EXHIBIT 10.6
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: 115843
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 7, 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: 974,353
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 3,839,340.56
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 7, 2005
Automatic Exercise: Applicable, provided, however, that
beginning with the tenth Exchange Business
Day prior to and including the Expiration
Date the Calculation
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Agent shall allocate the Number of Options
remaining to the Exchange 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 974,353
Options remain outstanding then Automatic
Exercise shall apply as follows: 300,000
on each of the three Exchange Business
Days prior to such Expiration Date and
74,353 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 Date:Three (3) Currency Business Days following
the 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
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greater than the market value of this
Transaction immediately prior to the
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
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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.
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:
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(i) the Shares that form First Union's
hedge position relating to each
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.
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Counterparty shall effect the listing of
the Shares or such other securities 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
Contribution: Union 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
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(ii) in connection with a cash payment
relating to a Counterparty
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 Representations: registration 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
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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 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.
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(b) Evaluation and Understanding. It has
the capability to evaluate and understand
(on its own behalf or through independent
professional 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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