<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
DURA AUTOMOTIVE SYSTEMS CAPITAL TRUST
(Exact name of Co-Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 41-1900709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 342-2311
(Address, including zip code, and telephone number, including
area code, of Registrant's principal offices)
STEPHEN E. K. GRAHAM
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
2791 RESEARCH DRIVE
ROCHESTER HILLS, MICHIGAN 48309
TELEPHONE: (248) 299-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------------
COPIES TO:
DENNIS M. MYERS, ESQ. DEWEY B. CRAWFORD, ESQ.
KIRKLAND & ELLIS GARDNER, CARTON & DOUGLAS
200 EAST RANDOLPH DRIVE 321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60610
TELEPHONE: (312) 861-2000 TELEPHONE: (312) 644-3000
----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
----------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
----------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
REGISTERED SECURITY PRICE
<S> <C> <C> <C>
Convertible Trust Preferred Securities of Dura
Automotive Systems Capital Trust.................. 2,300,000(1) $25.00(2)(3) $57,500,000(2)(3)
Convertible Subordinated Debentures of Dura
Automotive Systems, Inc........................... (4) -- --
Class A Common Stock, par value $.01 per share, of
Dura Automotive Systems, Inc...................... (5) -- --
Guarantee(6)....................................... -- -- --
Total............................................ 2,300,000 100% $57,500,000
<CAPTION>
AMOUNT OF
REGISTRATION FEE
<S> <C>
Convertible Trust Preferred Securities of Dura
Automotive Systems Capital Trust.................. $16,963
Convertible Subordinated Debentures of Dura
Automotive Systems, Inc........................... --
Class A Common Stock, par value $.01 per share, of
Dura Automotive Systems, Inc...................... --
Guarantee(6)....................................... --
Total............................................ $16,963
</TABLE>
(1) Includes 300,000 % Convertible Trust Preferred Securities (the "Preferred
Securities") that may be issued pursuant to exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(i) of the Securities Act.
(3) Exclusive of accrued interest and distributions, if any.
(4) $57,500,000 in aggregate principal amount of % Convertible Subordinated
Debentures (the "Debentures") of Dura Automotive Systems, Inc. (the
"Company") to be issued and sold to Dura Automotive Systems Capital Trust
(the "Issuer") in connection with the issuance by the Issuer of the
Preferred Securities. The Debentures may be distributed, under certain
circumstances, to the holders of Preferred Securities for no additional
consideration.
(5) Such shares of Class A Common Stock are issuable upon conversion of the
Preferred Securities registered hereunder. This Registration Statement also
covers such shares as may be issuable pursuant to anti-dilution adjustments.
(6) Includes the rights of holders of the Preferred Securities under the
Guarantee and certain back-up undertakings consisting of obligations of the
Company to provide certain indemnities in respect of, and pay and be
responsible for certain expenses and debts of, the Issuer as described in
the Registration Statement. No separate consideration will be received for
the Guarantee and the back-up undertakings.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 3, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
P R O S P E C T U S
[LOGO]
$50,000,000
2,000,000 CONVERTIBLE TRUST PREFERRED SECURITIES
DURA AUTOMOTIVE SYSTEMS CAPITAL TRUST
% CONVERTIBLE TRUST PREFERRED SECURITIES
(LIQUIDATION PREFERENCE $25 PER CONVERTIBLE TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO CLASS A
COMMON STOCK OF,
DURA AUTOMOTIVE SYSTEMS, INC.
------------
The % Convertible Trust Preferred Securities (the "Preferred Securities")
offered hereby (the "Offering") represent preferred undivided beneficial
interests in the assets of Dura Automotive Systems Capital Trust, a statutory
business trust created under the laws of the State of Delaware (the "Issuer").
Dura Automotive Systems, Inc., a Delaware corporation (the "Company"), will
directly or indirectly own all of the common securities of the Issuer (the
"Common Securities"), representing all of the common undivided beneficial
interests in the assets of the Issuer. The Issuer exists for the sole purpose of
issuing the Preferred Securities and the Common Securities and investing the
proceeds thereof in % Convertible Subordinated Debentures due ,
2028, having the terms described herein (the "Debentures"), to be issued by the
Company. The Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of the Preferred Securities--Subordination of Common Securities."
Application has been made to list the Preferred Securities on the Nasdaq
National Market ("Nasdaq"), subject to official notice of issuance, under the
symbol "DRRAP."
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
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.
<TABLE>
<CAPTION>
PRICE PROCEEDS
TO UNDERWRITING TO
PUBLIC(1) COMMISSION(2) ISSUER(3)(4)
<S> <C> <C> <C>
Per Preferred Security.......................... $ (3) $
Total(5)........................................ $ (3) $
</TABLE>
(1) Plus accrued distributions, if any, from , 1998.
(2) The Company, its principal operating subsidiary and the Issuer have agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act 1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in the Debentures, the Company has agreed to pay to the
Underwriters, as compensation for their arranging the investment therein of
such proceeds, $ per Preferred Security ($ in the aggregate or $
in the aggregate if the Underwriters exercise the over-allotment option in
full). See "Underwriting."
(4) Before deducting expenses, estimated at $500,000, all of which are payable
by the Company.
(5) The Issuer and the Company have granted the Underwriters a 30-day option to
purchase up to 300,000 additional Preferred Securities on the same terms and
conditions set forth above to cover over-allotments, if any. If the
Underwriters exercise the over-allotment option in full, the total Price to
Public will be $ , the total Underwriting Commission will be
$ and the total Proceeds to Issuer will be $ . See
"Underwriting."
--------------------------
The Preferred Securities are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that
delivery of certificates representing the Preferred Securities will be made on
or about , 1998 through The Depository Trust Company or at the
offices of Robert W. Baird & Co. Incorporated, Milwaukee, Wisconsin.
ROBERT W. BAIRD & CO. PIPER JAFFRAY INC.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
Holders of the Preferred Securities will be entitled to receive preferential
cumulative cash distributions from the Issuer at an annual rate of % of the
liquidation preference of $25 per Preferred Security accruing from the date of
original issuance and, unless deferred, payable quarterly in arrears on ,
, and of each year, commencing , 1998 ("Distributions").
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and other
payment dates for the Debentures, which will be the sole assets of the Issuer.
As a result, if principal or interest is not paid on the Debentures, no amounts
will be paid with respect to the Preferred Securities.
Each Preferred Security is convertible in the manner described herein at the
option of the holder at any time into shares of Class A Common Stock, par value
$.01 per share, of the Company (the "Class A Common Stock"), at a rate of
shares of Class A Common Stock for each Preferred Security (equivalent to a
conversion price of $ per share of Class A Common Stock), subject to
adjustment in certain circumstances. See "Description of the Preferred
Securities--Conversion Rights" and "Description of Capital Stock." The last
reported sale price of the Class A Common Stock, which is listed under the
symbol "DRRA" on Nasdaq, on February 27, 1998 was $31 1/8 per share. See "Price
Range of Common Stock."
The Company has the right to defer payment of interest on the Debentures at
any time or from time to time for a period not exceeding 20 consecutive quarters
with respect to each deferral period (each, an "Extension Period"), PROVIDED
that no Extension Period may extend beyond the stated maturity of the
Debentures. Upon the termination of any such Extension Period and the payment of
all amounts then due on any Interest Payment Date (as defined herein), the
Company may elect to begin a new Extension Period subject to the requirements
set forth herein. If interest payments on the Debentures are so deferred,
Distributions on the Preferred Securities will also be deferred, and the Company
will not be permitted, subject to certain exceptions set forth herein, to
declare or pay any cash distributions with respect to the Company's capital
stock or debt securities that rank PARI PASSU with or junior to the Debentures.
If a holder of Preferred Securities converts Preferred Securities into Class A
Common Stock during an Extension Period, the holder will not receive any of the
deferred Distribution.
During an Extension Period, interest on the Debentures will continue to
accrue (and the amount of Distributions to which holders of the Preferred
Securities are entitled will accumulate at the stated rate per annum, compounded
quarterly) and holders of Preferred Securities will be required to accrue and
recognize interest income for United States Federal income tax purposes. See
"Risk Factors--Factors Relating to Preferred Securities--Option to Extend
Interest Payment Period; Tax Consequences," "Description of the
Debentures--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences-- Interest Income and Original Issue Discount."
Except as provided below, the Preferred Securities may not be redeemed by
the Issuer prior to , 2001. The Preferred Securities are subject to
redemption, in whole or in part, on or after such date, at redemption prices set
forth herein, upon any permitted redemption by the Company of the Debentures.
See "Description of the Preferred Securities--Optional Redemption." In addition,
the Preferred Securities are subject to mandatory redemption upon the repayment
at maturity or as a result of acceleration of the Debentures. See "Description
of the Preferred Securities--Mandatory Redemption."
Following the occurrence of a Special Event (as herein defined), the
Preferred Securities are also subject to (i) exchange, in the manner described
herein, for Debentures (see "Description of the Preferred Securities-- Special
Event Exchange or Redemption") and (ii) redemption, in whole or in part, on or
after , 2001, at 100% of the liquidation preference thereof, plus
accrued and unpaid Distributions thereon, if such Special Event constitutes a
Tax Event (as defined herein). See "Description of Preferred Securities--Special
Event Exchange or Redemption." At any time, the Company will have the right to
dissolve the Issuer and, after satisfaction of the liabilities of the creditors
of the Issuer as provided by applicable law, cause the Debentures to be
distributed to the holders of the Preferred Securities in dissolution of the
Issuer. The Underwriters have informed the Company that the Underwriters intend
to make a market in the Debentures in the event that the Debentures are
distributed to the holders of Preferred Securities. See "Description of the
Preferred Securities-- Distribution of Debentures."
The Company has, through the Guarantee, the Trust Agreement, the Debentures
and the Indenture (each as defined herein), taken together, fully, irrevocably
and unconditionally guaranteed all of the Issuer's obligations under the
Preferred Securities. See "Description of the Guarantee," "Dura Automotive
Systems Capital
2
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
Trust" and "Description of the Debentures," respectively. The Guarantee of the
Company guarantees the payment of Distributions and payments on liquidation or
redemption of the Preferred Securities, but only in each case to the extent of
funds held by the Issuer, as described herein (the "Guarantee"). See
"Description of the Guarantee." If the Company does not make interest payments
on the Debentures held by the Issuer as a result of the Company's election to
defer payment during an Extension Period, or otherwise, the Issuer will have
insufficient funds to pay Distributions on the Preferred Securities. The
Guarantee does not cover payment of Distributions when the Issuer does not have
sufficient funds to pay such Distributions. In such event, a holder of Preferred
Securities may institute legal proceedings directly against the Company to
enforce payment under the Debentures. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and will rank PARI PASSU with the most senior
preferred stock, if any, issued from time to time by the Company and any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company. See "Description
of the Debentures--Subordination."
The Debentures are subordinate and junior in right of payment to all Senior
Debt (as defined herein) of the Company. The terms of the Debentures place no
limitation on the amount of Senior Debt that may be incurred by the Company or
the amount of indebtedness that may be incurred by its subsidiaries. The
Company's obligations under the Debentures will also be effectively subordinated
to all existing and future obligations of the Company's subsidiaries. As of
December 31, 1997, on a pro forma basis after giving effect to the consummation
of the Offering and the application of the proceeds thereof, the Company's
subsidiaries would have had aggregate liabilities of $269.8 million (including
trade payables).
In the event of the dissolution of the Issuer, after satisfaction of the
creditors of the Issuer as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive a liquidation preference of $25
per Preferred Security plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Debentures, subject to certain exceptions. See "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution."
(END OF COVER PAGE)
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE PREFERRED
SECURITIES AND THE CLASS A COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 UNDER
REGULATION M. SEE "UNDERWRITING."
3
<PAGE>
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, AND
THE RELATED NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. AS USED IN
THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY"
INCLUDES DURA AUTOMOTIVE SYSTEMS, INC. AND ALL OF ITS SUBSIDIARIES AND ITS AND
THEIR RESPECTIVE PREDECESSORS AND SUBSIDIARIES. THE TERM "PARENT" IS USED HEREIN
TO REFER TO DURA AUTOMOTIVE SYSTEMS, INC., EXCLUSIVE OF ITS SUBSIDIARIES. EXCEPT
AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS IS NOT EXERCISED. THE CLASS A
COMMON STOCK AND CLASS B COMMON STOCK ARE COLLECTIVELY REFERRED TO HEREIN AS THE
"COMMON STOCK."
THE COMPANY
Dura Automotive Systems, Inc. is a leading designer and manufacturer of
driver control systems, engineered mechanical components and cable-related
systems for the global automotive industry. The Company's products include
parking brake systems, automotive cables, transmission shifter systems, latches,
underbody tire carriers, jacks, brake, clutch and accelerator pedals, and other
mechanical assemblies. The Company sells its products to the major North
American, Japanese and European automotive original equipment manufacturers
("OEMs"). The Company has 26 manufacturing and product development facilities
located in the United States (Indiana, Michigan and Missouri), Australia,
Canada, France, Germany, Mexico, and Spain, and in Brazil through a joint
venture. The Company's revenues have increased from $129.3 million in 1993 to
$489.8 million in 1997 on a pro forma basis, a compound annual growth rate of
approximately 40%. Over this same period, the Company's operating income margin
has improved from 2.8% of revenues to 7.6% of revenues.
The Company believes that it is a leading North American supplier of parking
brake mechanisms, transmission shifter mechanisms and automotive cables, with
estimated market shares in excess of 75%, 40% and 25%, respectively. In
addition, the Company is one of the few suppliers to offer integrated parking
brake, shifter and latch systems. These systems, which consist of mechanisms and
cables, require significant design and engineering expertise because they are
critical to the vehicle's reliability, performance and safety. The Company
believes that its customers value its ability to design, manufacture and
assemble complete systems.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs continue to reduce their supplier base.
In order to lower costs and improve quality, OEMs are awarding sole-source
contracts to full-service suppliers who are able to supply larger portions of a
vehicle on a global basis. OEMs' criteria for supplier selection include not
only cost, quality and responsiveness, but also full-service design, engineering
and program management capabilities. OEMs are seeking suppliers capable of
providing complete systems rather than suppliers who only provide separate
component parts. In addition, OEMs are increasingly requiring their suppliers to
have the capability to design and manufacture their products in multiple
geographic markets. As a full-service supplier with strong OEM relationships,
the Company expects to continue to benefit from these trends.
On a pro forma basis, approximately 81% of the Company's 1997 revenues were
generated from sales to North American OEMs, with its major customers being
Ford, GM, Chrysler and Toyota. The Company manufactures products for many of the
most popular car, light truck and sport utility models, including eight of the
top ten selling vehicles in North America for 1997: the Ford Taurus, Explorer,
Ranger and F-Series pickups, GM Cavalier and C/K pickups, Dodge Ram pickups, and
Toyota Camry. As a result of recent acquisitions, approximately 17% of the
Company's 1997 pro forma revenues were generated from sales to European OEMs,
including Mercedes, Volkswagen and BMW. The Company is generally the sole
supplier of the parts it sells to OEMs and will ordinarily continue to supply
parts for a particular model for the life of the model, which usually ranges
from three to seven years.
4
<PAGE>
The Company's business objective is to capitalize on the trends in the
automotive supply industry in order to be the leading provider of driver control
and cable-related systems to OEMs worldwide. The Company's growth strategy
focuses on the identification and pursuit of (i) strategic acquisitions, (ii)
systems opportunities, (iii) increased customer and platform penetration, and
(iv) increased penetration of international markets, including "world car"
opportunities.
The Company has broadened its acquisition scope from the original focus on
cable-driven controls to include other highly engineered automotive components.
As a result, the Company competes in what it believes to be a $6 billion, highly
fragmented market that provides numerous potential acquisition and joint venture
opportunities. The Company seeks acquisition and joint venture opportunities
that: (i) provide additional product, manufacturing and technical capabilities;
(ii) broaden the Company's geographic coverage and strengthen its ability to
supply products on a global basis; (iii) increase the number of models for which
the Company supplies products and increase the content supplied for existing
models; and (iv) add new customers. The following recent acquisitions illustrate
the manner in which the Company has met these acquisition criteria:
- In December 1996, the Company acquired KPI Automotive Group ("KPI"), a
manufacturer of shifter systems, parking brake mechanisms, brake pedals and
underbody tire carriers. At the time of the acquisition, KPI had annual revenues
of approximately $95 million. The acquisition added significant market
penetration in console-based shifter systems, increased platform content and
added a significant new product line in underbody tire carriers.
- In January 1997, the Company acquired the VOFA Group ("VOFA"), a
manufacturer of shifter cables, brake cables and other light duty cables for the
European automotive and industrial markets. At the time of the acquisition, VOFA
had annual revenues of approximately $85 million. The acquisition provided the
Company with additional expertise in cables and a strong presence in Europe. In
addition, the acquisition added new customers, such as Mercedes, Volkswagen and
BMW.
- In August 1997, the Company acquired GT Automotive Systems, Inc. ("GT
Automotive"), a designer and manufacturer of column-mounted shifter systems, and
turn signal and tilt lever assemblies. At the time of the acquisition, GT
Automotive had annual revenues of approximately $70 million and a substantial
share of the North American column-mounted shifter systems market. GT
Automotive's strong position in this market, combined with the Company's
existing position in console-based shifter systems, increased the Company's
share of the North American shifter market. In addition, the acquisition added
Nissan as a customer.
In addition to KPI, VOFA and GT Automotive, the Company has successfully
completed four other strategic acquisitions and one joint venture since August
1994. Collectively, these transactions expanded the Company's global
manufacturing presence, added new customers such as PSA (Peugeot and Citroen)
and Renault and added new products. The Company is in the process of acquiring
Universal Tool & Stamping, Inc. ("Universal"), which manufactures automobile and
light truck jacks for North American OEMs.
The Company was formed by an investor group organized by Hidden Creek
Industries ("Hidden Creek") to acquire the Dura Automotive Hardware and
Mechanical Components divisions (the "Dura Divisions") from Wickes Manufacturing
Company ("Wickes"). In August 1994, the Company combined its operations with the
automotive parking brake cable and lever business and light duty cable business
(the "Brake and Cable Business") of Alkin Co. ("Alkin"), which significantly
expanded the Company's size and capabilities. The Company completed an initial
public offering ("IPO") of its Class A Common Stock in August 1996.
5
<PAGE>
DURA AUTOMOTIVE SYSTEMS CAPITAL TRUST
Dura Automotive Systems Capital Trust (the "Issuer") is a statutory business
trust created under Delaware law pursuant to (i) a trust agreement executed by
the Company (as Depositor), the Delaware Trustee (as defined herein) and one of
the Administrative Trustees (as defined herein) and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on March 2, 1998. In
connection with the Offering, such trust agreement will be amended and restated
in its entirety (as so amended and restated, the "Trust Agreement"). The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Issuer exists for the sole
purposes of (i) issuing and selling the Preferred Securities and Common
Securities, (ii) using the proceeds from the sale of the Preferred Securities
and Common Securities to acquire the Debentures issued by the Company and (iii)
engaging in only those other activities necessary or incidental thereto.
Accordingly, the Debentures will be the sole assets of the Issuer, and payments
under the Debentures will be the sole revenue of the Issuer. The Issuer has a
term of 45 years, but may dissolve earlier as provided in the Trust Agreement.
All of the Common Securities will be owned directly or indirectly by the
Company. The Company will pay all fees and expenses related to the Issuer and
the offering of the Preferred Securities and will pay, directly or indirectly,
all ongoing costs and expenses of the Issuer. The principal corporate offices of
the Issuer are located at 4508 IDS Center, Minneapolis, Minnesota 55402, and its
telephone number is (612) 342-2311.
THE OFFERING
SEE "RISK FACTORS" FOR A DISCUSSION OF FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER
WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND
THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
<TABLE>
<S> <C>
Securities Offered................ 2,000,000 of the Issuer's % Convertible Trust
Preferred Securities, liquidation preference of $25 per
security (the "Preferred Securities"). Additionally, the
Company and the Issuer have granted the Underwriters an
option for 30 days to purchase up to an additional
300,000 Preferred Securities at the initial offering
price solely to cover over-allotments, if any.
Issuer............................ Dura Automotive Systems Capital Trust, a statutory
business trust created under the laws of the State of
Delaware.
Distributions..................... Distributions on the Preferred Securities will be
cumulative from the date of original issuance of the
Preferred Securities and will be payable at the annual
rate of % of the liquidation preference of $25 per
Preferred Security. Distributions will be made quarterly
in arrears on , ,
and , commencing on , 1998, when and
to the extent that funds of the Issuer are available
therefor. The proceeds from the Offering will be
invested in the Debentures. Interest payment periods on
the Debentures are quarterly but may be deferred from
time to time by the Company for periods of up to 20
consecutive quarters, so long as no Debenture Event of
Default (as defined herein) has occurred and is
continuing. In the event of such a deferral, the Issuer
would be unable to make quarterly Distribution payments
on the Preferred Securities during the period of any
such deferral. During any such deferral period, interest
on the Debentures will continue to accrue (and the
amount of Distributions to which holders of the
Preferred Securities are
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<S> <C>
entitled will accumulate at the stated rate per annum
set forth herein, compounded quarterly) and holders of
Preferred Securities will be required to recognize
interest income for United States Federal income tax
purposes. See "Description of the Debentures--Option to
Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original
Issue Discount."
Distribution Deferral
Provisions...................... The Company has the right to defer payment of interest
on the Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend
beyond the stated maturity of the Debentures. Upon the
termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date,
the Company may elect to begin a new Extension Period
subject to the requirements set forth herein.
If interest payments on the Debentures are deferred,
Distributions on the Preferred Securities will also be
deferred and the Company will not be permitted, subject
to certain exceptions described herein, to declare or
pay any cash distribu-tions with respect to the
Company's capital stock or debt securities (including
guarantees of indebtedness for borrowed money) that rank
PARI PASSU with or junior to the Debentures. If a holder
of Preferred Securities converts Preferred Securities
into Class A Common Stock during an Extension Period,
the holder will not receive any of the deferred
Distribution.
Liquidation Preference............ $25 per Preferred Security, plus all accrued and unpaid
Distributions.
Conversion into Class A Common
Stock........................... Each Preferred Security is convertible in the manner
described below at the option of the holder into shares
of Class A Common Stock at the rate of shares of
Class A Common Stock for each Preferred Security
(equivalent to a conversion price of $ per share of
Class A Common Stock), subject to adjustment in certain
circumstances. A holder of Preferred Securities wishing
to exercise its conversion right must surrender any or
all of such Preferred Securities, together with an
irrevocable conversion notice, to the paying, conversion
and exchange agent acting on behalf of the holders of
Preferred Securities (the "Conversion Agent"), which
will exchange the Preferred Securities for a portion
(equal to the aggregate liqui-dation preference of the
Preferred Securities being so converted) of the
Debentures held by the Issuer and immediately convert
such Debentures into Class A Common Stock. However, no
fractional shares of Class A Common Stock will be issued
as a result of conversion, but in lieu thereof, such
fractional interest will be paid in cash. A holder
generally should not recognize gain or loss for United
States Federal income tax purposes upon the exchange
through the Conversion Agent of
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the Preferred Securities for a proportionate share of
the Debentures followed immediately thereafter by the
conversion of the Debentures into Class A Common Stock.
See "Certain Federal Income Tax Consequences--Conversion
of Preferred Securities into Class A Common Stock."
Common Stock Voting Rights........ The Company's outstanding capital stock consists of
Class A Common Stock and Class B Common Stock. Each
holder of Class A Common Stock is entitled to one vote
per share and each holder of Class B Common Stock is
entitled to ten votes per share on all matters submitted
to a vote of stockholders. Except as required by law and
the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate"), holders of
the Class A Common Stock and Class B Common Stock vote
together as a single class. See "Description of Capital
Stock."
Redemption........................ Except as provided below, the Preferred Securities may
not be redeemed by the Issuer prior to , 2001.
From time to time on or after such date, the Preferred
Securities will be subject to redemption, in whole or in
part, at the redemption prices set forth herein (plus
all accrued and unpaid Distributions to the date fixed
for redemption) upon any redemption by the Company of
the Debentures. See "Description of the Preferred
Securities--Optional Redemption" and "Description of the
Debentures--Optional Redemption."
The Preferred Securities are subject to mandatory
redemption upon the repayment at maturity or as a result
of acceleration of the Debentures. See "Description of
the Debentures--Debenture Events of Default; Notice,"
"Description of the Preferred Securities--Mandatory
Redemption" and "Description of the Debentures--Events
of Default."
Special Event Exchange or
Redemption...................... Upon the occurrence of a Special Event (as defined
herein), the Issuer Trustees (as defined herein) will
direct the Conversion Agent to exchange all outstanding
Preferred Securities for Debentures, provided that, in
the case of a Special Event that is a Tax Event (as
defined herein), the Company will have the right to
direct that less than all, or none, of the Preferred
Securities be so exchanged if and for so long as the
Company shall have elected to pay Additional Sums (as
defined herein) such that the amounts received by the
holders of Preferred Securities that remain outstanding
are not reduced thereby, and shall not have revoked any
such election or failed to make such payments. If a Tax
Event occurs and is continuing, the Debentures may be
redeemed by the Company on or after , 2001 at
100% of the principal amount thereof, plus accrued and
unpaid interest thereon. In the event of such a
redemption of the Debentures, the Preferred Securities
will be redeemed by the
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Issuer Trustees at $25 per Preferred Security plus
accrued and unpaid Distributions thereon. See
"Description of the Preferred Securities--Special Event
Exchange or Redemption."
A "Special Event" means a Tax Event or an Investment
Company Event. A "Tax Event" means the receipt by the
Property Trustee (as defined herein), on behalf of the
Issuer, of an opinion of counsel, rendered by a law firm
having a national tax and securities practice (which
opinion shall not have been rescinded by such law firm),
to the effect that, as a result of any amendment to, or
change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority
thereof or therein affecting taxation, or as a result of
any official administrative pronouncement or judicial
decision interpreting or applying such laws or
regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after
the date of issuance of the Preferred Securities under
the Trust Agreement and does not pertain to the use of
the proceeds of the issuance of the Debentures, there is
more than an insubstantial risk in each case after the
date hereof that (i) the Issuer is, or will be within 90
days of the date thereof, subject to United States
Federal income tax with respect to income received or
accrued on the Debentures, (ii) interest payable by the
Company on such Debentures is not, or within 90 days of
the date thereof will not be, deductible by the Company,
in whole or in part, for United States Federal income
tax purposes, or (iii) the Issuer is, or will be within
90 days of the date thereof, subject to more than a DE
MINIMIS amount of other taxes, duties or other
governmental charges. "Investment Company Event" means
the receipt by the Property Trustee, on behalf of the
Issuer, of an opinion of counsel, rendered by a law firm
having a national tax and securities practice (which
opinion shall not have been rescinded by such law firm),
to the effect that, as a result of the occurrence of a
change in law or regulation by any legislative body,
court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an
insubstantial risk that the Issuer is or will be
considered an investment company that is required to be
registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which Change in
1940 Act Law becomes effective on or after the date of
original issuance of the Preferred Securities.
"Additional Sums" means the additional amount as may be
necessary in order that the amount of Distributions then
due and payable by the Issuer on the outstanding
Preferred Securities and Common Securities of the Issuer
shall not be reduced as a result of any additional
taxes, duties and other governmental charges to which
the Issuer has become subject as a result of a Tax
Event.
</TABLE>
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<S> <C>
Distribution of Debentures........ At any time, the Company will have the right to dissolve
the Issuer and, after satisfaction of the liabilities of
creditors of the Issuer as provided by applicable law,
cause the Debentures to be distributed to the holders of
the Preferred Securities in dissolution of the Issuer.
See "Description of the Preferred
Securities--Distribution of Debentures."
Guarantee......................... Pursuant to the Guarantee, the Company will irrevocably
agree, on a subordinated basis, to guarantee the payment
in full of (a) the Distributions payable by the Issuer
on the Preferred Securities, to the extent the Issuer
has funds on hand available therefor, (b) the redemption
price (including all accumulated and unpaid
Distributions) of the Preferred Securities, to the
extent the Issuer has funds on hand available therefor,
and (c) payments on liquidation with respect to the
Preferred Securities (unless the Debentures are
distributed to the holders of the Preferred Securities),
to the extent that there are assets of the Issuer
available for distribution to holders of the Preferred
Securities. A holder of Preferred Securities may enforce
the Company's obligations under the Guarantee directly
against the Company, and the Company waives any right to
require that an action be brought against the Issuer or
any other person before proceeding against the Company.
The Guarantee will constitute an unsecured obligation of
the Company and will rank subordinate and junior in
right of payment to all liabilities of the Company and
PARI PASSU with the most senior preferred stock, if any,
issued from time to time by the Company and any
guarantee now or hereinafter entered into by the Company
in respect of any preferred or preference stock of any
affiliate of the Company. See "Risk Factors--Ranking of
Subordinated Obligations Under the Guarantee and the
Debentures," "Risk Factors--Structural Subordination"
and "Description of the Guarantee."
Voting Rights..................... Holders of Preferred Securities will generally have
limited voting rights, which relate primarily to the
modification of the Preferred Securities. Holders of
Preferred Securities will not be entitled to vote to
appoint, remove or replace the Issuer Trustees, which
voting rights are vested exclusively in the holder of
the Common Securities. The Issuer Trustees and the
Company may amend the Trust Agreement without the
consent of holders of Preferred Securities to ensure
that the Issuer will be classified for United States
Federal income tax purposes as a grantor trust even if
such action adversely affects the interests of such
holders. See "Description of the Preferred Securities--
Voting Rights; Amendment of the Trust Agreement."
Debentures........................ The Debentures will have a maturity of 30 years from the
date of original issuance and will bear interest at the
rate of % per annum payable quarterly in arrears. The
Company has the right from time to time to select an
interest payment period or periods longer than one
quarter to defer interest (during which
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10
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<S> <C>
period or periods interest will compound quarterly),
provided that no such deferral of interest payments will
exceed 20 consecutive quarters and provided further that
no such deferral of interest payments may extend beyond
the stated maturity of the Debentures. Accordingly,
Distribution payments on the Preferred Securities may
not be deferred beyond the stated maturity of the
Debentures. If the Company defers interest payments
longer than one quarter, subject to certain exceptions,
it will be prohibited from paying dividends on any of
its capital stock and making certain other restricted
payments until quarterly interest payments are resumed
and all accrued and unpaid interest on the Debentures is
brought current. The Company will have the right to make
partial payments of such interest during a deferral of
interest payments. The Debentures are convertible into
shares of Class A Common Stock at the option of the
holders thereof at a conversion rate of shares of
Class A Common Stock for each $25 in principal amount of
Debentures (equivalent to a conversion price of $
per share of Class A Common Stock) subject to certain
adjustments set forth herein. The Issuer will covenant
not to convert Debentures except pursuant to a notice of
conversion delivered to the Conversion Agent by a holder
of Preferred Securities.
In addition, on and after , 2001, the Debentures
are redeemable at the option of the Company at any time,
in whole or in part, at the redemption prices set forth
herein, together with accrued and unpaid interest to the
date fixed for redemption. See "Description of the
Debentures--Optional Redemption." Upon the occurrence
and continuation of a Tax Event, the Debentures are also
redeemable, in whole or in part, on or after ,
2001, at 100% of the principal amount thereof, plus
accrued and unpaid interest thereon. See "Description of
the Preferred Securities--Special Event Exchange or
Redemption."
The payment of the principal and interest on the
Debentures will be subordinated and junior in right of
payment to all Senior Debt (as defined herein) of the
Company. The Company's obligations under the Debentures
will also be effectively subordinated to all existing
and future obligations of the Company's subsidiaries.
See "Risk Factors--Ranking of Subordinated Obligations
under the Guarantee and the Debentures" and "Risk
Factors--Structural Subordination." While the Preferred
Securities are outstanding, the Issuer will not have the
right to amend the Indenture (as defined herein) or the
terms of the Debentures in a way that adversely affects
the holders of the Preferred Securities or to waive a
Debenture Event of Default (as defined herein) without
the consent of holders of at least a majority in
aggregate liquidation preference of the Preferred
Securities and, in certain cases, the Common
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11
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Securities then outstanding. See "Description of the
Debentures--Modification of Indenture."
Use of Proceeds................... The proceeds from the sale of the Preferred Securities
offered hereby will be used by the Issuer to purchase
the Debentures issued by the Company. The Company
expects to use such proceeds to repay a portion of the
borrowings under the Bank Credit Agreement. See "Use of
Proceeds."
Listing........................... Application has been made to list the Preferred
Securities on Nasdaq, subject to official notice of
issuance, under the symbol "DRRAP."
</TABLE>
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SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
PRO
FORMA
1993 1994(1) 1995(2) 1996(3) 1997(4) 1997(5)
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues................................. $ 129,328 $ 189,675 $ 253,726 $ 245,329 $ 449,111 $ 489,752
Gross profit............................. 12,717 19,050 34,167 37,519 74,025 77,237
Operating income......................... 3,587 7,875 17,560 19,326 37,610 37,222
Net income............................... 1,118 2,580 10,126 10,128 16,642 14,586
Basic earnings per share(6).............. $ 0.41 $ 0.75 $ 2.04 $ 1.57 $ 1.89 $ 1.66
Diluted earnings per share(6)............ 0.41 0.75 2.03 1.57 1.88 1.66
OTHER DATA:
Depreciation and amortization............ $ 2,409 $ 3,725 $ 5,578 $ 6,079 $ 12,303 $ 13,787
Capital expenditures, net................ 2,951 5,406 6,116 6,260 16,242 N/A
EBITDA(7)................................ 5,996 11,600 23,138 25,405 49,913 51,009
Net cash provided by (used in):
Operating activities................... 3,724 (6,156) 13,138 19,792 8,516 N/A
Investing activities................... (2,951) (46,878) 11,428 (95,093) (93,386) N/A
Financing activities................... (787) 53,037 (22,851) 75,236 87,620 N/A
EBITDA to interest expense............... 3.9x 3.3x 4.8x 9.8x 5.4x 4.3x
Ratio of earnings to fixed charges(8).... 2.2x 2.2x 3.4x 6.4x 3.8x 4.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED(9)
--------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................................................... $ 50,304 $ 50,304
Total assets............................................................. 419,264 419,264
Long-term debt, net of current maturities................................ 178,081 130,331
Preferred securities(10)................................................. -- 50,000
Total stockholders' investment........................................... 101,708 101,708
</TABLE>
- --------------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin.
The results of operations of this acquired business have been included in
the consolidated financial statements of the Company from August 31, 1994,
the date of acquisition.
(2) In April 1995, the Company sold the net assets of its window regulator
business (the "Window Regulator Business") to Rockwell International
Corporation ("Rockwell"), realizing a pretax gain of approximately $4.2
million. The results of operations of the Window Regulator Business have
been included in the consolidated financial statements of the Company
through April 2, 1995, the date of divestiture.
(3) Includes the results of operations of (i) the parking brake business
acquired from Rockwell (the "Rockwell Parking Brake Business") from October
1, 1996, and (ii) KPI from December 5, 1996, their respective dates of
acquisition. The Company issued an aggregate of 3,795,000 shares of its
Class A Common Stock in August 1996 in connection with the IPO.
(4) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the parking brake business of Excel Industries Inc. ("Excel Parking Brake
Business") from May 5, 1997, (iii) GT Automotive from August 29, 1997, and
(iv) REOM Industries (Aust) Pty Ltd. ("REOM") from December 12, 1997, which
represent their respective dates of acquisition.
(5) The pro forma statement of operations data for the year ended December 31,
1997 gives effect to (i) the acquisition of GT Automotive and (ii) the sale
of the Preferred Securities offered hereby and the application of the net
proceeds to the Company as described in "Use of Proceeds," as if such
transactions had occurred on
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January 1, 1997. The results of operations of the Excel Parking Brake
Business prior to its acquisition in May 1997 and those of REOM prior to its
acquisition on December 12, 1997 have not been included in the Company's pro
forma results of operations for the year ended December 31, 1997 because
such results are not material to the Company's results of operations taken
as a whole. Pro forma operating income and EBITDA for the year ended
December 31, 1997 include the effect of non-recurring charges totaling $3.4
million reflected in the operating results of GT Automotive during the
period from January 1, 1997 through August 29, 1997 (the date of the
acquisition of GT Automotive). These charges included $2.3 million
associated with losses to be incurred on certain future contracts and $1.1
million related to one-time increases in certain asset valuation allowances
and accrued liabilities. These charges reduced earnings per share by $0.23.
(6) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the year. Diluted earnings per share include the dilutive
effects of outstanding stock options using the treasury stock method. Pro
forma diluted earnings per share excludes the conversion of the Preferred
Securities (into approximately 1,147,000 shares of Class A Common Stock), as
their effect is anti-dilutive. See Note 3 to Notes to Consolidated Financial
Statements.
(7) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles, and the Company's calculation thereof may not be comparable to
that reported by other companies. The Company believes that it is widely
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness. This belief is based on the
Company's negotiations with its lenders who have indicated that the amount
of indebtedness the Company will be permitted to incur will be based, in
part, on the Company's actual and pro forma EBITDA. EBITDA does not take
into account the Company's working capital requirements, debt service
requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available for discretionary use.
(8) The ratio of earnings to fixed charges is computed by dividing (i) income
before income taxes, interest expense and the portion of rent determined to
be interest by (ii) total fixed charges, which includes interest expense,
minority interest and the portion of rent expense determined to be interest.
The portion of rent expense determined to be interest is 33% of gross rent
expense.
(9) As adjusted to reflect the sale of 2,000,000 Preferred Securities, $25 per
share liquidation preference, and the application of the net proceeds to the
Company as described in "Use of Proceeds." See "Capitalization."
(10) Represents the issuance of the Preferred Securities by the Issuer. The sole
assets of the Issuer will be approximately $51.5 million principal amount of
Debentures, such amount being the sum of the stated liquidation preference
of the Preferred Securities and the capital contributed by the Company in
exchange for the Common Securities.
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RISK FACTORS
THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). ALSO, DOCUMENTS
SUBSEQUENTLY FILED BY THE COMPANY WITH THE COMMISSION AND INCORPORATED HEREIN BY
REFERENCE WILL CONTAIN FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ON
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY AT THE
TIME SUCH STATEMENTS WERE MADE. WHEN USED IN THIS PROSPECTUS, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," "INTENDS" AND SIMILAR
EXPRESSIONS, AS THEY RELATE TO THE COMPANY, ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS, WHICH INCLUDE STATEMENTS RELATING TO, AMONG OTHER
THINGS, (I) THE INTEGRATION OF THE OPERATIONS OF RECENTLY ACQUIRED COMPANIES
WITH THOSE OF THE COMPANY; (II) THE STRATEGIC BENEFITS OF SUCH ACQUISITIONS; AND
(III) THE COMPANY'S ABILITY TO CONTINUE TO IMPLEMENT ITS OPERATING AND GROWTH
STRATEGY. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW, THE
MATTERS SET FORTH OR INCORPORATED IN THE PROSPECTUS GENERALLY AND CERTAIN
ECONOMIC AND BUSINESS FACTORS, SOME OF WHICH MAY BE BEYOND THE CONTROL OF THE
COMPANY. THE COMPANY CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF FACTORS MAY
NOT BE EXHAUSTIVE, PARTICULARLY WITH RESPECT TO FUTURE FILINGS WITH THE
COMMISSION. IN ANALYZING AN INVESTMENT IN THE PREFERRED SECURITIES OFFERED
HEREBY, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, ALONG WITH THE OTHER
MATTERS REFERRED TO HEREIN, THE RISK FACTORS DESCRIBED BELOW.
RISK FACTORS RELATING TO THE COMPANY
RELIANCE ON MAJOR CUSTOMERS
The Company's net sales to Ford and GM represented approximately 42% and
25%, respectively, of the Company's revenues in 1997 and approximately 49% and
36%, respectively, of the Company's revenues in 1996. Thus, the loss of Ford, GM
or any other significant customer could have a material adverse effect on the
Company. The contracts the Company has entered into with many of its customers
provide for supplying the customers' requirements for a particular model, rather
than for manufacturing a specific quantity of products. Such contracts range
from one year to the life of the model, usually three to seven years, and do not
require the purchase by the customer of any minimum number of parts. Therefore,
the loss of any one of such customers or a significant decrease in demand for
certain key models or group of related models sold by any of its major customers
could have a material adverse effect on the Company. The Company is involved in
claims with Ford involving alleged failures of certain self-adjust parking
brakes originally manufactured by the Brake and Cable Business of Alkin. Ford
has maintained that the Company or Alkin is responsible for all damages or
liabilities incurred by Ford as a result of these claims. As a result of these
claims, it is possible that the Company's relationship with Ford could be
adversely affected. See "Business--Legal Proceedings." There is substantial and
continuing pressure from the major OEMs to reduce costs, including the cost of
products purchased from outside suppliers such as the Company. If the Company is
unable to generate sufficient production cost savings in the future to offset
price reductions, the Company's gross margin could be adversely affected. See
"Business--Customers and Marketing."
INDUSTRY CYCLICALITY AND SEASONALITY
The automotive market is highly cyclical and is dependent on consumer
spending. Economic factors adversely affecting automotive production and
consumer spending could adversely impact the Company. In addition, the Company's
business is somewhat seasonal. The Company typically experiences decreased
revenues and operating income during the third calender quarter of each year due
to the impact of OEM plant shutdowns in July for vacations and new model
changeovers. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Quarterly Results of Operations and Seasonality."
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FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL INTRODUCTIONS
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models by its
major customers. New model development generally begins two to five years prior
to the marketing of such models to the public. The failure of the Company to
obtain new business on new models or to retain or increase business on
redesigned existing models could adversely affect the Company.
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal injury
or death, and there can be no assurance that the Company will not experience any
material product liability losses in the future. In addition, if any of the
Company's products prove to be defective, the Company may be required to
participate in a recall involving such products. In late 1994, Ford issued a
recall of a series of manual-transmission Ford F-Series pickups to repair the
self-adjust parking brakes originally manufactured by the Brake and Cable
Business of Alkin. The Company's share of such costs, which was fully reserved
at the time of the acquisition of the Brake and Cable Business from Alkin, has
reached the full $6.0 million limit agreed to by the Company and Ford. The
Company is also involved in a product recall relating to the same issue with
respect to the Ford Contour/Mystique in Europe. The Company has agreed to pay
50% of the costs of that recall not to exceed $1.0 million, which payments
totaled $0.4 million at December 31, 1997. The types of alleged failures that
prompted the F-Series recall have also led to a number of claims and lawsuits
filed against Ford. To date, two cases have been instituted directly against the
Company or Alkin relating to personal injury claims, and Ford has indicated that
it has received over 400 claims (generally for property damage) relating to
alleged defects in the self-adjust parking brakes. Ford has maintained that the
Company or Alkin is responsible for all damages or liabilities incurred by Ford
as a result of these claims, and as of December 31, 1997, Ford had tendered its
defense of 25 such claims to Dura and Alkin. Dura and Alkin have submitted these
claims to their insurance carriers. The Company maintains insurance against
product liability claims, but there can be no assurance that such coverage will
be adequate for liabilities ultimately incurred or that it will continue to be
available on terms acceptable to the Company. In November 1996, an insurance
carrier of the Company brought a declaratory judgment that its policy did not
provide coverage for an allegedly defective parking brake manufactured prior to
August 31, 1994. A successful claim brought against the Company in excess of
available insurance coverage or a requirement to participate in any product
recall may have a material adverse effect on the Company's results of operations
or financial condition. See "Business--Legal Proceedings."
INDUSTRY CONSOLIDATION; RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation, as OEMs seek to reduce costs and reduce
their supplier base. The Company intends to actively pursue acquisition targets
that will allow the Company to expand into new geographic markets, add new
customers, provide new product, manufacturing and service capabilities or
increase model penetration with existing customers. There can be no assurance
that the Company will find attractive acquisition candidates or successfully
integrate acquired businesses into the Company's existing business. If the
expected synergies from such transactions do not materialize or the Company
fails to successfully integrate new businesses into its existing businesses, the
Company's results of operations could be adversely affected. The Company is
currently in the process of acquiring Universal. To date, however, no definitive
agreement relating to such acquisition has been executed by the parties. As a
result, no assurance can be given that such acquisition will be completed or if
completed will be on the terms set forth herein. To the extent that the Company
may be considered as an acquisition candidate by a third party, certain
provisions in the Restated Certificate and the Amended and Restated By-laws
("By-laws") described below
16
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may inhibit a change in control of the Company. See "--Anti-Takeover Effects of
Certain Charter, By-law and Statutory Provisions."
SUBSTANTIAL LEVERAGE
The Company has consolidated indebtedness that is substantial in relation to
its stockholders' investment. As of December 31, 1997, the Company had
approximately $180 million of outstanding debt and approximately $102 million of
stockholders' investment.
The Company's indebtedness will have several important consequences for the
holders of the Preferred Securities (or Class A Common Stock which may be
acquired upon conversion), including but not limited to the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to debt service requirements (principal and interest) on its indebtedness and
will not be available for other purposes; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, or for general corporate purposes may be impaired; (iii) the
Company's leverage may increase its vulnerability to economic downturns and
limit its ability to withstand competitive pressures; (iv) the Company's ability
to capitalize on significant business opportunities may be limited; and (v) a
portion of the Company's indebtedness will be subject to fluctuations in
interest rates. See "Capitalization."
The Company's ability to satisfy its debt obligations will depend on its
future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control. The Company believes, based on current
circumstances, that the Company's cash flow, together with available borrowings
under the Bank Credit Agreement (as defined herein) will be sufficient to permit
the Company to meet its operating expenses and to service its debt requirements,
including the Debentures underlying the Preferred Securities, as they become
due. Significant assumptions underlie this belief, including, among other
things, that the Company will succeed in implementing its business strategy and
there will be no material adverse developments in the business, liquidity or
capital requirements of the Company. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. In addition, there can be no
assurance that the Company will not increase its leverage to meet capital
requirements in the future. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital Resources."
RISKS ASSOCIATED WITH FOREIGN OPERATIONS
The Company has significant international operations, specifically in
Europe, Canada and Latin America and, therefore, the Company is subject to
various political, economic and other uncertainties. Among other risks, the
Company's operations are subject to the risks of taxation policies, foreign
exchange restrictions, foreign trade policies and regulations, changing
political conditions and governmental regulations. Accordingly, no assurance can
be given that any of the Company's strategies will prove to be effective or that
management's goals will be achieved. In addition, the Company generates a
significant portion of its revenues in currencies other than U.S. Dollars.
Fluctuations in the exchange rates of these currencies could have an adverse
effect on the Company's financial results. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Foreign Currency
Transactions," and "Business--Properties."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success largely will depend on the efforts and
abilities of its executive officers and certain other key employees. The Company
currently does not have employment agreements
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with any of its executive officers or other key employees. The Company's
operations could be adversely affected if, for any reason, such executive
officers or key employees do not remain with the Company. See "Management."
COMPETITION
The automotive component supply industry is highly competitive. Some of the
Company's competitors are companies, or divisions or subsidiaries of companies,
that are larger and have greater financial and other resources than the Company.
In addition, with respect to certain of its products, some of the Company's
competitors are divisions of its OEM customers. There can be no assurance that
the Company's products will be able to compete successfully with the products of
these other companies. See "Business--Competition."
TECHNOLOGICAL AND REGULATORY CHANGES
Changes in legislative, regulatory or industry requirements or competitive
technologies may render certain of the Company's products obsolete. The
Company's ability to anticipate changes in technology and regulatory standards
and to develop and introduce new and enhanced products successfully on a timely
basis will be a significant factor in the Company's ability to grow and to
remain competitive. There can be no assurance that the Company will be able to
achieve the technological advances that may be necessary for it to remain
competitive or that certain of its products will not become obsolete. The
Company is also subject to the risks generally associated with new product
introductions and applications, including lack of market acceptance, delays in
product development and failure of products to operate properly. See
"Business--Competition" and "--Design and Engineering Support."
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of Federal, state and local
environmental and occupational health and safety laws and regulations. There can
be no assurance that the Company is at all times in complete compliance with all
such requirements. The Company has made and will continue to make capital and
other expenditures to comply with environmental requirements. If a release of
hazardous substances occurs on or from the Company's properties or any
associated offsite disposal location, or if contamination is discovered at any
of the Company's current or former properties, the Company may be held liable,
and the amount of such liability could be material. The Company is currently
involved in environmental matters at its Mancelona, Michigan and Canadian
facilities and at two landfill sites in Toledo, Ohio. See
"Business--Environmental Matters."
CONTROL BY CERTAIN STOCKHOLDERS
Onex DHC LLC (together with its affiliates, "Onex"), Alkin and certain other
stockholders associated with the Company or Hidden Creek beneficially own all of
the outstanding shares of Class B Common Stock. Each share of Class B Common
Stock has ten votes as compared to one vote for each share of Class A Common
Stock, and thus this amount currently represents 91.8% of the combined voting
power of the outstanding Common Stock. In addition, all of such stockholders
have entered into agreements to vote their shares for the election of directors
designated by certain of the existing stockholders. As a result of such stock
ownership and voting agreements, these stockholders are able to control the vote
on all matters submitted to a vote of the holders of Common Stock, including the
election of Directors, amendments to the Restated Certificate and the By-laws
and approval of significant corporate transactions. See "Description of Capital
Stock." Such consolidation of voting power could also have the effect of
delaying, deterring or preventing a change in control of the Company that might
be otherwise beneficial to stockholders. See "Security Ownership of Certain
Beneficial Owners and Management."
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DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company currently intends to retain earnings to support its growth
strategy and does not anticipate paying dividends on the Common Stock in the
foreseeable future. As a holding company, the ability of the Company to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its principal operating subsidiary, Dura Operating Corp. The
payment of dividends by such subsidiary to the Company for the purpose of paying
dividends to holders of Common Stock is limited by the terms of its Bank Credit
Agreement (as defined). The Company has received an amendment to its Bank Credit
Agreement to permit the distribution of cash from such subsidiary to the Company
for the purpose of paying interest on the Debentures. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares of Class A Common Stock or the availability of such shares for future
sale will have on the market price of the Class A Common Stock prevailing from
time to time. Sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Class A Common Stock. An aggregate of 4.7 million shares of Class
B Common Stock convertible into shares of Class A Common Stock are eligible for
sale under Rule 144 under the Securities Act. In addition, the holders of an
aggregate of 4.7 million shares of Class B Common Stock convertible into shares
of Class A Common Stock have certain rights to register their shares of Class A
Common Stock under the Securities Act at the Company's expense. See "Security
Ownership of Certain Beneficial Owners and Management."
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price of the Class A Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the Company's
businesses or general market or economic conditions. In addition, in recent
years, the stock market has experienced extreme price and volume fluctuations.
These fluctuations have had a substantial effect on the market prices for many
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could have a material adverse
effect on the market price for the Class A Common Stock. See "Price Range of
Common Stock."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
Certain provisions of the Restated Certificate and the By-laws may inhibit
changes in control of the Company not approved by the Company's Board of
Directors (the "Board"). These provisions include (i) disparate voting rights
per share between the Class A Common Stock and the Class B Common Stock, (ii) a
prohibition on stockholder action through written consents, (iii) a requirement
that special meetings of stockholders be called only by the Board, (iv) advance
notice requirements for stockholder proposals and nominations, (v) limitations
on the ability of stockholders to amend, alter or repeal the By-laws and (vi)
the authority of the Board to issue without stockholder approval preferred stock
with such terms as the Board may determine. The Company is also subject to the
protections of Section 203 of the Delaware General Corporation Law, which could
have similar effects. See "Description of Capital Stock."
RISK FACTORS RELATING TO PREFERRED SECURITIES
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE DEBENTURES
The obligations of the Parent under the Guarantee issued by the Parent for
the benefit of the holders of Preferred Securities are unsecured and rank
subordinate and junior in right of payment to all Senior Debt of the Parent and
PARI PASSU with most senior preferred stock, if any, issued from time to time by
the Parent and any guarantee now or hereafter entered into by the Parent in
respect of any preferred or preference stock of any affiliate of the Parent. The
obligations of the Parent under the Debentures are
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subordinate and junior in right of payment to all present and future Senior Debt
of the Company. The ability of the Issuer to pay amounts due on the Preferred
Securities is solely dependent upon the Parent making payments on the Debentures
as and when required. Neither the Indenture, the Guarantee nor the Trust
Agreement places any limitation on the amount of debt, including Senior Debt,
that may be incurred by the Parent and its subsidiaries. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the
Debentures--Subordination."
STRUCTURAL SUBORDINATION
The Parent is a holding company and its assets consist primarily of
investments in its subsidiaries. The Debentures are obligations exclusively of
the Parent. The Parent's ability to service its indebtedness, including the
Debentures, is dependent primarily upon the earnings of its subsidiaries and the
distribution or other payment of such earnings to the Parent in the form of
dividends, loans or advances, and repayment of loans and advances from the
Parent. The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make any funds available therefore, whether by dividends, loans
or other payments. As of December 31, 1997, on a pro forma basis giving effect
to the Offering and the application of the net proceeds therefrom, the Company's
subsidiaries had aggregate liabilities of $269.8 million, all of which are
structurally senior to the Debentures.
In addition, creditors of the Company's subsidiaries would be entitled to a
claim on the assets of such subsidiaries prior to any claims by the Parent.
Consequently, in the event of a liquidation or reorganization of any subsidiary,
creditors of such subsidiary are likely to be paid in full before any
distribution is made to the Parent, except to the extent that the Parent itself
is recognized as a creditor of such subsidiary, in which case the claims of the
Parent would still be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Parent. See "Description of the Preferred Securities--Distributions" and
"Description of the Debentures--Option to Extend Interest Payment Period."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer the payment of
interest on the Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
PROVIDED that no Extension Period may extend beyond the stated maturity of the
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period and terminate
the payments of all amounts then due, subject to the requirements described
herein. As a consequence of any such deferral, quarterly Distributions on the
Preferred Securities by the Issuer will be deferred (and the amount of
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions) during any such Extension Period.
Should an Extension Period occur, a holder of Preferred Securities will
continue to accrue income (in the form of original issue discount ("OID")) in
respect of its PRO RATA share of the deferred interest allocable to the
Debentures held by the Issuer for United States Federal income tax purposes. As
a result, a holder of Preferred Securities will include such income in its gross
income for United States Federal income tax purposes in advance of the receipt
of cash and will not receive the cash related to such income from the Issuer if
the holder disposes of the Preferred Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount." Moreover, if a holder of Preferred
Securities converts Preferred Securities into Class A Common Stock during an
Extension Period, the holder will not receive any of the deferred Distribution.
Additionally, during the pendency of any Extension Period, the Company will not
be permitted, subject to certain exceptions set forth herein, to declare or pay
any cash distribution with respect to the Company's capital stock or debt
securities (including guarantees of indebtedness for money borrowed) that rank
PARI PASSU with or junior to the Debentures. See "Description of the Preferred
Securities--Distributions."
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The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Debentures.
However, should the Company elect to exercise such right in the future, the
market price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Company's right to defer interest payments, the price at which the Preferred
Securities trade (which represent preferred undivided beneficial interests in
the Debentures) may be more volatile than the trading prices of other securities
that are not subject to such deferrals. See "Certain Federal Income Tax
Consequences."
SPECIAL EVENT EXCHANGE OR REDEMPTION
Upon certain circumstances following the occurrence and continuation of a
Special Event, the Preferred Securities are also subject to (i) exchange in
whole or, in the case of a Tax Event that has occurred and is continuing, in
whole or in part, in the manner described herein, for the Debentures or (ii)
redemption, in whole or in part, on or after , 2001, at the
liquidation preference thereof plus accrued and unpaid distributions, in the
case of a Tax Event. See "Description of the Preferred Securities--Special Event
Exchange or Redemption."
There can be no assurance as to the market prices for Preferred Securities
or Debentures that may be distributed in exchange for Preferred Securities if a
liquidation of the Issuer occurs or if the Preferred Securities are exchanged
for Debentures in connection with a Special Event. Accordingly, the Preferred
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Debentures that a holder of Preferred
Securities may receive on liquidation of the Issuer, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Debentures on
dissolution of the Issuer or if the Preferred Securities are exchanged for
Debentures in connection with a Special Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Debentures and should carefully review all the information regarding the
Debentures contained herein. See "Description of the Preferred
Securities--Special Event Exchange or Redemption" and "Description of the
Debentures."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities on a
subordinated basis the following payments, to the extent not paid by the Issuer:
(i) any accumulated and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Issuer has funds on hand available
therefor at such time; (ii) the redemption price with respect to any Preferred
Securities called for redemption, to the extent that the Issuer has funds on
hand available therefor at such time; and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Issuer (unless the Debentures are
distributed to holders of the Preferred Securities), the lesser of (a) the
aggregate of the liquidation preference and all accrued and unpaid Distributions
to the date of payment to the extent that the Issuer has funds on hand available
therefor at such time and (b) the amount of assets of the Issuer remaining
available for distribution to holders of the Preferred Securities in liquidation
of the Issuer.
As part of the Guarantee, the Parent will agree that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for Class A Common Stock or Debentures.
The holders of not less than a majority in aggregate liquidation preference
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of
Preferred Securities may institute a proceeding directly against the Parent to
enforce its rights under the Guarantee without first instituting a proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. If the
Parent were to
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default on its obligation to pay amounts payable under the Debentures, the
Issuer would lack funds for the payment of Distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and, in such event, holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing, a holder of Preferred Securities would be
required to rely on its enforcement by the Property Trustee of its rights as
registered holder of the Debenture against the Parent pursuant to the terms of
the Debenture. If, however, such event is attributable to the failure of the
Parent to pay interest or premium on or principal of the Debentures on the
payment date on which such payment is due and payable (or, in the case of
redemption, the date fixed for redemption), then a holder of Preferred
Securities may directly institute a proceeding against the Parent for
enforcement of payment to such holder of the interest or premium on or principal
of such Debentures having a principal amount equal to the aggregate liquidation
preference of the Preferred Securities of such holder (a "Direct Action"). In
connection with such Direct Action, the Parent will be subrogated to the rights
of such holder of Preferred Securities under the Trust Agreement to the extent
of any payment made by the Parent to such holder of Preferred Securities in such
Direct Action. Except as set forth herein, holders of Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
Debentures or assert directly any other rights in respect of the Debentures. See
"Description of the Preferred Securities--Enforcement of Certain Rights by
Holders of Preferred Securities," "Description of the Guarantee" and
"Description of the Debentures--Debenture Events of Default." The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Trust Agreement Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the holder of the
Debentures against the Company. In addition, the holders of a majority in
aggregate liquidation preference of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Trust Agreement, including
the right to direct the Property Trustee to exercise the remedies available to
it as a holder of the Debentures. If the Property Trustee fails to enforce its
rights as holder of the Debentures after a request therefor by a holder of
Preferred Securities, such holder may, to the fullest extent permitted by law,
proceed to enforce such rights directly against the Company. Notwithstanding the
foregoing, if a Trust Agreement Event of Default occurs that results from the
failure of the Company to pay principal of or interest on the Debentures when
due (or in the case of a redemption, on the redemption date), during the
continuance of such an event of default a holder of Preferred Securities may
institute a legal proceeding directly against the Company to obtain payment to
such holder of such principal or interest on Debentures having a principal
amount equal to the aggregate liquidation preference of the Preferred Securities
owned of record by such holder. See "Description of the Preferred
Securities--Trust Agreement Events of Default; Notice" and "--Voting Rights;
Amendment of the Trust Agreement."
LIMITED VOTING RIGHTS
Holders of Preferred Securities generally have limited voting rights,
primarily in connection with modifying the Preferred Securities and directing
the activities of the Property Trustee as the holder of the Debentures. Holders
of Preferred Securities are not entitled to vote to appoint, remove or replace
the Issuer Trustees (as defined), which voting rights are vested exclusively in
the holder of the Common Securities. The Issuer Trustees and the Company may
amend the Trust Agreement without the consent of holders of Preferred Securities
to ensure that the Issuer will be classified for United States Federal income
tax purposes as a grantor trust even if such action adversely affects the
interests of such holders. See "Description of the Preferred Securities--Voting
Rights; Amendment of the Trust Agreement."
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LIMITED COVENANTS; ABSENCE OF SINKING FUND
The covenants in the indenture under which the Debentures will be issued
(the "Indenture") are limited. The Company is not required under the Indenture
to meet any financial tests that measure the Company's working capital, interest
coverage or net worth in order to comply with the terms of the Indenture. There
are no covenants relating to the Company in the Trust Agreement. As a result,
neither the Indenture nor the Trust Agreement protects holders of Debentures or
Preferred Securities, respectively, in the event of a material adverse change in
the Company's financial condition or results of operations, or limits the
ability of the Company or any subsidiary to incur additional indebtedness.
Therefore, the provisions of these governing instruments should not be
considered a significant factor in evaluating whether the Company will be able
to comply with its obligations under the Debentures or the Guarantee. Further,
the Debentures do not have the benefit of any sinking fund payment by the
Company.
POSSIBLE TAX LEGISLATION
Prospective investors should be aware that legislation has been introduced
in the United States Congress in the past that would, if enacted, deny an
interest deduction to issuers of instruments such as the Debentures. No such
legislation is currently pending. There can be no assurance, however, that
similar legislation will not ultimately be enacted into law, or that other
developments will not occur after the date hereof that would adversely affect
the tax treatment of the Debentures and could result in the exchange of the
Debentures for Preferred Securities or, in certain limited circumstances, the
redemption of the Debentures by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities--Special Event Exchange or Redemption."
ABSENCE OF PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE OF
PREFERRED SECURITIES
Although an application has been filed to list the Preferred Securities on
Nasdaq, there can be no assurance that such application will be approved, or if
approved, that any market for the Preferred Securities will develop or, if one
does develop, that it will be maintained. If an active market for the Preferred
Securities fails to develop or be sustained, the trading price of the Preferred
Securities could be adversely affected. The Preferred Securities could trade at
prices that may be higher or lower than the offering price hereunder depending
on many factors, including prevailing interest rates, the price of the Common
Stock, the Company's operating results, any election by the Company to extend
interest payment periods and the market for similar securities.
In addition, the Preferred Securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest with respect to the
underlying Debentures. A holder disposing of Preferred Securities between record
dates for payments of distributions thereon will nevertheless be required for
United States Federal income tax purposes to include accrued but unpaid interest
on the Debentures through the date of disposition in income as ordinary income
(i.e., OID), and to add such amount to the adjusted tax basis in the holder's
Preferred Securities. To the extent the selling price is less than the holder's
adjusted tax basis (which will include, in the form of original issue discount,
all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes. See
"Certain Federal Income Tax Consequences--Sales of Preferred Securities."
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THE COMPANY
Dura Automotive Systems, Inc. is a holding company whose predecessor was
formed by Hidden Creek, Onex, J2R Corporation ("J2R") and certain others for the
purpose of acquiring the Dura Divisions from Wickes in November 1990. In August
1994, the Company entered into a transaction that combined the operations of the
Company's operating subsidiary, Dura Operating Corp., with the Brake and Cable
Business of Alkin.
Since August 1994, the Company has successfully completed the following
strategic acquisitions and joint venture:
POLLONE. In August 1996, the Company formed a joint venture with Excel
Industries Inc. ("Excel") to participate equally in the acquisition of a 25.5%
interest in Pollone S.A. ("Pollone"), a manufacturer of automotive components
and mechanical assemblies headquartered in Sao Paulo, Brazil, for $5 million in
total. The joint venture also loaned Pollone an additional $10.5 million
pursuant to notes which are convertible into equity of Pollone at the joint
venture's option. In January 1998, the joint venture increased its interest in
Pollone to 51.0% through the conversion of certain of these notes. This
investment provided the Company with a manufacturing presence in Latin America.
ROCKWELL PARKING BRAKE BUSINESS. In October 1996, the Company acquired the
Rockwell Parking Brake Business for approximately $3.8 million. The parking
brake business, which is operated from a facility in Cluses, France, added a
manufacturing presence in Europe and PSA (Peugeot and Citroen) and Renault as
customers.
KPI. In December 1996, the Company acquired KPI from Sparton Corporation
for approximately $78.8 million. KPI manufactures shifter systems, parking brake
mechanisms, brake pedals, and underbody tire carriers for the North American
automotive industry from facilities in Indiana and Michigan. The acquisition
added significant market penetration in console-based shifter systems, increased
platform content and added a significant new product line in underbody tire
carriers.
VOFA. In January 1997, the Company acquired VOFA for approximately $38.0
million in cash and assumed indebtedness, plus contingent payments. VOFA designs
and manufactures shifter cables, brake cables and other light duty cables for
the European automotive and industrial markets from facilities in Dusseldorf,
Gehren and Daun, Germany and Barcelona, Spain. The acquisition added new
customers, such as Mercedes, Volkswagen and BMW, provided a strong European
position and established the Company's cable manufacturing capabilities
globally.
EXCEL. In May 1997, the Company acquired the Excel Parking Brake Business
from Excel for approximately $2.9 million. The acquisition increased the
Company's penetration of the parking brake market and expanded the Company's
relationship with Chrysler.
GT AUTOMOTIVE. In August 1997, the Company acquired GT Automotive for
approximately $45.0 million in cash and assumed indebtedness, plus contingent
payments. GT Automotive designs and manufactures column-mounted shifter systems
and turn signal and tilt lever assemblies for North American OEMs. At the time
of the acquisition, GT Automotive had a substantial share of the North American
column-based shifter market. The acquisition of GT Automotive, combined with the
Company's existing position in console-based shifter systems, increased the
Company's share of the North American shifter market. In addition, the
acquisition added Nissan as a customer.
THIXOTECH. In December 1997, the Company purchased approximately 19% of the
outstanding common stock of Thixotech Inc. ("Thixotech") for approximately $0.5
million. The Company also loaned Thixotech an additional $2.8 million pursuant
to notes which are convertible into additional common stock of Thixotech at the
Company's option. If exercised, the Company could own a majority of Thixotech.
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Thixotech is currently pursuing the development of an alternative manufacturing
technology for component parts.
REOM. In December 1997, the Company acquired REOM, an Australian designer
and manufacturer of jacks and parking brakes, for approximately $3.7 million.
The acquisition added market penetration in parking brakes, added a new product
(jacks) and established a presence in the Pacific Rim.
UNIVERSAL. The Company is currently in the process of acquiring Universal,
a manufacturer of jacks for the North American automotive industry. Universal
had 1997 revenues of approximately $37.0 million. Universal's customers include
General Motors, Ford and Honda. The acquisition provides the Company with a
market presence for jacks in North America and adds Honda as a significant new
customer.
In order to focus on its higher margin products, the Company sold its Window
Regulator Business to Rockwell in April 1995 for approximately $18.0 million in
cash, resulting in a pretax gain of $4.2 million.
The principal executive offices of the Company are located at 4508 IDS
Center, Minneapolis, Minnesota 55402, and its telephone number is (612)
342-2311.
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USE OF PROCEEDS
The estimated net proceeds to the Company from the Offering, after deducting
the estimated underwriting commission and offering expenses payable by the
Company, are estimated to be approximately $47.8 million ($55.0 million if the
Underwriters' over-allotment option is exercised in full). All of the proceeds
from the sale of the Preferred Securities in the Offering will be invested by
the Issuer in Debentures, the proceeds of which the Company intends to apply to
the repayment of borrowings under its bank credit agreement (the "Bank Credit
Agreement").
The Bank Credit Agreement expires on August 29, 2002. On December 31, 1997,
the interest rates for borrowings under the Bank Credit Agreement ranged from
3.94% to 8.50%. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK
The Company's Class A Common Stock is traded on Nasdaq under the symbol
"DRRA." The following table sets forth, for the periods indicated, the high and
low closing prices for the Class A Common Stock as regularly quoted on Nasdaq.
The Class A Common Stock commenced trading on August 14, 1996. Prior thereto,
there was no public market for the Class A Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR 1996:
Third Quarter (commencing August 14, 1996).................................. $193/4 $17
Fourth Quarter.............................................................. 273/4 183/4
FISCAL YEAR 1997:
First Quarter............................................................... $27 $231/8
Second Quarter.............................................................. 283/4 221/2
Third Quarter............................................................... 333/8 27
Fourth Quarter.............................................................. 353/8 237/8
FISCAL YEAR 1998:
First Quarter (through February 27, 1998)................................... $311/8 $243/8
</TABLE>
On February 27, 1998, the last reported sale price of the Class A Common
Stock on Nasdaq was $31 1/8. As of December 31, 1997, there were approximately
100 holders of record of the Class A Common Stock and 18 holders of record of
the Class B Common Stock. The Company believes that it has significantly more
beneficial owners of its Class A Common Stock.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock in
the past and currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future. As
a holding company, the ability of the Company to pay dividends in the future is
dependent upon the receipt of dividends or other payments from its principal
operating subsidiary. Any future payment of dividends is within the discretion
of the Board and will depend upon, among other factors, the capital
requirements, operating results and financial condition of the Company from time
to time. In addition, the Company's ability to pay cash dividends is limited by
the terms of its Bank Credit Agreement. The Company has received an amendment to
its Bank Credit Agreement to permit the distribution of cash from such
subsidiary to the Parent for the purpose of paying interest on the Debentures.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
26
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1997 the actual
consolidated capitalization of the Company and the as adjusted capitalization
giving effect to the Offering and the application of the net proceeds therefrom
(after deducting the underwriting commission and estimated expenses of the
Offering) as set forth under "Use of Proceeds." This table should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
-----------------------------
ACTUAL AS ADJUSTED(1)
---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.......................................................... $ 4,148 $ 4,148
---------- --------
---------- --------
Long-term debt:
Bank Credit Agreement............................................................ $ 165,158 $ 117,408
Other............................................................................ 15,164 15,164
Less: current maturities......................................................... (2,241) (2,241)
---------- --------
Total long-term debt........................................................... 178,081 130,331
---------- --------
Company-Obligated Mandatorily Redeemable Convertible Trust Preferred Securities of
Dura Automotive Systems Capital Trust holding solely Debentures(2)................ -- 50,000
Stockholders' investment:
Preferred stock, $1 par value per share; 5,000,000 shares authorized; none issued
or outstanding................................................................. -- --
Class A Common Stock, $.01 par value per share; 30,000,000 shares authorized;
4,161,657 shares issued and outstanding........................................ 42 42
Class B Common Stock, $.01 par value per share; 10,000,000 shares authorized;
4,654,380 shares issued and outstanding........................................ 46 46
Additional paid-in capital....................................................... 63,402 63,402
Retained earnings................................................................ 41,028 41,028
Cumulative translation adjustment................................................ (2,810) (2,810)
---------- --------
Total stockholders' investment................................................. 101,708 101,708
---------- --------
Total capitalization......................................................... $ 279,789 $ 282,039
---------- --------
---------- --------
</TABLE>
- ------------------------
(1) As adjusted to give effect to the Offering, but assuming no exercise of the
Underwriters' over-allotment option. Proceeds are net of the underwriting
commission and estimated expenses of the Offering.
(2) Represents the issuance of the Preferred Securities by the Issuer. The sole
assets of the Issuer will be approximately $51.5 million principal amount of
Debentures, such amount being the sum of the stated liquidation preference
of the Preferred Securities and the capital contributed by the Company in
exchange for the Common Securities.
ACCOUNTING TREATMENT
The financial statements of the Issuer will be consolidated with the
Consolidated Financial Statements of the Company, with the Preferred Securities
shown on such Consolidated Financial Statements as Company-obligated mandatorily
redeemable convertible trust preferred securities of a subsidiary trust. The
sole assets of the Issuer will be the Debentures.
27
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Statement of Operations for the year ended December
31, 1997 gives effect to (i) the acquisition of GT Automotive and (ii) the sale
of the Preferred Securities offered hereby and the application of the net
proceeds to the Company as described in "Use of Proceeds," as if such
transactions had occurred on January 1, 1997. The Company acquired VOFA on
January 1, 1997. Accordingly, the results of operations of VOFA have been
included in the Company's results of operations for the year ended December 31,
1997. In addition, the results of operations of the Excel Parking Brake Business
prior to its acquisition on May 5, 1997 and those of REOM prior to its
acquisition on December 12, 1997 have not been included in the Company's pro
forma results of operations for the year ended December 31, 1997 because such
results are not material to the Company's results of operations taken as a
whole.
The unaudited pro forma financial data presented herein are based on the
assumptions and adjustments described in the accompanying notes. The Unaudited
Pro Forma Statement of Operations does not purport to represent what the
Company's results of operations actually would have been if the events described
above had occurred as of the dates indicated or what such results will be for
any future periods. The Unaudited Pro Forma Statement of Operations is based
upon assumptions and adjustments that the Company believes are reasonable. The
Unaudited Pro Forma Statement of Operations, and the accompanying notes, should
be read in conjunction with the historical financial statements of the Company,
including the notes thereto, included elsewhere in this Prospectus.
The acquisition of GT Automotive has been accounted for using the purchase
method of accounting and, accordingly, the assets acquired and liabilities
assumed have been or will be recorded at their fair values as of the date of its
acquisition. These amounts have been recorded based upon preliminary estimates
as of the date of the acquisition of GT Automotive. Further adjustments to the
acquired assets and assumed liabilities will be reflected as a change in
goodwill. Such adjustments, if any, are expected to be completed by August 29,
1998.
28
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
PRO FORMA
GT PRO FORMA FOR GT OFFERING
COMPANY(1) AUTOMOTIVE(2) ADJUSTMENTS AUTOMOTIVE ADJUSTMENTS PRO FORMA
----------- ------------- ------------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 449,111 $ 40,641 $ -- $ 489,752 $ -- $ 489,752
Cost of sales................... 375,086 37,450 (21)(3) 412,515 -- 412,515
----------- ------------- ----- ----------- ----------- -----------
Gross profit.................. 74,025 3,191 21 77,237 -- 77,237
Selling, general and
administrative expenses........ 32,815 2,850 -- 35,665 -- 35,665
Amortization expense............ 3,600 280 470(4) 4,350 -- 4,350
----------- ------------- ----- ----------- ----------- -----------
Operating income.............. 37,610 61 (449) 37,222 -- 37,222
Interest expense, net........... 9,298 1,693 453(5) 11,444 (3,343)(7) 8,101
----------- ------------- ----- ----------- ----------- -----------
Income (loss) before provision
for income taxes and
minority interest........... 28,312 (1,632) (902) 25,778 (3,343) 29,121
Provision for income taxes...... 11,670 (549) (173)(6) 10,948 (1,337)(6) 12,285
Minority interest............... -- -- -- -- (2,250)(8) 2,250
----------- ------------- ----- ----------- ----------- -----------
Net income (loss)............. $ 16,642 $ (1,083) $ (729) $ 14,830 $ (244) $ 14,586
----------- ------------- ----- ----------- ----------- -----------
----------- ------------- ----- ----------- ----------- -----------
Basic earnings per share........ $ 1.89 $ 1.68 $ 1.66
----------- ----------- -----------
----------- ----------- -----------
Weighted average common shares
outstanding(9)................. 8,808 8,808 8,808
----------- ----------- -----------
----------- ----------- -----------
Diluted earnings per share(9)... $ 1.88 $ 1.67 $ 1.66
----------- ----------- -----------
----------- ----------- -----------
Diluted shares outstanding(9)... 8,869 8,869 8,869
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Statement of Operations.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(1) Represents the results of operations of the Company for the year ended
December 31, 1997 and the results of operations of VOFA, the Excel Parking
Brake Business, GT Automotive and REOM from the dates of their respective
acquisition.
(2) Represents the results of operations for GT Automotive from January 1, 1997
through the date of acquisition, August 29, 1997. Operating income and
EBITDA for this period include the effect of non-recurring charges totaling
$3.4 million, including $2.3 million associated with losses to be incurred
on certain future contracts and $1.1 million related to one-time increases
in selected asset valuation allowances and accrued liabilities. These
charges reduced earnings per share by $0.23.
(3) Reflects the change in depreciation expense resulting from adjustments to
the depreciable lives of property, plant and equipment of GT Automotive (for
the period preceding its acquisition) to their estimated useful lives at the
time of their acquisition and from adjustments to value such property, plant
and equipment at fair value as of the date of acquisition.
(4) Represents the additional amortization of goodwill arising from the
acquisition of GT Automotive of $0.5 million, which is net of amortization
of goodwill previously recorded by GT Automotive of $0.3 million. Goodwill
is amortized on a straight-line basis over a forty-year period.
(5) Represents increased interest expense arising from indebtedness incurred in
connection with the acquisition of GT Automotive of $0.5 million, net of the
interest expense previously recorded by GT Automotive of $1.7 million.
(6) Adjusts the provision for income taxes on a pro forma basis to reflect the
Company's incremental tax rate of 40%.
(7) Represents the reduction in interest expense which results from the
application of the net proceeds from the Offering at an assumed interest
rate of 7.0% on the repaid borrowings. See "Use of Proceeds."
(8) Represents distributions on the Preferred Securities at an assumed rate of
7.5%, net of income tax benefits at the Company's incremental tax rate of
40%.
(9) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the year. Diluted earnings per share include the dilutive
effects of outstanding stock options using the treasury stock method. Pro
forma diluted earnings per share excludes the conversion of the Preferred
Securities (into approximately 1,147,000 shares of Class A Common Stock), as
their effect is anti-dilutive. See Note 3 to Notes to Consolidated Financial
Statements.
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company for each of the periods indicated. The selected
historical financial data for the Company for the years ended December 31, 1993
through 1997 have been derived from the Company's consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants. The selected historical consolidated financial data should be read
in conjunction with "Management's Discussion and Analysis of Result of
Operations and Financial Condition" and the consolidated financial statements
and notes thereto all included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994(1) 1995(2) 1996(3) 1997(4)
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 129,328 $ 189,675 $ 253,726 $ 245,329 $ 449,111
Cost of sales........................................ 116,611 170,625 219,559 207,810 375,086
---------- ---------- ---------- ---------- ----------
Gross profit....................................... 12,717 19,050 34,167 37,519 74,025
Selling, general and administrative expenses......... 8,643 10,485 15,513 17,157 32,815
Amortization expense................................. 487 690 1,094 1,036 3,600
---------- ---------- ---------- ---------- ----------
Operating income................................... 3,587 7,875 17,560 19,326 37,610
Interest expense, net................................ 1,533 3,473 4,822 2,589 9,298
Other income(2)...................................... -- -- (4,240) -- --
---------- ---------- ---------- ---------- ----------
Income before income taxes......................... 2,054 4,402 16,978 16,737 28,312
Provision for income taxes........................... 936 1,822 6,852 6,609 11,670
---------- ---------- ---------- ---------- ----------
Net income......................................... $ 1,118 $ 2,580 $ 10,126 $ 10,128 $ 16,642
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Basic earnings per share(5).......................... $ 0.41 $ 0.75 $ 2.04 $ 1.57 $ 1.89
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Diluted earnings per share(5)........................ $ 0.41 $ 0.75 $ 2.03 $ 1.57 $ 1.88
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
OTHER DATA:
Depreciation and amortization........................ $ 2,409 $ 3,725 $ 5,578 $ 6,079 $ 12,303
Capital expenditures, net............................ 2,951 5,406 6,116 6,260 16,242
EBITDA(6)............................................ 5,996 11,600 23,138 25,405 49,913
Net cash provided by (used in):
Operating activities............................... 3,724 (6,156) 13,138 19,792 8,516
Investing activities............................... (2,951) (46,878) 11,428 (95,093) (93,386)
Financing activities............................... (787) 53,037 (22,851) 75,236 87,620
EBITDA to interest expense........................... 3.9x 3.3x 4.8x 9.8x 5.4x
Ratio of earnings to fixed charges(7)................ 2.2x 2.2x 3.4x 6.4x 3.8x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital..................................... $ 3,287 $ 18,631 $ 13,701 $ 27,528 $ 50,304
Total assets........................................ 52,823 166,133 140,531 246,129 419,264
Long-term debt, net of current maturities........... 16,792 70,112 46,639 77,376 178,081
Total stockholders' investment...................... 4,369 17,418 27,683 87,367 101,708
</TABLE>
31
<PAGE>
- ------------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin.
The results of operations of this acquired business have been included in
the consolidated financial statements of the Company from August 31, 1994,
the date of acquisition.
(2) In April 1995, the Company sold the net assets of its Window Regulator
Business to Rockwell, realizing a pretax gain of approximately $4.2 million.
The results of operations of the Window Regulator Business have been
included in the consolidated financial statements of the Company through
April 2, 1995, the date of divestiture.
(3) Includes the results of operations of (i) the Rockwell Parking Brake
Business from October 1, 1996, and (ii) KPI from December 5, 1996, their
respective dates of acquisition. The Company issued an aggregate of
3,795,000 shares of its Class A Common Stock in August 1996 in connection
with the IPO.
(4) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the Excel Parking Brake Business from May 5, 1997, (iii) GT Automotive from
August 29, 1997, and (iv) REOM from December 12, 1997, which represent their
respective dates of acquisition.
(5) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the year. Diluted earnings per share include the dilutive
effects of outstanding stock options using the treasury stock method. See
Note 3 to Notes to Consolidated Financial Statements.
(6) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles, and the Company's calculation thereof may not be comparable to
that reported by other companies. The Company believes that it is widely
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness. This belief is based on the
Company's negotiations with its lenders who have indicated that the amount
of indebtedness the Company will be permitted to incur will be based, in
part, on the Company's actual and pro forma EBITDA. EBITDA does not take
into account the Company's working capital requirements, debt service
requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available for discretionary use.
(7) The ratio of earnings to fixed charges is computed by dividing (i) income
before income taxes, interest expense and the portion of rent determined to
be interest by (ii) total fixed charges, which includes interest expense,
minority interest and the portion of rent expense determined to be interest.
The portion of rent expense determined to be interest is 33% of gross rent
expense.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company ordinarily begins working on products awarded for new or
redesigned models two to five years prior to the marketing of such models to the
public. During such period, the Company incurs (i) costs related to the design
and engineering of such product, (ii) costs related to the production of the
tools and dies used to manufacture the new product and (iii) start-up costs
associated with the initial production of such product. In general, design and
engineering costs are expensed in the period incurred unless they are reimbursed
by the customer, in which case they are capitalized and amortized over the life
of such product as they are recovered from the customer. Costs incurred in the
production of the tools and dies are generally capitalized and reimbursed by the
customer prior to production. Start-up costs, which are generally incurred 30 to
60 days immediately prior to and immediately after initial production, are
expensed as incurred.
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
PRO
FORMA
1995 1996 1997 1997
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Revenues.................................................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................................. 86.5 84.7 83.5 84.2
--------- --------- --------- -----
Gross profit............................................................ 13.5 15.3 16.5 15.8
Selling, general and administrative expenses.............................. 6.1 7.0 7.3 7.3
Amortization expense...................................................... 0.5 0.4 0.8 0.9
--------- --------- --------- -----
Operating income........................................................ 6.9 7.9 8.4 7.6
Interest expense, net..................................................... 1.9 1.1 2.1 1.7
Other income.............................................................. 1.7 -- -- --
--------- --------- --------- -----
Income before provision for income taxes and minority interest.......... 6.7 6.8 6.3 5.9
Provision for income taxes................................................ 2.7 2.7 2.6 2.5
Minority interest......................................................... -- -- -- 0.4
--------- --------- --------- -----
Net income.............................................................. 4.0% 4.1% 3.7% 3.0%
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Revenues for 1997 increased by $203.8 million, or 83.1%, to $449.1 million
from $245.3 million for 1996. Approximately $179.0 million of the increase
relates to the acquisitions of KPI in December 1996, VOFA in January 1997 and GT
Automotive in August 1997. The remaining increase is due to increased production
on models served by the Company and new program awards.
COST OF SALES
Cost of sales for 1997 increased by $167.3 million, or 80.5%, to $375.1
million from $207.8 million for 1996. As a percentage of revenues, cost of sales
decreased to 83.5% for 1997 from 84.7% for 1996, resulting in an improved gross
margin of 16.5% from 15.3% in the preceding year. The higher margins are a
result of continued cost reduction efforts, including manufacturing process
improvements such as cellular
33
<PAGE>
manufacturing, mistake proofing, improved capacity utilization through
rationalization and consolidation of facilities and the effects of material cost
reductions achieved through the centralization of purchasing efforts and the
resulting greater purchasing power.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $15.7 million, or
91.3%, to $32.8 million for 1997 from $17.2 million for 1996. This increase is
due to incremental costs from the acquisitions of KPI, VOFA and GT Automotive,
engineering costs related to new business and costs associated with the greater
involvement in the design, engineering and prototyping of systems for customers.
As a percentage of revenues, selling, general and administrative expenses were
7.3% for 1997 compared to 7.0% for 1996.
INTEREST EXPENSE
Interest expense for 1997 increased by $6.7 million to $9.3 million from
$2.6 million for 1996. The increase was due principally to borrowings incurred
related to the acquisitions of KPI, VOFA and GT Automotive.
INCOME TAXES
The effective income tax rate for 1997 was 41.2% for 1997 compared to 39.5%
for 1996. The effective rates differed from the statutory rates primarily as a
result of an increased proportion of the Company's earnings being derived in
higher tax rate jurisdictions, such as Germany and Canada, state taxes and an
increase in non-deductible goodwill amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
REVENUES
Revenues for 1996 decreased by $8.4 million, or 3.3% , to $245.3 million
from $253.7 million for 1995. The decrease was due to the divestiture of the
Window Regulator Business to Rockwell in April 1995, which represented a
decrease of approximately $14.1 million, and the effects of the 1996 General
Motors strikes, which adversely impacted the Company's operations by
approximately $4.5 million. These decreases were offset by incremental new
business, including the benefits of the Chrysler mini-van tailgate latch
replacement program and the effects of the December 1996 acquisition of KPI.
COST OF SALES
Cost of sales for 1996 decreased by $11.8 million, or 5.4% , to $207.8
million from $219.6 million in 1995. As a percentage of revenues, cost of sales
decreased to 84.7% for 1996 from 86.5% for 1995, resulting in an improved gross
margin of 15.3% from 13.5% in the preceding year. The improvement in gross
margin is a result of (i) the divestiture of the Window Regulator Business,
which had lower margins, (ii) the Company's cost reduction efforts, which
included the implementation of more flexible cellular manufacturing methods,
(iii) the closing of an under-utilized facility, and (iv) improved margins on
various replacement business as a result of the Company's advanced engineering
process.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $1.7 million, or
11.0%, to $17.2 million for 1996 from $15.5 million for 1995. As a percentage of
revenues, selling, general and administrative expenses increased to 7.0% for
1996 from 6.1% for 1995, primarily as a result of the increased costs incurred
in providing a greater level of design and engineering services to customers and
the increased expenses related to the KPI acquisition.
34
<PAGE>
INTEREST EXPENSE
Interest expense for 1996 decreased by $2.2 million, or 45.8%, to $2.6
million from $4.8 million for 1995. The decrease was primarily due to the
repayment of debt with the net proceeds from the sale of the Window Regulator
Business in April 1995 and the 1996 IPO.
INCOME TAXES
The effective income tax rate for 1996 was 39.5% compared to 40.4% for 1995.
The effective rates were higher than Federal statutory rates primarily as a
result of state income taxes and nondeductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
On August 14, 1996, the Company completed the IPO of 3,795,000 shares of its
Class A Common Stock at a price of $14.50 per share. The Company realized net
proceeds of approximately $50.0 million from such offering.
The Company's principal source of funds has been, and is anticipated to
continue to be, its cash flows from operations. During 1997, the Company
generated $30.5 million from operations, before the effects of changes in
working capital, compared to $19.0 million in 1996. The cash generated from
operations combined with borrowings under the Company's Bank Credit Agreement
were used to fund capital expenditures of $16.2 million, to provide working
capital and to finance the acquisitions of KPI, VOFA and GT Automotive.
The Bank Credit Agreement consists of a revolving credit facility providing
for borrowings of up to $200.0 million. Borrowings under the Bank Credit
Agreement are secured by substantially all of the Company's assets and
guaranteed by the Parent. The Bank Credit Agreement provides the Company with
the ability to denominate a portion of its borrowings in foreign currencies up
to an amount equal to $50.0 million. As of December 31, 1997, the Company had
outstanding borrowings under the Bank Credit Agreement of approximately $165.2
million (of which approximately $2.8 million were denominated in Canadian
dollars and approximately $3.6 million were denominated in Deutsche Marks). The
Bank Credit Agreement requires the Company to pay a facility fee on the
commitment amount of 0.25% and contains various restrictive covenants, which,
among other things, require the Company to maintain certain financial ratios,
including minimum liquidity and interest coverage.
The Company estimates that it will fund approximately $19 million in capital
expenditures in 1998. These capital expenditures will be used primarily for the
purchase of machinery and equipment to support new business awards, as well as
to finance continued cost reduction efforts.
The Company believes that funds available under its Bank Credit Agreement,
together with funds generated by the Company's operations, will provide the
Company with sufficient liquidity and capital resources for working capital,
capital expenditures and other needs. However, any significant acquisitions may
require additional debt or equity financing in addition to the financing
received as a result of the sale of the Preferred Securities offered hereby. The
Company believes additional financing will be available from bank lenders,
through the issuance of public or private debt securities or through the
additional public offerings of equity securities.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
The Company typically experiences decreased revenues and operating income
during the third calendar quarter of each year due to production shutdowns at
OEMs for model changeovers and vacations.
35
<PAGE>
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact material purchases, labor
and other costs. In many cases, the Company has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that the Company serves. In the past few years, however, inflation has not been
a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of the Company's revenues during 1997 were derived
from manufacturing operations in Europe, Latin America and Canada. The results
of operations and the financial position of the Company's operations in these
countries are principally measured in their respective currency and translated
into U.S. dollars. The effects of foreign currency fluctuations in such
countries are somewhat mitigated by the fact that expenses are generally
incurred in the same currencies in which revenues are generated. The reported
income of these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency.
A significant portion of the Company's assets at December 31, 1997 are based
in its foreign operations and are translated into U.S. dollars at foreign
currency exchange rates in effect as of the end of each period, with the effect
of such translation reflected as a separate component of stockholders'
investment. Accordingly, the Company's consolidated stockholders' investment
will fluctuate depending upon the weakening or strengthening of the U.S. dollar
against the respective foreign currency.
The Company's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency and may, from
time to time, engage in hedging programs intended to reduce the Company exposure
to currency fluctuations.
YEAR 2000
The Company is in the process of replacing and upgrading its computer
systems, which, among other things, will accommodate the year 2000. The Company
currently expects its computer systems to be fully operational prior to the year
2000 so as not to adversely affect its operations. During 1998 and 1999, the
Company expects to incur costs of approximately $1.0 million and $1.5 million,
respectively, to make these replacements and upgrades. Failure of the Company to
make required modifications on a timely basis or the inability of other
companies with which the Company does business to complete their year 2000
modifications on a timely basis, could adversely affect the Company's
operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board released SFAS No.
130, "Reporting Comprehensive Income," effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 establishes standards for reporting and
display in the financial statements of total net income and the components of
all other nonowner changes in equity, referred to as comprehensive income. The
Company will adopt SFAS No. 130 in 1998 and is currently analyzing the impact it
will have on the disclosures in the financial statements.
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in 1998
and is currently analyzing the impact it will have on the disclosures in its
financial statements.
36
<PAGE>
BUSINESS
The Company is a leading designer and manufacturer of driver control
systems, engineered mechanical components and cable-related systems for the
global automotive industry. The Company's products include parking brake
systems, automotive cables, transmission shifter systems, latches, underbody
tire carriers, jacks, brake, clutch and accelerator pedals, and other mechanical
assemblies. The Company sells its products to the major North American, Japanese
and European automotive OEMs. The Company has 26 manufacturing and product
development facilities located in the United States (Indiana, Michigan and
Missouri), Australia, Canada, France, Germany, Mexico, and Spain, and in Brazil
through a joint venture. The Company's revenues have increased from $129.3
million in 1993 to $489.8 million in 1997 on a pro forma basis, a compound
annual growth rate of approximately 40%. Over this same period, the Company's
operating income margin has improved from 2.8% of revenues to 7.6% of revenues.
The Company believes that it is a leading North American supplier of parking
brake mechanisms, transmission shifter mechanisms and automotive cables, with
estimated market shares in excess of 75%, 40% and 25%, respectively. In
addition, the Company is one of the few suppliers to offer integrated parking
brake, shifter and latch systems. These systems, which consist of mechanisms and
cables, require significant design and engineering expertise because they are
critical to the vehicle's reliability, performance and safety. The Company
believes that its customers value its ability to design, manufacture and
assemble complete systems.
On a pro forma basis, approximately 81% of the Company's 1997 revenues were
generated from sales to North American OEMs, with its major customers being
Ford, GM, Chrysler and Toyota. The Company manufactures products for many of the
most popular car, light truck and sport utility models, including eight of the
top ten selling vehicles in North America for 1997: the Ford Taurus, Explorer,
Ranger and F-Series pickups, GM Cavalier and C/K pickups, Dodge Ram pickups, and
Toyota Camry. As a result of recent acquisitions, approximately 17% of the
Company's 1997 pro forma revenues were generated from sales to European OEMs,
including Mercedes, Volkswagen and BMW. The Company is generally the sole
supplier of the parts it sells to OEMs and will ordinarily continue to supply
parts for a particular model for the life of the model, which usually ranges
from three to seven years.
INDUSTRY TRENDS
The Company's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the growth of system sourcing and the increase in global
sourcing.
SUPPLIER CONSOLIDATION. During the 1990s, OEMs have continued to reduce
their supplier base in certain product segments, including mechanical
assemblies, awarding sole-source contracts to full-service suppliers. As a
result, OEMs currently work with a smaller number of full-service supplier's
each of which supplies a greater proportion of the total vehicle. These
requirements can best be met by suppliers with sufficient size and financial
resources to meet such demands. For full-service suppliers such as the Company,
this new environment provides an opportunity to grow by obtaining business
previously provided by other non full-service suppliers and by acquiring
suppliers that further enhance product, manufacturing and service capabilities.
OEMs rigorously evaluate suppliers on the basis of product quality, cost
control, reliability of delivery, product design capability, financial strength,
new technology implementation, quality and condition of facilities and overall
management. Suppliers that obtain superior ratings are considered for sourcing
new business; those that do not generally continue their existing contracts, but
normally do not receive additional business. Although these new supplier
policies have already resulted in significant consolidation of component
suppliers in certain segments, the Company believes that opportunities exist for
further consolidation within the Company's segment. This is particularly true in
Europe which has many suppliers in this segment, many with relatively small
market shares.
37
<PAGE>
SYSTEM SOURCING. OEMs increasingly seek suppliers capable of manufacturing
complete systems of a vehicle rather than suppliers who only produce the
separate parts that comprise a system. By outsourcing complete systems, OEMs are
able to reduce their costs associated with the design and integration of
different components and improve quality by enabling their suppliers to assemble
and test major portions of the vehicle prior to beginning production. The
Company has capitalized on this trend by designing its mechanisms and cable
systems to function together and by providing cable and mechanism designs that
are integrated into the design of the entire vehicle.
GLOBAL SOURCING. Regions such as Asia, Latin America and Eastern Europe are
expected to experience significant growth in vehicle demand over the next ten
years. OEMs are positioning themselves to reach these emerging markets in a
cost-effective manner by seeking to design and produce "world cars" which can be
designed in one vehicle center but produced and sold in many different
geographic markets, thereby allowing OEMs to reduce design costs and take full
advantage of low-cost manufacturing locations. OEMs increasingly are requiring
their suppliers to have the capability to design and manufacture their products
in multiple geographic markets.
The Company has seven manufacturing facilities located in France, Germany,
Spain, Australia and through its joint venture in Brazil. In addition, the
Company has formed, or is in the process of forming, strategic alliances with
other suppliers throughout the world. These strategic alliances, which range
from investments in other manufacturers to informal understandings, should not
only give the Company access to new geographic markets and customers, but also
the capability of offering complementary products. The Company also has two
technical centers located at its facilities in Europe and it has relocated
technical personnel resources to locations in which OEMs will develop "world
cars." By participating in the design of these vehicles and through
implementation of manufacturing processes near the international facilities of
the OEMs, the Company believes it can continue to expand on its international
presence.
STRATEGY
The Company's business objective is to capitalize on the consolidation,
globalization and system/ modular sourcing trends in the automotive supply
industry in order to be the leading provider of driver control systems,
engineered mechanical components and cable-related systems and to OEMs
worldwide. Key elements of the Company's operating and growth strategies are
outlined below:
OPERATING STRATEGY
FULL-SERVICE DESIGN AND ENGINEERING CAPABILITIES. The Company has
maintained a technological advantage through its investment in product
development and advanced engineering. The Company works with OEMs throughout the
product development process from concept vehicle and prototype development
through the design and implementation of manufacturing processes. The Company's
computer-aided design systems are compatible with its major customers, enabling
the Company to communicate design developments with customer engineers
throughout the design and development stage.
EFFICIENT MANUFACTURING/CONTINUOUS IMPROVEMENT PROGRAMS. The Company
continues to implement strategic initiatives designed to improve product quality
and reduce manufacturing costs through, among other things, the introduction of
cellular manufacturing methods, consolidation of manufacturing facilities,
improvement in inventory management and reduction of scrap. Manufacturing
flexibility enables the Company's facilities to produce modules and systems in a
cost-effective manner and strengthens the Company's ability to meet the
just-in-time and in-line sequence delivery schedules of many of its customers.
In addition, the Company utilizes the Dura Operating System, which is a common
set of key metrics used in all facilities, to measure actual performance in
comparison to standards and goals.
STRONG CUSTOMER RELATIONSHIPS. The Company has developed strong customer
relationships with over 20 OEMs based on its long history of high-quality
manufacturing and full system customer support.
38
<PAGE>
Significant investment in design and engineering capabilities drive new product
development, lower costs and provide the capabilities necessary to produce
complete systems. Access to and relationships with OEMs' engineering and
purchasing personnel allow the Company to identify business opportunities and
react to customer needs in the early stages of vehicle design and give it a
competitive advantage in securing new business.
DECENTRALIZED, PARTICIPATORY CULTURE. The Company's decentralized approach
to managing its manufacturing facilities encourages decision making and employee
participation in areas such as manufacturing processes and customer service.
This "team" approach enhances communication of strategic direction and goals
while facilitating a greater success rate in reaching and exceeding its
objectives and fosters a unified culture. The Company provides ownership-related
incentives to managers and salaried and hourly employees through grants under
the Company's stock option plan and participation in the employee stock purchase
plan.
GROWTH STRATEGY
STRATEGIC ACQUISITIONS. Since August 1994, the Company has successfully
completed seven strategic acquisitions and one joint venture. The Company seeks
to make acquisitions that: (i) provide additional product, manufacturing and
technical capabilities; (ii) broaden the Company's geographic coverage and
strengthen its ability to supply products on a global basis; (iii) increase the
number of models for which the Company supplies products and increase the
content level on existing models; and (iv) add new customers. The Company
competes in what it believes to be a $6 billion, highly fragmented market that
provides numerous potential acquisition and joint venture opportunities.
FOCUS ON HIGHER VALUE-ADDED SYSTEMS AND MODULES. OEMs continue to seek
suppliers capable of manufacturing complete modules and systems for a vehicle
rather than suppliers that produce only the component parts which comprise a
module or system. Systems manufacturing offers OEMs the opportunity for
significant cost savings and improved product quality and consistency. By
capitalizing on the Company's existing product portfolio and through the
combination of multifunctional mechanical and cable products, the Company
intends to continue to expand its capabilities to provide additional integrated
modules and systems.
INCREASE PLATFORM AND CUSTOMER PENETRATION. The Company's strategy is to
increase volume by adding new customers and to strengthen existing customer
relationships by broadening its range of products through internal development
efforts and acquisitions. During 1997, the Company established important new
customer relationships with Mercedes, Volkswagen and BMW through the acquisition
of VOFA. While maintaining its strong relationships with Ford and GM, the
Company has also successfully increased its participation in the supply of its
other customers' model lines. For example, during 1991, the Company participated
in only a limited number of Toyota's production models. By 1997, the Company had
established a supply relationship that covers a full range of Toyota vehicles,
including two models manufactured in Japan. The Company has also increased the
sales content on popular vehicle platforms such as Ford's Taurus/Sable and
Escort, Chrysler's minivan and Grand Cherokee, Dodge Ram and Dakota pickups, by
providing additional products which were developed by the Company or added to
its product line through acquisition.
EXPAND PENETRATION OF INTERNATIONAL MARKETS. In 1997, over 70% of total
worldwide passenger vehicle production occurred outside North America. To meet
OEMs' increasing preference for suppliers with global capabilities, the Company
has expanded its manufacturing operations into new geographic markets through
strategic acquisitions and joint ventures. Consistent with this strategy, the
Company believes that the VOFA (Germany and Spain), Rockwell Parking Brake
Business (France) and REOM (Australia) acquisitions as well as the Pollone
(Brazil) joint venture will expand its ability to serve its customers globally.
The Company believes that increased international sales will allow the Company
to mitigate the effects of cyclical downturns in a given geographic region and
further diversify the Company's OEM
39
<PAGE>
customer base. In addition, the Company believes that its increased
international presence will provide a competitive advantage in the pursuit of
certain "world car" supply opportunities.
PRODUCTS
The Company's product offerings include: automotive cables (such as parking
brake, shifter, throttle, oil level, hood release, and fuel door); parking brake
mechanisms (foot and hand operated); transmission shifter mechanisms (manual and
automatic console-based and column-mounted); latches (primary, secondary, and
combination hood, deck lid and tail gate); and other engineered mechanical
components (such as underbody tire carriers, jacks, brake, clutch and
accelerator pedals, and turn signal and tilt lever assemblies). The Company
believes that it is a leading North American supplier of parking brake
mechanisms, transmission shifter mechanisms and automotive cables, with
estimated market shares in excess of 75%, 40% and 25%, respectively. The Company
offers individual components as well as integrated parking brake, shifter and
latch systems, which consist of mechanisms and cables.
The following table sets forth the approximate composition by product
category of the Company's revenues on a pro forma basis for the last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
PRODUCT CATEGORY 1995 1996 1997
- ---------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Parking brake mechanisms........................................ 57% 39% 23%
Automotive cables............................................... 29 39 38
Latches......................................................... 9 12 4
Transmission shifter mechanisms................................. 3 4 24
Other body hardware............................................. 2 6 11
--- --- ---
Total....................................................... 100% 100% 100%
--- --- ---
--- --- ---
</TABLE>
CUSTOMERS AND MARKETING
The North American automotive market is dominated by Ford, GM and Chrysler,
with Japanese and foreign manufacturers accounting for approximately 20% of the
market. In North America, the Company supplies its products primarily to Ford,
GM, Chrysler and Toyota. As a result of recent acquisitions, the Company added
Mercedes, Volkswagen and BMW as new customers in 1997.
The following is a summary of the Company's customers that accounted for a
significant portion of consolidated revenues in the past three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
CUSTOMER 1995 1996 1997
- ---------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Ford............................................................ 52% 49% 42%
GM.............................................................. 35 36 25
Chrysler........................................................ 6 8 7
Toyota.......................................................... 5 5 4
Mercedes........................................................ -- -- 4
Volkswagen...................................................... -- -- 4
BMW............................................................. -- -- 3
Other........................................................... 2 2 11
--- --- ---
Total......................................................... 100% 100% 100%
--- --- ---
--- --- ---
</TABLE>
40
<PAGE>
The Company's customers award contracts for a particular car platform, which
may include more than one car model. Such contracts range from one year to the
life of the models, which is generally three to seven years, and do not require
the purchase by the customer of any minimum number of parts. The Company also
competes for new business to supply parts for successor models and therefore is
subject to the risk that the OEM will not select the Company to produce parts on
a successor model. Because the Company supplies parts for a broad cross-section
of both new and mature models, its reliance on any particular model is
minimized. The Company manufactures products for many of the most popular car,
light truck, sport utility and mini-van models in North America and Europe.
Although not comprehensive, the following table presents an overview of the
major models for which the Company has orders to supply products on current or
new model vehicles:
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK AND VAN MODELS*
- ---------------- ------------------------------------ ------------------------------------
<S> <C> <C>
Ford............ Crown Victoria/Grand Marquis, Bronco, Econoline, Expedition/
Contour/Mystique/MONDEO, Navigator, Navajo/Explorer/
Continental/ Town Car, Mark/Mark Mountaineer, F-Series, Ranger,
VIII, Taurus/ Sable, Cougar, Villager, Windstar, AUTOEUROPA MPV,
Escort/Tracer, Mustang, FIESTA, KA ESCORT VAN
GM.............. Achieva/Grand Am, Century, Corvette, Safari/Astro, Blazer/Jimmy/Bravada,
Deville/Seville/Eldorado, Firebird/ C/K Pickup/Tahoe/Sierra/Yukon,
Camaro, Lumina/Monte Carlo/Regal/ Silhouette/TransSport/Venture, S-10
Intrigue, Aurora/Riviera/Park Pickup/Sonoma, Suburban
Avenue, Olds 88/ Bonneville/LeSabre,
Saturn/ Innovate, Sunfire/Cavalier,
Malibu/ Cutlass/Grand Prix, ASTRA,
CORSA, VECTRA
Chrysler........ Intrepid/Concorde/LHS/300M, Neon, Caravan/Voyager, Dakota/Durango,
Prowler, Viper, Cirrus, Stratus, Cherokee/Grand Cherokee, Ram Van and
Breeze Pickup, Wrangler
Toyota.......... Avalon, Camry, Corolla, LEXUS, Sienna, Toyota Pickup
Prizm, Solara
Mercedes........ A, C, E, M AND S CLASS, CABRIO --
Volkswagen/Audi.. POLO, GOLF, PASSAT, A4, A8 TRANSPORTER, BUS
BMW............. 3, 5, 7 AND 8 SERIES --
</TABLE>
- ------------------------
*Models manufactured outside of North America are italicized.
Most of the parts the Company produces have a lead time of two to five years
from product development to production. Although not comprehensive, the
following table presents an overview of the
41
<PAGE>
major models for which the Company has been awarded new business (i.e., parts
not currently supplied by the Company):
<TABLE>
<CAPTION>
MODEL YEAR MODEL*
- -------------------- ------------------------------------------------
<S> <C>
1999................ GM CORSA park brake and door cables and Innovate
shifter system
Chrysler Grand Cherokee parking brake system and
shifter and hood release cables
PEUGEOT T1 parking brake
Cami Sidekick shifter
2000................ GM Lumina/Monte Carlo shifter and
C/K Pickup hood latch
2001................ Ford Explorer shifter
</TABLE>
- ------------------------
*Models manufactured outside of North America are italicized.
DESIGN AND ENGINEERING SUPPORT
The Company believes that engineering service and support are key factors in
successfully obtaining new business. The Company utilizes program management
with customer-dedicated program teams, which have full design, development, test
and commercial issues under the operational control of a single manager. In
addition, cross-functional teams are established for each new program to ensure
efficient product development from program conception through product launch.
The advanced technology development group focuses on enhancing product and
process technology.
The Company has four Technical Centers, two in Michigan, one in Germany and
one in France. A separate Advanced Technology Group has been established to
maintain the Company's position as a technology leader. The Advanced Technology
Group has developed many innovative features in the Company's products,
including many features which were developed in conjunction with the Company's
customers. The Company utilizes Computer Aided Designs ("CAD") in the design
process, which enables the Company to share data files with its customers via
compatible systems during the design stage, thereby improving function, fit and
performance within the total vehicle. The Company also utilizes CAD links with
its manufacturing engineers to enhance manufacturability and quality of the
designs early in the development process.
The Company has more than 200 patents granted or in the application process.
The patents granted expire over several years beginning in June 1998. Although
the Company believes that, taken together, the patents are significant, the loss
or expiration of any particular patent would not be material to the Company.
MANUFACTURING
In manufacturing its products, the Company utilizes two different
manufacturing processes, one for mechanisms and one for cables that will
ultimately attach to such mechanisms, creating a system. The Company utilizes
flexible manufacturing cells in both the mechanism and cable assembly processes.
Manufacturing cells are clusters of individual manufacturing operations and work
stations grouped in a cylindrical configuration, with the operators placed
centrally within the configuration. This provides flexibility by allowing
efficient changes to the number of operations each operator performs. When
compared to the more traditional, less flexible assembly line process, cell
manufacturing allows the Company to maintain its product output consistent with
its customers' requirements and reduce the level of inventory.
42
<PAGE>
Mechanical assemblies consist of between five and 50 individual components,
which are attached to form an integrated mechanism. The Company's assembly
operations are performed on either dedicated, high-volume, automated assembly
machines or on low capital-intensive, flexible, cell-oriented assembly units
capable of low or high volume production runs. The assembly operations construct
the final product through hot or cold forging machines, plastic injection
molding, welding, staking and riveting the component parts. A large portion of
the component parts are purchased from outside suppliers to the Company.
However, the Company manufactures its own stampings, a process which consists of
passing sheet metal through dies in a stamping press to form the metal into
three-dimensional parts. The Company produces stamped parts using single-stage
and progressive dies in presses, which range in size from 150 to 600 tons.
Through cell teams, which stress employee involvement, the Company's processes
are continuously upgraded to increase flexibility, improve operating safety and
minimize changeover times of the dies.
Cables are manufactured using a variety of processes, including plastic
injection molding, extrusion, wire flattening, spring making and zinc
diecasting. Wire is purchased from outside suppliers and then formed into
contra-twisted layers on tubular stranders and bunching machines to produce up
to 19-wire stranded cable. Corrosion resistance is provided by a proprietary,
ceramic coating applied during the stranding process. The cable then is
plastic-coated by an extrusion process to provide a smooth, low coefficient
surface that results in high efficiency and durability. Conduit is then produced
by flattening and coiling wire, which is then extruded with a protective
coating. Proprietary strand and conduit cutting machines enable efficient
processing. Assembly operations are arranged in cells to minimize inventory,
improve quality, reduce scrap, improve productivity and enhance employee
involvement. The cables are assembled with various attachments and end fittings
that allow the customer to install the cables to the appropriate mating
mechanisms.
The Company utilizes frequent communication meetings at all levels of
manufacturing to provide training and instruction as well as to assure a
cohesive, focused effort toward common goals. The Company encourages employee
involvement in all production activity and views such involvement as a key
element in the success of the Company. The Company also aggressively pursues
involvement from its suppliers, which is necessary to assure a consistent flow
of raw materials and components on a timely basis with consistently high
quality. The Company utilizes the component suppliers where practical in the
design and prototype stages of the new product development to facilitate the
most comprehensive, state-of-the-art designs available. The Company has made
substantial investments in manufacturing technology and product design
capability to support its products, including modern manufacturing equipment,
fineblanking, sophisticated computer-aided design systems and highly-trained
engineering personnel. These advanced capabilities have helped to further reduce
scrap rates, ensure superior product quality and increase efficiency.
The automotive industry has adopted a quality rating system known as
QS-9000, a rigorous inspection of a supplier's facilities and operating systems
performed by independent certified auditors. Certification and on-going
maintenance of certification is mandatory for future supply consideration. The
Company has received QS-9000 certification at all of its facilities except the
Rockwell Parking Brake Business, which is scheduled for certification in 1998.
The Company's plants have been recognized by its customers with various
awards, such as the Chrysler Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award, Isuzu Quality Achievement Award and Calsonic
Supplier of the Year Award. The Company has received Ford Q-1 certification at
all facilities shipping current model Ford products.
COMPETITION
The Company principally competes for new business at the beginning of the
development of new models and upon the redesign of existing models. New model
development generally begins two to five years before marketing of such models
to the public. Once a producer has been designated to supply parts
43
<PAGE>
for a new program an OEM usually will continue to purchase those parts from the
designated producer for the life of the program, although not necessarily for a
redesign. Competitive factors in the market for the Company's products include
product quality and reliability, cost, timely delivery, technical expertise and
development capability, new product innovation and customer service. The Company
operates in a highly competitive environment. The number of the Company's
competitors has decreased due to the supplier consolidation resulting from
changing OEM policies. The Company's primary competitors in mechanisms are
Adwest Incorporated, Scharwaechter GmbH & Co. ("Edscha"), Teleflex Incorporated,
Ficosa International, S.A., Ventra Group, Inc. ("Seeburn Division"), and Aries
Industries. The Company's primary competitors in cables are Teleflex
Incorporated, Ficosa International, S.A., Trident Automotive plc and Nippon
Cable System Inc.
SUPPLIERS AND RAW MATERIALS
The principal raw materials purchased by the Company are steel, wire and
resin. The types of steel the Company purchases include hot and cold rolled,
galvanized, organically coated and aluminized steel. In general, the wire used
by the Company is produced from steel with many of the same characteristics with
the exception that it has a higher carbon content. The Company utilizes plastic
resin to produce the protective coating for its cables and production of shifter
components. The Company employs just-in-time manufacturing and sourcing systems
enabling it to meet customer requirements for faster deliveries while minimizing
its need to carry significant inventory levels. The Company has not experienced
any significant shortages of raw materials and normally does not carry
inventories of raw materials or finished products in excess of those reasonably
required to meet production and shipping schedules.
The Company typically negotiates blanket purchase orders or 12-month supply
agreements with integrated steel suppliers, mini-mills and service centers that
have demonstrated timely delivery, quality steel and competitive prices. These
relationships allow the Company to order precise quantities and types of steel
for delivery on short notice, thereby permitting the Company to maintain low
inventories. In addition, the Company occasionally may "spot buy" steel from
service centers to meet customer demand, engineering changes or new part tool
trials.
Other raw materials purchased by the Company include dies, fasteners,
springs, rivets and rubber products, all of which are available from numerous
sources.
EMPLOYEES
As of December 31, 1997, the Company had approximately 5,200 employees,
approximately 825 of whom are salaried and the balance of whom are paid on an
hourly basis. Approximately 2,170 employees located at the Company's facilities
in Matamoros, Mexico, Windsor and Brantford, Ontario, Dusseldorf, Gehren and
Daun, Germany, Barcelona, Spain, Melbourne, Australia and East Jordan and
Mancelona, Michigan are currently covered by collective bargaining agreements.
<TABLE>
<CAPTION>
COLLECTIVE BARGAINING
LOCATION AGREEMENT EXPIRATION
- --------------------------- ----------------------------- -------------------------
<S> <C> <C>
Mexico..................... Confederacion de Trabajadores Annually
de Mexico
Canada..................... CAW December 1998; June 1999;
September 1999
Germany.................... IG-Metall December 1998
Spain...................... Comisiones Oberera December 1999
Australia.................. Australian Metals Workers No term
United States.............. UAW December 2000
</TABLE>
44
<PAGE>
Although management believes that the Company's relationship with its union
employees at these facilities is good, there can be no assurance that the
Company will be able to negotiate new agreements on favorable terms. In the
event the Company is unsuccessful in negotiating new agreements, these
facilities could be subject to work stoppages, which would have a material
adverse effect on the operations of the Company.
PROPERTIES
The following table provides information regarding the Company's principal
facilities. The Company believes that the productive capacity and utilization of
its facilities are sufficient to allow the Company to conduct its operations in
accordance with its business strategy. All of the owned facilities are subject
to liens under the Company's Bank Credit Agreement.
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
- ------------------------------------------ ----------- --------- --------------------
<S> <C> <C> <C>
Barcelona, Spain.......................... 179,000 Owned Manufacturing
Mancelona, Michigan....................... 167,000 Owned Manufacturing
Moberly, Missouri......................... 165,000 Owned Manufacturing
Fremont, Michigan......................... 160,000 Owned Manufacturing
Daun, Germany............................. 140,000 Owned Manufacturing
East Jordan, Michigan..................... 135,000 Owned Manufacturing
Gehren, Germany........................... 129,000 Owned Manufacturing
Dusseldorf, Germany....................... 113,000 Leased Manufacturing/
Product Development
Spring Lake, Michigan*.................... 95,000 Owned Manufacturing
White Cloud, Michigan*.................... 94,000 Leased Manufacturing
Hannibal, Missouri (South)................ 90,000 Owned Manufacturing
Livonia, Michigan......................... 84,000 Owned Manufacturing
Windsor, Ontario (2 locations)............ 84,000 Owned Manufacturing
Melbourne, Australia...................... 77,500 Leased Manufacturing
Hartford City, Indiana.................... 70,000 Owned Manufacturing
Brownstown, Indiana....................... 68,000 Owned Manufacturing
Brantford, Ontario........................ 66,000 Owned Manufacturing
Rochester Hills, Michigan................. 65,000 Leased Product Development/
Operating
Headquarters
Hannibal, Missouri (North)................ 64,000 Owned Manufacturing
Gladwin, Michigan......................... 60,000 Owned Manufacturing
Brookfield, Missouri...................... 51,000 Owned Manufacturing
Grand Haven, Michigan*.................... 48,000 Leased Product Development
Matamoros, Mexico......................... 42,000 Owned Manufacturing
Warren, Michigan.......................... 40,000 Leased Manufacturing
Cluses, France............................ 10,000 Leased Manufacturing
Minneapolis, Minnesota.................... 5,700 Leased Corporate
Headquarters
</TABLE>
- ------------------------
*Manufacturing at these facilities will be consolidated into the Fremont,
Michigan facility in 1998.
45
<PAGE>
Management believes that substantially all of its property and equipment is
in good condition and that it has sufficient capacity to meet its current
manufacturing needs.
LEGAL PROCEEDINGS
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal injury
or death, and there can be no assurance that the Company will not experience any
material product liability losses in the future. In addition, if any
Company-designed products prove to be defective, the Company may be required to
participate in a recall involving such products.
In late 1994, Ford issued a recall of a series of manual transmission Ford
F-Series pickups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business. Ford had received several reports
that the brakes failed. Pursuant to a letter agreement entered into in
connection with the acquisition of the Brake and Cable Business, the Company
agreed to reimburse Ford for up to $6.0 million of Ford's costs of the recall.
The Company has reimbursed Ford for the full amount under this agreement. The
Company is also involved in a product recall relating to the same issue with
respect to the Ford Mondeo in Europe. The Company has agreed to pay 50% of the
costs of that recall not to exceed $1.0 million, which payments totaled $0.4
million as of December 31, 1997.
The type of alleged failures that prompted the F-Series recalls have also
led to a number of claims and lawsuits filed against Ford and, in certain
instances, against the Company and/or Alkin. The Company may be subject to
claims brought directly against the Company by injured occupants of Ford
vehicles and to claims for contribution or indemnification asserted by Ford. The
agreement relating to the acquisition of the Brake and Cable Business provided
that the Company is liable for claims arising out of accidents that take place
on or after August 31, 1994 and that the Company will be liable for other claims
only to the extent any losses by Alkin relating to such claims are not paid by
Alkin's insurance policies (either because they are not over the deductible
amount, because Alkin's policy limits have been exceeded or because they are not
covered by Alkin's insurance policies for other reasons). Two cases were brought
directly against the Company or Alkin relating to personal injury claims, and
Ford has received over 400 claims (generally for property damage) relating to
alleged defects in the self-adjust parking brakes. The claims that purport to
seek recovery for personal injury allegedly as a result of the recall condition,
with several exceptions, have generally involved relatively minor injuries,
suffered principally while occupants were trying to stop or jump out of rolling
vehicles. Ford has maintained that the Company or Alkin is responsible for all
damages or liabilities arising out of these claims. The Company disputes this
position. As of December 31, 1997, Ford had tendered its defense of 25 such
claims to the Company and Alkin, and indicated that it would look to the Company
and Alkin for indemnification were Ford ultimately found to be liable and
required to make any payments relating to such claims. The Company and Alkin
have submitted these claims to their insurance carriers. The Company has
attempted to work with Ford to address the claims arising from the self-adjust
parking brakes originally manufactured by the Brake and Cable Business and does
not believe that these claims have adversely affected its business relationship
with Ford.
From time to time, in the ordinary course of its business, the Company
receives notice from a customer that a product may not be properly functioning.
For example, in November 1995, the Company was notified by Chrysler that it had
received reports of a number of parking brake failures in manual transmission
vehicles, particularly in Europe. Chrysler has notified the Company that as many
as 60,000 vehicles may be affected. The Company is working with Chrysler to
resolve this matter and does not believe the ultimate cost of resolution will
have a material effect on the Company's results of operations and financial
position. In addition, Chrysler has alleged that KPI produced minivan brake
pedals with improper pedal pad reinforcements, resulting in some failures as a
consequence of pedal pads bending. It is possible that Chrysler could seek
contribution from the Company for costs it incurs if recalls were undertaken for
these or similar matters or for costs associated with possible repairs.
46
<PAGE>
In June 1996, the Company was served with a complaint alleging a wrongful
death as the result of injuries purportedly caused by a defectively designed
rear latch on a Chrysler mini-van. Chrysler and two other suppliers to Chrysler
were also named as defendants in the complaint. The lawsuit was referred to the
Company's insurance carrier. Chrysler agreed to assume the defense of, and to
indemnify the Company with respect to, this claim as long as the plaintiffs do
not make any claim alleging a manufacturing defect as it relates to the Company.
The plaintiffs have not made such an allegation and the Company was dismissed
from the claim.
In early November 1996, the Company was served with a lawsuit brought by
affiliates of AIG, the Company's excess insurance carrier, in Toronto, Canada
seeking a declaratory judgment that the umbrella and excess liability policies
that it had issued to Onex do not provide coverage in connection with allegedly
defective self-adjust parking brakes manufactured by Alkin prior to August 31,
1994. The AIG policies at issue provided (a) the first layer of excess coverage
(beyond the Company's $3 million primary policy per year) for claims arising
from August 31, 1994 to April 1, 1996 in the amount of $20 million per year, and
(b) an additional layer of excess coverage at $33 to $53 million per year. In
principal part, the AIG affiliates claim that the policies do not provide
coverage with respect to products manufactured prior to August 31, 1994 or
liabilities assumed by the Company pursuant to purchase agreements. The AIG
affiliates also claim that the policies should be voided with respect to
self-adjust parking brake claims for inadequate disclosure at the time the
policies were applied for. The Company and Onex dispute the allegations of the
Ontario lawsuit and have filed a counterclaim against the AIG affiliates for
breach of contract.
The Company believes it maintains adequate insurance, including product
liability coverage, to cover the claims described above. The Company has also
established reserves in amounts it believes adequate to cover any adverse
judgments. However, any adverse judgment in excess of its insurance coverage and
such reserves could result in a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
The Company is subject to the requirements of Federal, state, and local
environmental and occupational health and safety laws and regulations. There can
be no assurance that the Company is at all times in complete compliance with all
such requirements. Although the Company has made and will continue to make
capital and other expenditures to comply with environmental requirements, the
Company does not expect to incur material capital expenditures for environmental
controls in 1998. If a release of hazardous substances occurs on or from the
Company's properties or any associated offsite disposal location, or if
contamination is discovered at any of the Company's current or former
properties, the Company may be held liable for remediation costs and expenses,
and the amount of such liability could be material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ") requested
that Wickes and the Company investigate environmental conditions at the
Company's Mancelona facility and at a certain adjacent property retained by
Wickes. Wickes and the Company jointly completed the requested investigation in
January of 1996. In 1997, Wickes and the Company agreed to undertake additional
investigatory work requested by MDEQ. The investigation found varying levels of
trichlorethylene at levels well above acceptable drinking water levels in wells
located off the Company's premises. While the source of the contamination has
yet to be identified, the Company immediately assumed the lead to establish
acceptable sources of drinking water for residents. The Company expanded its
investigatory work to delineate and monitor the characteristics of the
contamination. Additional work plans and test results have been reported to the
MDEQ. Depending upon the results of this work, the Company could incur
additional costs to further investigate or conduct cleanup at the facility.
In 1993, the Company received requests for information pursuant to CERCLA
from the U.S. EPA with respect to two landfill sites located in Toledo, Ohio. In
1994, the Company received a notice of potential liability under CERCLA from the
EPA with respect to one of the sites. The Company responded
47
<PAGE>
to the requests and notice by explaining to the EPA that it had no involvement
with these sites, which ceased operations prior to the formation of the Company
in 1990. In October 1996, the Company received notice that a motion had been
filed to add the Company as a defendant in a suit by the City of Toledo
involving one of the sites. As of August 22, 1997, the Company has received no
word of the disposition of the motion, the time period for services has expired
and the Company has received no indication that the plaintiff intends to pursue
a claim against it. The City alleges that the Company is liable as the
successor-in-interest to Dura Corporation. The Company has written to the City
denying that the Company is a successor and urging that the claim against the
Company be dropped. The Company is awaiting a response. If the claims goes
forward, the Company would be one of approximately 25 defendants. The total
recovery sought by the City, and the amount allegedly attributable to the
Company, are unknown to the Company.
In connection with the Company's acquisition of certain assets from Wickes
in 1990, and subject to certain limitations, Wickes agreed to indemnify the
Company for environmental liabilities arising from the operation of the acquired
facilities prior to the acquisition. The Company and Wickes subsequently agreed
that the Company had provided Wickes with timely and adequate notice with
respect to certain matters (including the matters described in the immediately
preceding paragraphs) and that, subject to the limitations set forth in the
agreement, those matters are covered by the Wickes indemnification. There can be
no assurance, however, that all costs associated with such matters will
ultimately be reimbursed by Wickes. The Company does not currently believe that
any liability associated with the foregoing matters will be material to the
Company.
In December 1996, the Company acquired the stock of KPI from Sparton
Corporation ("Sparton"). In connection with the acquisition, such subsidiaries
retained their liability under CERCLA with respect to certain waste disposal
sites, subject to indemnification by Sparton for liability in excess of a $1
million aggregate threshold amount, up to a $15 million aggregate cap. Of these
sites, the sites as to which the subsidiaries' liability has not yet been
resolved through a settlement are the Third Site in Zionsville, Indiana and the
Northeast Gravel Site in Grand Rapids, Michigan. Based upon estimates provided
by Sparton, the cost to resolve the liability of the acquired subsidiaries at
the Sparton-related sites is not currently expected to be material.
In August 1997, the Company acquired GT Automotive. In connection with the
acquisition, a clean up report was commissioned to determine whether hazardous
materials or hazardous substances were present in the soil, surface water or
ground water at the Brantford, Ontario facility. The Company believes that the
cost of any environmental remediation with respect to this matter will not be
material.
48
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and executive officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION(S)
- ------------------------------------- --- -------------------------------------
<S> <C> <C>
S. A. (Tony) Johnson................. 57 Chairman and Director
Karl F. Storrie...................... 60 President, Chief Executive Officer
and Director
David R. Bovee....................... 48 Vice President
Joe A. Bubenzer...................... 46 Senior Vice President
Stephen E. K. Graham................. 40 Vice President and Chief Financial
Officer
Robert R. Hibbs...................... 35 Vice President and Director
John J. Knappenberger................ 51 Vice President
Milton D. Kniss...................... 50 Vice President
Scott D. Rued........................ 41 Vice President
Neil C. Anderson..................... 47 Director
Robert E. Brooker, Jr................ 60 Director
W. H. Clement........................ 70 Director
Jack K. Edwards...................... 53 Director
James L. O'Loughlin.................. 52 Director
William L. (Barry) Orscheln.......... 47 Director
Eric J. Rosen........................ 36 Director
Barbara A. Westhues.................. 37 Director
</TABLE>
S. A. (TONY) JOHNSON has served as Chairman and a Director of the Company
since November 1990. Mr. Johnson is the founder, Chief Executive Officer and
President of Hidden Creek, a private industrial management company based in
Minneapolis, Minnesota, which has provided certain management and other services
to the Company. Mr. Johnson is also the President of J2R. Prior to forming
Hidden Creek, Mr. Johnson served from 1985 to 1989 as Chief Operating Officer of
Pentair, Inc., a diversified industrial company. From 1981 to 1985, Mr. Johnson
was President and Chief Executive Officer of Onan Corp., a diversified
manufacturer of electrical generating equipment and engines for commercial,
defense and industrial markets. Mr. Johnson served as Chairman and a director of
Automotive Industries Holding, Inc., a supplier of interior trim components to
the automotive industry, from May 1990 to August 1995. Mr. Johnson is also
Chairman and a director of Tower Automotive, Inc., a manufacturer of engineered
metal stampings and assemblies for the automotive industry.
KARL F. STORRIE has served as President, Chief Executive Officer and a
Director of the Company since March 1991. Prior to joining the Company and from
1986, Mr. Storrie was Group President of a number of aerospace manufacturing
companies owned by Coltec Industries, a multi-divisional public corporation.
Prior to becoming a Group President, Mr. Storrie was a Division President of two
aerospace design and manufacturing companies for Coltec Industries from 1981 to
1986. During his thirty-five year career, Mr. Storrie has held a variety of
positions in technical and operations management. Mr. Storrie is also a director
of Argo-Tech Corporation, a manufacturer of aircraft fuel, boost and transfer
pumps.
49
<PAGE>
DAVID R. BOVEE has served as Vice President of the Company since November
1990 and Chief Financial Officer of the Company from November 1990 to May 1997.
Mr. Bovee also serves as Assistant Secretary for the Company. Prior to joining
the Company, Mr. Bovee served as Vice President at Wickes in its Automotive
Group from 1987 to 1990.
JOE A. BUBENZER has had responsibility for European operations since June
1997. From October 1993 to May 1997, Mr. Bubenzer served as Vice President
Sales/Engineering since joining the Company in October 1993 and was named Senior
Vice President in 1995. Prior to joining the Company in October 1993, Mr.
Bubenzer filled various executive positions with ITT Automotive, a supplier of
components to the automotive industry, where he worked for six years, and, prior
to such time, at GM, where he worked for 14 years.
STEPHEN E. K. GRAHAM has served as Vice President and Chief Financial
Officer since joining the Company in June 1997. From 1996 to May 1997, Mr.
Graham was Chief Financial Officer of Cambridge Industries, Inc., a North
American supplier of components to the automotive industry. From 1994 to 1996,
Mr. Graham was Chief Financial Officer of Truck Components, Inc., a supplier of
components to the automotive and heavy truck industry. From 1989 to 1994, Mr.
Graham held several positions with Magna International, Inc., an automotive
components supplier.
ROBERT R. HIBBS has served as a Director of the Company since August 1994
and as Vice President since November 1990. Mr. Hibbs, a stockholder of J2R, has
also served as Vice President-Corporate Development of Hidden Creek since
January 1994 and as its Director from April 1990 through December 1993. Prior
thereto, Mr. Hibbs worked in the corporate finance area with Drexel Burnham
Lambert, an investment banking firm, in New York from 1988 to 1990.
JOHN J. KNAPPENBERGER has served as Vice President of Quality and Materials
of the Company since December 1995. Mr. Knappenberger assumed the responsibility
for sales and engineering in June 1997. Prior to joining the Company, Mr.
Knappenberger was Director of Quality for Carrier Corporation's North American
Operations, manufacturers of heating and air conditioning systems, from February
1992. From 1985 to 1991, Mr. Knappenberger was employed by TRW Inc., a supplier
of components to the automotive industry, beginning as Director of Quality in
1985 for the Steering and Suspension Division and becoming Vice President,
Quality for the Automotive Sector in 1990.
MILTON D. KNISS has served as Vice President of Operations of the Company
since January 1994. From April 1991 until January 1994, Mr. Kniss served as
Director of Michigan Operations for the Company. Mr. Kniss joined the
predecessor in 1981 as a Divisional Purchasing Manager, served as Plant Manager
of East Jordan, Michigan from 1982 until 1986, and Plant Manager of
Gordonsville, Tennessee until 1991.
SCOTT D. RUED has served as Vice President of the Company since November
1990. Mr. Rued, a stockholder of J2R, has also served as Executive Vice
President and Chief Financial Officer of Hidden Creek since January 1994 and
served as its Vice President Finance and Corporate Development from June 1989
through 1993. Mr. Rued has served as Vice President, Corporate Development and a
director of Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice
President, Chief Financial Officer and a director of Automotive Industries
Holding, Inc. from April 1990 to August 1995. Mr. Rued is also a director of The
Rottlund Company, Inc., a corporation engaged in the development and sale of
residential real estate.
NEIL C. ANDERSON has served as a Director of the Company since August 1994.
Mr. Anderson has also served as Vice President of Finance for Orscheln
Management Co. since March 1991 and was named Senior Vice President of Finance
in October 1995. Mr. Anderson has also served as a director for Analytical Bio
Chemistry Laboratories, Inc. since June 1995.
ROBERT E. BROOKER, JR. has served as a Director of the Company since
September 1996. From 1993 to 1995, Mr. Brooker was President and Chief Operating
Officer of Connell Limited Partnership. Prior
50
<PAGE>
thereto, Mr. Brooker served six years as President and Chief Executive Officer
at Lord Corporation. Mr. Brooker is also a director of Full Circle Investments,
a private investment company.
W. H. CLEMENT has served as a Director of the Company since 1993. Mr.
Clement serves as a consultant to Hidden Creek. From 1975 until May 1994, Mr.
Clement served as Chief Executive Officer or as President of Automotive
Industries Holding, Inc. and its predecessor. Mr. Clement is also a director of
F&M National Corporation, a bank holding company, and Tower Automotive, Inc.
JACK K. EDWARDS has served as a Director of the Company since December 1996.
Mr. Edwards joined Cummins Engine Co., Inc. in 1972 and has served as Executive
Vice President and Group President-- Power Generation and International since
March 1996. Mr. Edwards is also a director of David J. Joseph Co., a processor
and trader of steel scrap.
JAMES L. O'LOUGHLIN has served as a Director of the Company since August
1994. Mr. O'Loughlin has also served as Vice President and General Counsel to
Orscheln Management Co. since December 1987 and was named Senior Vice President
in October 1995.
WILLIAM L. (BARRY) ORSCHELN has served as a Director of the Company since
August 1994. Mr. Orscheln has also served as President of Alkin (and its
predecessors) since March 1994, as President of Orscheln Farm and Home since
September 1995, as President of Orscheln Properties Co., L.L.C., since October
1994 and as President of Orscheln Management Co. since December 1987. Mr.
Orscheln has served as a director of UMB Bank, a bank holding company, since
July 1989 and as a director of Orscheln Management Co. since 1987.
ERIC J. ROSEN has served as a Director of the Company since January 1995.
Mr. Rosen is Managing Director of Onex Investment Corp., a diversified
industrial corporation and an affiliate of Onex, and served as a Vice President
of Onex Investment Corp. from 1989 to February 1994. Prior thereto, Mr. Rosen
worked in the merchant banking group at Kidder, Peabody & Co. Incorporated from
1987 to 1989. Mr. Rosen is also a director of Tower Automotive, Inc.
BARBARA A. WESTHUES has served as a Director of the Company since August
1994. Ms. Westhues has served on the Audit Committee since August 1994. Ms.
Westhues has also served as the Controller of Orscheln Management Co. since
December 1987 and was named Senior Vice President in October 1995.
The Company currently has eleven Directors. Each Director is elected to
serve until the next annual meeting of stockholders or until a successor is duly
elected and qualified. Executive officers of the Company are duly elected by the
Board to serve until their respective successors are elected and qualified.
There are no family relationships between any of the Directors or executive
officers of the Company.
Certain of the Company's existing stockholders have entered into agreements
pursuant to which such stockholders have agreed to vote their shares of the
Company's voting stock for the election of directors designated by certain of
the existing stockholders. See "Security Ownership of Certain Beneficial Owners
and Management--Stockholders Agreement."
There are three Committees of the Board: the Executive Committee, the
Compensation Committee and the Audit Committee. The Executive Committee, which
is currently composed of Messrs. Johnson, Storrie and Orscheln, exercises the
powers of the Board of Directors during intervals between Board meetings and
acts as an advisory body to the Board by reviewing various matters prior to
their submission to the Board. The Compensation Committee, which is currently
composed of Messrs. Clement, Brooker and Edwards, reviews and makes
recommendations to the Board of Directors regarding salaries, compensation and
benefits of executive officers and key employees of the Company and grants all
options to purchase Common Stock of the Company. The Audit Committee is
currently composed of Messrs. Hibbs and Rosen and Ms. Westhues. Among other
duties, the Audit Committee reviews the internal and external financial
reporting of the Company, reviews the scope of the independent audit and
considers comments
51
<PAGE>
by the auditors regarding internal controls and accounting procedures and
management's response to these comments. The Company does not have a nominating
committee.
DIRECTOR COMPENSATION
Directors who are not employees of the Company or any of its affiliates each
receive an annual fee of $16,000 for serving as a director of the Company. In
addition, each non-employee director receives $1,000 for each Board of Directors
meeting attended, $500 for each committee meeting attended and reimbursement of
out-of-pocket expenses incurred to attend such meetings.
EXECUTIVE COMPENSATION
The following table sets forth the Company's chief executive officer's and
the four other most highly compensated executive officers' (the "Named Executive
Officers") compensation packages for the years ended December 31, 1997, 1996 and
1995. Other than the Company's 1996 Key Employee Stock Option Plan (the "Stock
Option Plan"), the Company does not maintain any long-term compensation plans.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------------------------- COMPENSATION
NAME AND OTHER ANNUAL --------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) OPTIONS GRANTED COMPENSATION(3)
- ---------------------------------- --------- ----------- --------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Karl F. Storrie................... 1997 $ 345,833 $ 425,000 $ 13,917 30,000 $ 6,856
President and Chief 1996 294,168 400,000 10,872 80,000 3,725
Executive Officer 1995 258,340 300,000 11,775 -- 3,600
Joe A. Bubenzer................... 1997 187,083 150,000 7,218 12,500 5,322
Senior Vice President 1996 168,000 140,000 10,424 10,000 2,637
1995 157,333 120,000 8,322 -- 2,616
Milton D. Kniss................... 1997 167,917 150,000 3,981 12,500 5,724
Vice President 1996 144,000 135,000 5,082 10,000 4,512
1995 122,000 110,000 6,250 -- 2,776
David R. Bovee.................... 1997 155,000 125,000 11,041 10,000 4,931
Vice President 1996 140,000 125,000 10,257 10,000 4,447
1995 130,833 100,000 4,389 -- 2,832
John J. Knappenberger............. 1997 147,500 120,000 5,852 10,000 5,614
Vice President 1996 135,000 110,000 47,156(5) 27,373 3,375
1995 4,625(4) 45,000 83 -- --
</TABLE>
- ------------------------------
(1) Includes amounts deferred by employees under the Company's 401(k) employee
savings plan, pursuant to Section 401(k) of the Internal Revenue Code.
(2) Includes the value of personal benefits and perquisites.
(3) The amounts disclosed in this column include amounts contributed by the
Company to the Company's 401(k) employees savings plan and profit sharing
plan and dollar value of premiums paid by the Company for term life
insurance on behalf of the named executive officers.
(4) Mr. Knappenberger became an employee of the Company on December 18, 1995.
(5) Includes $39,263 for reimbursement of relocation costs.
52
<PAGE>
The following table discloses for the Named Executive Officers, information
regarding stock options granted during, or held at the end of, 1997 pursuant to
the Stock Option Plan.
OPTION GRANT TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR OPTION
GRANTED TO TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------- ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
K.F. Storrie................... 30,000 20.8% $ 24.50 12/17/07 $ 462,238 $1,171,401
J.A. Bubenzer.................. 12,500 8.7% 24.50 12/17/07 192,599 488,084
M.D. Kniss..................... 12,500 8.7% 24.50 12/17/07 192,599 488,084
D.R. Bovee..................... 10,000 6.9% 24.50 12/17/07 154,079 390,457
J.J. Knappenberger............. 10,000 6.9% 24.50 12/17/07 154,079 390,467
</TABLE>
- --------------------------
(1) These options vest ratably over four years commencing one year from the date
of grant.
(2) Amounts reflect certain assumed rates of appreciation set forth in the
executive compensation disclosure rules of the Securities and Exchange
Commission. Actual gains, if any, on stock option exercises depend on future
performance of the Company's Common Stock and overall stock market
conditions. No assurances can be made that the amounts reflected in these
columns will be achieved.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
YEAR-END YEAR-END
------------- -----------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ------------- -----------------
<S> <C> <C>
40,000 / $ 410,000 /
K.F. Storrie............................................. 70,000 $471,500
2,500 /
J.A. Bubenzer............................................ 20,000 10,000 / 33,125
2,500 /
M.D. Kniss............................................... 20,000 10,000 / 33,125
2,500 /
D.R. Bovee............................................... 17,500 10,000 / 32,500
23,623 / 234,323 /
J.J. Knappenberger....................................... 13,750 17,500
</TABLE>
53
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the equity
ownership of the Company as of December 31, 1997 by (i) each person or entity
known to the Company who beneficially owns five percent or more of the Common
Stock of the Company, (ii) each Director and Named Executive Officer and (iii)
all Directors and executive officers of the Company as a group. Unless otherwise
stated, each of the persons named in the table has sole voting and investment
power with respect to the securities beneficially owned by it or him as set
forth opposite its or his name. Beneficial ownership of the Common Stock listed
in the table has been determined in accordance with the applicable rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------------------------------
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------ ----------------------
DIRECTORS, OFFICERS AND NUMBER OF PERCENT OF NUMBER OF PERCENT OF
5% STOCKHOLDERS SHARES CLASS SHARES CLASS
- ----------------------------------------------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
ONEX DHC LLC(1)(2)................................... -- --% 2,501,990 53.8%
Alkin Co.(2)(3)...................................... -- -- 2,166,810 46.6
J2R Corporation(2)(4)................................ -- -- 408,211 8.8
S. A. Johnson(2)(4).................................. -- -- 417,879 9.0
Karl F. Storrie(2)(5)................................ 4,400 * 155,531 3.3
David R. Bovee(2).................................... 1,000 * 33,808 *
Joe A. Bubenzer(2)................................... 1,200 * 38,314 *
Stephen E. K. Graham................................. -- -- -- --
Robert R. Hibbs(2)(6)................................ -- -- 416,160 8.9
John J. Knappenberger................................ 29,709 * 1,250 *
Milton D. Kniss(2)................................... -- -- 11,461 *
Neil C. Anderson(2)(3)............................... -- -- 2,166,810 46.6
Robert E. Brooker, Jr................................ 20,000 * 2,500 *
W. H. Clement(2)..................................... 2,000 * -- --
Jack K. Edwards...................................... -- -- 2,500 *
James L. O'Loughlin(2)(3)............................ -- -- 2,166,810 46.6
William L. Orscheln(2)(3)............................ -- -- 2,166,810 46.6
Eric J. Rosen(1)(2).................................. -- -- 2,501,990 53.8
Scott D. Rued(2)(7).................................. -- -- 412,107 8.9
Barbara A. Westhues(2)(3)............................ -- -- 2,166,810 46.6
Dresdner RCM Global Investors LLC(8)................. 396,500 9.5 -- --
State of Wisconsin Investment Board(9)............... 237,000 5.7 -- --
The Northwestern Mutual Life Insurance Company(10)... 206,900 5.0 -- --
All Directors and Officers as a group (17 persons)... 58,309 1.4 4,636,813 99.6
</TABLE>
- --------------------------
* Less than one percent.
(1) Reflects shares of Class B Common Stock held by Onex DHC LLC, which has
shared voting power over 2,501,990 shares of Common Stock (see footnote (2))
and sole dispositive power over 1,794,913 shares of Class B Common Stock.
Mr. Rosen, a Director of the Company, is Managing Director of Onex
Investment Corp. and disclaims beneficial ownership of all shares of Common
Stock owned by Onex DHC LLC. Onex DHC LLC and Onex Investment Corp. are both
wholly owned subsidiaries of Onex Corporation. The address for Onex DHC LLC
and Mr. Rosen is c/o Onex Investment Corp., 712 Fifth Avenue, 40th Floor,
New York, New York 10019.
(2) Onex, J2R, Messrs. Johnson, Storrie, Bovee, Bubenzer, Hibbs, Kniss, Clement,
Rosen and Rued and certain of the Company's other existing stockholders have
entered into agreements pursuant to which such stockholders agreed to vote
their shares of Common Stock in the same manner as Onex votes its shares on
all matters
54
<PAGE>
presented to the Company's stockholders for a vote and, to the extent
permitted by law, granted to Onex a proxy to effectuate such agreement. As a
result, Onex has voting control of approximately 49.3% of the Common Stock.
All of the Company's existing stockholders, including Alkin, have entered
into an agreement providing for the election of the Board. As a result, such
stockholders collectively have voting control over 91.8% of the Common
Stock.
(3) Includes 14,420 shares issuable upon the exercise of currently exercisable
options issued to Alkin in connection with the Company's acquisition of the
automotive parking brake cable and lever business and light duty cable
business from Alkin. Alkin has granted each of Messrs. Anderson and
O'Loughlin and Ms. Westhues options to acquire 13,218 shares of the Class B
Common Stock owned by Alkin. Messrs. Anderson, O'Loughlin and Orscheln and
Ms. Westhues are officers of Alkin and, other than Mr. Orscheln, each
disclaims beneficial ownership of the shares owned by Alkin other than the
shares subject to each of their outstanding options. The address for Alkin
is 2000 U.S. Highway 63 South, Moberly, Missouri 65270, and the address of
each such individual is c/o Alkin at the same address.
(4) Includes 408,211 shares owned by J2R, of which Mr. Johnson is President, and
9,668 shares owned by Mr. Johnson. The address for Mr. Johnson and J2R is
c/o Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota
55402.
(5) Includes 1,400 shares owned by Mr. Storrie's wife. Mr. Storrie disclaims
beneficial ownership of such shares.
(6) Includes 408,211 shares owned by J2R, of which Mr. Hibbs is a stockholder,
and 7,949 shares owned by Mr. Hibbs. Mr. Hibbs disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Hibbs is c/o Dura
Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
(7) Includes 408,211 shares owned by J2R, of which Mr. Rued is a stockholder,
and 3,898 shares owned by Mr. Rued. Mr. Rued disclaims beneficial ownership
of the shares owned by J2R. The address for Mr. Rued is c/o Dura Automotive
Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
(8) Dresdner RCM Global Investors LLC ("Dresdner RCM") reported as of December
31, 1997 sole voting power with respect to 354,600 shares of Class A Common
Stock and sole dispositive power with respect to 396,500 shares of Class A
Common Stock. RCM Capital Management, L.L.C. ("RCM Capital"), a wholly owned
subsidiary of Dresdner, RCM Limited L.P., as the Managing Agent of RCM
Capital, and RCM General Corporation, as the General Partner of RCM Limited
L.P., also reported beneficial ownership of such shares. The address for
Dresdner Bank AG is Jurgen-Ponto-Platz 1, 60301 Frankfurt, Germany and the
address for the other entities is Four Embarcadero Center, Suite 2900, San
Francisco, California 94111.
(9) State of Wisconsin Investment Board ("SWIB") reported as of December 31,
1997 sole voting and dispositive power with respect to 237,000 shares of
Class A Common Stock. The address for SWIB is P.O. Box 7842, Madison,
Wisconsin 53707.
(10) The Northwestern Mutual Life Insurance Company ("NWMI") reported as of
December 31, 1997 shared voting and dispositive power with respect to
206,900 shares of Class A Common Stock. The address for NWMI is 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. NWMI indirectly owns a
majority of the oustanding capital stock of Robert W. Baird & Co.
Incorporated.
STOCKHOLDERS AGREEMENT
On August 31, 1994, the Company, Onex, J2R, Alkin and certain individuals
named therein (including members of the Company's management) entered into a
Stockholders Agreement (as amended, the "Stockholders Agreement"). The
Stockholders Agreement requires all the parties thereto to vote their shares of
Common Stock and take any other action necessary to ensure the Board will be
comprised of eleven persons, seven of whom, including the two independent
directors, shall be designated by Onex, J2R and certain stockholders affiliated
with Hidden Creek (collectively, the "MC Stockholders") and four of whom shall
be designated by Alkin (the "Alkin Stockholders"). The voting provision
terminates automatically when the Alkin Stockholders cease to own at least 10%
of the outstanding Common Stock. The Stockholders Agreement also contains
provisions granting the parties thereto certain tag-along rights allowing them
to sell their shares in certain private sales of Common Stock initiated by the
other parties to the Stockholders Agreement. The Stockholders Agreement also
provides that the affirmative vote of two-thirds of the Board is required to
issue any Preferred Stock (as defined below) of the Company. The Stockholders
Agreement also binds subsequent transferees who have acquired their shares in
private sales
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from the parties to the Stockholders Agreement. Subject to certain exemptions,
each of Alkin, Onex, J2R and the MC Stockholders have agreed not to compete with
the business of the Company for a period of five years after the date of the
original Stockholders Agreement and Onex, J2R, the MC Stockholders and the
Company have agreed not to compete with the business of Alkin during that
period. J2R, Onex and Messrs. Johnson, Rued and Hibbs have also entered into an
agreement requiring the parties to vote their shares of Common Stock as directed
by Onex, and providing Onex with certain first offer rights in connection with
private sales of Common Stock.
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DURA AUTOMOTIVE SYSTEMS CAPITAL TRUST
Dura Automotive Systems Capital Trust (the "Issuer") is a statutory business
trust created under Delaware law pursuant to (i) a trust agreement executed by
the Company (as Depositor), the Delaware Trustee and one of the Administrative
Trustees (each as defined herein) and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on March 2, 1998. In connection with the
Offering, such trust agreement will be amended and restated in its entirety (as
so amended and restated, the "Trust Agreement"). The Issuer exists for the sole
purposes of (i) issuing and selling the Preferred Securities and Common
Securities, (ii) using the proceeds from the sale of the Preferred Securities
and Common Securities to acquire the Debentures issued by the Company and (iii)
engaging in only those other activities necessary or incidental thereto.
Accordingly, the Debentures will be the sole assets of the Issuer, and payments
under the Debentures will be the sole revenue of the Issuer. The Issuer has a
term of 45 years, but may dissolve earlier as provided in the Trust Agreement.
All of the Common Securities will be directly or indirectly owned by the
Company. The Common Securities will rank PARI PASSU, and payments will be made
thereon PRO RATA, with the Preferred Securities, except that upon the occurrence
and continuance of a Declaration Event of Default (as defined herein) resulting
from an Event of Default under the Indenture, the rights of the Company as
holder of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Preferred Securities. See "Description of the
Preferred Securities--Subordination of Common Securities." The Company will
acquire Common Securities in an aggregate liquidation preference equal to not
less than 3% of the total capitalization of the Issuer.
The Issuer's business and affairs are conducted by its trustees, which will
be appointed by the Company as holder of the Common Securities. Pursuant to the
Trust Agreement, the number of trustees will initially be five. Three of the
trustees (the "Administrative Trustees") will be persons who are employees or
officers of, or affiliated with, the Company. A fourth trustee will be a
financial institution unaffiliated with the Company that will serve as property
trustee (the "Property Trustee") under the Trust Agreement. The First National
Bank of Chicago will act as the Property Trustee until removed or replaced by
the holder of the Common Securities. See "Description of the Debentures." The
fifth trustee will be a financial institution or an affiliate thereof which
maintains a principal place of business or residence in the State of Delaware
(the "Delaware Trustee"). First Chicago Delaware Inc. will act as Delaware
Trustee until removed or replaced by the holder of the Common Securities. The
Administrative Trustees, the Property Trustee and the Delaware Trustee are
referred to herein as the "Issuer Trustees." First National Bank of Chicago will
also act as indenture trustee under the Guarantee (the "Guarantee Trustee") and
as the indenture trustee under the indenture relating to the Debentures. See
"Description of the Guarantee" and "Description of the Debentures."
The Property Trustee will hold the title to the Debentures for the benefit
of the Issuer and holders of the Preferred Securities and the Common Securities
and will have the power to exercise all of the rights, powers and privileges as
the holder of the Debentures. In addition, the Property Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Debentures for
the benefit of the Issuer and holders of the Preferred Securities and the Common
Securities. The Property Trustee will make payments of Distributions and
payments on liquidation, redemption and otherwise to the holders of the
Preferred Securities and the Common Securities out of funds from the Property
Account. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Preferred Securities. The Company, as the holder of all the
Common Securities, will have the right to appoint, remove or replace any Issuer
Trustee and to increase or decrease the number of Issuer Trustees, provided that
the number of Issuer Trustees shall be at least three, a majority of which will
be Administrative Trustees. The duties and obligations of the Issuer Trustees
are governed by the Trust Agreement. The rights of the holders of the Preferred
Securities, including economic rights, right to information and voting rights,
are as set forth in the Trust Agreement and the Delaware
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Business Trust Act, as amended (the "Trust Act"). The Trust Agreement, the
Indenture and the Guarantee also incorporate by reference the terms of the Trust
Indenture Act. The Trust Agreement, the Indenture and the Guarantee will each be
qualified under the Trust Indenture Act.
The Company will pay all fees and expenses related to the Issuer and the
offering of the Preferred Securities and will pay, directly or indirectly, all
ongoing costs and expenses of the Issuer. See "Description of the
Debentures--Expenses of Issuer." The principal executive offices of the Issuer
are located at 4508 IDS Center, Minneapolis, Minnesota 55402, and its telephone
number is (612) 342-2311.
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DESCRIPTION OF THE PREFERRED SECURITIES
This summary of certain terms of the Preferred Securities and of certain
provisions of documents described below does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of such documents (including the definitions therein of certain
terms), forms of which are included as exhibits to the Registration Statement of
which this Prospectus forms a part. Wherever particular Sections of, or terms
defined in, such documents are referred to herein, such Sections or defined
terms are incorporated by reference herein. As used in this section, the
"Company" refers to Dura Automotive Systems, Inc., exclusive of its
subsidiaries.
GENERAL
Pursuant to the terms of the Trust Agreement, the Issuer Trustees, on behalf
of the Issuer, will issue the Preferred Securities and the Common Securities.
The Preferred Securities will represent preferred undivided beneficial interests
in the assets of the Issuer and the Common Securities will represent common
undivided beneficial interests in the assets of the Issuer. All of the Common
Securities are owned by the Company. The Preferred Securities rank PARI PASSU,
and payments will be made thereon PRO RATA, with the Common Securities except as
described under "--Subordination of Common Securities." Legal title to the
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Preferred Securities and Common Securities. The Trust Agreement
will not permit the issuance by the Issuer of any securities other than the
Preferred Securities and the Common Securities or the incurrence of any
indebtedness by the Issuer. The payment of Distributions out of money held by
the Issuer, and payments upon redemption of the Preferred Securities or
dissolution of the Issuer, are guaranteed by the Company to the extent described
under "Description of the Guarantee." The Guarantee is held by the Guarantee
Trustee for the benefit of the holders of the Preferred Securities. The
Guarantee does not cover payment of Distributions when the Issuer does not have
sufficient available funds to pay such Distributions. The remedy of a holder of
Preferred Securities in such an event is as described herein in "--Enforcement
of Certain Rights by Holders of Preferred Securities" and in "--Voting Rights;
Amendment of the Trust Agreement."
DISTRIBUTIONS
Distributions on each Preferred Security will be payable at the annual rate
of % of the liquidation preference of $25 per Preferred Security.
Distributions will accumulate from the date of original issuance and will be
payable quarterly in arrears on , , and of each
year to holders of record on the applicable record date, commencing ,
1998, when, as and if available for payment by the Property Trustee, except as
otherwise described below. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which Distributions are payable on the Preferred
Securities is not a Business Day (as defined below), then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day and without any additional Distributions or other payment in
respect of any such delay (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer the payment of interest on
the Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each deferral period (each an "Extension
Period"), provided that no Extension Period may extend beyond the stated
maturity of the Debentures. As a consequence of any such election, quarterly
Distributions on the Preferred Securities will be deferred by the Issuer during
any such Extension Period. Distributions to which holders of the Preferred
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Securities are entitled will accumulate additional Distributions thereon at the
rate per annum set forth herein, compounded quarterly from the relevant payment
date for such Distributions. The term "Distributions" as used herein shall
include any such additional Distributions. During any such Extension Period, the
Company may not, and may not cause any of its subsidiaries to, (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock, or (ii)
make any payment of principal, interest or premium, if any, on, or repay,
repurchase or redeem any debt securities (including guarantees of indebtedness
for money borrowed) of the Company that rank PARI PASSU with or junior to the
Debentures (other than (a) any dividend, redemption, liquidation, interest,
principal or guarantee payment by the Company where the payment is made by way
of securities (including capital stock) that rank PARI PASSU with or junior to
the securities on which such dividend, redemption, interest, principal or
guarantee payment is being made, (b) payments under the Guarantee, (c) purchases
of Common Stock related to the issuance of Common Stock under any of the
Company's benefit plans for its directors, officers or employees, (d) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock, and (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the stated
maturity of the Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period. See "Description of the
Debentures--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
The Company has no current intention to exercise its right to defer payments
of interest by extending the interest payment period on the Debentures.
Distributions with respect to the Preferred Securities must be paid on the
dates payable to the extent that the Issuer has funds available for the payment
of such Distributions in the Property Account. The funds of the Issuer available
for distribution to holders of the Preferred Securities are limited to payments
under the Debentures in which the Issuer invested the proceeds from the issuance
and sale of the Preferred Securities and the Common Securities. See "Description
of the Debentures." If the Company does not make interest payments on such
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Preferred Securities. The payment of Distributions (if and
to the extent the Issuer has funds on hand available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by the
Company on a limited basis as set forth herein under "Description of the
Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which shall be the fifteenth day (whether or not a Business Day) next
preceding the relevant distribution date. As long as the Preferred Securities
remain in book-entry form, subject to any applicable laws and regulations and
the provisions of the Trust Agreement, each such payment will be made as
described under "--Certain Book-Entry Procedures for Global Certificates."
CONVERSION RIGHTS
GENERAL
The Preferred Securities will be convertible at any time, at the option of
the holder thereof and in the manner described below, into shares of Class A
Common Stock at the rate of shares of Class A Common Stock for each Preferred
Security (equivalent to a conversion price of $ per share of Class A Common
Stock), subject to adjustment as described under "--Conversion Price
Adjustments" below.
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A holder of Preferred Securities wishing to exercise its conversion right
shall surrender such Preferred Securities together with an irrevocable
conversion notice to the Property Trustee, as conversion agent or to such other
agent appointed for such purpose (the "Conversion Agent"), which shall, on
behalf of such holder, exchange the Preferred Securities for a portion of the
Debentures and immediately convert such Debentures into Class A Common Stock. So
long as a book-entry system for the Preferred Securities is in effect, however,
the procedures for converting the Preferred Securities that are in the form of
Global Certificates into shares of Class A Common Stock will be as described
under "--Certain Book-Entry Procedures for Global Certificates." The Company's
delivery upon conversion of the fixed number of shares of Class A Common Stock
into which the Debentures are convertible (together with the cash payment, if
any, in lieu of any fractional share) shall be deemed to satisfy the Company's
obligation to pay the principal amount at maturity of the portion of the
Debentures so converted and any unpaid interest accrued on such Debentures at
the time of such conversion. For a discussion of the taxation of such an
exchange to holders, see "Certain Federal Income Tax Consequences--Conversion of
Preferred Securities into Class A Common Stock." Holders may obtain copies of
the required form of the conversion notice from the Conversion Agent.
Accrued Distributions will not be paid on Preferred Securities that are
converted, PROVIDED HOWEVER, that holders of Preferred Securities at the close
of business on a Distribution payment record date will be entitled to receive
the Distribution payable on such Preferred Securities on the corresponding
Distribution payment date notwithstanding the conversion of such Preferred
Securities on or subsequent to such Distribution record date but prior to such
Distribution payment date. Except as provided in the immediately preceding
sentence, the Issuer will make no payment or allowance for accumulated and
unpaid Distributions, whether or not in arrears, on converted Preferred
Securities. The Company will make no payment or allowance for dividends on the
shares of Class A Common Stock issued upon such conversion. Each conversion will
be deemed to have been effected immediately prior to the close of business on
the day on which proper notice was received by the Conversion Agent.
Shares of Class A Common Stock issued upon conversion of Preferred
Securities will be validly issued, fully paid and non-assessable. No fractional
shares of Class A Common Stock will be issued as a result of conversion, but in
lieu thereof such fractional interest will be paid in cash.
CONVERSION PRICE ADJUSTMENTS
GENERAL
The conversion price will be subject to adjustment in certain events
including, without duplication: (i) the payment of dividends (and other
distributions) payable exclusively in Common Stock on Common Stock; (ii) the
issuance to all holders of Common Stock of rights or warrants entitling holders
of such rights or warrants (for a period not exceeding 45 days) to subscribe for
or purchase Common Stock at less than the then Current Market Price (as defined
below); (iii) subdivisions and combinations of Common Stock; (iv) the payment of
dividends (and other distributions) to all holders of Common Stock consisting of
evidences of indebtedness of the Company, securities or capital stock, cash, or
assets (including securities, but excluding those rights or warrants referred to
above in clause (ii) and dividends and distributions paid exclusively in cash);
(v) the payment of dividends (and other distributions) on Common Stock paid
exclusively in cash, excluding (A) cash dividends that do not exceed the per
share amount of the immediately preceding regular cash dividend (as adjusted to
reflect any of the events referred to in clauses (i) through (vi) of this
sentence), and (B) cash dividends if the annualized per share amount thereof
does not exceed 12.5% of the last sale price of Common Stock, as reported on the
Nasdaq National Market, on the trading day immediately preceding the date of
declaration of such dividend (such adjustment being limited to the amount in
excess of 12.5% of such Current Market Price); and (vi) payment in respect of a
tender or exchange offer (other than an odd-lot offer) by the Company or any
subsidiary of the Company for Common Stock at a price per share in excess of
110% of the Current Market Price of Common Stock on the trading day next
succeeding the last date tenders or exchanges may be made pursuant to such
tender
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or exchange offer (such adjustment being limited, in respect of the excess over
Current Market Price, to the amount in excess of 110% of such Current Market
Price).
The Company from time to time may reduce the conversion price of the
Debentures (and thus the conversion price of the Preferred Securities) by any
amount selected by the Company for any period of at least 30 days, in which case
the Company shall give at least 15 days' notice of such reduction. The Company
may, at its option, make such reductions in the conversion price, in addition to
those set forth above, as the Board of Directors of the Company deems advisable
to avoid or diminish any income tax to holders of Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. See "Certain Federal Income Tax
Consequences-- Adjustment of Conversion Price."
There will be no adjustment in the conversion price in the case of the
issuance of any Common Stock (or securities convertible into or exchangeable for
Common Stock), except as specifically described above. For example, no
adjustment of the conversion price will be made upon the issuance of any shares
of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan, or the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any present or future employee
benefit plan or program of the Company or pursuant to any option, warrant,
right, or exercisable, exchangeable or convertible security which does not
constitute an issuance to all holders of Common Stock of rights or warrants
entitling holders of such rights or warrants to subscribe for or purchase Common
Stock at less than the Current Market Price. There shall also be no adjustment
of the conversion price in case of the issuance of any Common Stock (or
securities convertible into or exchangeable for Common Stock), except as
specifically described above. If any action would require adjustment of the
conversion price pursuant to more than one of the anti-dilution provisions, only
one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to holders of the Preferred
Securities. No adjustment in the conversion price will be required unless such
adjustment would require an increase or decrease of at least 1% of the
conversion price, but any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
The term "Current Market Price" of Common Stock for any day means the last
reported sale price, regular way, on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on such day,
regular way, in either case as reported on the NYSE Consolidated Transactions
Tape, or, if the Common Stock is not listed or admitted to trading on the NYSE
on such day, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, if the Common Stock is listed on a
national securities exchange, or the Nasdaq National Market, or, if the Common
Stock is not quoted or admitted to trading on such quotation system, on the
principal quotation system on which the Common Stock may be listed or admitted
to trading or quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of the Common Stock in the over-the-counter market on the day
in question as reported by the National Quotation Bureau Incorporated, or a
similar generally accepted reporting service, or, if not so available in such
manner, as furnished by any NYSE member firm selected from time to time by the
Board of Directors of the Company for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the Board of Directors of
the Company.
MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY
In the event that the Company is a party to any transaction (including,
without limitation, a merger other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of Common Stock),
consolidation, sale of all or substantially all of the assets of the Company,
recapitalization or reclassification of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination of Common Stock) or any
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compulsory share exchange (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which shares of Common Stock shall
be converted into the right to receive, or shall be exchanged for, (i) in the
case of any Transaction other than a Transaction involving a Common Stock
Fundamental Change (as defined below) (and subject to funds being legally
available for such purpose under applicable law at the time of such conversion),
securities, cash or other property, each Preferred Security shall thereafter be
convertible into the kind and, in the case of a Transaction which does not
involve a Fundamental Change (as defined below), amount of securities, cash and
other property receivable upon the consummation of such Transaction by a holder
of that number of shares of Common Stock into which a Preferred Security was
convertible immediately prior to such Transaction, or (ii) in the case of a
Transaction involving a Common Stock Fundamental Change, common stock, each
Preferred Security shall thereafter be convertible (in the manner described
herein) into common stock of the kind received by holders of Common Stock (but
in each case after giving effect to any adjustment discussed below relating to a
Fundamental Change if such Transaction constitutes a Fundamental Change). The
holders of Preferred Securities will have no voting rights with respect to any
Transaction described in this section.
If any Fundamental Change occurs, then the conversion price in effect will
be adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change, each Preferred
Security shall be convertible solely into common stock of the kind received by
holders of Common Stock as a result of such Common Stock Fundamental Change.
The conversion price in the case of any Transaction involving a Fundamental
Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined
below), the conversion price of the Preferred Securities will thereupon
become the lower of (A) the conversion price in effect immediately prior
to such Non-Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs,
and (B) the result obtained by multiplying the greater of the Applicable
Price (as defined below) or the then applicable Reference Market Price
(as defined below) by a fraction, the numerator of which is $25 and the
denominator of which is (x) the amount of the redemption price per
Preferred Security if the redemption date were the date of such
Non-Stock Fundamental Change (or, for the period commencing on
and through , and the twelve-month periods commencing
and , the product of , and , respectively, multiplied by
$25) plus (y) any then-accrued and unpaid distributions on one Preferred
Security; and
(ii) in the case of a Common Stock Fundamental Change, the
conversion price of the Preferred Securities in effect immediately prior
to such Common Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs,
will thereupon be adjusted by multiplying such conversion price by a
fraction of which the numerator will be the Purchaser Stock Price (as
defined below) and the denominator will be the Applicable Price;
provided, however, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration received by a
holder of Common Stock is common stock of the successor, acquiror, or
other third party (and cash, if any, is paid only with respect to any
fractional interests in such common stock resulting from such Common
Stock Fundamental Change) and (B) all Common Stock will have been
exchanged for, converted into, or acquired for common stock (and cash
with respect to fractional interests) of the successor, acquiror, or
other third party, the conversion price of the Preferred Securities in
effect immediately prior to such Common Stock Fundamental Change will
thereupon be adjusted by multiplying such conversion price by a fraction
of which the numerator will be one and the denominator will be the
number of shares of common stock of the successor, acquiror, or other
third party received by a holder of one share of Common Stock as a
result of such Common Stock Fundamental Change.
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The foregoing conversion price adjustments are designed, in certain
circumstances, to reduce the conversion price that would be applicable in
Fundamental Change Transactions where all or substantially all the Common Stock
is converted into securities, cash, or property and not more than 50% of the
value received by the holders of Common Stock consists of stock listed or
admitted for listing subject to notice of issuance on the NYSE or a national
securities exchange or quoted on Nasdaq (a Non-Stock Fundamental Change, as
defined below). Such reduction would result in an increase in the amount of the
securities, cash, or property into which each Preferred Security is convertible
over that which would have been obtained in the absence of such conversion price
adjustments.
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than the then applicable conversion price of a
Preferred Security but greater than or equal to the "Reference Market Price,"
the conversion price will be adjusted as described above with the effect that
each Preferred Security will be convertible into securities, cash or property of
the same type received by the holders of Common Stock in the Transaction but in
an amount per Preferred Security that would at the time of the Transaction have
had a value equal to the then applicable redemption price per Preferred Security
set forth below under "--Optional Redemption."
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price) is lower than both the conversion price of a Preferred
Security in effect prior to any adjustment described above and the Reference
Market Price, the conversion price will be adjusted as described above but
calculated as though such initial value had been the Reference Market Price.
In a Fundamental Change Transaction where all or substantially all the
Common Stock was converted into securities, cash, or property and more than 50%
of the value received by the holders of Common Stock consists of listed or
Nasdaq traded common stock (a Common Stock Fundamental Change, as defined
below), the foregoing adjustments are designed to provide in effect that (a)
where Common Stock is converted partly into such common stock and partly into
other securities, cash, or property, each Preferred Security will be convertible
solely into a number of shares of such common stock determined so that the
initial value of such shares (measured as described in the definition of
"Purchaser Stock Price" below) equals the value of the shares of Common Stock
into which such Preferred Security was convertible immediately before the
Transaction (measured as aforesaid) and (b) where Common Stock is converted
solely into such common stock, each Preferred Security will be convertible into
the same number of shares of such common stock receivable by a holder of the
number of shares of Common Stock into which such Preferred Security was
convertible immediately before such Transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock Fundamental
Change in which the holders of the Common Stock received only cash, the amount
of cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the Closing Prices (as defined below) for the Common
Stock during the ten trading days prior to the record date for the determination
of the holders of Common Stock entitled to receive such securities, cash, or
other property in connection with such Non-Stock Fundamental Change or Common
Stock Fundamental Change or, if there is no such record date, the date upon
which the holders of the Common Stock shall have the right to receive such
securities, cash, or other property (such record date or distribution date being
hereinafter referred to as the "Entitlement Date"), in each case as adjusted in
good faith by the Company to appropriately reflect any of the events referred to
in clauses (i) through (vi) of the first paragraph under "--Conversion Price
Adjustments--General."
The term "Closing Price" means on any day the reported last sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on Nasdaq or, if the stock is not
traded on Nasdaq, on the NYSE Consolidated Transactions Tape or, if the stock is
not listed or admitted to trading on the NYSE, on the principal national
securities exchange on which such
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stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as furnished by any NYSE member firm selected by the Debenture Trustee
for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consisted of common stock that for each of the ten consecutive trading
days prior to the Entitlement Date has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on Nasdaq; provided, however, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Preferred
Securities continue to exist as outstanding Preferred Securities or (ii) not
later than the occurrence of such Fundamental Change, the outstanding Preferred
Securities are converted into or exchanged for shares of convertible preferred
stock of an entity succeeding to the business of the Company or a subsidiary
thereof, which convertible preferred stock has powers, preferences, and
relative, participating, optional, or other rights, and qualifications,
limitations, and restrictions, substantially similar to those of the Preferred
Securities.
The term "Fundamental Change" means the occurrence of any Transaction or
event in connection with a plan pursuant to which all or substantially all of
the Common Stock is exchanged for, converted into or acquired for, or
constitutes solely the right to receive securities, cash, or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the Common Stock shall be exchanged for, converted into, or acquired for or
constitutes solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the consideration that a holder of Common
Stock received in such Transaction or event as a result of which more than 50%
of the Common Stock shall have been exchanged for, converted into, or acquired
for or constitute solely the right to receive securities, cash, or other
property. The term "Non-Stock Fundamental Change" means any Fundamental Change
other than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
the Company to appropriately reflect any of the events referred to in clauses
(i) through (vi) of the first paragraph under "--Conversion Price
Adjustments--General."
The term "Reference Market Price" shall initially mean $ (which is an
amount equal to 66 2/3% of the reported last sale price for Class A Common Stock
on Nasdaq as set forth on the cover page of this Prospectus) and in the event of
any adjustment of the conversion price other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial conversion price of the Preferred
Securities.
SPECIAL EVENT EXCHANGE OR REDEMPTION
At any time following the occurrence and the continuation of a Tax Event or
an Investment Company Event, the Property Trustees shall direct the Conversion
Agent to exchange all outstanding Preferred Securities for Debentures, provided,
that in the case of a Tax Event, the Company shall have the right to (a) direct
that less than all, or none, of the Preferred Securities be so exchanged if and
for so long as the Company shall have elected to pay any Additional Sums such
that the net amounts received by the holders
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of Preferred Securities not so exchanged in respect of Distributions and other
distributions are not reduced as a result of such Tax Event, and shall not have
revoked any such election or failed to make such payments or (b) redeem the
Preferred Securities in the manner set forth below.
If a Tax Event shall occur or be continuing, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Debentures, in whole or in part, for cash upon the later of (i) 90 days
following the occurrence of such Tax Event or (ii) , 2001. Promptly
following such redemption, Preferred Securities and Common Securities with an
aggregate liquidation preference equal to the aggregate principal amount of the
Debentures so redeemed will be redeemed by the Issuer at the liquidation
preference thereof plus accrued and unpaid Distributions thereon to the
redemption date on a PRO RATA basis. The Common Securities will be redeemed on a
PRO RATA basis with the Preferred Securities, except that if a Trust Agreement
Event of Default has occurred and is continuing, the Preferred Securities will
have a priority over the Common Securities with respect to the Redemption Price.
A "Special Event" means a Tax Event or an Investment Company Event. A "Tax
Event" means the receipt by the Property Trustee, on behalf of the Issuer, of an
opinion of counsel, rendered by a law firm having a national tax and securities
practice (which opinion shall not have been rescinded by such law firm), to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of issuance of the Preferred Securities under the Trust
Agreement and does not pertain to the use of the proceeds of the issuance of the
Debentures, there is more than an insubstantial risk in each case after the date
hereof that (i) the Issuer is, or will be within 90 days of the date thereof,
subject to United States Federal income tax with respect to income received or
accrued on the Debentures; (ii) interest payable by the Company on such
Debentures is not, or within 90 days of the date thereof will not be, deductible
by the Company, in whole or in part, for United States Federal income tax
purposes; or (iii) the Issuer is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges. "Investment Company Event" means the receipt by the
Property Trustee, on behalf of the Issuer, of an opinion of counsel, rendered by
a law firm having a national tax and securities practice (which opinion shall
not have been rescinded by such law firm), to the effect that, as a result of
the occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Issuer is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities.
Legislation has been introduced in the United States Congress in the past
that would, if enacted, deny an interest deduction to issuers of instruments
such as the Debentures. No such legislation has been enacted. There can be no
assurance, however, that similar legislation will not ultimately be enacted into
law, or that other developments will not occur after the date hereof that would
adversely affect the tax treatment of the Debentures and constitute a Tax Event,
which would permit the Issuer to exchange the Preferred Securities, in whole or
in part, for the Debentures or redeem, in whole or in part, the Preferred
Securities and corresponding Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Issuer on the
outstanding Preferred Securities and Common Securities of the Issuer shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which the Issuer has become subject as a result of a Tax Event that
has occurred and is continuing.
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Holders of Preferred Securities, by purchasing such Preferred Securities,
will be deemed to have agreed to be bound by these exchange provisions in regard
to the exchange of such Preferred Securities for Debentures on the terms
described above.
DISTRIBUTION OF DEBENTURES
At any time, the Company will have the right to terminate the Issuer and,
after satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Preferred Securities in liquidation of the Issuer. Under current United States
Federal income tax law and interpretations and assuming, as expected, the Issuer
is not treated as an association taxable as a corporation for United States
Federal income tax purposes, a distribution of the Debentures should not be a
taxable event to the Issuer and holders of the Preferred Securities. Should
there be a change in law, a change in legal interpretation, a Special Event or
other circumstances, however, the distribution could be a taxable event to
holders of the Preferred Securities. See "Certain Federal Income Tax
Consequences--Redemption of Preferred Securities for Debentures or Cash Upon
Dissolution of the Issuer."
After the liquidation date fixed for any distribution of Debentures for
Preferred Securities (i) such Preferred Securities will no longer be deemed to
be outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the
record holder of such Preferred Securities, will receive a registered global
certificate or certificates representing the Debentures to be delivered upon
such distribution and (iii) any certificates representing such Preferred
Securities not held by DTC or its nominee will be deemed to represent the
Debentures having a principal amount equal to the liquidation preference of such
Preferred Securities, and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid Distributions on such Preferred Securities until such
certificates are presented to the Property Trustee for transfer or reissuance.
OPTIONAL REDEMPTION
Except as provided under "--Mandatory Redemption" below, the Preferred
Securities may not be redeemed by the Issuer prior to , 2001.
On and after such date, upon any permitted redemption by the Company of
Debentures, the Preferred Securities are subject to redemption, in whole or in
part, at the following percentages of the liquidation preference thereof plus
accrued and unpaid Distributions, if any, to the date fixed for redemption if
redeemed during the twelve-month period commencing in each of the
following years indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------- ---------------------
<S> <C>
2001...................... %
2002......................
2003......................
2004......................
2005......................
2006......................
2007......................
2008 and thereafter.......
</TABLE>
The Issuer may not redeem the Preferred Securities in part unless all
accrued and unpaid Distributions have been paid in full on all outstanding
Preferred Securities for all quarterly distribution periods terminating on or
prior to the redemption date. If fewer than all the outstanding Preferred
Securities are to be redeemed, the Preferred Securities to be so redeemed will
be selected as described under "--Certain
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Book-Entry Procedures for Global Certificates--Transfer Agent, Registrar and
Paying, Conversion and Exchange Agent."
In the event the Company redeems the Debentures in certain circumstances
upon the occurrence of a Tax Event as described under "--Special Event Exchange
or Redemption," the appropriate amount of the Preferred Securities will be
redeemed at 100% of the principal amount thereof together with accrued and
unpaid Distributions to the redemption date.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of the acceleration of the
Debentures upon the occurrence of a "Debenture Event of Default" described under
"Description of the Debentures--Debenture Events of Default," the Debentures
shall be subject to mandatory redemption, in whole but not in part, by the
Company, and the proceeds from such repayment will be applied to redeem
Preferred Securities and Common Securities having an aggregate liquidation
preference equal to the aggregate principal amount of Debentures so repaid or
redeemed at a redemption price equal to the respective liquidation preference of
the Preferred Securities and Common Securities or, in the case of a redemption
of the Debentures, at the redemption price paid with respect to the Debentures,
as described below, together with accrued and unpaid distributions on the
Preferred Securities and Common Securities to the date of redemption. In the
case of acceleration of the Debentures, the Preferred Securities will be
redeemed only when repayment of the Debentures has actually been received by the
Issuer. In addition, as described above under "--Special Event Exchange or
Redemption," upon the occurrence of a Special Event, Preferred Securities shall
be exchanged for Debentures unless, in the case of a Tax Event, the Company
shall have elected to (a) pay any Additional Sums such that the net amounts of
Distributions received by the holders of any Preferred Securities not so
exchanged are not reduced as a result of such Tax Event and shall not have
revoked any such election or failed to make such payments or (b) redeem the
Preferred Securities as further set forth in "--Special Event Exchange or
Redemption."
REDEMPTION PROCEDURES
Preferred Securities redeemed on the date fixed for redemption shall be
redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the Debentures. Redemptions of the Preferred
Securities shall be made and the redemption price shall be payable on the
redemption date only to the extent that the Issuer has funds on hand available
for the payment of such redemption price. See also "--Subordination of Common
Securities."
Notice of any redemption (optional or mandatory) of Preferred Securities
(which notice will be irrevocable) will be mailed by the Property Trustee to
each record holder of Preferred Securities that are being redeemed not fewer
than 30 nor more than 60 days prior to the redemption date. If the Property
Trustee gives a notice of redemption in respect of the Preferred Securities,
then, by 12:00 noon, New York City time, on the redemption date, to the extent
funds are available, the Property Trustee will deposit irrevocably with DTC or
the Conversion Agent, as the case may be, funds sufficient to pay the applicable
redemption price and will give DTC or the Conversion Agent, as the case may be,
irrevocable instructions and authority to pay the redemption price to the
holders of such Preferred Securities. See "--Certain Book-Entry Procedures for
Global Certificates." If such Preferred Securities are no longer in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the Paying Agent funds sufficient to pay the applicable redemption
price and will give the Paying Agent irrevocable instructions and authority to
pay the redemption price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities as of the relevant record dates for the related
distribution dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease, except
the
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right of the holders of such Preferred Securities to receive the redemption
price, but without interest on such redemption price, and such Preferred
Securities will cease to be outstanding. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
redemption price on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the redemption price in respect of Preferred Securities called
for redemption is improperly withheld or refused and not paid either by the
Issuer or by the Company pursuant to the Guarantee as described under
"Description of the Guarantee," Distributions on such Preferred Securities will
continue to accrue at the then applicable rate, from the redemption date
originally established by the Issuer to the date such redemption price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the redemption price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the redemption price on the Preferred Securities and any
distribution or exchange of Debentures to holders of Preferred Securities shall
be made to the applicable record holders thereof as they appear on the register
for such Preferred Securities on the relevant record date, which shall be the
fifteenth day (whether or not a Business Day) prior to the redemption date or
liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities issued by
the Issuer are to be redeemed on a redemption date, then the aggregate
liquidation preference of such Preferred Securities and Common Securities to be
redeemed shall be allocated PRO RATA among the Preferred Securities and the
Common Securities. The particular Preferred Securities to be redeemed shall be
selected not more than 60 days prior to the redemption date by the Property
Trustee from the outstanding Preferred Securities not previously called for
redemption, by lot or by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
liquidation preference of the Preferred Securities. The Property Trustee shall
promptly notify the Conversion Agent in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the liquidation preference thereof to be redeemed; it
being understood that, in the case of Preferred Securities held by DTC (or any
successor) or its nominee, the distribution of the proceeds of such redemption
will be made in accordance with the procedures of DTC or its nominee. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate liquidation preference of Preferred Securities
which has been or is to be redeemed.
Notice of any redemption of Debentures will be mailed at least 30 days but
not more than 60 days before the redemption date to each holder of Debentures to
be redeemed at its registered address. Unless the Company defaults in payment of
the redemption price, on and after the redemption date interest ceases to accrue
on such Debentures or portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the redemption price of, the Preferred
Securities and Common Securities, as applicable, shall be made PRO RATA based on
the liquidation preference of such Preferred Securities and Common Securities;
provided, however, that if on any distribution date or redemption date a Trust
Agreement Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or redemption price of, any of the Common Securities, and
no other payment on account of the redemption, liquidation or other acquisition
of such Common Securities, shall be made unless payment in
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full in cash of all accumulated and unpaid Distributions on all of the
outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the redemption price the full amount
of such redemption price on all of the outstanding Preferred Securities then
called for redemption, shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or redemption price of, the Preferred
Securities then due and payable.
In the case of any Trust Agreement Event of Default, the Company as holder
of the Common Securities will be deemed to have waived any right to act with
respect to any such Trust Agreement Event of Default until all such Trust
Agreement Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until any such Trust Agreement Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Preferred Securities and not on behalf of the Company as holder
of the Common Securities, and only the holders of the Preferred Securities will
have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, termination,
dissolution or winding up of the Issuer (each, a "Liquidation"), the holders of
the Preferred Securities at that time will be entitled to receive out of the
assets of the Issuer, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
preference of $25 per Preferred Security plus accrued and unpaid Distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Debentures in an aggregate principal amount
equal to the aggregate stated liquidation preference of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on, the Preferred Securities, have been
distributed on a PRO RATA basis to the holders of Preferred Securities in
exchange for such Preferred Securities. See "--Distribution of Debentures."
If such Liquidation Distribution can be paid only in part because the Issuer
has insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Issuer on the Preferred
Securities shall be paid on a PRO RATA basis. The holder(s) of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
liquidation PRO RATA with the holders of the Preferred Securities, except that
if a Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
Pursuant to the Trust Agreement, the Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of Debentures to the holders of the Preferred Securities and
Common Securities, if the Company, as Depositor, has given written direction to
the Property Trustee to terminate the Issuer (which direction is optional and
wholly within the discretion of the Company, as Depositor); (iii) the
redemption, conversion, or exchange of all of the Preferred Securities and
Common Securities; (iv) the entry by a court of competent jurisdiction of an
order for the dissolution of the Issuer; and (v) the occurrence of a Special
Event, except in the case of a Tax Event following which the Company has elected
to pay any Additional Sums such that the net amount received by holders of
Preferred Securities in respect of Distributions is not reduced as a result of
such Tax Event and the Company has not revoked any such election or failed to
make such payment.
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TRUST AGREEMENT EVENTS OF DEFAULT; NOTICE
An event of default under the Indenture (a "Debenture Event of Default")
constitutes an event of default under the Trust Agreement with respect to the
Preferred Securities and the Common Securities (a "Trust Agreement Event of
Default"), whatever the reason for such Debenture Event of Default and whether
it shall be voluntary or involuntary or be 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.
Within ten days after the occurrence of any Trust Agreement Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Trust Agreement Event of Default to the holders of the Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Trust Agreement Event of Default shall have been cured or waived. The
Company, as Depositor, and the Administrative Trustees, on behalf of the Issuer,
are required to file annually with the Property Trustee a certificate as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under the Trust Agreement.
If a Trust Agreement Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of the Issuer as described above. See "--Liquidation Distribution
Upon Termination." The existence of a Trust Agreement Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Trust Agreement Event of Default has occurred and is continuing, then
the holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as a holder of the Debentures against the
Company. In addition, the holders of a majority in aggregate liquidation
preference of the Preferred Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Trust Agreement, including the right to direct
the Property Trustee to exercise the remedies available to it as a holder of the
Debentures. If the Property Trustee fails to enforce its rights as holder of the
Debentures after a request therefor by a holder of Preferred Securities, such
holder may proceed to enforce such rights directly against the Company.
Notwithstanding the foregoing, if a Trust Agreement Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may directly institute a
Direct Action against the Company for enforcement of payment to such holder of
the principal of or interest on the Debentures having a principal amount equal
to the aggregate liquidation preference of the Preferred Securities of such
holder on or after the respective due date specified in the Debentures. In
connection with such Direct Action, the Company will be subrogated to the rights
of such holder of Preferred Securities under the Trust Agreement to the extent
of any payment made by the Company to such holder of Preferred Securities in
such Direct Action. The holders of Preferred Securities will not be able to
exercise directly against the Company any other remedy available to the Property
Trustee unless the Property Trustee first fails to do so.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Issuer Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Issuer Trustee, shall be the successor of such Issuer
Trustee under the Trust Agreement, provided such corporation shall be otherwise
qualified and eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. The Issuer may, at the request of the Company, with the consent
of the Administrative Trustees and without the consent of the Property Trustee,
the Delaware Trustee or the holders of the Preferred Securities, merge with or
into, consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided that (i) such successor entity either (a)
expressly assumes all of the obligations of the Issuer with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities and rank in priority with respect to Distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, if any, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of the Issuer, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Issuer
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity)
and (b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Issuer nor such successor entity will
be required to register as an investment company under the Investment Company
Act, and (viii) the Company or any permitted successor or assignee owns all of
the Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Issuer shall not,
except with the consent of holders of 100% in aggregate liquidation preference
of the Preferred Securities, consolidate, amalgamate, merge with or into, be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Issuer or the successor entity to be classified as other than a grantor trust
for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company and the
Issuer Trustees, without the consent of the holders of the Preferred Securities
(i) to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the Trust
Agreement that shall not be inconsistent with the other provisions of the Trust
Agreement, (ii) to modify, eliminate or add to any provision of the Trust
Agreement to such extent as shall be necessary to ensure that the Issuer will
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be classified for United States Federal income tax purposes as a grantor trust
at all times that any Preferred Securities and Common Securities are outstanding
or to ensure that the Issuer will not be required to register as an "investment
company" under the Investment Company Act or be classified as other than a
grantor trust for United States Federal income tax purposes or (iii) to maintain
the qualification of the Trust Agreement under the Trust Indenture Act;
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of
Preferred Securities or Common Securities, and any amendments of the Trust
Agreement shall become effective when notice thereof is given to the holders of
Preferred Securities and Common Securities. The Trust Agreement may be amended
by the Issuer Trustees and the Company with (i) the consent of holders
representing not less than a majority (based upon liquidation preferences) of
the outstanding Preferred Securities and Common Securities, acting as a single
class, and (ii) receipt by the Issuer Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the Issuer's status
as a grantor trust for United States Federal income tax purposes or the Issuer's
exemption from the status of an "investment company" under the Investment
Company Act; provided further that (a) without the consent of each holder of
Preferred Securities and Common Securities, the Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Preferred
Securities and Common Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Preferred Securities and
Common Securities as of a specified date or (ii) restrict the right of a holder
of Preferred Securities and Common Securities to institute suit for the
enforcement of any such payment on or after such date.
If any proposed amendment of the Trust Agreement provides for, or the Issuer
Trustees otherwise propose to effect, the dissolution, winding-up or termination
of the Issuer, other than pursuant to the terms of the Trust Agreement, then the
holders of the then outstanding Preferred Securities, as a class, will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of the holders of the majority
in aggregate liquidation preference of the Preferred Securities.
The holders of a majority in aggregate liquidation preference of Preferred
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Debentures. So long as
any Debentures are held by the Property Trustee, the Issuer Trustees shall not
(i) direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee or executing any trust or power
conferred on the Debenture Trustee with respect to such Debentures, (ii) waive
any past default that is waivable under the Indenture, (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required, without in each case, obtaining the prior approval of the holders of a
majority in aggregate liquidation preference of all outstanding Preferred
Securities (except in the case of clause (iv), which consent, in the event that
no Trust Agreement Event of Default shall occur and be continuing, shall be of
the holders of Preferred Securities and Common Securities, voting together as a
single class); provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each holder of the Preferred Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders of the Preferred
Securities. The Property Trustee shall notify each holder of record of the
Preferred Securities of any notice of default with respect to the Debentures.
A waiver of a Debenture Event of Default will constitute a waiver of the
corresponding Trust Agreement Event of Default.
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Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of the Preferred Securities and the
Common Securities or pursuant to written consent. The Property Trustee will
cause a notice of any meeting at which holders of Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of record of Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for the Issuer to redeem and cancel the Preferred Securities in accordance with
the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company, the Issuer Trustees or
any affiliate of any Issuer Trustee shall, for purposes of such vote or consent,
be treated as if such Preferred Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Certain Book-Entry Procedures for
Global Certificates."
Holders of the Preferred Securities will have no rights to appoint or remove
the Issuer Trustees, who may be appointed, removed or replaced solely by the
Company, as the direct or indirect holder of all the Common Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable distribution dates
or, if the Preferred Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the Securities Register. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and the Company.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Property Trustee and the Company. In the event that the
Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and the Company) to act as Paying
Agent.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL CERTIFICATES
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interests in the global certificate or certificates issued in connection with
sales of Preferred Securities made pursuant to this Prospectus. All of the
Preferred Securities will be issued as fully registered securities registered in
the name of Cede & Co. (as nominee for DTC). Preferred Securities will be
initially represented by one or more certificates in registered, global form
(collectively, the "Global Certificate"). The Global Certificates will be
deposited with DTC.
DTC has advised the Issuer and the Company as follows: DTC 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 Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants ("participants") and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
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DTC has advised the Issuer and the Company that its current practice, upon
the issuance of the Global Certificate, is to credit, on its internal system,
the respective principal amount of the individual beneficial interests
represented by such Global Certificate to the accounts with DTC of the
participants through which such interests are to be held. Ownership of
beneficial interests in the Global Certificate will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominees (with respect to interests of participants) and the records
of participants and indirect participants (with respect to interests of persons
other than participants).
As long as DTC, or its nominee, is the registered holder of a Global
Certificate, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the Preferred Securities represented by such Global
Certificate for all purposes under the Trust Agreement and the Preferred
Securities.
Except in the limited circumstances described above, owners of beneficial
interests in a Global Certificate will not be entitled to have any portions of
such Global Certificate registered in their names, will not receive or be
entitled to receive physical delivery of Preferred Securities in definitive form
and will not be considered the owners or holders of the Global Certificate (or
any Preferred Securities represented thereby) under the Trust Agreement or the
Preferred Securities.
Investors may hold their interests in the Global Certificate directly
through DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system. All interests in a Global
Certificate, including those held through Euroclear or CEDEL, will be subject to
the procedures and requirements of DTC. Those interests held through Euroclear
and CEDEL will also be subject to the procedures and requirements of such
system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of its participants,
which in turn act on behalf of indirect participants and certain banks, the
ability of a person having beneficial interests in a Global Certificate to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of Distributions on Global Certificates will be made to DTC or its
nominee as the registered owner thereof. Neither the Issuer, the Company, the
Property Trustee nor any of their respective agents will 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 Certificate or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Issuer and the Company expect that DTC or its nominee, upon receipt of
any payment of Distributions in respect of a Global Certificate representing any
Preferred Securities held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Certificate for such Preferred Securities as shown on the records of DTC or its
nominee. The Issuer and the Company also expect that payments by participants to
owners of beneficial interests in such Global Certificate held through such
participants will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers registered in
"street name." Such payments will be the responsibility of such participants.
Interests in the Global Certificates will trade in DTC's settlement system
and secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures of
DTC and its participants. Transfers between participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same-day funds.
Transfers between
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participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
DTC has advised the Issuer and the Company that it will take any action
permitted to be taken by a holder of certificates (including the presentation of
Preferred Securities for exchange as described below and the conversion of
Preferred Securities) only at the direction of one or more participants to whose
account with DTC interests in the Global Certificates are credited and only in
respect of such portion of the aggregate liquidation preference of the Preferred
Securities as to which such participant or participants has or have given such
direction. However, if there is a Trust Agreement Event of Default, DTC reserves
the right to exchange the Global Certificates for Preferred Securities in
certificated form, and to distribute such Preferred Securities to its
participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Certificate among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Issuer, the Company, the Property Trustee nor any of their respective agents
will have any responsibility for the performance by DTC, its participants or
indirect participants of its respective obligations under the rules and
procedures governing their operations, including maintaining, supervising or
reviewing the records relating to, or payments made on account of, beneficial
ownership interests in Global Certificates.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts such Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners of the Preferred Securities and the voting
rights of participants, indirect participants and beneficial owners of Preferred
Securities will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Property Trustee and the Company. In the event that a successor securities
depositary is not obtained, definitive Preferred Securities certificates
representing such Preferred Securities are required to be printed and delivered.
The Company, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation preference of
Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for the
Preferred Securities will be printed and delivered.
TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The Property Trustee presently acts as transfer agent, registrar and paying,
conversion and exchange agent for the Preferred Securities.
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Registration of transfers or exchanges of Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuer will not be required to register or cause to be
registered the transfer of the Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries may maintain deposit accounts
and conduct other banking and corporate securities transactions and
relationships with the Property Trustee in the ordinary course of their
businesses. The Property Trustee, other than during the occurrence and
continuance of a Trust Agreement Event of Default, undertakes to perform only
such duties as are specifically set forth in the Trust Agreement and, after such
Trust Agreement Event of Default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Trust Agreement at the request
of any holder of Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby. If
no Trust Agreement Event of Default has occurred and is continuing and the
Property Trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Preferred Securities are entitled under the Trust Agreement
to vote, then the Property Trustee shall take such action as is directed by the
Company and, if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Preferred Securities and the
Common Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer in such a way that the Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States Federal income tax purposes and so that the Debentures will be
treated as indebtedness of the Company for United States Federal income tax
purposes. In this connection, the Company and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Issuer or the Trust Agreement, that the Company and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The Trust Agreement and the Preferred Securities are governed by, and
construed in accordance with, the internal laws of the State of Delaware without
regard to its conflict of laws principles and excluding sections 3540 and 3561
of Title 12 of the Delaware General Corporate Laws.
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DESCRIPTION OF THE GUARANTEE
The Guarantee will be executed and delivered by the Company concurrently
with the issuance by the Issuer of the Preferred Securities for the benefit of
the holders from time to time of such Preferred Securities. The First National
Bank of Chicago will be appointed as trustee ("Guarantee Trustee") under the
Guarantee. This summary of certain provisions of the Guarantee does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Guarantee (the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part).
The Guarantee Trustee holds the Guarantee for the benefit of the holders of the
Preferred Securities. As used in this section, the "Company" refers to Dura
Automotive Systems, Inc., exclusive of its subsidiaries.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company
irrevocably agreed to pay in full on a subordinated basis, to the extent set
forth herein, the Guarantee Payments (as defined below) to the holders of the
Preferred Securities, as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert other than the
defense of payment. The following payments with respect to the Preferred
Securities, to the extent not paid by or on behalf of the Issuer (the "Guarantee
Payments"), are subject to the Guarantee: (i) any accumulated and unpaid
Distributions required to be paid on the Preferred Securities, to the extent
that the Issuer has funds on hand available therefor at such time, (ii) the
redemption price with respect to any Preferred Securities called for redemption
to the extent that the Issuer has funds on hand available therefor at such time,
or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation
of the Issuer (unless the Debentures are distributed to holders of the Preferred
Securities), the lesser of (a) the Liquidation Distribution, to the extent that
the Issuer has funds on hand available therefor at such time, and (b) the amount
of assets of the Issuer remaining available for distribution to holders of
Preferred Securities. The Company's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Company to the
holders of the Preferred Securities or by causing the Issuer to pay such amounts
to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Issuer's obligations under the Preferred Securities, but applies only to the
extent that the Issuer has funds sufficient to make such payments, and is not a
guarantee of collection. If the Company does not make interest payments on the
Debentures held by the Issuer, the Issuer will not be able to pay Distributions
on the Preferred Securities and will not have funds legally available therefor.
The Company has, through the Guarantee, the Trust Agreement, the Debentures
and the Indenture, taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantee."
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Issuer with respect to the Common Securities to
the same extent as the Guarantee, except that upon the occurrence and during the
continuation of a Trust Agreement Event of Default, holders of Preferred
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all other liabilities of
the Company and will rank PARI PASSU with most senior preferred stock, if any,
now or hereinafter issued by the Company with any guarantee now or hereinafter
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entered into by the Company in respect of any preferred or preference stock of
any affiliate of the Company. The terms of the Preferred Securities provide that
each holder by acceptance thereof consents and agrees to the subordination and
other provisions of the Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee is held for the benefit of the holders of the Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Issuer or upon distribution of the
Debentures to the holders of the Preferred Securities. The Guarantee does not
place a limitation on the amount of additional indebtedness that may be incurred
by the Company or any of its subsidiaries.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in aggregate liquidation preference of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities--Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
CERTAIN COVENANTS OF THE COMPANY
The Company covenanted in the Guarantee that if and so long as (i) the
Issuer is the holder of all the Debentures, (ii) a Tax Event in respect of the
Issuer has occurred and is continuing and (iii) the Company has elected, and has
not revoked such election, to pay Additional Sums in respect of the Preferred
Securities and Common Securities, the Company, subject to the subordination
provisions hereinafter referenced, will pay to the Issuer such Additional Sums.
The Company also covenanted that it will not, and it will not cause any of its
subsidiaries to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal of or,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities (including guarantees of indebtedness for money borrowed) of the
Company that rank PARI PASSU with or junior to the Debentures (other than (a)
any dividend, redemption, liquidation, interest, principal or guarantee payment
by the Company where the payment is made by way of securities (including capital
stock) that rank PARI PASSU with or junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being made,
(b) redemptions or purchases of any rights issued pursuant to a rights agreement
and the declaration of a dividend of such rights or the issuance of preferred
stock under such plans in the future, (c) payments under the Guarantee, (d)
purchases of Common Stock related to the issuance of Common Stock under any of
the Company's benefit plans for its directors, officers or employees, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock and (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute a Debenture Event of Default and
(b) in respect of which the Company shall not have taken reasonable steps to
cure, (ii) the Company shall be in default with respect to its payment of any
obligations under the Guarantee or (iii) the Company shall have given notice of
its election of an Extension Period as provided in the Indenture with respect to
the Debentures and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing. The Company has also
covenanted (i) for
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so long as Preferred Securities are outstanding, not to convert Debentures
except pursuant to a notice of conversion delivered to the Conversion Agent by a
holder of Preferred Securities, (ii) to maintain directly or indirectly 100%
ownership of the Common Securities, provided that certain successors which are
permitted pursuant to the Indenture may succeed to the Company's ownership of
the Common Securities, (iii) not to voluntarily terminate, wind-up or liquidate
the Issuer, except (a) in connection with a distribution of the Debentures to
the holders of the Preferred Securities in liquidation of the Issuer or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the Trust Agreement, (iv) to maintain the reservation for issuance of the number
of shares of Common Stock that would be required from time to time upon the
conversion of all the Debentures then outstanding, (v) to use its reasonable
efforts, consistent with the terms and provisions of the Trust Agreement, to
cause the Issuer to remain classified as a grantor trust and not as an
association taxable as a corporation for United States Federal income tax
purposes and (vi) to deliver shares of Common Stock upon an election by the
holders of the Preferred Securities to convert such Preferred Securities into
Common Stock.
As part of the Guarantee, the Company has agreed that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for Common Stock or Debentures.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation preference of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. In addition, any record holder of Preferred Securities shall have the
right, which is absolute and unconditional, to proceed directly against the
Company to obtain Guarantee Payments, without first waiting to determine if the
Guarantee Trustee has enforced the Guarantee or instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. The
Company has waived any right or remedy to require that any action be brought
just against the Issuer, or any other person or entity before proceeding
directly against the Company.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the redemption price of the Preferred Securities, upon full payment
of the amounts payable upon liquidation
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of the Issuer, upon the distribution, if any, of Class A Common Stock to the
holders of Preferred Securities in respect of the conversion of all such
holders' Preferred Securities into Class A Common Stock or upon distribution of
Debentures to the holders of the Preferred Securities in exchange for all of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the law
of the State of Illinois.
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DESCRIPTION OF THE DEBENTURES
The Debentures will be issued under a Junior Convertible Subordinated
Indenture, dated , 1998 between the Company and The First National Bank
of Chicago, as trustee (the "Debenture Trustee"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. This summary of certain terms and provisions of the Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture. Whenever particular defined terms
of the Indenture are referred to herein, such defined terms are incorporated
herein or therein by reference. As used in this section, the Company refers to
Dura Automotive Systems, Inc., exclusive of its subsidiaries.
GENERAL
The Debentures are unsecured and rank junior and subordinate in right of
payment to all future Senior Debt of the Company. The Debentures are limited in
aggregate principal amount to approximately $ million (approximately $
million if the Underwriters' over-allotment option is exercised in full), such
amount being the sum of the aggregate stated liquidation preference of the
Preferred Securities and capital contributed by the Company in exchange for the
Common Securities. The Indenture does not limit the incurrence or issuance of
other secured or unsecured debt of the Company, whether under the Indenture or
any existing or other indenture that the Company may enter into in the future or
otherwise. See "--Subordination."
Concurrently with the issuance of the Preferred Securities, the Issuer
invested the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Debentures. The Debentures are in the principal amount
equal to the aggregate stated liquidation preference of the Preferred Securities
plus the Company's concurrent investment in the Common Securities.
The Debentures are not subject to any sinking fund provision. The entire
principal amount of the Debentures will mature, and become due and payable,
together with any accrued and unpaid interest thereon, on , 2028.
INTEREST
The Debentures bear interest at the annual rate of % per annum, payable
quarterly in arrears on , , and , of each year,
commencing on , 1998 (each, an "Interest Payment Date"), to the person
in whose name each Debenture is registered at the close of business on the
Business Day next preceding such Interest Payment Date, subject to certain
exceptions. It is anticipated that, until the liquidation, if any, of the
Issuer, each Debenture will be held in the name of the Property Trustee in trust
for the benefit of the holders of the Preferred Securities and the Common
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay). Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the stated rate per annum, compounded quarterly. The term
"interest" as used herein shall include quarterly interest payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date and
Additional Sums, as applicable.
GLOBAL SECURITIES
If distributed to holders of the Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Issuer as
a result of the occurrence of a Special Event, the Debentures will be issued in
the same form as the Preferred Securities which such Debentures replace. Any
Global Certificate will be replaced by one or more global certificates (each a
"Global Security")
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registered in the name of the depository or its nominee. Except under the
limited circumstances described below, the Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Debentures in definitive form. The Global Securities described above may not be
transferred except by the depository to a nominee of the depository or by a
nominee of the depository to the depository or another nominee of the depository
or to a successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security are not entitled to receive physical delivery of Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Debentures shall be
exchangeable, except for another Global Security of like denomination and tenor
to be registered in the name of the depository or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner of Preferred
Securities must rely on the procedures of DTC or if such person is not a
participant, on the procedures of the participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
If Debentures are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Issuer and a Global Security is
issued, DTC will act as securities depository for the Debentures represented by
such Global Security. For a description of DTC and the specific terms of the
depository arrangements, see "Description of the Preferred Securities--Certain
Book-Entry Procedures for Global Certificates." As of the date of this
Prospectus, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depository in the event
DTC or such depository is unable or unwilling to continue as a depository for
the Global Securities.
None of the Company, the Debenture Trustee, any Paying Agent or the
Securities Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Security representing such Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Global Security is exchangeable for Debentures registered in the names of
persons other than DTC or its nominee only if (i) DTC notifies the Company that
it is unwilling or unable to continue as a depository for such Global Debenture
and no successor depositary shall have been appointed by the Company within 90
days, or if at any time DTC ceases to be a clearing agency registered under the
Exchange Act at a time when DTC is required to be so registered to act as such
depository, (ii) the Company in its sole discretion determines that such Global
Security shall be so exchangeable, or (iii) there shall have occurred and be
continuing an Event of Default with respect to such Global Security. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such Global Security. In the event that Debentures are issued in
definitive form, such Debentures will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices described
in "--Payment and Paying Agents" below.
PAYMENT AND PAYING AGENTS
Payments on Debentures represented by a Global Security will be made to DTC,
as the depositary for the Debentures. In the event Debentures are issued in
definitive form, principal of and premium, if any, and any interest on
Debentures will be payable, the transfer of the Debentures will be registrable,
and the
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Debentures will be exchangeable for Debentures of other denominations of a like
aggregate principal amount at the corporate office of the Debenture Trustee in
the City of New York or at the office of such Paying Agent or Paying Agents as
the Company may designate, except that at the option of the Company payment of
any interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Securities Register or (ii)
by wire transfer to an account maintained by the Person entitled thereto as
specified in the Securities Register, provided that proper transfer instructions
have been received by the Regular Record Date. Payment of any interest on
Debentures will be made to the Person in whose name such Debentures are
registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Regular Record Date for
the interest payable on any Interest Payment Date shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent.
Any monies deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of and premium,
if any, or interest on any Debentures and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and payable
shall, at the request of the Company, be repaid to the Company and the holder of
such Debentures shall thereafter look, as a general unsecured creditor, only to
the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest (including any Liquidated Damages) on the Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each Extension Period, provided that no Extension Period may extend
beyond the stated maturity of the Debentures. At the end of such Extension
Period, the Company must pay all interest then accrued and unpaid (together with
interest thereon at the stated annual rate, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Debentures (or holders of Preferred Securities while
the Preferred Securities are outstanding) will continue to be required to accrue
interest income for United States Federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not, and may not cause any
subsidiary to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of the Company that
rank PARI PASSU with or junior to the Debentures (other than (a) any dividend,
redemption, liquidation, interest, principal or guarantee payment by the Company
where the payment is made by way of securities (including capital stock) that
rank PARI PASSU with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (b)
redemptions or purchases of any rights pursuant to a rights agreement and the
declaration of a dividend of such rights or the issuance of preferred stock
under such plan in the future, (c) payments under the Guarantee, (d) purchases
of Common Stock related to the issuance of Common Stock under any of the
Company's benefit plans for its directors, officers or employees, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock, and (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the stated
maturity of the Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due
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on any Interest Payment Date, the Company may elect to begin a new Extension
Period subject to the above requirements. No interest shall be due and payable
during an Extension Period, except at the end thereof. The Company shall give
the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election to begin any Extension Period at least one Business Day
prior to the earlier of (i) the record date for the date Distributions on the
Preferred Securities (or, if no Preferred Securities are outstanding, for the
date interest on the Debentures would have been payable except for the election
to begin such Extension Period) and (ii) the date the Property Trustee is (or,
if no Preferred Securities are outstanding, the Debenture Trustee is) required
to give notice to Nasdaq or other applicable self-regulatory organization or to
holders of such Preferred Securities (or, if no Preferred Securities are
outstanding, to the holders of such Debentures) of such record date. The
Debenture Trustee and the Property Trustee shall give notice of the Company's
election to begin an Extension Period to the holders of the Debentures and the
Preferred Securities, respectively.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of acceleration upon the
occurrence of a Debenture Event of Default, the Company will redeem the
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, together with any accrued and unpaid interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York City time, on the date of such repayment or acceleration or at such other
time on such earlier date as the parties thereto shall agree. The Debentures are
not entitled to the benefit of any sinking fund or, except as set forth above or
as a result of acceleration, any other provision for mandatory prepayment.
OPTIONAL REDEMPTION
On and after , 2001, the Company will have the right, at any time
and from time to time, to redeem the Debentures, in whole or in part, upon
notice given as provided below, during the twelve month periods beginning on
, in each of the following years and at the indicated redemption prices
(expressed as a percentage of the principal amount of the Debentures being
redeemed), together with any accrued but unpaid interest on the portion being
redeemed.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------- ---------------------
<S> <C>
2001...................... %
2002......................
2003......................
2004......................
2005......................
2006......................
2007......................
2008 and thereafter.......
</TABLE>
For so long as the Issuer is the holder of all the outstanding Debentures,
the proceeds of any such redemption will be used by the Issuer to redeem
Preferred Securities and Common Securities in accordance with their terms. The
Company may not redeem the Debentures in part unless all accrued and unpaid
interest has been paid in full on all outstanding Debentures. The Company may
not, in any case, redeem the Debentures unless all accrued and unpaid interest
thereon has been paid in full on all outstanding Debentures through the last
interest payment date prior to and including the date of redemption. See
"Description of the Preferred Securities--Optional Redemption."
The Company also shall have the right to redeem the Debentures at any time
after , 2001 upon the occurrence of a Tax Event as described in
"Description of the Preferred Securities--Special Event Exchange or Redemption"
at a redemption price equal to the principal amount thereof, plus any accrued
and unpaid interest.
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REDEMPTION PROCEDURES
Notices of any redemption of the Debentures and the procedures for such
redemption shall be as provided with respect to the Preferred Securities under
"Description of the Preferred Securities-- Redemption Procedures." Notice of any
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of Debentures to be redeemed at its registered
address. Unless the Company defaults in payment of the redemption price, on and
after the redemption date interest ceases to accrue on such Debentures or
portions thereof called for redemption.
DISTRIBUTION OF DEBENTURES
At any time, the Company has the right to terminate the Issuer and cause the
Debentures to be distributed to the holders of the Preferred Securities in
liquidation of the Issuer after satisfaction of liabilities to creditors of the
Issuer as provided by applicable law. If distributed to holders of Preferred
Securities in liquidation, the Debentures will initially be issued in the form
of one or more Global Securities and DTC, or any successor depositary for the
Preferred Securities, will act as depositary for the Debentures. It is
anticipated that the depositary arrangements for the Debentures would be
substantially identical to those in effect for the Preferred Securities. There
can be no assurance as to the market price of any Debentures that may be
distributed to the holders of Preferred Securities. For a description of DTC and
the terms of the depositary matters, see "Description of the Preferred
Securities--Certain Book-Entry Procedures for Global Certificates."
CONVERSION OF THE DEBENTURES
The Debentures are convertible at the option of the holders of the
Debentures into Common Stock, at any time prior to redemption or maturity, at
the rate of shares of Class A Common Stock for each $25 in principal amount
of the Debentures (equivalent to a conversion price of per share of Class A
Common Stock), subject to the conversion price adjustments described under
"Description of the Preferred Securities--Conversion Rights." The Issuer
covenanted for so long as the Preferred Securities are outstanding not to
convert the Debentures except pursuant to a notice of conversion delivered to
the Conversion Agent by a holder of Preferred Securities. Upon surrender of such
Preferred Securities to the Conversion Agent for conversion, the Issuer will
distribute the commensurate principal amount of the Debentures to the Conversion
Agent on behalf of the holder of every Preferred Security so converted,
whereupon the Conversion Agent will convert such Debentures into Class A Common
on behalf of such holder. The Company's delivery to the holders of the
Debentures (through the Conversion Agent) of the fixed number of shares of
Common Stock into which the Debentures are convertible (together with the cash
payment, if any, in lieu of fractional shares) will be deemed to satisfy the
Company's obligation to pay the principal amount of the Debentures, and the
accrued and unpaid interest attributable to the period from the last date to
which interest has been paid or duly provided for.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of Debentures, amend, waive or supplement the Indenture
for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of the Debentures, or the holders
of the Preferred Securities so long as they remain outstanding) and qualifying,
or maintaining the qualification of, the Indenture under the Trust Indenture
Act. The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Debentures, to modify the Indenture in a
manner affecting the rights of the holders of the Debentures; provided that no
such modification may, without the consent of the holder of each outstanding
Debentures so affected, (i) change the stated maturity of the Debentures, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon (other than deferrals of the payments of interest as
described under "--Option to Extend Interest Payment Period") or reduce the
premiums
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payable upon the redemption thereof, impair any right to institute suit for the
enforcement of any such payment, or change the subordination provisions of the
Indenture or any right to convert any Debentures in a manner adverse to the
holders or (ii) reduce the percentage of principal amount of the Debentures, the
holders of which are required to consent to any such modification of the
Indenture, provided that, so long as any of the Preferred Securities remain
outstanding, (a) no such modification may be made that adversely affects the
holders of such Preferred Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority in aggregate liquidation
preference of the Preferred Securities then outstanding unless and until the
principal of the Debentures and all accrued and unpaid interest thereon has been
paid in full and (b) where a consent under the Indenture would require the
consent of each holder of Debentures, no such consent will be given by the
Property Trustee without prior consent of each holder of the Preferred
Securities.
DEBENTURE EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the Debentures
constitutes a "Debenture Event of Default" with respect to such Debentures:
(i) failure for 30 days to pay any interest on the Debentures, when due
(subject to the deferral of any due date in the case of an Extension
Period);
(ii) failure to pay any principal of or premium, if any, on the
Debentures when due whether at maturity, upon redemption by declaration or
otherwise;
(iii) failure by the Company to deliver shares of Common Stock upon an
appropriate election by holders of the Debentures to convert such
Debentures;
(iv) default for 90 days by the Company in the observance or performance
of any other covenant or agreement contained in the Indenture relating to
the Debentures after written notice thereof as provided in the Indenture; or
(v) certain events of bankruptcy, insolvency or reorganization relating
to the Company.
The holders of a majority in aggregate outstanding principal amount of the
Debentures have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or exercising any
trust or power conferred on the Trustee consistent with the Indenture. The
Debenture Trustee or the holders of not less than 25% in aggregate principal
amount of the Debentures then outstanding may declare the principal due and
payable immediately upon a Debenture Event of Default, and, should the Debenture
Trustee or the holders of the Debentures fail to make such declaration, the
holders of at least 25% in aggregate liquidation preference of the Preferred
Securities then outstanding shall have such right. The holders of a majority in
aggregate outstanding principal amount of the Debentures may annul and rescind
such declaration if the default (other than the non-payment of the principal of
the Debentures which has become due solely by such acceleration) has been cured
or waived and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee and, should the holders of the Debentures fail to annul and
rescind such declaration, the holders of a majority in aggregate liquidation
preference of the Preferred Securities then outstanding shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Debentures affected thereby may, on behalf of the holders of all the Debentures,
waive any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture and, should the holders of
the Debentures fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation preference of the Preferred
Securities shall have such right. The Company is
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required to file annually with the Debenture Trustee a certificate as to whether
or not the Company is in compliance with all the conditions and covenants
applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to the
Debentures, the Property Trustee will have the right to declare the principal of
and the interest on the Debentures and any other amounts payable under the
Indenture to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable, a
holder of Preferred Securities may institute a Direct Action for payment after
the respective due date specified in the Debentures. The Company may not amend
the Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Debentures held by the Issuer or the
Property Trustee and the Company shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such holder in
any Direct Action.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially or as an entirety to the Company, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Debentures; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
happened and be continuing; (iii) in the case of the Debentures, such
transaction is permitted under the Trust Agreement and Guarantee and does not
give rise to any breach or violation of the Trust Agreement or Guarantee; and
(iv) certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Debentures protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the Debentures.
EXPENSES OF ISSUER
Pursuant to the Indenture, the Company will pay all of the costs, expenses
or liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or Common Securities the amounts due such
holders pursuant to the terms of the Preferred Securities or Common Securities.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable at their stated maturity
within one year or are to be property called for redemption within one year, and
the Company deposits or causes to be deposited with the Debenture Trustee trust
funds, in trust, for the purpose and in an amount in the currency or currencies
in which the Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Debentures not previously delivered to the Debenture Trustee
for cancellation, for the principal and premium, if any, and interest to the
date of the deposit or to
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the stated maturity, as the case may be, then the Indenture will cease to be of
further effect (except as to the Company's obligations to pay all other sums due
pursuant to the Indenture and to provide the officers' certificates and opinions
of counsel described therein), and the Company will be deemed to have satisfied
and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Debentures
issued thereunder will be subordinate and junior in right of payment to all
Senior Debt (as defined below) of the Company whether now existing or
hereinafter incurred. Upon any payment or distribution of assets of the Company
to creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, the holders of Senior Debt
will first be entitled to receive payment in full of principal of and premium,
if any, and interest, if any, on such Senior Debt before the Property Trustee,
on behalf of the holders of the Debentures, will be entitled to receive or
retain any payment in respect of the principal of and premium, if any, or
interest, if any, on the Debentures.
In the event of the acceleration of the maturity of any Debentures, the
holders of all Senior Debt outstanding at the time of such acceleration will
first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of Debentures
will be entitled to receive or retain any payment in respect of the principal of
or premium, if any, or interest, if any, on the Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Debentures may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Debt, or an event
of default with respect to any Senior Debt resulting in the acceleration of the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another person the payment of which, in either case, such
Person has guaranteed or for which such Person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt of the
Company, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is PARI
PASSU with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include:
(i) any Debt of the Company which, when incurred and without respect to
any election under Section 1111(b) of the Bankruptcy Code, was without
recourse to the Company,
(ii) any Debt of the Company to any of its subsidiaries;
(iii) Debt to any employee of the Company,
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(iv) any liability for taxes,
(v) Debt or other monetary obligations to trade creditors or assumed by
the Company or any of its subsidiaries in the ordinary course of business in
connection with the obtaining of goods, materials or services, and
(v) the Debentures.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Company.
GOVERNING LAW
The Indenture and the Debentures will be governed by and construed in
accordance with the laws of the State of Illinois.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of the Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
As used in this section, the term the "Company" refers to Dura Automotive
Systems, Inc., exclusive of its subsidiaries.
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." Taken together, the Company's
obligations under the Debentures, the Indenture, the Trust Agreement and the
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on the Debentures, the Issuer will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover payment of
Distributions when the Issuer does not have sufficient funds to pay such
Distributions. In such event, a holder of Preferred Securities may institute a
Direct Action directly against the Company to enforce payment of such
Distributions to such holder after the respective due dates. All obligations of
the Company under the Guarantee are subordinate and junior in right of payment
to all future Senior Debt of the Company on substantially the same terms as
provided above with respect to the Debentures; and PARI PASSU with any unsecured
debt, now or hereafter incurred by the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Debentures, such payments will be sufficient to cover Distributions and other
payments due on the Preferred Securities, primarily because (i) the aggregate
principal amount of the Debentures will be equal to the sum of the aggregate
stated liquidation preference of the Preferred Securities and Common Securities;
(ii) the interest rate and interest and other payment dates on the Debentures
will match the Distribution rate and Distribution and other payment dates for
the Preferred Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of the Issuer except the Issuer's obligations to
holders of the Preferred Securities under such Preferred Securities; and (iv)
the Trust Agreement further provides that the Issuer will not engage in any
activity that is not consistent with the limited purposes of the Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other person or entity.
A default or event of default under any Senior Debt of the Company will not
constitute a default under the Indenture or a Debenture Event of Default.
However, in the event of payment defaults under, or acceleration of, Senior Debt
of the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Debentures until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on the Debentures would constitute a Debenture
Event of Default.
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LIMITED PURPOSE OF ISSUER
The Preferred Securities evidence a beneficial interest in the Issuer, and
the Issuer exists for the sole purpose of issuing the Preferred Securities and
Common Securities and investing the proceeds thereof in the Debentures. A
principal difference between the rights of a holder of Preferred Securities and
a holder of Debentures is that a holder of Debentures is entitled to receive
from the Company the principal amount of and interest accrued on Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from the Issuer (or from the Company under the applicable
Guarantee) if and to the extent the Issuer has funds available for the payment
of such Distributions.
RIGHTS UPON LIQUIDATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Issuer involving the liquidation of the Debentures, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Issuer, the Liquidation Distribution in cash. See "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt, but entitled to receive
payment in full of principal and interest before any stockholders of the Company
receive payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Issuer (other than the Issuer's obligations to the holders of the Preferred
Securities), the positions of a holder of such Preferred Securities and a holder
of such Debentures relative to other creditors and to stockholders of the
Company in the event of liquidation or bankruptcy of the Company would be
substantially the same.
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DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of the Company consists of
30,000,000 shares of Class A Common Stock, par value $0.01 per share, 10,000,000
shares of Class B Common Stock, par value $0.01 per share and 5,000,000 shares
of Preferred Stock, par value $1.00 per share (the "Preferred Stock"). As of
December 31, 1997, 4,161,657 shares of Class A Common Stock, 4,654,380 shares of
Class B Common Stock and no shares of Preferred Stock were issued and
outstanding. The following summary of certain provisions of the Company's
capital stock describes all material provisions of, but does not purport to be
complete and is subject to, and qualified in its entirety by, the Restated
Certificate and the By-laws of the Company that are included as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.
The Restated Certificate and By-laws contain certain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the Board and which may have the effect of delaying, deferring or
preventing a future takeover or change in control of the Company unless such
takeover or change in control is approved by the Board.
CLASS A COMMON STOCK
All of the outstanding shares of Class A Common Stock are validly issued,
fully paid and nonassessable. Subject to the prior rights of the holders of any
Preferred Stock, the holders of outstanding shares of Class A Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board may from time to time determine. See
"Dividend Policy." The shares of Class A Common Stock are not convertible and
the holders thereof have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Class A Common Stock are entitled to receive PRO RATA
the assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Preferred Stock then outstanding. Each outstanding share of Class
A Common Stock is entitled to one vote on all matters submitted to a vote of
stockholders. Except as otherwise required by law or the Restated Certificate,
the Class A Common Stock and Class B Common Stock vote together on all matters
submitted to a vote of the stockholders, including the election of Directors.
The Class A Common Stock is traded on Nasdaq under the symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B Common Stock generally have
identical rights to those of the Class A Common Stock except with respect to
voting power and conversion rights. Each share of Class B Common Stock is
entitled to ten votes on all matters submitted to a vote of stockholders, as
compared to one vote for each share of Class A Common Stock. Class B Common
Stock is convertible at the option of the holder, and mandatorily convertible
upon any transfer thereof (except to affiliates) and at any time that the MC
Stockholders and their affiliates, in the aggregate, do not beneficially own at
least 10% of the total outstanding shares of Common Stock, into Class A Common
Stock on a share-for-share basis. The Class B Common Stock is not registered
under the Securities Act and will not be listed for trading on any national
securities exchange or on Nasdaq.
PREFERRED STOCK
The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series. Satisfaction of any dividend preferences of outstanding shares
of
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Preferred Stock would reduce the amount of funds available for the payment of
dividends on shares of Common Stock. Holders of shares of Preferred Stock may be
entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of the Company before any payment is made to the
holders of shares of Common Stock. Under certain circumstances, the issuance of
shares of Preferred Stock may render more difficult or tend to discourage a
merger, tender offer or proxy contest, the assumption of control by a holder of
a large block of the Company's securities or the removal of incumbent
management. Upon the affirmative vote of a majority of the total number of
Directors then in office, the Board, without stockholder approval, may issue
shares of Preferred Stock with voting and conversion rights which could
adversely affect the holders of shares of Common Stock. Upon consummation of the
Offering, there will be no shares of Preferred Stock outstanding, and the
Company has no present intention to issue any shares of Preferred Stock. The
Stockholders Agreement provides that the affirmative vote of two-thirds of the
Board is required to issue any Preferred Stock.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
BY-LAWS
The Restated Certificate provides that stockholder action can be taken only
at an annual or special meeting of stockholders and cannot be taken by written
consent in lieu of a meeting. The Restated Certificate and the By-laws provide
that, except as otherwise required by law, special meetings of the stockholders
can only be called by the Chairman of the Board or the President of the Company,
or pursuant to a resolution adopted by a majority of the Board. Stockholders are
not permitted to call a special meeting or to require the Board to call a
special meeting.
The By-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and who
has given to the Company's Secretary timely written notice, in proper form, of
the stockholder's intention to bring that business before the meeting. Although
the By-laws do not give the Board the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted
at a special or annual meeting, the By-laws may have the effect of precluding
the conduct of certain business at a meeting if the proper procedures are not
followed or may discourage or defer a potential acquiror from conducting a
solicitation of proxies to elect its own slate of Directors or otherwise
attempting to obtain control of the Company.
The Restated Certificate and By-laws provide that the affirmative vote of
holders of at least 80% of the total votes eligible to be cast in the election
of Directors will be required to amend, alter, change or repeal certain of their
provisions. This requirement of a super-majority vote to approve amendments to
the Restated Certificate and By-laws could enable a minority of the Company's
stockholders to exercise veto power over any such amendments. In addition, the
Class B Common Stock has ten votes, as compared to one vote for each share of
Class A Common Stock, on all matters, including the election of Directors, to
come before the stockholders. By virtue of such stock ownership, the holders of
the Class B Common Stock will be able to control the vote on all matters
submitted to a vote of the holders of Common Stock, including the election of
Directors, amendments to the Restated Certificate and By-laws and approval of
significant corporate transactions. Such concentration of ownership could also
have the effect of delaying, deterring or preventing a change in control of the
Company that might otherwise be beneficial to stockholders. See "Risk
Factors--Control by Certain Stockholders."
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CERTAIN PROVISIONS OF DELAWARE LAW
The Company is subject to the "business combination" provisions of the
Delaware General Corporation Law. In general, such provisions prohibit a
publicly held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction is approved by the Board of
Directors prior to the date the "interested stockholder" obtained such status,
(ii) upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder," owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer, or (iii) on or subsequent to
such date the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit to a
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years, did own) 15% or
more of a corporation's voting stock. The statute could prohibit or delay
mergers or other takeover or change in control attempts with respect to the
Company and, accordingly, may discourage attempts to acquire the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate limits the liability of Directors to the fullest
extent permitted by the Delaware General Corporation Law. In addition, the
Restated Certificate provides that the Company shall indemnify Directors and
officers of the Company to the fullest extent permitted by such law. The Company
has entered into indemnification agreements with its current Directors and
executive officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock is Firstar
Trust Company.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership, disposition and conversion
of the Preferred Securities. Unless otherwise stated, this summary deals only
with Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance. This summary does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, foreign taxpayers (except to the
extent discussed under the heading "United States Alien Holders") or persons
that will hold the Preferred Securities as a position in a "straddle," as part
of a "synthetic security" or "hedge," as part of a "conversion transaction" or
other integrated investment or as other than a capital asset. This summary also
does not address the tax consequences to persons that have a functional currency
other than the United States Dollar. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
CLASSIFICATION OF THE DEBENTURES
The Company has taken the position that the Debentures will be classified
for United States Federal income tax purposes as indebtedness of the Company
under current law and, by acceptance of Preferred Securities, each holder
covenants to treat the Debentures as indebtedness and the Preferred Securities
as evidence of an indirect beneficial ownership interest in the Debentures. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The remainder of this discussion assumes that
the Debentures will be classified as indebtedness of the Company for United
States Federal income tax purposes.
CLASSIFICATION OF THE ISSUER
In the opinion of Kirkland & Ellis, special United States tax counsel to the
Issuer and the Company, the Issuer will not be classified as an association
taxable as a corporation for United States Federal income tax purposes.
Accordingly, for United States Federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Debentures, and each holder will be required to include in its
gross income any interest with respect to its allocable share of those
Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, the Company has the option to defer the payment of
interest on the Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the stated maturity of the
Debentures. The Company's option to extend the interest period will cause the
Debentures to be subject to the OID rules for United States Federal income tax
purposes. Accordingly, regardless of a holder's regular method of accounting, a
holder will recognize interest income (in the form of OID) on a daily basis
under a constant yield method over the term of the Debentures (including during
any Extension Period),
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regardless of the receipt of cash with respect to the period to which such
income is attributable and regardless of whether the Company exercises its
option to extend any interest payment period. The amount of OID that will be
recognized in any quarter will approximately equal the amount of income that
accrues on the Debentures in that quarter at the stated interest rate.
As a result, holders will include interest (in the form of OID) in gross
income in advance of the receipt of cash, and any holders who dispose of
Preferred Securities or convert Preferred Securities into Class A Common Stock
prior to the record date for the payment of distributions will include interest
in gross income but will not receive any cash related thereto from the Issuer.
Because income on the Debentures will constitute interest, corporate holders
will not be entitled to a dividends-received deduction with respect to any
income recognized with respect to the Debentures.
REDEMPTION OF PREFERRED SECURITIES FOR DEBENTURES OR CASH UPON DISSOLUTION OF
THE ISSUER
Under certain circumstances, the Debentures may be distributed to holders in
exchange for the Preferred Securities. Under current law, such a distribution to
holders, for United States Federal income tax purposes, would be treated as a
nontaxable event to each holder, and each holder would receive an aggregate tax
basis in the Debentures distributed equal to such holder's aggregate tax basis
in its Preferred Securities exchanged therefor. A holder's holding period in the
Debentures so received would include the period during which the Preferred
Securities were held by such holder. If, however, the exchange is caused by a
Tax Event that has occurred and is continuing, which results in the Issuer being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to the Issuer and holders of the Preferred
Securities.
Under certain circumstances described herein (see "Description of the
Preferred Securities--Special Event Exchange or Redemption"), the Debentures may
be redeemed for cash and the proceeds of such redemption distributed to holders
in redemption of their Preferred Securities. Under current law, such a
redemption would, for United States Federal income tax purposes, constitute a
taxable disposition of the redeemed Preferred Securities, and a holder would
recognize gain or loss in the same manner as if it sold such redeemed Preferred
Securities for cash.
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. The
tax basis of a Preferred Security will be increased by the amount of any
interest (in the form of OID) that is included in income, and will be decreased
by the amount of any payment made by the Company on the Debentures. In general,
such gain or loss will be a capital gain or loss and will be a long-term capital
gain or loss if the Preferred Securities have been held for more than one year
at the time of sale. Long-term capital gain of an individual U.S. Holder is
subject to a maximum United States Federal income tax rate of 28% in respect of
capital assets held for more than one year. The maximum tax rate is reduced to
20% for capital assets held for more than 18 months. Capital gain on the
disposition of assets held for not more than one year is taxed at the rates
applicable for ordinary income (i.e., up to 39.6%).
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Debentures. A holder who disposes of its Preferred Securities between record
dates for payments of distributions thereon will be required to include in
income as ordinary income any accrued but unpaid interest (in the form of OID)
on the Debentures to the date of disposition and to add such amount to its
adjusted tax basis in its PRO RATA share of the underlying Debentures deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis, such holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States Federal income tax purposes.
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CONVERSION OF PREFERRED SECURITIES INTO CLASS A COMMON STOCK
A holder of Preferred Securities generally will not recognize income, gain
or loss upon the conversion of the Preferred Securities into Class A Common
Stock through the Conversion Agent. A holder of Preferred Securities will,
however, recognize gain upon the receipt of cash in lieu of a fractional share
of Class A Common Stock generally equal to the amount of cash received less such
holder's tax basis in such fractional share. Such holder's tax basis in Class A
Common Stock received upon conversion should generally be equal to such holder's
tax basis in the Preferred Securities delivered to the Conversion Agent for
exchange (which will include any accrued but unpaid OID) less the basis
allocated to any fractional share for which cash is received, and such holder's
holding period in the Class A Common Stock received upon conversion should
generally begin on the date such holder acquired the Preferred Securities that
are subsequently delivered to the Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Debentures were
adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Class A Common Stock into or for which the
Debentures are convertible or exchangeable) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
antidilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Class A Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
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 foreign estate or trust.
Under present United States Federal income tax law:
(a) payments by the Issuer or any of its paying agents to any holder of a
Preferred Security who or which is a United States Alien Holder will not be
subject to United States Federal withholding tax; provided, that (i) the
beneficial owner of the Preferred Security does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (ii) the beneficial owner of the Preferred
Security is not a controlled foreign corporation that is related to the Company
through stock ownership, and (iii) either (A) the beneficial owner of the
Preferred Security certifies its status as a United States Alien Holder to the
Issuer or its agent, under penalties of perjury, and provides its name and
address or (B) (x) 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 Preferred Security in
such capacity, certifies to the Issuer or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner by it or by a
Financial Institution holding such security for the beneficial owner and
furnishes the Issuer or its agent with a copy thereof; or (y) with respect to
payments after December 31, 1998, a "qualified intermediary" (which includes
certain foreign financial institutions, foreign clearing organizations or
foreign branches of United States financial institutions or clearing
organizations which have entered into withholding agreements with
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the Internal Revenue Service and have received appropriate certification from
the beneficial owner) provides the Issuer or any of its paying agents with an
intermediary withholding certificate;
(b) dividends paid with respect to Class A Common Stock to a United States
Alien Holder generally will be subject to withholding of United States Federal
income tax at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty), unless the dividend (i) is effectively connected
with the conduct of a trade or business of the United States Alien Holder within
the United States and certain certification requirements are satisfied, or (ii)
if an income tax treaty applies, is attributable to a United States permanent
establishment of the United States Alien Holder;
(c) except to the extent that an applicable treaty otherwise provides, a
United States Alien Holder generally will be taxed in the same manner as other
holders with respect to interest (in the form of OID) or dividends if the income
is effectively connected with a United States trade or business of the United
States Alien Holder (effectively connected interest (in the form of OID) or
dividends received by a corporate United States Alien Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty);
(d) a United States Alien Holder of a Preferred Security or Class A Common
Stock generally will not be subject to United States Federal income or
withholding tax on any gain (other than that attributable to accrued but unpaid
interest (in the form of OID), which is taxable in the manner described above)
realized upon the sale or other disposition of a Preferred Security or Class A
Common Stock (including the receipt of cash in lieu of fractional shares upon
conversion of Preferred Securities into shares of Class A Common Stock), unless
(i) (A) the gain is effectively connected with the conduct of a trade or
business of the United States Alien Holder in the United States or (B) if a tax
treaty applies, the gain is attributable to a United States permanent
establishment of the United States Alien Holder; (ii) in the case of a United
States Alien Holder who is an individual and holds the Preferred Securities or
Class A Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the disposition and certain
other conditions are met; (iii) the United States Alien Holder is subject to tax
pursuant to the provisions of United States Federal income tax laws applicable
to certain United States expatriates; or (iv) (A) the Company is or has been a
"U.S. real property holding corporation" for United States Federal income tax
purposes at any time during the five-year period ending on the date of
disposition, or, if shorter, the period during which the United States Alien
Holder held the Preferred Securities or Class A Common Stock and (B) if the
interest sold is considered stock that is "regularly traded on an established
securities market" at any time during the year of disposition, the United States
Alien Holder meets certain minimum ownership requirements; and
(e) except to the extent that an applicable treaty otherwise provides, a
United States Alien Holder generally will be taxed in the same manner as other
holders with respect to gain on the sale or disposition of Preferred Securities
or Class A Common Stock if the gain is effectively connected with a United
States trade or business of the United States Alien Holder (effectively
connected gain realized by a corporate United States Alien holder may also,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate or such lower rate as may be specified by an applicable income tax
treaty).
A United States Alien Holder who sells or otherwise disposes of Preferred
Securities or Class A Common Stock generally will recognize gain or loss that is
subject to United States Federal income tax if (i) the Company is or has been a
"U.S. real property holding corporation" during the period described in (d) (iv)
(A) above, and (ii) if the interest sold is considered stock that is "regularly
traded on an established securities market" at any time during the calendar year
of disposition, the United States Alien Holder meets certain minimum ownership
requirements. The Company does not believe that it is a U.S. real property
holding corporation as of the date hereof, although it has not determined or
established whether it will be a U.S. real property holding corporation in the
future.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for
99
<PAGE>
purposes of the withholding discussed above and, under the current
interpretation of such regulations, for purposes of determining the
applicability of an income tax treaty rate. Recently published final Treasury
Regulations (the "1997 Withholding Regulations"), generally effective for
payments after December 31, 1998, provide certain presumptions which differ from
the presumption described above. Under the 1997 Withholding Regulations, a
United States Alien Holder of Class A Common Stock that wishes to claim the
benefit of a treaty rate is required to satisfy applicable certification
requirements. In addition, the 1997 Withholding Regulations provide that
dividend payments are generally subject to information reporting and backup
withholding unless applicable certification requirements are satisfied. The 1997
Withholding Regulations also require, in the case of interest or dividends with
respect to Preferred Securities or Common Stock held by a foreign partnership,
that (x) the certification requirements described above be provided by the
partners rather than by the foreign partnership and (y) the partnership provide
certain information, which in certain circumstances may include a United States
taxpayer identification number. A look-through rule would apply in the case of
tiered partnerships.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to
noncorporate holders on Forms 1099, which forms will be mailed to holders of
record prior to January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may be
subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's United States Federal income tax,
provided the required information is timely filed with the Internal Revenue
Service.
POSSIBLE TAX LEGISLATION
Prospective investors should be aware that legislation has been introduced
in the United States Congress in the past that would, if enacted, deny an
interest deduction to issuers of instruments such as the Debentures. No such
legislation has been enacted. There can be no assurance, however, that similar
legislation will not ultimately be enacted into law, or that other developments
will not occur after the date hereof that would adversely affect the tax
treatment of the Debentures and could result in the exchange of the Debentures
for Preferred Securities or, in certain limited circumstances, the redemption of
the Debentures by the Company and the distribution of the resulting cash in
redemption of the Preferred Securities. See "Description of the Preferred
Securities--Special Event Exchange or Redemption."
100
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Issuer and the Company have agreed to sell to each of the underwriters named
below (the "Underwriters"), and each of the Underwriters has severally agreed to
purchase from the Issuer and the Company, the respective number of Preferred
Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
- -------------------------------------------------------------------------------- -----------
<S> <C>
Robert W. Baird & Co. Incorporated..............................................
Piper Jaffray Inc...............................................................
-----------
Total......................................................................... 2,000,000
-----------
-----------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 2,000,000 Preferred
Securities offered hereby if any are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Issuer and the Company have been advised by the Underwriters that the
Underwriters propose to offer such Preferred Securities to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow and such dealers may re-allow a concession not in
excess of $ per share to other dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
be changed by the Underwriters.
The Issuer and the Company have granted to the Underwriters an option,
expiring 30 days from the date of this Prospectus, to purchase up to 300,000
additional Preferred Securities at the public offering price set forth on the
cover page of this Prospectus. The Underwriters may exercise such option solely
to cover over-allotments, if any, made in connection with the sale of the
Preferred Securities that the Underwriters have agreed to purchase. To the
extent the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.
The Issuer and the Company have agreed that, except with the prior written
consent of Robert W. Baird & Co. Incorporated, during the 45 days following the
date of this Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any Preferred Securities, any preferred stock or any other securities
(including any backup undertakings of such preferred stock or other securities)
of the Company or of the Issuer, in each case that are substantially similar to
the Preferred Securities, or any securities convertible into or exchangeable for
the Preferred Securities or such substantially similar securities of either the
Issuer or the Company.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Debentures of the Company,
the Underwriting Agreement provides that the Company will pay as compensation to
the Underwriters for arranging the investment therein of such proceeds, $ per
Preferred Security ($ in the aggregate) for the accounts of the several
Underwriters (or $ in the aggregate if the Underwriters exercise the
over-allotment option in full).
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Preferred
Securities. Specifically, the Underwriters may over-allot the Offering, creating
a syndicated short position. In addition, the Underwriters may bid for, and
purchase, shares of Preferred Securities and Class A Common Stock in the open
market to cover syndicate short positions or to stabilize the price of the
Preferred Securities or Class A Common Stock. Finally, the
101
<PAGE>
Underwriters may reclaim selling concessions allowed for distributing the
Preferred Securities or Class A Common Stock in the Offering, if the
Underwriters repurchase previously distributed Preferred Securities or Class A
Common Stock in syndicate covering transactions, in stabilization transfers or
otherwise. Any of these activities may stabilize or maintain the market price of
the Preferred Securities or the Class A Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Underwriters and dealers may engage in passive market making
transactions in the Class A Common Stock in accordance with Rule 103 of
Regulation M promulgated by the Securities and Exchange Commission (the
"Commission"). In general, a passive market maker may not bid for, or purchase,
the Class A Common Stock at a price that exceeds the highest independent bid. In
addition, the net daily purchases made by any passive market maker generally may
not exceed 30% of its average daily trading volume in the Class A Common Stock
during a specified two-month prior period, or 200 shares, whichever is greater.
A passive market maker must identify passive market making bids as such on
Nasdaq electronic inter-dealer reporting system. Passive market making may
stabilize or maintain the market price of the Class A Common Stock above
independent market levels. Underwriters and dealers are not required to engage
in passive market making and may end passive market making activities at any
time.
Robert W. Baird & Co. Incorporated has performed investment banking services
for the Company in the past for which it has received customary compensation.
The Underwriting Agreement provides that the Company, Dura Operating Corp.
and the Issuer will indemnify the Underwriters against certain liabilities under
the Securities Act of 1933 or contribute to payments the Underwriters may be
required to make in respect thereof.
Application has been made to have the Preferred Securities listed on Nasdaq,
subject to official notice of issuance, under the symbol "DRRAP."
LEGAL MATTERS
Certain legal matters for the Company and the Issuer with respect to the
Debentures and the validity of the Guarantee will be passed upon for the Company
and the Issuer by Kirkland & Ellis, a partnership including professional
corporations, Chicago, Illinois. Certain matters of Delaware law relating to the
validity of the Preferred Securities, the enforceability of the Trust Agreement
and the formation of the Issuer will be passed upon by Richards, Layton &
Finger, P.A., special Delaware counsel to the Company and the Issuer. Certain
legal matters will be passed upon for the Underwriters by Gardner, Carton &
Douglas, Chicago, Illinois.
EXPERTS
The audited financial statements included in this Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
AVAILABLE INFORMATION
The Company and the Issuer have filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the securities offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement and
the exhibits and schedules thereto, to which reference is hereby made.
Statements made in this Prospectus as to the contents of any agreement or other
document are not necessarily complete; with respect to each such agreement or
other document filed as an exhibit to the Registration Statement,
102
<PAGE>
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
this reference.
The Company is subject to the information requirements of the Exchange Act
(Commission File No. 0-21139), and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial statements and other matters. The Registration
Statement, as well as such reports, proxy statements and other information, may
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and should be available for inspection and copying at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates by
writing to the Commission Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Web site that contains
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Such material can also be inspected at the reading room of
the library of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., 2nd Floor, Washington, D.C. 20006.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting securities of
the Issuer will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Issuer has no independent operations
and exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Issuer and investing the proceeds
thereof in the Debentures issued by the Company and (iii) the obligations of the
Issuer under the Preferred Securities are fully and unconditionally guaranteed
by the Company. See "Dura Automotive Systems Capital Trust," "Description of the
Guarantee" and "Description of the Debentures."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company 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 offering of the Preferred Securities shall be deemed
incorporated by reference in this Prospectus and a part hereof from the
respective date of filing each such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other 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 UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM A
COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT
HAVE BEEN INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO DURA AUTOMOTIVE
SYSTEMS, INC., 4508 IDS CENTER, MINNEAPOLIS, MINNESOTA 55402, TELEPHONE (612)
342-2311.
The following document filed by the Company with the Commission under the
Exchange Act are incorporated herein by reference: the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
103
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997............................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997................. F-4
Consolidated Statements of Stockholders' Investment for the years ended December 31, 1995, 1996 and 1997... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Dura Automotive Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Dura
Automotive Systems, Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Dura Automotive Systems,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the 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
Minneapolis, Minnesota,
January 30, 1998
F-2
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 1,667 $ 4,148
Accounts receivable................................................... 49,490 79,032
Inventories........................................................... 18,093 30,301
Other current assets.................................................. 14,678 24,800
--------- ---------
Total current assets.............................................. 83,928 138,281
--------- ---------
Property, Plant and Equipment:
Land and buildings.................................................... 16,926 44,553
Machinery and equipment............................................... 42,800 73,892
Construction in progress.............................................. 2,811 6,616
Less-accumulated depreciation......................................... (15,190) (23,523)
--------- ---------
Net property, plant and equipment................................. 47,347 101,538
--------- ---------
Goodwill, net of accumulated amortization of $2,415 and $5,653.......... 103,885 160,063
Other Assets, net of accumulated amortiztion of $556 and $918........... 10,969 19,382
--------- ---------
$ 246,129 $ 419,264
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable...................................................... $ 30,230 $ 49,153
Accrued liabilities................................................... 26,090 36,583
Current maturities of long-term debt.................................. 80 2,241
--------- ---------
Total current liabilities......................................... 56,400 87,977
Long-Term Debt, net of current maturities............................... 77,376 178,081
Other Noncurrent Liabilities............................................ 24,986 51,498
--------- ---------
Commitments and Contingencies (Notes 3, 8, 9 and 10)
Stockholders' Investment:
Preferred stock, par value $1; 5,000,000 shares authorized; none
issued or outstanding............................................... -- --
Common stock, Class A; par value $.01; 30,000,000 shares authorized;
3,795,000 and 4,161,657 shares issued and outstanding............... 38 42
Common stock, Class B; par value $.01; 10,000,000 shares authorized;
4,998,254 and 4,654,380 shares issued and outstanding............... 50 46
Additional paid-in capital............................................ 62,893 63,402
Retained earnings..................................................... 24,386 41,028
Cumulative translation adjustment..................................... -- (2,810)
--------- ---------
Total stockholders' investment.................................... 87,367 101,708
--------- ---------
$ 246,129 $ 419,264
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues...................................................... $ 253,726 $ 245,329 $ 449,111
Cost of sales................................................. 219,559 207,810 375,086
--------- --------- ---------
Gross profit............................................ 34,167 37,519 74,025
Selling, general and administrative expenses.................. 15,513 17,157 32,815
Amortization expense.......................................... 1,094 1,036 3,600
--------- --------- ---------
Operating income........................................ 17,560 19,326 37,610
Interest expense.............................................. 4,822 2,589 9,298
Gain on sale of window regulator business..................... 4,240 -- --
--------- --------- ---------
Income before income taxes.............................. 16,978 16,737 28,312
Provision for income taxes.................................... 6,852 6,609 11,670
--------- --------- ---------
Net income.............................................. $ 10,126 $ 10,128 $ 16,642
--------- --------- ---------
--------- --------- ---------
Basic earnings per share (Note 3)............................. $ 2.04 $ 1.57 $ 1.89
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share (Note 3)........................... $ 2.03 $ 1.57 $ 1.88
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
CLASS A CLASS B ADDITIONAL CUMULATIVE
----------------------- ----------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
---------- ----------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994................. -- $ -- 4,904,186 $ 49 $ 13,237 $ 4,132 $ --
Repurchase of common stock, net.......... -- -- (46,204) -- (136) -- --
Issuance of common stock................. -- -- 149,325 1 274 -- --
Net income............................... -- -- -- -- -- 10,126 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1995................. -- -- 5,007,307 50 13,375 14,258 --
Initial public offering of common stock,
net.................................... 3,795,000 38 -- -- 49,537 -- --
Repurchase of common stock, net.......... -- -- (9,053) -- (19) -- --
Net income............................... -- -- -- -- -- 10,128 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1996................. 3,795,000 38 4,998,254 50 62,893 24,386 --
Sale of stock under Employee Stock
Discount Purchase Plan................. 16,922 -- -- -- 383 -- --
Exercise of options...................... 5,861 -- -- -- 85 -- --
Collection of common stock subscriptions
receivable............................. -- -- -- -- 41 -- --
Conversion from Class B to Class A....... 343,874 4 (343,874) (4) -- -- --
Change in cumulative translation
adjustment............................. -- -- -- -- -- -- (2,810)
Net income............................... -- -- -- -- -- 16,642 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1997................. 4,161,657 $ 42 4,654,380 $ 46 $ 63,402 $ 41,028 $ (2,810)
---------- --- ---------- --- ----------- --------- -----------
---------- --- ---------- --- ----------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 10,126 $ 10,128 $ 16,642
Adjustments required to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization......................... 5,578 6,079 12,303
Deferred income tax provision......................... 5,067 3,331 1,521
Gain on sale of window regulator business............. (4,240) -- --
Change in other operating items:
Accounts receivable................................. 11,772 (2,248) (12,841)
Inventories......................................... 2,167 458 2,512
Other current assets................................ (1,405) 3,038 (7,803)
Accounts payable and accrued liabilities............ (15,927) (994) 3,479
Other assets and liabilities........................ -- -- (7,297)
--------- --------- ---------
Net cash provided by operating activities......... 13,138 19,792 8,516
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net................................. (6,116) (6,260) (16,242)
Acquisitions, net......................................... -- (83,850) (70,481)
Net proceeds from sale of window regulator business....... 18,006 -- --
Investments in joint ventures and other................... (462) (4,983) (6,663)
--------- --------- ---------
Net cash provided by (used in) investing
activities........................................ 11,428 (95,093) (93,386)
--------- --------- ---------
FINANCING ACTIVITIES:
Borrowings under revolving credit facility................ 95,500 145,500 267,987
Repayments of revolving credit facility................... (105,750) (68,500) (174,869)
Repayments of debt........................................ (12,740) (51,320) (6,008)
Stock offering proceeds, net.............................. -- 49,575 --
Sale (repurchase) of common stock, net.................... 139 (19) 510
--------- --------- ---------
Net cash provided by (used in) financing
activities........................................ (22,851) 75,236 87,620
--------- --------- ---------
EFFECT OF EXCHANGE RATE ON CASH............................. -- -- (269)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS................... 1,715 (65) 2,481
CASH AND CASH EQUIVALENTS, beginning of period.............. 17 1,732 1,667
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 1,732 $ 1,667 $ 4,148
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for--
Interest................................................ $ 4,822 $ 3,195 $ 8,715
--------- --------- ---------
--------- --------- ---------
Income taxes............................................ $ 2,285 $ 2,087 $ 5,589
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Dura Automotive Systems, Inc. (the Company) and subsidiaries designs and
manufactures driver control systems, engineered mechanical components and
cable-related systems for the global automotive industry. The Company has
manufacturing facilities located in Indiana, Michigan, Missouri, Australia,
Canada, France, Germany, Mexico and Spain, and in Brazil through its joint
venture in Pollone S.A. (See Note 4).
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
FISCAL YEAR:
The Company reports its operating results based on a 52-/53-week fiscal
year. For presentation purposes, the Company uses December 31 as its fiscal
year-end.
CASH EQUIVALENTS:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which approximates
fair value.
INVENTORIES:
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Raw materials.............................................. $ 9,384 $ 15,562
Work in process............................................ 4,767 9,126
Finished goods............................................. 3,942 5,613
--------- ---------
$ 18,093 $ 30,301
--------- ---------
--------- ---------
</TABLE>
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Excess of cost over billings on uncompleted tooling
projects.................................................. $ 7,541 $ 12,603
Deferred income taxes...................................... 6,067 9,350
Prepaid expenses........................................... 1,070 2,847
--------- ---------
$ 14,678 $ 24,800
--------- ---------
--------- ---------
</TABLE>
F-7
<PAGE>
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the production of customer-owned tooling to be
used by the Company in the manufacture of its products. The Company receives a
specific purchase order for this tooling and is reimbursed by the customer
within one operating cycle. Costs are deferred until reimbursed by the customer.
Forecasted losses on incomplete projects are recognized currently.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. For financial reporting
purposes, depreciation is provided on the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings 30 years
Machinery and equipment 3 to 20 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of are removed from the
related accounts, and any residual values are charged or credited to income.
OTHER ASSETS:
Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired and is being amortized on a straight-line basis over 40
years. Other assets principally consist of transaction costs incurred related to
the acquisitions and are being amortized over five to seven years.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill, the Company would recognize an
impairment loss.
Certain tooling and design costs related to previously proven product
designs are reimbursed by the Company's customers as the related product is sold
through an incremental increase in each product's unit selling price. Such costs
are capitalized and amortized using the unit of production method over the life
of the related tool. Amounts capitalized and included in other assets were $2.9
million at December 31, 1996 and $4.2 million at December 31, 1997. If the
Company forecasts that the amount of capitalized tooling and design costs
exceeds the amount to be realized through the sale of product, a loss is
recognized currently. Research and development and start-up costs, which are not
material, are expensed as incurred.
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Compensation and benefits.................................. $ 9,663 $ 17,170
Medical insurance.......................................... 5,641 7,012
Other...................................................... 10,786 12,401
--------- ---------
$ 26,090 $ 36,583
--------- ---------
--------- ---------
</TABLE>
F-8
<PAGE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Plant closure and consolidation costs...................... $ 5,205 $ 23,724
Legal and environmental.................................... 8,477 7,496
Post-retirement medical benefits........................... 6,097 7,188
Other...................................................... 5,207 13,090
--------- ---------
$ 24,986 $ 51,498
--------- ---------
--------- ---------
</TABLE>
REVENUE RECOGNITION AND SALES COMMITMENTS:
The Company recognizes revenue as its products are shipped to its customers.
The Company enters into agreements with its customers at the beginning of a
given vehicle's life to produce products. Once such agreements are entered into
by the Company, fulfillment of the customers' purchasing requirements is
generally the obligation of the Company for the entire production life of the
vehicle, generally with terms of up to 7 years. In certain instances, the
Company may be committed under existing agreements to supply product to its
customers at selling prices which are not sufficient to cover the direct cost to
produce such product. In such situations, the Company records a liability for
the estimated future amount of such losses. Such losses are recognized at the
time that the loss is probable and reasonably estimable.
INCOME TAXES:
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using currently enacted tax
rates.
COMMON STOCK:
The holder of each share of Class A common stock outstanding is entitled to
one vote per share and the holder of each share of Class B common stock
outstanding is entitled to ten votes per share.
STOCK OPTIONS:
The Company accounts for stock options under the provisions of Accounting
Principles Board Opinion (APB) No. 25, under which no compensation expense is
recognized when the stock options are granted. The pro forma effects had the
Company followed the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123 are included in Note 3.
USE OF ESTIMATES:
The preparation of consolidated 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
reporting period. The ultimate results could differ from those estimates.
F-9
<PAGE>
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated using
the average rates prevailing throughout the period. Translation gains or losses
are accumulated as a separate component of stockholders' investment.
RECLASSIFICATIONS:
Certain amounts previously reported in the 1995 and 1996 consolidated
financial statements have been reclassified to conform to the 1997 presentation.
The reclassifications had no effect on previously reported net income or
stockholders' investment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
During June 1997, the Financial Accounting Standards Board released SFAS No.
130, "Reporting Comprehensive Income," effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 establishes standards for reporting and
display in the financial statements of total net income and the components of
all other nonowner changes in equity, referred to as comprehensive income. The
Company will adopt SFAS No. 130 in 1998 and is currently analyzing the impact it
will have on the disclosures in the financial statements.
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in 1998
and is currently analyzing the impact it will have on the disclosures in its
financial statements.
3. STOCKHOLDERS' INVESTMENT:
INITIAL PUBLIC OFFERING OF CLASS A COMMON STOCK:
On August 14, 1996, the Company completed an initial public offering of
3,795,000 shares of its Class A common stock at $14.50 per share (the
"Offering"). The Company received net proceeds of approximately $50 million from
the Offering. Net proceeds from the Offering were used to repay certain
outstanding indebtedness. Immediately prior to the completion of the Offering,
the Company's board of directors and stockholders approved an Amended and
Restated Certificate of Incorporation and a recapitalization pursuant to which
the outstanding shares of the Company's Class A, B and C common stock were
exchanged for 4,998,254 shares in the aggregate of the Company's new Class B
common stock (out of a total of 10,000,000 shares of Class B common stock
authorized for issuance under the Amended and Restated Certificate of
Incorporation). Immediately after the consummation of the recapitalization and
the Offering, the Company had 8,793,254 shares of common stock outstanding. In
addition, the Company has options outstanding to purchase 32,045 shares of Class
B common stock at an exercise price of $1.45 per share. The accompanying
consolidated financial statements have been retroactively restated to give
effect to the recapitalization as if it had occurred at the beginning of the
earliest period presented.
EARNINGS PER SHARE:
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding during
the year. Diluted earnings per share include the
F-10
<PAGE>
dilutive effects of outstanding stock options using the treasury stock method as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income......................................... $ 10,126 $ 10,128 $ 16,642
--------- --------- ---------
--------- --------- ---------
Weighted average number of Class A common shares
outstanding....................................... -- 1,434 3,907
Weighted average number of Class B common shares
outstanding....................................... 4,967 5,000 4,901
Dilutive effect of outstanding stock options after
application of the treasury stock method.......... 22 28 61
--------- --------- ---------
Diluted shares outstanding......................... 4,989 6,462 8,869
--------- --------- ---------
--------- --------- ---------
Basic earnings per share........................... $ 2.04 $ 1.57 $ 1.89
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share......................... $ 2.03 $ 1.57 $ 1.88
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company adopted SFAS No. 128, "Earnings per Share," effective December
15, 1997. As a result, the Company's reported earnings per share (EPS) for 1995
and 1996 have been restated as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Primary EPS as reported........................................ $ 2.03 $ 1.57
Effect of SFAS No. 128......................................... 0.01 --
--------- ---------
Basic EPS as restated.......................................... $ 2.04 $ 1.57
--------- ---------
--------- ---------
Fully diluted EPS as reported.................................. $ 2.03 $ 1.57
Effect of SFAS No. 128......................................... -- --
--------- ---------
Diluted EPS as restated........................................ $ 2.03 $ 1.57
--------- ---------
--------- ---------
</TABLE>
STOCK OPTION PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the 1996 Key Employee Stock Option Plan
(the "Stock Option Plan"). Certain people who are full-time, salaried employees
of the Company are eligible to participate in the Stock Option Plan (an
"Employee Participant"). A committee of the board of directors selects the
Employee Participants and determines the terms and conditions of the options.
The Stock Option Plan provides for the issuance of options to Employee
Participants covering up to 600,000 shares of Class A common stock of the
Company,
F-11
<PAGE>
subject to certain adjustments reflecting changes in the Company's
capitalization. Information regarding the Stock Option Plan is as follows:
<TABLE>
<CAPTION>
Shares Exercise Weighted Average
Under Option Prices Exercise Price
------------- ----------- -------------------
<S> <C> <C> <C>
Outstanding, December 31, 1995............... -- $ -- $ --
Granted.............................. 108,134 14.50 14.50
Granted.............................. 76,100 20.75 20.75
Granted.............................. 3,500 23.50 23.50
------------- ----------- ------
Outstanding, December 31, 1996............... 187,734 14.50-23.50 17.20
Granted.............................. 20,000 28.00 28.00
Granted.............................. 80,000 24.50 24.50
Granted.............................. 44,300 25.75 25.75
Exercised............................ (5,861) 14.50-20.75 14.61
Forfeited............................ (9,500) 20.75 20.75
------------- ----------- ------
Outstanding, December 31, 1997............... 316,673 $14.50-28.00 $ 20.86
------------- ----------- ------
------------- ----------- ------
</TABLE>
Of the outstanding options at December 31, 1997, options covering 89,798
shares are currently exercisable with a weighted average exercise price of
$16.84 per share.
The weighted average fair value of options granted during 1996 was $8.92 and
during 1997 was $14.05.
As of December 31, 1997, the outstanding stock options granted in 1996 have
a remaining contractual life of 9 years and the outstanding stock options
granted in 1997 have a remaining contractual life of 10 years.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the Dura Automotive Systems, Inc.
Independent Director Stock Option Plan (the "Director Option Plan") that
provides for the issuance of options to Independent Directors, as defined, to
acquire up to 100,000 shares of the Company's Class A common stock, subject to
certain adjustments reflecting changes in the Company's capitalization. The
option exercise price must be at least 100 percent of the fair value of the
Class A common stock at the time the option is issued. Such option grants vest
six months from the date of grant. As of December 31, 1997, the Company had
granted options under the Director Option Plan to acquire 21,000 shares of the
Company's Class A Common Stock at an exercise price of $24.50 to $25.50 per
share. As of December 31, 1997, 5,000 of these options were exercisable.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the Dura Automotive Systems, Inc. Employee
Stock Discount Purchase Plan (the "Employee Stock Purchase Plan") which provides
for the sale of up to 500,000 shares of the Company's Class A common stock at
discounted purchase prices, subject to certain limitations. The cost per share
under this plan is 85% of the market value of the Company's Class A common stock
at the date of purchase, as defined. No shares of Class A common stock were
issued to employees pursuant to this plan during the year ended December 31,
1996 and 16,922 shares of Class A common stock were issued during the year ended
December 31, 1997. The weighted average fair value of shares sold in 1997 was
$22.63.
F-12
<PAGE>
STOCK-BASED COMPENSATION PLANS:
As discussed above, the Company has two stock option plans, the Stock Option
Plan and the Director Option Plan, and the Employee Stock Purchase Plan. The
Company has elected to continue to account for these plans under APB No. 25,
under which no compensation cost has been recognized. Had compensation cost for
these plans been determined as allowed under SFAS No. 123 the Company's pro
forma net income and pro forma earnings per share would have been as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C> <C>
Net income As Reported $ 10,126 $ 10,128 $ 16,642
Pro Forma 10,126 10,093 16,504
Basic earnings per share As Reported $ 2.04 $ 1.57 $ 1.89
Pro Forma 2.04 1.57 1.87
Diluted earnings per share As Reported $ 2.03 $ 1.57 $ 1.88
Pro Forma 2.03 1.56 1.86
</TABLE>
The effect of the stock offered under the Employee Stock Purchase Plan was
not material for 1996 and 1997.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 6.1% to 6.6% in 1996 and 5.7% to 6.5%
in 1997; expected life of seven years for 1996 and 1997; expected volatility of
19%, 24% and 28% in 1996 and 38% and 45% in 1997.
DIVIDENDS:
The Company has not declared or paid any cash dividends in the past. As
discussed in Note 5, the Company's debt agreement restricts the amount of
dividends the Company can declare or pay. As of December 31, 1997, under the
most restrictive debt covenants, the Company could not have paid any cash
dividends.
4. ACQUISITIONS AND DIVESTITURE:
In August 1996, the Company formed a joint venture with Excel Industries
Inc. (Excel) to participate equally in the acquisition of a 26 percent interest
in Pollone S.A. (Pollone), a manufacturer of automotive components and
mechanical assemblies headquartered in Brazil, for $5 million in total. The
Company has accounted for its portion of this investment using the cost method
of accounting. The joint venture has also loaned Pollone an additional $10.5
million pursuant to notes which bear interest at approximately 7% and mature
from August 1998 through August 2000. Certain of these notes are convertible
into equity of Pollone, at the joint venture's option. The investment and the
notes are included in other assets in the accompanying consolidated balance
sheets.
In October 1996, the Company acquired the parking brake business of Rockwell
Light Vehicle Systems France S.A. (the French Operations). The aggregate
purchase price was approximately $3.75 million. The parking brake business is
operated from a facility in Cluses, France. The pro forma effects of this
transaction are not material to the Company's results of operations for the year
ended December 31, 1997.
In December 1996, the Company acquired all of the outstanding common stock
of KPI Automotive Group (KPI) from Sparton Corporation for approximately $78.8
million in cash. KPI manufactures shifter systems, parking brake mechanisms,
brake pedals, underbody spare tire carriers and airbag components for the North
American automotive industry from facilities in Indiana and Michigan. The
acquisition was financed with proceeds from borrowings under the Company's
revolving credit facility.
F-13
<PAGE>
In January 1997, the Company acquired all of the outstanding common stock of
the VOFA Group (VOFA) for approximately $38 million in cash and assumed
indebtedness. The cash portion of the purchase price was financed with
borrowings under the Company's bank credit agreement. The Company will also make
additional payments of up to approximately $6 million if certain operating
targets are achieved by VOFA in the first three years following the acquisition.
VOFA manufactures shifter cables, brake cables and other light duty cables for
the European automotive and industrial markets from facilities in Dusseldorf,
Gehren and Daun, Germany and Barcelona, Spain.
In May 1997, the Company acquired the automotive parking brake business from
Excel for approximately $2.9 million. The pro forma effects of this transaction
are not material to the Company's results of operations for the year ended
December 31, 1997.
In August 1997, the Company acquired GT Automotive Systems, Inc. (GT
Automotive), headquartered in Livonia, Michigan. GT Automotive has manufacturing
facilities in Livonia and Warren, Michigan and Windsor and Brantford, Ontario,
Canada, with annual revenues of approximately $70 million. Initial consideration
for the acquisition of GT Automotive was $45 million in cash and assumed
indebtedness. The Company will also make additional payments of up to $15
million if certain operating targets are achieved by GT Automotive in the first
two years following the acquisition. The acquisition was financed with proceeds
from borrowings under the Company's bank credit agreement, as amended.
In December 1997, the Company acquired all of the outstanding common stock
of REOM Industries, an Australian designer and manufacturer of jacks and parking
brakes, for approximately $3.7 million. The pro forma effects of this
transaction are not material to the Company's results of operations for the year
ended December 31, 1997.
The acquisitions of the French Operations, KPI, VOFA, the Excel parking
brake business and GT Automotive have been accounted for using the purchase
method of accounting and, accordingly, the assets acquired and liabilities
assumed have been recorded at their fair values as of the dates of the
acquisitions. The excess of the purchase price over the fair value of the assets
acquired and liabilities assumed has been recorded as goodwill. The assets
acquired and liabilities assumed of the Excel parking brake business and GT
Automotive have been recorded based upon preliminary estimates of fair value as
of the dates of acquisition. The Company does not believe the final allocation
of purchase price will be materially different from preliminary allocations. Any
changes to the preliminary estimates will be reflected as an adjustment to
goodwill. Additional purchase liabilities recorded included approximately $13.6
million for costs associated with the shutdown and consolidation of certain
acquired facilities and $16.6 million for severance and related costs. At
December 31, 1997 liabilities for approximately $11.6 million for facility
related costs and $14.9 million in severance costs remain on the consolidated
balance sheet. Results of operations for these acquisitions have been included
in the accompanying consolidated financial statements since the dates of
acqusition.
On April 2, 1995, the Company sold the net assets of its window regulator
business to Rockwell International Corporation for approximately $18 million in
cash, resulting in a pretax gain of approximately $4.2 million. The results of
operations of the window regulator business have been included in the
accompanying consolidated financial statements through April 2, 1995, the date
of divestiture.
F-14
<PAGE>
Following are unaudited consolidated pro forma results of operations for the
year ended December 31, 1997 giving effect to the acquisition of GT Automotive
as if it were completed at the beginning of the period (in thousands, except per
share data):
<TABLE>
<CAPTION>
Pro Forma for
the Year Ended
Dec. 31, 1997
---------------
<S> <C>
Revenues.................................................... $ 489,752
---------------
---------------
Net income.................................................. $ 14,830
---------------
---------------
Basic earnings per share.................................... $ 1.68
---------------
---------------
Diluted earnings per share.................................. $ 1.67
---------------
---------------
</TABLE>
The unaudited pro forma consolidated financial information does not purport
to represent what the Company's financial position or results of operations
would actually have been if these transactions had occurred at such dates or to
project the Company's future results of operations.
5. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Revolving credit facility, due August 2002, interest at the lender's
prevailing reference rate plus 0.5% or the Eurocurrency rate plus 0.5%,
at the discretion of the Company (6.06% to 8.25% at December 31, 1996
and 3.94% to 8.50% at December 31, 1997)................................ $ 77,000 $ 165,158
Other.................................................................... 456 15,164
--------- ---------
77,456 180,322
Less--Current maturities................................................. (80) (2,241)
--------- ---------
$ 77,376 $ 178,081
--------- ---------
--------- ---------
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
1998............................................................... $ 2,241
<S> <C>
1999............................................................... 5,006
2000............................................................... 2,004
2001............................................................... 1,156
2002............................................................... 169,915
---------
$ 180,322
---------
---------
</TABLE>
The Company's bank credit agreement, as amended, consists of a revolving
credit facility with a committed amount of $200 million and is collateralized by
substantially all assets of the Company. The agreement also provides the Company
with the ability to denominate a portion of its borrowings in foreign currencies
up to an amount equivalent to $50 million ($30 million sub-limit for Deutsche
Marks). As of December 31, 1997, $158.8 million of borrowings outstanding under
the revolving credit facility are denominated in U.S. dollars, $2.8 million of
borrowings are denominated in Canadian dollars and $3.6 million of borrowings
are denominated in Deutsche Marks. The bank credit agreement requires the
Company to pay a facility fee on the commitment amount of 0.25% and contains
various restrictive covenants, which, among other matters, require the Company
to maintain certain financial ratios, including
F-15
<PAGE>
minimum liquidity and interest coverage. The bank credit agreement also limits
additional indebtedness, investments, rental obligations and cash dividends. The
Company was in compliance with all such covenants at December 31, 1997. In
addition, the Company has outstanding letters of credit in the amount of
approximately $3 million expiring through July 2000.
6. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current.......................................................... $ 1,785 $ 3,278 $ 10,149
Deferred......................................................... 5,067 3,331 1,521
--------- --------- ---------
Total............................................................ $ 6,852 $ 6,609 $ 11,670
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the provision for income taxes at the statutory rates to
the reported income tax provision is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Federal provision at statutory rates............................. $ 5,898 $ 5,858 $ 9,909
State taxes, net of federal benefit.............................. 685 652 990
Foreign provision in excess of U.S. tax rate..................... -- -- 444
Amortization of non-deductible goodwill.......................... 255 224 440
Foreign sales corporation benefit................................ -- (192) (260)
Other, net....................................................... 14 67 147
--------- --------- ---------
Total............................................................ $ 6,852 $ 6,609 $ 11,670
--------- --------- ---------
--------- --------- ---------
</TABLE>
A summary of deferred tax assets (liabilities) is as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Accrued legal and insurance costs........................................ $ 5,306 $ 6,150
Accrued plant closure and consolidation costs............................ 1,332 5,560
Depreciation and property basis differences.............................. (3,539) (4,100)
Deferred design costs.................................................... (1,251) (1,480)
Inventory valuation adjustments.......................................... 307 1,330
Postretirement benefit obligations....................................... 1,247 1,280
Accrued compensation costs............................................... 798 1,230
Other reserves and accruals not deductible for tax purposes.............. 1,867 568
Canadian net operating loss carryforwards................................ -- 1,475
Valuation allowance...................................................... -- (1,475)
--------- ---------
Net deferred income tax asset............................................ $ 6,067 $ 10,538
--------- ---------
--------- ---------
</TABLE>
The valuation allowance was established for the Canadian net operating
losses acquired in connection with the acquisition of GT Automotive as their
realization is not assured.
F-16
<PAGE>
7. MAJOR CUSTOMERS:
The Company sells its products directly to automobile manufacturers.
Following is a summary of customers that accounted for a significant portion of
consolidated revenues for each of the three years in the period ended December
31, 1997:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Ford...................................................... 52% 49% 42%
GM........................................................ 35 36 25
Chrysler.................................................. 6 8 7
</TABLE>
As of December 31, 1996 and 1997, receivables from these customers
represented 89 percent and 71 percent of total accounts receivable.
8. EMPLOYEE BENEFIT PLANS:
PENSION PLANS:
The Company sponsors two defined benefit pension plans which cover certain
hourly and salary employees. The Company's policy is to make annual
contributions to the plans to fund the normal cost and the unfunded frozen
initial liability over 11.5 years. The salaried employee related plan was
curtailed during 1996. The Company agreed to provide certain additional benefits
to a defined group of individuals who were included in the salaried employee
plan under a separate defined contribution plan, and has accrued the present
value of such benefits. The net effect of the curtailment and the provision for
benefits under the separate defined contribution plan was not material.
Net pension expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the year.......................... $ 413 $ 236 $ 185
Interest cost on projected benefit obligation......................... 277 243 252
Return on plan assets................................................. (150) (237) (232)
Net amortization and deferral......................................... 26 65 42
--------- --------- ---------
Net pension expense................................................. $ 566 $ 307 $ 247
--------- --------- ---------
--------- --------- ---------
</TABLE>
Pursuant to Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions," the Company has recorded deferred pension costs of
$194,000, $393,000 and $347,000 at December 31, 1995, 1996 and 1997 related to
the minimum pension liability, which are classified as other assets in the
accompanying consolidated balance sheets.
F-17
<PAGE>
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation.............................................. $ 2,825 $ 3,491
--------- ---------
--------- ---------
Accumulated benefit obligation......................................... $ 3,393 $ 4,157
--------- ---------
--------- ---------
Projected benefit obligation........................................... $ 3,393 $ 4,157
Plan assets at fair value................................................ 2,732 3,206
--------- ---------
Projected benefit obligation in excess of plan assets................ 661 951
Unrecognized net loss.................................................... (31) (527)
Prior service cost....................................................... (393) (347)
Adjustment to recognize minimum liability................................ 660 874
--------- ---------
Accrued pension costs.................................................. $ 897 $ 951
--------- ---------
--------- ---------
</TABLE>
The accumulated and projected benefit obligations were determined using an
assumed discount rate of 7.5 percent for the years ended December 31, 1996 and
1997. The assumed long-term rate of return on assets was 8.0 percent at December
31, 1996 and 1997. Plan assets consist principally of common stock, fixed income
securities and guaranteed investment contracts.
RETIREMENT SAVINGS PLANS:
The Company sponsors employee retirement savings plans which allow qualified
employees to provide for their retirement on a tax-deferred basis. In accordance
with the terms of the retirement savings plans, the Company is required to match
certain of the participants' contributions and/or provide employer contributions
based on the Company's performance and other factors. Such employer
contributions totaled $976,000, $1.6 million and $2.2 million during fiscal
1995, 1996 and 1997.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company has various postretirement medical benefit plans for certain
employee groups and has recorded a liability for its estimated obligations under
these plans.
Net periodic postretirement benefit cost is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the year..................... $ 74 $ 84 $ 101
Interest cost on projected benefit obligation.................... 679 558 433
Net amortization and deferral.................................... 124 127 (97)
--------- --------- ---------
Net periodic postretirement benefit cost....................... $ 877 $ 769 $ 437
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Accumulated benefit obligation........................................... $ 4,544 $ 5,755
Plan assets at fair value................................................ -- --
--------- ---------
Projected benefit obligation in excess of plan assets.................. 4,544 5,755
Prior service cost....................................................... 97 89
Unrecognized net gain.................................................... 1,456.... 1,344....
--------- ---------
Accrued postretirement benefits........................................ $ 6,097 $ 7,188
--------- ---------
--------- ---------
</TABLE>
For measurement purposes, a 7 percent annual rate of increase for the
healthcare cost trend was assumed for 1997. The rate was assumed to decrease 1
percent annually to 5 percent and remain level thereafter. Increasing the
assumed healthcare cost trend assumption by one percentage point would increase
the accumulated postretirement benefit obligation by approximately $510,000 and
the net periodic postretirement expense by approximately $89,000 for the year
ended December 31, 1997.
9. COMMITMENTS AND CONTINGENCIES:
ALKIN SERVICE AND SUPPLY AGREEMENTS:
In connection with the 1994 acquisition of Alkin Co. (Alkin), the Company
entered into agreements with Alkin whereby the Company receives services related
to data processing, payroll and personnel administration, and other
administrative matters. Amounts paid under these service agreements were $1.8
million, $1.3 million and $1.1 million for the years ended December 31, 1995,
1996 and 1997. Future minimum commitments under the service agreements are
approximately $80,000 in 1998. In addition, the Company and Alkin have mutually
agreed to supply each other's operations with certain items necessary for the
manufacture of their products. These supply agreements are for periods of up to
five years and are at terms which the Company believes are no less favorable
than could be obtained from an independent party.
LEASES:
The Company leases office and manufacturing space and certain equipment
under operating lease agreements which require it to pay maintenance, insurance,
taxes and other expenses in addition to annual rentals. Future annual rental
commitments at December 31, 1997 under these operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Amount
- --------------------------------------------- -----------
<S> <C>
1998 $ 1,306
1999 930
2000 631
2001 471
2002 353
Thereafter 869
-----------
$ 4,560
-----------
-----------
</TABLE>
LITIGATION:
The Company is party to certain claims arising in the ordinary course of
business. In the opinion of management, based upon the advice of legal counsel,
the outcomes of such claims are not expected to be material to the Company.
F-19
<PAGE>
10. RELATED PARTY TRANSACTIONS:
The Company paid fees to Hidden Creek Industries (HCI), an affiliate of the
Company, of approximately $250,000 in 1995 in connection with the divestiture,
$750,000 in 1996 in connection with the acquisitions and the Offering and
$850,000 in 1997 in connection with the acquisitions of VOFA and GT Automotive.
In addition, under the terms of a management agreement, which was terminated in
August 1996, the Company paid HCI monthly management fees for certain
administrative services. Total management fees of approximately $733,000 for the
year ended December 31, 1995 and $881,000 for the year ended December 31, 1996
are included in selling, general and administrative expenses in the accompanying
consolidated statements of operations. See Note 4 for discussion of acquisitions
and divestiture.
11. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1996 and 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Basic Diluted
Gross Operating Net Earnings Per Earnings Per
Revenues Profit Income Income Share Share
----------- --------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1996:
First...................... $ 59,303 $ 7,732 $ 3,336 $ 1,347 $ 0.27 $ 0.27
Second..................... 68,054 10,952 6,822 3,607 0.72 0.72
Third...................... 57,130 7,552 3,250 1,746 0.25 0.25
Fourth..................... 60,842 11,283 5,918 3,428 0.39 0.39
----------- --------- ----------- --------- ----- -----
----- -----
$ 245,329 $ 37,519 $ 19,326 $ 10,128 $ 1.57 $ 1.57
----------- --------- ----------- --------- ----- -----
----------- --------- ----------- --------- ----- -----
1997:
First...................... $ 107,367 $ 16,582 $ 7,803 $ 3,544 $ 0.40 $ 0.40
Second..................... 115,350 19,239 10,769 5,100 0.58 0.58
Third...................... 101,862 15,449 6,920 2,657 0.30 0.30
Fourth..................... 124,532 22,755 12,118 5,341 0.61 0.60
----------- --------- ----------- --------- ----- -----
----- -----
$ 449,111 $ 74,025 $ 37,610 $ 16,642 $ 1.89 $ 1.88
----------- --------- ----------- --------- ----- -----
----------- --------- ----------- --------- ----- -----
</TABLE>
The sum of per share amounts for the quarters does not necessarily equal the
total for the year due to the timing of the Offering and its effects on the
computation of weighted average number of shares outstanding.
F-20
<PAGE>
GRAPHIC APPENDIX
The inside front cover of the Prospectus contains a series of multi-colored
pictures of certain of the mechanical assemblies and systems manufactured by the
Company. The pictures depict and the captions read "Foot-Operated Parking Brake
System," "Console-Based Transmission Shifter System," "Hood Latch System,"
"Hand-Operated Parking Brake System," "License Plate Housing Assembly,"
"Underbody Tire Carrier," and "Accelerator and Brake Pedal System." In addition,
it contains a multi-colored, three-dimensional diagram of an automobile, with
several of the various mechanical assemblies and systems manufactured by the
Company graphically depicted within the automobile and labeled accordingly.
Specifically identified (with the following labels) are examples of (in
clockwise rotation) the "Primary & Secondary Hood Latch," "Dipstick Cable,"
"Shifter Cable," "Shift Mechanism," "Hand Brake," "Park Brake Cables," "Rear
Deck Latch," "Rear Deck Cable," "Suspension Arms," "Fuel Filler Door Cable,"
"Foot Brake," and "Hood Latch Cable." In the center of the inside front cover,
the "Dura" logo appears in red.
The inside back cover of the Prospectus contains a map of the World
highlighting the Company's manufacturing and product development locations.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE PREFERRED SECURITIES OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 15
The Company............................................................... 24
Use of Proceeds........................................................... 26
Price Range of Common Stock............................................... 26
Dividend Policy........................................................... 26
Capitalization............................................................ 27
Accounting Treatment...................................................... 27
Unaudited Pro Forma Financial Statements.................................. 28
Selected Consolidated Financial Data...................................... 31
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 33
Business.................................................................. 37
Management................................................................ 49
Security Ownership of Certain Beneficial Owners and Management............ 54
Dura Automotive Systems Capital Trust..................................... 57
Description of the Preferred Securities................................... 59
Description of the Guarantee.............................................. 78
Description of the Debentures............................................. 82
Relationship Among the Preferred Securities, the Debentures and the
Guarantee............................................................... 91
Description of Capital Stock.............................................. 93
Certain Federal Income Tax Consequences................................... 96
Underwriting.............................................................. 101
Legal Matters............................................................. 102
Experts................................................................... 102
Available Information..................................................... 102
Incorporation of Certain Documents by Reference........................... 103
Index to Consolidated Financial Statements................................ F-1
</TABLE>
$50,000,000
[LOGO]
2,000,000
CONVERTIBLE TRUST
PREFERRED SECURITIES
DURA AUTOMOTIVE
SYSTEMS CAPITAL
TRUST
% CONVERTIBLE TRUST
PREFERRED SECURITIES
(LIQUIDATION PREFERENCE $25 PER
CONVERTIBLE TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY, AND CONVERTIBLE INTO
CLASS A COMMON STOCK OF,
DURA AUTOMOTIVE
SYSTEMS, INC.
----------------
P R O S P E C T U S
----------------
ROBERT W. BAIRD & CO.
INCORPORATED
PIPER JAFFRAY INC.
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions) payable by the Issuer and the
Company in connection with the issuance and distribution of the Preferred
Securities pursuant to the Prospectus contained in this Registration Statement.
The Company will pay all of these expenses.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 16,963
NASD Filing Fee................................................... 6,250
Nasdaq Listing Application Fee....................................
Accounting Fees and Expenses......................................
Legal Fees and Expenses...........................................
Blue Sky Fees and Expenses........................................
Printing Expenses.................................................
Miscellaneous Expenses............................................
---------
Total........................................................... $ 500,000
---------
---------
</TABLE>
All expenses other than the Securities and Exchange Commission Registration
Fee and NASD Filing Fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person was an officer, director, employee or agent of such
corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interest except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws provide for the indemnification of directors and officers
of the Company to the fullest extent permitted by the General Corporation Law of
the State of Delaware.
II-1
<PAGE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
In that regard, the Amended and Restated By-laws of the Company provide that
the Company shall indemnify any person who was or is a party or is threatened to
be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that he,
or a person of whom he is the legal representative, is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee, fiduciary, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
liabilities and losses (including attorneys' fees actually and reasonably
incurred in connection with such proceeding); provided that the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the Board of Directors of the Company.
Under the Trust Agreement, the Company will agree to indemnify each of the
Trustees of the Dura Automotive Systems Capital Trust or any predecessor Trustee
for the Dura Automotive Systems Capital Trust, and to hold each Trustee harmless
against, any loss, damage, claims, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the Trust Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties under the Trust
Agreement.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S> <C>
3.1 Form of Amended and Restated Certificate of Incorporation of the Company incorporated by
reference to Exhibit 3.1 of the Registrant's Form S-1, Registration No. 333-06601 filed under
the Securities Act of 1933 (the "Form S-1").
3.2 Form of Amended and Restated By-laws of the Company, incorporated by reference to Exhibit 3.2 of
the Form S-1.
4.1 Stockholders Agreements, dated as of August 31, 1994, by and among the Company, Onex U.S.
Investments, Inc., J2R, Alkin, the HCI Stockholders (as defined therein) and the Management
Stockholders (as defined therein), incorporated by reference to Exhibit 4.1 of the Form S-1.
4.2 Amendment to Stockholders Agreement, dated May 17, 1995, by and between the Company, Onex DHC
LLC, J2R, Alkin, the HCI Stockholders (as defined therein) and the Management Stockholders (as
defined therein), incorporated by reference to Exhibit 4.2 of the Form S-1.
4.3 Registration Agreement, dated as of August 31, 1994, among the Company, Alkin and the MC
Stockholders (as defined therein), incorporated by reference to Exhibit 4.3 of the Form S-1.
4.4 Amendment to Registration Agreement, dated May 17, 1995, by and between the Company, the MC
Stockholders (as defined therein) and Alkin, incorporated by reference to Exhibit 4.4 of the
Form S-1.
4.5 Investor Stockholder Agreement, dated as of August 31, 1994, by and among the Company, Onex U.S.
Investments, Inc., J2R and certain other stockholders party thereto, incorporated by reference
to Exhibit 4.5 of the S-1.
4.6 Form of certificate representing Class A Common Stock of the Company, incorporated by reference
to Exhibit 4.6 of the Form S-1.
4.7 Amendment No. 1 to Amended and Restated Stockholders Agreement, dated August 13, 1996, by and
between the Company, Onex DHC LLC, J2R, Alkin Co. and the HCI Stockholders and Management
Stockholders listed therein, incorporated by reference to Exhibits 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997.
*4.8 Certificate of Trust of Dura Automotive Systems Capital Trust.
*4.9 Form of Amended and Restated Trust Agreement of Dura Automotive Systems Capital Trust among Dura
Automotive Systems, Inc., as Sponsor, The First National Bank of Chicago, as Property Trustee,
First Chicago Delaware, Inc., as Delaware Trustee and the Administrative Trustees named therein.
*4.10 Form of Junior Convertible Subordinated Indenture between Dura Automotive Systems, Inc. and The
First National Bank of Chicago, as Indenture Trustee.
*4.11 Form of Preferred Security (included in Exhibit A-1 to Exhibit 4.9 above).
*4.12 Form of Debenture (included in Exhibit A to Exhibit 4.10 above).
*4.13 Form of Guarantee Agreement between Dura Automotive Systems, Inc., as Guarantor, and The First
National Bank of Chicago, as Guarantee Trustee with respect to the Preferred Securities of Dura
Automotive Systems Capital Trust.
*5.1 Opinion of Kirkland & Ellis as to the validity of the issuance of the Debentures and the
Guarantee to be issued by the Company (including consent).
</TABLE>
II-3
<PAGE>
ITEM 16. EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S> <C>
*5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity of the
issuance of the Preferred Securities to be issued by Dura Automotive Systems Capital Trust
(including consent).
*8.1 Opinion of Kirkland & Ellis as to certain tax matters (including consent).
*12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen LLP.
*23.4 Consent of Kirkland & Ellis (including in Exhibits 5.1 and 8.1).
*23.5 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
24.1 Powers of Attorney.
*25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Indenture, Property Trustee under the Trust
Agreement, and Guarantee Trustee under the Guarantee.
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Chicago Delaware, Inc., as Delaware Trustee under the Trust Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrants have been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
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 Registrants will, unless in the opinion of their 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 Securities Act and will be governed by
the final adjudication of such issue. The undersigned Registrants hereby
undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rochester Hills, State of Michigan on the 3rd day of
March, 1998.
<TABLE>
<S> <C> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
By: /s/ DAVID R. BOVEE
------------------------------------------
David R. Bovee
VICE PRESIDENT
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
* Officer and Director
- ------------------------------ (principal executive March 3, 1998
Karl F. Storrie officer)
Vice President and Chief
* Financial Officer
- ------------------------------ (principal financial and March 3, 1998
Stephen E.K. Graham accounting officer)
*
- ------------------------------ Chairman of the Board and March 3, 1998
S.A. Johnson Director
*
- ------------------------------ Director March 3, 1998
Neil C. Anderson
*
- ------------------------------ Director March 3, 1998
Robert E. Brooker, Jr.
*
- ------------------------------ Director March 3, 1998
William H. Clement
*
- ------------------------------ Director March 3, 1998
Jack K. Edwards
*
- ------------------------------ Vice President and March 3, 1998
Robert R. Hibbs Director
*
- ------------------------------ Director March 3, 1998
James O'Loughlin
*
- ------------------------------ Director March 3, 1998
William L. Orscheln
*
- ------------------------------ Director March 3, 1998
Eric J. Rosen
*
- ------------------------------ Director March 3, 1998
Barbara A. Westhues
</TABLE>
II-5
<PAGE>
* The undersigned, by signing his name hereto, does execute this Registration
Statement on behalf of the above-named officers and/or Directors of the
Registrant pursuant to the Power of Attorney executed by such officers
and/or Directors and filed as an exhibit to this Registration Statement.
<TABLE>
<S> <C> <C>
/s/ DAVID R. BOVEE
------------------------------------------
David R. Bovee
ATTORNEY-IN-FACT
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rochester Hills, State of Michigan on the 3rd day of
March, 1998.
<TABLE>
<S> <C> <C>
DURA AUTOMOTIVE SYSTEMS CAPITAL TRUST
By: Dura Automotive Systems, Inc.
By: /s/ DAVID R. BOVEE
------------------------------------------
David R. Bovee
VICE PRESIDENT
</TABLE>
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
March 2, 1998
<PAGE>
EXHIBIT 24.1
DURA AUTOMOTIVE SYSTEMS, INC.
POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-3
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and/or
directors of the Dura Automotive Systems, Inc. (the "Company"), hereby appoint
Stephen E.K. Graham, David R. Bovee, Scott D. Rued or Carl E. Nelson, and each
of them, as attorneys-in-fact for the undersigned and for each of them (with
full power of substitution and resubstitution), for and in the name, place and
stead of each of undersigned officers and directors of the Company, to sign and
file with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act"), a Registration Statement on Form S-3 (the
"Registration Statement"), for the purpose of registering the issuance and sale
of: (i) up to $69.0 million in aggregate liquidation preference of Convertible
Trust Preferred Securities (the "Preferred Securities") by Dura Automotive
Systems Capital Trust (the "Issuer"); (ii) up to $69.0 million in aggregate
principal amount of Convertible Subordinated Notes of the Company; (iii) that
number of shares of Class A Common Stock of the Company that are issuable upon
the conversion of the Preferred Securities; and (iv) the guarantee by the
Company of the obligations of the Issuer under the Preferred Securities, and any
and all amendments, supplements and exhibits to any such Registration Statement,
including post-effective amendments and any registration statement filed under
Rule 462(b) under the Securities Act, to register additional securities of the
Company and the Issuer and any and all documents required to be filed with any
state securities regulating board or commission pertaining to such Registration
Statement or securities covered thereby, hereby granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing necessary or desirable to be done in order to
effectuate the same as fully and to all intents and purposes as each of the
undersigned might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or any of
their substitutes, may do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ KARL F. STORRIE Officer and Director
- ------------------------------ (principal executive February 26, 1998
Karl F. Storrie officer)
Vice President and Chief
/s/ STEPHEN E.K. GRAHAM Financial Officer
- ------------------------------ (principal financial and February 26, 1998
Stephen E.K. Graham accounting officer)
/s/ S.A. JOHNSON
- ------------------------------ Chairman of the Board and February 26, 1998
S.A. Johnson Director
/s/ NEIL C. ANDERSON
- ------------------------------ Director February 26, 1998
Neil C. Anderson
/s/ ROBERT E. BROOKER, JR.
- ------------------------------ Director February 26, 1998
Robert E. Brooker, Jr.
/s/ WILLIAM H. CLEMENT
- ------------------------------ Director February 26, 1998
William H. Clement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JACK K. EDWARDS
- ------------------------------ Director February 26, 1998
Jack K. Edwards
/s/ ROBERT R. HIBBS
- ------------------------------ Vice President and February 26, 1998
Robert R. Hibbs Director
/s/ JAMES O'LOUGHLIN
- ------------------------------ Director February 26, 1998
James O'Loughlin
/s/ WILLIAM L. ORSCHELN
- ------------------------------ Director February 26, 1998
William L. Orscheln
/s/ EARL J. ROSEN
- ------------------------------ Director February 26, 1998
Earl J. Rosen
/s/ BARBARA A. WESTHUES
- ------------------------------ Director February 26, 1998
Barbara A. Westhues
</TABLE>
