Exhibit 10.7
SHARE OPTION TRANSACTION
[First Union Logo]
DATE: MARCH 11, 2002
TO: COLTEC INDUSTRIES INC
ADDRESS: FOUR COLISEUM CENTRE DRIVE
0000 XXXX XXXXXX XXXX
XXXXXXXXX, XXXXX XXXXXXXX 00000
ATTENTION: XXXXXXXX XXXXX
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
FROM: FIRST UNION SECURITIES, INC.
as Agent (the "Agent") of First Union National Bank
FIRST UNION REFERENCE NUMBER: 115221
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between First Union
National Bank ("First Union") and Coltec Industries Inc ("Counterparty", and
collectively with First Union, the "Parties") on the Trade Date as specified
below (the "Transaction"). This Confirmation constitutes a "Confirmation" as
referred to in the Master Agreement specified below.
The definitions and provisions contained in the 2000 ISDA Definitions (including
the June 2000 Version Annex thereto) (the "2000 Definitions") and the 1996 ISDA
Equity Derivatives Definitions (the "Equity Definitions", and together with the
2000 Definitions, the "Definitions"), in each case as published by the
International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated
into, and subject to this Confirmation. References herein to "Transaction" shall
be deemed references to "Swap Transaction" for purposes of the 2000 Definitions.
In the event of any inconsistency between the 2000 Definitions and the Equity
Definitions, the Equity Definitions will govern. In the event of any
inconsistency between either set of Definitions and this Confirmation, this
Confirmation will prevail.
This Confirmation evidences a complete and binding agreement between First Union
and Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement in the form of the ISDA Master Agreement (Multicurrency-Cross
Border) as if the parties had executed an agreement in such form, but without
any Schedule except for the election of New York law (without regard to
conflicts of law principles) as the governing law and U.S. Dollars as the
Termination Currency. Neither party is acting as the other party's financial
advisor for this Transaction nor is it relying on the other party for any
evaluation of the present or future results, consequences, risks, and benefits
of this transaction, whether financial, accounting, tax, legal, or otherwise.
The terms of the Transaction to which this Confirmation relates are as follows:
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GENERAL TERMS:
Transaction Type: Share Option Transaction
Trade Date: March 6, 2002
Option Style: American
Option Type: Call
Buyer: Counterparty
Seller: First Union
Shares: The common shares of Xxxxxxxx Corporation
(the "Issuer"), CUSIP #000000000, Ticker
Symbol: GR
Number of Options: 1,891,391
Option Entitlement: One Share(s) per Option
Multiple Exercise: Applicable
Minimum Number of Options: 1
Maximum Number of Options: 300,000
Strike Price: USD 52.34
Premium: USD 11,079,957.62
Premium Amount Payer: Counterparty
Premium Payment Date: Three (3) Currency Business Days following the
Trade Date.
Exchange: New York Stock Exchange
Related Exchange(s): Any nationally recognized exchange or
quotation system on which options or futures
contracts on the Shares are traded or quoted.
Clearance System: If Physical settlement applies, the Clearance
System shall be DTC.
Procedure for Exercise:
----------------------
Commencement Date: The Premium Payment Date.
Expiration Time: The regular close of trading on the Exchange,
without regard to extended trading hours.
Expiration Date: March 6, 2007
Automatic Exercise: Applicable, provided, however, that beginning
with the tenth Exchange Business Day prior to
and including the Expiration Date the
Calculation Agent shall allocate the Number of
Options remaining to the Exchange
2
Business Days in this period so that up to the
Maximum Number of Options can be exercised on
the Exchange Business Days ending on the
Expiration Date. For example, if on the tenth
Exchange Business Day prior to and including
the Expiration Date 1,891,391 Options remain
outstanding then Automatic Exercise shall
apply as follows: 300,000 on each of the six
Exchange Business Days prior to such
Expiration Date and 91,391 on the Expiration
Date.
First Union's Agent's Telephone
Number and Telex and/or
Facsimile Number and
Contact Details for Purpose
Of Giving Notice: Xxxxxx Xxxxx or Head Trader
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Valuation:
---------
Valuation Time: The Expiration Time
Valuation Date: Each Exercise Date
Reference Price: If Physical Settlement applies, the Reference
Price shall be the closing price per Share
quoted by the Exchange at the Expiration Time
on the Expiration Date.
Settlement Terms: Cash or Physical Settlement, at Counterparty's
---------------- election, and Counterparty must provide notice
(which may be oral telephonic or written
facsimile notice) given to First Union on or
before five (5) Exchange Business Days prior
to the applicable Exercise Date, between the
hours of 9:00 a.m. and 4:00 p.m. local time in
New York. If Counterparty fails to notify
First Union of its election and this Option is
exercised, then Physical Settlement shall
apply for such Exercise Date. If Physical
Settlement applies for this Transaction, then
the settlement terms shall be as provided in
the Equity Definitions. If Counterparty elects
Cash Settlement, then the settlement terms
shall be as follows:
Settlement Currency: USD
Cash Settlement Payment Three (3) Currency Business Days following the
Date: applicable Valuation Date
Cash Dividends: This Transaction assumes that a quarterly cash
-------------- dividend of $0.275 per share shall be declared
and paid by the Issuer. If an ex-dividend date
for the payment of a cash dividend to the
holders of record of the Shares occurs on any
date from and excluding the Trade Date to but
including the Exercise Date and such payment
is either more or less than $0.275 per Share
then the Calculation Agent shall determine the
market value of this Transaction immediately
prior to such payment and immediately after
such payment. (If no quarterly cash dividend
is declared and paid in a quarter than a cash
dividend amount of zero shall be assumed.)
If the market value of this Transaction
immediately after the payment is greater than
the market value of this Transaction
immediately prior to the
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payment then within one Currency Business Day
of such determination the Counterparty shall
pay such excess to First Union. If the market
value of this Transaction immediately after
the payment is less than the market value of
this Transaction immediately prior to the
payment then within one Currency Business Day
of such determination First Union shall pay
such difference to the Counterparty.
Notwithstanding the foregoing, the
Counterparty may elect that, in lieu of any
such payment that the Calculation Agent adjust
the Strike Price of this Transaction to
account for the change in the market value of
this Transaction.
Adjustments:
-----------
Method of Adjustment: Calculation Agent Adjustment; provided,
however, that notwithstanding Section 9.1 of
the 1996 ISDA Equity Derivatives Definitions,
if an ex-dividend date for the payment of a
dividend by the Issuer in securities of the
Counterparty or an affiliate of the
Counterparty to the holders of record of the
Shares (a "Counterparty Securities
Distribution") occurs on any date from and
excluding the Trade Date to but including the
Exercise Date, as the case may be, the
Counterparty in lieu of a Calculation Agent
Adjustment shall elect either (i) to have
First Union physically deliver to it the
number of securities equal to X or (ii) to
have First Union pay to the Counterparty the
actual proceeds First Union receives from
selling such securities. First Union shall pay
any proceeds it receives within one Currency
Business Day after the receipt thereof. If the
Counterparty fails to make an election (which
may be oral or in writing) on or before one
Exchange Business Day prior to the payment of
such dividend then it shall have been deemed
to have elected physical settlement.
"X" means the number of securities received by
First Union in connection with First Union's
hedge relating to this Transaction.
Extraordinary Events:
--------------------
Consequences of Merger
Events:
(a) Share-for-Share: Alternative Obligation, provided that if in
either party's reasonable judgement such
consequence cannot or would not provide a
commercially reasonable result, then First
Union will transfer to the Counterparty, upon
receipt, any consideration it receives in
connection with the Merger Event as a holder
of the Shares associated with First Union's
hedge, net of any taxes, charges or other
expenses, including any costs or losses
incurred by First Union in connection with the
early termination of this Transaction.
(b) Share-for-Other: First Union will transfer to the Counterparty,
upon receipt, any consideration it receives in
connection with the Merger Event as a holder
of the Shares associated with First Union's
hedge, net of any taxes, charges or other
expenses, including any costs or losses
incurred by First Union in connection with the
early termination of this Transaction.
(c) Share-for-Combined: First Union will transfer to the Counterparty,
upon receipt, any consideration it receives in
connection with the Merger Event as a holder
of the Shares
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associated with First Union's hedge, net of
any taxes, charges or other expenses,
including any costs or losses incurred by
First Union in connection with the early
termination of this Transaction.
Nationalization or Insolvency: First Union will transfer to the Counterparty,
----------------------------- upon receipt, any consideration it receives in
connection with the Nationalization or
Insolvency as a holder of the Shares
associated with First Union's hedge, net of
any taxes, charges or other expenses,
including any costs or losses incurred by
First Union in connection with the early
termination of this Transaction.
Calculation Agent: First Union
-----------------
Settlement Amount: For purposes of determining the Settlement
----------------- Amount under Section 6(e) of the Master
Agreement, "Second Method" and "Loss" shall
apply.
Payments to First Union: First Union Charlotte
----------------------- Capital Markets
Attention: Derivatives Desk
Fed. ABA No. 000000000
Ref: Equity Derivatives
Payments to Counterparty: Coltec Industries Inc
------------------------ Bank of America
ABA No. 000000000
Account No. 3750781281
Ref: TIDES Hedge
Representations of Counterparty: The Counterparty is not required to obtain any
------------------------------- approval, authorization, license, consent,
exemption, adjudication or order of, or to
file any notice or registration with, any
governmental authority of the United States of
America or the state in which the Counterparty
resides or is domiciled (i) as a condition to
the validity or enforceability of, or for the
execution, delivery or performance by the
Counterparty under, this Confirmation or (ii)
as a condition to the exercise by First Union
of its rights hereunder.
The execution and delivery and performance
under this Confirmation by the Counterparty
will not contravene or constitute a default
under any statute, regulation, rule, order,
judgment or decree of any governmental
authority of the United States of America or
the state in which the Counterparty resides or
is domiciled, or under any contractual
agreement or restriction that is binding on
the Counterparty or its assets or that affects
the performance by the Counterparty of its
obligations hereunder.
Additional Representations, On any date where the Counterparty is the
Warranties and Covenants: Issuer or an Affiliate of the Issuer
------------------------ and Cash Settlement is elected and on each
date where the Counterparty elects a cash
payment in connection with a Counterparty
Securities Distribution, the following shall
apply:
Registration Provisions: Counterparty agrees to cause to be prepared
----------------------- and filed with the Securities and Exchange
Commission (the "SEC") a registration
statement relating to:
(i) the Shares that form First Union's hedge
position relating to each
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Valuation Date and to cause such
registration statement to be effective at
all times from and including the date
that the Counterparty elects Cash
Settlement in connection with the
relevant Exercise Date, or
(ii) any securities received in connection
with the Counterparty Securities
Distribution, and to cause such
registration statement to be effective at
all times from and including the date of
the Counterparty Securities Distribution,
and to cause such registration statement to be
kept continuously effective and in compliance
with the Securities Act of 1933, as amended
(the "Securities Act"), and all applicable
rules and regulations of the SEC and usable by
First Union for sale of such Shares or
securities, as the case may be, to and
including the date that First Union or its
affiliate(s) has finally sold such Shares or
securities.
At the request of First Union, First Union,
and any nationally recognized underwriter
selected by it and reasonably acceptable to
Counterparty (an "Underwriter"), and the
Counterparty shall enter into an agreement (an
"Underwriting Agreement") on reasonable and
customary underwriting terms, including but
not limited to, provisions requiring
indemnification and contribution and the
delivery of (i) opinions of counsel for the
Counterparty in form and substance reasonably
acceptable to First Union and any Underwriter
and (ii) a "cold comfort" letter signed by the
independent public accountants who have issued
a report on the financial statements included
in the registration statement, each covering
substantially the same matters with respect to
the Shares or other securities and the
offering, sale and issuance thereof as are
customarily covered in opinions of issuer's
counsel and in accountants' letters delivered
to underwriters in underwritten public
offerings of similar securities, and, in the
case of the accountants' letter, such other
financial matters as First Union and any
Underwriter may have reasonably requested, and
shall allow First Union and any Underwriter,
and their agents and legal counsel, to
complete a customary "due diligence" review of
the Counterparty, and in connection with the
preparation and filing of each registration
statement, shall allow First Union and any
Underwriter, and their agents and legal
counsel, the opportunity to review and comment
on the form of registration statement, each
prospectus included therein or to be filed
with the Securities and Exchange Commission,
and each amendment thereto or supplement
thereof, and in each case will make the
corrections reasonably requested by them prior
to filing any such registration statement. In
addition, Counterparty shall have caused the
securities to be registered or qualified the
securities under securities or "blue sky" laws
of such states or other jurisdictions in the
United States and Puerto Rico that First Union
and any Underwriter shall have reasonably
requested.
Counterparty shall have caused the Shares or
such other securities to be registered with or
approved by such other governmental agencies
or authorities in the United States as may be
necessary to enable First Union and any
Underwriter to consummate the disposition of
such Shares or such other securities.
Counterparty shall effect the listing of the
Shares or such other securities
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on the Exchange and on each other securities
exchange on which similar securities issued by
Issuer are then listed, or if no such
securities are then listed on any securities
exchange, Counterparty will use its best
efforts to effect such listing upon a national
securities exchange.
Counterparty shall pay all reasonable costs
and expenses incurred in connection with the
foregoing.
Counterparty will not be required to make a
registration statement available or register
or qualify the shares or such other securities
under state securities or blue sky laws or
enter into any Underwriting Agreement if, in
the unqualified written opinion of nationally
recognized outside counsel for Counterparty in
form and substance reasonably acceptable to
First Union, no registration under the
Securities Act, and registration or
qualification under state securities or blue
sky laws is required for public resales of the
relevant Shares or other securities by First
Union. Such opinion shall be provided to First
Union and shall state that First Union is
entitled to rely thereon. Counterparty shall
indemnify First Union from any liabilities,
costs and expenses incurred by First Union in
effecting any resales without registration in
reliance on such opinion.
Indemnification and Counterparty agrees to indemnify First Union
Contribution: and its affiliates and their respective
------------ directors, officers, partners, agents,
controlling parties and employees (First Union
and each such person being an "Indemnified
Party") from and against any and all losses,
claims, damages and liabilities, joint and
several to which such Indemnified Party may
become subject under any applicable law, or
otherwise related to, arising out of the
engagement of First Union pursuant to, and the
performance by First Union of the services
contemplated by this letter other than those
arising solely out of First Union's gross
negligence or willful misconduct and will
promptly reimburse any Indemnified Party for
all expenses (including reasonable legal fees
and expenses) as they are incurred in
connection with the investigation of,
preparation for, or defense of any pending or
threatened claim or any action or proceeding
arising therefrom, whether or not such
Indemnified Party is a party thereto. This
indemnity agreement shall be in addition to
any liability that Counterparty otherwise may
have.
Make-Whole: If Counterparty fails to comply with or
---------- perform any agreement or obligation contained
in "Registration Provisions" above (without
regard to whether the cause of non-compliance
is not within the control of Counterparty) or
Counterparty's representations contained in
"Securities Laws and Registration
Representations" below are incorrect or
misleading in any material respect, then
Counterparty shall immediately notify First
Union thereof and:
(i) in connection with Cash Settlement on an
Exercise Date, the Counterparty shall pay
to First Union, promptly upon demand, the
amount (if positive) equal to the
Reference Price per Share minus the
actual per Share proceeds it receives in
selling each Share comprising its hedge;
or
(ii) in connection with a cash payment
relating to a Counterparty
7
Distribution Date, First Union shall pay
to the Counterparty the actual proceeds
it receives in selling the securities in
a private placement promptly upon receipt
of such proceeds.
Securities Laws and Counterparty represents that any registration
Registration Representations: statement filed and any prospectus delivered
---------------------------- to First Union in connection with sales made
under such registration statement (as such
prospectus may be supplemented from time to
time) will not include an untrue statement of
a material fact or omit to state a material
fact necessary in order to make the statements
therein, in light of the circumstances under
which they were made, not misleading.
Counterparty represents, and is deemed to
repeat on each day that a registration
statement filed in connection with this
Transaction is effective, that each of the
required filings under all applicable
securities laws have been filed and, as of the
respective dates thereof, there are no
misstatements of material fact contained
therein or omissions of a material fact
required to be stated therein or necessary to
make the statements therein not misleading.
Counterparty represents that it is not
entering into this Transaction while in
possession of material non-public information
concerning the business, operations or
prospects of the Issuer.
Counterparty represents that it is not
entering into this Transaction to create
actual or apparent trading activity in the
Shares (or any security convertible into or
exchangeable for Shares), to manipulate the
price of the Shares (or any security
convertible into or exchangeable for Shares)
or to facilitate a distribution of Shares (or
any security convertible into or exchangeable
for Shares).
Counterparty represents, from the Trade Date
until such time as it shall have been notified
by First Union that it has completed
establishing its initial hedge, that (i) the
Issuer has publicly disclosed all material
information with respect to its condition
(financial or otherwise) and (ii) if
Counterparty or the Issuer were to have
purchased Shares on any day during such
period, such purchases were in compliance with
U.S. securities laws.
Rule 10b-18: With the cooperation of Counterparty, First
----------- Union undertakes to use its best efforts to
satisfy the conditions of Rule 10b-18 under
the Securities Act, to the extent applicable,
in establishing its initial hedge.
Terms relating to the Agent: (a) The Agent is registered as a broker-dealer
--------------------------- with the SEC and the National Association of
Securities Dealers, is acting hereunder for
and on behalf of First Union solely in its
capacity as agent for First Union pursuant to
instructions from First Union, and is not and
will not be acting as the Seller's agent,
broker, advisor or fiduciary in any respect
under or in connection with this Transaction.
(b) In addition to acting as First Union's
agent in executing this Transaction, the Agent
is authorized from time to time to give
written payment and/or delivery instructions
to the Seller directing it to make its
8
payments and/or deliveries under this
Transaction to an account of the Agent for
remittance to First Union (or its designee),
and for that purpose any such payment or
delivery by the Seller to the Agent shall be
treated as a payment or delivery to First
Union.
(c) Except as otherwise provided herein, any
and all notices, demands, or communications of
any kind transmitted in writing by either
First Union or the Seller under or in
connection with this Transaction, including
without limitation, any option exercise
notice, will be transmitted exclusively by
such party to the other party through the
Agent at the following address:
First Union Securities, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Equity Derivatives
Notwithstanding the foregoing, any such
notice, demand or communication by Seller
shall be deemed to have been given to First
Union when it is so given to the Agent, and
any such notice, demand or communication to
Seller shall not be deemed to have been given
until it is given to Seller.
(d) The Agent shall have no responsibility or
liability to First Union or the Seller for or
arising from (i) any failure by either First
Union or the Seller to perform any of their
respective obligations under or in connection
with this Transaction, (ii) the collection or
enforcement of any such obligations, or (iii)
the exercise of any of the rights and remedies
of either First Union or the Seller under or
in connection with this Transaction. Each of
First Union and the Seller agrees to proceed
solely against the other to collect or enforce
any such obligations, and the Agent shall have
no liability in respect of this Transaction
except for its gross negligence or willful
misconduct in performing its duties as the
agent of First Union.
(e) Upon written request, the Agent will
furnish to First Union and the Seller the date
and time of the execution of this Transaction
and a statement as to the source and amount of
any remuneration received or to be received by
the Agent in connection with this Transaction.
Representations: Each party represents to the other party on
--------------- the date hereof that (absent a written
agreement between the parties that expressly
imposes affirmative obligations to the
contrary for this Transaction):
(a) Non-Reliance. It has made its own
independent decision to enter into this
Transaction, is acting at arm's length for its
own account, and is not relying on any
communication (written or oral) of the other
party as a recommendation or investment advice
regarding this Transaction.
(b) Evaluation and Understanding. It has the
capability to evaluate and understand (on its
own behalf or through independent professional
9
advice), and does understand, the terms,
conditions and risks of this Transaction and
is willing to accept those terms and
conditions and to assume (financially and
otherwise) those risks.
(c) CFTC Matters:
(i) It is an eligible contract
participant, as defined in the Commodity
Futures Modernization Act of 2000.
(ii) It has entered into the Agreement
and this Transaction as principal (and
not as agent or in any other capacity,
fiduciary or otherwise).
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us by
facsimile at 000-000-0000 (Attention: Xxxxxxxx Xxxxx, by telephone contact
000-000-0000).
Very truly yours,
FIRST UNION SECURITIES, INC., FIRST UNION NATIONAL BANK
acting solely in its capacity as Agent
of First Union National Bank By: First Union Securities, Inc.,
acting solely in its capacity as
its Agent
By: /s/ Xxxxxx Xxxx By: /s/ Xxxx Xxxxxx Xxxxxxx
---------------------------------- ------------------------------
Name: Xxxxxx Xxxx Name: Xxxx Xxxxxx Xxxxxxx
Title: Vice President Title: Senior Vice President
Accepted and confirmed as
of the date first above written:
COLTEC INDUSTRIES INC
By: /s/ Xxxxxxxx Xxxxx
-----------------------------------
Name: Xxxxxxxx Xxxxx
Title: Assistant Treasurer
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