<PAGE>
RULE NO. 424(b)(3)
REGISTRATION NO. 333-42321
PROSPECTUS
$275,000,000
LOGO
MARK IV INDUSTRIES, INC.
4 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
----------------
The 4 3/4% Convertible Subordinated Notes Due 2004 (the "Notes") of Mark IV
Industries, Inc., a Delaware corporation ("Mark IV" or the "Company"), and the
shares of the Company's common stock, par value $.01 per share (the "Common
Stock" and, together with the Notes, the "Securities"), issuable upon
conversion of the Notes, may be offered for sale from time to time for the
account of certain holders of the Securities (the "Selling Holders") as
described under "Selling Holders." The Selling Holders may, from time to time,
sell the Securities offered hereby to or through one or more underwriters,
directly to other purchasers or through agents in ordinary brokerage
transactions, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale, at prices related to then prevailing market
prices or at negotiated prices. See "Plan of Distribution."
The Notes will mature on November 1, 2004, unless previously redeemed.
Interest on the Notes is payable semi-annually on May 1 and November 1 of each
year. Holders ("Holders") of the Notes are entitled, at any time through
November 1, 2004, subject to prior redemption, to convert any Notes or
portions thereof into Common Stock at a conversion price of $32.8125 per
share, subject to certain adjustments. See "Description of the Notes--
Conversion of Notes." The Common Stock is quoted on the New York Stock
Exchange ("NYSE") under the symbol "IV." On February 12, 1998, the last
reported sale price of the Common Stock on the NYSE was $23 3/16 per share.
The Notes are redeemable, in whole or in part, at the option of the Company,
at any time on or after November 3, 2000, at the declining redemption prices
set forth herein, plus accrued and unpaid interest. In the event of a Change
of Control (as defined herein), each Holder of Notes may require the Company
to repurchase such Holder's Notes in whole or in part at a redemption price of
100% of the principal amount thereof plus accrued and unpaid interest. See
"Description of Notes--Optional Redemption by the Company" and "--Repurchase
Upon Change of Control."
The Notes constitute general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company. In addition, because the
Company's operations are conducted primarily through its operating
subsidiaries, claims of creditors and holders of indebtedness of such
subsidiaries will have priority with respect to the assets and earnings of
such subsidiaries over the claims of creditors of the Company, including
Holders of the Notes.
The Notes were originally issued on October 29, 1997 in transactions exempt
from registration under the Securities Act of 1933, as amended (the
"Securities Act").
The Company will not receive any of the proceeds from the sale by the
Selling Holders of any of the Notes or the Common Stock issuable upon
conversion thereof.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The date of this Prospectus is February 13, 1998.
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including certain information incorporated by reference
herein, may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Any statements with regard
to the Company's expectations as to industry conditions and its financial
results, demand for or pricing of its products and other aspects of its
business may constitute forward-looking statements. Although the Company makes
such statements based on assumptions which it believes to be reasonable, there
can be no assurance that actual results will not differ materially from the
Company's expectations. Accordingly, the Company hereby identifies the
following important factors, among others, which could cause its results to
differ from any results which might be projected, forecasted or estimated in
any such forward-looking statements: (i) general economic and competitive
conditions in the markets and countries in which the Company operates, and the
risks inherent in international operations and joint ventures; (ii) the
Company's ability to continue to control and reduce its costs of production;
(iii) the level of consumer demand for new vehicles equipped with the
Company's products; (iv) the level of consumer demand for the Company's
aftermarket products, which varies based on such factors as the severity of
winter weather, the age of automobiles in the Company's markets and the impact
of improvements or changes in original equipment products; (v) the effect of
changes in the distribution channels for the Company's aftermarket and
industrial products; and (vi) the strength of the U.S. dollar against
currencies of other countries where the Company operates, as well as cross-
currencies between the Company's operations outside of the United States and
other countries with whom they transact business. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described in the
forward-looking statements. The Company does not intend to update forward-
looking statements.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Common Stock is listed on the New York Stock Exchange and, in
connection with such listing, the Company also files reports, proxy statements
and other information with the New York Stock Exchange. Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005. The Commission maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding issuers who file electronically with the Commission. The address of
that site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to
the Securities offered hereby. This Prospectus omits certain information
contained in the Registration Statement, including exhibits thereto, in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is made
to the Registration Statement and exhibits thereto, copies of which may be
inspected at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or obtained from the Commission at the same address at
prescribed rates.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the Company
are incorporated by reference in their entirety in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997, as amended by Amendment No. 1 on Form 10-K/A dated June
27, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
May 31, 1997, August 31, 1997 and November 30, 1997.
3. The Company's Current Report on Form 8-K dated August 11, 1997.
4. The Company's Current Report on Form 8-K dated November 7, 1997.
5. The Company's Proxy Statement for the Annual Meeting of Stockholders
held July 21, 1997.
6. The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form 8-A, dated August 28, 1987.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering of the Notes and the Common Stock into which such
Notes are convertible shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference in this Prospectus modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon the request of such person, a copy of
any or all of the documents referred to above, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
herein or in any incorporated document. Requests should be directed to
Investor Relations, Mark IV Industries, Inc., 501 John James Audubon Parkway,
P.O. Box 810, Amherst, New York 14226-0810 (telephone number: (716) 689-4972).
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere or incorporated by reference in this Prospectus. Unless the context
otherwise requires, all references herein to the "Company" or "Mark IV" include
Mark IV Industries, Inc. and its subsidiaries.
THE COMPANY
Mark IV is a diversified manufacturer of a broad range of proprietary and
other power and fluid transfer products and systems which serve primarily
automotive and industrial markets. Many of Mark IV's product groups have a
significant, and in certain instances the leading, share of their respective
markets. Products manufactured by Mark IV principally serve specialized needs
in markets in which relatively few manufacturers compete. These products are
sold primarily directly, but also through independent distributors, to other
manufacturers, commercial users and resellers in the United States and Europe
and, to a lesser extent, in Canada, Latin America and the Far East. Mark IV
operates 70 manufacturing facilities and 45 distribution and sales locations
and employs approximately 17,000 people in 20 countries.
Mark IV's business strategy is focused on building its worldwide Automotive
and Industrial business segments through internal growth and selective
strategic acquisitions, and the continuation of cost control and quality
improvement programs. The Company's operating strategy emphasizes establishing
cooperative programs with customers to engineer, design and develop higher
value-added systems in addition to individual products, the introduction of
new, more cost effective and durable products, and management for continuous
improvement.
In furtherance of these strategies, over its last five fiscal years, Mark IV
has: (i) enhanced its ability to provide a broader range of products to its
existing customers through its acquisition of Purolator Products Company, a
leading manufacturer of automotive and industrial filtration products and
systems in late fiscal 1995; (ii) established a joint venture in Brazil and is
in the process of establishing manufacturing facilities in Argentina and
Brazil; (iii) established distribution centers to serve markets in Latin
America and the Pacific Rim, and acquired manufacturing and distribution
facilities in Mexico; (iv) increased its industrial hose and couplings
production capacity and strengthened its position in the hose and couplings
products market through its acquisition of Imperial Eastman at the beginning of
fiscal 1997; (v) emphasized continuous product development, with a significant
amount of its current sales arising from the introduction of new products or
products which have been redesigned; (vi) initiated during fiscal 1997 a
restructuring of the Company's manufacturing and distribution facilities to
make them more focused and cost effective; and (vii) expanded its Automotive
segment with the acquisition in October 1997 of LPI Systemes Moteurs SA, a
manufacturer of air handling systems in France.
On October 29, 1997, the Company issued and sold $275,000,000 aggregate
principal amount of the Notes (the "Note Offering") to Bear, Stearns & Co. Inc.
which resold the Notes in transactions exempt from registration under the
Securities Act.
The Company's principal executive office is located at 501 John James Audubon
Parkway, P.O. Box 810, Amherst, New York 14226-0810 and its telephone number is
(716) 689-4972.
THE NOTES
Issuer...................... Mark IV Industries, Inc.
Securities Offered.......... Securities Offered $275,000,000 of 4 3/4%
Convertible Subordinated Notes Due 2004 issued
under an indenture dated as of October 29, 1997
(the "Indenture"), between the Company and The
Bank of New York, as trustee (the "Trustee").
4
<PAGE>
Interest Payment Dates...... May 1, and November 1, of each year, commencing
May 1, 1998.
Maturity.................... November 1, 2004.
Conversion Price............ Convertible into Common Stock of the Company at
$32.8125 per share, subject to adjustment as set
forth herein. See "Description of Notes--
Conversion of Notes."
Change of Control........... In the event of a Change of Control (as defined
herein), Holders of the Notes will have the right
to require the Company to repurchase their Notes
in whole or in part at a price of 100% of the
principal amount thereof plus accrued and unpaid
interest, if any. See "Description of Notes--
Repurchase Upon Change of Control."
Redemption.................. The Notes are redeemable, in whole or in part, at
the option of the Company, at any time on or
after November 3, 2000, at the declining
redemption prices set forth herein plus accrued
and unpaid interest thereon. See "Description of
Notes--Optional Redemption by the Company."
Ranking..................... The Notes constitute general unsecured
obligations of the Company and are subordinated
in right of payment to all existing and future
Senior Indebtedness (as defined herein) of the
Company. As of November 30, 1997, on a pro forma
basis, after giving effect to the Note Offering
and the intended use of the net proceeds thereof
to refinance all of the Company's $258,000,000
principal amount of 8 3/4% Senior Subordinated
Notes due April 1, 2003, the Company would have
had approximately $659,200,000 of Senior
Indebtedness outstanding, including $500,000,000
in aggregate principal amount ($497,400,000 net
of original issue discount) of senior
subordinated notes which rank senior to the
Notes. In addition, because the Company's
operations are conducted primarily through its
operating subsidiaries, claims of creditors and
holders of indebtedness of such subsidiaries have
priority with respect to the assets and earnings
of such subsidiaries over the claims of creditors
of the Company, including Holders of the Notes.
As of November 30, 1997, the aggregate
liabilities of such subsidiaries were
approximately $752,000,000. The Indenture does
not limit the amount of additional indebtedness
which the Company can create, incur, assume or
guarantee, nor does the Indenture limit the
amount of indebtedness which any subsidiary can
create, incur, assume or guarantee. See
"Description of Notes--Subordination."
Use of Proceeds............. The Company will not receive any of the proceeds
from the sale by the Selling Holders of the Notes
or the Common Stock issuable upon conversion
thereof. See "Use of Proceeds."
Listing..................... The Common Stock is quoted on the NYSE under the
symbol "IV."
5
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Holders of the Notes or the Common Stock issuable upon conversion thereof.
The net proceeds to the Company from the sale on October 29, 1997 of the
Notes (after payment of the Initial Purchaser's discount and estimated
expenses of the offering) was approximately $269,700,000. The net proceeds are
being used to refinance all of the Company's then outstanding $258,000,000
outstanding principal amount of 8 3/4% Senior Subordinated Notes due April 1,
2003 (the "8 3/4% Notes"). Through February 12, 1998, $184,903,000 principal
amount of the 8 3/4% Notes had been repurchased by the Company in open market
transactions at an aggregate cost of approximately $195,200,000. The 8 3/4%
Notes that remain outstanding will be redeemed on the optional redemption date
of April 2, 1998 at 104.375% of their aggregate principal amount.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is currently traded on the NYSE. The following table sets
forth for the fiscal periods indicated the high and low closing sale prices
per share of Common Stock as reported by the NYSE Composite Tape. All amounts
have been adjusted for the 5% stock dividends paid in April 1996 and May 1997.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
FISCAL 1996
First Quarter......................................... $18 1/4 $15 3/8
Second Quarter........................................ 21 3/8 18 1/4
Third Quarter......................................... 21 3/8 16 3/4
Fourth Quarter........................................ 20 16 3/8
FISCAL 1997
First Quarter......................................... 21 1/8 18 1/8
Second Quarter........................................ 22 3/8 19 1/2
Third Quarter......................................... 22 5/8 19
Fourth Quarter........................................ 22 1/2 19 7/8
FISCAL 1998
First Quarter......................................... 25 22 1/8
Second Quarter........................................ 25 7/16 23 1/4
Third Quarter......................................... 28 22
Fourth Quarter (through February 12, 1998)............ 23 3/16 20 1/4
</TABLE>
On February 12, 1998, the closing sale price of the Common Stock as reported
on the NYSE Composite Tape was $23 3/16. As of February 12, 1998, there were
approximately 2,100 holders of record of the Common Stock.
Mark IV currently pays a regular quarterly cash dividend of $.04 per share
(or $.16 per share on an annual basis) on its Common Stock. Mark IV intends to
continue to pay such quarterly dividend, subject to future results of
operations and other relevant factors. Pursuant to the Company's Credit
Agreement, payment of dividends on Mark IV's Common Stock is subject to
certain limitations.
6
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at November 30, 1997, and as adjusted to give effect to the
intended application of the net proceeds from the Note Offering to refinance
the Company's outstanding 8 3/4% Notes. See "Use of Proceeds."
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
---------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT:
Notes payable(1)...................................... $ 138,200 $ 138,200
Current maturities of long-term debt.................. 10,000 10,000
---------- ----------
Total short-term debt............................. $ 148,200 $ 148,200
========== ==========
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES:
SENIOR DEBT:
Credit Agreement(2)................................. $ -- $ --
Other............................................... 13,600 13,600
---------- ----------
Total senior debt................................. 13,600 13,600
---------- ----------
SUBORDINATED DEBT:
8 3/4% Senior Subordinated Notes due April 1, 2003.. 73,100 --
7 3/4% Senior Subordinated Notes due April 1, 2006.. 248,700 248,700
7 1/2% Senior Subordinated Notes due September 1,
2007............................................... 248,700 248,700
4 3/4% Convertible Subordinated Notes due November
1, 2004............................................ 275,000 275,000
---------- ----------
Total subordinated debt........................... 845,500 772,400
---------- ----------
Total long-term debt.............................. 859,100 786,000
---------- ----------
STOCKHOLDERS' EQUITY.................................. 756,900 756,900(3)
---------- ----------
Total capitalization.............................. $1,616,000 $1,542,900
========== ==========
</TABLE>
- --------
(1) Consists primarily of foreign notes payable.
(2) The Company's Credit Agreement, which expires on March 8, 2001, provides
for a revolving credit facility with borrowing availability of
$400,000,000 under a domestic facility and $100,000,000 under a multi-
currency facility. If any amounts were outstanding under the Credit
Agreement, the interest rate on such borrowings currently would be in a
range of 6.0% to 6.25% per annum.
(3) Before deducting any redemption premium (net of tax benefit) related to
the retirement of the remaining 8 3/4% Notes.
7
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial information
of the Company for each of the five fiscal years in the period ended February
28, 1997 and for the nine-month periods ended November 30, 1996 and 1997.
Information for the nine-month periods ended November 30, 1996 and 1997 is
unaudited but, in the opinion of management, includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation. The results of operations for the nine-month period ended
November 30, 1997 are not necessarily indicative of the results to be expected
for the full year. These tables should be read in conjunction with the
Company's Consolidated Financial Statements incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED LAST DAY OF FEBRUARY NOVEMBER 30,
------------------------------------------------------ -----------------------
1993(1) 1994(1) 1995(1) 1996(1) 1997 1996(1) 1997
---------- ---------- ---------- ---------- ---------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales from
continuing operations.. $ 806,700 $ 958,900 $1,306,400 $1,779,200 $2,076,000 $1,556,800 $1,655,300
========== ========== ========== ========== ========== ========== ==========
Operating income(2)..... $ 86,700 $ 104,100 $ 135,500 $ 188,300 $ 223,200 $ 170,600 $ 184,900
Restructuring charge.... -- -- -- -- 112,500 112,500 --
Interest expense........ 44,400 43,100 46,300 52,600 59,000 44,800 46,700
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
taxes.................. $ 42,300 $ 61,000 $ 89,200 $ 135,700 $ 51,700 $ 13,300 $ 138,200
========== ========== ========== ========== ========== ========== ==========
Income from continuing
operations(3):
Before restructuring
charge................ $ 26,700 $ 38,200 $ 55,000 $ 82,800 $ 100,200 $ 76,700 $ 84,900
Restructuring charge:.. -- -- -- -- (67,500) (67,500) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total continuing... $ 26,700 $ 38,200 $ 55,000 $ 82,800 $ 32,700 $ 9,200 $ 84,900
========== ========== ========== ========== ========== ========== ==========
Fully diluted income per
share from continuing
operations(4):
Actual:
Before restructuring
charge.............. $ .54 $ .72 $ .96 $ 1.24 $ 1.50 $ 1.15 $ 1.30
Restructuring charge. -- -- -- -- (1.01) (1.01) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total continuing... $ .54 $ .72 $ .96 $ 1.24 $ .49 $ .14 $ 1.30
========== ========== ========== ========== ========== ========== ==========
Pro forma
(Unaudited)(5):
Before restructuring
charge.............. $ 1.51 $ 1.29
Restructuring charge. (.90) --
---------- ----------
Total continuing... $ .61 $ 1.29
========== ==========
Cash dividends per $ .07 $ .08 $ .10 $ .11 $ .14 $ .10 $ .12
share(4)............... ========== ========== ========== ========== ========== ========== ==========
Fully-diluted weighted
average number of 58,200 58,700 60,700 66,600 66,700 66,700 65,800
shares outstanding(4).. ========== ========== ========== ========== ========== ========== ==========
OTHER FINANCIAL DATA (UNAUDITED):
EBITDA(6)(7)............ $ 112,000 $ 139,000 $ 179,800 $ 247,500 $ 292,200 $ 221,200 $ 242,600
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ratio of EBITDA to
interest expense
Actual................. 2.52x 3.23x 3.88x 4.71x 4.95x 4.94x 5.20x
Pro forma(5)........... 5.82x 5.95x
Ratio of earnings to
fixed charges(8):
Actual................. 1.86x 2.30x 2.75x 3.34x 3.48x 3.49x 3.57x
Pro forma(5)........... 4.06x 4.02x
<CAPTION>
AS OF THE LAST DAY OF FEBRUARY
------------------------------------------------------ NOVEMBER 30,
1993 1994 1995 1996 1997 1997
---------- ---------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 275,400 $ 312,800 $ 379,700 $ 404,900 $ 364,600 $ 542,500
Total assets............ $1,124,800 $1,282,300 $1,846,400 $2,013,100 $1,974,600 $2,389,400
Long-term debt,
excluding current
maturities............. $ 497,100 $ 567,200 $ 610,700 $ 642,500 $ 528,500 $ 859,100
Stockholders' equity.... $ 345,600 $ 345,400 $ 635,500 $ 725,500 $ 758,400 $ 756,900
</TABLE>
(See footnotes on following page)
8
<PAGE>
- --------
(1) Income statement amounts have been restated to reflect discontinued
operations.
(2) Represents income from continuing operations before the restructuring
charge, interest expense and taxes.
(3) Net of related tax effects.
(4) All share related amounts have been adjusted for previous stock
distributions.
(5) For the purpose of calculating the pro forma amounts, it is assumed the
Note Offering and the intended refinancing of the 8 3/4% Notes had each
occurred at the beginning of the period.
(6) "EBITDA" is defined as income from continuing operations before interest
expense, taxes and depreciation and amortization. EBITDA is presented
because it is a widely accepted indicator of funds available to service
debt, although it is not a U.S. generally accepted accounting principles
("GAAP") based measure of liquidity or financial performance. The Company
believes that EBITDA, while providing useful information, should not be
considered in isolation or as an alternative to net income and cash flows
as determined under GAAP.
(7) Excluding the restructuring charge in fiscal 1997.
(8) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before income taxes
and the restructuring charge, plus fixed charges and (ii) fixed charges
consist of interest expense incurred, capitalized interest, amortization
of debt expense and 15% of rental payments under operating leases (an
amount estimated by management to be the interest component of such
rentals). If the restructuring charge were included in the ratio
determination for fiscal 1997 and the nine-month period ended November 30,
1996, the actual ratio would be 1.76x and 1.24x, respectively.
9
<PAGE>
BUSINESS
Mark IV is a diversified manufacturer of a broad range of proprietary and
other power and fluid transfer products and systems which serve primarily
automotive and industrial markets. Many of Mark IV's product groups have a
significant, and in certain instances the leading, share of their respective
markets. Products manufactured by Mark IV principally serve specialized needs
in markets in which relatively few manufacturers compete. These products are
sold primarily directly, but also through independent distributors, to other
manufacturers, commercial users and resellers in the United States and Europe
and, to a lesser extent, in Canada, Latin America and the Far East. Mark IV
operates 70 manufacturing facilities and 45 distribution and sales locations
and employs approximately 17,000 people in 20 countries.
The Company classifies its operations into the following two business
segments: (i) Mark IV Automotive, which includes the design, manufacture and
distribution of (a) fuel, power transmission, and fluid handling systems and
components, and (b) filters and filtration systems, for the global automotive
aftermarket and OEM (original equipment manufacturers) market; and (ii) Mark
IV Industrial, which includes the design, manufacture and distribution of
power and fluid management systems and components for industrial OEM and
distribution markets worldwide.
Mark IV's business strategy is focused on building its worldwide Automotive
and Industrial business segments through internal growth and selective
strategic acquisitions, and the continuation of cost control and quality
improvement programs. The Company's operating strategy emphasizes establishing
cooperative programs with customers to engineer, design and develop higher
value-added systems in addition to individual products, the introduction of
new, more cost effective and durable products, and management for continuous
improvement.
In furtherance of these strategies, over its last five fiscal years, Mark IV
has: (i) enhanced its ability to provide a broader range of products to its
existing customers through its $286.3 million acquisition of Purolator
Products Company, a leading manufacturer of automotive and industrial
filtration products and systems in late fiscal 1995; (ii) established a joint
venture in Brazil and is in the process of establishing manufacturing
facilities in Argentina and Brazil; (iii) established distribution centers to
serve markets in Latin America and the Pacific Rim, and acquired manufacturing
and distribution facilities in Mexico; (iv) increased its industrial hose and
couplings production capacity and strengthened its position in the hose and
couplings products market through its $78.0 million acquisition of Imperial
Eastman at the beginning of fiscal 1997; (v) emphasized continuous product
development, with a significant amount of its current sales arising from the
introduction of new products or products which have been redesigned; and (vi)
initiated during fiscal 1997 a restructuring of the Company's manufacturing
and distribution facilities to make them more focused and cost effective.
RECENT DEVELOPMENTS
As part of the Company's strategy to become more focused within its
Industrial business segment, the Company sold its Professional Audio, Vapor
Corporation, Interstate Highway Sign, and Eagle Signal businesses and certain
other non-operating assets during fiscal 1997. Shortly after the end of the
fiscal year, the Company also sold its Gulton Data Systems and LFE Industrial
Systems businesses. The total of all of these divestitures generated gross
proceeds of approximately $313.0 million.
During fiscal 1997, the Company also initiated a restructuring of its
manufacturing and distribution facilities, which is expected to improve
customer service, reduce costs, and dedicate its facilities to either the
Automotive or Industrial business segments. The restructuring resulted in a
pre-tax charge against earnings of $112.5 million, with $51.8 million related
to cash expenditures required to be made primarily over a two-year period. The
remaining $60.7 million non-cash portion of the charge represents primarily
asset write-offs and pension benefits to be paid out of the Company's pension
fund. The Company believes that the restructuring will result in an annual
pre-tax cost savings of between $40.0 million and $45.0 million; however, the
restructuring activities are proceeding slower than originally scheduled.
While the closing of operations is proceeding as scheduled, the relocation and
start-up of product lines and distribution activities is behind schedule. The
Company is currently undertaking to accelerate restructuring to meet schedule
as it closes out its fiscal year ending February 28, 1998, and expects to
realize net benefits from the restructuring beginning sometime during the
first half and increasing into the second half of the next fiscal year ending
February 28, 1999.
10
<PAGE>
On October 2, 1997, as a part of its strategy to pursue selective strategic
acquisitions and expand its international presence, the Company acquired LPI
Systemes Moteurs SA ("LPI") for a cash purchase price of approximately $60.0
million. LPI operates three manufacturing facilities in France, and supplies
plastic air admission systems, which include air intake manifolds and cooling
modules produced by injection, welding and blow molding technologies, for the
automotive OEM markets. The LPI acquisition enables the Company's Automotive
segment to expand its systems capabilities to include air handling systems in
addition to the segment's existing fuel and fluid handling capabilities.
On October 29, 1997, the Company issued and sold $275,000,000 aggregate
principal amount of the Notes to Bear, Stearns & Co. Inc. which resold the
Notes in transactions exempt from registration under the Securities Act.
11
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the Directors
and Executive Officers of the Company.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITIONS AND OFFICES WITH THE COMPANY EXPIRES
---- --- -------------------------------------- --------
<S> <C> <C> <C>
Sal H. Alfiero...... 60 Chairman of the Board and Chief Executive 1999
Officer
William P. Montague. 51 President and Director 2000
Gerald S. Lippes.... 57 Secretary and Director 1998
Clement R. Arrison.. 67 Director 1999
Joseph G. Donohoo... 79 Director 2000
Herbert Roth, Jr.... 68 Director 1998
Kurt J. Johansson... 56 Senior Vice President --
Giuliano Zucco...... 50 Vice President --
Richard F. Bing..... 50 Vice President --
John J. Byrne....... 48 Vice President and Chief Financial Officer --
Frederic L. Cook.... 50 Senior Vice President--Administration --
Richard L. Grenolds. 48 Vice President and Chief Accounting Officer --
Douglas J. Fiegel... 50 Vice President, Financial Control & Reporting --
Patricia A. Richert. 47 Vice President and Chief Information Officer --
Mark G. Barberio.... 35 Treasurer --
</TABLE>
Sal H. Alfiero has been Chairman of the Board and Chief Executive Officer of
the Company since its incorporation. Mr. Alfiero serves as Director of Phoenix
Home Life Mutual Insurance Company and is also a Director of Marine Midland
Bank. He holds a B.S. degree in Aeronautical Engineering from Rensselaer
Polytechnic Institute and holds an M.B.A. degree from the Harvard Graduate
School of Business Administration.
William P. Montague has been employed by the Company since April 1972 and
was elected President and a Director effective March 1, 1996. He was
previously a Vice President of the Company from May 1974 and was elected
Executive Vice President and Chief Financial Officer in March 1986. He holds
both a B.S. degree in accounting and an M.B.A. degree from Wilkes University
and is a certified public accountant. He is a Director of Gibraltar Steel
Corporation and of Gleason Corp.
Gerald S. Lippes has been general counsel, Secretary and a Director of the
Company since its incorporation. He has been engaged in the private practice
of law in Buffalo, New York, since 1965 and is a partner of the firm of
Lippes, Silverstein, Mathias & Wexler LLP, Buffalo, New York. Mr. Lippes is
also a Director of Gibraltar Steel Corporation.
Clement R. Arrison has been a Director of the Company since November 1976.
He was President of the Company from 1976 until his retirement effective March
1, 1996. Mr. Arrison holds a B.S. degree in engineering from the University of
Michigan and holds a professional engineering license.
Joseph G. Donohoo has been a Director of the Company since its
incorporation. He is Chairman of the Board of The Gibson Group, Inc.
("Gibson"), a marketer of paper board, and Chairman of the Board of Clinch
River Corporation, a manufacturer of semi-chemical corrugating material.
Clinch River is a majority owned subsidiary of Gibson.
Herbert Roth, Jr. has been a Director of the Company since September 1985,
having been Chairman of the Board and Chief Executive Officer of LFE
Corporation prior to its acquisition by Mark IV in July 1985. Mr. Roth also
serves as a Director of Boston Edison Company; Phoenix Home Life Mutual
Insurance Company; Landauer, Inc.; Tech/Ops Sevcon, Inc.; and Phoenix Total
Return Fund, Inc., and is a Trustee of Phoenix Series Fund, Phoenix Multi
Portfolio Fund, and The Big Edge Series Fund.
12
<PAGE>
Kurt J. Johansson was elected Senior Vice President of the Company in
December 1994 and is President of the Company's Mark IV Automotive business
segment, headquartered in Solvesborg, Sweden, with responsibility for its
worldwide operations. Mr. Johansson has been employed by the Company since
October 1990. Mr. Johansson studied at the School of Economics and Business
Administration in Stockholm, Sweden, as well as at the Technical University in
Gothenburg, Sweden.
Giuliano Zucco was elected Vice President of the Company in March 1997, and
is Executive Vice President of the Company's Mark IV Automotive business
segment. Mr. Zucco has been employed by the Company since January 1991 and is
based in Turin, Italy. Mr. Zucco holds an Engineering degree and an M.B.A.
degree from the University in Turin, Italy.
Richard F. Bing was elected Vice President of the Company in May 1997, and
is President of Mark IV Industrial's Dayco Industrial Division, based in
Miamisburg, Ohio. Mr. Bing has been employed by the Company since 1976,
serving in various roles from Plant Manager of successively larger
manufacturing facilities, to Director of Manufacturing, and Vice President--
Materials Management and Procurement. He holds a B.S. degree in physical
science from Rutgers University and is certified in production and inventory
management.
John J. Byrne has been employed by the Company since September 1973 and was
elected Vice President and Chief Financial Officer in March 1996. He has been
a Vice President since March 1986 and was elected Vice President--Finance of
the Company in March 1988. He holds a B.S. degree in accounting from
Pennsylvania State University and an M.B.A. degree from Canisius College.
Frederic L. Cook was elected Senior Vice President--Administration in March
1988, and prior thereto, he had been Vice President--Finance of the Company
since May 1986. Prior to joining the Company in 1986, Mr. Cook was a tax
partner with the accounting firm of Coopers & Lybrand L.L.P., where he was
employed for 19 years. He holds a B.S. degree in accounting from the Rochester
Institute of Technology and is a certified public accountant.
Richard L. Grenolds was elected Vice President and Chief Accounting Officer
in July 1989. Prior to joining the Company in 1989, Mr. Grenolds was a general
practice partner with the accounting firm of Coopers & Lybrand L.L.P., where
he was employed for 17 years. He holds a B.S. degree in accounting from the
Rochester Institute of Technology and is a certified public accountant.
Douglas J. Fiegel was elected Vice President, Financial Control and
Reporting in 1990. Prior to that he was the Company's Controller since joining
the Company in 1986. He holds a B.B.A. degree in accounting from Niagara
University and is a certified public accountant.
Patricia A. Richert has been employed by the Company since 1973, and has
been Vice President and Chief Information Officer since 1990. From August 1994
to August 1996, she was also Vice President of Information Technology for the
Company's Dayco Products, Inc. subsidiary. She holds a B.S. degree in
accounting from the State University of New York at Buffalo.
Mark G. Barberio was elected Treasurer of the Company in August 1997. Mr
Barberio has been employed by the Company since 1985, serving in various
accounting and finance roles, and in August 1995 was appointed Director--
Global Treasury. He holds a B.S. degree in accounting from the Rochester
Institute of Technology and an M.B.A. degree from the State University of New
York at Buffalo.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 10, 1998 (except
as otherwise noted) with respect to all stockholders known by the Company to
be the beneficial owners of more than 5% of its outstanding Common Stock, each
Director, each Named Executive Officer in the Summary Compensation Table, and
all Executive Officers and Directors as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES(1) OF CLASS
---- --------- --------
<S> <C> <C>
Sal H. Alfiero.......................................... 4,449,903(2) 7.1%
William P. Montague..................................... 799,176(3) 1.3%
Gerald S. Lippes........................................ 1,629,967(4) 2.6%
Clement R. Arrison...................................... 1,490,396(5) 2.4%
Joseph G. Donohoo....................................... 12,158(6) *
Herbert Roth, Jr........................................ 20,103(7) *
Kurt J. Johansson....................................... 73,089(8) *
Bruce A. McNiel......................................... 100,219(9) *
John J. Byrne........................................... 94,430(10) *
All Executive Officers and Directors as a Group (16 per-
sons).................................................. 8,989,757(11) 14.1%
FMR Corporation......................................... 4,972,865(12) 7.9%
New York Life Insurance Company......................... 5,257,147(13) 8.3%
Neuberger & Berman LLC.................................. 3,433,465(14) 5.5%
</TABLE>
- --------
*Less than 1%
(1) Except as otherwise indicated in the following footnotes, each person
listed in the table has both sole voting and sole investment power with
respect to the number of shares of Common Stock set forth opposite his
name. Messrs. Alfiero, Montague and Lippes, each of whom is an executive
officer of the Company, have the right to direct the Trustee of the
Company's Master Defined Benefit Pension Plan (the "Plan") with respect
to the investment by the Trustee in shares of the Company's Common Stock
and voting of the shares of the Company's Common Stock owned by such
Plan. The Plan owns 2,108,222 shares of the Company's Common Stock (3.4%
of the total number of shares outstanding). Such executive officers are
not participants in the Plan and disclaim any beneficial ownership in the
shares, and the shares have not been included in the amounts listed in
this table.
(2) Includes 319,070 restricted shares of Common Stock issued to Mr. Alfiero
under the Mark IV Industries, Inc. 1992 Restricted Stock Plan (the
"Restricted Plan"), as well as 142,246 shares of Common Stock issuable
under currently exercisable options granted under the Mark IV Industries,
Inc. and Subsidiaries 1992 Incentive Stock Option Plan (the "1992 Option
Plan"). Also includes 16,176 shares of Common Stock allocated to Mr.
Alfiero's self-directed accounts in the Company's retirement and 401(k)
savings plan. Does not include 24,764 shares of Common Stock owned by the
Alfiero Family Charitable Foundation of which Mr. Alfiero is one of four
directors and for which he disclaims beneficial ownership. Also does not
include 316,687 derivative shares of the Company's Common Stock, which
represent the $7,323,396 total value of Mr. Alfiero's account balance in
the Company's Deferred Compensation Arrangements.
(3) Includes 8,409 restricted shares of Common Stock issued to Mr. Montague
under the Restricted Plan, as well as 91,618 shares of Common Stock
issuable under currently exercisable options granted pursuant to the 1992
Option Plan. Also includes 6,667 shares of Common Stock allocated to Mr.
Montague's self-directed accounts in the Company's retirement and 401(k)
savings plan. Does not include 21,876 shares of Common Stock owned by the
Montague Family Charitable Foundation of which Mr. Montague is one of
four directors and for which he disclaims beneficial ownership. Also does
not include 136,280 derivative shares of the Company's Common Stock,
which represent the $3,151,470 total value of Mr. Montague's account
balance in the Company's Deferred Compensation Arrangements.
(4) Includes 6,382 restricted shares of Common Stock issued to Mr. Lippes
under the Restricted Plan, as well as 71,771 shares of Common Stock
issuable under currently exercisable options granted pursuant to the 1992
Option Plan. Does not include 62,677 shares of Common Stock owned by the
Lippes Family
14
<PAGE>
Charitable Foundation of which Mr. Lippes is one of four directors and for
which he disclaims beneficial ownership. Also does not include 87,700
derivative shares of the Company's Common Stock, which represent the
$2,028,063 total value of Mr. Lippes' account balance in the Company's
Deferred Compensation Arrangements.
(5) Does not include 115,766 shares of Common Stock owned by the Arrison
Family Charitable Foundation of which Mr. Arrison is one of four
directors and for which he disclaims beneficial ownership.
(6) Includes 1,658 shares of Common Stock held by The Gibson Group, Inc.
Pension Fund, of which Mr. Donohoo is a trustee and has voting power.
Does not include 13,611 derivative shares of the Company's Common Stock,
which represent the $314,748 total value of Mr. Donohoo's account balance
in the Company's Deferred Compensation Arrangements.
(7) Does not include 12,278 derivative shares of the Company's Common Stock,
which represent the $283,935 total value of Mr. Roth's account balance in
the Company's Deferred Compensation Arrangements.
(8) Includes 2,027 restricted shares of Common Stock issued to Mr. Johansson
under the Restricted Plan, as well as 70,405 shares of Common Stock
issuable under currently exercisable options granted pursuant to the
Company's 1988 Incentive Stock Option Plan (the "1988 Option Plan") and
the 1992 Option Plan. Does not include 11,675 derivative shares of the
Company' s Common Stock, which represent the $269,984 total value of Mr.
Johansson's account balance in the Company's Deferred Compensation
Arrangements.
(9) Includes 2,027 restricted shares of Common Stock issued to Mr. McNiel
under the Restricted Plan, as well as 80,913 shares of Common Stock
issuable under currently exercisable options granted pursuant to the 1988
and 1992 Option Plans. Also includes 3,068 shares of Common Stock
allocated to Mr. McNiel's self-directed accounts in the Company's
retirement and 401(k) savings plan. Does not include 26,201 derivative
shares of the Company's Common Stock, which represent the $605,898 total
value of Mr. McNiel's account balance in the Company's Deferred
Compensation Arrangements. Mr. McNiel resigned as an officer of the
Company effective February 1, 1998.
(10) Includes 2,027 restricted shares of Common Stock issued to Mr. Byrne
under the Restricted Plan, as well as 32,347 shares of Common Stock
issuable under currently exercisable options granted pursuant to the 1992
Option Plan. Also includes 3,694 shares of Common Stock allocated to Mr.
Byrne's self-directed accounts in the Company's retirement and 401(k)
savings plan. Does not include 44,133 derivative shares of the Company's
Common Stock, which represent the $1,020,576 total value of Mr. Byrne's
account balance in the Company's Deferred Compensation Arrangements.
(11) Includes 343,996 restricted shares of Common Stock issued to the group
under the Restricted Plan, as well as 643,318 shares of Common Stock
issuable under currently exercisable options granted pursuant to the 1988
and 1992 Option Plans. Also includes 39,878 shares of Common Stock
allocated to the officers' self directed accounts in the Company's
retirement and 401(k) savings plan. Does not include 874,051 derivative
shares of the Company's Common Stock (1.4% of the total number of shares
outstanding), which represents the $20,212,432 total value of the group's
account balances in the Company's Deferred Compensation Arrangements.
(12) Based on information set forth in a statement on Schedule 13-G filed with
the Commission by FMR Corporation ("FMR") on February 10, 1998, FMR held
on behalf of itself 4,972,865 shares of the Company's Common Stock,
through its subsidiaries Fidelity Management and Research Company
(4,923,492 shares) and Fidelity Management Trust Company (49,373 shares).
The stated business address of FMR is 82 Devonshire Street, Boston, MA
02109.
(13) Based on information set forth in a statement on Schedule 13-G filed with
the SEC by MacKay-Shields Financial Corporation ("MSFC") on behalf of
itself and its parent, New York Life Insurance Company ("NYLIC") on
February 7, 1997, MSFC and NYLIC held shared voting and dispositive power
for 5,257,147 shares (adjusted for the 5% stock dividend distributed to
stockholders of record as of April 18, 1997) of the Company's Common
Stock, which amount includes 182,857 shares of Common Stock that MSFC has
the right to acquire through the conversion into Common Stock of the
Company's 4 3/4% Notes. The stated business address of MSFC and NYLIC is
9 West 57th Street, New York, NY 10019.
(14) Based on information set forth in a statement on Schedule 13-G filed with
the SEC by Neuberger & Berman, LLC ("N&B") on February 10, 1997, N&B held
shared voting and dispositive power for 3,433,465 shares (adjusted for
the 5% stock dividend distributed to stockholders of record as of April
18, 1997) of the Company's Common Stock. The stated business address of
N&B is 605 Third Avenue, New York, NY 10158-3698.
15
<PAGE>
SELLING HOLDERS
The Notes were initially issued and sold pursuant to a Purchase Agreement,
dated as of October 23, 1997, between the Company and Bear, Stearns & Co. Inc.
(the "Initial Purchaser"). The Notes were acquired from the Initial Purchaser
by the Selling Holders in compliance with Rule 144A, Regulation D or
Regulation S under the Securities Act, or in other permitted resale
transactions from holders who acquired such Notes from the Initial Purchaser
or their successors in further permitted resale transactions exempt from
registration under the Securities Act. The Company agreed to indemnify and
hold the Initial Purchaser harmless against certain liabilities under the
Securities Act that may arise in connection with the sale of the Notes by the
Initial Purchaser.
Except as otherwise indicated, the table below sets forth certain
information with respect to the Securities as of January 5, 1998. The term
"Selling Holders" includes the beneficial owners of such Securities listed
below and their respective transferees, pledgees, donees or their successors.
To the knowledge of the Company and based on certain representations made by
the Selling Holders, other than as a result of the ownership of the Securities
indicated below, none of the Selling Holders other than Bear, Stearns & Co.
Inc. has had any material relationship with the Company or any of its
affiliates within the past three years. Bear, Stearns & Co. Inc. has engaged
in transactions with and performed various investment banking and other
services for the Company in the past and may do so from time to time in the
future.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AGGREGATE PRINCIPAL OF COMMON STOCK
AMOUNT OF NOTES ISSUABLE UPON
NAME OF SELLING OWNED AND THAT MAY CONVERSION OF NOTES
HOLDER BE SOLD THAT MAY BE SOLD
--------------- ------------------- -------------------
<S> <C> <C>
Allstate Insurance Company............. $ 4,000,000 121,904
American Community Mutual Insurance
Company............................... 540,000 16,457
American Pioneer Life Ins. Co. of New
York.................................. 70,000 2,133
American Progressive Life & Health Ins.
Co. of N.Y............................ 70,000 2,133
American Public Entity Excess Pool..... 80,000 2,438
American Republic Insurance Company.... 700,000 21,333
AMWEST Surety Insurance Company........ 500,000 15,238
Arkansas PERS.......................... 1,500,000 45,714
Associated Physicians Insurance Compa-
ny.................................... 50,000 1,523
Banca Popolare di Bergamo C.V. ........ 700,000 21,333
Bank of America Convertible Securities
Fund.................................. 100,000 3,047
Bank of America Pension Plan........... 3,000,000 91,428
Bankers Trust International............ 7,500,000 228,571
BCS Life Insurance Company............. 665,000 20,266
Bear, Stearns & Co. Inc................ 28,350,000 864,000
Bond Fund Series--Oppenheimer Bond Fund
for Growth............................ 19,000,000 579,047
Canadian Imperial Holdings, Inc........ 6,500,000 198,095
Care America Life Insurance Company.... 115,000 3,504
Catholic Relief Insurance Company of
America............................... 545,000 16,609
Catholic Mutual Relief Society of Amer-
ica................................... 445,000 13,561
Catholic Mutual Relief Society Retire-
ment Plan & Trust..................... 200,000 6,095
Century National Insurance Company..... 1,000,000 30,476
CFW-C, L.P............................. 2,500,000 76,190
Chicago Mutual Insurance Company....... 70,000 2,133
Chrysler Insurance Company............. 5,450,000 166,095
Concord Life Insurance Company......... 125,000 3,809
Condor Insurance Company............... 165,000 5,028
Convertible Securities Fund............ 100,000 3,047
CSA Fraternal Life Insurance Company... 125,000 3,809
Dean Witter Convertible Securities
Trust................................. 2,200,000 67,047
Dean Witter Income Builder Fund........ 4,000,000 121,904
Dean Witter Variable Income Builder
Fund.................................. 400,000 12,190
Delaware PERS.......................... 900,0008 27,428
Employee Benefit Convertible Fund...... 100,000 3,047
Farmers Home Mutual Insurance Company.. 350,000 10,666
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
AGGREGATE PRINCIPAL OF COMMON STOCK
AMOUNT OF NOTES ISSUABLE UPON
NAME OF SELLING OWNED AND THAT MAY CONVERSION OF NOTES
HOLDER BE SOLD THAT MAY BE SOLD
--------------- ------------------- -------------------
<S> <C> <C>
Federated Rural Electric Insurance
Corp.................................. 300,000 9,142
Financial American Life Ins. Co........ 50,000 1,523
First Delaware Insurance Company....... 15,000 457
First Patriot Insurance Company........ 75,000 2,285
Franklin Investors Securities Trust--
Convertible Securities Fund........... 3,000,000 91,428
Frontier Insurance Company............. 1,300,000 39,619
Goodville Mutual Casualty Company...... 50,000 1,523
Gopher State Mutual Insurance Company.. 135,000 4,114
Grain Dealers Mutual Insurance......... 220,000 6,704
Guarantee Trust Life Insurance Co...... 1,215,000 37,028
Guaranty Income Life Insurance Company. 500,000 15,238
Holy Family Society.................... 65,000 1,980
HSBC Securities Inc.................... 3,300,000 100,571
ICI American Holdings.................. 400,000 12,190
Illinois Founders Insurance............ 90,000 2,742
J.P. Morgan & Co. Incorporated......... 6,500,000 198,095
KA Management Ltd...................... 2,897,931 88,317
KA Trading LP.......................... 1,702,069 51,872
Kanawha Insurance Company.............. 55,000 1,676
Key Asset Management, Inc.............. 160,000 4,876
Lakeside Capital L.L.C................. 100,000 3,047
Lebanon Mutual Insurance Company....... 105,000 3,200
Lipper Convertibles, L.P............... 4,200,000 128,000
Lipper Offshore Convertibles, L.P...... 2,800,000 85,333
Lone Star Life Insurance Company....... 1,100,000 33,523
Lutheran Brotherhood................... 2,500,000 76,190
Mainstay Convertible Fund.............. 4,150,000 126,476
Mainstay Strategic Value Fund.......... 250,000 7,619
Mainstay VP Convertible Portfolio...... 1,100,000 33,523
Massachusetts Mutual Life Insurance
Company............................... 3,000,000 91,428
MassMutual Corporate Investors......... 750,000 22,857
MassMutual Corporate Value Partners
Limited............................... 1,500,000 45,714
MassMutual High Yield Partners LLC..... 1,800,000 54,857
MassMutual Participation Investors..... 450,000 13,714
McCarthy Group Asset Management........ 1,300,000 39,619
Medico Life Insurance Company.......... 570,000 17,371
Medmarc Insurance Company.............. 715,000 21,790
Midwest Security Life.................. 275,000 8,380
Midwestern National Life Ins. Co. of
Ohio.................................. 495,000 15,085
Millers Casualty Insurance Co. of Tex-
as.................................... 330,000 10,057
Millers Mutual Fire Ins. Co. of Texas.. 1,370,000 41,752
Mutual Protective Insurance Company.... 925,000 28,190
N.H.B.D., L.P.......................... 2,250,000 68,571
Nalco Chemical Retirement Trust........ 250,000 7,619
NatWest Securities Ltd. ............... 5,000,000 152,380
NCMIC Insurance Company................ 545,000 16,609
New Castle Mutual Insurance Company.... 35,000 1,066
New York Life Separate Account #7...... 500,000 15,238
Old Guard Fire Insurance Company....... 170,000 5,180
Old Guard Insurance Company............ 500,000 15,238
Ozark National Life Insurance Company.. 1,150,000 35,047
Pacific Horizon Capital Income Fund.... 3,000,000 91,428
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
AGGREGATE PRINCIPAL OF COMMON STOCK
AMOUNT OF NOTES ISSUABLE UPON
NAME OF SELLING OWNED AND THAT MAY CONVERSION OF NOTES
HOLDER BE SOLD THAT MAY BE SOLD
--------------- ------------------- -------------------
<S> <C> <C>
Pacific Innovation Trust Capital Income
Fund.................................. 85,000 5,638
Pacific Life Insurance Co.............. 2,000,000 60,952
PHICO Insurance Company................ 390,000 11,885
Physicians Mutual Insurance Company.... 385,000 11,733
Pioneer Insurance Company.............. 90,000 2,742
Police & Fireman's Insurance Associa-
tion.................................. 100,000 3,047
PRIM Board............................. 2,000,000 60,952
Provident Life and Accident Insurance
Co.................................... 4,000,000 121,904
Secura Insurance, A Mutual Company..... 565,000 17,219
Service Life and Casualty Insurance
Company............................... 70,000 2,133
Service Lloyd Insurance Company........ 70,000 2,133
Smith Barney Convertible Securities
Portfolio............................. 3,000,000 91,428
Salomon Brothers Asset Management Inc.. 25,475,000 776,380
Soundshore Partners L.P................ 1,060,000 32,304
Standard Mutual Insurance Company...... 300,000 9,142
State of Oregon/SAIF Corporation....... 1,000,000 30,476
Texas Builders Insurance Company....... 125,000 3,809
The Guardian Life Insurance Company of
America............................... 11,400,000 347,428
The Guardian Life Insurance Company
Master Pension Trust.................. 600,000 18,285
TransGuard Insurance Company Inc....... 1,000,000 30,476
United National Insurance Company...... 3,450,000 105,142
United Teachers Associates Insurance
Company............................... 1,825,000 55,619
Washington International Insurance Com-
pany.................................. 380,000 11,580
Western Home Insurance Company......... 200,000 6,095
Westward Life Insurance Company........ 100,000 3,047
Wisconsin Lawyers Mutual Insurance Com-
pany.................................. 210,000 6,400
Wisconsin Mutual Insurance Company..... 135,000 4,114
World Insurance Company................ 625,000 19,047
ZENECA Holdings Trust.................. 400,000 12,190
------------ ---------
Total.............................. $218,470,000 6,658,079
============ =========
</TABLE>
The preceding table has been prepared based on information furnished to the
Company by the Depositary Trust Company, New York, New York ("DTC") and by or
on behalf of the Selling Holders. With respect to each Selling Holder, the
principal amount set forth may have increased or decreased since the
information was furnished, and there may be additional Selling Holders of
which the Company is unaware.
In view of the fact that Selling Holders may offer all or a portion of the
Notes or shares of Common Stock held by them pursuant to this offering, and
because this offering is not being underwritten on a firm commitment basis, no
estimate can be given as to the amount of Notes or the number of shares of
Common Stock that will be held by the Selling Holders after completion of this
offering. In addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes since the
date on which they provided information regarding their Notes, in transactions
exempt from the registration requirements of the Securities Act.
Information concerning the Selling Holders may change from time to time and
any such changed information that the Company becomes aware of will be set
forth in supplements to this Prospectus if and when necessary. In addition,
the per share conversion price, and the number of shares issuable upon
conversion of the Notes, is subject to adjustment under certain circumstances.
Accordingly, the aggregate principal amount of Notes and the number of shares
of Common Stock issuable upon conversion thereof offered hereby may increase
or decrease. As of the date of this Prospectus, the aggregate principal amount
of Notes outstanding is $275,000,000.
18
<PAGE>
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of October 29, 1997 (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"), a copy of which has been filed with the Commission as an Exhibit
to the Registration Statements of which this Prospectus forms a part. The
terms of the Indenture are also governed by certain provisions contained in
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summaries of certain provisions of the Notes and the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Notes and the Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus and those terms made a part of the Indenture by
reference to the Trust Indenture Act as in effect on the date of the
Indenture. Wherever particular provisions or defined terms of the Indenture
(or of the form of Notes which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference in their
entirety. As used in this "Description of Notes" section, the "Company" refers
to Mark IV Industries, Inc. and does not, unless the context otherwise
indicates, include its subsidiaries.
GENERAL
The Notes represent general unsecured subordinated obligations of the
Company and are convertible into Common Stock as described below under the
subheading "--Conversion of Notes." The Notes are limited to $275,000,000
aggregate principal amount, have been issued in fully registered form only in
denominations of $1,000 in principal amount or any multiple thereof and will
mature on November 1, 2004, unless earlier redeemed at the option of the
Company.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or
the incurrence of debt by the Company or any of its subsidiaries.
The Notes bear interest from the date of original issue at the annual rate
set forth on the cover page hereof, payable semi-annually on May 1 and
November 1, commencing on May 1, 1998, to Holders of record at the close of
business on the preceding April 15 and October 15, respectively. Interest is
computed on the basis of a 360-day year composed of twelve 30-day months.
Unless other arrangements are made, interest will be paid by check mailed to
Holders entitled thereto. Principal will be payable, and the Notes may be
presented for conversion, registration of transfer and exchange, without
service charge, at the office of the Trustee in New York, New York. Reference
is made to the information set forth below under the subheading "--Form,
Denomination and Registration" for information as to Notes held as beneficial
interests in one or more global notes.
CONVERSION OF NOTES
The Holders of Notes are entitled at any time after December 27, 1997 (60
days following the date of original issuance thereof) through the close of
business on November 1, 2004, subject to prior redemption, to convert any
Notes or portions thereof (in denominations of $1,000 in principal amount or
multiples thereof) into Common Stock at a conversion price of $32.8125 per
share, subject to adjustment as described below; provided that in the case of
Notes called for redemption, conversion rights will expire immediately prior
to the close of business on the last business day before the date fixed for
redemption, unless the Company defaults in payment of the redemption price.
Except as described below, no adjustment will be made on conversion of any
Notes for interest accrued thereon or for dividends paid on any Common Stock
issued. Holders of Notes at the close of business on a record date will be
entitled to receive the interest payable on such Notes on the corresponding
interest payment date. However, Notes surrendered for conversion after the
close of business on a record date, and before the opening of business on the
corresponding interest payment date must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted (unless such Note is
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<PAGE>
subject to redemption on a redemption date between such record date and the
close of business on the corresponding interest payment date). The interest
payment with respect to a Note called for redemption on a date during the
period from the close of business on or after any record date to the close of
business on the business day following the corresponding interest payment date
will be payable on the corresponding interest payment date to the registered
Holder at the close of business on that record date (notwithstanding the
conversion of such Note before the close of business on the corresponding
interest payment date) and a Holder of Notes who elects to convert need not
include funds equal to the interest to be paid. The Company is not required to
issue fractional shares of Common Stock upon conversion of Notes and, in lieu
thereof, will pay a cash adjustment based upon the closing price of the Common
Stock on the last business day prior to the date of conversion.
The conversion price is subject to adjustment (under formulae set forth in
the Indenture) upon the occurrence of certain events, including: (i) the
issuance of Common Stock as a dividend or distribution on the outstanding
Common Stock, (ii) the issuance to all holders of Common Stock of certain
rights, options or warrants entitling them (for a period expiring within 45
days after the date fixed for determination of stockholders entitled to
receive such rights, options or warrants) to purchase Common Stock at less
than the current market price, (iii) certain subdivisions, combinations and
reclassifications of Common Stock, (iv) distributions to all holders of Common
Stock of capital stock of the Company (other than Common Stock) or evidences
of indebtedness of the Company or assets (including securities, but excluding
those dividends, rights, options, warrants and distributions referred to in
clauses (i) or (ii) above and dividends and distributions in connection with
the liquidation, dissolution or winding up of the Company and dividends and
distributions paid exclusively in cash), (v) distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to
in clause (iv) or in connection with a consolidation, merger or sale of assets
of the Company as referred to in clause (ii) of the second paragraph below) to
all holders of Common Stock in an aggregate amount that, together with (x) all
other such all-cash distributions made within the preceding 12 months in
respect of which no adjustment has been made and (y) any cash and the fair
market value of other consideration payable in respect of any tender offers by
the Company or any of its subsidiaries for Common Stock concluded within the
preceding 12 months in respect of which no adjustment has been made, exceeds
20% of the Company's market capitalization (being the product of the then
current market price of the Common Stock times the number of shares of Common
Stock then outstanding) on the record date for such distribution and (vi) the
purchase of Common Stock pursuant to a tender offer made by the Company or any
of its subsidiaries which involves an aggregate consideration that, together
with (x) any cash and the fair market value of any other consideration payable
in any other tender offer by the Company or any of its subsidiaries for Common
Stock expiring within the 12 months preceding such tender offer in respect of
which no adjustment has been made and (y) the aggregate amount of any such
all-cash distributions referred to in clause (v) above to all holders of
Common Stock within the 12 months preceding the expiration of such tender
offer in respect of which no adjustments have been made, exceeds 20% of the
Company's market capitalization on the expiration of such tender offer. No
adjustment of the conversion price will be made for shares issued pursuant to
a plan for reinvestment of dividends or interest. Except as stated above, the
conversion price will not be adjusted for the issuance of Common Stock or any
securities convertible into or exchangeable for Common Stock or carrying the
right to purchase any of the foregoing. No adjustment in the conversion price
will be required unless such adjustment would require a change of at least 1%
in the conversion price then in effect; provided that any adjustment that
would otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment.
No adjustment will be made pursuant to clause (iv) of the preceding
paragraph if the Company makes proper provision for each Holder of Notes who
converts a Note to receive, in addition to the Common Stock issuable upon such
conversion, the kind and amount of assets (including securities) if such
Holder had been a holder of the Common Stock at the time of the distribution
of such assets or securities. Rights, options or warrants distributed by the
Company to all holders of the Common Stock that entitle the holders thereof to
purchase shares of the Company's capital stock and that, until the occurrence
of an event (a "Triggering Event"), (i) are deemed to be transferred with the
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, shall not be deemed to be distributed until
the occurrence of the Triggering Event.
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<PAGE>
In the case of (i) any reclassification or change of the Common Stock (other
than changes in par value or from par value to no par value or resulting from
a subdivision or a combination) or (ii) a consolidation or merger involving
the Company or a sale or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an entirety
(determined on a consolidated basis), in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the Holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or
been entitled to receive upon such reclassification, change, consolidation,
merger, sale or conveyance had such Notes been converted into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
sale or conveyance, after giving effect to any adjustment event, assuming that
a Holder of Notes would not have exercised any rights of election as to the
stock, other securities or other property or assets receivable in connection
therewith and received per share the kind and amount received per share by a
plurality of non-electing shareholders.
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to the United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Tax Considerations--
United States Holders--Adjustments to Conversion Price."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price by any amount for any period of at least 20 days, in
which case the Company shall give at least 15 days' notice of such decrease,
if the Board of Directors has made a determination that such decrease would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price,
in addition to those set forth above, as the Company deems advisable to avoid
or diminish any income tax to its stockholders 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 Tax Considerations."
SUBORDINATION
The payment of principal of, premium if any, and interest on the Notes will,
to the extent set forth in the Indenture, be subordinated in right of payment
to the prior payment in full of all Senior Indebtedness. Upon any distribution
to creditors of the Company in a liquidation or dissolution of the Company or
in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding related to the Company or its property, in an assignment for the
benefit of creditors or any marshalling of the Company's assets and
liabilities, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due or to become due thereon before the
Holders of the Notes will be entitled to receive any payment in respect of the
principal of, premium, if any, or interest on the Notes (except that Holders
of Notes may receive securities that are subordinated at least to the same
extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (a) a default in the payment of
the principal of, premium, if any, or interest on Senior Indebtedness occurs
and is continuing beyond any applicable period of grace or (b) any other
default occurs and is continuing with respect to Senior Indebtedness that
permits holders of the Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the representative or representatives of
holders of at least a majority in principal amount of Senior Indebtedness then
outstanding. Payments on the Notes may and shall be resumed (i) in the case of
a payment default, upon the date on which such default is cured or waived, or
(ii) in the case of a non-payment default, 179 days after the date on which
the applicable Payment Blockage Notice is received (or sooner, if such default
is cured or waived), unless the maturity of any Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced within 360
days after the receipt by the Trustee of any prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice.
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<PAGE>
In the event that the Trustee (or paying agent if other than the Trustee) or
any Holder receives any payment of principal or interest with respect to the
Notes at a time when such payment is prohibited under the Indenture, such
payment shall be held in trust for the benefit of, and shall be paid over and
delivered to, the holders of Senior Indebtedness or their representative as
their respective interests may appear. After all Senior Indebtedness is paid
in full and until the Notes are paid in full, Holders shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Notes) to
the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Holders have been applied to the payment of Senior
Indebtedness.
As of November 30, 1997, on a pro forma basis, after giving effect to the
Note Offering and the intended use of the net proceeds therefrom, the Company
would have had outstanding approximately $659,200,000 of indebtedness that
would be considered Senior Indebtedness, including $500,000,000 in aggregate
principal amount ($497,400,000 net of original issue discount) of senior
subordinated notes to which the Notes will be subordinated. The Indenture does
not prohibit or limit the incurrence of Senior Indebtedness.
In addition, because the Company's operations are conducted primarily
through its operating subsidiaries, creditors and holders of indebtedness of
such subsidiaries will have priority with respect to the assets and earnings
of such subsidiaries over the claims of creditors of the Company, including
Holders of the Notes. As of November 30, 1997, the aggregate liabilities of
such subsidiaries were approximately $752,000,000. The Indenture does not
limit the amount of additional indebtedness which any of the Company's
subsidiaries can create, incur, assume or guarantee.
Because of these subordination provisions, in the event of a liquidation or
insolvency of the Company or any of its subsidiaries, Holders of Notes may
recover less, ratably, than the holders of Senior Indebtedness.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Notes. The
subordination provisions of the Indenture and the Notes will not prevent the
occurrence of any Default or Event of Default under the Indenture or limit the
rights of the Trustee or any other holder, subject to the matters described
under this subsection, to pursue any other rights or remedies with respect to
the Notes.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to November
3, 2000. At any time on or after that date, the Notes may be redeemed at the
Company's option on at least 30 but not more than 60 days' notice, in whole at
any time or in part from time to time, at the following prices (expressed in
percentages of the principal amount), together with accrued and unpaid
interest, if any, thereon to the date fixed for redemption if redeemed during
the 12-month period beginning November 3 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000........................ 102.375%
2001........................ 101.583%
2002........................ 100.792%
2003 and thereafter......... 100.000%
</TABLE>
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Note is to
be redeemed in part only, a new Note or Notes in principal amount equal to the
unredeemed principal portion thereof will be issued. If a portion of a
Holder's Notes is selected for partial redemption and such Holder converts a
portion of such Notes, such converted portion shall be deemed to be taken from
the portion selected for redemption. No sinking fund is provided for the
Notes.
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<PAGE>
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets (determined on a
consolidated basis), whether in a single transaction or a series of related
transactions, to any person unless: (i) either the Company is the resulting,
surviving or transferee person (the "Successor Company") or the Successor
Company is a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and the Successor
Company (if not the Company) expressly assumes by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Indenture and the Notes,
including the conversion rights described above under "--Conversion of Notes,"
(ii) immediately after giving effect to such transaction no Event of Default
has happened and is continuing and (iii) the Company delivers to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
REPURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require that the Company repurchase such Holder's Notes in whole
or in part in integral multiples of $1,000, at a purchase price in cash in an
amount equal to 100% of the principal amount thereof, together with accrued
and unpaid interest to the date of purchase, pursuant to an offer (the "Change
of Control Offer") made in accordance with the procedures described below and
the other provisions in the Indenture.
A "Change of Control" means an event or series of events in which (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) acquires "beneficial ownership" (as determined in accordance
with Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
50% of the combined voting power of the then outstanding securities entitled
to vote generally in elections of directors of the Company (the "Voting
Stock") or (ii) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of its
assets to any person, or any other corporation merges into the Company, and,
in the case of any such transaction, the outstanding Common Stock of the
Company is changed or exchanged as a result, unless the shareholders of the
Company immediately before such transaction own, directly or indirectly, at
least 51% of the combined voting power of the outstanding voting securities of
the corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock immediately before such
transaction; provided that a Change of Control shall not be deemed to have
occurred if either (i) the closing price per share of the Common Stock for any
5 trading days within the period of 10 consecutive trading days ending
immediately after the announcement of such Change of Control shall equal or
exceed 105% of the conversion price of the Notes in effect on such trading day
or (ii) at least 90% of the consideration in the Change of Control transaction
consists of shares of common stock traded on a national securities exchange or
quoted on the Nasdaq National Market, and as a result of such transaction, the
Notes become convertible solely into such common stock.
Within 30 days following any Change of Control, the Company shall send by
first-class mail, postage prepaid, to the Trustee and to each Holder of Notes,
at such Holder's address appearing in the security register, a notice stating,
among other things, that a Change of Control has occurred, the repurchase
price, the repurchase date, which shall be a business day no earlier than 30
days nor later than 60 days from the date such notice is mailed, and certain
other procedures that a Holder of Notes must follow to accept a Change of
Control Offer or to withdraw such acceptance.
The Company will comply, to the extent applicable, with the requirements of
Rule 13e-4 under the Exchange Act and other securities laws or regulations in
connection with the repurchase of the Notes as described above.
The occurrence of certain of the events that would constitute a Change of
Control may constitute a default under the agreements governing the Company's
Senior Indebtedness. Future indebtedness of the Company may
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<PAGE>
contain prohibitions of certain events which would constitute a Change of
Control or require the Company to offer to repurchase such indebtedness upon a
Change of Control. Moreover, the exercise by the Holders of Notes of their
right to require the Company to purchase the Notes could cause a default under
such indebtedness, even if the Change of Control itself does not, due to the
financial effect of such purchase on the Company. The Company's ability to pay
cash to Holders of Notes upon a purchase may be limited by the Company's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required purchases. Furthermore,
the Change of Control provisions may in certain circumstances make more
difficult or discourage a takeover of the Company and the removal of the
incumbent management.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of or premium, if any, on the Notes when due at
maturity, upon redemption or otherwise (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); (ii) a default
for 30 days in payment of any installment of interest on the Notes (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture); (iii) a default by the Company for 90 days after notice in the
observance or performance of any other covenants in the Indenture; or (iv)
certain events involving bankruptcy, insolvency or reorganization of the
Company. The Indenture provides that the Trustee may withhold notice to the
Holders of Notes of any default (except in payment of principal, premium, if
any, or interest with respect to the Notes) if the Trustee considers it in the
interest of the Holders of Notes to do so.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company
shall cure all defaults (except the nonpayment of interest on, premium, if
any, and principal of any Notes which shall have become due by acceleration)
and certain other conditions are met, such declaration may be cancelled and
past defaults may be waived by the Holders of a majority in principal amount
of Notes then outstanding.
The Holders of a majority in principal amount of the Notes then outstanding
shall have the right to direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, subject to certain
limitations specified in the Indenture. The Indenture provides that, subject
to the duty of the Trustee following an Event of Default to act with the
required standard of care, the Trustee will not be under an obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless the Trustee receives satisfactory
indemnity against any associated loss, liability or expense.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture will cease to be of further effect as to all outstanding Notes
(except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders
of Notes to receive payments of principal of, premium, if any, and interest
on, the Notes, (iv) rights of Holders of Notes to convert to Common Stock, (v)
rights, obligations and immunities of the Trustee under the Indenture and (vi)
rights of the Holders of Notes as beneficiaries of the Indenture with respect
to the property so deposited with the Trustee payable to all or any of them),
if (A) the Company will have paid or caused to be paid the principal of,
premium, if any, and interest on the Notes as and when the same will have
become due and payable or (B) all outstanding Notes (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (C) (x) the Notes not previously delivered to the
Trustee for cancellation will have become due and payable or are by their
terms to become due and payable within one year or are to be called for
redemption under arrangements satisfactory to the Trustee upon delivery of
notice and (y) the Company will have irrevocably deposited with the Trustee,
as trust funds, cash, in an amount sufficient to pay principal of and interest
on the outstanding Notes, to maturity or redemption, as the case may be. Such
trust may only be established if such deposit will not result in a breach or
violation of, or constitute a default under, any agreement or instrument
pursuant to which the Company is a party or by which it is bound and the
Company has delivered to the Trustee
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<PAGE>
an Officers' Certificate and an opinion of counsel, each stating that all
conditions related to such defeasance have been complied with.
The Indenture will also cease to be in effect (except as described in
clauses (i) through (vi) in the immediately preceding paragraph) and the
indebtedness on all outstanding Notes will be discharged on the 123rd day
after the irrevocable deposit by the Company with the Trustee, in trust,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of Notes, of cash, U.S. Government Obligations (as defined in the
Indenture) or a combination thereof, in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay the principal
of, premium, if any, and interest on the Notes then outstanding in accordance
with the terms of the Indenture and the Notes ("legal defeasance"). Such legal
defeasance may only be effected if (i) such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound, (ii) the
Company has delivered to the Trustee an opinion of counsel stating that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, based thereon, the holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge by the Company and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
had not occurred, (iii) the Company has delivered to the Trustee an opinion of
counsel to the effect that after the 123rd day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and (iv) the Company has delivered to the Trustee an Officers'
Certificate and an opinion of counsel stating that all conditions related to
the defeasance have been complied with.
The Company may also be released from its obligations under the covenant
described above under "--Merger, Consolidation and Sale of Assets" with
respect to the Notes outstanding on the 123rd day after the irrevocable
deposit by the Company with the Trustee, in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of Notes, of
cash, U.S. Government Obligations or a combination thereof, in an amount
sufficient in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay the principal of, premium, if any, and interest on the
Notes then outstanding in accordance with the terms of the Indenture and the
Notes ("covenant defeasance"). Such covenant defeasance may only be effected
if (i) such deposit will not result in a breach or violation of, or constitute
a default under, any agreement or instrument to which the Company is a party
or by which it is bound, (ii) the Company has delivered to the Trustee an
Officers' Certificate and an opinion of counsel to the effect that the Holders
of Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and covenant defeasance by the Company
and will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit and
covenant defeasance had not occurred, (iii) the Company has delivered to the
Trustee an opinion of counsel to the effect that after the 123rd day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and (iv) the Company has delivered to the Trustee
an Officers' Certificate and an opinion of counsel stating that all conditions
related to the covenant defeasance have been complied with. Following such
covenant defeasance, the Company will no longer be required to comply with the
obligations described above under "--Merger, Consolidation and Sale of
Assets."
Notwithstanding any satisfaction and discharge or defeasance of the
Indenture, the obligations of the Company described under "--Conversion of
Notes" will survive to the extent provided in the Indenture until the Notes
cease to be outstanding.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in principal
amount of the Notes at the time outstanding, to modify the Indenture or
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<PAGE>
any supplemental indenture or the rights of the Holders of Notes, except that
no such modification shall (i) extend the fixed maturity of any Note, reduce
the rate or extend the time of payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon, reduce any amount
payable upon redemption thereof, impair or affect the right of a Holder to
institute suit for the payment thereof, change the currency in which the Notes
are payable, modify the subordination provisions of the Indenture in a manner
adverse to the Holders of Notes or impair the right to convert the Notes into
Common Stock subject to the terms set forth in the Indenture, without the
consent of the Holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, without the consent of the Holders of all of the Notes
then outstanding.
CONCERNING THE TRUSTEE
The Bank of New York, the Trustee under the Indenture, has been appointed by
the Company as the paying agent, conversion agent, registrar and custodian
with regard to the Notes. The Trustee and/or its affiliates may in the future
provide banking and other services to the Company in the ordinary course of
their respective businesses.
FORM, DENOMINATION AND REGISTRATION
The Notes have been issued in fully registered form only, in denominations
of $1,000 in principal amount and integral multiples thereof. Except as
described in the next paragraph, the Notes are represented by permanent global
Notes, in definitive, fully registered form without interest coupons (each a
"Global Note") and are deposited with the Trustee as custodian for The
Depositary Trust Company, New York, New York ("DTC") and registered in the
name of Cede & Co. ("Cede") as DTC's nominee. Except as set forth below, the
Global Notes may be transferred, in whole or in part, only to another nominee
of DTC or to a successor of DTC or its nominee.
Holders of Notes who elect to take physical delivery of their certificates
instead of holding their interest through a Global Note (collectively referred
to herein as the "Non-Global Holders") will be issued a certificated note in
registered form (a "Certificated Note"). Upon the transfer of any Certificated
Note issued to a Non-Global Holder, such Certificated Note will, unless the
transferee requests otherwise, be exchanged for an interest in a Global Note.
Payment of interest on and the redemption and repurchase price of the Global
Notes will be made to Cede, the nominee for DTC, as registered owner of the
Global Notes, by wire transfer of immediately available funds on each interest
payment date, each redemption date and each repurchase date, as applicable.
None of the Company, the Trustee or any paying agent 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 Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest. Payment of interest on and the redemption and
repurchase of the Certificated Notes will be paid by check mailed to such
holders entitled thereto on each interest payment date, each redemption date
and each repurchase date, as applicable.
The Company has been informed by DTC that, with respect to any payment of
interest on, or the redemption or repurchase price of, the Global Notes, DTC's
practice is to credit Participants' accounts on the payment date, redemption
date or repurchase date, as applicable therefor, with payments in amounts
proportionate to their respective beneficial interests in the principal amount
represented by the Global Notes as shown on the records of DTC, unless DTC has
reason to believe that it will not receive payment on such payment date.
Payments by Participants to owners of beneficial interests in the principal
amount represented by the Global Notes held through such Participants will be
the responsibility of such Participants, as is now the case with securities
held for the accounts of customers registered in "street name."
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in immediately available funds.
Because DTC can only act on behalf of Participants, who in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having a
beneficial interest in the
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principal amount represented by the Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interest, may be affected by the lack of a
physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have responsibility for the
performance of DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a Holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below) only at the direction
of one or more Participants to whose account DTC interests in the Global Notes
are credited, and only in respect of the principal amount of the Notes
represented by the Global Notes as to which such Participant or Participants
has or have given such direction.
DTC has advised 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 and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship with,
a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will cause Certificated Notes to be
issued in exchange for interests in the Global Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease which
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Credit Agreement" means the Amended and Restated Credit and Guarantee
Agreement, dated as of March 8, 1996, as amended from time to time, by and
among the Company and Dayco PTI S.p.A., as Borrowers, and certain other
subsidiaries of the Company, as Guarantors, The Chase Manhattan Bank, as
Administrator and Bid Agent, Bank of America National Trust and Savings
Association, as Documentation Agent, and the banks and other financial
institutions that are signatories thereto, and any refinancings or
replacements thereof providing for Indebtedness in principal amount of up to
$500,000,000, less, in the case of any such refinancings or replacements, the
amount of all permanent reductions thereunder.
"8 3/4% Notes" means the Company's 8 3/4% Senior Subordinated Notes due
April 1, 2003 issued pursuant to the Indenture dated as of March 15, 1993
between the Company and Citibank N.A., as trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
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pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, from time to time.
"Indebtedness" of any person means any indebtedness, contingent or
otherwise, in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to Capital Lease Obligations), if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP (except that any
such balance that constitutes a trade payable and/or an accrued liability
arising in the ordinary course of business shall not be considered
Indebtedness), and shall also include, to the extent not otherwise included,
any Capital Lease Obligations, the maximum fixed repurchase price of any
Redeemable Stock, indebtedness secured by a Lien to which the property or
assets owned or held by such Person is subject, whether or not the obligations
secured thereby shall have been assumed, guarantees of items that would be
included within this definition to the extent of such guarantees (exclusive of
whether such items would appear upon such balance sheet), and net liabilities
in respect of Interest Rate Protection Obligations. For purposes of the
preceding sentence, the maximum fixed repurchase price of any Redeemable Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Stock as if such Redeemable Stock were
repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, provided that if such Redeemable Stock
is not then permitted to be repurchased, the repurchase price shall be the
book value of such Redeemable Stock. The amount of Indebtedness of any person
at any date shall be, without duplication, (i) the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability of any such contingent obligations at such date and (ii) in the case
of Indebtedness of others secured by a Lien to which the property or assets
owned or held by such Person is subject, the lesser of the fair market value
at such date of any asset subject to a Lien securing the Indebtedness of
others and the amount of the Indebtedness secured.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to
give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Redeemable Stock" means any capital stock or other equity interest which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable before the stated maturity of the Notes), or upon
the happening of any event, matures or is mandatorily redeemable, in whole or
in part, prior to the stated maturity of the Notes.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed, unless, in
the case of any particular Indebtedness, the instrument under which such
Indebtedness is created, incurred, assumed or guaranteed expressly provides
that such Indebtedness shall not be senior or superior
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in right of payment to the Notes. Without limiting the generality of the
foregoing, "Senior Indebtedness" shall include the principal of, premium, if
any, and interest on all obligations of every nature of the Company from time
to time owed to (i) the lenders under the Credit Agreement, including, without
limitation, principal of and interest on, and all fees and expenses payable
under the Credit Agreement and (ii) the holders of the 7 3/4% Notes, the 8
3/4% Notes, or the 7 1/2% Notes.
"7 1/2% Notes" means the Company's 7 1/2% Senior Subordinated Notes due
September 1, 2007, issued pursuant to the Indenture, dated as of August 11,
1997 between the Company and Marine Midland Bank, as trustee.
"7 3/4% Notes" means the Company's 7 3/4% Senior Subordinated Notes due
April 1, 2006 issued pursuant to the Indenture, dated as of March 11, 1996,
between the Company and Fleet National Bank, as trustee.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 200 million shares of
Common Stock, par value $.01 per share, and 10 million shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). As of February 12,
1998, approximately 62,900,000 shares of Common Stock were issued and
outstanding. There are no shares of Preferred Stock issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters to be voted upon by the stockholders.
Subject to the rights of holders of outstanding Preferred Stock, if any, the
holders of Common Stock are entitled to receive such dividends, if any, as may
be declared by the Board of Directors out of funds legally available therefor.
See "Price Range of Common Stock and Dividend Policy." In the event of a
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock have the right to a ratable portion of the assets remaining after
payment to the Company's creditors, subject to any preferential payments
required to be made to holders of outstanding Preferred Stock, if any. Holders
of Common Stock do not have cumulative voting, preemptive, redemption or
conversion rights. All outstanding shares of Common Stock are, and the shares
issuable upon conversion of the Notes sold in this offering will be, fully
paid and nonassessable. The preferences and rights of holders of shares of
Common Stock may become subject to those of holders of shares of any series of
Preferred Stock which the Company may issue in the future.
PREFERRED STOCK
The Board of Directors has the authority, without further stockholder
approval, to issue the shares of Preferred Stock in one or more series from
time to time and to fix the powers, designations, preferences, and rights, and
the qualifications, limitations, or restrictions of such preferences and/or
rights. While the issuance of Preferred Stock could provide needed flexibility
in connection with possible acquisitions and for other corporate purposes,
such issuance could also make it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company or discourage an
attempt to gain control of the Company, and might adversely affect the holders
of Common Stock.
CERTAIN CERTIFICATE OF INCORPORATION, BY-LAW AND STATUTORY PROVISIONS
Directors' Liability. The General Corporation Law of Delaware (the "Delaware
Law") provides that a corporation may limit the liability of each director to
the corporation or its stockholders for monetary damages except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and
(iv) for any transaction from which the director derives an improper personal
benefit. The Company's Certificate of Incorporation provides for the
elimination and limitation of the personal liability of directors of the
Company for monetary
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damages to the fullest extent permitted by Delaware Law. In addition, the
Certificate of Incorporation provides that if the Delaware Law is amended to
authorize the further elimination or limitation of the liability of a
director, then the liability of the directors shall be eliminated or limited
to the fullest extent permitted by the Delaware Law, as so amended. The effect
of this provision is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary
duty of care as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (i)
through (iv) above. This provision does not limit or eliminate the rights of
the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of
care. The Certificate of Incorporation also provides that the Company shall,
to the full extent permitted by Delaware Law, as amended from time to time,
indemnify and advance expenses to each of its currently acting and former
directors, officers, employees and agents.
Classified Board of Directors. The By-laws provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As nearly as practical, each class shall consist of one-
third of the Board of Directors constituting the entire Board of Directors. As
a result, approximately one-third of the Board of Directors will be elected
each year. The stockholders may not amend or repeal this provision except upon
the affirmative vote of holders of not less than 66 2/3% of the outstanding
shares of stock of the Company entitled to vote thereon. Holders of a majority
of the outstanding shares of stock of the Company entitled to vote with
respect to election of directors may remove directors for cause. Holders of
not less than 66 2/3% of the outstanding shares of stock of the Company
entitled to vote with respect to election of directors may remove directors
without cause. Vacancies on the Board of Directors, to the extent not filled
by stockholders, may be filled by a vote of the majority of the remaining
directors then in office, although less than a quorum.
Stockholder Meetings. The By-laws permit any action required or permitted to
be taken by the stockholders of the Company at an annual or special meeting of
stockholders to be taken by written consent in lieu of a meeting. The By-laws
provide that special meetings of stockholders may be called only by a majority
of the directors or any officer instructed by a majority of the directors to
call the meeting. Stockholders are not permitted to call a special meeting of
stockholders or to require that the Board of Directors call or instruct any
officer of the Company to call a special meeting of stockholders.
Section 203 of Delaware Law. The Company is subject to the "business
combination" provisions of the Delaware Law. In general, Section 203 of the
Delaware Law prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
"interested stockholder," unless (a) prior to such date the board of directors
of the corporation approved either the "business combination" or the
transaction which resulted in the stockholder becoming an "interested
stockholder," (b) 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 (i) by persons who are
directors and also officers and (ii) 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
(c) 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" includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the "interested stockholders." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock.
Certain provisions described above may have the effect of delaying
stockholder actions with respect to certain business combinations and the
election of new members to the Board of Directors. As such, the provisions
could have the effect of discouraging open market purchases of Common Stock
because they may be considered disadvantageous by a stockholder who desires to
participate in a business combination or elect a new director.
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RIGHTS PLAN
On May 17, 1995, the Board of Directors of the Company declared a dividend
of one right ("Right") for each outstanding share of the Company's Common
Stock to stockholders of record at the close of business on June 2, 1995. Each
Right entitles the registered holder to purchase from the Company a unit
consisting of one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Junior Preferred Stock"), at a
Purchase Price of $80.00 per unit of one one-hundredth of a share, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. A Distribution Date will occur and the Rights will separate
from the Common Stock upon the earliest of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the shares of Common Stock then outstanding (the
"Shares Acquisition Date"), or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 20% or more of such outstanding Common Stock
(unless such tender offer or exchange offer is an offer for all outstanding
shares of Common Stock which a majority of the unaffiliated Directors who are
not officers of the Company determine to be fair to and otherwise in the best
interests of the Company and its stockholders). Under the Rights Agreement,
for purposes of calculating percentages of Common Stock outstanding, shares of
Common Stock outstanding shall include all shares of Common Stock deemed to be
beneficially owned by a person and its affiliates and associates, even if not
actually then outstanding.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after June 2,
1995 will contain a notation incorporating the Rights Agreement by reference,
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 2, 2005, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates
alone will represent the Rights. Except (i) with respect to certain shares of
Common Stock issued or sold pursuant to the exercise of stock options or under
any employee plan or arrangement, or upon the exercise, conversion or exchange
of certain securities of the Company, or (ii) as otherwise determined by the
Board of Directors, only Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that a person becomes the beneficial owner of 20% or more of
the then outstanding shares of Common Stock (except pursuant to an offer for
all outstanding shares of Common Stock which a majority of the Directors who
are not officers of the Company and who are not affiliates or associates of
such person determine to be fair to and otherwise in the best interests of the
Company and its stockholders) (such event, a "Flip-in Event"), each holder of
a Right will thereafter have the right to receive, upon payment of the
Purchase Price, Common Stock (or, in certain circumstances, cash, property or
other securities of the Company) having a value (based on a formula set forth
in the Rights Agreement) equal to two times the Purchase Price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the Flip-in
Event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by an Acquiring Person (or by
certain related parties) will be null and void. However, Rights are not
exercisable following the occurrence of the Flip-in Event until such time as
the Rights are no longer redeemable by the Company as set forth below.
For example, at a Purchase Price of $80.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following a Flip-in
Event would entitle its holder to purchase $160.00 worth of Common
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Stock (or other consideration, as noted above) determined pursuant to a
formula set forth in the Rights Agreement, for $80.00. Assuming that the
Common Stock had a per share value of $40.00 at such time (as determined
pursuant to such formula), the holder of each valid Right would be entitled to
purchase four shares of Common Stock for $80.00.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or in which it is the
surviving corporation but its Common Stock is changed or exchanged (other than
a merger meeting certain conditions which follows an offer for all outstanding
shares of Common Stock which a majority of the unaffiliated Directors who are
not officers of the Company determine to be fair to and otherwise in the best
interests of the Company and its stockholders), or (ii) 50% or more of the
Company's assets, earning power or cash flow is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon payment of the
Purchase Price, common stock of the acquiring company having a value equal to
two times the exercise price of the Right. The events set forth in this
paragraph and the Flip-in Event described in the second preceding paragraph
are referred to as the "Triggering Events."
The Purchase Price payable, and the number of one one-hundredths of a share
of Junior Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Junior Preferred Stock, (ii) if
holders of the Junior Preferred Stock are granted certain rights or warrants
to subscribe for Junior Preferred Stock or convertible securities at less than
the current market price of the Junior Preferred Stock, or (iii) upon the
distribution to holders of the Junior Preferred Stock of evidences of
indebtedness or assets (excluding cash dividends not in excess of 200% of
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Junior Preferred Stock (other than fractions of
one one-hundredth of a share, or integral multiples thereof) will be issued
and, in lieu thereof, an adjustment in cash will be made based on the market
price of the Junior Preferred Stock on the last trading date prior to the date
of exercise.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by
the Board of Directors). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority
of the Continuing Directors (as defined below) who are not officers of the
Company. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, with, where required, the concurrence of such
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
The term "Continuing Director" means any member of the Board of Directors of
the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors,
but shall not include an Acquiring Person or an affiliate or associate of such
person, or any representative of any of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above, or are redeemed
as provided in the second preceding paragraph.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
the Board of Directors of the Company prior to the Distribution
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Date. After the Distribution Date, the provisions of the Rights Agreement may
be amended by the Board (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (other than an
Acquiring Person or an affiliate or associate thereof), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that
no amendment to adjust the time period governing redemption shall be made at
such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. Exercise of the Rights will
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The
existence of Rights, however, should not affect an offer at a fair price and
otherwise in the best interests of the Company and its stockholders as
determined by the Board of Directors. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors since
the Board of Directors may, at its option, at any time until ten days
following the Stock Acquisition Date redeem all but not less than all of the
then outstanding Rights at the $.01 redemption price.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company serves as transfer agent and
registrar of the Common Stock.
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CERTAIN TAX CONSIDERATIONS
GENERAL
The following is a discussion of certain U.S. federal income tax and estate
tax consequences of the purchase, ownership and disposition of the Notes as of
the date hereof. This summary applies only to U.S. Holders of the Notes and
Common Stock who hold such Notes or Common Stock as capital assets within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"). It does not discuss all of the tax consequences that may be relevant
to a Holder in light of its particular circumstances or to Holders subject to
special rules, such as dealers in securities or foreign currencies, financial
institutions, life insurance companies, or regulated investment companies, or
to Holders whose functional currency is not the United States dollar or who
hold the Notes or the Common Stock as part of a synthetic security, conversion
transaction, or certain "straddle" or hedging transactions.
The U.S. federal income tax and estate tax considerations set forth below
are based upon the Code and regulations, rulings and judicial decisions
thereunder as of the date hereof. Such authorities may be repealed, revoked or
modified, possibly with retroactive effect, so as to result in U.S. federal
income tax consequences different from those presented below.
For purposes of this discussion, a "United States Holder" is a Holder that
is an individual who is a citizen or resident of the United States, a
corporation or a partnership that is organized under the laws of the United
States or any state thereof (except, in the case of a partnership, to the
extent future Treasury regulations provide otherwise), an estate whose income
is includible in gross income regardless of its source, or a trust other than
a "foreign trust," as such term is defined in Section 7701(a)(31) of the Code.
A "Non-United States Holder" is a Holder that is not a United States Holder.
UNITED STATES HOLDERS
Interest. Interest on a Note should be taxable to a United States Holder as
ordinary interest income at the time the interest is received or accrued, in
accordance with the United States Holder's regular method of accounting for
United States federal income tax purposes. This discussion assumes that the
Notes were not issued with "original issue discount" for United States federal
income tax purposes.
Sale, Exchange or Redemption of a Note. A United States Holder will
recognize gain or loss, if any, on the sale, redemption or other taxable
disposition of a Note in an amount equal to the difference, if any, between
the United States Holder's adjusted tax basis in the Note and the amount
received therefor (other than amounts attributable to accrued and unpaid
interest on the Notes, which will be treated as interest for United States
federal income tax purposes). Subject to the market discount rules noted under
"--Market Discount and Bond Premium" below, gain or loss, if any, recognized
on the sale, redemption or other taxable disposition of a Note generally will
be long-term capital gain or loss if the Note was held for more than one year
as of the date of disposition. Under recently enacted legislation, the net
capital gain of an individual derived in respect of the Notes generally will
be taxed at a maximum rate of 28% if the holding period for the Notes was
greater than one year but not more than 18 months, or 20% if the holding
period was greater than 18 months (the "Preferential Tax Rate").
Market Discount and Bond Premium. If a United States Holder acquires a Note
subsequent to its original issuance and the Note's stated redemption price at
maturity exceeds the United States Holder's initial tax basis in the Note by
more than a de minimis amount, the United States Holder should generally be
treated as having acquired the Note at a "market discount" equal to such
excess. Gain on the disposition of a Note acquired with more than de minimis
market discount generally will be treated as ordinary income to the extent it
does not exceed the accrued market discount on the Note. Generally, the amount
of accrued market discount is determined using a straight-line accrual method,
or, at the option of the taxpayer, using a prescribed constant-yield method. A
Holder of a Note purchased with market discount may be required to defer a
portion of its interest deductions for the taxable year attributable to any
indebtedness incurred or continued to purchase or carry the Note. A
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<PAGE>
Holder may elect to include market discount in income currently as it accrues
on all market discount obligations acquired by such Holder during the taxable
year such election is made and thereafter, in which case, neither the rule
regarding the recharacterization of income as ordinary upon disposition, nor
the interest deferral rule will apply to such Holder. All United States
Holders should consult their tax advisers regarding the existence, if any, of
and tax consequences relating to, market discount. If a United States Holder's
initial tax basis in a Note exceeds the stated redemption price at maturity of
the Note, the United States Holder should generally be treated as having
acquired the Note with "bond premium" in an amount equal to such excess. A
United States Holder who purchases a Note at a premium may elect to amortize
the premium as an offset to interest income under a constant-yield method over
the life of the Note. If a Holder makes an election to amortize premium, such
election will apply to all taxable debt instruments held by the Holder as of
the beginning of the taxable year in which the election is made and
thereafter, and may only be revoked with the consent of the Internal Revenue
Service. On December 30, 1997, the Internal Revenue Service published final
regulations effective generally March 2, 1998 relating to the amortization of
bond premium. All United States Holders who purchase Notes at a premium should
consult their tax advisers regarding the election to amortize premium and the
method of amortization to be employed.
Conversion of the Notes. A United States Holder generally will not recognize
gain or loss upon conversion of the Notes into Common Stock, except to the
extent that any cash paid in lieu of a fractional share of Common Stock
exceeds (or is less than) its tax basis allocable to such fractional share.
The United States Holder's tax basis in shares of Common Stock received upon
conversion will be the same as the United States Holder's adjusted tax basis
of the Notes converted (reduced by the portion of such basis allocable to any
fractional Common Stock interest for which the United States Holder receives a
cash payment from the Company). The holding period of the Common Stock
received in the conversion generally will include the holding period of the
Notes that were converted.
Dividends. Dividends paid on Common Stock received upon conversion will be
taxable to a United States Holder as ordinary income, to the extent paid out
of the Company's current or accumulated earnings and profits, then as a tax-
free return of capital to the extent of the Holder's tax basis in the Common
Stock, and thereafter as capital gains from the sale or exchange of such
Common Stock. Subject to certain restrictions, dividends received by a
corporate United States Holder generally will be eligible for the 70%
dividends received deduction if the Holder owns less than 20% of the voting
power and value of the Company's stock (other than any non-voting, non-
convertible, non-participating preferred stock). A corporate United States
Holder that owns 20% or more of the voting power and value of the Company's
stock (other than any non-voting, non-convertible, non-participating preferred
stock) generally will qualify for an 80% dividends received deduction. The
dividends received deduction is subject, however, to certain holding period,
taxable income, and other limitations.
Sale of Common Stock. A United States Holder of Common Stock received on
conversion who sells or otherwise disposes of such stock in a taxable
transaction will recognize capital gain or loss equal to the difference
between the cash and the fair market value of any property received on such
sale and the United States Holder's tax basis in such stock. Such gain or loss
will be long term gain or loss if the holding period for such Common Stock was
more than one year, and such long-term capital gain, in the case of an
individual, will be subject to a maximum Preferential Tax Rate as described
above.
Redemption of Common Stock. A redemption by the Company of some or all of a
United States Holder's Common Stock will be treated as a dividend to the
redeeming United States Holder to the extent of the Company's current and
accumulated earnings and profits unless the redemption meets one of the tests
under Section 302(b) of the Code. If one of the tests under Section 302(b) is
met, the redemption will be treated as an exchange giving rise to capital gain
or loss, except to the extent of declared but unpaid dividends. Such gain or
loss will be long-term capital gain or loss if the holding period for the
Common Stock was more than one year and such long-term capital gain, in the
case of an individual, will be subject to a maximum Preferential Tax Rate as
described above. United States Holders should consult their tax advisors as to
the application of Section 302(b) to their particular circumstances.
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<PAGE>
Adjustments to Conversion Price. Pursuant to Treasury Regulations
promulgated under Section 305 of the Code, a United States Holder of a Note
should be treated as having received a constructive distribution from the
Company upon an adjustment in the conversion price of the Notes if (i) as a
result of such adjustment, the proportionate interest of such United States
Holder in the assets or earnings and profits of the Company is increased and
(ii) the adjustment is not made pursuant to a bona fide, reasonable, anti-
dilution formula. An adjustment in the conversion price would not be
considered made pursuant to such a formula if the adjustment were made to
compensate for certain taxable distributions with respect to the Common Stock
into which the Notes are convertible. Thus, under certain circumstances, a
decrease in the conversion price of the Notes may be taxable to a United
States Holder of a Note as a dividend to the extent of the current or
accumulated earnings and profits of the Company. In addition, the failure to
adjust fully the conversion price of the Notes to reflect distributions of
stock dividends with respect to the Common Stock may result in a taxable
dividend to the United States Holders of the Common Stock. A failure to
properly adjust the conversion ratio could therefore cause Holders of Notes or
Common Stock to have taxable ordinary income in connection with an event
pursuant to which they will have received no cash or other property.
Backup Withholding and Information Reporting. A United States Holder of a
Note, or of Common Stock issued upon conversion of a Note, may be subject to
information reporting and possibly backup withholding. If applicable, backup
withholding would apply at a rate of 31% with respect to dividends or interest
on, or the proceeds of a sale, exchange, redemption, retirement, or other
disposition of, such Note or Common Stock, as the case may be, unless (i) such
United States Holder is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable backup withholding
rules. Amounts withheld under the backup withholding rules from a payment to a
United States Holder will be allowed as a credit against such Holder's United
States federal income tax and may entitle the Holder to a refund, provided
that the required information is provided to the IRS.
Recently issued Treasury regulations (the "Final Withholding Regulations"),
which are generally effective with respect to payments made after December 31,
1998, modify the currently effective information reporting and backup
withholding procedures and requirements, and provide certain presumptions
regarding the status of Holders when payments to the Holders cannot be
reliably associated with appropriate documentation provided to the payor. To
avoid backup withholding with respect to payments made after December 31,
1998, United States Holders will be required to provide certification, if
applicable, that conforms to the requirements of the Final Withholding
Regulations, subject to certain transitional rules which may apply to extend
until December 31, 1999 a certification given in accordance with prior
Treasury Regulations. Because the application of the Final Withholding
Regulations will vary depending on the United States Holder's particular
circumstances, United States Holders are urged to consult their own tax
advisors regarding the application of the Final Withholding Regulations.
NON-UNITED STATES HOLDERS
The Notes. The payment of interest on a Note generally will not be subject
to United States federal withholding tax, if (1) the interest is not
effectively connected with the conduct of a trade or business within the
United States, (2) the Non-United States Holder 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, (3) the Non-United States
Holder is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership and (4) either (i) the
beneficial owner of the Note certifies to the Company or its agent, under
penalties of perjury, that it is not a United States Holder and provides its
name and address on United States Treasury Form W-8 (or on a suitable
substitute form) or (ii) 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 Note
certifies under penalties of perjury that such a Form W-8 (or suitable
substitute form) has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payer with a copy thereof. Payments to a Non-United States Holder not
described in
36
<PAGE>
clauses 2 through 4, above, will be subject to withholding at a rate of 30% on
the gross amount of such payment, unless the rate of withholding is reduced or
eliminated by an applicable income tax treaty and the Non-United States Holder
provides the Company with a properly completed Form 1001 certifying to its
exemption from withholding under such treaty. For a Non-United States Holder
for which payments on the Notes constitute income effectively connected with a
United States trade or business of such Holder, such Holder must provide a
properly executed Form 4224 (or such successor forms as the IRS designates) in
order to avoid imposition of withholding tax at a rate of 30% (and, in the
case of corporate Holders, the branch profits tax). Non-United States Holders
providing such certification instead will be subject to United States net
income taxation at regular graduated rates on such effectively connected
income. The Final Withholding Regulations consolidate and modify the current
certification requirements and means by which a Non-United States Holder may
claim exemption from United States federal income tax withholding. A Non-
United States Holder must provide certification that complies with the
procedures in the Final Withholding Regulation (defined above under "--United
States Holders--Backup Withholding and Information Reporting"), where
required, by the first payment date after the effective date of those
regulations, subject to certain transitional rules which may extend
certifications previously provided by such Non-United States Holder in
accordance with the currently effective Treasury Regulations until December
31, 1999. Non-United States Holders claiming benefits under an income tax
treaty may be required to obtain a taxpayer identification number ("TIN") and
to certify eligibility under the applicable treaty's limitations on benefits
article in order to comply with the Final Withholding Regulations'
certification requirements. All Non-United States Holders should consult their
tax advisors regarding the application of the Final Withholding Regulations,
which are generally effective with respect to payments made after December 31,
1998.
A Non-United States Holder generally will not be subject to United States
federal income tax on any capital gain realized in connection with the sale,
exchange, retirement, or other disposition of a Note, including the exchange
of a Note for Common Stock, provided (i) such gain is not effectively
connected with the conduct by such holder of a trade or business in the United
States, and (ii) in the case of a Non-United States Holder that is an
individual, such holder is not present in the United States for 183 days or
more in the taxable year of the disposition.
A Note held directly by an individual who, at the time of death, is not a
citizen or resident of the United States should not be includible in such
individual's gross estate for U.S. estate tax purposes as a result of such
individual's death if the individual 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 and, at the time of the individual's death, if
payments with respect to such Note would not have been effectively connected
with the conduct by such individual of a trade or business in the United
States. Even if the Note was includible in the gross estate under the
foregoing rules, the Note may be excluded under the provisions of an
applicable estate tax treaty.
The Common Stock. In general, dividends (including any amounts that are
treated as dividends as described above) paid to a Non-United States Holder of
the Common Stock will be subject to United States federal income tax
withholding at a 30% rate unless such rate is reduced by an applicable income
tax treaty. Dividends that are effectively connected with such Non-United
States Holder's conduct of a trade or business in the United States or, if a
tax treaty applies, attributable to a permanent establishment, or, in the case
of an individual, a "fixed base," in the United States ("United States trade
or business income") are generally subject to U.S. federal income tax at
regular rates, but are not generally subject to the 30% withholding tax if the
Non-United States Holder files the appropriate form with the payer. Any United
States trade or business income received by a Non-United States Holder that is
a corporation may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
applicable under an income tax treaty.
Dividends paid to an address in a foreign country are presumed (absent
actual knowledge to the contrary) to be paid to a resident of such country for
purposes of the withholding tax discussed above and, under current Treasury
Regulations, for purposes of determining the applicability of a tax treaty
rate. Under the Final Withholding Regulations, which are generally effective
with respect to payments made after December 31, 1998,
37
<PAGE>
a Non-United States Holder of the Common Stock who wishes to claim the benefit
of an applicable tax treaty rate would be required to satisfy applicable
certification and other requirements, which might include filing a Form W-8
that contains the Non-United States Holder's name and address and a
certification that such Holder is eligible for the benefits of such treaty
under its limitations on benefits article.
A Non-United States Holder of the Common Stock that is eligible for a
reduced rate of United States federal withholding tax pursuant to an income
tax treaty or that has been subject to overwithholding may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
A Non-United States Holder of the Common Stock generally will not be subject
to United States income or withholding tax on capital gain realized on the
sale, exchange or redemption (provided that the redemption is treated as the
sale or exchange of the stock) of such stock, provided (i) such gain is not
effectively connected with the conduct by such holder of a trade or business
in the United States, and (ii) in the case of a Non-United States Holder that
is an individual, such individual is not present in the United States for 183
days or more in the taxable year of the disposition. Common Stock held
directly by an individual who at the time of death is not a citizen or
resident of the United States will nevertheless generally be includible in the
gross estate of such individual for United States estate tax purposes, subject
to contrary provisions of an applicable estate tax treaty.
Backup Withholding and Information Reporting. Payments on the Notes made by
the Company or any paying agent of the Company to Non-United States Holders
generally should not be subject to information reporting and backup
withholding at the rate of 31% if the certification described under "--The
Notes" above is received and the payer does not have actual knowledge that the
Holder is a United States Holder. If paid to an address outside the United
States, dividends on Common Stock held by Non-United States Holders will
generally not be subject to information reporting and backup withholding,
provided that the payer does not have actual knowledge that the Holder is a
United States person. However, under the Final Withholding Regulations, which
will not be effective prior to January 1, 1999, dividend payments will be
subject to information reporting and backup withholding unless applicable
certification requirements are satisfied.
Payment of proceeds from a sale of a Note or the Common Stock to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the Non-United States Holder certifies as to its
Non-United States Holder status or otherwise establishes an exemption from
information reporting and backup withholding. Payment outside the United
States of the proceeds of the sale of a Note or the Common Stock to or through
a foreign office of a "broker" (as defined in applicable United States
Treasury Regulations) should not be subject to information reporting or backup
withholding, except that if the broker is a United States person, a controlled
foreign corporation for United States federal income tax purposes or a foreign
person 50% or more of whose gross income is from a United States trade or
business, information reporting should apply to such payment unless the broker
has documentary evidence in its records that the beneficial owner is not a
United States Holder and certain other conditions are not met or the
beneficial owner otherwise establishes an exemption.
All Non-United States Holders are urged to consult their own tax advisors
regarding the possible application of information reporting and backup
withholding in light of their particular circumstances under the Final
Withholding Regulations.
THE UNITED STATES FEDERAL INCOME TAX AND ESTATE TAX DISCUSSION SET FORTH
ABOVE IS INTENDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A
PARTICULAR HOLDER'S SITUATION. PERSONS CONSIDERING A PURCHASE OF THE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF THE NOTES AND THE COMMON
STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING
RETROACTIVE CHANGES) IN UNITED STATES FEDERAL AND OTHER TAX LAWS.
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<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling Holders
may from time to time offer the Securities through brokers, dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the Selling Holders and/or the purchasers of the Securities
for whom they may act as agent. The Selling Holders and any such brokers,
dealers or agents who participate in the distribution of the Securities may be
deemed to be "underwriters," and any profits on the sale of the Securities by
them and any discounts, commissions or concessions received by any such
brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling Holders may be
deemed to be underwriters, the Selling Holders may be subject to certain
statutory liabilities, including, but not limited to, Sections 11, 12 and 17
of the Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Securities may be sold by one or more of the following methods, without
limitation: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; (f)
through the writing of options; and (g) other. At any time a particular offer
of the Securities is made, a revised Prospectus or Prospectus Supplement, if
required, will be distributed which will set forth the aggregate amount and
type of Securities being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, any discounts,
commissions and other items constituting compensation from the Selling Holders
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers. Such Prospectus Supplement and, if necessary, a post-effective
amendment to the Registration Statement of which this Prospectus is a part,
will be filed with the Commission to reflect the disclosure of additional
information with respect to the distribution of the Securities. In addition,
the Securities covered by this Prospectus may be sold in private transactions
or under Rule 144 rather than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Holders and any broker,
dealer, agent or underwriter regarding the sale of the Securities by the
Selling Holders. There is no assurance that any Selling Holder will sell any
or all of the Securities offered by it hereunder or that any such Selling
Holder will not transfer, devise or gift such Securities by other means not
described herein.
The Selling Holders and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, under the
Exchange Act, which may limit the timing of purchases and sales of any of the
Securities by the Selling Holders and any other such person. Furthermore,
under Regulation M, any person engaged in the distribution of the Securities
may not simultaneously engage in market-making activities with respect to the
particular Securities being distributed for certain periods prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the Securities and the ability of any person or entity to
engage in market-making activities with respect to the Securities.
Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Notes by the Company, each of the Company and
the Selling Holders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses incidental
to the registration, offering and sale of the Securities to the public other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
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<PAGE>
LEGAL MATTERS
The legality of the securities being offered hereby will be passed upon for
the Company by Stroock & Stroock & Lavan LLP, New York, New York, special
counsel to the Company.
EXPERTS
The Consolidated Balance Sheets as of February 28, 1997 and February 29,
1996 and the Consolidated Statements of Income, Stockholders' Equity and Cash
Flows for each of the three years in the period ended February 28, 1997 and
Financial Statement Schedule of Mark IV Industries, Inc. and Subsidiaries,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
40
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NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING 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, THE SELLING HOLDERS OR ANY
OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THOSE TO WHICH
IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO PURCHASE BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL
FOR SUCH PERSON 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 TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Disclosure Regarding Forward-Looking Statements............................ 2
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 4
Use of Proceeds............................................................ 6
Price Range of Common Stock and
Dividend Policy........................................................... 6
Capitalization............................................................. 7
Selected Financial Information............................................. 8
Business................................................................... 10
Directors and Executive Officers of the Company............................ 12
Security Ownership of Certain Beneficial Owners and Management............. 14
Selling Holders............................................................ 16
Description of Notes....................................................... 19
Description of Capital Stock............................................... 29
Certain Tax Considerations................................................. 34
Plan of Distribution....................................................... 39
Legal Matters.............................................................. 40
Experts.................................................................... 40
</TABLE>
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$275,000,000
LOGO
MARK IV INDUSTRIES, INC.
4 3/4% CONVERTIBLE
SUBORDINATED NOTES
DUE 2004
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PROSPECTUS
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February 13, 1998
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