in Section 9.04(a)(xxii). 'Trust' shall have the meaning provided in Section 9.13(a)(viii).'" II. Miscellaneous. 1. In order to induce the Banks to enter into this Modification, the Company and the Canadian Borrower hereby represent and warrant that (i) all representations and warranties contained in Section 7 of the Credit Agreement are true and correct in all material respects on and as of the Modification Effective Date (as defined below) and after giving effect to this Modification (unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (ii) there exists no Default or Event of Default on the Modification Effective Date after giving effect to this Modification. 2. This Modification is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 3. This Modification may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same -3- 4 instrument. A complete set of counterparts shall be lodged with the Company and the Administrative Agent. 4. THIS MODIFICATION AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 5. This Modification shall become effective on the date (the "Modification Effective Date") when each Credit Party (including without limitation, the Company, the Canadian Borrower and each Subsidiary Guarantor) and the Required Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by usage of facsimile transmission) the same to the Administrative Agent at its Notice Office. This Modification and the agreements contained herein shall be binding on the successors and assigns of the parties hereto. 6. From and after the Modification Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. * * * -4- 5 IN WITNESS WHEREOF, the parties hereto have caused a counterpart of this Modification to be duly executed and delivered as of the date first above written. COLTEC INDUSTRIES INC By________________________________ Title: COLTEC AEROSPACE CANADA LTD. By________________________________ Title: BANKERS TRUST COMPANY, Individually and as Administrative Agent By________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Individually and as Documentation Agent By________________________________ Title: THE CHASE MANHATTAN BANK, Individually and as Syndication Agent By________________________________ Title: -5- 6 BANK OF MONTREAL, Individually and as Canadian Paying Agent and Canadian Documentation Agent By________________________________ Title: ALLIED IRISH BANK, PLC, CAYMAN ISLANDS BRANCH By________________________________ Title: BANK OF IRELAND By________________________________ Title: BANK COMMERCIALE ITALIANA NEW YORK BRANCH By________________________________ Title: By________________________________ Title: BANK LEUMI TRUST COMPANY OF NEW YORK By________________________________ Title: -6- 7 THE BANK OF NEW YORK By________________________________ Title: BANK OF SCOTLAND By________________________________ Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By________________________________ Title: NATEXIS BANQUE BFCE, formerly BANQUE FRANCAISE DU COMMERCE EXTERIEUR By________________________________ Title: CIBC INC. By________________________________ Title: THE YASUDA TRUST & BANKING COMPANY, LTD. By________________________________ Title: -7- 8 COMMERCIAL LOAN FUNDING TRUST I By Lehman Commercial Paper Inc., not in its individual capacity but solely as administrative agent. By________________________________ Title: CORESTATES BANK By________________________________ Title: CREDIT LYONNAIS ATLANTA AGENCY By________________________________ Title: CREDIT LYONNAIS NEW YORK BRANCH By________________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By________________________________ Title: -8- 9 FIRST UNION NATIONAL BANK (f/k/a First Union National Bank of North Carolina) By________________________________ Title: THE FUJI BANK, LIMITED, ATLANTA AGENCY By________________________________ Title: ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG (f/k/a Girocredit Bank AG Der Sparkassen, Grand Cayman Island Branch) By________________________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By________________________________ Title: LEHMAN COMMERCIAL PAPER INC. By________________________________ Title: -9- 10 LLOYDS BANK PLC By________________________________ Title: MELLON BANK, N.A. By________________________________ Title: NATIONSBANK, N.A. By________________________________ Title: THE SAKURA BANK, LTD. By________________________________ Title: THE SANWA BANK, LIMITED By________________________________ Title: SOCIETE GENERALE By________________________________ Title: -10- 11 THE SUMITOMO BANK, LIMITED By________________________________ Title: THE TOKAI BANK, LIMITED NEW YORK BRANCH By________________________________ Title: WACHOVIA BANK, N.A. By________________________________ Title: BT BANK OF CANADA By________________________________ Title: BANK OF AMERICA CANADA By________________________________ Title: THE CHASE MANHATTAN BANK OF CANADA By________________________________ Title: -11- 12 CREDIT LYONNAIS CANADA By________________________________ Title: CANADIAN IMPERIAL BANK OF COMMERCE By________________________________ Title: MELLON BANK CANADA By________________________________ Title: Acknowledged and agreed: AMI INDUSTRIES INC CII HOLDINGS INC COLTEC CANADA INC COLTEC INDUSTRIAL PRODUCTS INC COLTEC INTERNATIONAL SERVICES CO COLTEC NORTH CAROLINA INC. COLTEC TECHNICAL SERVICES INC DELAVAN INC (F/K/A DELAVAN NEWCO INC.) GARLOCK INC GARLOCK INTERNATIONAL INC GARLOCK OVERSEAS CORPORATION HABER TOOL COMPANY INC HOLLEY PERFORMANCE PRODUCTS INC JAMCO PRODUCTS, LLC MENASCO AEROSYSTEMS INC STEMCO INC WALBAR INC By__________________________ Title: On behalf of each of the above Subsidiary Guarantors -12- EX-4.7 7 AMENDED AND RESTATED PLEDGE AGREEMENT 1 EXHIBIT 4.7 AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT PLEDGE AGREEMENT (this "Agreement"), dated as of March 24, 1992, amended and restated as of December 18, 1996 and further amended and restated as of March 16, 1998, made by COLTEC INDUSTRIES INC, a Pennsylvania corporation (the "Pledgor"), to BANKERS TRUST COMPANY, as Collateral Agent, (the "Pledgee") for the benefit of the Secured Creditors (as defined below) (except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as therein defined). W I T N E S S E T H : WHEREAS, the Pledgor, Coltec Aerospace Canada Ltd., the financial institutions (the "Banks") from time to time party thereto, Bank of America National Trust and Savings Association, as Documentation Agent (in such capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent" and together with the Pledgee, the Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the Banks and their respective successors and assigns, and together with any other financial institutions from time to time party to the Credit Agreement hereinafter referred to, the "Bank Creditors"), have entered into a Credit Agreement, dated as of March 24, 1992, and amended and restated as of January 11, 1994, and further amended and restated as of December 18, 1996, and as further amended, providing for the making of Loans to the Borrowers and the issuance of, and participation in, Letters of Credit, all as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same has been, and may from time to time in the future be, amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional guarantors or additional borrowers thereunder that are Subsidiaries of the Pledgor and whose obligations are guaranteed by the Pledgor thereunder or any increase in the amount borrowed) all or any portion of, the Indebtedness under such agreement or any successor agreements, whether or not with the same agent, trustee, representative, financial institutions or holders; provided that, with respect to any agreement providing for the refinancing or replacement of Indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (i) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Banks shall have consented in writing to the refinancing or replacement Indebtedness being treated, along with their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred under the Credit Agreement being refinanced (if such Credit Agreement 2 is to remain outstanding) and (iii) a notice to the effect that the refinancing or replacement Indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Pledgor to the Pledgee); WHEREAS, the Pledgor may at any time and from time to time enter into (or guarantee obligations of one or more of its Subsidiaries under) one or more of the following agreements: (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements") with one or more Bank Creditors or affiliates of Bank Creditors (each such Bank Creditor or affiliate, even if the respective Bank Creditor subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank Creditor's or affiliate's successors and assigns, collectively, the "Interest Rate Protection Creditors"); WHEREAS, the Pledgor may issue New Senior Notes and New Senior Exchange Notes as provided in the Credit Agreement that may be (to the extent permitted pursuant to the Credit Agreement) equally and ratably secured hereunder with the Credit Agreement Obligations as hereinafter provided (with any holders of New Senior Notes and New Senior Exchange Notes from time to time being herein collectively called "Senior Noteholders" and with all documentation evidencing any New Senior Notes or New Senior Exchange Notes, including without limitation the indenture and any subsidiary guarantees to be entered into in connection with the New Senior Notes, being herein called "Senior Note Documents"); WHEREAS, the Pledgor has heretofore entered into a Pledge Agreement, dated as of March 24, 1992, amended and restated as of January 11, 1994 and further amended and restated as of December 18, 1996 (as amended, modified or supplemented prior to the date hereof, the "Original Company Pledge Agreement"); WHEREAS, it is a condition to the extensions of credit under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Pledgor of the New Senior Notes that the Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, the Pledgor desires to execute this Agreement to (i) satisfy the conditions described in the preceding paragraph and (ii) amend and restate the Original Company Pledge Agreement; NOW, THEREFORE, in consideration of the extensions of credit to be made to the Pledgor under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Pledgor of the New Senior Notes and other benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Pledgee for the ratable benefit of the Secured Creditors and -2- 3 hereby covenants and agrees with the Pledgee for the ratable benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor for the ratable benefit of the Bank Creditors, the Interest Rate Protection Creditors and the Senior Noteholders, in each case to the extent from time to time holding Obligations (as defined below) of such Pledgor secured hereunder (collectively, and together with the Pledgee, the "Secured Creditors"), to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors, now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents, and the due performance of, and compliance with, all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents by the Pledgor (all such principal, interest, obligations, liabilities and indebtedness described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of the Pledgor to the Interest Rate Protection Creditors, now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection or Other Hedging Agreement (including, without limitation, all such obligations and liabilities of the Pledgor under any guarantee by it of obligations pursuant to any Interest Rate Protection or Other Hedging Agreement), and the due performance of, and compliance with, all of the terms, conditions and agreements contained therein by the Pledgor (all such obligations, liabilities and indebtedness described in this clause (ii) being herein collectively called the "Interest Rate Protection Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all (x) principal of and interest on the New Senior Notes and the New Senior Exchange Notes and (y) other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of the Pledgor to the Senior Noteholders, whether now existing or hereafter incurred under, arising out of or in connection with the New Senior Notes, the New Senior Exchange Notes and the other Senior Note Documents, and the due performance of, and compliance with, all of the terms, conditions and agreements contained therein by the Pledgor (all such obligations, liabilities and indebtedness described in this clause (iii) being herein collectively called the "Senior Note Obligations"); -3- 4 (iv) (x) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral in a manner not in violation of the terms hereof and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Pledgor referred to in clauses (i) through (iv) above, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default at any time under, and as defined in, any of the Credit Agreement and the Senior Note Documents and any payment default (after the expiration of any applicable grace period) on any of the Obligations (as defined below) secured hereunder at such time) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (vi) of this Section 1 being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any Domestic Corporation at any time owned by the Pledgor and (y) with respect to corporations that are not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock of any Foreign Corporation at any time owned by the Pledgor, provided that, except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder more than 66% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote and (ii) the term "Notes" shall mean (x) all promissory notes at any time issued to the Pledgor by any of its Subsidiaries or Affiliates and (y) all other promissory notes from time to time issued to, or held by, the Pledgor, provided that, except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder any promissory notes issued to the Pledgor by any Subsidiary of the Pledgor which is a Foreign Corporation. As used herein, the term "Securities" shall mean all of the Stock and Notes. The Pledgor represents and warrants, as to the stock of corporations and promissory notes owned by the Pledgor, that on the Fifth Amendment Effective Date (a) the Stock consists of the number and type of shares of the stock of -4- 5 the corporations as described in Part I of Annex A hereto; (b) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Annex A hereto; (c) the Notes consist of the promissory notes described in Part II of Annex A hereto; and (d) the Pledgor is the holder of record and sole beneficial owner of the Stock and the Notes and there exist no options or preemption rights in respect of any of the Stock. In the circumstances and only to the extent provided in Section 8.11 of the Credit Agreement, the 66% limitation set forth in the proviso in clause (i)(y) and the limitation set forth in the proviso in clause (ii) of this Section 2 and the last sentence of Section 3.2 shall no longer be applicable. 3. PLEDGE OF SECURITIES, ETC. 3.1. Pledge. To secure the Obligations and for the purposes set forth in Section 1, the Pledgor (i) hereby grants to the Pledgee a security interest in all of the Collateral, (ii) hereby pledges and deposits as security with the Pledgee the Securities owned by the Pledgor on the date hereof, and delivers to the Pledgee certificates therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such securities, with signatures appropriately guaranteed) in the case of capital stock, or such other instruments of transfer as are acceptable to the Pledgee and (iii) hereby assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of the Pledgor's right, title and interest in and to such Securities (and in and to the certificates or instruments evidencing such Securities), to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. 3.2. Subsequently Acquired Securities. If the Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, the Pledgor will promptly thereafter pledge and deposit such Securities (or certificates or instruments representing Securities) as security with the Pledgee and deliver to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such securities, with signatures appropriately guaranteed) in the case of capital stock, or such other instruments of transfer as are acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by a principal executive officer of the Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder. Subject to the last sentence of Section 2, the Pledgor shall not be required at any time to pledge hereunder any promissory notes issued to the Pledgor by a Subsidiary which is a Foreign Corporation or more than 66% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. 3.3. Uncertificated Securities. Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law. The Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies -5- 6 hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Securities promptly upon request of the Pledgee. 3.4. Definitions of Pledged Stock; Pledged Notes; Pledged Securities and Collateral. (a) All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock"; all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes"; all Pledged Stock and Pledged Notes together are called the "Pledged Securities"; and the Pledged Securities, together with all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, are hereinafter called the "Collateral." (b) If (i) a Bankruptcy Default or Notified Acceleration Event (as each such term is defined in the Company Security Agreement, provided, however, references therein to the Assignor and the Collateral Agent shall be references to the Pledgor and the Pledgee, respectively) has occurred and is continuing, or (ii) any other Event of Default or Acceleration Event (as each such term is defined in the Company Security Agreement, provided, however, references therein to the Assignor and the Collateral Agent shall be references to the Pledgor and the Pledgee, respectively) has occurred and is continuing, but in the case of this clause (b) only if, and to the extent that, the Pledgee (acting at the direction of the Required Secured Creditors (as defined in Annex B hereto)) has given notice to the Pledgor to take the actions specified below in this sentence, then in either such case all cash proceeds of, and cash payments received in respect of, Collateral shall be paid by the Pledgor (or the respective payor) as directed by the Pledgee. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral, but excluding cash proceeds of sales of Collateral unless the respective sale and release of Collateral is permitted pursuant to this Agreement and the Credit Agreement, shall be paid to the Pledgor. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO SPECIFIED EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Pledgee (acting at the direction of the Required Secured Creditors) has so notified the Pledgor, the Pledgor shall be entitled to vote any and all Pledged Securities owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in, or be inconsistent with, any of the terms of this Agreement, the Credit Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or any Senior Note Document, or which would have the effect of impairing the value of the Collateral (other than any impairment in the form of a decline in the market value of such Pledged Security which occurred solely as a result of any vote relating to the manner in which the business of the corporation issuing such Pledged Security is to be -6- 7 conducted to the extent the Pledgor shall have voted the Pledged Securities owned by it in good faith and in accordance with its prudent business judgment) or any part thereof or the rights, priorities, remedies, position or interests of the Pledgee or any Secured Creditor. All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease in case either (i) a Bankruptcy Default or Notified Acceleration Event shall occur and be continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing but in the case of this clause (ii) only to the extent the Pledgee (acting at the direction of the Required Secured Creditors) has so notified the Pledgor, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Pledgee (acting at the direction of the Required Secured Creditors) has so notified the Pledgor, all dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the Pledgor. The Pledgee shall be entitled to receive directly, and to retain as part of the Collateral: (a) all other or additional stock or securities paid or distributed by way of dividend or otherwise, as the case may be, in respect of the Pledged Stock; (b) all other or additional stock or other securities paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (c) all other or additional stock or other securities or property (excluding cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 and Section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of the Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF SPECIFIED EVENTS. If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, then and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or any Senior Note Documents, in each case to the extent then in effect and secured hereby (with all of the documents listed above being herein collectively called the "Secured Debt Documents") or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform -7- 8 Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which the Pledgor hereby agrees to be commercially reasonable: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to the Pledgor; (b) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (c) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note; (d) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full power of substitution to do so); and (e) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 10 days' notice of the time and place of any such sale shall be given to the Pledgor. The Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. The Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Document or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Document or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or -8- 9 remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other or further action in any circumstances without notice or demand. The Secured Creditors agree that this Agreement may be enforced only by the action of the Pledgee acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually or as a group, directly or indirectly, to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby or to cause the Pledgee or the Required Secured Creditors to take or cause to be taken any action in respect of this Agreement (except as expressly contemplated hereby), it being understood and agreed that such rights and remedies may be exercised only by the Pledgee for the ratable benefit of all Secured Creditors upon the terms and conditions of this Agreement, it being further understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Collateral Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Collateral Agent of the type provided in clauses (iv) and (v) of the definition of Obligations; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined below) of the Pledgor shall be paid to the Secured Creditors as provided in Section 9(e), with each Secured Creditor receiving an amount equal to its outstanding Primary Obligations of the Pledgor or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations of the Pledgor shall be paid to the Secured Creditors as provided in Section 9(e), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations of the Pledgor or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 18, to the Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as -9- 10 a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, of the Pledgor and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, of the Pledgor, (y) "Primary Obligations" of the Pledgor shall mean (i) in the case of the Credit Agreement Obligations, all Obligations of the Pledgor arising out of or in connection with (including, without limitation, as obligor or guarantor, as the case may be) the principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts of all Letters of Credit issued under the Credit Agreement and outstanding, and all Fees outstanding and unpaid at the relevant time, (ii) in the case of the Senior Note Obligations, all Obligations of the Pledgor secured hereby arising out of or in connection with the principal of, and interest on, the New Senior Notes and the New Senior Exchange Notes and (iii) in the case of the Interest Rate Protection Obligations, all Obligations of the Pledgor arising out of or in connection with (including, without limitation, as a direct obligor or a guarantor, as the case may be) Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities), and (z) "Secondary Obligations" of the Pledgor shall mean all Obligations of the Pledgor secured hereby other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 9 only) (i) first, to the Primary Obligations of the Pledgor and (ii) second, to the Secondary Obligations of the Pledgor. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued under the Credit Agreement, such amounts shall be paid to the Paying Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Paying Agent to the Collateral Agent for distribution in accordance with Section 9(a). (e) Except as set forth in Section 9(d), all payments required to be made hereunder shall be made (i) if to the Bank Creditors, to the Paying Agent under the Credit -10- 11 Agreement for the account of the Bank Creditors, and (ii) if to any other Secured Creditors (other than the Collateral Agent), to the trustee, paying agent or other similar representative (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. (f) For purposes of applying payments received in accordance with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the Paying Agent under the Credit Agreement and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Paying Agent, each Representative for any other Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. Unless it has actual knowledge (including by way of written notice from a Representative for any Secured Creditor or directly from a Secured Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that the Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral pledged by it hereunder and the aggregate amount of the Obligations of the Pledgor. Notwithstanding anything to the contrary in this Agreement (including Annex B), (i) all actions required or permitted to be taken under this Agreement by the Senior Noteholders shall be so taken only by the trustee under the indenture under which the Senior Notes were issued on behalf of the Senior Noteholders (the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all payments required to be made with respect to the Senior Note Obligations shall be paid to the Senior Notes Trustee, and the Pledgee shall be entitled (but not required) to conclusively rely upon and act in accordance with any instructions from the Senior Notes Trustee subject to the terms and conditions of this Agreement and to assume that such instructions are being given in accordance with such indenture. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of sale proceeds by the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. The Pledgor agrees to indemnify and hold harmless the Pledgee and each other Secured Creditor (other than the Senior Noteholders) and their respective successors, assigns, employees, agents, servants and Representatives (including the Administrative Agent) hereunder (individually an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, in each case growing out of or resulting from this -11- 12 Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under the other Credit Documents or the Interest Rate Protection and Other Hedging Agreements, provided that the Pledgor shall not be required to indemnify any Indemnitee in respect of any claims, demands, losses, judgments, liabilities, costs or expenses to the extent arising from the gross negligence or willful misconduct of such Indemnitee. In no event shall any Indemnitee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Pledgor agrees that it will join with the Pledgee in executing and, at the Pledgor's own expense, file and refile under the applicable Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) The Pledgor hereby appoints the Pledgee the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee's discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth in Annex B hereto, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety. 14. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). -12- 13 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The Pledgor represents and warrants that (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will have) good and marketable title to, all Securities pledged hereunder, subject to no Lien (except the Lien created by this Agreement); (b) it has full corporate power, authority and legal right to pledge all the Securities pursuant to this Agreement; (c) this Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms except to the extent the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law); (d) except to the extent already obtained, no consent of any other party (including, without limitation, any stockholder or creditor of the Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by the Pledgor in connection with (i) the execution, delivery or performance of this Agreement, (ii) the validity or enforceability of this Agreement, (iii) the perfection or enforceability of the Pledgee's security interest in the Collateral or (iv) the exercise by the Pledgee of any of its rights or remedies provided herein; (e) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign applicable to the Pledgor, or of the Certificate of Incorporation or By-Laws of the Pledgor or of any securities issued by the Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, loan agreement, credit agreement or other material contract, agreement or instrument or undertaking to which the Pledgor or any of its Subsidiaries is a party or which purports to be binding upon the Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of any Lien or encumbrance on any of the assets of the Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f) all the shares of the Stock have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; (g) each of the Pledged Notes, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and equitable principles (regardless of whether enforcement is sought in equity or at law); and (h) the pledge, assignment and delivery of the Securities pursuant to this Agreement creates a valid and perfected first priority Lien in such Securities, and the proceeds thereof (other than any cash proceeds thereof to the extent not required to be delivered to the Pledgee pursuant to the terms hereof), subject to no Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of the Pledgor which would include the Securities. The Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all Persons whomsoever; and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. -13- 14 16. PLEDGOR'S OBLIGATIONS ABSOLUTE ETC. The obligations of the Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Document or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (c) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (d) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing. 17. REGISTRATION, ETC. (a) If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed then, and in every such case, upon receipt by the Pledgor from the Pledgee of a written request or requests that the Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, the Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided that the Pledgee shall furnish to the Pledgor such information regarding the Pledgee as the Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. The Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the Pledgor by the Pledgee expressly for use therein. -14- 15 (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion, (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), without any action on the part of any Secured Creditor, this Agreement shall terminate and be of no further force or effect (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the Pledgor, will execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Pledgee hereunder. As used in this Agreement, "Termination Date" shall mean the first to occur of (i) that date upon which the Total Commitment and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding, all Letters of Credit have been terminated and all other Credit Agreement Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) then owing by the Pledgor have been paid in full, (ii) that date upon which the Collateral is automatically released pursuant to the first sentence of Section 26 of Part I of the Fifth Amendment to Credit Agreement or the Administrative Agent directs the Pledgee to release the Collateral pursuant to the second sentence of Section 26 of Part I of the Fifth Amendment to the Credit Agreement and (iii) that date upon which the Credit Documents are amended to release all Collateral subject to this Agreement. (b) It is expressly acknowledged and agreed that the Collateral may be sold from time to time to the extent permitted by, and in accordance with the terms of, the Credit Agreement. In addition, it is expressly acknowledged and agreed that any or all of the Collateral may be released by the Pledgee acting at the direction of the Required Secured Creditors. Upon any sale of the type described in the second preceding sentence or release of any such Collateral -15- 16 as provided in the immediately preceding sentence, the Pledgee shall, at the request and expense of the Pledgor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to the Pledgor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. Notwithstanding anything to the contrary contained above in this Section 18(b), in the event the Senior Notes Trustee shall have notified the Pledgee in writing that the Senior Note Obligations have been accelerated in accordance with the terms of the Senior Note Documents (and (x) the Senior Note Obligations have not been paid in full and (y) the respective acceleration has not been rescinded), the Collateral Agent shall not thereafter release any Collateral pursuant to this Section 18(b) or consent to any termination of this Agreement, except in each case with the prior written consent of the Senior Noteholders holding a majority of the then outstanding Senior Note Obligations secured hereby (or following the payment in full of the Senior Note Obligations or the rescission of the respective acceleration). (c) At any time that the Pledgor desires that Collateral be released as provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 18(a) or (b), and the Pledgee shall be entitled (but not required) to conclusively rely thereon. If requested by the Pledgee (although the Pledgee shall have no obligation to make any such request), the Pledgor shall furnish appropriate legal opinions (from counsel acceptable to the Pledgee) to the effect set forth in the immediately preceding sentence. (d) Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Pledgee in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by the Pledgor were permitted to be received by the Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon the request and at the expense of the Pledgor, duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such Pledged Note if same is then in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 18. Upon any release of Collateral pursuant to Section 18(a), (b), (c) or (d), none of the Secured Creditors shall have any continuing right or interest in such Collateral or the proceeds thereof. 19. NOTICES ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed as follows: -16- 17 (a) if to the Pledgor, at: Coltec Industries Inc 3 Coliseum Center 2550 West Tyvola Road Charlotte, North Carolina 28217 Attention: Thomas B. Jones, Jr. Telephone: (704) 423-7052 Facsimile: (704) 423-7127 (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Attention: Mary Kay Coyle Telephone: (212) 250-9094 Facsimile: (212) 250-7200 (c) if to any Bank Creditor (other than the Pledgee), either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any other Secured Creditor, either (x) to the Representative for such Secured Creditor at such address as such Representative may have provided to the Pledgor and the Pledgee from time to time, or (y) in the absence of such a Representative, directly to such Secured Creditor at such address as such Secured Creditor shall have specified in writing to the Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with the written consent of the Required Banks (or all the Banks if required by Section 13.12 of the Credit Agreement)); provided, however, that any change, waiver, modification or variance materially adversely affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Class Creditors (as defined below) of such affected Class; provided, further, that any Class shall not be considered to be affected differently from any other Class due to the Obligations of any such other Class being paid, repaid, refinanced, renewed or extended and the Collateral being released, in -17- 18 whole or in part (whether by action of such other Class or otherwise), as security for such Class and such other Class. Notwithstanding anything to the contrary contained above, it is understood and agreed that the Required Banks may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreement or any refinancing or extension thereof). For the purpose of this Agreement, the term "Class" shall mean, at any time, each class of Secured Creditors with outstanding Obligations secured hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders of Senior Note Obligations secured hereby or (z) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations secured hereby; provided that, without limiting the foregoing, it is expressly acknowledged and agreed that other creditors may be added as "Secured Creditors" hereunder (either as part of an existing Class of creditors or as a newly created Class) with the consent of the Required Secured Creditors, and that such addition shall not require the written consent of the Requisite Class Creditors of the various Classes. For the purpose of this Agreement, the term "Requisite Class Creditors" of any Class shall mean each of (i) with respect to the Credit Agreement Obligations, the Required Banks and (ii) with respect to any other Obligations, the holders of at least a majority of all Obligations outstanding from time to time. 21. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns; provided that the Pledgor may not assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the consent of the Required Secured Creditors). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 22. AMENDMENT AND WAIVER. Upon the execution and delivery of this Agreement by the parties hereto, the Original Company Pledge Agreement shall be amended, restated and superseded in its entirety by this Agreement, effective as of the date hereof, with all rights, obligations and security interests created under or granted pursuant to the Original Company Pledge Agreement continuing from the date thereof. -18- 19 IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Agreement to be executed and delivered by their duly elected officers duly authorized as of the date first above written. COLTEC INDUSTRIES INC, (as "Pledgor") By /s/ THOMAS B. JONES, JR. ___________________________ Title: Vice President and Treasurer BANKERS TRUST COMPANY, as Collateral Agent (as "Pledgee") By /s/ ANTHONY LOGRIPPO __________________________ Title: Vice President -19- 20 ANNEX A ANNEX A LIST OF PLEDGED STOCK AND PLEDGED NOTES Part I. Pledged Stock
========================================================================================================= Percentage of Name of Issuing Corporation Type of Shares Number of Shares Outstanding Shares of Capital Stock - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- =========================================================================================================
21 Annex A Page 2 Part II. Pledged Notes
Principal Lender Borrower Amount ------ -------- ------
22 Annex A Page 3 23 ANNEX B ANNEX B THE PLEDGEE 1. Appointment. The Secured Creditors, by their acceptance of the benefits of the Company Pledge Agreement to which this Annex B is attached (the "Pledge Agreement") hereby irrevocably designate the Collateral Agent (and any successor Pledgee) to act as Pledgee as specified herein and therein. Unless otherwise defined herein, all capitalized terms used herein (x) and defined in the Pledge Agreement, are used herein as therein defined and (y) not defined in the Pledge Agreement, are used herein as defined in the Credit Agreement referenced in the Pledge Agreement. Each Secured Creditor hereby irrevocable authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of the Pledge Agreement shall be deemed irrevocably to authorize, the Pledgee to take such action on its behalf under the provisions of the Pledge Agreement and any instruments and agreements referred to therein and to exercise such powers and to perform such duties thereunder as are specifically delegated to or required of the Pledgee by the terms thereof and such other powers as are reasonably incidental thereto. The Pledgee may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 2. Nature of Duties. (a) The Pledgee shall have no duties or responsibilities except those expressly set forth herein or in the Pledge Agreement. The duties of the Pledgee shall be mechanical and administrative in nature; the Pledgee (in such capacity) shall not have by reason of this Agreement, any other Credit Document or any other Secured Debt Document a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any other Secured Debt Document, expressed or implied, is intended to or shall be so construed as to impose upon the Pledgee any obligations in respect of the Pledge Agreement except as expressly set forth herein and therein. (b) The Pledgee shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Pledgee shall not be required to ascertain or inquire as to the performance by any Pledgor of any of the covenants or agreements contained in the Pledge Agreement, any other Credit Document or any other Secured Debt Document. (d) The Pledgee shall be under no obligation or duty to take any action under, or with respect to, the Pledge Agreement if taking such action (i) would subject the Pledgee to a tax in any jurisdiction where it is not then subject to a tax , (ii) would require the Pledgee to qualify to do business, or obtain any license, in any jurisdiction where it is not then so qualified or licensed or (iii) would subject the Pledgee to in personam jurisdiction in any locations where it is not then so subject. 24 Annex B Page 2 (e) Notwithstanding any other provision of this Annex B, neither the Pledgee nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with, or pursuant to this Annex B or the Pledge Agreement except for its own gross negligence or willful misconduct. 3. Lack of Reliance on the Pledgee. Independently and without reliance upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Pledgor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith and (ii) its own appraisal of the creditworthiness of the Pledgor and its Subsidiaries, and the Pledgee shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any notes or at any time or times thereafter. The Pledgee shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Pledge Agreement or the security interests granted thereunder or the financial condition of the Pledgor or any Subsidiary of the Pledgor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Pledge Agreement, or the financial condition of the Pledgor or any Subsidiary of the Pledgor, or the existence or possible existence of any default or event of default. The Pledgee makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Pledgor thereto or as to the security afforded by the Pledge Agreement. 4. Certain Rights of the Pledgee. (a) No Secured Creditor shall have the right to cause the Pledgee to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Pledgee to take any such action, it being understood and agreed that nothing in this Annex B shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. If the Pledgee shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with the Pledge Agreement, the Pledgee shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Pledgee shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Pledgee as a result of the Pledgee acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the Required Banks (or, to the extent required by Section 13.12 of the Credit Agreement, all of the Banks). Notwithstanding anything to the contrary contained in the immediately preceding sentence, if at any time the principal of any Obligations secured hereby has been accelerated, or the final maturity date with respect to any such principal Obligations has occurred, and as a result thereof one or more payment Events of Default (where the aggregate principal amount of such Obligations accelerated or not paid at final maturity equals or exceeds $100,000,000), which 25 Annex B Page 3 payment Events of Default shall have continued in existence for at least 90 consecutive days after the date of such acceleration or final maturity, and the Required Secured Creditors at such time (determined without regard to this sentence) have not directed the Pledgee to commence enforcement proceedings pursuant to the Pledge Agreement, then so long as such payment Event of Default is continuing the Secured Creditors holding at least a majority of the outstanding Obligations secured hereby subject to such payment Event of Default shall constitute the Required Secured Creditors for purposes of causing the Pledgee to commence enforcement proceedings pursuant to the Pledge Agreement, provided that in such event the Secured Creditors which would constitute the Required Secured Creditors in the absence of this sentence shall have the right to direct the manner and method of enforcement so long as such directions do not materially delay or impair the taking of enforcement action. (b) Notwithstanding anything to the contrary contained herein, the Pledgee is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Pledgee but have not yet been received, to take any action which the Pledgee, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Pledgee shall be governed thereby and the Pledgee shall not take any further action which would be contrary thereto. (c) Notwithstanding anything to the contrary contained herein or in the Pledge Agreement, the Pledgee shall not be required to take any action that exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or its officers, directors, agents or employees to personal liability, unless the Pledgee shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement, any Secured Debt Document or applicable law. 5. Reliance. The Pledgee shall be entitled to rely, and shall be fully protected in relying, upon, any note, writing, resolution, notice, statement, certificate, telex, teletype message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel selected by it. 6. Indemnification. To the extent the Pledgee is not reimbursed and indemnified by the Pledgor under the Pledge Agreement, the Secured Creditors (other than the Senior Noteholders) will reimburse and indemnify the Pledgee, in proportion to their respective outstanding principal amounts (including, for this purpose, the Stated Amount of outstanding Letters of Credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection or Other Hedging Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct. The indemnities set forth in this Section 6 shall survive the repayment of all Obligations, with the respective indemnification at 26 Annex B Page 4 such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Pledgee is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of the Pledge Agreement. The indemnities set forth in this Section 6 are in addition to any indemnities provided by the Banks to the Pledgee pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Pledgee to the extent the Pledgee does not receive payments pursuant to this Section 6 from the Secured Creditors (other than the Senior Noteholders) (although in such event, and upon the payment in full of all such amounts owing to the Pledgee by the Banks, the Banks shall be subrogated to the rights of the Pledgee to receive payment from such Secured Creditors). 7. The Pledgee in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Pledgee is a party, and to act as agent under one or more of such Credit Documents, the Pledgee shall have the rights and powers specified therein and herein for a "Bank", or an "Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "Required Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Pledgee in its individual capacity. The Pledgee and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with the Pledgor or any Affiliate or Subsidiary of the Pledgor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from the Pledgor for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 8. Holders. The Pledgee may deem and treat the payee of any note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Pledgee. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such note or of any note or notes issued in exchange therefor. 9. Resignation by the Pledgee. (a) The Pledgee may resign from the performance of all of its functions and duties hereunder and under the Pledge Agreement at any time by giving 15 Business Days' prior written notice to the Pledgor and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Pledgee pursuant to Section 9(b) or (c) below. (b) If a successor Pledgee shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Pledgee, with the consent of the Pledgor, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. 27 Annex B Page 5 (c) If no successor Pledgee has been appointed pursuant to Section 9(b) above by the 15th Business Day after the date of such notice of resignation was given by the Pledgee, as a result of a failure by the Pledgor to consent to the appointment of such a successor Pledgee, the Required Secured Creditors shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. EX-4.8 8 AMENDED AND RESTATED SECURITY AGREEMENT 1 EXHIBIT 4.8 AMENDED AND RESTATED SECURITY AGREEMENT between COLTEC INDUSTRIES INC and BANKERS TRUST COMPANY, as Collateral Agent Dated as of March 24, 1992 and AMENDED AND RESTATED as of December 18, 1996 and FURTHER AMENDED AND RESTATED as of March 16, 1998 2 TABLE OF CONTENTS Page ---- ARTICLE I SECURITY INTERESTS ...........................................................3 1.1.Grant of Security Interests......................................3 1.2.Power of Attorney................................................4 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ............................4 2.1.Necessary Filings................................................4 2.2.No Liens.........................................................4 2.3.Other Financing Statements.......................................4 2.4.Chief Executive Office; Records..................................5 2.5.Location of Inventory and Equipment..............................5 2.6.Recourse.........................................................6 2.7.Trade Names; Change of Name......................................6 ARTICLE III SPECIAL PROVISIONS CONCERNINGRECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS .......................................6 3.1.Additional Representations and Warranties........................6 3.2.Maintenance of Records...........................................7 3.3.Direction to Account Debtors; Contracting Parties; etc...........7 3.4.Modification of Terms; etc.......................................8 3.5.Collection.......................................................8 3.6.Instruments......................................................8 3.7. Government Contracts...........................................8 3.8. Assignment of Claims Act Notices...............................9 3.9. Further Actions................................................9 ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS .........................................10 4.1.Additional Representations and Warranties.......................10 (i) 3 Page ---- 4.2.Licenses and Assignments........................................10 4.3.Infringements...................................................10 4.4.Preservation of Marks...........................................10 4.5.Maintenance of Registration.....................................11 4.6.Future Registered Marks.........................................11 4.7.Remedies........................................................11 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS ........................12 5.1.Additional Representations and Warranties.......................12 5.2.Licenses and Assignments........................................12 5.3.Infringements...................................................12 5.4.Maintenance of Patents..........................................12 5.5.Prosecution of Patent Application...............................12 5.6.Other Patents and Copyrights....................................13 5.7.Remedies........................................................13 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL ........................................13 6.1.Protection of Collateral Agent's Security.......................13 6.2.Warehouse Receipts Non-negotiable...............................14 6.3.Further Actions.................................................14 6.4.Financing Statements............................................14 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT ................................14 7.1.Remedies; Obtaining the Collateral Upon Default.................14 7.2.Remedies; Disposition of the Collateral.........................15 7.3.Waiver of Claims................................................16 7.4.Application of Proceeds.........................................17 7.5.Remedies Cumulative.............................................19 7.6.Discontinuance of Proceedings...................................20 7.7.Purchasers Of Collateral........................................20 ARTICLE VIII (ii) 4 Page ---- INDEMNITY ....................................................................20 8.1.Indemnity........................................................20 8.2.Indemnity Obligations Secured by Collateral; Survival............21 ARTICLE IX DEFINITIONS...................................................................22 ARTICLE X THE COLLATERAL AGENT .........................................................28 10.1.Appointment.....................................................28 10.2.Nature of Duties................................................28 10.3.Lack of Reliance on the Collateral Agent........................29 10.4.Certain Rights of the Collateral Agent..........................29 10.5.Reliance........................................................30 10.6.Indemnification.................................................30 10.7.The Collateral Agent in its Individual Capacity.................31 10.8.Holders.........................................................31 10.9.Resignation by the Collateral Agent.............................32 10.10.Fees and Expenses of Collateral Agent..........................32 ARTICLE XI MISCELLANEOUS 11.1.Notices.........................................................32 11.2.Waiver; Amendment...............................................33 11.3.Obligations Absolute............................................34 11.4.Successors and Assigns..........................................34 11.5.Headings Descriptive............................................35 11.6.Severability....................................................35 11.7.GOVERNING LAW...................................................35 11.8.Assignor's Duties...............................................35 11.9.Termination; Release............................................35 ANNEX A Schedule of Permitted Filings ANNEX B Schedule of Record Locations ANNEX C Schedule of Inventory and Equipment Locations ANNEX D Schedule of Trade, Fictitious and Other Names ANNEX E Schedule of Marks (iii) 5 Page ---- ANNEX F Schedule of Patents and Applications ANNEX G Schedule of Copyrights and Applications (iv) 6 AMENDED AND RESTATED COMPANY SECURITY AGREEMENT SECURITY AGREEMENT (this "Agreement"), dated as of March 24, 1992, amended and restated as of December 18, 1996 and further amended and restated as of March 16, 1998, between COLTEC INDUSTRIES INC, a Pennsylvania corporation (the "Assignor"), and BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral Agent") for the benefit of the Secured Creditors (as defined below) (except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as therein defined). W I T N E S S E T H : WHEREAS, the Assignor, Coltec Aerospace Canada Ltd., the financial institutions (the "Banks") from time to time party thereto, Bank of America National Trust and Savings Association, as Documentation Agent (in such capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent" and together with the Pledgee, the Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the Banks and their respective successors and assigns, and together with any other financial institutions from time to time party to the Credit Agreement hereinafter referred to, the "Bank Creditors"), have entered into a Credit Agreement, dated as of March 24, 1992, and amended and restated as of January 11, 1994, and further amended and restated as of December 18, 1996 and as further amended, providing for the making of Loans to the Borrowers and the issuance of, and participation in, Letters of Credit, all as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same has been, and may from time to time in the future be, amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional guarantors or additional borrowers thereunder that are Subsidiaries of the Assignor and whose obligations are guaranteed by the Assignor thereunder or any increase in the amount borrowed) all or any portion of, the Indebtedness under such agreement or any successor agreements, whether or not with the same agent, trustee, representative, financial institutions or holders; provided that with respect to any agreement providing for the refinancing or replacement of Indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (i) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Banks shall have consented in writing to the refinancing or replacement -2- 7 Indebtedness being treated, along with their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred under the Credit Agreement being refinanced (if such Credit Agreement is to remain outstanding) and (iii) a notice to the effect that the refinancing or replacement Indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Assignor to the Collateral Agent); WHEREAS, the Assignor may at any time and from time to time enter into (or guaranty obligations of one or more of its Subsidiaries under) one or more of the following agreements: (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements") with one or more Bank Creditors or affiliates of Bank Creditors (each such Bank Creditor or affiliate, even if the respective Bank Creditor subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank Creditor's or affiliate's successors and assigns, collectively, the "Interest Rate Protection Creditors"); WHEREAS, the Assignor may issue New Senior Notes and New Senior Exchange Notes as provided in the Credit Agreement that may be (to the extent permitted pursuant to the Credit Agreement) equally and ratably secured hereunder with the Credit Agreement Obligations as hereinafter provided (with any holders of New Senior Notes and New Senior Exchange Notes from time to time being herein collectively called "Senior Noteholders" and with all documentation evidencing any New Senior Notes or New Senior Exchange Notes, including without limitation the indenture and any subsidiary guarantees to be entered into in connection with the New Senior Notes, being herein called "Senior Note Documents"); WHEREAS, the Assignor has heretofore entered into a Security Agreement, dated as of March 24, 1992 (as amended, modified or supplemented prior to the date hereof, the "Original Company Security Agreement"); WHEREAS, it is a condition to the extensions of credit under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Assignor of the New Senior Notes that the Assignor shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, the Assignor desires to execute this Agreement to (i) satisfy the condition described in the preceding paragraph and (ii) amend and restate the Original Company Security Agreement; NOW, THEREFORE, in consideration of the extensions of credit to be made to the Assignor under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Assignor of the New Senior Notes and other benefits accruing to the Assignor, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby makes the following representations and warranties to the Collateral Agent for the ratable benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the ratable benefit of the Secured Creditors as follows: -2- 8 ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent for the ratable benefit of the Bank Creditors, the Interest Rate Protection Creditors and the Senior Noteholders, in each case to the extent from time to time holding Obligations of the Assignor secured hereunder (collectively, and together with the Collateral Agent, the "Secured Creditors"), a continuing security interest of first priority (subject to Liens evidenced by Permitted Filings and other Liens permitted under Section 9.01 of the Credit Agreement) in, all of the right, title and interest of the Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash Collateral Account established for the Assignor and all moneys, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (v) all Equipment, (vi) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of the Assignor symbolized by the Marks, (vii) all Patents and Copyrights, and all reissues, renewals or extensions thereof, (viii) all computer programs of the Assignor and all intellectual property rights therein and all other proprietary information of the Assignor, including, but not limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than the Pledged Securities and any other capital stock or promissory notes not required to be pledged pursuant to the Company Pledge Agreement), and (x) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"); provided, however that to the extent that any Contract may be terminated (in accordance with the terms thereof after giving effect to any applicable laws) in the event of granting of a security interest therein, or in the event the granting of a security interest in any Contract shall violate applicable law, then the security interest granted hereby shall be limited to the extent necessary so that such Contract may not be so terminated or no such violation of law shall exist, as the case may be. (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which the Assignor may acquire at any time during the continuation of this Agreement. (c) If (i) a Bankruptcy Default or Notified Acceleration Event has occurred and is continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing, but in the case of this clause (ii) only if, and to the extent that, the Collateral Agent (acting at the direction of the Required Secured Creditors) has given notice to the Assignor to take the actions specified below in this sentence, then in either such case all cash Proceeds of, and cash payments received in respect of, Collateral shall be paid by the Assignor (or the respective payor) directly to the Cash Collateral Account or as otherwise directed by the Collateral Agent. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral (including without limitation all payments received in respect of Receivables and Contracts, or in payment for sales of Inventory, but excluding cash Proceeds of sales of other Collateral unless the respective sale and release of -3- 9 Collateral is permitted pursuant to this Agreement and the Credit Agreement) shall be paid to the Assignor. 1.2. Power of Attorney. The Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of the Assignor or otherwise), in the Collateral Agent's discretion, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement and the occurrence of the Restatement Effective Date, as follows: 2.1. Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interests granted by the Assignor to the Collateral Agent hereby in respect of the Collateral have been or shall have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes or shall constitute a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Annex A hereto, but only to the respective date, if any, set forth on Annex A (the "Permitted Filings") and to any other Liens permitted under Section 9.01 of the Credit Agreement) and is or shall be entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests. 2.2. No Liens. The Assignor is, and as to Collateral acquired by it from time to time after the date hereof the Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Liens created hereby, Liens permitted under Section 9.01 of the Credit Agreement or evidenced by the Permitted Filings), and the Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the Restatement Effective Date, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) on file or of record in any relevant jurisdiction covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Annex A hereto or to the extent filed after the Effective Date so long as the respective such filing did not (and the Lien evidenced thereby did not) violate the applicable provisions of the Original Credit Agreement, and so long as the Total Commitment has not been terminated or any Letter of Credit or Note remains outstanding or any of the Obligations remain unpaid or any Interest Rate Protection or Other -4- 10 Hedging Agreement remains in effect or any obligations are owed with respect thereto, the Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Assignor or as otherwise permitted pursuant to Section 9.01 of the Credit Agreement. 2.4. Chief Executive Office; Records. The chief executive office of the Assignor is located at 3 Coliseum Center, 2550 West Tyvola Road, Charlotte, North Carolina 28217. The Assignor will not move its chief executive office except to such new location as the Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of the Assignor and the only original books of account and records of the Assignor relating thereto are, and will continue to be, kept at such chief executive office, at such other locations shown on Annex B hereto or at such new locations as the Assignor may establish in accordance with the last sentence of this Section 2.4, provided that, so long as (x) true and correct copies of all documents evidencing such Receivables and Contract Rights and copies of such books and records are kept at such chief executive office or at such other locations shown on Annex B hereto, and (y) the failure to maintain any original copies of the foregoing at such locations could not have an adverse effect upon the validity, perfection or priority of any security interest granted hereunder, the Assignor shall be permitted to keep original copies of the foregoing at other locations to be determined in a manner consistent with its past practices. All Receivables and Contract Rights of the Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above. The Assignor shall not establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.5. Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof by the Assignor is located at one of the locations shown on Annex C hereto. The Assignor agrees that all Inventory and all Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex C hereto, or such new location as the Assignor may establish in accordance with the last sentence of this Section 2.5. The Assignor may establish a new location for Inventory and Equipment only if (i) it shall give to the Collateral Agent written notice of such new location as promptly as practicable and in no -5- 11 event later than 60 days after the establishment thereof, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, as promptly as practicable and in no event later than 75 days after the establishment thereof, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.6. Recourse. This Agreement is made with full recourse to the Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of the Assignor contained herein, in the other Credit Documents, in the Interest Rate Protection or Other Hedging Agreements, the Senior Note Documents and otherwise in writing in connection herewith or therewith. 2.7. Trade Names; Change of Name. The Assignor does not have or operate in any jurisdiction under, or in the preceding 12 months has not had or has not operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed on Annex D hereto. The Assignor shall not change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex D hereto and new names (including, without limitation, any names of divisions or operations) established in accordance with the last sentence of this Section 2.7. The Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, the Assignor shall be deemed to have represented and warranted that (x) such -6- 12 Receivable, and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will represent the obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), and (iii) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction and (y) there is no fact or circumstance known to Assignor which would suggest that any such Receivable (i) will not represent the genuine, legal, valid and binding obligation of such account debtor or (ii) will not evidence true and valid obligations, enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 3.2. Maintenance of Records. The Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and the Assignor will make the same available on the Assignor's premises to the Collateral Agent for inspection, at the Assignor's own cost and expense, at any and all reasonable times upon demand. Upon the occurrence and during the continuance of any of the conditions specified in the first sentence of Section 1.1(c) of this Agreement, and upon the request of the Collateral Agent, the Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Assignor). If the Collateral Agent so directs, the Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents of the Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account established for the Assignor, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clauses (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent that the Assignor might have done. Without notice to or assent by the Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral -7- 13 Account in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the Assignor. 3.4. Modification of Terms; etc. The Assignor shall not rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 and except, so long as none of the conditions described in the first sentence of Section 1.1(c) shall occur and be continuing, such modifications, adjustments and sales effected by the Assignor in the ordinary course of business consistent with past practice. The Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. The Assignor shall endeavor to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, at any time when payments in respect of Receivables and Contracts may be made to the Assignor in accordance with the second sentence of Section 1.1(c) of this Agreement, the Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the Assignor. 3.6.Instruments. If the Assignor owns or acquires any Instrument constituting Collateral, the Assignor will within 10 days after such acquisition, notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. Government Contracts. a)" \* MERGEFORMAT (a) The Assignor hereby covenants and agrees that promptly after any request by the Collateral Agent, the Assignor will provide to the Collateral Agent (i) notice setting forth in reasonable detail all Government Contracts with respect to which the Assignor reasonably expects to receive payments or other consideration with a value in excess of $500,000 to which the Assignor is a party at such time, and (ii) with respect to each Government Contract referred to in clause (i) above, (a) the true and correct GC Notice Recipient and (b) the anticipated annual gross revenue under such Government Contract. -8- 14 (b) The Assignor hereby covenants and agrees that, at the request of the Collateral Agent, as promptly as practicable and in any event within 60 days following its entering into of any Government Contract (other than a Restricted Government Contract) with respect to which the Assignor reasonably expects to receive payments or other consideration with a value in excess of $500,000 after the date of such request, the Assignor shall notify the Collateral Agent thereof, which notice shall set forth (i) each GC Notice Recipient with respect to such Government Contract and (ii) the anticipated gross revenue under such Government Contract. (c) The Assignor agrees that promptly upon obtaining knowledge that any of the information provided to the Collateral Agent pursuant to Section 3.7(a) or (b) has changed, it shall give written notice of such change to the Collateral Agent. (d) The Assignor hereby covenants and agrees that it will not enter into any Restricted Government Contract unless the Assignor (i) determines in good faith that it must agree to a prohibition on the assignment of Receivables arising under such Government Contract in order to obtain such Government Contract and (ii) gives the Collateral Agent at least 10 Business Days' prior written notice of its intention to enter into such Restricted Government Contract. 3.8. Assignment of Claims Act Notices. (a) Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs the Assignor, the Assignor shall prepare and deliver to the Collateral Agent, with respect to each Government Contract to which the Assignor is a party on the date of such request, (i) a written notice of the assignment contained herein, each of which notices shall be in form and substance satisfactory to the Collateral Agent (each such notice, an "Assignment of Claims Act Notice") and (ii) an executed, attested and sealed (but undated) instrument of assignment, each of which instruments shall be in form and substance satisfactory to the Collateral Agent (each such instrument, an "Instrument of Assignment"). At any time after the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c), the Assignor shall, upon five Business Days' notice from the Collateral Agent, file on behalf of the Collateral Agent an Assignment of Claims Act Notice (by certified mail, return receipt requested, or in such other manner acceptable to the Collateral Agent), together with three copies thereof and a true copy of the corresponding Instrument of Assignment, with each GC Notice Recipient with respect to each Government Contract of the Assignor as shall be designated from time to time by the Collateral Agent. The Assignor hereby further agrees that the Collateral Agent may at any time after the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) directly file the notices and instruments of assignment described in this Section 3.8. (b) The Assignor acknowledges and agrees that each Instrument of Assignment is supplemental to, and not in substitution for, the terms and provisions of this Agreement. 3.9. Further Actions. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent, or the GC Notice Recipients with respect to any Government Contract, from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of -9- 15 attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS 4.1. Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful exclusive owner of the Marks listed in Annex E hereto and that said listed Marks include all the United States federal registrations or applications registered in the United States Patent and Trademark Office that the Assignor now owns in connection with its business. The Assignor represents and warrants that it owns or is licensed to use all Marks that it uses. The Assignor further warrants that it is aware of no third party claim that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any mark. The Assignor represents and warrants that it is the owner of record of all U.S. Trademark registrations and applications listed in Annex E hereto and that said registrations are valid, subsisting, have not been cancelled and that the Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, any document which may be required by the U.S. Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise expressly permitted in the Credit Agreement, the Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent (which approval shall not be unreasonably withheld). 4.3. Infringements. Except as otherwise expressly permitted in the Credit Agreement, the Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who, in any material respect, may be infringing or otherwise violating any of the Assignor's rights in and to any significant Mark, or with respect to any party claiming that the Assignor's use of any significant Mark violates in any material respect any property right of that party. The Assignor further agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute any Person infringing, in any material respect, any significant Mark. 4.4. Preservation of Marks. Except as otherwise expressly permitted in the Credit Agreement, the Assignor agrees to use its significant Marks in interstate or foreign commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks registered under the laws of the United States. -10- 16 4.5. Maintenance of Registration. Except as otherwise explicitly permitted in the Credit Agreement, the Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 et seq. to maintain trademark registration, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its significant Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent. The Assignor agrees to notify the Collateral Agent not later than 6 months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any significant Mark that the affidavits of use or the renewal is being processed. 4.6. Future Registered Marks. If any Mark registration issues hereafter to the Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate the Assignor shall deliver a copy of such certificate, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 4.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of the Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of the Assignor in connection with which the Marks have been used; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change the Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. -11- 17 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS 5.1. Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful exclusive owner of all rights in the Patents listed in Annex F hereto and in the Copyrights listed in Annex G hereto, that said Patents include all the United States patents and applications for United States patents that such Assignor now owns and that said Copyrights constitute all the United States copyrights registered with the United States Copyright Office and applications for United States copyrights that the Assignor now owns. The Assignor represents and warrants that it owns or is licensed to practice under all Patents and Copyrights that it now uses or practices under. The Assignor further warrants that it is aware of no third party claim that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any patent or any copyright. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and record the same. 5.2. Licenses and Assignments. Except as otherwise expressly permitted in the Credit Agreement, the Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent (which approval shall not be unreasonably withheld). 5.3. Infringements. The Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to the Assignor with respect to any material infringement or other material violation of the Assignor's rights in any significant Patent or Copyright, or with respect to any claim that practice of any significant Patent or Copyright materially violates any property right of that party. The Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing, in any material respect, any significant Patent or Copyright. 5.4. Maintenance of Patents. Except as otherwise expressly permitted in the Credit Agreement, at its own expense, the Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent. 5.5. Prosecution of Patent Application. Except as otherwise expressly permitted in the Credit Agreement, at its own expense, the Assignor shall diligently prosecute all applications for United States patents listed in Annex F hereto and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent. -12- 18 5.6. Other Patents and Copyrights. Within 30 days of acquisition of a United States Patent or Copyright, or of filing of an application for a United States Patent or Copyright, the Assignor shall deliver to the Collateral Agent a copy of said Patent or Copyright or such application, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 5.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, the Collateral Agent may by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of the Assignor in each of the Patents and Copyrights vested, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and the Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. The Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. The Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at the Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by the Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee), (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days' prior written notice thereof by the insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors and (iv) shall be deposited with the Collateral Agent. If the Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if the Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and the Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. The Collateral Agent may apply any proceeds of such insurance in accordance with Section 7.4. The Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of the Assignor to pay the Obligations shall in no way be -13- 19 affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Assignor. 6.2. Warehouse Receipts Non-negotiable. The Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. Further Actions. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. Financing Statements. The Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. The Assignor will pay any applicable filing fees, recordation taxes and related expenses. The Assignor authorizes the Collateral Agent to file any such financing statements without the signature of the Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. The Assignor agrees that, if there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may also: (a) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from the Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Assignor's premises where any of the Collateral is located and -14- 20 remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Assignor; and (b) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of the Assignor in respect of such Collateral; and (c) withdraw all moneys, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4; and (d) sell, assign or otherwise liquidate, or direct the Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and (e) take possession of the Collateral or any part thereof, by directing the Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event the Assignor shall at its own expense: (i) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, and (ii) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and (iii) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (f) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; it being understood that the Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 7.2. Remedies; Disposition of the Collateral. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when -15- 21 taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the Assignor or any nominee of the Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent and the Secured Creditors may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Assignor as hereinabove specified, the Collateral Agent need give the Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. The Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Assignor's expense. 7.3. Waiver of Claims. Except as otherwise provided in this Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Assignor hereby further waives, to the extent permitted by law: (a) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any -16- 22 portion thereof, and the Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Assignor. 7.4. Application of Proceeds. a)" \* MERGEFORMAT (a) All moneys collected by the Collateral Agent (or, to the extent a Mortgage to which the Company is a party requires proceeds of Collateral under such Mortgage to be applied in accordance with the provisions of this Agreement, the Mortgagee under such Mortgage) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing the Collateral Agent of the type described in clauses (iv) and (v) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(e), with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(e), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 11.9(a) hereof, to the Assignor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (w) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all Obligations arising out of or in connection with (including, without limitation, as obligor or guarantor, as the case may be) the principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the -17- 23 aggregate Stated Amounts of all Letters of Credit issued under the Credit Agreement and outstanding, and all Fees outstanding and unpaid at the relevant time, (ii) in the case of the Senior Note Obligations, all Obligations secured hereby arising out of or in connection with the principal of, and interest on, the New Senior Notes and the New Senior Exchange Notes and (iii) in the case of the Interest Rate Protection Obligations, all Obligations arising out of or in connection with (including, without limitation, as a direct obligor or a guarantor, as the case may be) Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (y) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued (or deemed issued) under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Paying Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Paying Agent to the Collateral Agent for distribution in accordance with Section 7.4(a) hereof. (e) Except as set forth in Section 7.4(d) hereof, all payments required to be made hereunder shall be made (x) if to the Bank Creditors, to the Paying Agent under the Credit Agreement for the account of the Bank Creditors and (y) if to any other Secured Creditors (other than the Collateral Agent), to the trustee, paying agent or other similar representative (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Paying Agent under the Credit Agreement and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Paying -18- 24 Agent, each Representative for any Secured Creditors and the Secured Creditors agree (or shall agree) to provide, upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. Unless it has actual knowledge (including by way of written notice from a Representative for any Secured Creditor or directly from a Secured Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that the Assignor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. Notwithstanding anything to the contrary in this Agreement, (i) all actions required or permitted to be taken under this Agreement by the Senior Noteholders shall be so taken only by the trustee under the indenture under which the Senior Notes were issued on behalf of the Senior Noteholders (the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all payments required to be made with respect to the Senior Note Obligations shall be paid to the Senior Notes Trustee, and the Collateral Agent shall be entitled (but not required) to conclusively rely upon and act in accordance with any instructions from the Senior Notes Trustee subject to the terms and conditions of this Agreement and to assume that such instructions are being given in accordance with such indenture. 7.5. Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement or any other Secured Debt Document now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on the Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. The Secured Creditors agree that this Agreement may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually or as a group, directly or indirectly, to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby or to cause the Collateral Agent or the Required Secured Creditors to take or cause to be taken any action in respect of this Agreement (except as expressly contemplated hereby), it being understood and agreed that such rights and remedies may be exercised only by the Collateral Agent for the ratable benefit of all Secured Creditors upon the terms and conditions of this -19- 25 Agreement, it being further understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. 7.6. Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. 7.7. Purchasers Of Collateral. Upon any sale of the Collateral by the Collateral Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of sale proceeds by the Collateral Agent or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication or nonapplication thereof. ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) The Assignor agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor (other than the Senior Noteholders) and their respective successors, assigns, employees, agents, servants and Representatives (including the Administrative Agent) hereunder (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Document or any other document executed in connection herewith and therewith or in any other way connected with the administration of the transactions contemplated hereby and thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), any contract claim or, to the maximum extent permitted under applicable law, the violation of the laws of any country, state or other governmental body or unit, or any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage); provided that no -20- 26 Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. The Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a), the Assignor agrees to pay, or reimburse, the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because the Assignor shall have failed to comply with its obligations under this Agreement or any other Secured Debt Document), any and all fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b), the Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by the Assignor in this Agreement or any other Secured Debt Document or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement or any other Secured Debt Document. (d) If and to the extent that the obligations of the Assignor under this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of the Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the full payment of all the New Senior Notes and the New Senior Exchange Notes issued under the Senior Note Documents, the termination of all Interest Rate Protection or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. -21- 27 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Acceleration Event" shall mean the acceleration prior to the stated final maturity, or the failure to pay at the stated final maturity, of (i) Obligations representing principal of, or interest on, extensions of credit (including, without limitation, all Letter of Credit Outstandings) pursuant to the Credit Agreement, (ii) Obligations representing principal of, or interest on, the New Senior Notes or the New Senior Exchange Notes or (iii) any Interest Rate Protection Obligations if such Interest Rate Protection Obligations aggregate at least $10,000,000 in amount, provided that, in each case, any such Acceleration Event shall cease to exist upon payment in full of the Obligations so accelerated or not paid. "Administrative Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignment of Claims Act Notice" shall have the meaning provided in Section 3.8 of this Agreement. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Bank Creditor" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Bankruptcy Default" shall mean any Default or Event of Default with respect to the Assignor pursuant to Section 10.05 of the Credit Agreement. "Banks" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 11.2 to this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. -22- 28 "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of the Assignor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts between the Assignor and one or more additional parties (including, without limitation, (i) each partnership agreement to which the Assignor is a party, (ii) any Interest Rate Protection or Other Hedging Agreements and (iii) any Government Contracts). "Copyrights" shall mean any United States copyright which the Assignor now or hereafter has registered with the United States Copyright Office, as well as any application for a United States copyright registration now or hereafter made with the United States Copyright Office by the Assignor. "Credit Agreement" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documentation Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, movable trade fixtures and vehicles now or hereafter owned by the Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default at any time under, and as defined in, any of the Credit Agreement and the Senior Note Documents and any payment default (after the expiration of any applicable grace period) on any of the Obligations secured hereunder at such time. "GC Notice Recipient" shall mean each (i) contracting officer, or the head of the respective U.S. government department or agency relating to such Government Contract, (ii) -23- 29 surety or sureties upon the bond or bonds, if any, relating to such Government Contract, and (iii) disbursing officer, if any, designated in such Government Contract to make payment. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of the Assignor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement to which the Assignor is a party or with respect to any partnership of which the Assignor is a partner. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Government Contract" shall mean all Contracts between the Assignor and the United States of America or any agency or department thereof. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instrument" shall have the meaning provided in Article 9 of the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that "Instrument" shall not include any Pledged Note or other promissory note not required to be pledged pursuant to the Company Pledge Agreement. "Instrument of Assignment" shall have the meaning provided in Section 3.8 of this Agreement. "Interest Rate Protection Creditors" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Interest Rate Protection Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Interest Rate Protection or Other Hedging Agreements" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production --from raw materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from the Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor. "Marks" shall mean any trademarks and service marks now held or hereafter acquired by the Assignor, which are registered in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any political -24- 30 subdivision thereof and any application for such trademarks and service marks, as well as any unregistered marks used by the Assignor in the United States and trade dress including logos, designs, trade names, company names, business names, fictitious business names and other business identifiers in connection with which any of these registered or unregistered marks are used. "Notified Acceleration Event" shall mean any Acceleration Event with respect to which the Required Secured Creditors have given written notice to the Collateral Agent that a "Notified Acceleration Event" exists, provided that such written notice may only be given if such Acceleration Event is continuing and, provided further that any such Notified Acceleration Event shall cease to exist once there is no longer any Acceleration Event in existence. "Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Assignor to the Bank Creditors, now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents, and the due performance of, and compliance with, all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents by the Assignor (all such principal, interest, obligations, liabilities and indebtedness described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of the Assignor to the Interest Rate Protection Creditors, now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection or Other Hedging Agreement (including, without limitation, all such obligations and liabilities of the Assignor under any guarantee by it of obligations pursuant to any Interest Rate Protection or Other Hedging Agreement), and the due performance of, and compliance with, all of the terms, conditions and agreements contained therein by the Assignor (all such obligations, liabilities and indebtedness described in this clause (ii) being herein collectively called the "Interest Rate Protection Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all (x) principal of and interest on the New Senior Notes and the New Senior Exchange Notes and (y) other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of the Assignor to the Senior Noteholders, whether now existing or hereafter incurred under, arising out of or in connection with the New Senior Notes, the New Senior Exchange Notes and the other Senior Note Documents, and the due performance of, and compliance with, all of the terms, conditions and agreements contained therein by the Assignor (all such obligations, liabilities and indebtedness described in this clause (iii) being herein collectively called the "Senior Note Obligations"); (iv) (x) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral in a manner not in violation of the terms hereof and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, -25- 31 expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignor referred to in clauses (i) through (iv) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. It is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. "Original Company Security Agreement" shall have the meaning provided in the fourth WHEREAS clause of this Agreement. "Other Undisclosed Inventory" shall mean all Undisclosed Inventory under and as defined in the Subsidiaries Security Agreement. "Patents" shall mean any United States patent to which the Assignor now or hereafter has title or license to use, as well as any application for a United States patent now or hereafter made by the Assignor. "Permitted Filings" shall have the meaning provided in Section 2.1 of this Agreement. "Pledged Securities" shall have the meaning provided in the Company Pledge Agreement. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. -26- 32 "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor and, in any event, shall include, but shall not be limited to, all of the Assignor's rights to payment for goods sold or leased or services performed by the Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by the Assignor to secure the foregoing, (b) all of the Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto, and (h) all other writings related in any way to the foregoing; provided that "Receivables" shall not include any Pledged Note or other promissory note not required to be pledged pursuant to the Company Pledge Agreement. "Representative" shall have the meaning provided in Section 7.4 of this Agreement. "Required Secured Creditors" shall have the meaning provided in Section 10.4(a) to this Agreement. "Requisite Class Creditors" shall have the meaning provided in Section 11.2 to this Agreement. "Restricted Government Contract" shall mean any Government Contract which by its terms prohibits the assignment of Receivables arising thereunder. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in Section 1.1 of this Agreement. "Secured Debt Documents" shall mean this Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement and any Senior Note Documents, in each case to the extent then in effect and subject to the security interest granted hereby, collectively. "Senior Noteholders" shall have the meaning provided in the third WHEREAS clause of this Agreement. "Senior Note Documents" shall have the meaning provided in the third WHEREAS clause of this Agreement. -27- 33 "Senior Note Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Syndication Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Termination Date" shall have the meaning provided in Section 11.9(a) of this Agreement. ARTICLE X THE COLLATERAL AGENT 10.1. Appointment. The Secured Creditors, by their acceptance of the benefits of this Agreement hereby irrevocably designate Bankers Trust Company, as Collateral Agent, to act as specified herein. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of this Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and any instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 10.2. Nature of Duties. (a) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent (in such capacity) shall not have by reason of this Agreement, any other Credit Document or any other Secured Debt Document a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any other Secured Debt Document, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (b) The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Assignor of any of the covenants or agreements contained in this Agreement, any other Credit Document or any other Secured Debt Document. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any Credit Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such -28- 34 tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or (iii) would subject the Collateral Agent to in personam jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Agreement, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement except for its own gross negligence or willful misconduct. 10.3. Lack of Reliance on the Collateral Agent. Independently and without reliance upon the Collateral Agent, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Assignor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Assignor and its Subsidiaries, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the security interests granted hereunder or the financial condition of the Assignor or any Subsidiary of the Assignor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, or the financial condition of the Assignor or any Subsidiary of the Assignor, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Assignor thereto or as to the security afforded by this Agreement. 10.4. Certain Rights of the Collateral Agent. a)" \* MERGEFORMAT (a) No Secured Creditor shall have the right to cause the Collateral Agent to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Collateral Agent to take any such action, it being understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. If the Collateral Agent shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the Required Banks (or, to the extent required by -29- 35 Section 13.12 of the Credit Agreement, all of the Banks). Notwithstanding anything to the contrary contained in the immediately preceding sentence, if at any time the principal of any Obligations secured hereby has been accelerated, or the final maturity date with respect to any such principal Obligations has occurred, and as a result thereof one or more payment Events of Default (where the aggregate principal amount of such Obligations accelerated or not paid at final maturity equals or exceeds $100,000,000), which payment Events of Default shall have continued in existence for at least 90 consecutive days after the date of such acceleration or final maturity, and the Required Secured Creditors at such time (determined without regard to this sentence) have not directed the Collateral Agent to commence enforcement proceedings pursuant to this Agreement, then so long as such payment Event of Default is continuing the Secured Creditors holding at least a majority of the outstanding Obligations secured hereby subject to such payment Event of Default shall constitute the Required Secured Creditors for purposes of causing the Collateral Agent to commence enforcement proceedings pursuant to this Agreement, provided that in such event the Secured Creditors which would constitute the Required Secured Creditors in the absence of this sentence shall have the right to direct the manner and method of enforcement so long as such directions do not materially delay or impair the taking of enforcement action. (b) Notwithstanding anything to the contrary contained herein, the Collateral Agent is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Collateral Agent but have not yet been received, to take any action which the Collateral Agent, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Collateral Agent shall be governed thereby and the Collateral Agent shall not take any further action which would be contrary thereto. (c) Notwithstanding anything to the contrary contained in this Agreement, the Collateral Agent shall not be required to take any action that exposes or, in the good faith judgment of the Collateral Agent may expose, the Collateral Agent or its officers, directors, agents or employees to personal liability, unless the Collateral Agent shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Collateral Agent may be, contrary to this Agreement, any Secured Debt Document or applicable law. 10.5. Reliance. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement and the other Security Documents and its duties thereunder and hereunder, upon advice of counsel selected by it. 10.6. Indemnification. To the extent the Collateral Agent is not reimbursed and indemnified by the Assignor under this Agreement, the Secured Creditors (other than the Senior Noteholders) will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, the stated amount of outstanding -30- 36 letters of credit and any unreimbursed drawings in respect of letters of credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection or Other Hedging Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Article X shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Article X are in addition to any indemnities provided by the Banks to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 10.6 from the Secured Creditors (other than the Senior Noteholders) (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Banks who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from such Secured Creditors). 10.7. The Collateral Agent in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Credit Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Bank", an "Agent" or an "Administrative Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with the Assignor or any Affiliate or Subsidiary of the Assignor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from the Assignor for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 10.8. Holders. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or Note issued in exchange therefor. -31- 37 10.9. Resignation by the Collateral Agent. (a) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 15 Business Days' prior or written notice to the Assignor and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (b) or (c) below. (b) If a successor Collateral Agent shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Collateral Agent, with the consent of the Assignor, which consent shall not be unreasonably withheld, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. (c) If no successor Collateral Agent has been appointed pursuant to clause (b) above by the 15th Business Day after the date of such notice of resignation was given by the Collateral Agent, as a result of a failure by the Assignor to consent to the appointment of such a successor Collateral Agent, the Required Secured Creditors shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. 10.10. Fees and Expenses of Collateral Agent. (a) The Assignor (by its execution and delivery hereof) hereby agrees that it shall pay to Bankers Trust Company as the original Collateral Agent, such fees as have been separately agreed to in writing with Bankers Trust Company for acting as Administrative Agent and as Collateral Agent hereunder. In the event a successor Collateral Agent is at any time appointed pursuant to the preceding Section 10.9, the Assignor hereby agrees to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. Absent manifest error, the determination by a successor Collateral Agent of the fees owing to it shall be conclusive and binding upon the Assignor. (b) In addition, the Assignor agrees to pay all reasonable out-of-pocket costs and expenses of the Collateral Agent in connection with this Agreement and any actions taken by the Collateral Agent hereunder, and agrees to pay all costs and expenses of the Collateral Agent in connection with the enforcement of this Agreement and the documents and instruments referred to herein (including, without limitation, reasonable fees and disbursements of counsel for the Collateral Agent). ARTICLE XI MISCELLANEOUS 11.1. Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: -32- 38 (a) if to the Assignor, at: Coltec Industries Inc 3 Coliseum Center 2550 West Tyvola Road Charlotte, North Carolina 28217 Attention: Thomas B. Jones, Jr. Telephone: (704) 423-7052 Facsimile: (704) 423-7127 (b) if to the Collateral Agent: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Attention: Mary Kay Coyle Telephone: (212) 250-9094 Facsimile: (212) 250-7200 (c) if to any Bank Creditor (other than the Collateral Agent), either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any other Secured Creditor, either (x) to the Representative for such Secured Creditor, at such address as such Representative may have provided to the Assignor and the Collateral Agent from time to time, or (y) in the absence of such a Representative directly to such Secured Creditor at such address as such Secured Creditor shall have specified in writing to the Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 11.2. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Assignor and the Collateral Agent (with the written consent of the Required Banks (or all the Banks if required by Section 13.12 of the Credit Agreement)); provided, however, that any change, waiver, modification or variance materially adversely affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Class Creditors (as defined below) of such affected Class; provided, further, that any Class shall not be considered to be affected differently from any other Class due to the Obligations of any such other Class being paid, repaid, refinanced, renewed or extended and the Collateral being released, in whole or in part (whether by action of such other Class or otherwise), as security for such Class and such other Class. Notwithstanding anything to the contrary contained above, it is understood and -33- 39 agreed that the Required Banks may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreement or any refinancing or extension thereof). For the purpose of this Agreement, the term "Class" shall mean, at any time, each class of Secured Creditors with outstanding Obligations secured hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders of Senior Note Obligations secured hereby or (z) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations secured hereby; provided that, without limiting the foregoing, it is expressly acknowledged and agreed that other creditors may be added as "Secured Creditors" hereunder (either as part of an existing Class of creditors or as a newly created Class) with the consent of the Required Secured Creditors, and that such addition shall not require the written consent of the Requisite Class Creditors of the various Classes. For the purpose of this Agreement, the term "Requisite Class Creditors" of any Class shall mean each of (i) with respect to the Credit Agreement Obligations, the Required Banks and (ii) with respect to any other Obligations, the holders of at least a majority of all Obligations outstanding from time to time. 11.3. Obligations Absolute. The obligations of the Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement or any other Secured Debt Document except as specifically set forth in a waiver granted pursuant to Section 11.2 hereof; (c) any renewal of, extension of, amendment to or modification of any Secured Debt Document or any security for any of the Obligations; (d) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (e) any furnishing of any additional security to the Collateral Agent or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or its assignee; or (f) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; whether or not the Assignor shall have notice or knowledge of any of the foregoing. 11.4. Successors and Assigns. This Agreement shall be binding upon the Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and each Secured Creditor and their respective successors and assigns, provided that the Assignor may not transfer or assign any or all of its rights or obligations hereunder without the written consent of the Collateral Agent (with the consent of the Required Secured Creditors). All agreements, statements, representations and warranties made by the Assignor herein or in any certificate or other instrument delivered by the Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection or Other Hedging Agreements, regardless of any investigation made by the Secured Creditors or on their behalf. -34- 40 11.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.6. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 11.8. Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that the Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of the Assignor under or with respect to any Collateral. 11.9. Termination; Release. a)" \* MERGEFORMAT (a) After the Termination Date (as defined below), without any action on the part of any Secured Creditor, this Agreement shall terminate and be of no further force or effect (provided that all indemnities set forth herein including, without limitation, in Section 10.6 hereof shall survive any such termination) and the Collateral Agent, at the request and expense of the Assignor, will execute and deliver to the Assignor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent hereunder. As used in this Agreement, "Termination Date" shall mean the first to occur of (i) that date upon which the Total Commitment and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding, all Letters of Credit have been terminated and all other Credit Agreement Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) then owing by the Assignor have been paid in full, (ii) that date upon which the Collateral is automatically released pursuant to the first sentence of Section 26 of Part I of the Fifth Amendment to Credit Agreement or the Administrative Agent directs the Collateral Agent to release the Collateral pursuant to the second sentence of Section 26 of Part I of the Fifth Amendment to the Credit Agreement and (iii) that date upon which the Credit Documents are amended to release all Collateral subject to this Agreement. (b) It is expressly acknowledged and agreed that the Collateral may be sold from time to time to the extent permitted by, and in accordance with the terms of, the Credit -35- 41 Agreement. In addition, it is expressly acknowledged and agreed that any or all of the Collateral may be released by the Collateral Agent acting at the direction of the Required Secured Creditors. Upon any sale of the type described in the second preceding sentence or release of any such Collateral as provided in the immediately preceding sentence, the Collateral Agent shall, at the request and expense of the Assignor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to the Assignor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. Notwithstanding anything to the contrary contained above in this Section 11.9(b), in the event the Senior Notes Trustee shall have notified the Collateral Agent in writing that the Senior Note Obligations have been accelerated in accordance with the terms of the Senior Note Documents (and (x) the Senior Note Obligations have not been paid in full and (y) the respective acceleration has not been rescinded), the Collateral Agent shall not thereafter release any Collateral pursuant to this Section 11.9(b) or consent to any termination of this Agreement, except in each case with the prior written consent of the Senior Noteholders holding a majority of the then outstanding Senior Note Obligations secured hereby (or following the payment in full of the Senior Note Obligations or the rescission of the respective acceleration). (c) At any time that the Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 11.9(a) or (b), and the Collateral Agent shall be entitled (but not required) to conclusively rely thereon. If requested by the Collateral Agent (although the Collateral Agent shall have no obligation to make any such request), the Assignor shall furnish appropriate legal opinions (from counsel acceptable to the Collateral Agent) to the effect set forth in the immediately preceding sentence. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 11.9. Upon any release of Collateral pursuant to Section 11.9(a) or (b), none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof. 11.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with Assignor and the Collateral Agent. 11.11. Amendment and Restatement. Upon the execution and delivery of this Agreement by the parties hereto, the Original Company Security Agreement shall be amended, restated and superseded in its entirety by this Agreement, effective as of the date hereof, with all rights, obligations and security interests created under or granted pursuant to the Original Company Security Agreement continuing from the date thereof. -36- 42 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ADDRESSES 3 Coliseum Center COLTEC INDUSTRIES INC, 2550 West Tyvola Road as Assignor Charlotte, NC 28217 Attention: Thomas B. Jones, Jr. By /s/ THOMAS B. JONES, JR. -------------------------------- Title: Vice President and Treasurer One Bankers Trust Plaza BANKERS TRUST COMPANY, 130 Liberty Street as Collateral Agent New York, New York 10006 Attention: Mary Kay Coyle By /s/ ANTHONY LOGRIPPO -------------------------------- Title: Vice President 43 ANNEX A To Company Security Agreement -------------------------- SCHEDULE OF PERMITTED FILINGS -----------------------------
Secured Original Description Location Party/ies Number File Date of Collateral Permitted
44 ANNEX B to COMPANY SECURITY AGREEMENT SCHEDULE OF RECORD LOCATIONS
Assignor Location County - -------- -------- ------ Coltec Industries Inc Three Coliseum Centre Mecklenburg 2550 West Tyvola Road Charlotte, NC 28217 DIVISIONS 1. Chandler Evans Control Charter Oak Boulevard Hartford Systems Division P. O. Box 330651 W. Hartford, CT 06133-0651 2. Coltec Specialty Products 9426 Old Katy Rd. Harris Division Houston, TX 77055 a. Specialty Products - Burnet 101 John Kelly Drive Burnet Burnet, TX 78611 b. Repro-Lon-Burnet 203 Repro Drive Burnet Burnet, TX 78611 c. Freeport Facility 1404 N. Ave. J Brazoria Freeport, TX 77541 3. Delavan Spray Technologies 4115 Corporate Center Dr. Union Monroe, NC 28110 a. Delavan Fuel Metering P. O. Box 969 Bamberg U.S. Highway 301 South Bamberg, SC 29003 4. Fairbanks Morse Engine Division 701 White Avenue Rock Beloit, WI 53511 a. Fairbanks Morse Engine Northwoods Industrial Park West Harris Division Houston Facility 12253 F.M. 529 Houston, TX 77041
45
Assignor Location County - -------- -------- ------ b. Fairbanks Morse Engine 630 Tidewater Dr. Independ. Division Norfolk, VA 23504 City of Norfolk c. Fairbanks Morse Engine 18926 13th Place South King Division Seattle, WA 98148 5. Garlock Helicoflex 2770 The Boulevard Richland P. O. Box 9889 Columbia, SC 29209 6. Lewis Engineering 238 Water Street New Haven Naugatuck, CT 06770-0231 a. Delavan Process Instrumentation 11 Rado Drive New Haven P. O. Box 559 Naugatuck, CT 06770-0559 7. Menasco Aerospace Texas 4000 South Highway 157 Tarrant Euless, TX 76040-7012 8. Quincy Compressor Division 3501 Wismann Lane Adams Quincy, IL 62301-3116 a. Bay Minette 701 North Dobson Ave. Baldwin Bay Minette, AL 36507-3174 9. Sterling Die Operation 13811 Enterprise Avenue Cuyahoga Cleveland, OH 44135-5196
-2- 46 ANNEX B to Company Security Agreement SCHEDULE OF RECORD LOCATIONS
Location County - -------- ------
47 ANNEX C to Company Security Agreement SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
ADDRESS STATE COUNTY - ------- ----- ------
48 ANNEX D to Company Security Agreement SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES 49 ANNEX E to Company Security Agreement SCHEDULE OF MARKS 50 ANNEX F to Company Security Agreement SCHEDULE OF PATENTS AND APPLICATIONS
Patent Number Date Issued (Application) (Applied) - ------------- ---------
51 Annex F to Company Security Agreement 52 Annex G to Company Security Agreement SCHEDULE OF COPYRIGHTS AND APPLICATIONS 53 ANNEX C to COMPANY SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATION
Assignor Location County - -------- -------- ------ Coltec Industries Inc Three Coliseum Centre Mecklenburg 2550 West Tyvola Road Charlotte, NC 28217 DIVISIONS Chandler Evans Control Charter Oak Boulevard Hartford Systems Division P. O. Box 330651 W. Hartford, CT 06133-0651 Coltec Specialty Products 9426 Old Katy Rd. Harris Division Houston, TX 77055 a. Specialty Products - Burnet 101 John Kelly Drive Burnet Burnet, TX 78611 b. Repro-Lon-Burnet 203 Repro Drive Burnet Burnet, TX 78611 c. Freeport Facility 1404 N. Ave. J Brazoria Freeport, TX 77541 Delavan Spray Technologies 4115 Corporate Center Dr. Union Monroe, NC 28110 a. Delavan Fuel Metering P. O. Box 969 Bamberg U.S. Highway 301 South Bamberg, SC 29003 Fairbanks Morse Engine Division 701 White Avenue Rock Beloit, WI 53511 a. Fairbanks Morse Engine Northwoods Industrial Park West Harris Division Houston Facility 12253 F.M. 529 Houston, TX 77041
54
b. Fairbanks Morse Engine 630 Tidewater Dr. Independ. Division Norfolk, VA 23504 City of Norfolk c. Fairbanks Morse Engine 18926 13th Place South King Division Seattle, WA 98148 Garlock Helicoflex 2770 The Boulevard Richland P. O. Box 9889 Columbia, SC 29209 Lewis Engineering 238 Water Street New Haven Naugatuck, CT 06770-0231 a. Delavan Process Instrumentation 11 Rado Drive New Haven P. O. Box 559 Naugatuck, CT 06770-0559 Menasco Aerospace Texas 4000 South Highway 157 Tarrant Euless, TX 76040-7012 Quincy Compressor Division 3501 Wismann Lane Adams Quincy, IL 62301-3116 a. Bay Minette 701 North Dobson Ave. Baldwin Bay Minette, AL 36507-3174 Sterling Die Operation 13811 Enterprise Avenue Cuyahoga Cleveland, OH 44135-5196
-2- 55 ANNEX D to COMPANY SECURITY AGREEMENT SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES Divisions of the Company Chandler Evans Control Systems Delavan Spray Technologies Fairbanks Morse Engine Lewis Engineering Menasco Aerospace Texas Quincy Compressor Sterling Die Coltec Specialty Products Tex-O-Lon Repro-Lon Garlock Helicoflex Operations of the Company None 56 Annex E TO COMPANY SECURITY AGREEMENT UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS OWNED BY COLTEC INDUSTRIES INC
Registration No. Registration Date Mark - ---------------- ----------------- ---- 1,595,097 May 8, 1989 AUTOCOACH 845,374 March 5, 1968 CENTRI-VAC 1,504,797 September 20, 1988 CONTENDER 1,656,150 September 10, 1991 DEMAND-A-MATIC 1,050,018 October 12, 1976 DOMINATOR 1,133,503 April 22, 1980 DOMINATOR 1,118,641 May 22, 1979 ECONOMASTER 1,896,777 May 30, 1995 ENVIRO DESIGN 1,297,367 September 25, 1984 FAIRBANKS MORSE 1,874,506 January 17,1995 FMD 1,595,098 May 8, 1990 FUELCOACH 1,020,361 September 16, 1975 HOLLEY 1,021,903 October 17, 1975 HOLLEY 1,062,188 March 29, 1977 HOLLEY 1,120,891 June 26, 1979 HOLLEY 188,941 September 9, 1924 HOLLEY 1,844,076 July 12, 1994 HOLLEY 1,712,058 September 8, 1992 IQ-500 1,754,899 March 2, 1993 IQ-750
57 ANNEX E Page 2
858,916 October 22, 1968 LE 1,353,694 August 13, 1985 MASTER-FIT 1,270,570 March 20, 1984 MEP & DESIGN 1,016,317 July 22, 1975 M/T 658,999 March 4, 1978 MOLONEY 700,479 July 5, 1960 PEP 1,553,662 August 29, 1989 PRO DOMINATOR 1,778,849 June 29, 1993 PRO-JECTION 1,655,245 September 3, 1991 QA 1,654,761 August 27, 1991 QE 1,676,566 February 25, 1992 QQ 1,821,009 February 15, 1994 QR-25 1,654,763 August 27, 1991 QRD 1,654,762 August 27, 1991 QSI 1,821,010 February 15, 1994 QTS 1,821,011 February 15, 1994 QT 1,578,649 January 23, 1990 QUANTUM 1,824,058 March 1, 1994 QUINC-CIP 1,874,995 January 24, 1995 QUINSYN-F 1,955,520 February 13, 1996 QUINSYN 1,657,165 September 17, 1991 QUINCY 1,656,010 September 10, 1991 QUINCY AIR MASTER 578,458 August 11, 1953 QUINCY COMPRESSORS
58 ANNEX E Page 3
1,159,708 July 7, 1981 RENEW KIT 1,066,680 May 31, 1977 STREET DOMINATOR 1,050,017 October 12, 1976 STRIP DOMINATOR 1,658,217 September 24, 1991 THE ENGINE BUILDER 1,750,137 February 2, 1993 THE PRIDE AND THE POWER 1,557,635 September 26, 1989 TRICK KIT 1,730,640 November10, 1992 VOLUMAX 2,132,398 January 27, 1998 Ortman Logo Pending Applications: Serial No. Filing Date Mark - ---------- ----------- ---- 75/009,602 October 16, 1995 HOLLEY 75/070,904 March 11, 1996 POWER$YNC 75/319,517 July 3, 1997 Q-SERV 75/249,484 February 28, 1997 Q911 75/249,485 February 28, 1997 QUIN-C-BLUE 75/349,741 September 2, 1997 DOMINATOR 75/349,914 August 28, 1997 STRIP DOMINATOR 75/400,240 December 4, 1997 QQ & Design 75/400,584 December 5, 1997 MENASCO
59 Annex F to Company Security Agreement None 60 Annex G to Company Security Agreement UNITED STATES PATENTS AND PATENT APPLICATIONS OWNED BY COLTEC INDUSTRIES INC
Patent No. Issue Date Title - ---------- ---------- ----- 4,193,947 03/18/80 Carbureting Discharge Means 4,197,822 04/15/80 Circuit Means and Apparatus for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,213,735 07/22/80 Constant Flow Centrifugal Pump 4,223,749 09/16/80 Pulse Generating Means 4,223,651 09/23/80 Solenoid Vacuum Control Valve Means and Apparatus for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,224,908 09/30/80 Apparatus and System for Controlling the Air-Fuel Ration Supplied to a Combustion Engine 4,225,536 09/30/80 Power Valve 4,230,645 10/28/80 Induction Passage Structure 4,232,372 12/04/80 Positive and Negative Acceleration Responsive Means and System 4,246,875 01/27/81 Apparatus and System for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,246,929 01/27/81 Temper Proof Idle Adjusting Screws. 4,247,263 01/27/81 Pump Assembly Including Vane and Impeller 4,258,317 03/24/81 Combination Analog-Digital Indicator
61 ANNEX G Page 2
4,269,062 05/26/81 Method for Gauging Fluid Flow 4,283,353 08/11/81 Tamper Proof Sealing Plug 4,289,460 09/15/81 Bearing Lubricating System for Gear Pump 4,294,282 10/13/81 Apparatus and System for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,302,931 12/01/81 Fuel Flow Limiting Device 4,306,441 12/22/81 Method and Apparatus for Manufacturing and Forming Engine Induction Passage Venturi 4,307,451 12/22/81 Backup Control 4,318,214 03/09/82 Method and Apparatus for Manufacturing and Forming Engine Induction Passage Venturi 4,325,339 04/20/82 Apparatus and System for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,354,809 10/19/82 Fixed Displacement Vane Pump with Pumping 4,357,283 11/02/82 Carburetor 4,361,073 11/30/82 Sub Critical Control Mechanism 4,393,651 07/19/83 Fuel Control Method and Apparatus 4,395,441 07/26/83 Method of Coating Liquid Penetrable Articles with Polymeric Dispersions 4,408,418 10/11/83 Through Feed Cylindrical Dies 4,408,953 10/11/83 High Performance Centrifugal Pump 4,408,961 10/11/83 Jet Pump with Integral Pressure Regulator
62 ANNEX G Page 3
4,415,855 11/15/83 Combination Analog-Digital Indicator 4,417,734 11/29/83 Shaft Seal Assembly 4,423,593 01/03/84 Fuel Control for Controlling Helicopter Rotor/Turbine Acceleration 4,434,762 03/06/84 Apparatus and System for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,434,763 03/06/84 Apparatus and System for Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,453,378 06/12/84 Torsional Mode Suppressor 4,454,754 06/19/84 Engine Failure Detection 4,462,268 07/31/84 Anti-Twist Throttle Lever 4,464,895 08/14/84 Gas Turbine Engine Starting Technique and Control 4,465,640 08/14/84 Adjustable Choke Linkage Means 4,466,526 08/21/84 Helicopter Engine Control with Dela Anticipator 4,467,640 08/28/84 Gas Turbine Engine Power Availability Measurement 4,470,118 09/04/84 Gas Turbine Engine Fuel Control 4,478,038 10/23/84 Manual Training Mode for Fuel Control 4,483,508 11/20/84 Gradient Power Valve Assembly 4,487,548 12/11/84 Centrifugal Main Fuel Pump Having Starting Element 4,488,236 12/11/84 Helicopter Cruise Fuel Conserving Engine Control
63 ANNEX G Page 4
4,490,791 12/25/84 Adaptive Gas Turbine Acceleration Control 4,493,465 01/15/85 Helicopter Engine Torque Compensator 4,493,623 01/15/85 Oil Lube Drive Shaft for Fuel Pump 4,500,268 02/19/85 Rotary Pump Having Brake Means with Thermal Fuse 4,500,966 02/19/85 Super Contingency Aircraft Engine Control 4,502,842 03/05/85 Multiple Compressor Controller 4,529,361 07/16/85 Vane Pump with Spokes with U-Shaped Vanes 4,537,025 08/27/85 Electronic Fuel Control with Manual Train 4,546,539 10/15/85 Dies for Producing Swedge Form Thread 4,556,032 12/03/85 Adapter Means for Creating an Open Loop Manually Adjustable Apparatus and System for Selectively Controlling the Air-Fuel Ratio Supplied to a Combustion Engine 4,558,673 12/17/85 Electronic Ignition System For Internal Combustion Engines 4,573,376 03/04/86 Method of Producing Thread Die 4,576,033 03/18/86 Thread Rolling Die Construction 4,578,945 04/01/86 Limiter for Gas Turbine Fuel Control 4,605,235 08/12/86 Shaft Seal Assembly for Fuel Pumps 4,608,820 09/02/86 Dual Stepper Motor Actuator
64 ANNEX G Page 5
4,608,880 09/02/86 Push Pull Multiplier Linkage 4,611,093 09/09/86 Electric Bushing Having Replaceable Stud 4,628,797 12/16/86 Rotary Actuator 4,629,394 12/16/86 Centrifugal Pump with Low Flow Diffuser 4,631,947 12/30/86 Thread Rolling Dies 4,643,635 02/17/87 Vapor Core Pump with Impeller 4,666,348 05/19/87 Cutter for Thread Rolling Dies 4,669,735 06/02/87 Fail Safe High Pressure Seal 4,681,178 06/21/87 Vehicular Intake Scoop 4,711,619 12/08/87 Fuel Pump with Reduced Displacement 4,713,954 12/22/87 Self Pointing Thread Rolling Dies 4,716,751 01/05/88 Non-Slip Thread Rolling Dies 4,736,155 04/05/88 Transducer Temperature Control 4,736,331 04/05/88 Helicopter Hover Indicator 4,754,927 07/05/88 Control Vanes 4,793,133 12/27/88 Manual Backup/Fuel Control 4,793,219 12/27/88 Method of Manufacturing Thread Rolling Dies 4,804,313 02/14/89 Side Channel Fuel Pump 4,873,955 10/17/89 Idle Air Flow Shutoff Valve 4,929,260 05/29/90 Adjustable Air Cleaner Fastening Assembly 4,969,444 11/13/90 Transfer System for Comb Engine Fuel
65 ANNEX G Page 6
5,010,487 04/23/91 Engine Diagnostic Program 5,012,780 05/07/91 Stand Alone Fuel Injection System 5,020,316 06/04/91 Helicopter Control with Decay Anticipation 5,230,952 06/27/93 Improved Friction Material 5,208,540 05/04/93 Ignition Performance Monitor and Monitoring Method for Capacitive Discharge Ignition Systems 5,297,520 03/29/94 Fuel Supply System With High Turn Down Ratio 5,367,875 11/29/94 Automated Catalytic Reduction System Des.348,429 07/05/94 Insulating Cover for Pole Bracket Supports 5,413,466 5/9/95 Unified Fuel Pump Assembly 5,490,387 2/13/96 Flame-Out Resistant Fuel Pumping System 5,545,014 8/13/96 Variable Displacement Vane Pump, Component Parts and Method 5,545,018 8/13/96 Variable Displacement Vane Pump Having Floating Ring Seal 5,551,404 9/3/96 Fuel Injection System For Marine Engines 5,556,271 9/17/96 Valve System for Capacity Control of a Screw Compressor and Method of Manufacturing Such Valves 5,694,682 12/9/97 Valve System for Capacity Control of a Screw Compressor and Method of Manufacturing Such Valves
66 ANNEX G Page 7
5,713,724 2/3/98 System and Methods for Controlling Rotary Screw Compressors 5,716,201 2/10/98 Variable Displacement Vane PumpWith Vane Tip Relief 5,726,891 3/10/98 Surge Detection System Using Engine Signature 5,733,109 3/31/98 Variable Displacement Vane PumpWith Regulated Vane Loading
67 ANNEX G Page 8
Pending Applications: Serial No. Filing Date Description - ---------- ----------- ----------- 08/500,297 July 10, 1995 Variable Displacement Vane Pump Adjustable By Low Actuation Loads 08/509,400 July 31, 1995 Variable Displacement Vane Pump Having Cam Seal With Seal Land 08/544,374 October 17, 1995 Low Actuation Friction Cam Seal 08/890,144 July 9, 1997 Floating Wrist Pin for Piston Assembly 08/946,635 October 8, 1997 System and Methods for Controlling Rotary Screw Compressors 08/960,388 October 29, 1997 Method and Apparatus for Adjusting the Rotors of a Rotary Screw Compressor
68 Annex H to Company Security Agreement UNITED STATES COPYRIGHT REGISTRATIONS OWNED BY COLTEC INDUSTRIES INC
Registration No. Effective Date Description - ---------------- -------------- ----------- VAu 338-209 May 9, 1996 TA-7 Fuel Control System Technical Drawings Volume #1 VAu 338-210 May 9, 1996 TA-7 Fuel Control System Technical Drawings Volume #2 VAu 338-212 May 9, 1996 TA-7 Fuel Control System Technical Drawings Volume #3 VAu 338-211 May 9, 1996 TA-7 Fuel Control System Technical Drawings Volume #4
EX-4.9 9 AMENDED AND RESTATED SUBSIDIARY PLEDGE AGREEMENT 1 EXHIBIT 4.9 AMENDED AND RESTATED SUBSIDIARIES PLEDGE AGREEMENT PLEDGE AGREEMENT, (this "Agreement") dated as of March 24, 1992, amended and restated as of December 18, 1996 and further amended and restated as of March 16, 1998, made by each of the undersigned (each a "Pledgor" and collectively the "Pledgors"), to BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee") for the benefit of the Secured Creditors (as defined below) (except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as therein defined). W I T N E S S E T H : WHEREAS, Coltec Industries Inc (the "Company"), Coltec Aerospace Canada Ltd., the financial institutions (the "Banks") from time to time party thereto, Bank of America National Trust and Savings Association, as Documentation Agent (in such capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent" and together with the Pledgee, the Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the Banks and their respective successors and assigns, and together with any other financial institutions from time to time party to the Credit Agreement hereinafter referred to, the "Bank Creditors"), have entered into a Credit Agreement, dated as of March 24, 1992, and amended and restated as of January 11, 1994, and further amended and restated as of December 18, 1996, and as further amended, providing for the making of Loans to the Borrowers and the issuance of, and participation in, Letters of Credit, all as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same has been, and may from time to time in the future be, amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, or refinancing or restructuring (including, but not limited to, the inclusion of additional guarantors or additional borrowers thereunder that are Subsidiaries of the Company and whose obligations are guaranteed by the Company thereunder or any increase in the amount borrowed) of all or any portion of, the Indebtedness under such agreement or any successor agreements, whether or not with the same agent, trustee, representative, financial institutions or holders; provided that, with respect to any agreement providing for the refinancing or replacement of Indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (i) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Banks shall have consented in writing to the refinancing or replacement Indebtedness being treated, along with their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred under the Credit Agreement being refinanced (if such Credit Agreement is to remain outstanding) and (iii) a notice to the effect that the refinancing or replacement Indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Company to the Pledgee); 2 2 WHEREAS, the Company and its Subsidiaries may at any time and from time to time enter into (or guarantee obligations under) one or more of the following agreements: (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements") with one or more Bank Creditors or affiliates of Bank Creditors (each such Bank Creditor or affiliate, even if the respective Bank Creditor subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank Creditor's or affiliate's successors and assigns, collectively, the "Interest Rate Protection Creditors"); WHEREAS, the Company may issue New Senior Notes and New Senior Exchange Notes as provided in the Credit Agreement that may be (to the extent permitted pursuant to the Credit Agreement) (x) guaranteed by various of the Pledgors pursuant to a subsidiary guarantee (the "Senior Note Subsidiaries Guaranty") and (y) equally and ratably secured hereunder with the Credit Agreement Obligations as hereinafter provided (with any holders of New Senior Notes and New Senior Exchange Notes from time to time being herein collectively called "Senior Noteholders" and with all documentation evidencing any New Senior Notes or New Senior Exchange Notes, including without limitation the indenture and any Senior Note Subsidiaries Guaranty to be entered into in connection with the New Senior Notes, being herein called "Senior Note Documents"); WHEREAS, each Pledgor is a direct or indirect Subsidiary of the Company and, as such, will receive benefits from the above-described extensions of credit; WHEREAS, each Pledgor has entered into a guaranty dated as of March 24, 1992 and amended and restated as of December 18, 1996 (the "Subsidiaries Guaranty") pursuant to which each Pledgor has unconditionally guaranteed any and all obligations and liabilities of the Company under, or with respect to, the Credit Documents and the Interest Rate Protection or Other Hedging Agreements; WHEREAS, certain of the Pledgors have heretofore entered into a Pledge Agreement, dated as of March 24, 1992 (as amended, modified or supplemented prior to the date hereof, the "Original Subsidiaries Pledge Agreement"); WHEREAS, it is a condition to the extensions of credit under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Company of the New Senior Notes that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to (i) satisfy the conditions described in the preceding paragraph and (ii) amend and restate the Original Subsidiaries Pledge Agreement. NOW, THEREFORE, in consideration of the extensions of credit to be made to each Pledgor under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Company of the New Senior Notes and other benefits accruing to each Pledgor, the receipt and 3 3 sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee for the ratable benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the ratable benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS, ETC. This Agreement is made by each Pledgor for the ratable benefit of the Bank Creditors, the Interest Rate Protection Creditors and the Senior Noteholders, in each case to the extent from time to time holding Obligations (as defined below) of such Pledgor secured hereunder (collectively, and together with the Pledgee, the "Secured Creditors"), to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of such Pledgor whether now existing or hereafter incurred under, arising out of or in connection with the Subsidiaries Guaranty and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Subsidiaries Guaranty (all such obligations, liabilities and indebtedness described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) without duplication of the obligations, liabilities and indebtedness covered by the foregoing clause (i), the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of such Pledgor to the Interest Rate Protection Creditors, now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection or Other Hedging Agreement (including, without limitation, all such obligations and liabilities of such Pledgor under any guarantee by it of obligations pursuant to any Interest Rate Protection or Other Hedging Agreement), and the due performance of, and compliance with, all of the terms, conditions and agreements contained therein by such Pledgor (all such obligations, liabilities and indebtedness described in this clause (ii) being herein collectively called the "Interest Rate Protection Obligations"); (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness of such Pledgor whether now existing or hereafter incurred under, arising out of or in connection with the Senior Note Subsidiaries Guaranty and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Senior Note Subsidiaries Guaranty (all such obligations, liabilities and indebtedness described in this clause (iii) being herein collectively called the "Senior Note Obligations"); (iv) (x) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral in a manner not in violation of the terms hereof and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee 4 4 in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of such Pledgor referred to in clauses (i) through (iv) above, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default at any time under, and as defined in, any of the Credit Agreement and the Senior Note Documents and any payment default (after the expiration of any applicable grace period) on any of the Obligations (as defined below) secured hereunder at such time) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (vi) of this Section 1 being herein collectively called the "Obligations;" provided that it is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (other than Garlock Bearings, Inc.) (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any Domestic Corporation at any time owned by any Pledgor and (y) with respect to corporations that are not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock of any Foreign Corporation at any time owned by any Pledgor, provided that, except as provided in the last sentence of this Section 2, each Pledgor shall not be required to pledge hereunder more than 66% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote and (ii) the term "Notes" shall mean (x) all promissory notes at any time issued to any Pledgor by any of its Subsidiaries or Affiliates and (y) all other promissory notes from time to time issued to, or held by, any Pledgor, provided that, except as provided in the last sentence of this Section 2, no Pledgor shall be required to pledge hereunder any promissory notes issued to such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation. As used herein, the term "Securities" shall mean all of the Stock and Notes. Each Pledgor represents and warrants, as to the stock of corporations and promissory notes owned by such Pledgor, that on the Fifth Amendment Effective Date (a) the Stock of such Pledgor consists of the number and type of shares of the stock of the corporations as described under the name of such Pledgor in Part I of Annex A hereto; (b) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Annex A hereto; (c) the Notes of such Pledgor consist of the promissory notes described in Part II of Annex A hereto where such Pledgor is listed as the "Lender"; and (d) such Pledgor is the holder of record and sole beneficial owner of the Stock so shown under its name and there exist no options or preemption rights in respect of any such Stock. In the circumstances and only to the extent provided in Section 8.11 of the Credit Agreement, the 66% limitation set forth in 5 5 clause (i)(y) and the limitation set forth in the proviso contained in clause (ii) of this Section 2 and the last sentence of Section 3.2 shall no longer be applicable. 3. PLEDGE OF SECURITIES, ETC. 3.1. Pledge. To secure the Obligations and for the purposes set forth in Section 1, each Pledgor hereby (i) grants to the Pledgee a security interest in all of the Collateral, (ii) pledges and deposits as security with the Pledgee the Securities owned by such Pledgor on the date hereof, and delivers to the Pledgee certificates therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by such Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such securities, with signatures appropriately guaranteed) in the case of capital stock or such other instruments of transfer as are acceptable to the Pledgee and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Securities (and in and to the certificates or instruments evidencing such Securities), to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. 3.2. Subsequently Acquired Securities. If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, such Pledgor will promptly thereafter pledge and deposit such Securities (or certificates or instruments representing Securities) as security with the Pledgee and deliver to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by such Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such securities, with signatures appropriately guaranteed) in the case of capital stock, or such other instruments of transfer as are acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by a principal executive officer of such Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder. Subject to the last sentence of Section 2, no Pledgor shall be required at any time to pledge hereunder any promissory notes issued to such Pledgor by a Subsidiary of such Pledgor which is a Foreign Corporation or more than 66% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. 3.3. Uncertificated Securities. Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2, if any Securities (whether not owned or hereafter acquired) are uncertificated securities, the respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law. Each Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Securities promptly upon request of the Pledgee. 3.4. Definitions of Pledged Stock; Pledged Notes; Pledged Securities and Collateral. (a) All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock"; all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes"; all Pledged Stock and Pledged Notes together are called the "Pledged Securities"; and the Pledged Securities together with all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, are hereinafter called the "Collateral." 6 6 (b) If (i) a Bankruptcy Default or Notified Acceleration Event (as each such term is defined in the Subsidiaries Security Agreement, provided, however, references therein to "Assignor" and the "Collateral Agent" shall be references to each Pledgor and the Pledgee, respectively) has occurred and is continuing, or (ii) any other Event of Default or Acceleration Event (as each such term is defined in the Subsidiaries Security Agreement, provided, however, references therein to "Assignor" and the "Collateral Agent" shall be references to each Pledgor and the Pledgee, respectively) has occurred and is continuing, but in the case of this clause (b) only if, and to the extent that, the Pledgee (acting at the direction of the Required Secured Creditors (as defined in Annex B hereto)) has given notice to any Pledgor to take the actions specified below in this sentence, then in either such case all cash proceeds of, and cash payments received in respect of, Collateral shall be paid by such Pledgor (or the respective payor) as directed by the Pledgee. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral, but excluding cash proceeds of sales of Collateral unless the respective sale and release of Collateral is permitted pursuant to this Agreement and the Credit Agreement, shall be paid to such Pledgor. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the respective Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO SPECIFIED EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Pledgee (acting at the direction of the Required Secured Creditors) has so notified each Pledgor, each Pledgor shall be entitled to vote any and all Pledged Securities owned by it and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in a breach of any covenant contained in, or be inconsistent with, any of the terms of this Agreement, the Credit Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or any Senior Note Document, or which would have the effect of impairing the value of the Collateral (other than any impairment in the form of a decline in the market value of a Pledged Security which occurred solely as a result of any vote relating to the manner in which the business of the corporation issuing such Pledged Security is to be conducted to the extent such Pledgor shall have voted the Pledged Securities owned by it in good faith and in accordance with its prudent business judgment) or any part thereof or the rights, priorities, remedies, position or interests of the Pledgee or any Secured Creditor. All such rights of each Pledgor to vote and to give consents, waivers and ratifications shall cease in case either (i) a Bankruptcy Default or Notified Acceleration Event shall occur and be continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing but in the case of this clause (ii) only to the extent the Pledgee (acting at the direction of the Required Secured Creditors) has so notified the respective Pledgor, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Pledgee 7 7 (acting at the direction of the Required Secured Creditors) has so notified the respective Pledgor, all dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the respective Pledgor. The Pledgee also shall be entitled to receive directly, and to retain as part of the Collateral: (a) all other or additional stock or securities paid or distributed by way of dividend or otherwise, as the case may be, in respect of the Pledged Stock; (b) all other or additional stock or other securities paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (c) all other or additional stock or other securities or property (excluding cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by any Pledgor contrary to the provisions of this Section 6 and Section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF SPECIFIED EVENTS OF DEFAULT. If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, then, and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or any Senior Note Documents, in each case to the extent then in effect and secured hereby (with all of the documents listed above being herein collectively called the "Secured Debt Documents") or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to any Pledgor; (b) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (c) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note; (d) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the 8 8 Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); and (e) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 10 days' notice of the time and place of any such sale shall be given to such Pledgor. The Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Document or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Document or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other or further action in any circumstances without notice or demand. The Secured Creditors agree that this Agreement may be enforced only by the action of the Pledgee acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually or as a group, directly or indirectly, to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby or to cause the Pledgee or the Required Secured Creditors to take or cause to be taken any action in respect of this Agreement (except as expressly contemplated hereby), it being understood and agreed that such rights and remedies may be exercised only by the Pledgee for the ratable benefit of all Secured Creditors upon the terms and conditions of this Agreement, it being further understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. 9 9 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Collateral Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Collateral Agent of the type provided in clauses (iv) and (v) of the definition of Obligations; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 9(e), with each Secured Creditor receiving an amount equal to its outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 9(e), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 18, to the respective Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount, without duplication, of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, of the respective Pledgor and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, of the respective Pledgor, (y) "Primary Obligations" shall mean (i) in the case of the Subsidiaries Guaranty, all obligations and liabilities of each Pledgor arising out of or in connection with the principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts of all Letters of Credit issued (or deemed issued) under the Credit Agreement and outstanding, and all Fees outstanding and unpaid at the relevant time, (ii) in the case of the Senior Note Subsidiaries Guaranty, all obligations and liabilities of each Pledgor arising out of or in connection with the principal of, and interest on, the New Senior Notes and the New Senior Exchange Notes and (iii) in the case of the Interest Rate Protection or Other Hedging Agreements, all amounts due under the Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities), and (z) "Secondary Obligations" shall mean all Obligations secured hereby other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes 10 10 of making determinations under this Section 9 only) (i) first, to the Primary Obligations and (ii) second, to the Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued under the Credit Agreement, such amounts shall be paid to the Paying Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Paying Agent to the Collateral Agent for distribution in accordance with Section 9(a). (e) Except as set forth in Section 9(d), all payments required to be made here under shall be made (i) if to the Bank Creditors, to the Paying Agent under the Credit Agreement for the account of the Bank Creditors, and (ii) if to any other Secured Creditors (other than the Collateral Agent), to the trustee, paying agent or other similar representative (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. (f) For purposes of applying payments received in accordance with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the Paying Agent under the Credit Agreement and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Paying Agent, each Representative for any other Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. Unless it has actual knowledge (including by way of written notice from a Representative for any Secured Creditor or directly from a Secured Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that each Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral pledged by it hereunder and the aggregate amount of the Obligations of such Pledgor. Notwithstanding anything to the contrary in this Agreement (including Annex B), (i) all actions required or permitted to be taken under this Agreement by the Senior Noteholders shall be so taken only by the trustee under the indenture under which the Senior Notes were issued on behalf of the Senior Noteholders (the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all payments required to be made with respect to the Senior Note Obligations shall be paid to the Senior 11 11 Notes Trustee, and the Pledgee shall be entitled (but not required) to conclusively rely upon and act in accordance with any instructions from the Senior Notes Trustee subject to the terms and conditions of this Agreement and to assume that such instructions are being given in accordance with such indenture. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of sale proceeds by the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. Each Pledgor jointly and severally agrees to indemnify and hold harmless the Pledgee and each other Secured Creditor (other than the Senior Noteholders) and their respective successors, assigns, employees, agents, servants and Representatives (including the Administrative Agent) hereunder (individually an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, in each case growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under the other Credit Documents or the Interest Rate Protection and Other Hedging Agreements, provided that the Pledgors shall not be required to indemnify any Indemnitee in respect of any claims, demands, losses, judgments, liabilities, costs or expenses to the extent arising from the gross negligence or willful misconduct of such Indemnitee. In no event shall any Indemnitee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgors under this Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the applicable Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) Each Pledgor hereby appoints the Pledgee as its attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee's 12 12 discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth in Annex B hereto, the terms of which shall be deemed incorporated herein by reference as fully as if same were set forth herein in their entirety. 14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the Credit Agreement). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS. Each Pledgor represents and warrants that (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will have) good and marketable title to, all Securities pledged by it hereunder, subject to no Lien, except the Lien created by this Agreement; (b) it has full corporate power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (c) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms except to the extent the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law); (d) except to the extent already obtained, no consent of any other party (including, without limitation, any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection (i) with the execution, delivery or performance of this Agreement, (ii) the validity or enforceability of this Agreement, (iii) the perfection or enforceability of the Pledgee's security interest in the Collateral or (iv) the exercise by the Pledgee of any of its rights or remedies provided herein; (e) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign applicable to such Pledgor, or of the Certificate of Incorporation or By-Laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, loan agreement, credit agreement or other material contract, agreement or instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of any Lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f) all the shares of the Stock have been duly and validly issued, are fully paid and nonassessable and are subject to no options to purchase or similar rights; (g) each of the Pledged Notes, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and equitable principles (regardless 13 13 of whether enforcement is sought in equity or at law); and (h) the pledge, assignment and delivery of the Securities pursuant to this Agreement creates a valid and perfected first priority Lien in such Securities, and the proceeds thereof (other than any cash proceeds thereof to the extent not required to be delivered to the Pledgee pursuant to the terms hereof), subject to no Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of such Pledgor which would include the Securities. Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all Persons whomsoever; and each Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Document or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (v) any limitation on any other Pledgor's liability or obligations under this Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or any other Secured Debt Document or any invalidity or unenforceability, in whole or in part, of this Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or any other Secured Debt Documents or any term thereof; or (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 17. REGISTRATION, ETC. (a) If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed then, and in every such case, upon receipt by any Pledgor from the Pledgee of a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, such Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided, that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may request in writing and as shall be required in 14 14 connection with any such registration, qualification or compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), without any action on the part of any Secured Creditor, this Agreement shall terminate and be of no further force or effect (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral of such Pledgor as may be in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Pledgee hereunder. As used in this Agreement, "Termination Date" shall mean the first to occur of (i) that date upon which the Total Commitment and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding, all Letters of Credit have been terminated and all other Credit Agreement Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) then owing by the Pledgors have been paid in full, (ii) that date upon which the Collateral is automatically released pursuant to the first sentence 15 15 of Section 26 of Part I of the Fifth Amendment to Credit Agreement or the Administrative Agent directs the Pledgee to release the Collateral pursuant to the second sentence of Section 26 of Part I of the Fifth Amendment to the Credit Agreement and (iii) that date upon which the Credit Documents are amended to release all Collateral subject to this Agreement. (b) In the event that any Pledgor is released from its obligations pursuant to the Subsidiaries Guaranty in accordance with the terms thereof, then such Pledgor shall cease to be a Pledgor hereunder and the Pledgee, at the request and expense of the respective Pledgor, will execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as to such Pledgor, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral pledged by such Pledgor as may be in possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys of such Pledgor at the time held by the Pledgee hereunder. (c) It is expressly acknowledged and agreed that the Collateral may be sold from time to time to the extent permitted by, and in accordance with the terms of, the Credit Agreement. In addition, it is expressly acknowledged and agreed that any or all of the Collateral may be released by the Pledgee acting at the direction of the Required Secured Creditors. Upon any sale of the type described in the second preceding sentence or release of any such Collateral as provided in the immediately preceding sentence, the Pledgee shall, at the request and expense of the respective Pledgor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to such Pledgor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. Notwithstanding anything to the contrary contained above in this Section 18(c), in the event the Senior Notes Trustee shall have notified the Pledgee in writing that the Senior Note Obligations have been accelerated in accordance with the terms of the Senior Note Documents (and (x) the Senior Note Obligations have not been paid in full and (y) the respective acceleration has not been rescinded), the Collateral Agent shall not thereafter release any Collateral pursuant to this Section 18(c) or consent to any termination of this Agreement, except in each case with the prior written consent of the Senior Noteholders holding a majority of the then outstanding Senior Note Obligations secured hereby (or following the payment in full of the Senior Note Obligations or the rescission of the respective acceleration). (d) At any time that any Pledgor desires that Collateral be released as provided in the foregoing Section 18(a), (b) or (c), it shall deliver to the Pledgee a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to such Section 18(a), (b) or (c), and the Pledgee shall be entitled (but not required) to conclusively rely thereon. If requested by the Pledgee (although the Pledgee shall have no obligation to make any such request), such Pledgor shall furnish appropriate legal opinions (from counsel acceptable to the Pledgee) to the effect set forth in the immediately preceding sentence. (e) Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Pledgee in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by any Pledgor were permitted to be received by such Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon the 16 16 request and at the expense of the respective Pledgor, duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such Pledged Note if same is then in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 18. Upon any release of Collateral pursuant to Section 18(a), (b), (c), (d) or (e), none of the Secured Creditors shall have any continuing right or interest in such Collateral or the proceeds thereof. 19. NOTICES, ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed as follows: (a) if to any Pledgor, at the address set forth opposite its signature below: with a copy to: Coltec Industries Inc 3 Coliseum Center 2550 West Tyvola Road Charlotte, North Carolina 28217 Attention: Thomas B. Jones, Jr. Telephone: (704) 423-7052 Facsimile: (704) 423-7127 (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Attention: Mary Kay Coyle Telephone: (212) 250-9094 Facsimile: (212) 250-7200 (c) if to any Bank Creditor (other than the Pledgee), either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any other Secured Creditor, either (x) to the Representative for such Secured Creditor at such address as such Representative may have provided to the Pledgors and the Pledgee from time to time, or (y) in the absence of such a Representative, directly to such Secured Creditor at such address as such Secured Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 17 17 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby (it being understood that additional Pledgors may be added as parties hereto from time to time in accordance with the Credit Agreement and Pledgors may be released as parties hereto in accordance with Section 18(b), and that no consent of any other Pledgor or of the Secured Creditors shall be required in connection therewith) and the Pledgee (with the written consent of the Required Banks (or all the Banks if required by Section 13.12 of the Credit Agreement)); provided, however, that any change, waiver, modification or variance materially adversely affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Class Creditors (as defined below) of such affected Class; provided, further, that any Class shall not be considered to be affected differently from any other Class due to the Obligations of any such other Class being paid, repaid, refinanced, renewed or extended and the Collateral being released, in whole or in part (whether by action of such other Class or otherwise), as security for such Class and such other Class. Notwithstanding anything to the contrary contained above, it is understood and agreed that the Required Banks may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreement or any refinancing or extension thereof). For the purpose of this Agreement, the term "Class" shall mean, at any time, each class of Secured Creditors with outstanding Obligations secured hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders of Senior Note Obligations secured hereby or (z) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations secured hereby; provided that, without limiting the foregoing, it is expressly acknowledged and agreed that other creditors may be added as "Secured Creditors" hereunder (either as part of an existing Class of creditors or as a newly created Class) with the consent of the Required Secured Creditors, and that such addition shall not require the written consent of the Requisite Class Creditors of the various Classes. For the purpose of this Agreement, the term "Requisite Class Creditors" of any Class shall mean each of (i) with respect to the Credit Agreement Obligations, the Required Banks and (ii) with respect to any other Obligations, the holders of at least a majority of all Obligations outstanding from time to time. 21. MISCELLANEOUS. This Agreement shall be binding upon the respective successors and assigns of each Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns; provided that no Pledgor may assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the consent of the Required Secured Creditors). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 22. AMENDMENT AND RESTATEMENT. Upon the execution and delivery of this Agreement by the parties hereto, the Original Subsidiaries Pledge Agreement shall be amended, restated and superseded in its entirety by this Agreement, effective as of the date hereof, with all 18 18 rights, obligations and security interests created under or granted pursuant to the Original Subsidiaries Pledge Agreement continuing from the date thereof. 19 19 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed and delivered by their duly elected officers duly authorized as of the date first above written. Address: AMI INDUSTRIES INC, as a Pledgor By____________________________ Name: Title: CII HOLDINGS INC, as a Pledgor By____________________________ Name: Title: COLTEC CANADA INC, as a Pledgor By____________________________ Name: Title: COLTEC INDUSTRIAL PRODUCTS INC, as a Pledgor By____________________________ Name: Title: COLTEC NORTH CAROLINA INC, as a Pledgor By____________________________ Name: Title: 20 20 COLTEC TECHNICAL SERVICES INC, as a Pledgor By____________________________ Name: Title: DELAVAN INC, as a Pledgor By____________________________ Name: Title: GARLOCK INC, as a Pledgor By____________________________ Name: Title: GARLOCK INTERNATIONAL INC, as a Pledgor By____________________________ Name: Title: GARLOCK OVERSEAS CORPORATION, as a Pledgor By____________________________ Name: Title: 21 21 HABER TOOL COMPANY INC, as a Pledgor By____________________________ Name: Title: HOLLEY PERFORMANCE PRODUCTS INC, as a Pledgor By____________________________ Name: Title: JAMCO PRODUCTS, LLC, as a Pledgor By____________________________ Name: Title: MENASCO AEROSYSTEMS INC, as a Pledgor By____________________________ Name: Title: COLTEC INTERNATIONAL SERVICES CO., as a Pledgor By____________________________ Name: Title: 22 22 STEMCO INC, as a Pledgor By____________________________ Name: Title: WALBAR INC, as a Pledgor By____________________________ Name: Title: BANKERS TRUST COMPANY, as Pledgee By____________________________ Name: Title: 23 ANNEX A ANNEX A LIST OF PLEDGES STOCK AND PLEDGED NOTES Part I. Pledged Stock
Percentage of Name of Issuing Corporation Type of Shares Number of Shares Outstanding Shares of Capital Stock
24 2 Part II. Pledged Notes Principal Lender Borrower Amount 25 3 26 ANNEX B ANNEX B THE PLEDGEE 1. Appointment. The Secured Creditors, by their acceptance of the benefits of the Subsidiaries Pledge Agreement to which this Annex B is attached (the "Pledge Agreement") hereby irrevocably designate the Collateral Agent (and any successor Pledgee) to act as Pledgee as specified herein and therein. Unless otherwise defined herein, all capitalized terms used herein (x) and defined in the Pledge Agreement, are used herein as therein defined and (y) not defined in the Pledge Agreement, are used herein as defined in the Credit Agreement referenced in the Pledge Agreement. Each Secured Creditor hereby irrevocable authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of the Pledge Agreement shall be deemed irrevocably to authorize, the Pledgee to take such action on its behalf under the provisions of the Pledge Agreement and any instruments and agreements referred to therein and to exercise such powers and to perform such duties thereunder as are specifically delegated to or required of the Pledgee by the terms thereof and such other powers as are reasonably incidental thereto. The Pledgee may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 2. Nature of Duties. (a) The Pledgee shall have no duties or responsibilities except those expressly set forth herein or in the Pledge Agreement. The duties of the Pledgee shall be mechanical and administrative in nature; the Pledgee (in such capacity) shall not have by reason of this Agreement, any other Credit Document or any other Secured Debt Document a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any other Secured Debt Document, expressed or implied, is intended to or shall be so construed as to impose upon the Pledgee any obligations in respect of the Pledge Agreement except as expressly set forth herein and therein. (b) The Pledgee shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Pledgee shall not be required to ascertain or inquire as to the performance by any Pledgor of any of the covenants or agreements contained in the Pledge Agreement, any other Credit Document or any other Secured Debt Document. (d) The Pledgee shall be under no obligation or duty to take any action under, or with respect to, the Pledge Agreement if taking such action (i) would subject the Pledgee to a tax in any jurisdiction where it is not then subject to a tax , (ii) would require the Pledgee to qualify to do business, or obtain any license, in any jurisdiction where it is not then so qualified or licensed or (iii) would subject the Pledgee to in personam jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Annex B, neither the Pledgee nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with, or pursuant to this Annex B or the Pledge Agreement except for its own gross negligence or willful misconduct. 27 2 3. Lack of Reliance on the Pledgee. Independently and without reliance upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Pledgor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith and (ii) its own appraisal of the creditworthiness of each Pledgor and its Subsidiaries, and the Pledgee shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any notes or at any time or times thereafter. The Pledgee shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Pledge Agreement or the security interests granted thereunder or the financial condition of any Pledgor or any Subsidiary of any Pledgor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Pledge Agreement, or the financial condition of any Pledgor or any Subsidiary of any Pledgor, or the existence or possible existence of any default or event of default. The Pledgee makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of any Pledgor thereto or as to the security afforded by the Pledge Agreement. 4. Certain Rights of the Pledgee. (a) No Secured Creditor shall have the right to cause the Pledgee to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Pledgee to take any such action, it being understood and agreed that nothing in this Annex B shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. If the Pledgee shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with the Pledge Agreement, the Pledgee shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Pledgee shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Pledgee as a result of the Pledgee acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the Required Banks (or, to the extent required by Section 13.12 of the Credit Agreement, all of the Banks). Notwithstanding anything to the contrary contained in the immediately preceding sentence, if at any time the principal of any Obligations secured hereby has been accelerated, or the final maturity date with respect to any such principal Obligations has occurred, and as a result thereof one or more payment Events of Default (where the aggregate principal amount of such Obligations accelerated or not paid at final maturity equals or exceeds $100,000,000), which payment Events of Default shall have continued in existence for at least 90 consecutive days after the date of such acceleration or final maturity, and the Required Secured Creditors at such time (determined without regard to this sentence) have not directed the Pledgee to commence enforcement proceedings pursuant to the Pledge Agreement, then so long as such payment Event of Default is continuing the Secured Creditors holding at least a majority of the outstanding Obligations secured hereby subject to such payment Event of Default shall constitute the Required Secured Creditors for purposes of causing the Pledgee to commence enforcement proceedings pursuant to the Pledge Agreement, provided that in such event the Secured Creditors which would 28 3 constitute the Required Secured Creditors in the absence of this sentence shall have the right to direct the manner and method of enforcement so long as such directions do not materially delay or impair the taking of enforcement action. (b) Notwithstanding anything to the contrary contained herein, the Pledgee is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Pledgee but have not yet been received, to take any action which the Pledgee, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Pledgee shall be governed thereby and the Pledgee shall not take any further action which would be contrary thereto. (c) Notwithstanding anything to the contrary contained herein or in the Pledge Agreement, the Pledgee shall not be required to take any action that exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or its officers, directors, agents or employees to personal liability, unless the Pledgee shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement, any Secured Debt Document or applicable law. 5. Reliance. The Pledgee shall be entitled to rely, and shall be fully protected in relying, upon, any note, writing, resolution, notice, statement, certificate, telex, teletype message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon advice of counsel selected by it. 6. Indemnification. To the extent the Pledgee is not reimbursed and indemnified by the Pledgors under the Pledge Agreement, the Secured Creditors (other than the Senior Noteholders) will reimburse and indemnify the Pledgee, in proportion to their respective outstanding principal amounts (including, for this purpose, the Stated Amount of outstanding Letters of Credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection or Other Hedging Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder, or in any way relating to or arising out of its actions as Pledgee in respect of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct. The indemnities set forth in this Section 6 shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Pledgee is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of the Pledge Agreement. The indemnities set forth in this Section 6 are in addition to any indemnities provided by the Banks to the Pledgee pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Pledgee to the extent the Pledgee does not receive payments pursuant to this Section 6 from the Secured Creditors (other than the Senior Noteholders) (although in such event, and 29 4 upon the payment in full of all such amounts owing to the Pledgee by the Banks, the Banks shall be subrogated to the rights of the Pledgee to receive payment from such Secured Creditors). 7. The Pledgee in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Pledgee is a party, and to act as agent under one or more of such Credit Documents, the Pledgee shall have the rights and powers specified therein and herein for a "Bank", or an "Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "Required Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Pledgee in its individual capacity. The Pledgee and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with any Pledgor or any Affiliate or Subsidiary of any Pledgor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from the Pledgors for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 8. Holders. The Pledgee may deem and treat the payee of any note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Pledgee. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such note or of any note or notes issued in exchange therefor. 9. Resignation by the Pledgee. (a) The Pledgee may resign from the performance of all of its functions and duties hereunder and under the Pledge Agreement at any time by giving 15 Business Days' prior written notice to the Company and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Pledgee pursuant to Section 9(b) or (c) below. (b) If a successor Pledgee shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Pledgee, with the consent of the Pledgors, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. (c) If no successor Pledgee has been appointed pursuant to Section 9(b) above by the 15th Business Day after the date of such notice of resignation was given by the Pledgee, as a result of a failure by the Company to consent to the appointment of such a successor Pledgee, the Required Secured Creditors shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Pledgee as provided above. EX-4.10 10 AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT 1 EXHIBIT 4.10 AMENDED AND RESTATED SECURITY AGREEMENT among DOMESTIC SUBSIDIARIES OF COLTEC INDUSTRIES INC and BANKERS TRUST COMPANY, as Collateral Agent Dated as of March 24, 1992 and AMENDED AND RESTATED as of December 18, 1996 and FURTHER AMENDED AND RESTATED as of March 16, 1998 2 TABLE OF CONTENTS
Page ARTICLE I SECURITY INTERESTS....................................................................................... 3 1.1.Grant of Security Interests.......................................................................... 3 1.2.Power of Attorney.................................................................................... 4 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................... 4 2.1.Necessary Filings................................................................................... 4 2.2.No Liens............................................................................................ 4 2.3.Other Financing Statements.......................................................................... 5 2.4.Chief Executive Office; Records..................................................................... 5 2.5.Location of Inventory and Equipment................................................................. 6 2.6.Recourse............................................................................................ 6 2.7.Trade Names; Change of Name......................................................................... 6 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS................................. 7 3.1.Additional Representations and Warranties........................................................... 7 3.2.Maintenance of Records.............................................................................. 7 3.3.Direction to Account Debtors; Contracting Parties; etc.............................................. 8 3.4.Modification of Terms; etc.......................................................................... 8 3.5.Collection.......................................................................................... 8 3.6.Instruments......................................................................................... 8 3.7.Government Contracts................................................................................ 9 3.8.Assignment of Claims Act Notices.................................................................... 9 3.9.Further Actions..................................................................................... 10 ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS..................................................................... 10 4.1.Additional Representations and Warranties........................................................... 10 4.2.Licenses and Assignments............................................................................ 10 4.3.Infringements....................................................................................... 10 4.4.Preservation of Marks............................................................................... 11 4.5.Maintenance of Registration......................................................................... 11 4.6.Future Registered Marks............................................................................. 11 4.7.Remedies............................................................................................ 11
(i) 3 ARTICLE V SPECIAL PROVISIONS CONCERNING
Page PATENTS AND COPYRIGHTS .......................................................................................... 12 5.1.Additional Representations and Warranties........................................................... 12 5.2.Licenses and Assignments............................................................................ 12 5.3.Infringements....................................................................................... 12 5.4.Maintenance of Patents.............................................................................. 12 5.5.Prosecution of Patent Application................................................................... 12 5.6.Other Patents and Copyrights........................................................................ 13 5.7.Remedies............................................................................................ 13 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL.................................................................... 13 6.1.Protection of Collateral Agent's Security........................................................... 13 6.2.Warehouse Receipts Non-negotiable................................................................... 14 6.3.Further Actions..................................................................................... 14 6.4.Financing Statements................................................................................ 14 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT............................................................ 14 7.1.Remedies; Obtaining the Collateral Upon Default..................................................... 14 7.2.Remedies; Disposition of the Collateral............................................................. 15 7.3.Waiver of Claims.................................................................................... 16 7.4.Application of Proceeds............................................................................. 17 7.5.Remedies Cumulative................................................................................. 19 7.6.Discontinuance of Proceedings....................................................................... 20 7.7.Purchasers Of Collateral............................................................................ 20 ARTICLE VIII INDEMNITY............................................................................................... 20 8.1.Indemnity........................................................................................... 20 8.2.Indemnity Obligations Secured by Collateral; Survival............................................... 21 ARTICLE IX DEFINITIONS............................................................................................. 22 ARTICLE X THE COLLATERAL AGENT.................................................................................... 28 10.1.Appointment........................................................................................ 28 10.2.Nature of Duties................................................................................... 28 10.3.Lack of Reliance on the Collateral Agent........................................................... 29 10.4.Certain Rights of the Collateral Agent............................................................. 29
(ii) 4
Page 10.5.Reliance........................................................................................... 30 10.6.Indemnification.................................................................................... 30 10.7.The Collateral Agent in its Individual Capacity.................................................... 31 10.8.Holders............................................................................................ 31 10.9.Resignation by the Collateral Agent................................................................ 31 10.10.Fees and Expenses of Collateral Agent............................................................. 32 ARTICLE XI MISCELLANEOUS........................................................................................... 32 11.1.Notices............................................................................................ 32 11.2.Waiver; Amendment.................................................................................. 33 11.3.Obligations Absolute; Subrogation.................................................................. 34 11.4.Successors and Assigns............................................................................. 34 11.5.Headings Descriptive............................................................................... 35 11.6.Severability....................................................................................... 35 11.7.GOVERNING LAW...................................................................................... 35 11.8.Assignors' Duties.................................................................................. 35 11.9.Termination; Release............................................................................... 35
ANNEX A Schedule of Permitted Filings ANNEX B Schedule of Chief Executive Offices ANNEX C Schedule of Record Locations ANNEX D Schedule of Inventory and Equipment Locations ANNEX E Schedule of Trade, Fictitious and Other Names ANNEX F Schedule of Marks ANNEX G Schedule of Patents and Applications ANNEX H Schedule of Copyrights and Applications (iii) 5 AMENDED AND RESTATED SUBSIDIARIES SECURITY AGREEMENT SECURITY AGREEMENT (this "Agreement"), dated as of March 24, 1992, amended and restated as of December 18, 1996 and further amended and restated as of March 16, 1998, among each DOMESTIC SUBSIDIARY of COLTEC INDUSTRIES INC whose name appears on the signature pages hereto (each an "Assignor" and collectively, the "Assignors") and BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral Agent") for the benefit of the Secured Creditors (as defined below) (except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as therein defined). W I T N E S S E T H : WHEREAS, Coltec Industries Inc (the "Company"), Coltec Aerospace Canada Ltd., the financial institutions (the "Banks") from time to time party thereto, Bank of America National Trust and Savings Association, as Documentation Agent (in such capacity, the "Documentation Agent"), The Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication Agent"), Bank of Montreal, as Canadian Paying Agent (in such capacity, the "Canadian Paying Agent"), and Bankers Trust Company, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent" and together with the Pledgee, the Documentation Agent, the Syndication Agent, the Canadian Paying Agent and the Banks and their respective successors and assigns, and together with any other financial institutions from time to time party to the Credit Agreement hereinafter referred to, the "Bank Creditors"), have entered into a Credit Agreement, dated as of March 24, 1992, and amended and restated as of January 11, 1994, and further amended and restated as of December 18, 1996 and as further amended, providing for the making of Loans to the Borrowers and the issuance of, and participation in, Letters of Credit, all as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same has been, and may from time to time in the future be, amended, modified, extended, renewed, replaced, restated, supplemented or refinanced from time to time, and including any agreement extending the maturity of, refinancing or restructuring (including, but not limited to, the inclusion of additional guarantors or additional borrowers thereunder that are Subsidiaries of the Company and whose obligations are guaranteed by the Company thereunder or any increase in the amount borrowed) all or any portion of, the Indebtedness under such agreement or any successor agreements, whether or not with the same agent, trustee, representative, financial institutions or holders; provided, that with respect to any agreement providing for the refinancing or replacement of Indebtedness under the Credit Agreement, such agreement shall only be treated as, or as part of, the Credit Agreement hereunder if (i) either (A) all obligations under the Credit Agreement being refinanced or replaced shall be paid in full at the time of such refinancing or replacement, and all commitments and letters of credit issued pursuant to the refinanced or replaced Credit Agreement shall have terminated in accordance with their terms or (B) the Required Banks shall 6 have consented in writing to the refinancing or replacement Indebtedness being treated, along with their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the refinancing Indebtedness shall be permitted to be incurred under the Credit Agreement being refinanced (if such Credit Agreement is to remain outstanding) and (iii) a notice to the effect that the refinancing or replacement, Indebtedness shall be treated as issued under the Credit Agreement shall be delivered by the Company to the Collateral Agent); WHEREAS, the Company and its Subsidiaries may at any time and from time to time enter into, or guaranty, one or more of the following agreements: (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements") with one or more Bank Creditors or affiliates of Bank Creditors (each such Bank Creditor or affiliate, even if the respective Bank Creditor subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank Creditor's or affiliate's successors and assigns, collectively, the "Interest Rate Protection Creditors"); WHEREAS, the Company may issue New Senior Notes and New Senior Exchange Notes as provided in the Credit Agreement that may be (to the extent permitted pursuant to the Credit Agreement) (x) guaranteed by various of the Assignors pursuant to a subsidiary guarantee (the "Senior Note Subsidiaries Guaranty") and (y) equally and ratably secured hereunder with the Credit Agreement Obligations as hereinafter provided (with any holders of New Senior Notes and New Senior Exchange Notes from time to time being herein collectively called "Senior Noteholders" and with all documentation evidencing any New Senior Notes or New Senior Exchange Notes, including without limitation the indenture and any Senior Note Subsidiaries Guaranty to be entered into in connection with the New Senior Notes, being herein called "Senior Note Documents"); WHEREAS, each Assignor is a direct or indirect Subsidiary of the Company and, as such, will receive benefits from the above-described extensions of credit; WHEREAS, each Assignor has entered into a guaranty dated as of March 24, 1992 and amended and restated as of December 18, 1996 (the "Subsidiaries Guaranty") pursuant to which each Assignor has unconditionally guaranteed any and all obligations and liabilities of the Company under, or with respect to, the Credit Documents and the Interest Rate Protection or Other Hedging Agreements; WHEREAS, certain of the Assignors have heretofore entered into a Security Agreement, dated as of March 24, 1992 (as amended, modified or supplemented prior to the date hereof, the "Original Subsidiaries Security Agreement"); WHEREAS, it is a condition to the extensions of credit under the Credit Agreement and to the obligations of the initial purchasers of the New Senior Notes under the purchase agreement to be entered into in connection with the issuance by the Company of the -2- 7 New Senior Notes that each Assignor shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, each Assignor desires to execute this Agreement to (i) satisfy the condition described in the preceding paragraph and (ii) amend and restate the Original Subsidiaries Security Agreement; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Assignor under the Credit Agreement and under the purchase agreement to be entered into in connection with the issuance by the Company of the New Senior Notes, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent for the ratable benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the ratable benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of the Obligations, each Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent for the ratable benefit of the Bank Creditors, the Interest Rate Protection Creditors and the Senior Noteholders, in each case to the extent from time to time holding Obligations of such Assignor secured hereunder (collectively, and together with the Collateral Agent, the "Secured Creditors"), a continuing security interest of first priority (subject to Liens evidenced by Permitted Filings and Liens permitted under Section 9.01 of the Credit Agreement) in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash Collateral Account established for each Assignor and all moneys, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (v) all Equipment, (vi) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vii) all Patents and Copyrights, and all reissues, renewals or extensions thereof, (viii) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including, but not limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than the Pledged Securities and any other capital stock or promissory notes not required to be pledged pursuant to the Subsidiaries Pledge Agreement) and (x) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"); provided, however that to the extent that any Contract may be terminated (in accordance with the terms thereof after giving effect to any applicable laws) in the event of granting of a security interest therein, or in the event the granting of a security interest in any Contract shall violate applicable law, then the security interest granted hereby shall be limited to the extent necessary so that such Contract may not be so terminated or no such violation of law shall exist, as the case may be. -3- 8 (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. (c) If (i) a Bankruptcy Default or Notified Acceleration Event has occurred and is continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing, but in the case of this clause (ii) only if, and to the extent that, the Collateral Agent (acting at the direction of the Required Secured Creditors) has given notice to any of the Assignors to take the actions specified below in this sentence, then in either such case all cash Proceeds of, and cash payments received in respect of, Collateral shall be paid by such Assignor (or the respective payor) directly to the Cash Collateral Account or as otherwise directed by the Collateral Agent. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral (including without limitation all payments received in respect of Receivables and Contracts, or in payment for sales of Inventory, but excluding cash Proceeds of sales of other Collateral unless the respective sale and release of Collateral is permitted pursuant to this Agreement and the Credit Agreement) shall be paid to the respective Assignor. 1.2. Power of Attorney. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise), in the Collateral Agent's discretion, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement and the occurrence of the Restatement Effective Date, as follows: 2.1. Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interests granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been or shall have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes or shall constitute a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Annex A hereto, but only to the respective date, if any, set forth on Annex A (the "Permitted Filings") and to any other Liens permitted under Section 9.01 of the Credit Agreement) and is or shall be entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests. 2.2. No Liens. Such Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, -4- 9 security interest, encumbrance or other right, title or interest of any Person (other than Liens created hereby, permitted under Section 9.01 of the Credit Agreement or evidenced by the Permitted Filings), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the Restatement Effective Date, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) on file or of record in any relevant jurisdiction covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Annex A hereto or to the extent filed after the Effective Date so long as the respective such filing did not (and the Lien evidenced thereby did not) violate the applicable provisions of the Original Credit Agreement, and so long as the Total Commitment has not been terminated or any Letter of Credit or Note remains outstanding or any of the Obligations remain unpaid or any Interest Rate Protection or Other Hedging Agreement remains in effect or any obligations are owed with respect thereto, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as otherwise permitted pursuant to Section 9.01 of the Credit Agreement. 2.4. Chief Executive Office; Records. The chief executive office of such Assignor is located at the address set forth for each such Assignor on Annex B hereto. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at such other locations shown on Annex C hereto or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4, provided that, so long as (x) true and correct copies of all documents evidencing such Receivables and Contract Rights and copies of such books and records are kept at the chief executive office of such Assignor or at such other locations shown on Annex C hereto and (y) the failure to maintain any original copies of the foregoing at such locations could not have an adverse effect upon the validity, perfection or priority of any security interest granted hereunder, such Assignor shall be permitted to keep original copies of the foregoing at other locations to be determined in a manner consistent with its past practices. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above. Such Assignor shall not establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without -5- 10 limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.5. Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof by such Assignor is located at one of the locations shown on Annex D hereto for such Assignor. Such Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex D hereto for such Assignor, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5. Such Assignor may establish a new location for Inventory and Equipment only if (i) it shall give to the Collateral Agent written notice of such new location as promptly as practicable and in no event later than 60 days after the establishment thereof, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, as promptly as practicable and in no event later than 75 days after the establishment thereof, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.6. Recourse. This Agreement is made with full recourse to such Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of such Assignor contained herein, in the other Credit Documents, in the Interest Rate Protection or Other Hedging Agreements, the Senior Note Documents and otherwise in writing in connection herewith or therewith. 2.7. Trade Names; Change of Name. Such Assignor does not have or operate in any jurisdiction under, or in the preceding 12 months has not had or has not operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade, fictitious or other names as are listed on Annex E hereto for such Assignor. Such Assignor shall not change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex E hereto for such Assignor and new names (including, without limitation, any names of divisions or operations) established in accordance with the last sentence of this Section 2.7. Such Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all -6- 11 financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that (x) such Receivable, and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will represent the obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), and (iii) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction and (y) there is no fact or circumstance known to such Assignor which would suggest that any such Receivable (i) will not represent the genuine, legal, valid and binding obligation of such account debtor or (ii) will not evidence true and valid obligations, enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 3.2. Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and each Assignor will make the same available on such Assignor's premises to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon demand. Upon the occurrence and during the continuance of any of the conditions specified in the first sentence of Section 1.1(c) of this Agreement, and upon the request of the Collateral Agent, each Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). If the Collateral Agent so directs, each Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. -7- 12 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account established for such Assignor, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clauses (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent that such Assignor might have done. Without notice to or assent by any Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.4. Modification of Terms; etc. No Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 and except, so long as none of the conditions described in the first sentence of Section 1.1(c) shall occur and be continuing, such modifications, adjustments and sales effected by each Assignor in the ordinary course of business consistent with past practice. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, at any time when payments in respect of Receivables and Contracts may be made to any Assignor in accordance with the second sentence of Section 1.1(c) of this Agreement, each Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which each Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.6. Instruments. If any Assignor owns or acquires any Instrument constituting Collateral, such Assignor will within 10 days after such acquisition, notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the -8- 13 Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. Government Contracts. (a) Such Assignor hereby covenants and agrees that promptly after any request by the Collateral Agent, such Assignor will provide to the Collateral Agent (i) notice setting forth in reasonable detail all Government Contracts with respect to which such Assignor reasonably expects to receive payments or other consideration with a value in excess of $500,000 to which such Assignor is a party at such time, and (ii) with respect to each Government Contract referred to in clause (i) above, (a) the true and correct GC Notice Recipient and (b) the anticipated annual gross revenue under such Government Contract. (b) Each Assignor hereby covenants and agrees that, at the request of the Collateral Agent, as promptly as practicable and in any event within 60 days following its entering into any Government Contract (other than a Restricted Government Contract) with respect to which such Assignor reasonably expects to receive payments or other consideration with a value in excess of $500,000 after the date of such request, such Assignor shall notify the Collateral Agent thereof, which notice shall set forth (i) each GC Notice Recipient with respect to such Government Contract and (ii) the anticipated gross revenue under such Government Contract. (c) Each Assignor agrees that promptly upon obtaining knowledge that any of the information provided to the Collateral Agent pursuant to Section 3.7(a) or (b) with respect to such Assignor has changed, it shall give written notice of such change to the Collateral Agent. (d) Each Assignor hereby covenants and agrees that it will not enter into any Restricted Government Contract unless such Assignor (i) determines in good faith that it must agree to a prohibition on the assignment of Receivables arising under such Government Contract in order to obtain such Government Contract and (ii) gives the Collateral Agent at least 10 Business Days' prior written notice of its intention to enter into such Restricted Government Contract. 3.8. Assignment of Claims Act Notices. (a) Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs any Assignor, such Assignor shall prepare and deliver to the Collateral Agent, with respect to each Government Contract to which such Assignor is a party on the date of such request, (i) a written notice of the assignment contained herein, each of which notices shall be in form and substance satisfactory to the Collateral Agent (each such notice, an "Assignment of Claims Act Notice") and (ii) an executed, attested and sealed (but undated) instrument of assignment, each of which instruments shall be in form and substance satisfactory to the Collateral Agent (each such instrument, an "Instrument of Assignment"). At any time after the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c), each Assignor shall, upon five Business Days' notice from the Collateral Agent, file on behalf of the Collateral Agent an Assignment of Claims Act Notice (by certified mail, return receipt requested, or in such other manner acceptable to the Collateral Agent), together with three copies thereof and a true copy of the corresponding Instrument of Assignment, with each GC Notice Recipient with respect to each Government Contract of such Assignor as shall be designated from time to time by the Collateral Agent. Each -9- 14 Assignor hereby further agrees that the Collateral Agent may at any time after the occurrence and during the continuance of any of the conditions described in the first sentence of 1.1(c) directly file the notices and instruments of assignment described in this Section 3.8. (b) Each Assignor acknowledges and agrees that each Instrument of Assignment is supplemental to, and not in substitution for, the terms and provisions of this Agreement. 3.9. Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent, or the GC Notice Recipients with respect to any Government Contract, from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS 4.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful exclusive owner of the Marks listed under its name in Annex F hereto and that said listed Marks include all the United States registered in the United States Patent and Trademark Office that such Assignor now owns in connection with its business. Each Assignor represents and warrants that it owns or is licensed to use all Marks that it uses. Each Assignor further warrants that it is aware of no third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any mark. Each Assignor represents and warrants that it is the owner of record of all U.S. Trademark registrations listed under its name in Annex F hereto and that said registrations are valid, subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, any document which may be required by the U.S. Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise expressly permitted in the Credit Agreement, each Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent (which approval shall not be unreasonably withheld). 4.3. Infringements. Except as otherwise expressly permitted in the Credit Agreement, each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who, in any material respect, may be infringing or otherwise violating any of the respective Assignor's rights in and to any significant Mark, or with respect to -10- 15 any party claiming that such Assignor's use of any significant Mark violates in any material respect any property right of that party. Each Assignor further agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute any Person infringing, in any material respect, any significant Mark. 4.4. Preservation of Marks. Except as otherwise expressly permitted in the Credit Agreement, each Assignor agrees to use its significant Marks in interstate or foreign commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks registered under the laws of the United States. 4.5. Maintenance of Registration. Each Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 et seq. to maintain trademark registration, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its significant Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent. Each Assignor agrees to notify the Collateral Agent not later than 6 months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any significant Mark that the affidavits of use or the renewal is being processed. 4.6. Future Registered Marks. If any Mark registration issues hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate such Assignor shall deliver a copy of such certificate, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 4.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, the Collateral Agent may, by written notice to the applicable Assignors, take any or all of the following actions: (i) declare the entire right, title and interest of the respective Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the respective Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct the respective Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and -11- 16 registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS 5.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful exclusive owner of all rights in the Patents listed under its name in Annex H hereto and in the Copyrights listed under its name in Annex G hereto, that said Patents include all the United States patents and applications for United States patents that such Assignor now owns and that said Copyrights constitute all the United States copyrights registered with the United States Copyright Office and applications for United States copyrights that such Assignor now owns. Each Assignor represents and warrants that it owns or is licensed to practice under all Patents and Copyrights that it now uses or practices under. Each Assignor further warrants that it is aware of no third-party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any patent or any copyright. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and record the same. 5.2. Licenses and Assignments. Except as otherwise expressly permitted in the Credit Agreement, each Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent (which approval shall not be unreasonably withheld). 5.3. Infringements. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any infringement or other material violation of such Assignor's rights in any significant Patent or Copyright, or with respect to any claim that practice of any significant Patent or Copyright violates any property right of that party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing, in any material respect any significant Patent or Copyright. 5.4. Maintenance of Patents. Except as otherwise expressly permitted in the Credit Agreement, at its own expense, each Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent. 5.5. Prosecution of Patent Application. Except as otherwise expressly permitted in the Credit Agreement, at its own expense, each Assignor shall diligently prosecute all applications for United States patents listed under its name in Annex G hereto and shall not -12- 17 abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent. 5.6. Other Patents and Copyrights. Within 30 days of acquisition of a United States Patent or Copyright, or of filing of an application for a United States Patent or Copyright, the respective Assignor shall deliver to the Collateral Agent a copy of said Patent or Copyright or such application, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 5.7. Remedies. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, the Collateral Agent may by written notice to the applicable Assignors, take any or all of the following actions: (i) declare the entire right, title, and interest of the respective Assignor in each of the Patents and Copyrights vested, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the respective Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. No Assignor will do anything to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates or certified copies thereof with respect to such insurance (and any other insurance maintained by each Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee), (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days' prior written notice thereof by the insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors and (iv) and shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. The Collateral Agent may apply any proceeds of such insurance in accordance with Section 7.4. Each Assignor assumes all liability and responsibility in -13- 18 connection with the Collateral acquired by it and the liability of such Assignor to pay its Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses. Each Assignor authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Secured Creditors have so directed, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may also: (a) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from any Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Assignor's premises where any of the Collateral is located and -14- 19 remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; and (b) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of such Assignor in respect of such Collateral; and (c) withdraw all moneys, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4; and (d) sell, assign or otherwise liquidate, or direct any Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and (e) take possession of the Collateral or any part thereof, by directing any Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (i) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, and (ii) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and (iii) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (f) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. 7.2. Remedies; Disposition of the Collateral. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral -15- 20 may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of such Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent and the Secured Creditors may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to any Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to any Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. Each Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Assignor's expense. 7.3. Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (a) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or -16- 21 delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of any Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. Application of Proceeds. (a) All moneys collected by the Collateral Agent (or, to the extent a Mortgage to which any Assignor is a party requires proceeds of Collateral under such Mortgage to be applied in accordance with the provisions of this Agreement, the Mortgagee under such Mortgage) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing the Collateral Agent of the type described in clauses (iv) and (v) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(e), with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(e), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 11.9(a) hereof, to the respective Assignor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (w) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount, without duplication, of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary Obligations" shall mean -17- 22 (i) in the case of the Credit Agreement Obligations, all Obligations arising out of or in connection with (including, without limitation, as obligor or guarantor, as the case may be) the principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts of all Letters of Credit issued under the Credit Agreement and outstanding, and all Fees outstanding and unpaid at the relevant time, (ii) in the case of the Senior Note Obligations, all Obligations secured hereby arising out of or in connection with the principal of, and interest on, the New Senior Notes and the New Senior Exchange Notes and (iii) in the case of the Interest Rate Protection Obligations, all Obligations arising out of or in connection with (including, without limitation, as a direct obligor or a guarantor, as the case may be) Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (y) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued (or deemed issued) under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Paying Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Paying Agent to the Collateral Agent for distribution in accordance with Section 7.4(a) hereof. (e) Except as set forth in Section 7.4(d) hereof, all payments required to be made hereunder shall be made (x) if to the Bank Creditors, to the Paying Agent under the Credit Agreement for the account of the Bank Creditors and (y) if to any other Secured Creditors (other than the Collateral Agent), to the trustee, paying agent or other similar representative (each a "Representative") for such Secured Creditors or, in the absence of such a Representative, directly to the other Secured Creditors. -18- 23 (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Paying Agent under the Credit Agreement and (ii) the Representative for any other Secured Creditors or, in the absence of such a Representative, upon the respective Secured Creditors for a determination (which the Paying Agent, each Representative for any Secured Creditors and the Secured Creditors agree (or shall agree) to provide, upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Secured Creditors. Unless it has actual knowledge (including by way of written notice from a Representative for any Secured Creditor or directly from a Secured Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that each Assignor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. Notwithstanding anything to the contrary in this Agreement, (i) all actions required or permitted to be taken under this Agreement by the Senior Noteholders shall be so taken only by the trustee under the indenture under which the Senior Notes were issued on behalf of the Senior Noteholders (the "Senior Notes Trustee") as directed by the Senior Noteholders and (ii) all payments required to be made with respect to the Senior Note Obligations shall be paid to the Senior Notes Trustee, and the Collateral Agent shall be entitled (but not required) to conclusively rely upon and act in accordance with any instructions from the Senior Notes Trustee subject to the terms and conditions of this Agreement and to assume that such instructions are being given in accordance with such indenture 7.5. Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, or any other Secured Debt Document now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. The Secured Creditors agree that this Agreement may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually or as a group, directly or indirectly, to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby or to -19- 24 cause the Collateral Agent or the Required Secured Creditors to take or cause to be taken any action in respect of this Agreement (except as expressly contemplated hereby), it being understood and agreed that such rights and remedies may be exercised only by the Collateral Agent for the ratable benefit of all Secured Creditors upon the terms and conditions of this Agreement, it being further understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. 7.6. Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case each Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. 7.7. Purchasers Of Collateral. Upon any sale of the Collateral by the Collateral Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of sale proceeds by the Collateral Agent or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication or nonapplication thereof. ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) Each Assignor hereby jointly and severally agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor (other than the Senior Noteholders) and their respective successors, assigns, employees, agents, servants and Representatives (including the Administrative Agent) hereunder (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Document or any other document executed in connection herewith and therewith or in any other way connected with the administration of the transactions contemplated hereby and thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), any contract claim or, to the maximum extent permitted under applicable law, the violation of the laws of any country, state or other governmental body or unit, or any tort (including, without -20- 25 limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage); provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Assignors shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Assignors of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a), each Assignor hereby jointly and severally agrees to pay, or reimburse, the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because any Assignor shall have failed to comply with its obligations under this Agreement or any other Secured Debt Document), any and all fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b), each Assignor hereby jointly and severally agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by any Assignor in this Agreement or any other Secured Debt Document or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement or any other Secured Debt Document. (d) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the full payment of all the New Senior Notes and the New Senior Exchange Notes issued under the Senior Note Documents, the termination of all Interest Rate Protection or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. -21- 26 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Acceleration Event" shall mean the acceleration prior to the stated final maturity, or the failure to pay at the stated final maturity, of (i) Obligations representing principal of, or interest on, extensions of credit (including, without limitation, all Letter of Credit Outstandings) pursuant to the Credit Agreement, (ii) Obligations representing principal of, or interest on, the New Senior Notes or the New Senior Exchange Notes or (iii) any Interest Rate Protection Obligations if such Interest Rate Protection Obligations aggregate at least $10,000,000 in amount, provided that, in each case, any such Acceleration Event shall cease to exist upon payment in full of the Obligations so accelerated or not paid. "Administrative Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignment of Claims Act Notice" shall have the meaning provided in Section 3.8 of this Agreement. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Bank Creditor" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Bankruptcy Default" shall mean any Default or Event of Default with respect to the Company pursuant to Section 10.05 of the Credit Agreement. "Banks" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Cash Collateral Account" shall mean the non- interest bearing cash collateral account maintained with the Collateral Agent for the benefit of the Secured Creditors, with one such account to be established for each Assignor. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 11.2 to this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. -22- 27 "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Company" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts between any Assignor and one or more additional parties (including, without limitation, (i) each partnership agreement to which such Assignor is a party, (ii) any Interest Rate Protection or Other Hedging Agreements and (iii) any Government Contracts). "Copyrights" shall mean any United States copyright which any Assignor now or hereafter has registered with the United States Copyright Office, as well as any application for a United States copyright registration now or hereafter made with the United States Copyright Office by any Assignor. "Credit Agreement" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documentation Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by each Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, movable trade fixtures and vehicles now or hereafter owned by each Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default at any time under, and as defined in, any of the Credit Agreement and the Senior Note Documents and any payment default (after the expiration of any applicable grace period) on any of the Obligations secured hereunder at such time. -23- 28 "GC Notice Recipient" shall mean each (i) contracting officer, or the head of the respective U.S. government department or agency relating to such Government Contract, (ii) surety or sureties upon the bond or bonds, if any, relating to such Government Contract, and (iii) disbursing officer, if any, designated in such Government Contract to make payment. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of any Assignor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement to which such Assignor is a party or with respect to any partnership of which such Assignor is a partner. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Government Contract" shall mean all Contracts between any Assignor and the United States of America or any agency or department thereof. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instrument" shall have the meaning provided in Article 9 of the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that "Instrument" shall not include any Pledged Note or other promissory note not required to be pledged pursuant to the Subsidiaries Security Agreement. "Instrument of Assignment" shall have the meaning provided in Section 3.8 of this Agreement. "Interest Rate Protection Creditors" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Interest Rate Protection Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Interest Rate Protection or Other Hedging Agreements" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. -24- 29 "Marks" shall mean any trademarks and service marks now held or hereafter acquired by any Assignor, which are registered in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any political subdivision thereof and any application for such trademarks or service marks, as well as any unregistered marks used by any Assignor in the United States and trade dress including logos, designs, trade names, company names, business names, fictitious business names and other business identifiers in connection with which any of these registered or unregistered marks are used. "Notified Acceleration Event" shall mean any Acceleration Event with respect to which the Required Secured Creditors have given written notice to the Collateral Agent that a "Notified Acceleration Event" exists, provided that such written notice may only be given if such Acceleration Event is continuing and, provided further that any such Notified Acceleration Event shall cease to exist once there is no longer any Acceleration Event in existence. "Obligations" shall mean, with respect to each Assignor, (i) all obligations and liabilities of such Assignor whether now existing or hereafter incurred under, arising out of or in connection with the Subsidiaries Guaranty and the due performance and compliance by such Assignor with all of the terms, conditions and agreements contained in the Subsidiaries Guaranty (all such obligations and liabilities described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) without duplication of the obligations and liabilities covered by the foregoing clause (i), all obligations and liabilities owing by the Company to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection or Other Hedging Agreement, whether such Interest Rate Protection or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by the Company with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Interest Rate Protection Obligations"); (iii) all obligations and liabilities of such Assignor whether now existing or hereafter incurred under, arising out of or in connection with the Senior Note Subsidiaries Guaranty and the due performance and compliance by such Assignor with all of the terms, conditions and agreements contained in the Senior Note Subsidiaries Guaranty (all such obligations, liabilities and indebtedness described in this clause (iii) being herein collectively called the "Senior Note Obligations"); (iv) (x) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral in a manner not in violation of the terms hereof and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of such Assignor referred to in clauses (i) through (iv) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of -25- 30 this Agreement. It is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. "Original Subsidiaries Security Agreement" shall have the meaning provided in the sixth WHEREAS clause of this Agreement. "Patents" shall mean any United States patent to which any Assignor now or hereafter has title or license to use, as well as any application for a United States patent now or hereafter made by any Assignor. "Permitted Filings" shall have the meaning provided in Section 2.1 of this Agreement. "Pledged Securities" shall have the meaning provided in the Subsidiaries Pledge Agreement. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by any Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by any Assignor to secure the foregoing, (b) all of such Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other -26- 31 instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto, and (h) all other writings related in any way to the foregoing; provided that "Receivables" shall not include any Pledged Note or other promissory note not required to be pledged pursuant to the Subsidiaries Pledge Agreement. "Representative" shall have the meaning provided in Section 7.4 of this Agreement. "Required Secured Creditors" shall have the meaning provided in Section 10.4(a) to this Agreement. "Requisite Class Creditors" shall have the meaning provided in Section 11.2 to this Agreement. "Restricted Government Contract" shall mean any Government Contract which by its terms prohibits the assignment of Receivables arising thereunder. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in Section 1.1 of this Agreement. "Secured Debt Documents" shall mean this Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement and any Senior Note Documents, in each case to the extent then in effect and subject to the security interest granted hereby, collectively. "Senior Noteholders" shall have the meaning provided in the third WHEREAS clause of this Agreement. "Senior Note Documents" shall have the meaning provided in the third WHEREAS clause of this Agreement. "Senior Note Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Senior Note Subsidiaries Guaranty" shall have the meaning provided in the third WHEREAS clause of this Agreement. "Subsidiaries Guaranty" shall have the meaning provided in the fifth WHEREAS clause of this Agreement. "Syndication Agent" shall have the meaning provided in the first WHEREAS clause of this Agreement. -27- 32 "Termination Date" shall have the meaning provided in Section 11.9(a) of this Agreement. ARTICLE X THE COLLATERAL AGENT 10.1. Appointment. The Secured Creditors, by their acceptance of the benefits of this Agreement hereby irrevocably designate Bankers Trust Company, as Collateral Agent, to act as specified herein. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Obligation by the acceptance of such Obligation and by the acceptance of the benefits of this Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and any instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder or thereunder by or through its authorized agents, sub-agents or employees. 10.2. Nature of Duties. (a) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent (in such capacity) shall not have by reason of this Agreement, any other Credit Document or any other Secured Debt Document a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any other Secured Debt Document, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (a)(b) The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (b)(c) The Collateral Agent shall not be required to ascertain or inquire as to the performance by any Assignor of any of the covenants or agreements contained in this Agreement, any other Credit Document or any other Secured Debt Document. (c)(d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any Credit Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or (iii) would subject the Collateral Agent to in personam jurisdiction in any locations where it is not then so subject. (d)(e) Notwithstanding any other provision of this Agreement, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its -28- 33 individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement except for its own gross negligence or willful misconduct. 10.3. Lack of Reliance on the Collateral Agent. Independently and without reliance upon the Collateral Agent, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Assignor and its respective Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of each Assignor and its respective Subsidiaries, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the security interests granted hereunder or the financial condition of any of the Assignors or any of their respective Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, or the financial condition of any of the Assignors or any of their respective Subsidiaries, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Assignors thereto or as to the security afforded by this Agreement. 10.4. Certain Rights of the Collateral Agent. (a) No Secured Creditor shall have the right to cause the Collateral Agent to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Collateral Agent to take any such action, it being understood and agreed that nothing in this Agreement shall affect the rights of the Secured Creditors to accelerate their respective Obligations in accordance with their respective Secured Debt Documents. If the Collateral Agent shall request instructions from the Required Secured Creditors, with respect to any act or action (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. As used herein, the term "Required Secured Creditors" shall mean the Required Banks (or, to the extent required by Section 13.12 of the Credit Agreement, all of the Banks). Notwithstanding anything to the contrary contained in the immediately preceding sentence, if at any time the principal of any Obligations secured hereby has been accelerated, or the final maturity date with respect to any such principal Obligations has occurred, and as a result thereof one or more payment Events of Default (where the aggregate principal amount of such Obligations accelerated or not paid at final maturity equals or exceeds $100,000,000), which payment Events of Default shall have continued -29- 34 in existence for at least 90 consecutive days after the date of such acceleration or final maturity, and the Required Secured Creditors at such time (determined without regard to this sentence) have not directed the Collateral Agent to commence enforcement proceedings pursuant to this Agreement, then so long as such payment Event of Default is continuing the Secured Creditors holding at least a majority of the outstanding Obligations secured hereby subject to such payment Event of Default shall constitute the Required Secured Creditors for purposes of causing the Collateral Agent to commence enforcement proceedings pursuant to this Agreement, provided that in such event the Secured Creditors which would constitute the Required Secured Creditors in the absence of this sentence shall have the right to direct the manner and method of enforcement so long as such directions do not materially delay or impair the taking of enforcement action. (e) Notwithstanding anything to the contrary contained herein, the Collateral Agent is authorized, but not obligated, (i) to take any action reasonably required to perfect or continue the perfection of the Liens on the Collateral for the benefit of the Secured Creditors and (ii) when instructions from the Required Secured Creditors have been requested by the Collateral Agent but have not yet been received, to take any action which the Collateral Agent, in good faith, believes to be reasonably required to promote and protect the interests of the Secured Creditors in the Collateral; provided that once instructions have been received, the actions of the Collateral Agent shall be governed thereby and the Collateral Agent shall not take any further action which would be contrary thereto. (f) Notwithstanding anything to the contrary contained in this Agreement, the Collateral Agent shall not be required to take any action that exposes or, in the good faith judgment of the Collateral Agent may expose, the Collateral Agent or its officers, directors, agents or employees to personal liability, unless the Collateral Agent shall be adequately indemnified as provided herein, or that is, or in the good faith judgment of the Collateral Agent may be, contrary to this Agreement, any Secured Debt Document or applicable law. 10.5. Reliance. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement and the other Security Documents and its duties thereunder and hereunder, upon advice of counsel selected by it. 10.6. Indemnification. To the extent the Collateral Agent is not reimbursed and indemnified by the Assignors under this Agreement, the Secured Creditors (other than the Senior Noteholders) will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, the stated amount of outstanding letters of credit and any unreimbursed drawings in respect of letters of credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection or Other Hedging Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as -30- 35 Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Article X shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Article X are in addition to any indemnities provided by the Banks to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 10.6 from the Secured Creditors (other than the Senior Noteholders) (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Banks who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from such Secured Creditors). 10.7. The Collateral Agent in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Credit Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Bank", an "Agent" or an "Administrative Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks", "holders of Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with any Assignor or any Affiliate or Subsidiary of such Assignor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from such Assignor for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 10.8. Holders. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee of such Note or Note issued in exchange therefor. 10.9. Resignation by the Collateral Agent. (a) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 15 Business Days' prior or written notice to the Assignors and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (b) or (c) below. -31- 36 (b) If a successor Collateral Agent shall not have been appointed within said 15 Business Day period by the Required Secured Creditors, the Collateral Agent, with the consent of the Company, which consent shall not be unreasonably withheld, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. (c) If no successor Collateral Agent has been appointed pursuant to clause (b) above by the 15th Business Day after the date of such notice of resignation was given by the Collateral Agent, as a result of a failure by the Company to consent to the appointment of such a successor Collateral Agent, the Required Secured Creditors shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. 10.10. Fees and Expenses of Collateral Agent. (a) Each Assignor (by its execution and delivery hereof) hereby agrees jointly and severally to pay to Bankers Trust Company as the original Collateral Agent, such fees as have been separately agreed to in writing with Bankers Trust Company for acting as Administrative Agent and as Collateral Agent hereunder. In the event a successor Collateral Agent is at any time appointed pursuant to the preceding Section 10.9, each Assignor hereby agrees jointly and severally to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. Absent manifest error, the determination by a successor Collateral Agent of the fees owing to it shall be conclusive and binding upon each Assignor. (b) In addition, each Assignor agrees jointly and severally to pay all reasonable out-of-pocket costs and expenses of the Collateral Agent in connection with this Agreement and any actions taken by the Collateral Agent hereunder, and agrees jointly and severally to pay all costs and expenses of the Collateral Agent in connection with the enforcement of this Agreement and the documents and instruments referred to herein (including, without limitation, reasonable fees and disbursements of counsel for the Collateral Agent). ARTICLE XI MISCELLANEOUS 11.1. Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Assignor, to such Assignor at its address set forth opposite its signature below: -32- 37 with a copy to: Coltec Industries Inc 3 Coliseum Center 2550 West Tyvola Road Charlotte, North Carolina 28217 Attention: Thomas B. Jones, Jr. Telephone: (704) 423-7052 Facsimile: (704) 423-7127 (b) if to the Collateral Agent: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Attention: Mary Kay Coyle Telephone: (212) 250-9094 Facsimile: (212) 250-7200 (c) if to any Bank Creditor (other than the Collateral Agent), either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any other Secured Creditor, either (x) to the Representative for such Secured Creditor, at such address as such Representative may have provided to the Assignors and the Collateral Agent from time to time, or (y) in the absence of such a Representative directly to such Secured Creditor at such address as such Secured Creditor shall have specified in writing to the Assignors and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 11.2. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each of the Assignors and the Collateral Agent (with the written consent of the Required Banks (or all the Banks if required by Section 13.12 of the Credit Agreement)); provided, however, that any change, waiver, modification or variance materially adversely affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Class Creditors (as defined below) of such affected Class; provided, further, that any Class shall not be considered to be affected differently from any other Class due to the Obligations of any such other Class being paid, repaid, refinanced, renewed or extended and the Collateral being released, in -33- 38 whole or in part (whether by action of such other Class or otherwise), as security for such Class and such other Class. Notwithstanding anything to the contrary contained above, it is understood and agreed that the Required Banks may agree to modifications to this Agreement for the purpose, among other things, of securing additional extensions of credit (including, without limitation, pursuant to the Credit Agreement or any refinancing or extension thereof). For the purpose of this Agreement, the term "Class" shall mean, at any time, each class of Secured Creditors with outstanding Obligations secured hereby at such time, i.e., (x) the Bank Creditors as holders of the Credit Agreement Obligations secured hereby, (y) the Senior Noteholders as the holders of Senior Note Obligations secured hereby or (z) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations secured hereby; provided that, without limiting the foregoing, it is expressly acknowledged and agreed that other creditors may be added as "Secured Creditors" hereunder (either as part of an existing Class of creditors or as a newly created Class) with the consent of the Required Secured Creditors, and that such addition shall not require the written consent of the Requisite Class Creditors of the various Classes. For the purpose of this Agreement, the term "Requisite Class Creditors" of any Class shall mean each of (i) with respect to the Credit Agreement Obligations, the Required Banks and (ii) with respect to any other Obligations, the holders of at least a majority of all Obligations outstanding from time to time. 11.3. Obligations Absolute; Subrogation. The obligations of each Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement or any other Secured Debt Document except as specifically set forth in a waiver granted pursuant to Section 11.2 hereof; (c) any renewal of, extension of, amendment to or modification of any Secured Debt Document or any security for any of the Obligations; (d) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (e) any furnishing of any additional security to the Collateral Agent or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or its assignee; (f) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof, or (g) any limitation on any other Assignor's liability or obligations under this Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or any other Secured Debt Document or any invalidity or unenforceability, in whole or in part, of this Agreement, the Subsidiaries Guaranty, the Senior Note Subsidiaries Guaranty or any other Secured Debt Documents or any term thereof, whether or not any Assignor shall have notice or knowledge of any of the foregoing. 11.4. Successors and Assigns. This Agreement shall be binding upon each Assignor and its respective successors and assigns and shall inure to the benefit of the Collateral Agent and each Secured Creditor and their respective successors and assigns, provided that no Assignor may transfer or assign any or all of its rights or obligations hereunder without the written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon -34- 39 by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection or Other Hedging Agreements, regardless of any investigation made by the Secured Creditors or on their behalf. 11.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.6. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 11.8. Assignors' Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of any Assignor under or with respect to any Collateral. 11.9. Termination; Release. (a) After the Termination Date (as defined below), without any action on the part of any Secured Creditor, this Agreement shall terminate and be of no further force or effect (provided that all indemnities set forth herein including, without limitation, in Section 10.6 hereof shall survive any such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will execute and deliver to such Assignor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the respective Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent hereunder. As used in this Agreement, "Termination Date" shall mean the first to occur of (i) that date upon which the Total Commitment and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding, all Letters of Credit have been terminated and all other Credit Agreement Obligations (excluding normal continuing indemnity obligations which survive in accordance with their terms, so long as no amounts are then due and payable in respect thereof) then owing by such Assignor have been paid in full, (ii) that date upon which the Collateral is automatically released pursuant to the first sentence of Section 26 of Part I of the Fifth Amendment to Credit Agreement or the Administrative Agent directs the Collateral Agent to release the Collateral pursuant to the second sentence of Section -35- 40 26 of Part I of the Fifth Amendment to the Credit Agreement and (iii) that date upon which the Credit Documents are amended to release all Collateral subject to this Agreement. (b) In the event that any Assignor is released from its obligations pursuant to the Subsidiaries Guaranty in accordance with the terms thereof, then such Person shall cease to be an Assignor hereunder and the Collateral Agent, at the request and expense of the respective Person, will execute and deliver to such Person, a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as to such Person, and will duly assign, transfer and deliver to such Person (without recourse and without any representation or warranty) such of the Collateral pledged by such Person as may be in possession of the Collateral Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys of such Person at the time held by the Collateral Agent hereunder. (c) It is expressly acknowledged and agreed that the Collateral may be sold from time to time to the extent permitted by, and in accordance with the terms of, the Credit Agreement. In addition, it is expressly acknowledged and agreed that any or all of the Collateral may be released by the Collateral Agent acting at the direction of the Required Secured Creditors. Upon any sale of the type described in the second preceding sentence or release of any such Collateral as provided in the immediately preceding sentence, the Collateral Agent shall, at the request and expense of the respective Assignor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to such Assignor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. Notwithstanding anything to the contrary contained above in this Section 11.9(c), in the event the Senior Notes Trustee shall have notified the Collateral Agent in writing that the Senior Note Obligations have been accelerated in accordance with the terms of the Senior Note Documents (and (x) the Senior Note Obligations have not been paid in full and (y) the respective acceleration has not been rescinded), the Collateral Agent shall not thereafter release any Collateral pursuant to this Section 11.9(c) or consent to any termination of this Agreement, except in each case with the prior written consent of the Senior Noteholders holding a majority of the then outstanding Senior Note Obligations secured hereby (or following the payment in full of the Senior Note Obligations or the rescission of the respective acceleration) (d) At any time that any Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 11.9(a), (b) or (c), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 11.9(a), (b) or (c), and the Collateral Agent shall be entitled (but not required) to conclusively rely thereon. If requested by the Collateral Agent (although the Collateral Agent shall have no obligation to make any such request), such Assignor shall furnish appropriate legal opinions (from counsel acceptable to the Collateral Agent) to the effect set forth in the immediately preceding sentence. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 11.9. Upon any release of -36- 41 Collateral pursuant to Section 11.9(a), (b) or (c), none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof. 11.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Company and the Collateral Agent. 11.11. Amendment and Restatement. Upon the execution and delivery of this Agreement by the parties hereto, the Original Subsidiaries Security Agreement shall be amended, restated and superseded in its entirety by this Agreement, effective as of the date hereof, with all rights, obligations and security interests created under or granted pursuant to the Original Subsidiaries Security Agreement continuing from the date thereof. -37- 42 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ASSIGNORS: Address: AMI INDUSTRIES INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary CII HOLDINGS INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary COLTEC CANADA INC, as an Assignor By /S/ ROBERT J. TUBBS ----------------------------------- Title: Executive Vice President, General Counsel and Secretary COLTEC INDUSTRIAL PRODUCTS INC, as an Assignor By /S/ ROBERT J. TUBBS ----------------------------------- Title: Executive Vice President, General Counsel and Secretary COLTEC NORTH CAROLINA, INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary COLTEC TECHNICAL SERVICES INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary DELAVAN INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary GARLOCK INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary -38- 43 GARLOCK INTERNATIONAL INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary COLTEC INTERNATIONAL SERVICES CO., as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary GARLOCK OVERSEAS CORPORATION, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary HABER TOOL COMPANY INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary HOLLEY PERFORMANCE PRODUCTS INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary JAMCO PRODUCTS, LLC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary MENASCO AEROSYSTEMS INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary STEMCO INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary -39- 44 WALBAR INC, as an Assignor By /S/ ROBERT J. TUBBS ------------------------------------ Title: Executive Vice President, General Counsel and Secretary -40- 45 BANKERS TRUST COMPANY, as Collateral Agent By /s/ DAVID J. BELL ---------------------------- Title: Vice President -41- 46 ANNEX A to Subsidiaries Security Agreement SCHEDULE OF PERMITTED FILINGS
Secured Original Description Location Party/ies Number File Date of Collateral Permitted - -------- --------- ------ ----------------------- ---------
47 ANNEX B to Subsidiaries Security Agreement SCHEDULE OF CHIEF EXECUTIVE OFFICES 48 ANNEX C to Subsidiaries Security Agreement SCHEDULE OF RECORD LOCATIONS Location County - -------- ------ 49 ANNEX D to Subsidiaries Security Agreement SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS ADDRESS STATE COUNTY - ------- ----- ------ 50 ANNEX E to Subsidiaries Security Agreement SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES 51 ANNEX F to Subsidiaries Security Agreement SCHEDULE OF MARKS 52 ANNEX G to Subsidiaries Security Agreement SCHEDULE OF PATENTS AND APPLICATIONS Patent Number Date Issued (Application) (Applied) - ------------- --------- 53 ANNEX H to Subsidiaries Security Agreement SCHEDULE OF COPYRIGHTS AND APPLICATIONS (i) 54 ANNEX B to SUBSIDIARIES SECURITY AGREEMENT SCHEDULE OF CHIEF EXECUTIVE OFFICES
Assignor Address County - -------- ------- ------ 1. AMI Industries, Inc. 1275 North Newport Rd El Paso Colorado Springs, CO 80916-2779 2. CII Holdings Inc 1100 North Market Street New Castle Suite 780 Wilmington, DE 19801 3. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West. Tyvola Road Charlotte, NC 28217 4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 5. Coltec International Services Co c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 7. Coltec Technical Services Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217
55 8. Delavan Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 P. O. Box 65100 Polk 811 Fourth Street West Des Moines, IA 50265-0100 9. Garlock Inc 1666 Division Street Wayne Palmyra, NY 14522 10. Garlock International Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 11. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Road Charlotte, NC 28217 12. Haber Tool Company Inc 42001 Koppernick Wayne Canton, MI 48187 13. Holley Performance Products Inc 1801 Russellville Road Robertson Bowling Green, KY 42102 14. Jamco Products, LLC 9426 Old Katy Rd. Harris Houston, TX 77055 15. Menasco Aerosystems Inc 10900 N.E. 8th Street King Suite 900 Bellevue, WA 98004 16. Stemco Inc 300 E. Industrial Blvd. Harrison Longview, TX 75606 17. Walbar Inc Peabody Industrial Center Essex Peabody, MA 01960-3369
-2- 56 DIVISIONS
Assignor Address County - -------- ------- ------ Delavan Gas Turbine Products P. O. Box 65100 Polk Division of Delavan Inc 811 Fourth Street West Des Moines, IA 50265-0100 France Compressor Products 104 Pheasant Run Bucks Division of Coltec Industrial Newtown, PA 18940 Products Inc Garlock Sealing Technologies 1666 Division Street Wayne Division of Garlock Inc Palmyra, NY 14522 Haber Tool Operation of 42001 Koppernick Wayne Haber Tool Company Inc Canton, MI 48187 Holley Performance Products 1801 Russellville Road Warren Bowling Green, KY 42101 Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish Division of Menasco Aerosytems Inc Everett, WA 98204 Stemco Truck Products Division 300 E. Industrial Blvd. Harrison of Stemco Inc Longview, TX 75602-4720 Walbar Arizona Division of 323 S. Bracken Lane Maricopa Walbar Inc Chandler, AZ 85224 Walbar Metals Division of Peabody Industrial Center Essex Walbar Inc Fifth Street Peabody, MA 01960-336
-3- 57 ANNEX C to SUBSIDIARIES SECURITY AGREEMENT SCHEDULE OF RECORD LOCATIONS
Assignor Address County - -------- ------- ------ 1. AMI Industries, Inc. 1275 North Newport Rd. El Paso Colorado Springs, CO 80916-2779 2. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 3. CII Holdings Inc 1100 North Market Street New Castle Ste. 780 Wilmington, DE 19801 4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 a. France Compressor Products 104 Pheasant Run Bucks Division Newtown, PA 18940 b. Plastomer Products Division 23 Friends Lane Bucks Newtown, PA 18949 a. Porter Process 1600 Industry Road Montgomery P. O. Box 310 Hatfield, PA 19440 c. Valves & Industrial Plastics 602 North 10th Street Camden Camden, NJ 08101-0648 5. Coltec International Services Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217
58 6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 7. Coltec Technical Services Inc c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 8. Delavan Inc 811 Fourth Street Polk West Des Moines, IA 50265-0100 c/o Coltec Industries Inc Mecklenburg Three Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 a. Delavan Gas Turbine Products P. O. Box 65100 Polk Division 811 Fourth Street West Des Moines, IA 50265-0100 b. Delavan-Carroll Operation 400 North Bella Vista Drive Carroll P. O. Box 826 Carroll, IA 51401-0826 c. Delavan Steel Treating 2250 Fuller Road Polk Operation West Des Moines, IA 50265 d. Delavan Power Generation 2200 Delavan Drive Polk West Des Moines, IA 50265 9. Garlock Bearings Inc 700 Mid-Atlantic Parkway Gloucester Thorofare, NJ 08086
-2- 59
Assignor Address County - -------- ------- ------ 10. Garlock Inc 1666 Division Street Wayne Palmyra, NY 14522 a. Garlock Sealing Technologies 1666 Division Street Wayne Palmyra, NY 14522 a. Compression Packing 300 Alling Drive Wayne Products Sodus, NY 14551 b. Garlock Rubber 201 Dana Drive Green Technologies Paragould, AR 72450 c. Garlock Metallic Gaskets 1977 Kindred Street Harris Houston, TX 77049 d. Lubrikup 208 Rose Street Lycoming P. O. Drawer 3066 Williamsport, PA 17701 11. Garlock International Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 12. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 13. Haber Tool Company Inc 42001 Koppernick Wayne Canton, MI 48187 a. Danti Tool-Saginaw 1270 Agricola Drive Wayne Saginaw, MI 48604 b. Danti Tool-Standish 4281 Air Park Drive Arenez P. O. Box 767 Standish, MI 48658 14. Holley Performance Products Inc 1801 Russellville Road Robertson Bowling Green, KY 42102 a. Springfield Plant 509 Industrial Drive Robertson Springfield, TN 37172
-3- 60
Assignor Address County - -------- ------- ------ 15. Jamco Products, LLC 9426 Old Katy Rd. Harris Houston, TX 77055 16. Menasco Aerosystems Inc 10900 N.E. 8th Street King Suite 900 Bellevue, WA 98004 a. Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish Division Everett, WA 98204 17. Stemco Inc 300 E. Industrial Blvd. Harrison Longview, TX 75606 18. Walbar Inc Peabody Industrial Center Essex Peabody, MA 01960-3369 a. Walbar Arizona 323 S. Bracken Lane Maricopa Chandler, AZ 85224 a. Walbar Tempe 811 West Broadway Maricopa Tempe, AZ 85282 b. Walbar Metals Peabody Industrial Center Essex Fifth Street Peabody, MA 01960 a. Greenwood Plant 5502 Highway 25 North Greenwood Hodges, SC 29653 19. Jamco, LLC 300 E. Industrial Blvd. Harrison Longview, TX 75606
-4- 61 ANNEX D to SUBSIDIARIES SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATION
Assignor Address County - -------- ------- ------ 1. AMI Industries, Inc. 1275 North Newport Rd. El Paso Colorado Springs, CO 80916-2779 2. CII Holdings Inc 1100 North Market Street New Castle Ste. 780 Wilmington, DE 19801 3. Coltec Canada Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 4. Coltec Industrial Products Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 a. France Compressor Products 104 Pheasant Run Bucks Division Newtown, PA 18940 b. Plastomer Products Division 23 Friends Lane Bucks Newtown, PA 18949 a. Porter Process 1600 Industry Road Montgomery P. O. Box 310 Hatfield, PA 19440 c. Valves & Industrial Plastics 602 North 10th Street Camden Camden, NJ 08101-0648 5. Coltec International Services Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 6. Coltec North Carolina Inc c/o Coltec Industries Inc Mecklenburg
62 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 7. Coltec Technical Products Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 8. Delavan Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 a. Delavan Gas Turbine Products P. O. Box 65100 Polk Division 811 Fourth Street West Des Moines, IA 50265-0100 b. Delavan-Carroll Operation 400 North Bella Vista Drive Carroll P. O. Box 826 Carroll, IA 51401-0826 c. Delavan Steel Treating 2250 Fuller Road Polk Operation West Des Moines, IA 50265 d. Delavan Power Generation 2200 Delavan Drive Polk West Des Moines, IA 50265 9. Garlock Inc 1666 Division Street Wayne Palmyra, NY 14522 a. Garlock Sealing Technologies 1666 Division Street Wayne Palmyra, NY 14522 2860 Plymouth Drive Ontario, Canada Oakville, Ontario Canada L6H 5S8 4100 Rue Garlock Quebec, Canada Sherbrooke, Quebec Canada J1L 1W5
-2- 63 a. Compression Packing 300 Alling Drive Wayne Products Sodus, NY 14551 b. Garlock Rubber 201 Dana Drive Green Technologies Paragould, AR 72450 c. Garlock Metallic Gaskets 1977 Kindred Street Harris Houston, TX 77049 d. Lubrikup 208 Rose Street Lycoming P. O. Drawer 3066 Williamsport, PA 17701 e. Stemco, Inc. 300 East Boulevard Harrison Harrison, TX 75606 10. Garlock International Inc c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 11. Garlock Overseas Corporation c/o Coltec Industries Inc Mecklenburg 3 Coliseum Centre 2550 West Tyvola Rd. Charlotte, NC 28217 12. Haber Tool Company Inc 42001 Koppernick Wayne Canton, MI 48187 a. Danti Tool-Saginaw 1270 Agricola Drive Wayne Saginaw, MI 48604 b. Danti Tool-Standish 4281 Air Park Drive Arenez P. O. Box 767 Standish, MI 48658 c. General Motors Corp. 2100 Burlingame Wyoming Grand Rapids, MI 49509 (consignment Inventory at GM plant) 13. Holley Performance Products Inc 1801 Russellville Road Robertson Bowling Green, KY 42102
-3- 64 a. Springfield Plant 509 Industrial Drive Robertson Springfield, TN 37172 14. Jamco Products, LLC 9426 Old Katy Rd. Harris Houston, TX 77055 15. Menasco Aerosystems Inc 10900 N.E. 8th Street King Suite 900 Bellevue, WA 98004 a. Menasco Aerospace Everett 2701-94th Street, S.W. Snohomish Division Everett, WA 98204 16. Walbar Inc Peabody Industrial Center Essex Peabody, MA 01960-3369 a. Walbar Arizona 323 S. Bracken Lane Maricopa Chandler, AZ 85224 a. Walbar Tempe 811 West Broadway Maricopa Tempe, AZ 85282 b. Walbar Metals Peabody Industrial Center Essex Fifth Street Peabody, MA 01960 a. Greenwood Plant 5502 Highway 25 North Greenwood Hodges, SC 29653
-4- 65 ANNEX E to SUBSIDIARIES SECURITY AGREEMENT SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES
Assignor Name -------- ---- 1. AMI Industries, Inc. AMI Aircraft Seating Systems 2. Coltec Industrial Products France Compressor Products Plastomer Products Porter Process Camden Operation Valves & Industrial Plastics 3. Delavan Inc Delavan-Carroll Operation Delavan Fuel Metering Operation Delavan Steel Treating Operation Delavan Power Generation Operation Delavan Gas Turbine Products 4 Garlock Inc Garlock Sealing Technologies Garlock Rubber Technologies Garlock Metallic Gaskets Lubrikup 5. Haber Tool Company Haber Tool Operation Danti Tool & Die, Inc. Danti Tool - Saginaw Danti Tool - Standish 6. Lewis Engineering Company Delavan Process Instrumentation 7. Menasco Aerosystems Inc Menasco Aerospace Everett 8. Quincy Compressor Ortman Fluid Power 9. Stemco Inc Stemco Truck Products 10. Walbar Inc Walbar Arizona Walbar Metals
66 Annex F to SUBSIDIARIES SECURITY AGREEMENT UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS UTILIZED BY THE ANCHOR PACKING COMPANY
Registration No. Registration Date Description ---------------- ----------------- ----------- 254,554 March 26, 1929 A & Design 160,368 October 24, 1922 A & Design 1,644,249 May 14, 1991 A & Design 342,295 January 12, 1937 AMFLEX 1,083,502 January 24, 1978 ANCHORPAK 617,860 December 20, 1955 ANKLON 1,086,914 March 7, 1978 ANKOFLUOR 1,040,442 June 1, 1976 ANKOLITE 608,562 July 12, 1955 ANKOLITE 605,166 April 26, 1955 ANKOPRENE 391,118 October 21, 1941 ANKOR-FLEX 224,948 March 8, 1927 ANKORITE 605,505 May 3, 1955 ANKOTALLIC 1,193,180 April 6, 1982 ANKOTEX 992,853 September 10, 1974 CONQUISTADOR 91,305 April 29, 1913 HYDROIL 824,892 February 28, 1967 MOL-ANKO-THANE 1,081,037 January 3, 1978 ROTA-FACE 58,839 April 28, 1908 TAURIL 550,937 November 20, 1951 TRIPLE "U" 920,213 September 14, 1971 TWICOM 1,033,285 February 10, 1976 ULTRAGLIDE 618,677 January 3, 1956 VY/FLEX
67 Annex F Page 2 UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS OWNED BY COLTEC NORTH CAROLINA INC FOR USE BY THE COMPANY AND ITS SUBSIDIARIES
Registration No. Registration Date Description ---------------- ----------------- ----------- 909,429 March 9, 1971 CORPORATE LOGO 1,699,817 July 7, 1992 COLTEC INDUSTRIES & LOGO 1,712,599 September 1, 1992 COLTEC INDUSTRIES & LOGO 1,737,584 December 1, 1992 COLTEC INDUSTRIES & LOGO 1,742,117 December 22, 1992 COLTEC INDUSTRIES & LOGO 1,767,835 April 27, 1993 COLTEC INDUSTRIES & LOGO 1,835,154 May 10, 1994 COLTEC INDUSTRIES & LOGO
68 Annex F Page 3 UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS OWNED BY DELAVAN INC
Registration No. Registration Date Description ---------------- ----------------- ----------- 1,351,698 July 30, 1985 COLOR JET 1,454,865 September 1, 1987 COLOR JET 1,276,170 May 1, 1984 COLOR-BRATE 1,301,207 October 23, 1984 COLOR-BRATE 1,184,648 January 5, 1982 DEL-O-FLO 1,272,744 April 3, 1984 DELA-FIT 1,065,670 May 17, 1977 DELAVAN 1,052,304 November 9, 1976 DELAVAN 1,292,321 August 28, 1984 RAINDROP 1,012,800 June 10, 1975 RAINDROP 1,253,590 October 11, 1983 SDX 723,593 November 7, 1961 SONAC 704,944 September 27, 1960 SONAC 1,100,006 August 22, 1978 SWIRL-AIR 1,021,995 October 7, 1975 WHIRL-RAIN 167,179 May 16, 1991 BALL-JET 082,895 July 30, 1990 DURA-JET 1,837,824 May 31, 1994 DELAVAN 1,975,827 May 28, 1996 DELAVAN PROTEK
69 Annex F Page 4 Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 74/570,379 September 6, 1994 CLEAN AIR TECHNOLOGY 74/633,711 February 13, 1995 PRO-TEC
70 Annex F Page 5 UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS UTILIZED BY GARLOCK INC AND OWNED BY COLTEC NORTH CAROLINA
Registration No. Registration Date Description ---------------- ----------------- ----------- 312,661 May 1, 1934 BELMONT 661,669 May 13, 1958 BELMONT 321,984 February 19, 1935 BELMONT & DESIGN 661,670 May 13, 1958 BELMONT & DESIGN 1,198,739 June 22, 1982 BLUE-GARD 48,356 December 26, 1905 CALIPER & SCALE DESIGN 181,026 March 11, 1924 CALIPER & SCALE DESIGN 642,595 March 12, 1957 CALIPER & SCALE DESIGN 647,488 June 25, 1957 CALIPER & SCALE DESIGN 439,630 July 6, 1948 CHEMISEAL 739,748 October 23, 1962 CHEMISEAL 605,500 May 3, 1955 CHEVRON 291,050 January 26, 1932 CHEVRON & DESIGN 610,403 August 9, 1955 CHEVRON & DESIGN 611,808 September 6, 1955 CHRISSCROSS BRAID 1,602,289 June 19, 1990 ENVELON 1,602,856 January 8, 1991 ES-FLO 763,513 January 21, 1964 FLEX-O-MATIC 807,815 May 3, 1966 FLUR-O-FRAN 818,903 November 22, 1966 FLUR-O-FRAN 662,591 June 3, 1958 FRANCE & DESIGN 1,076,821 November 8, 1977 GAR-FIL 1,127,190 December 4, 1979 GAR-MAX 908,922 March 2, 1971 GAR-SEAL 581,360 October 20, 1953 GAR-SEAL 849,823 May 28, 1968 GARFITE 904,160 December 15, 1970 GARFLEX 1,016,821 July 29, 1975 GARLOCK 647,010 June 18, 1957 GARLOCK 643,892 April 9, 1957 GARLOCK 801,648 January 11, 1966 GARLOCK 844,381 February 20, 1968 GARLOCK 642,594 March 12, 1957 GARLOCK 184,261 May 20, 1924 GARLOCK 356,210 April 19, 1938 GARLOCK 647,487 June 25, 1957 GARLOCK 1,284,068 July 3, 1984 GARLOCK 372,869 November 14, 1939 GARLOCK 377,981 May 21, 1940 GARLOCK 377,983 May 21, 1940 GARLOCK
71 Annex F Page 6 646,952 June 18, 1957 GARLOCK 23,420 July 25, 1893 GARLOCK & DESIGN 806,599 April 5, 1966 GARLOCK & DESIGN 37,332 November 19, 1901 GARLOCK & DESIGN 1,209,712 September 21, 1982 GARPHIL 958,129 May 1, 1973 GARTHANE 1,301,678 October 23, 1984 GRAPH-LOCK 291,999 March 1, 1932 GUARDIAN 884,653 January 20, 1970 GUARDIAN 943,554 September 26, 1972 GUARDIAN 1,120,036 June 12, 1979 GUARDIAN 860,761 November 26, 1968 GYLON 1,067,113 June 7, 1977 HC & DESIGN 508,591 April 12, 1949 KLOZURE 572,833 April 7, 1953 LATTICE BRAID 378,035 May 21, 1940 LUBALL 1,577,765 January 16, 1990 LUBRIKUP & DESIGN 756,832 September 17, 1963 MARBLOCK 855,561 August 27, 1968 MARINEPAK 612,198 September 13, 1955 MECHANIPAK 1,600,832 June 12, 1990 MILL-RIGHT 800,512 December 14, 1965 MULTI/FACTURING 728,548 March 13, 1962 F/S 1,305,022 November 13, 1984 PACKMASTER 930,297 March 7, 1972 PLAST-O-LON 871,317 June 17, 1969 PLASTI-PAK 769,027 May 5, 1964 PLASTI-THREAD 830,588 June 20, 1967 POLYFLEX 1,624,844 November 27, 1990 SLUDGE-PAK 1,278,970 May 22, 1984 SOLDIER DESIGN 721,009 September 5, 1961 STANDARD PACKING OF THE WORLD 1,237,326 May 10, 1983 SYNTHE-PAK 1,078,252 November 29, 1977 THERMOLUBE 1,107,793 December 5, 1978 UNI-CARTRIDGE 1,717,214 September 15, 1992 POWR-STOR 1,983,797 July 2, 1996 THE SEAL CIRCUIT 2,057,119 April 29, 1997 SIGNUM
72 Annex F Page 7 Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 74/486,360 February 4, 1994 FLUIDTEC 74/505,505 March 24, 1994 FLEXSEAL 74/570,376 October 6, 1994 MICRO-TEC 74/713,822 August 10, 1995 IFG & Design 75/008,867 October 20, 1995 GARLOCK & Design 75/013,746 November 1, 1995 CRISSCROSS-BRAID 75/213,220 December 13, 1996 GARLOCK SEALING TECHNOLOGIES 75/326,418 July 16, 1997 MODEL 64 75/282,702 April 29, 1997 ISO-GARD 75/274,704 April 15, 1997 QUICKSET 75/274,880 April 15, 1997 QUICKBUSHING 75/307,615 June 12, 1997 IFG 75/313,975 June 24, 1997 DURATUFF 75/346,277 August 25, 1997 MICRO-TEC 75/367,992 October 9, 1997 SHIPSET 75/367,993 October 3, 1997 STRESS-SAVER
73 Annex F Page 8 UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS UTILIZED BY STEMCO INC AND OWNED BY COLTEC NORTH CAROLINA
Registration No. Registration Date Description ---------------- ----------------- ----------- 1,595,097 May 8, 1990 AUTOCOACH 935,683 June 13, 1972 BATT-METER 1,105,543 November 7, 1978 DRIVELESS HUBODOMETER 1,109,921 December 26, 1978 ENGLER 1,595,098 May 8, 1990 FUELCOACH 1,034,829 March 2, 1976 GRIT GUARD 876,024 September 2, 1969 REVO-COUNT 1,517,800 December 27, 1988 S & DESIGN 1,636,155 February 26, 1991 SS4 788,516 April 20, 1965 STEMCO 801,703 January 11, 1966 STEMCO 1,016,820 July 19, 1975 STEMCO 801,705 January 11, 1966 STEMCO in Oval 788,172 April 13, 1965 STEMCO in Oval 1,418,935 December 2, 1986 STEMCO in Oval 1,646,844 June 4, 1991 STEMCO SYSTEM 4 1,394,705 May 27, 1986 STEMCO-ENGLER 1,420,805 December 16, 1986 STEMCO-MONROE 602,976 March 8, 1955 WIG-WAG 1,044,631 July 27, 1976 PRO-TORQ 1,417,174 November 18, 1986 PRO TORQUE 1,977,349 May 28, 1996 HYCARB 2,038,511 February 18, 1997 SPINDLE NUT KEEPER RING DESIGN
74 Annex F Page 9 Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 75/345,012 August 21, 1997 SENTINEL 75/349,954 August 29, 1997 SS4 75/355,075 September 11, 1997 HIGHER STANDARD OF PERFORMANCE 75/356,563 September 15, 1997 ESP 75/362,550 September 25, 1997 DISCOVER 75/362,551 September 25, 1997 VOYAGER 75/385,341 November 5, 1997 STEMCO & "S" Design 75/406,981 December 17, 1997 ADVANTAGE 2000 75/408,576 December 19, 1997 GUARDIAN HP
75 Annex F Page 10 UNITED STATES TRADEMARK REGISTRATIONS UTILIZED BY WALBAR INC AND OWNED BY COLTEC NORTH CAROLINA
Registration No. Registration Date Description ---------------- ----------------- ----------- 992,349 September 3, 1974 WALCOAT 1,796,539 October 5, 1993 SIMULCOAT
76 Annex F Page 11 UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS UTILIZED BY COLTEC INDUSTRIAL PRODUCTS INC
Registration No. Registration Date Description ---------------- ----------------- ----------- 1,776,257 June 15, 1993 MULTILUBE
Serial No. Filing Date Description ---------- ----------- ----------- 75/041,642 January 11, 1996 The Cylinder Solution People
77 Annex G None. 78 Annex H to Subsidiary Security Agreement UNITED STATES PATENTS AND PATENT APPLICATIONS UTILIZED BY GARLOCK INC AND OWNED BY COLTEC NORTH CAROLINA
Patent No. Issue Date Title ---------- ---------- ----- 4,258,927 03/31/81 Shaft Seal with Retractable PTFE-Lined Sealing Lip 4,274,641 06/23/81 Shaft Seal and Method 4,289,318 09/15/81 Hydraulic Motor Balancing Ring Seal 4,289,321 09/15/81 Pressure Shaft Seal and Method 4,308,938 01/05/82 Disc Brake Assembly and Method 4,311,316 01/19/82 Shaft Seal and Method 4,328,974 05/11/82 Stuffing Box Packing System and Method 4,335,889 06/22/82 Shaft Seal with Liner Flange 4,364,588 12/12/82 Band Seal Clamp 4,406,847 09/27/83 Method for Making a Lip type Shaft Seal Having a Resin Liner 4,501,429 02/26/85 Mechanical Seal Flush Agitator and Wear Monitor for Mechanical Seals 4,504,067 03/12/85 High Pressure Shaft Seal with Low-Friction 4,510,966 04/16/85 Plug Valve with Floating Stem Seal 4,552,367 11/12/85 Hub Seal and Axle Assembly and Method for Its Making 4,817,966 04/04/89 Rotary Shaft Bearing Isolator Seal 4,852,890 08/01/8 Rotary Shaft Bearing Isolator Seal 4,859,526 08/22/89 High Temperature Compressed Asbestos Sheet
79 Annex H Page 2 Re.33,192 04/03/90 Method of Molding an Elastomeric Shaft Seal with a Polytetrafluoroethlene Liner Simultaneously Formed Thereon 4,900,629 02/13/90 High Compressibility Gasket Material 4,913,951 04/03/90 Fabrication of Reinforced PTFE Gasketing Materia 4,961,891 10/09/90 High Compressibility Gasketing Material 4,990,296 02/05/91 Welding of Filled Sintered PTFE 4,994,303 02/19/91 Fiber Impregnation Process 5,004,248 04/02/91 Unitized Seal with Unitizing Joint Remote from Seal Lip 5,024,451 06/18/91 Multi-Position Labyrinth Seal Ring 5,480,161 01/2//96 Shaft Seal With Controlled Porosity Elements 5,484,173 01/16/96 Flowing Arch Expansion Joint Using FEP Liner Bonded to Fiberglass Fabric Layer and Reinforced With a Plurality of Fabric Plies Covered with Elastomeric Outer Layer 5,533,737 7/9/96 Seals With Particle Exclusion Means 5,511,797 4/30/96 Tandem Seal 5,603,513 2/18/97 Compressed Non-Asbestos Gasketing for Steam
80 Annex H Page 3 Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 08/877,002 June 16, 1997 Gasket With Wedge-Shaped Grooves for Facing Materials 08/620,406 March 22, 1996 Compact Five Ring Stuffing Box 08/783,094 January 14, 1997 Anti-Buckling Spiral Wound Gasket 08/844,445 April 18, 1997 Floating Wiper Seal Assembly 08/869,692 June 5, 1997 Labyrinth Seal Device And Method of Assembly
81 Annex H Page 4 UNITED STATES PATENTS OWNED BY COLTEC INDUSTRIAL PRODUCTS INC
Patent No. Issue Date Title ---------- ---------- ----- 5,501,827 March 26, 1996 Laser Markable PTFE Resin Material and Method of Making 5,697,390 December 16, 1997 Process for Producing Filled PTFE Resin Composite Materials 5,722,667 March 3, 1998 Seal for Use Between Planar Surfaces
82 Annex H Page 5 UNITED STATES PATENTS AND PATENT APPLICATIONS OWNED BY JAMCO LLC
Patent No. Issue Date Description ---------- ---------- ----------- 5,421,594 June 6, 1995 Gasket
Pending Applications: Serial No. Filing Date Description ---------- ----------- ----------- 08/647,435 April 30, 1996 Hybrid Gasket
83 Annex H Page 6 UNITED STATES PATENTS AND PATENT APPLICATIONS UTILIZED BY STEMCO INC AND OWNED BY COLTEC NORTH CAROLINA INC
Patent No. Issue Date Description ---------- ---------- ----------- 4,989,222 01/29/91 Electronic Hubodometer 4,939,481 02/05/91 Axle Ring Removal Tool 5,328,275 7/12/94 Unitized Wheel Hub and Bearing Assembly 5,478,642 12/26/95 Resin-Based Friction Material Comprising Aramid, Acrylic and Carbon Fibers In a Phenolic Resin Binder
Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 08/381,699 January 31, 1995 Vented Hubcap 08/501,494 July 12, 1995 Resin-Based Friction Material 08/572,921 December 15, 1995 Vent Valve Concept 08/916,978 August 14, 1997 Unitized Wheel Hub and Bearing Assembly With Lubricant Distributing Vanes 08/891,477 July 11, 1997 Contaminent Excluding Hubcap Vent Plug 08/957,807 October 24, 1997 Hub Seal With Machinable Thrust Ring
84 Annex H Page 7 UNITED STATES PATENTS AND APPLICATIONS UTILIZED BY WALBAR INC AND OWNED BY COLTEC NORTH CAROLINA INC
Patent No. Issue Date Title ---------- ---------- ----- 4,293,338 10/06/81 Diffusion Coating Composition of Improved Flowability 5,482,578 1/09/96 Diffusion Coating Process 5,492,726 2/20/96 Platinum Group Silicide Modified Aluminide Coating Process and Products 5,668,607 11/18/97 Platinum Group Silicide Modified Aluminide Coating Process and Products
Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 08/520,282 August 28, 1995 Improved Diffusion Coating Process
85 Annex H Page 8 UNITED STATES PATENTS AND APPLICATIONS OWNED BY DELAVAN INC.
Patent No. Issue Date Title ---------- ---------- ----- 4,186,877 02/05/80 Bypass Nozzle 4,360,156 11/23/92 Fluid Metering and Spraying 4,570,858 02/18/86 Coating Spray Nozzle Tips 4,623,277 11/18/86 Self-Tightening Shaft Coupler 5,058,809 10/22/91 Foam Generating Aspirating Nozzle 5,115,634 5/26/92 Simplex Airblast Fuel Injection Method 5,152,463 10/6/92 Aspirating Simplex Spray Nozzle 5,224,333 7/6/93 Simplex Airblast Fuel Injection 5,472,145 12/5/95 Straight Stream Nozzle 5,491,972 2/20/96 Combination Ignitor and Fuel Atomizer Nozzle Assembly for a Gas Turbine 5,701,732 12/30/97 Method and Appartus for Purging of Gas Turbine Injectors 5,732,730 12/31/98 Combined Check Valve and Metering Valve Assembly
Pending Applications:
Serial No. Filing Date Description ---------- ----------- ----------- 08/866,467 May 30, 1997 Purging of Fluid Spray Apparatus
86 Annex H Page 9 UNITED STATES PATENTS OWNED BY AMI INDUSTRIES INC.
Patent No. Issue Date Title ---------- ---------- ----- 5,643,128 07/01/97 Harmonic Drive Using Guided, Floating Cam Driven Cylinders As Power Transmitting Elements
87 Annex I to SUBSIDIARIES SECURITY AGREEMENT UNITED STATES COPYRIGHT REGISTRATIONS OWNED BY GARLOCK INC
Registration No. Registration Date Description ---------------- ----------------- ----------- VA 455,795 March 11, 1991 Slide Chart
EX-4.11 11 SECOND AMENDMENT TO ADMINISTRAITON AGREEMENT 1 EXHIBIT 4.11 SECOND AMENDMENT TO RECEIVABLES TRANSFER AND ADMINISTRATION AGREEMENT THIS SECOND AMENDMENT TO RECEIVABLES TRANSFER AND ADMINISTRATION AGREEMENT, dated as of January 26, 1998 (this "Amendment"), is to that Receivables Transfer and Administration Agreement, dated as of September 19, 1997 (as amended and modified hereby and as amended by the First Amendment thereto, dated as of December 15, 1997 and as further amended and modified from time to time hereafter, the "Transfer Agreement"), by and among COLTEC INDUSTRIES INC, a Pennsylvania corporation, as agent for the Sellers (the "Sellers' Agent"), as collection agent (the "Collection Agent") and as a Seller, the entities listed on the signature pages thereof (each a "Seller" and, collectively, the "Sellers") and COLTEC NORTH CAROLINA INC, a North Carolina corporation, as Purchaser (the "Purchaser"). Terms used and not otherwise defined in this Amendment shall have the meanings set forth in the Transfer Agreement. WITNESSETH: WHEREAS, the parties hereto desire to amend the Transfer Agreement to reflect the removal of Holley Performance Products Inc ("Holley") as a Seller under that Agreement. NOW, THEREFORE, IN CONSIDERATION of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendment and Termination. a. Holley desires to withdraw, and terminate its rights and obligations, as a Seller under the Transfer Agreement, including, without limitation, under the Sale Assignment, dated as of September 22, 1997 (the "Sale Assignment") by and between Holley and the Purchaser, effective as of the date of this Amendment. As of the date of this Amendment, the parties hereto agree that Holley will no longer sell, transfer, absolutely assign, set over or convey Receivables, Related Security and the proceeds thereof to the Purchaser under the Agreement or under the Sale Assignment (which Sale Assignment is hereby terminated as of the date hereof). 711e withdrawal of Holley as a Seller does not affect the Receivables, Related Security and the proceeds thereof that were transferred and assigned by Holley prior to the date of this Amendment. The Purchaser will retain as its property the Receivables, Related Security and proceeds thereof that were previously transferred by Holley to it. b. Schedule 4.01(n) referred to in, and attached to, the Transfer Agreement, is hereby deleted and replaced in its entirety with the revised Schedule 4.01(n) attached hereto. 2. No Other Changes. Except as modified by this Amendment, all of the terms and provisions of the Transfer Agreement remain in full force and effect. 2 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original. It shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. 4. Governing Law. This Amendment shall be construed and enforced in accordance with the laws of the State of North Carolina without regard to its rules with respect to conflicts of law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 The undersigned have caused this SECOND AMENDMENT TO RECEIVABLES TRANSFER AND ADMINISTRATION AGREEMENT to be duly executed and delivered by their proper duly authorized representatives as of the 26th day of January, 1998. COLTEC INDUSTRIES INC, as Sellers' Agent By: /s/ Thomas B. Jones, Jr. ---------------------------- Name: Thomas B. Jones, Jr. Title: Vice President COLTEC NORTH CAROLINA INC, as Purchaser By: /s/ Thomas B. Jones, Jr. ---------------------------- Name: Thomas B. Jones, Jr. Title: Vice President HOLLEY PERFORMANCE PRODUCTS INC, as Seller By: /s/ Robert J. Tubbs ---------------------------- Name: Robert J. Tubbs Title: Vice President 4 APPENDIX 1 Schedule 4.01(n) LIST OF TRADENAMES
Subsidiaries Tradenames - ------------ ---------- 1. Coltec Industries Inc Chandler Evans Control Systems Delavan Process Instrumentation Fairbanks Morse Engine Haber Tool Lewis Engineering Company Menasco Aerosystems Quincy Compressor Sterling Die 2. AMI Industries, Inc. Aircraft Seating Systems 3. Coltec Canada Inc None 4. Coltec Industrial Products France Compressor Products Ortman Fluid Power Plastomer Products 5. Delavan-Delta Inc Delavan Commercial Products 6. Delavan Inc Delavan Fuel Metering Products Delavan Gas Turbine Products 7. Garlock Bearings Inc None 8. Garlock Inc Garlock Metallic Gaskets Garlock Sealing Technologies 9. Menasco Aerosystems Inc None 10. Stemco Inc Stemco Truck Products 11. Walbar Inc Walbar Arizona Walbar Metals
EX-12.1 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 COLTEC INDUSTRIES INC AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS)
Three Months Ended ------------------------ Year Ended December 31, March 29 March 30 ------------------------------------------------------------------ 1998 1997 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations before extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600 Add [(deduct): Income taxes: Federal and foreign ............... 12,993 11,072 48,875 28,111 17,616 27,251 13,684 State and local ................... 471 1,487 6,241 5,121 2,601 2,105 1,877 Portion of rents representative of Interest factor (1) ............ 879 751 2,983 3,321 2,868 3,979 4,078 Interest Expense .................... 15,080 12,364 54,613 78,182 91,208 90,337 111,497 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations before extraordinary Item, as adjusted ....................... $ 54,644 $ 47,166 $ 207,586 $ 167,305 $ 148,813 $ 172,118 $ 155,736 ========== ========== ========== ========== ========== ========== ========== Fixed charges: Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497 Capitalized interest .............. 225 225 1,455 1,139 997 689 1,140 Portion of rents representative of Interest factor(1) ............ 879 751 2,983 3,321 2,868 2,979 3,678 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Fixed charges ....................... $ 16,184 $ 13,340 $ 59,051 $ 80,642 $ 95,073 $ 94,005 $ 116,315 ========== ========== ========== ========== ========== ========== ========== Ratio of earnings to fixed charges ...................... 3.4 3.5 3.5 2.1 1.6 1.8 1.3 ========== ========== ========== ========== ========== ========== ==========
Note: (1) Estimated to be 1/3 of total rent expenses. 2 COLTEC INDUSTRIES INC AND SUBSIDIARIES COMPUTATION OF RATIO OF EBITDA TO INTEREST EXPENSE (IN THOUSANDS)
Three Months Ended ------------------------ Year Ended December 31, March 29 March 30 ------------------------------------------------------------------ 1998 1997 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations before extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 54,570 $ 34,521 $ 45,446 $ 24,600 Interest expense .................... 15,080 12,364 54,043 78,182 89,886 89,472 110,190 Income taxes: ....................... 12,993 11,072 48,875 28,111 17,615 27,251 13,684 Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings before interest, taxes, depreciation and authorization (EBITDA) ............ $ 65,710 $ 53,439 $ 236,207 $ 193,589 $ 164,108 $ 207,300 $ 197,496 ========== ========== ========== ========== ========== ========== ========== Interest expense .................. $ 15,080 $ 12,364 $ 54,613 $ 76,182 $ 91,208 $ 90,337 $ 111,497 ========== ========== ========== ========== ========== ========== ========== Ratio of EBITDA to interest Expense ............................ 4.4 4.3 4.3 2.5 2.0 2.3 1.8 ========== ========== ========== ========== ========== ========== ==========
3 EXHIBIT 12.1 COLTEC INDUSTRIES INC AND SUBSIDIARIES COMPUTATION OF RATIO OF TOTAL DEBT TO EBITDA (IN THOUSANDS)
Three Months Ended ------------------------ Year Ended December 31, March 29 March 30 ------------------------------------------------------------------ 1998 1997 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations before extraordinary Item ................. $ 25,221 $ 21,492 $ 94,874 $ 94,570 $ 34,521 $ 45,446 $ 24,600 Interest expense .................... 15,080 12,364 54,813 74,894 89,886 89,462 110,190 Income taxes ........................ 12,993 11,072 48,875 28,111 17,615 27,251 13,684 Depreciation and amortization ....... 12,416 8,511 38,415 36,014 42,086 42,131 49,022 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings before interest, taxes, depreciation and amortization (EBITDA) ............. $ 65,710 $ 53,439 $ 239,207 $ 193,589 $ 184,108 $ 207,300 $ 197,486 ========== ========== ========== ========== ========== ========== ========== Ratio of EBITDA to interest expense ................... 13.1 13.7 3.2 3.7 5.1 4.7 5.2 ========== ========== ========== ========== ========== ========== ==========
EX-23.2 13 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.2 As independent public accountants, we hereby consent to the use of our report included in this Registration Statement and to the incorporation by reference in this Registration Statement of our report dated February 2, 1998 (except with respect to information discussed in Note 20 as to which the date is April 16, 1998) included in Coltec Industries Inc's Form 10-K for the year ended December 31, 1997 and to all references to our Firm included in this Registration Statement. Arthur Andersen LLP Charlotte, North Carolina May 15, 1998 EX-25.1 14 FORM T-1 1 Exhibit 25.1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________ BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) COLTEC INDUSTRIES, INC (Exact name of Registrant as specified in its charter) PENNSYLVANIA 13-1846375 (State or other jurisdiction (I.R.S. employer Incorporation or organization Identification no.) 3 COLISEUM CENTRE 2550 WEST TYVOLA ROAD CHARLOTTE, NC 28217 (Address, including zip code of Principal executive offices) 7.5% SENIOR EXCHANGE NOTES DUE 2008 (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3.-15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August_7, 1990, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated June 21, 1995 - Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration No. 33-65171, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated March 20, 1996, incorporate by referenced to Exhibit 1 filed with Form T-1 Statement, Registration No. 333-25843 and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated June 19, 1997, copy attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on November 18, 1997. Copy attached. -2- 3 EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - The latest report of condition of Bankers Trust Company dated as of December_31, 1997. Copy attached. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 7th day of May, 1998. BANKERS TRUST COMPANY By: /s/ Sandra J. Shaffer ------------------------------------- Sandra J. Shaffer Assistant Vice President -4- EX-99.1 15 FORM OF LETTER OF TRANSMITTAL 1 Exhibit 99.1 LETTER OF TRANSMITTAL FOR TENDERS OF $300,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7 1/2% SENIOR NOTES DUE 2008 OF COLTEC INDUSTRIES INC PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. TENDERED SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER. To: Bankers Trust Company, The Exchange Agent By Overnight Courier or Hand By Registered or Certified Mail: Delivery: Bankers Trust Company Bankers Trust Company Corporate Trust & Agency Group Corporate Trust & Agency Group Receipt & Delivery Window P.O. Box 1458 123 Washington Street, 1st Floor Church Street Station New York, NY 10006 New York, NY 10008-1458 By Facsimile: (212) 250-6275/3290 (For Eligible Institutions Only) Confirm by Telephone: (212) 250-6270 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges that he or she has received and reviewed the Prospectus dated , 1998 (the "Prospectus"), of Coltec Industries Inc (the "Issuer") a Pennsylvania corporation, and this Letter of Transmittal (the "Letter"), which together constitute the Issuer's offer (the "Exchange Offer") to exchange up to $300,000,000 aggregate principal amount of the Issuer's 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Issuer's issued and outstanding 7 1/2% Senior Notes Due 2008 (the "Outstanding Notes"). The terms of the Exchange Notes are identical in all material respects to the Outstanding Notes except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except that, if the Exchange Offer is not consummated by October 13, 1998, the interest rate borne by the Outstanding Notes will increase by amounts specified in the Prospectus until the Exchange Offer is consummated. The Exchange Notes will evidence the same indebtedness as 2 the Outstanding Notes and will be issued under and entitled to the same benefits as the Outstanding Notes under the Indenture under which the Outstanding Notes were, and the Exchange Notes will be, issued (the "Indenture"). In addition, the Exchange Notes and the Outstanding Notes will be treated as one series of securities under the Indenture. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Issuer, in its sole discretion, extends the Exchange Offer. The Issuer reserves the right to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the time and date when the Exchange Offer as so extended shall expire. The Issuer shall notify the holders of the Outstanding Notes of any extension by oral or written notice prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Exchange Notes will bear interest from the last interest payment date on which interest was paid on the Outstanding Note surrendered in exchange thereof or, if no such interest payment has occurred, from the date interest begins to accrue on such Outstanding Note. The Exchange Offer is not conditioned upon any minimum principal amount of Outstanding Notes being tendered for exchange. However, the Exchange Offer is subject to certain conditions. Please see the Prospectus under the section entitled "The Exchange Offer--Certain Conditions to the Exchange Offer". The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Outstanding Notes in any jurisdiction in which the making or acceptance of the Exchange Offer would not be in compliance with the laws of such jurisdiction. This Letter is to be completed by a holder of Outstanding Notes either if certificates are to be forwarded herewith or if a tender of certificates for Outstanding Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering Outstanding Notes". Holders of Outstanding Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and deliver all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, may tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus under the section entitled "The Exchange Offer--Guaranteed Delivery Procedures". Holders who wish to tender their Outstanding Notes must complete this Letter of Transmittal in its entirety. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW 3 3 List below the Outstanding Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Outstanding Notes should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF OUTSTANDING NOTES (SEE INSTRUCTIONS 2, 3, AND 8)
- ---------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------------- 1 2 3 ------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT OF OUTSTANDING NOTES TENDERED(2) (MUST BE IN TITLE OF SECURITIES AND AGGREGATE PRINCIPAL DENOMINATIONS OF $1,000 OR CERTIFICATE NUMBER(S)(1) AMOUNT OF OUTSTANDING NOTES INTEGRAL MULTIPLES THEREOF) ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ TOTAL - ----------------------------------------------------------------------------------------------------------------------
(1) Certificate numbers not required if Outstanding Notes are being tendered by book-entry transfer. (2) Unless otherwise indicated, a holder will be deemed to have tendered ALL of the Outstanding Notes represented in column 2. [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------- Account Number: -------------------------------------------------------- Transaction Code Number: ----------------------------------------------- 4 4 [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ------------------------------------------- Window Ticket Number (if any): --------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------ If delivered by book-entry transfer, complete the following: Account Number: ------------------------------------------------------------ Transaction Code Number: --------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ---------------------------------------------------------------------- Address: ------------------------------------------------------------------- --------------------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 5 5 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Outstanding Notes indicated above. The undersigned has completed, executed and delivered this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. Subject to, and effective upon, the acceptance for exchange of the Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Outstanding Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Issuer) with respect to the tendered Outstanding Notes with full power of substitution to (i) deliver certificates for such Outstanding Notes to the Issuer and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuer, (ii) present such Outstanding Notes for transfer on the books of the Issuer and (iii) receive for the account of the Issuer all benefits and otherwise exercise all rights of the beneficial ownership of such Outstanding Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Outstanding Notes tendered hereby and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned hereby further represents that (i) any Exchange Notes acquired in exchange for Outstanding Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes and (iii) neither the holder nor any such other person is an "affiliate", as described in Rule 405 under the Securities Act of 1933 (the "Securities Act"), of the Issuer. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes, it represents that the Outstanding Notes to be exchanged for Exchange Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent and the Issuer to be necessary or desirable to complete the assignment, transfer and sale of the Outstanding Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of, the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the instructions contained in this Letter. For the purposes of the Exchange Offer, the Issuer shall be deemed to have accepted validly tendered Outstanding Notes when, as and if the Issuer has given oral and written notice thereof to the Exchange Agent. If any tendered Outstanding Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Outstanding Notes will be returned (or, in the case of Outstanding Notes tendered by book-entry number through the Book-Entry Transfer Facility, will be promptly credited to an account maintained at the Book-Entry Transfer Facility), without expense, to the undersigned at the address shown below or 6 6 at a different address as may be indicated herein under the "Special Delivery Instructions" as promptly as practicable after the Expiration Date. The undersigned understands that tenders of Outstanding Notes pursuant to the procedures described under the section entitled "The Exchange Offer--Procedures for Tendering Outstanding Notes" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the Exchange Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) in the name(s) of the undersigned or, in the case of a book-entry delivery of Outstanding Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Outstanding Notes". In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Outstanding Notes accepted for exchange in the name(s) of, and return any certificates for Outstanding Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned understands that the Issuer shall have no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Outstanding Notes from the name of the registered holder(s) thereof if the Issuer do not accept for exchange any of the Outstanding Notes so tendered. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE. 7 7 PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE) I hereby TENDER the Outstanding Notes described above in the box entitled "Description of Outstanding Notes" pursuant to the terms of the Exchange Offer. X ---------------------------------- ---------------------------------- X ---------------------------------- ---------------------------------- X ---------------------------------- ---------------------------------- SIGNATURE(S) OF OWNER(S) DATE If a holder is tendering any Outstanding Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Outstanding Notes or on a security position listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 4. Name(s): ------------------------------------------------------------------------ (Please Type or Print) - -------------------------------------------------------------------------------- Capacity: ----------------------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 4) Signature(s) Guaranteed by an Eligible Institution: ----------------------------- (Authorized Signature) - -------------------------------------------------------------------------------- (Title) - -------------------------------------------------------------------------------- (Name of Firm) - -------------------------------------------------------------------------------- (Area Code and Telephone Number) Dated: ------------------------------ 8 8 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 4 AND 5) To be completed ONLY if certificates for Outstanding Notes not exchanged and/or Exchange Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Outstanding Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: Exchange Notes and/or Outstanding Notes to: Name (PLEASE TYPE OR PRINT) --------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address --------------------------------------------------------------------------- (ZIP CODE) --------------------------------------------------------------------------- EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (COMPLETE SUBSTITUTE FORM W-9) [ ] Credit unexchanged Outstanding Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. - -------------------------------------------------------------------------------- (BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4 AND 5) To be completed ONLY if certificates for Outstanding Notes not exchanged and/or Exchange Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Outstanding Notes" on this Letter above. Mail: Exchange Notes and/or Outstanding Notes to: Name (PLEASE TYPE OR PRINT) --------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address --------------------------------------------------------------------------- (ZIP CODE) --------------------------------------------------------------------------- 9 9 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. This Letter must be used to forward, and must accompany, all certificates for Outstanding Notes tendered pursuant to the Exchange Offer. INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND CERTIFICATES. This Letter is to be completed by holders either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Outstanding Notes". Certificates for all physically tendered Outstanding Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Outstanding Notes tendered hereby must be in denominations of $1,000 and integral multiples thereof. The method of delivery of this Letter, the Outstanding Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Outstanding Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letter or Outstanding Notes should be sent to the Issuer. Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available, (ii) who cannot deliver their Outstanding Notes, this Letter or any other documents required hereby to the Exchange Agent prior to the Expiration Date or (iii) who cannot comply with the procedures for book-entry tender on a timely basis, may tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (i) such tender must be made through an Eligible Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile transmission (immediately followed by mail or hand delivery)) setting forth the name and address of the holder, the certificate number(s) of such Outstanding Notes (except in the case of book-entry tenders) and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three business days after the Expiration Date, this Letter (or a facsimile hereof) together with the certificate(s) representing the Outstanding Notes (except in the case of book-entry tenders) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter (or facsimile hereof), as well as all other documents required by this Letter and the certificate(s) representing all tendered Outstanding Notes in proper form for transfer or a Book-Entry Confirmation with respect to such Outstanding Notes, must be received by the Exchange Agent within three business days after the Expiration Date, all as provided in the Prospectus under the section entitled "The Exchange Offer--Guaranteed Delivery Procedures". Any holder who wishes to tender his Outstanding Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Outstanding Notes according to the guaranteed delivery procedures set forth above. As used in this Letter, "Eligible Institution" shall mean a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States or which is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended. 10 10 All questions as to the validity, eligibility (including time of receipt), acceptance and withdrawal of tendered Outstanding Notes will be determined by the Issuer in its sole discretion, which determination will be final and binding. The Issuer reserves the absolute right to reject any and all Outstanding Notes not properly tendered or any Outstanding Notes the Issuer's acceptance of which would, in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves the right to waive any defects, irregularities or conditions of tender as to particular Outstanding Notes. The Issuer's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter, as soon as practicable following the Expiration Date. See "The Exchange Offer" in the Prospectus. 2. TENDER BY HOLDER. Only a holder of Outstanding Notes may tender such Outstanding Notes in the Exchange Offer. Any beneficial owner whose Outstanding Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on behalf of such beneficial owner. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing this Letter and delivering such owner's Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. 3. PARTIAL TENDERS AND WITHDRAWALS. Tenders of Outstanding Notes will be accepted only in denominations of $1,000 or integral multiples thereof. If less than all of the Outstanding Notes are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Outstanding Notes to be tendered in the box above entitled "Description of Outstanding Notes--Principal Amount of Outstanding Notes Tendered". A reissued certificate representing the balance of nontendered Outstanding Notes will be sent to such tendering holder (except in the case of book-entry tenders), unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OUTSTANDING NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. Any holder who has tendered Outstanding Notes may withdraw the tender by delivering written notice of withdrawal to the Issuer prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at its address set forth on the first page of this Letter. Any such notice of withdrawal must (i) specify the name of the person having deposited the Outstanding Notes to be withdrawn (the "Depositor"); (ii) include a statement that the Depositor is withdrawing its election to have Outstanding Notes exchanged and identify the Outstanding Notes to be withdrawn (including the certificate number or numbers and principal amount of such Outstanding Notes (except in the case of book-entry tenders)); (iii) be signed by the holder in the same manner as the original signature on this Letter by which such Outstanding Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee (as defined in the Prospectus) register the transfer of such Outstanding Notes into the name of the person withdrawing the tender; and (iv) where certificates for Outstanding Notes have been transmitted, specify the name in which such Outstanding Notes are to be registered, if different from that of the Depositor. If Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, the name of the registered holder and the certificate numbers of the particular Outstanding Notes withdrawn must also be furnished to the Exchange Agent as aforesaid prior to the physical release of the withdrawn Outstanding Notes. If the Outstanding Notes have been tendered pursuant to the procedures for book-entry tender set forth in the Prospectus, a notice of withdrawal must specify, in lieu of certificate numbers, the name and account number at the Book-Entry 11 11 Transfer Facility to be credited with the withdrawn Outstanding Notes. Outstanding Notes properly withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn Outstanding Notes may be retendered by again following one of the procedures herein at any time prior to 5:00 p.m., New York City time, on the Expiration Date. All questions as to the validity, form and eligibility (including time of receipt) of notice of withdrawal will be determined by the Issuer, whose determinations will be final and binding on all parties. Neither the Issuer, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. See "The Exchange Offer--Withdrawal of Tenders" in the Prospectus. 4. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURE. If this Letter is signed by the registered holder of the Outstanding Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates (if applicable) without any change whatsoever. If any tendered Outstanding Notes are owned of record by two or more joint owners, all such owners must sign this Letter. If any tendered Outstanding Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Outstanding Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Notes are to be issued, or any untendered Outstanding Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder(s) appear(s) on the certificate(s). If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted. Endorsements on certificates for Outstanding Notes or signatures on bond powers required by this Instruction 4 must be guaranteed by an Eligible Institution. Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Outstanding Notes are tendered: (i) by a registered holder of such Outstanding Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Outstanding Notes) who has not completed the box entitled "Special Issuance Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Outstanding Notes should indicate in the applicable box the name and address in or to which Exchange Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Outstanding Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that Outstanding Notes not exchanged be credited to such amount maintained at the Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Outstanding Notes not exchanged will be returned to the name or address of the person signing this Letter. 12 12 6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the transfer of Outstanding Notes to them or their order pursuant to the Exchange Offer. If, however, Exchange Notes and/or substitute Outstanding Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Outstanding Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Notes specified in this Letter. 7. WAIVER OF CONDITIONS. Subject to the terms and conditions set forth in the Prospectus, the Issuer reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Outstanding Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Outstanding Notes for exchange. Neither the Issuer nor any other person is obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING, AS WELL AS REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER, MAY BE DIRECTED TO THE EXCHANGE AGENT, AT THE ADDRESS INDICATED ON THE FIRST PAGE OF THIS LETTER OR BY TELEPHONE AT (212) 250-2500. 13 13 IMPORTANT TAX INFORMATION Under federal income tax laws, a registered holder of Outstanding Notes or Exchange Notes is required to provide the Trustee (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such holder is an individual, the TIN is his social security number. If the Trustee is not provided with the correct TIN or an adequate basis for an exemption, a $50 penalty may be imposed by the Internal Revenue Service, and payments made to such holder with respect to Outstanding Notes or Exchange Notes may be subject to backup withholding. Certain holders (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt holders should indicate their exempt status on Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Trustee a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. A Form W-8 can be obtained from the Trustee. If backup withholding applies, the Trustee is required to withhold 31% of any payments made to the holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments made with respect to Outstanding Notes or Exchange Notes the holder is required to provide the Trustee with: (i) the holder's correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (A) such holder is exempt from backup withholding, (B) the holder has not been notified by the Internal Revenue Service that the holder is subject to backup withholding as a result of failure to report all interest or dividends or (C) the Internal Revenue Service has notified the holder that the holder is no longer subject to backup withholding; and (ii) if applicable, an adequate basis for exemption. If the holder is awaiting a TIN, such holder should check the box in Part 3 of the Substitute Form W-9. In such case, the Trustee shall retain 31% of any payments made to such holder with respect to the Outstanding Notes or Exchange Notes until such holder furnishes its TIN to the Trustee. 14 14 TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE "IMPORTANT TAX INFORMATION" ABOVE) PAYOR'S NAME: [ ] NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU UNDER THE SENIOR NOTES OR THE EXCHANGE NOTES.
- ---------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN Social Security Number FORM W-9 THE BOX AT RIGHT AND CERTIFY BY OR____________________________ SIGNING AND DATING BELOW Employer Identification Number - ---------------------------------------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2--Certification--Under penalties of PART 3 perjury I certify that: INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and Awaiting TIN [ ] (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------- Payer's Request for Taxpayer Certificate instructions:--You must cross out item (2) in Part 2 above if you have Identification Number ("TIN") been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE ------------------------------------------ DATE ------------------------------------------ NAME ------------------------------------------ (Please Print) - ----------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. It is understood that 31% of all reportable payments made to me will be withheld until I provide a taxpayer identification number. - --------------------------------- - --------------------------------- Signature and Date - --------------------------------- IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR SENIOR NOTES (IF APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. EX-99.2 16 FORM OF NOTICE OF GUARANTEED DELIVERY 1 Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY OF COLTEC INDUSTRIES INC PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. TENDERED SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER. This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Coltec Industries Inc (the "Company") made pursuant to the Prospectus, dated [ ] , 1997 (the "Prospectus"), if certificates for Outstanding Notes of the Company are not immediately available or if the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Company prior to midnight, New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to Bankers Trust Company (the "Exchange Agent") as set forth below. Capitalized terms not defined herein are defined in the Prospectus. Main Delivery To: Bankers Trust Company, Exchange Agent By Overnight Courier or Hand By Registered or Certified Mail: Delivery: Bankers Trust Company Bankers Trust Company Corporate Trust & Agency Group Corporate Trust & Agency Group Receipt & Delivery Window P.O. Box 1458 123 Washington Street, 1st Floor Church Street Station New York, NY 10006 New York, NY 10008-1458 By Facsimile: (212) 250-6275/3290 (For Eligible Institutions Only) Confirm by Telephone: (212) 250-6270 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Outstanding Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. 2 3 DESCRIPTION OF OUTSTANDING NOTES
- ---------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------------- 1 2 3 ------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT OF OUTSTANDING NOTES TENDERED(2) (MUST BE IN TITLE OF SECURITIES AND AGGREGATE PRINCIPAL DENOMINATIONS OF $1,000 OR CERTIFICATE NUMBER(S)(1) AMOUNT OF OUTSTANDING NOTES INTEGRAL MULTIPLES THEREOF) ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ TOTAL - ----------------------------------------------------------------------------------------------------------------------
(1) Certificate numbers not required if Outstanding Notes are being tendered by book-entry transfer. (2) Unless otherwise indicated, a holder will be deemed to have tendered ALL of the Outstanding Notes represented in column 2. PLEASE SIGN HERE X ----------------------------------------------------------- ----------------------------------------------------------- X ----------------------------------------------------------- ----------------------------------------------------------- SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY DATE
---------------------------------- AREA CODE AND TELEPHONE NUMBER Must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Outstanding Notes or on a security position listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, please set forth full title. Name(s): ------------------------------------------------------------------------ (Please Type or Print) Capacity: ----------------------------------------------------------------------- Address: ------------------------------------------------------------------------ (Include Zip Code) THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY 3 4 (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates representing the principal amount of Outstanding Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Outstanding Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus, together with one ore more properly completed and duly executed Letters of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three business days after the Expiration Date. ----------------------------------------------------------- ----------------------------------------------------------- Name of Firm Authorized Signature ----------------------------------------------------------- ----------------------------------------------------------- Address Title Name: ----------------------------------------------------------- ------------------------------------------------------ Zip Code (Please Type or Print) Area Code and Tel. No. Date: ------------------------------------------ ------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM. CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.3 17 FORM OF LETTER TO BROKERS, DEALERS, ETC. 1 Exhibit 99.3 COLTEC INDUSTRIES INC OF COLTEC INDUSTRIES INC PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. TENDERED SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER. To: BROKERS, DEALERS COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES Coltec Industries Inc (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus dated , 1998 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for its outstanding 7 1/2% Senior Notes Due 2008 (the "Outstanding Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated as of April 16, 1998, among the Company and the other signatories thereto. We are requesting that you contact your clients for whom you hold Outstanding Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Outstanding Notes registered in your name or in the name of your nominee, or who hold Outstanding Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated , 1998; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Outstanding Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Outstanding Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; and 5. Return envelopes addressed to Bankers Trust Company, the Exchange Agent for the Outstanding Notes. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the 2 Exchange Agent and certificates representing the Outstanding Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Outstanding Notes wish to tender, but it is impracticable for them to forward their certificates for Outstanding Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering Outstanding Notes" and "The Exchange Offer--Guaranteed Delivery Procedures". The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Outstanding Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all transfer taxes applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer, except as set forth in Instruction 5 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to Bankers Trust Company, the Exchange Agent for the Outstanding Notes, at the address set forth on the front of the Letter of Transmittal. Very truly yours, COLTEC INDUSTRIES INC NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures EX-99.4 18 FORM OF LETTER TO CLIENTS 1 Exhibit 99.4 $300,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7 1/2% SENIOR NOTES DUE 2008 OF COLTEC INDUSTRIES INC PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. TENDERED SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER. TO OUR CLIENTS: Enclosed for your consideration is a Prospectus dated , 1998 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Coltec Industries Inc (the "Company") to exchange its 7 1/2% Series B Senior Notes Due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for its outstanding 7 1/2% Senior Notes Due 2008 (the "Outstanding Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated as of April 16, 1998, among the Company and the other signatories thereto. This material is being forwarded to you as the beneficial owner of the Outstanding Notes carried by us in your account but not registered in your name. A TENDER OF SUCH OUTSTANDING NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Outstanding Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Outstanding Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless extended by the Company (the "Expiration Date"). Any Outstanding Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Outstanding Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Certain Conditions to the Exchange Offer". 3. Any transfer taxes incident to the transfer of Outstanding Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 2 4. The Exchange Offer expires at 5:00 p.m., New York City time, on , 1998, unless extended by the Company. If you wish to have us tender your Outstanding Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OUTSTANDING NOTES. 3 3 INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Coltec Industries Inc with respect to its Outstanding Notes. This will instruct you to tender the Outstanding Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Outstanding Notes held by you for my account as indicated below: Aggregate Principal Amount of Outstanding Notes 7 1/2% Senior Notes Due 2008 ............... ------------------------------------------------- [ ] Please do not tender any Outstanding Notes held by you for my account. ------------------------------------------------- Signature(s) ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Please print name(s) here ------------------------------------------------- ------------------------------------------------- Address(es) ------------------------------------------------- Area Code and Telephone Number Dated: ---------------------------------------------- ------------------------------------------------- Tax Identification or Social Security No(s).
None of the Outstanding Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Outstanding Notes held by us for your account. -----END PRIVACY-ENHANCED MESSAGE-----