UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 28, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to _____________________
Commission File No. 1-8862
MARK IV INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 23-1733979
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(State or other jurisdiction of (IRS employer Identification number)
incorporation or organization)
501 John James Audubon Pkwy., P.O. Box 810, Amherst, NY 14226-0810
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-4972
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Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
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Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant based on the closing price of the Common
Stock on May 20, 1999 on the New York Stock Exchange was approximately $723.5
million.
As of May 20, 1999, the number of outstanding shares of Registrant's
Common Stock, $.01 par value, was 49,133,624 shares.
Documents Incorporated By Reference
-----------------------------------
Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year are incorporated by reference into Part III.
<PAGE>2
MARK IV INDUSTRIES, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I Page
Item 1: Business....................................................3
Item 2: Properties.................................................22
Item 3: Legal Proceedings..........................................23
Item 4: Submission of Matters to a Vote
of Security Holders.......................................23
PART II
Item 5: Market for the Company's Common Stock and
Related Security Holder Matters...........................24
Item 6: Selected Financial Data....................................25
Item 7: Management's Discussion and Analysis
of Financial Condition and Results
of Operations.............................................27
Item 8: Financial Statements and Supplementary
Data......................................................40
Item 9: Disagreement on Accounting and Financial
Disclosure................................................67
PART III
Item 10: Directors and Executive Officers of the
Registrant................................................67
Item 11: Executive Compensation.....................................67
Item 12: Security Ownership of Certain Beneficial
Owners and Management.....................................67
Item 13: Certain Relationships and Related
Transactions..............................................67
PART IV
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K ......................................68
Signatures.................................................75
Exhibit Index..............................................76
<PAGE>3
PART I
ITEM 1. BUSINESS
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General
Mark IV Industries, Inc. ("Mark IV" or "the Company") is a diversified
manufacturer of a broad range of proprietary and other power and fluid
transfer products and systems which serve primarily industrial and automotive
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
and commercial users in the United States and Europe and, to a lesser extent,
in Canada, Latin America and the Far East. Mark IV operates 75 manufacturing
facilities and 45 distribution and sales locations and employs approximately
17,000 people in 19 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, and the
introduction of new, more cost effective and durable products and systems.
In furtherance of these strategies, over its last five fiscal years,
Mark IV has:
(i) increased its emphasis on cash-flow and asset utilization by
selling its non-core businesses and emphasizing cash-flow in its
new management incentive plans;
(ii) expanded its product make-up and increased its new business
opportunities to supply power systems to the emerging city car
market through its $148 million acquisition of Lombardini FIM SpA
("Lombardini") in April 1999;
(iii) initiated during fiscal 1997 a restructuring of the Company's
manufacturing and distribution facilities to make them more
focused and cost effective;
(iv) completed its restructuring plan in fiscal 1999, and began to
reposition its automotive aftermarket business and make certain
other strategic decisions relative its personnel requirements and
inventory management practices;
(v) expanded its international presence and capabilities and
complemented its existing automotive power transmission business
through its $60 million acquisition of LPI Systemes Moteurs S.A.
("LPI") in October 1997;
(vi) expanded LPI's products and technology from Europe to North
America;
(vii) increased its industrial hose and couplings production capacity
and strengthened its position in the related marketplace through
its $78 million acquisition of Imperial Eastman in fiscal 1997;
(viii) established manufacturing facilities in Argentina and Brazil;
(ix) established distribution centers to serve markets in Latin America
and the Pacific Rim, and acquired manufacturing and distribution
facilities in Australia and Mexico; and
(x) emphasized continuous product development.
<PAGE>4
Recent Developments
- - In February 1999, as part of the Company's strategy to improve its
return on assets employed, the Company sold its Automotive Filter
Business for $276 million. Near the end of fiscal 1999 the Company also
sold several smaller stand-alone business units for net cash
consideration of approximately $16 million.
- - In April 1999, the Company acquired the net assets of Lombardini, an
Italian-based manufacturer of small gasoline and diesel engines, for
$148 million. Lombardini produces small engines of up to 50kw in
power(65 horsepower), and competes in various markets, including
supplying engines to agricultural, marine, automotive, electrical
generation and home and lawn care markets, primarily in Europe. The
Company believes an additional growth opportunity resulting from the
Lombardini acquisition is in providing a power system (diesel engine and
continuously variable transmission) for application in the emerging
market for city cars (ultra-compact, economical and environmentally
friendly) in Europe and other regions throughout the world where
automotive congestion and pollution is a significant issue.
- - During the latter part of fiscal 1997, the Company began to realign and
refocus its operations, including the closure of certain facilities and
the termination of approximately 1,700 employees, with a net reduction
of approximately 1,000 employee positions. In that regard, the Company
recognized a restructuring charge of $112.5 million in fiscal 1997
(including $60.7 million of non-cash charges). During fiscal 1999, the
Company began to reposition its automotive aftermarket business, and
made certain other strategic decisions relative to its personnel
requirements, inventory management practices, facility utilization and
non-core lines of business. During this period the Company also
completed the remaining facility rationalization related to its fiscal
1997 restructuring plan. As a result of these activities, the Company
recognized a repositioning charge in fiscal 1999 in the amount of $66
million. Approximately $25 million of the charge related to non-cash
items, including $12.1 million related to inventory, and the balance
related primarily to the impairment of the value of certain fixed
assets.
- - In May 1998, the Company announced the completion of its 7.3 million
share repurchase program approved by the Board of Directors in March
1997. The stock was purchased at an average price of $22.00 per share,
for a total cost of $160.8 million. Upon completion of that program,
the Board of Directors approved the purchase of an additional ten
million shares. In May 1999, the Company completed the ten million
share repurchase program. Such shares were acquired over the preceding
twelve-month period at an average cost of $16.55 per share, or a total
cost of approximately $165.5 million. Upon completion of the May 1998
program, the Company's Board of Directors approved the purchase of an
additional ten million shares.
<PAGE>5
- - During fiscal 1998, the Company acquired the net assets of LPI for a net
cash purchase price of approximately $60 million. LPI, based in France,
manufactures plastic air admission systems which include air intake
manifolds and cooling modules produced by injection molding, welding and
blow molding technologies. Certain of LPI's technology and products in
place in Europe are being replicated in North America.
- - During fiscal 1997, 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 Signs and
Eagle Signal businesses and certain other non-operating assets. In
fiscal 1998, the Company sold its Gulton Data Systems and LFE Industrial
Systems businesses. The total of all of these divestitures generated
gross proceeds of approximately $313 million.
- - At the beginning of fiscal 1997, the Company acquired the net assets of
Imperial Eastman for a cash purchase price of approximately $78 million.
Imperial Eastman is a manufacturer and marketer of a broad range of
thermoplastic hydraulic and pneumatic hose assemblies, and steel and
brass couplings, adapters and fittings for high and low pressure
applications. Imperial Eastman is included in the Company's Industrial
Business Segment.
- - During fiscal 1998, the Company completed the sale of $275 million
principal amount of its 4-3/4% Convertible Subordinated Notes due 2004,
and $250 million principal amount of its 7-1/2% Senior Subordinated
Notes due 2007.
- - The Company used a portion of the net proceeds from its fiscal 1998
financing transactions and the divestiture transactions completed during
fiscal 1997 to reduce outstanding senior indebtedness under the
Company's Credit Agreement and domestic demand lines, and to refinance
its $258 million principal amount of 8-3/4% Senior Subordinated Notes
due April 1, 2003.
- - In March 1996, the Company entered into a $500 million, five-year non-
amortizing revolving credit facility (the "Credit Agreement") with
various financial institutions. The proceeds of the initial borrowings
under the Credit Agreement were used to repay amounts outstanding under
the Company's previously existing credit agreements.
- - In March 1996, the Company also completed the sale of $250 million
principal amount of its 7-3/4% Senior Subordinated Notes due 2006. The
net proceeds from the sale of the 7-3/4% Notes were used to reduce
outstanding indebtedness under the Credit Agreement.
<PAGE>6
Segment Information
The Company classifies its operations into the following two business
segments:
(i) Mark IV Automotive, which includes the design, manufacture and
distribution of power transmission, fuel and fluid handling, and
air-intake systems and components 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 transmission and fluid management systems
and components for industrial OEM and distribution markets
worldwide, specialty filtration products and systems, and
transportation and other products and systems.
Financial information regarding the business segments is presented in
Note 13 to the Company's audited consolidated financial statements included
elsewhere herein. A more detailed discussion concerning the make-up of the
Company's two business segments follows.
MARK IV AUTOMOTIVE
Mark IV Automotive designs, manufactures and sells a variety of high
quality automotive systems and components to the global automotive industry.
Sales in this segment were approximately $991 million in fiscal 1999,
representing 51% of Mark IV's total revenue during the year. Approximately
79% of the segment's sales were to OEM/OES customers, with the balance of the
Company's automotive products sold to the aftermarket.
Mark IV Automotive is focused on expanding its business to become a more
global supplier of safety, environmental and comfort related products to the
automotive industry. During fiscal 1999, Mark IV Automotive's sales increased
6%, after adjusting for the effects of acquired and discontinued operations.
This growth was driven by improvements in both its European and North American
markets, coupled with the start-up of operations in Brazil and Argentina.
Domestic growth was hampered somewhat by the General Motors strike earlier in
the fiscal year; however, new products, including the air-intake manifold line
(acquired with the October 1997 purchase of LPI) helped drive growth over the
full year. In addition to adding to sales, the acquisition of LPI also
provided the Company with new products and technology to be leveraged in its
North American OEM market.
Significant changes have been occurring in both the OEM and aftermarket
sectors of the Automotive business, and Mark IV Automotive has been changing
along with them. The industry's ongoing globalization and the consolidation
of suppliers in the marketplace are two of the most important factors
impacting the business. The introduction of LPI's air-intake technology
products to customers in North America, and the acquisition of Lombardini,
completed after the close of fiscal 1999, represent two new growth
opportunities for Mark IV Automotive. Research and development activities,
including an increasing number of simulation studies, are helping Mark IV
shorten its time required to develop new products, which helps increase
customer service and satisfaction. Continued internal growth, together with
additional acquisitions to help round-out product lines and geography, will
provide Mark IV with new products, technology and capacity going forward.
<PAGE>7
Mark IV Automotive is OEM driven and aftermarket leveraged. The Company
views its OEM business as the primary driver for growth in the automotive
business segment, and that its long-term success in the aftermarket is
dependent on providing OEM-approved products to its aftermarket customers.
Therefore, the Company's primary focus continues to be on supplying products
and systems designed, manufactured and sold to global automotive
manufacturers. It is anticipated that this will, in turn, enhance the
Company's ability to sell components into the aftermarket. After the sale of
Purolator's Automotive Filter Business, the Company is concentrating its
efforts on strengthening the position of its Dayco belts and hose line.
Automotive OEM/OES
Mark IV Automotive designs and supplies engineered systems and
components for the majority of automotive engine and platform manufacturers in
the world today, primarily serving OEMs in North America and Europe, and to a
lesser extent, in South America and Asia/Pacific.
In the automotive OEM market, the Company's emphasis is on providing
complete systems or subsystems to meet the needs of its customers. Management
believes Mark IV Automotive is recognized as an innovator in its "systems"
orientation, which helps OEM customers to decrease the amount of time in the
development stage, and minimize their fixed expenses, and allows the Company
to increase its sales dollars per vehicle. The Company's efforts in this area
over the past several years have been focused on expanding its technological
and engineering capabilities. Today, Mark IV Automotive is one of the world's
leading automotive systems manufacturers in the areas of power transmission,
air-intake and fuel and fluid handling.
Technical Centers
Mark IV Automotive has ten technical centers located in the U.S. and
Europe, each of which is dedicated to the development of products in its core
product areas. Research and development activities and resources are
coordinated throughout these centers. As a result, the Company is able to
avoid duplication and can capitalize on developments and improvements made in
its core technologies.
Customer Orientation
Mark IV Automotive is customer-oriented. Its research and development
efforts, which include an increased use of simulation studies, are shortening
the time required to develop new products and helping to satisfy its
customers' needs more quickly. The systems and components it provides have
been concentrated in several key areas of its Engine and Platform Divisions.
Following the recent acquisition of Lombardini, it is anticipated that the
Company's product and systems offerings during fiscal 2000 will include
products in the newly formed Power Train Division.
Engine Division
The Engine Division includes systems and components which address customers'
Power Transmission, and Air-Intake and Cooling needs.
<PAGE>9
Power Transmission Systems
Mark IV Automotive is a leading manufacturer of accessory drive and
camshaft drive systems consisting of components such as timing and poly-rib
belts, automatic tensioning devices, pulleys, idlers, brackets, dampers and
starter drives for the global automotive market. The power transmission group
is focused on providing fully designed front-end accessory drive systems which
offer customers increased value and improved performance.
Engines fitted with Mark IV's systems are top performers in terms of
economy, minimization of power loss, and the reduction of vibration and noise.
In addition, developments in the materials field have helped to increase the
durability of the Company's products while reducing important parameters such
as weight and size. Mark IV expects to remain in the forefront of the
industry by continuing to provide customers with innovative power transmission
systems with performance characteristics that meet or exceed the changing
needs of the marketplace. Its systems engineering capabilities are employed
at state-of-the-art technical centers in Rochester Hills, Michigan;
Springfield, Missouri; and Chieti, Valperga and Airasca, Italy, to serve
customers around the world.
During fiscal 1999, the Company's North American power transmission
group increased business 10%, and secured significant front-end accessory
drive business for future model years with its North American customers. Mark
IV Automotive's rigid components products, such as tensioners, pulleys, and
idlers, experienced significant growth during fiscal 1999. In the current
year, several new product programs will be introduced, including a high
performance serpentine drive belt.
Significant investments in new equipment and technology have been made
in the Power Transmission Division to ensure the unit maintains its leadership
position in the industry. Additional investments will also occur in the
coming year in the areas of belt and automated tensioner manufacturing
equipment. In fiscal 1999, the Company's Power Transmission Division received
numerous top quality awards from customers, both domestic and abroad. In
addition, all of the Division's manufacturing facilities have now received QS-
9000 registration, and are pursuing further improvement in the areas of
environmental and shop floor control.
In Europe,"Virtual Testing Simulation" was a new engine technology
development introduced to Mark IV Automotive's customers during the fiscal
year. This predictive modeling tool allows Mark IV Automotive to test its
power transmission systems on an engine transmission during the design stage,
to predict performance before the engine is actually built. Prior to this,
engines had to be designed, built, and then tested. Today, using the
customer's specifications, virtual testing can be used to create a full
picture of the engine, and predict how different component designs will affect
engine performance before the system is built. This process enables the
Company to advise its customers how the transmission will work, saving them
time and money in the process. Virtual testing is also used to improve or
resolve problems in existing engine designs.
<PAGE>9
Air-Intake and Cooling Systems
Also included in the Engine Division are air-intake and cooling systems,
which include a variety of high quality air intake manifolds, engine cooling
systems and components, ducts, thermostat housings, brake fluid, surge and
power steering tanks, and water pumps. This group's plastic air admissions
systems, including air-intake manifolds and cooling modules, are produced by
patented injection molding, welding and blow molding processes, making Mark IV
a recognized world leader in these technology areas.
Mark IV Automotive entered this market primarily through the October
1997 acquisition of LPI, headquartered in France. LPI has three manufacturing
facilities and a technical center, all located in France. In December 1998,
after completing technical development and testing, the Chateauroux, France
LPI facility started production of a new synthetic water-pump. The benefits
of this new product are derived from the synthetic materials used in
manufacturing resulting in a lighter weight, lower price and a better
performing water-pump. To date, the air-intake products have been sold
primarily in Europe to leading automotive companies, including Peugeot,
Citroen, Renault, Ford, BMW, Porsche and Volkswagen. In the second half of
fiscal 2000, the Company's new 175,000 square foot manufacturing facility and
technical center in Montreal, Quebec, Canada, is expected to be fully
operational. This facility will initially employ 150-200 people and provide
injection molded and welded nylon air intake manifolds for North American
automotive OEM customers, where a substantial amount of new business has
already been secured with Ford and General Motors.
The formula used in France to provide air intake and cooling systems to
the Company's European customers is being duplicated in Montreal, including
utilization of the same manufacturing equipment and tooling, materials and
work cell manufacturing processes. In addition, new employees in Montreal are
being trained by experienced personnel from the Company's LPI operations in
France.
Platform Division
Mark IV Automotive's Platform Division provides systems and components
to meet its customers' fluid handling and fuel systems needs.
Fluid Handling Systems
Management believes Mark IV Automotive is an established leader in the
design and manufacture of fluid handling systems. The Company's fluid
handling products consist of hose and hose assemblies for power steering, air
conditioning, oil cooling and other high-pressure applications, as well as
radiator hose, heater hose and other related hose, couplings and assemblies.
Only 50% of vehicles produced in Europe today include both air
conditioning and power steering, while in the U.S., over 95% of all new
vehicles are comparably equipped. The number of European cars which feature
these products is growing at a faster rate than the overall market,
representing a continuing growth opportunity for Mark IV Automotive in Europe.
<PAGE>10
The Company's fluid handling unit is recognized as one of the few
suppliers in North America with vertically integrated hose and metal tubing
assembly operations. This integrated capability results in optimal product
solutions for customers, enabling them to depend on a single supplier for
complete design and manufacturing responsibility.
The focus of the fluid handling group is to provide cost effective
system solutions that solve a variety of problems. Mark IV Automotive's
products are expected to operate in extreme conditions, including a wide range
of temperatures, pressures, and corrosive environments, and to be able to
handle fluids ranging from gases to liquids. These system requirements drive
the need for innovative research and development of new generation materials
and components, which are provided by the Company's technical centers in
Ocala, Florida, and Torino, Italy. Mark IV Automotive has also been
successful in integrating innovative NVH (noise and vibration) solutions into
its fluid handling assemblies, generating several new NVH patents each year.
Fuel Systems
Mark IV Automotive's fuel products include all systems and components
required for the safe transport of fuel--from the gas tank inlet into a
vehicle's gas tank, and from the tank into the engine. Mark IV Automotive's
products vary from completed systems to individual components, including
tubes, hose, couplings, fuel fillers, fuel pumps, fittings, valves, canisters,
filters, quick connectors and other assemblies. These products are currently
manufactured in North America, Europe and South America, and are sold to major
OEM customers around the world.
As automotive manufacturers continue to reduce their supply base, they
are placing increased responsibility for engineering and testing on their
suppliers, and sourcing complete systems rather than components. In response,
Mark IV Automotive's fuel unit is focused on gaining competitive advantage by
expanding its global presence, remaining market driven, and establishing
alliances with customers, as well as other members of the automotive supply
community.
The Company's research and development efforts led to three significant
breakthroughs during the year which include low permeation plastic barrier
hose constructions, coatings, and plastic fuel filler assemblies. Three years
in development, the low permeation fuel hose provides excellent performance to
automotive customers, minimizing the transfer of gasoline through the hose and
out into the environment. Another addition to the fuel line products is
coating enhancements. The silver coating applied over zinc-nickel extends the
life of the fuel filler systems from 10 to 15 years. The Company succeeded in
developing a new fuel filler assembly made of plastic. The fill tube
maintains the same dimensions all the way through the bends and circular-cross
section by the use of a patent-pending forming process. This value-added
feature gives the customer a product that is lower in weight and price, with
excellent performance properties.
<PAGE>11
Power Train Division
With the April 1999 acquisition of Lombardini, Mark IV has formed the
Power Train Division as a dedicated business unit. Lombardini, an Italian
based company, is a leading European manufacturer of small diesel engines with
manufacturing plants in Italy and France, and sales and distribution offices
throughout Europe and North America.
In a growing number of cities, vehicle congestion has caused increasing
problems with traffic, parking, emissions, noise and other environmental
issues. As a result, laws are being changed to restrict city traffic in many
countries. Consequently, in Europe, as in other continents, the "City Car and
City Van" (specially designed, ultra compact, economical and environmentally
friendly vehicles) market is emerging as a rapidly growing segment in a mature
automotive market. The Power Train unit will develop and market Power Pac
modules consisting of a diesel engine integrated with a continuously variable
transmission (CVT) currently under development by the Company. Management
believes Lombardini, along with LPI's air-intake business, provides new growth
opportunities for the Company, allowing Mark IV Automotive to enter a brand
new growing segment of the automotive market.
Automotive Aftermarket
In the automotive aftermarket, Mark IV Automotive provides a vast array
of automotive belts, hose and accessories to automotive warehouse
distributors, oil companies, original equipment service centers, retail and
auto parts chains, mass merchandisers, farm and fleet stores, and hardware
distributors.
The belts and hose manufactured and marketed primarily under the
Company's Dayco(R) brand name are widely recognized. Through its
restructuring activities, these two core product lines have streamlined the
Company's sales and marketing operations.
In fiscal 1999, the pilot program for Dayco's "Preferred Parts" stocking
program won praise and acceptance from Dayco's automotive aftermarket customer
test base. Preferred Parts utilizes information from R.L. Polk's vehicle
registration database. Their data is used to prepare a customized stocking
list of the Dayco products that fit the vehicles that are actually located in
a warehouse distributor's or jobber's market area. Although primarily
designed for these distribution channels, the Preferred Parts program is also
extremely beneficial to the installer, since it provides him with a reliable
source of supply. In response to the suggestions of the customers in its
pilot group, Dayco has obtained the hardware and software to keep the database
current, and also to reduce the time from a customer's request to the delivery
of the Preferred Parts report. With these technical advances, a full roll-out
of the Preferred Parts program is planned during fiscal 2000.
In an effort to help its customers streamline their inventories, as well
as giving them more products to sell, our Dayco and Dayco Eastman (formerly
Imperial Eastman) engineers combined their expertise to introduce a brand new
coupling style called the "HY" series, which will replace multiple coupling
series from both the old Dayco and old Imperial Eastman lines. The expanded
product offering is projected to increase Dayco's hydraulic sales
significantly during fiscal 2000.
<PAGE>12
The Company's Fayetteville, NC distribution center experienced its first
year of full operation in fiscal 1999. The warehouse management software
interfaces with the Dayco Aftermarket's Customer Order Inventory Network
("COIN") order processing system. Unlike some warehousing operations that
work in a "batch" mode that updates nightly, the Dayco system updates every
five minutes. With the sale of the Purolator Automotive Filter Business, the
Fayetteville facility will be dedicating 188,000 square feet to the Dayco
distribution business beginning in Fiscal 2000.
Outlook
Internal growth in the Company's automotive business will be achieved
through research and development and the resulting introduction of new
products to the market, and experiencing the benefits of having completed the
restructuring efforts which began in fiscal 1997 and were completed during
fiscal 1999. External growth will be achieved through entree into new markets
due to acquisitions to date, and those to occur going forward. The Company
will continue to provide its customers with quality products and service,
while improving efficiencies and reducing costs.
Mark IV Automotive's strength lies in its focus on the design,
development and manufacture of new or improved safety, environmental and
comfort related automotive products, predominantly for the OEM market. The
Company's technological capabilities, combined with increased investments in
research and development, will allow it to continue working with its customers
to provide solutions to today's automotive problems, and meet the needs of
tomorrow.
MARK IV INDUSTRIAL
Mark IV Industrial provides Power Transmission and Fluid Management,
Specialty Filtration, and Transportation products and systems to customers
around the world. Representing 49% of Mark IV's total revenue base, Mark IV
Industrial's sales were approximately $960 million in fiscal 1999. The
Company's focus in this segment includes serving its customers better by
expanding product offerings and improving quality and delivery, while at the
same time enhancing the utilization of its resources. The Company's efforts
in these areas are geared to position it as a significant supplier of
industrial products in key markets.
Combining the strengths of its brands, which include Dayco(R),
Purolator(R), Swan(R), Imperial Eastman(R), Facet(R), Mark IV IVHS, Luminator,
F-P Electronics and Caplugs(R), Mark IV Industrial is organized into three
primary operating units: Dayco Industrial, Specialty Filtration and
Transportation and Other.
Dayco Industrial
Dayco Industrial Transmission is focused on two primary areas: Power
Transmission and Fluid Management. Its Power Transmission systems and
components are used in the transmission of power - either mechanically or
through the use of hydraulics or fluid power. Its Fluid Management products
are used in the movement containment, processing, treatment or control of
fluids. The systems and components in these areas primarily consist of a
variety of belts, tensioners and pulleys and hose, couplings and assemblies,
which are specially designed for a variety of industrial applications.
<PAGE>13
Dayco Industrial's products are specially designed for a variety of
applications in markets which include petroleum, mining, forest products, lawn
& garden, construction, agriculture, and other niche markets. In these
markets, its products are supplied either directly to industrial original
equipment manufacturers (OEM's), and/or through established distribution and
retail networks.
During fiscal 1999, the Company acquired COG, a German company, adding
about $6 million to its annual revenue base in Europe. COG manufacturers and
distributes industrial power transmission belts. The addition of this company
will have a positive impact on the Company's power-transmission business in
Europe by increasing its product line, customer base and distribution channels
and allowing Dayco to increase its business with customers in the German
market.
During fiscal 1998, the Company acquired Imperial Eastman Australia,
Australian Hose Manufacturing and Rubicon Industrial, adding about $21 million
to its annual revenue base. The addition of these companies expanded the
Company's industrial product lines, and increased the group's penetration in
Australia.
Power Transmission
Dayco's power transmission products include a specific line of hydraulic
hose and couplings for use in the global mining industry, encompassing both
underground and above-ground processes, with each using different products and
standards. Its power transmission product line also supplies synchronous
drive belts which have been enhanced through advances in rubber compounding,
construction and design, resulting in the belt's improved performance and
design flexibility, while saving space, weight, energy and cost. In most
instances, Dayco's RPP Plus synchronous drive belts will replace old-fashioned
timing belts, roller chain and gear-driven drives, in addition to providing
high-torque, high-efficiency performance.
Dayco provides power transmission management solutions for its key
markets. In Dayco's lawn and garden equipment market, Dayco is a supplier to
the top names in the industry. As manufacturers have explored the use of
fluid power for more precision and control in their top-of-the-line units,
Dayco has responded with hydraulic hose and coupling solutions to meet their
demanding application needs. The Company's revenue derived from fluid power
sales in this market has doubled over the last three years.
Synergies experienced between the Company's Industrial and Automotive
groups have proven to be beneficial. Dayco Industrial's line of hydraulic
hose, couplings, and crimpers also serves the automotive and light-duty and
heavy-duty truck aftermarkets through Mark IV Automotive. Over the past year,
Dayco Industrial introduced a brand new coupling style called the "HY" series,
which replaced multiple coupling series from the combined Dayco and Eastman
product lines, enabling its industrial customers to streamline their
inventories. The Dayco Eastman hydraulic product offering, including the "HY"
coupling, has been introduced to the Company's automotive aftermarket
customers.
The launch of a new industrial and hydraulic filtration product line by
Purolator Filter Products has allowed the Company to take advantage of Dayco
Industrial's relationship with top fluid power distributors in North America.
Many distributors of hydraulic hose and couplings also sell products used to
filter the hydraulic fluid used in the system.
<PAGE>14
Fluid Management
Dayco Industrial continues to enhance and develop new fluid management
products, such as GST II, a general purpose air and water hose. This product
line now offers new sizes, brighter colors for safety, and higher working
pressures for demanding applications such as those found in the construction
industry. In the motor fuel-dispensing segment of the petroleum market, Dayco
introduced the Flex-Ever(TM) Ultimate II Vapor Recovery Hose, which features a
DuPont Dow Elastomers cover compound called Hypalon(R). This material
produces a rugged, abrasion resistant curb pump hose that performs equally
well in the hot summer weather of Yuma, Arizona or during the cold winter
months in Upstate New York. Dayco's expertise with vapor recovery and
gasoline dispensing hose provides additional leverage in global markets, as
more stringent vapor recovery regulations have come into effect in Europe and
Asia.
Rubicon Industrial, one of the Australian acquisitions completed at the
end of fiscal 1998, provides a more complete offering of thermoplastic hose
for the Company's industrial hose product line, with specific products
targeted at the mining, manufacturing equipment, and construction markets,
along with other products designed for special fluid handling applications.
Dayco Swan helped add to its Martha Stewart everyday garden (TM) line of
products offered by K-Mart, with the creation of a special garden hose. Soft,
flexible, and extra-tough, this rubber/vinyl hose was a featured item when
Martha Stewart and K-Mart launched their spring/summer line of products for
the home.
Dayco Swan was recently awarded with a "Partners In Progress" award from
Sears for their performance in supplying garden hose to their stores
nationwide during 1998. This highly prestigious honor was bestowed upon only
150 of Sears' 10,000 suppliers. Dayco's facilities in McCook, Nebraska and
Bucyrus, Ohio were awarded the Canadian Tire of Canada's highest honor, the
"Award of Excellence" in the leisure products category. This award is given
to suppliers who provide the highest quality and service to Canadian Tire.
Manufacturing Update
Dayco Industrial's manufacturing performance and efficiency were
significantly enhanced during the year by establishing the "cell" production
concept in Bucyrus, Ohio for the manufacture of Dayco Swan garden hose. The
"cell" concept provides efficiency throughout the grouping of continuous
processes, which minimizes hand-offs, and allows a cross-functional work team
to see a product through from raw material to its finished state.
Productivity increased to match the unit's business growth, while overall
manufacturing square footage was reduced.
Dayco's expanded Alliance, Nebraska plant became fully operational
during fiscal 1999. The Alliance facility produces braided wire and spiral
wire reinforced high-pressure hydraulic hose for agricultural, construction,
mining, and manufacturing equipment.
On the quality front, the Company's hose manufacturing facilities have
completed the ISO 9000 registration process over the past year. Along with its
power transmission facilities, which completed their registration as a group
in fiscal 1998, all of Dayco Industrial's key manufacturing facilities are now
ISO 9000 registered, an increasingly important factor when global industrial
customers are choosing suppliers.
<PAGE>15
Technology
Dayco Industrial's focus has been on servicing its customers by bringing
simplicity to ordering through the internet, utilizing its Dayco Direct
system, and implementing a new Enterprise Reserve Planning (ERP) system.
Dayco Direct is a significant new improvement in customer
communications. This successful integration of the internet into daily
operations has been well received by the Company's customer base, bringing
simplicity and up-to-the minute information right to their fingertips. The
system allows users to place orders, change orders, check the availability of
stock, price an order, and track an order's status, in real time, via the
internet. Users can even link with carriers, such as UPS and Consolidated
Freightways, to check the status of their shipments. This is not only a
benefit to the Company's customers, it frees up the Company's highly trained,
professional sales force to meet with distributors to provide technical
support information and trouble-shoot tough applications.
Another successful innovation this year was the implementation of the
Enterprise Resource Planning system. This new system makes the business more
efficient and better connected by linking all important functions within the
company: manufacturing, inventory, finance, order entry, sales and marketing
information on one central system.
Specialty Filtration
The Company's Specialty Filtration products include specialized
industrial fluid filters; heating and air conditioning filters for
residential, commercial and industrial users; and highly technical filters and
filtration systems. These products are provided by the Company's Purolator
Filter Products, Facet International, and Purolator Products Air Filtration
operations.
Purolator Filter Products
The Filter Products Group (FPG) of Mark IV Industrial manufactures and
markets a variety of advanced filtration products and devices used in the
aeropower, fluid processing and industrial markets.
In the Aeropower market, FPG manufactures fuel, lube and hydraulic
filters, indicators and switches for the commercial, military and general
aviation market segments.
The fluid processing market includes the Poroplus(R) Sand Control Screen
for the oil and gas market, and porous metal media filters for the Chemical
Processing Pharmaceutical market segment.
The Industrial market consists of a recently introduced hydraulic filter
line for the Industrial and Mobil Equipment markets, and a spin-on fuel and
lube product line for the Marine market. An array of specialty filter
products are designed and sold for OEM and end-user customers in the
utilities, paper and general industrial markets.
<PAGE>16
Facet International
Facet International designs, manufactures and distributes filters, oil
and water separators, refueling, filtration, anti-pollution and water
recycling systems, and bilge separators, for all types of liquids, gases, or
liquid gases. The Company supplies a variety of customers in the aviation
fuel handling, marine, refining, power generation, petrochemical, mobile
equipment and military markets. Many of its products help protect the
environment, reducing contamination and making it possible to recover and
reuse valuable industrial resources.
Facet is a worldwide provider of aviation refueling filtration and
separation systems with direct operations in ten countries. The company has a
significant number of technical approvals throughout the world for its
commercial and military aviation products. In addition, Facet International
recently developed a new type of bilge water separator to add to its already
wide range of marine products.
During fiscal 1999, Facet acquired Cosema International, located in
Torino, Italy. Cosema, with annual sales of $10.6 million, markets coolant
filtration and swarf (metal-turnings) handling systems directly to end-users
and manufacturers of machine tools. The addition of Cosema expands Facet's
industrial filtration lines, as well as provides its customers clear solutions
to a host of filtration and separation problems.
Purolator Products Air Filtration Company (PPAFC)
Through PPAFC, Mark IV Industrial manufactures and distributes a broad
range of heating, ventilation and air conditioning (HVAC) filters and
filtration products for residential, commercial and industrial uses. Sold
under the brand names Purolator(R) Facet(R) and Purolator Filtration Systems,
these filter products range from basic efficiency panel filters used in homes,
to medium and high efficiency products or equipment used in office buildings,
hospitals, manufacturing facilities and new construction projects.
New EPA Method 319 regulations for paint emissions led to the
development of two new filtration systems for paint spray booth applications.
This spurred sales of Purolator's Mark 80-D pleated filter and Prebond Pad
products which meet EPA Method 319 filtration requirements. As industry
becomes more technologically advanced, the demand for Purolator's High
Efficiency Particulate Air (HEPA) filter and equipment to the cleanroom market
is expected to increase. Fiscal 1999 brought the introduction of Purolator's
ASHRAE V-cell and Ducted Ceiling Modules. Both are used in the strict
environments of telecommunications, semiconductors, and pharmaceutical
testing. Purolator also expanded its ULTRA-cell(R) line of HEPAs, offering
more capacities and construction options for the most sensitive applications.
Transportation and Other
Transportation
The Company's Transportation Group includes Luminator Aircraft,
Luminator Mass Transit, F-P Electronics and Mark IV IVHS in North America,
with LLE and SLE in Europe. Transportation products include rail and bus
destination signs, electronic toll equipment, rail car lighting, automatic
vehicle location systems and information display components, as well as
lighting and passenger service units for commercial aircraft. These products
are sold to bus, rail, aircraft OEM and aftermarket, transit and
transportation authorities and industrial manufacturers.
<PAGE>17
Electronic Toll Markets
Since its inception five years ago, Mark IV IVHS has now shipped 4.5
million electronic toll transponders. Mark IV transponders are used in toll
road systems collecting over $3.0 billion in annual revenue. With the
addition of the Massachusetts Turnpike Authority, E-ZPass has grown to twelve
transportation authorities in New York, New Jersey, Pennsylvania, Delaware,
Maryland and Massachusetts. Now that the E-Pass system is maturing in New
York State, installation is underway in New Jersey, Delaware and
Massachusetts, and Pennsylvania soon after. At completion, E-ZPass will
stretch from Baltimore to Buffalo. It will be the largest electronic toll
road system in the world.
Another contract was awarded to Mark IV IVHS by the State of Illinois.
The first phase of I-Pass(R) operated by ISHTA, the major toll road authority,
has been implemented in fiscal 1999, including a new feature - express lanes.
The Company's equipment has been demonstrated to operate successfully at
highway speeds on Highway 407 in Toronto, as that highway is an open road with
no toll plazas.
In Orlando, Florida, the Company's first major customer for electronic
toll collection, Osceola County, continues to expand with the large tourist
traffic to the Disney site. Express lanes will be part of a new toll plaza
design along SR429 separating E-Pass(TM) and cash toll lanes. Express lanes
will allow E-Pass customers to pass through plazas safely up to the posted
speed levels for the highway.
Information Display Market
Mark IV is a leading supplier in both Europe and North America of bus
and rail destination signs. In the United States, Congress has approved the
Transportation Equity Act for the 21st Century (TEA 21), which replaces the
landmark ISTEA Reauthorization Act for fiscal years 1998-2003. TEA 21
constitutes the funding authorized to the Department of Transportation for
mass transit and highway programs for the next four years. What makes the
reauthorization unique is it includes unprecedented provisions designed to
guarantee funding for transit programs at significant levels through fiscal
year 2003. TEA 21's transit program authorized $41 billion with a guaranteed
funding level of $36 billion, representing at least a 50% increase and - if
fully funded - as much as a 70% increase over appropriated funding in the
preceding six years of ISTEA. TEA 21 is expected to generate many
opportunities for Luminator, IVHS, and F-P Electronics.
In early 1999, F-P Electronics introduced the Ultra line, a hybrid LED
magnetic disc display. The Ultra product is assembled in destination signs by
Luminator Mass Transit, LLE and SLE. The low weight and thin profile offer
significant maintenance and fuel saving advantages to a transit authority over
the operating life of the bus or rail car.
<PAGE>18
Mass Transit Products
The Luminator Mass Transit Bus Products Unit introduced MAX 3000(TM) with
Ultra Display in January 1999. MAX 3000 is the sequel to MEGA MAX(TM) (2000),
which was introduced in 1996. MAX 3000 is lighter, slimmer and easier to
maintain since there are fewer parts. The New York City Transit Authority
(among others), is installing MAX 3000 on hundreds of new buses they are
putting into service in fiscal 2000. In addition to the advancements made to
the sign, the Operator Display Keyboard (ODK - the sign's control console),
now contains the system processor board and a plug-in port for a flash card.
Using the plug-in card method to download message listings dramatically
reduces the process from minutes to seconds.
Another new product that will be introduced during fiscal 2000, that
will significantly impact visually impaired riders, is the Talking Sign.
Luminator's destination signs on a bus or train will house a transmitter. The
visually impaired person will have a hand held receiver. When the receiver is
pointed at the vehicle, the person will receive an audible message advising
the destination of the bus or train. The Talking Sign will be a great asset
to visually impaired people, enabling them to use public transit with more
confidence and independence.
Lighting Products Market
The Rail Products business unit is looking forward to the inauguration
of Amtrak's high speed service in December 1999, between Washington D.C. and
Boston. As Luminator is the major lighting supplier for the high-speed
trains, it will be an outstanding showcase for its products. Lights were
specifically designed to complement the fashionable interiors of the sleek
high-speed trains. Another high profile exposure for Luminator will be on New
York City's new subway trains, the R142/R142A, which will commence service in
the latter part of fiscal 2000.
Luminator is expanding its lighting products scope of sales by selling
directly to interior design companies in addition to the car builders.
Luminator will also be selling its sign systems to communication system
suppliers and system integrators.
Aircraft Products Markets
Luminator Aircraft Products has begun delivery of Passenger Service
Units (PSU) and several other interior lighting products for the Boeing B-717
commercial airliner, scheduled to enter service in mid 1999. This is part of a
joint business venture between Luminator and Drager Aerospace of Germany,
Fischer Aerospace of Austria, and Boeing's Douglas Products Division.
Aftermarket support of the Company's existing products, along with seat marker
light retrofit programs at several major airlines, continues to be a
significant part of the business.
<PAGE>19
Manufacturing Update
Luminator Mass Transit has undergone a major revamping of its plant as
part of an ongoing program to improve productivity without compromising the
quality standards expected by its customers. The layout of the production
floor, stock acquisition process, and implementation of Design for
Manufacturability (DFM) processes have made tremendous inroads, improving
productivity and the work environment, and reducing manufacturing costs. New
products are being designed utilizing DFM methods and existing products are
being redesigned incorporating elements of DFM wherever possible. Luminator's
premier sign, MAX 3000, was the first product resulting from the successful
implementation of the DFM methods.
In addition, LLE has moved into a new facility in Rastatt, Germany with
expanded manufacturing capabilities. This new facility will manufacture bus
and rail destination signs for both LLE and SLE, as well as other display
products.
Other Industrial Products
Included in this sector of the Industrial Business Segment are the
Company's Protective Closures' and NRD business units. Protective Closures is
made up of its Caplugs Division, which manufactures plastic, metal, and vinyl
caps, plugs, edge liners and protective netting sold to a broad base of
industrial and automotive OEM customers; and the Mokon Division, which
produces circulating oil and water temperature control systems. NRD is a
leading supplier of ionization elements used in smoke detectors, and also
manufactures self-energized, luminous exit signs, and static control devices
used mainly in the electronics and printing industries.
Outlook
Certain depressed market and geographic conditions negatively affected
Mark IV Industrial's revenue opportunities throughout fiscal 1999. Such
conditions are believed to be temporary in nature. Mark IV Industrial expects
to achieve growth in the coming decade by focusing on research and development
programs, and supplying new products to its targeted markets. Acquisitions
and strategic alliances created through collaborative engineering with
customers and specific product expertise, are also expected to provide
additional areas of opportunity.
In the global marketplace, demand is increasing for the systems and
components that Mark IV Industrial is strategically positioned to provide. By
focusing on specific market segments where it has leadership positions, and
expanding its product offerings within these areas, as well as in the
geographic regions in which it participates, it expects to continue to
generate new growth opportunities.
<PAGE>20
Mark IV Industrial is committed to satisfying the needs of its customers
by continuing to design, manufacture and distribute its products in an
efficient and cost effective manner. In addition, it is committed to
expanding its product offerings--through product line extensions, acquisitions
and/or joint ventures--in order to expand its array of power transmission and
fluid management, transportation systems and components and specialty
filtration products and systems.
Marketing and Competition
Mark IV's products are marketed primarily in the United States and
Europe, and to a lesser extent in Canada, Latin America and the Far East. The
Company uses its own sales engineers and other sales personnel, independent
distributors and sales representatives to market its products.
A majority of the Company's products have a significant and in many
instances a leading market share in their respective markets. Most of the
markets for the Company's products are characterized by a limited number of
competitors; however, competition in certain of those markets is intense.
Some of the Company's competitors are substantially larger than Mark IV and
have greater financial resources. The Company competes on the basis of price,
quality, technical innovation and its ability to fill orders promptly, with
the relative importance of each factor depending on the market for the
particular product.
Backlog
The Company does not believe that the backlog of orders for any of its
products is material to the Company as a whole.
Patents and Trademarks
Although a number of patents and trademarks have been issued to the
Company and its subsidiaries, the Company believes its competitive position is
more dependent on its technical knowledge and processes than on patent or
trademark protection. The Company believes, however, that its trademarks and
tradenames used in connection with certain products may be significant to its
business.
Research and Development
The Company is engaged in ongoing research and development in connection
with new and existing products and systems. Research and development
expenditures are expensed as incurred, and amounted to $53.3 million; $47.4
million and $39.9 million for the Company's continuing operations in fiscal
1999, 1998 and 1997, respectively. It is anticipated that such costs will
increase as a percentage of sales in fiscal 2000 as a result of a number of
new product and systems initiatives which the Company is pursuing.
<PAGE>21
Raw Materials and Supplies
The materials and supplies used to produce the Company's products are
generally obtained from a wide variety of suppliers, and the Company has not
experienced any shortages. Although certain materials are readily available
from only a few suppliers, the Company does not anticipate any significant
difficulties in obtaining any of these raw materials in the foreseeable
future.
Government Regulation
Certain of the Company's electrostatic control devices, smoke-detector
ionization elements and self-illuminating lights have radioactive components,
the production, storage and transportation of which are subject to federal,
state and local laws and regulations. Federal and state regulations also
limit the amount of exposure the Company's employees may have to such
radioactive materials. The Company has obtained the necessary licenses and
approvals required for its businesses and believes it is in material
compliance with all applicable regulations concerning radioactive materials
and employee safety.
Certain federal and state environmental superfund statutes generally
impose joint and several liability on present and former owners and operators,
transporters and generators for remediation of contaminated properties,
regardless of fault. The Company has been designated as a potentially
responsible party under these statutes at a number of sites. Based on the
facts currently known to the Company, management expects that the costs to the
Company of remedial actions at the sites where it has been named a potentially
responsible party, will not have a material adverse effect on the Company's
results of operations or financial condition.
The Company's facilities are also subject to many other federal, state
and local requirements relating to the protection of the environment, and the
Company has made, and will continue to make, expenditures to comply with such
provisions. The Company believes that its facilities are in material
compliance with these laws and regulations and does not believe that future
compliance with such laws and regulations will have a material adverse affect
on its results of operations or financial condition.
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally the "Occupational Safety and Health Act" and regulations
thereunder which, among other requirements, establish noise and dust
standards. The Company believes that it is in material compliance with these
laws and regulations and does not believe that future compliance with such
laws and regulations will have a material adverse affect on its results of
operations or financial condition.
<PAGE>22
Employees
The Company currently employs approximately 17,000 persons, of whom
approximately 13,000 are production employees, with the remainder serving in
executive, administrative, engineering or sales capacities. The Company
currently has approximately 2,100 North American production employees that are
covered by 9 collective bargaining agreements which expire at various times
through the year 2004. The Company believes its relationship with its
employees is good.
Other
Mark IV was incorporated in Delaware in 1970 and its executive offices
are at 501 John James Audubon Parkway, Amherst, New York 14226-0810. Its
telephone number is (716) 689-4972. Information on Mark IV can be obtained on
the Company's website at http://www.mark-iv.com.
ITEM 2. PROPERTIES
The table below summarizes the approximate floor space of the Company's
corporate office and principal manufacturing facilities by business segment.
Approximate Floor Space
---------------------------
(In Thousands of Square Feet)
Owned Leased Total
----- ------ -----
Corporate Office - 32,400 32,400
Industrial (1) 4,249,400 645,300 4,894,700
Automotive (2) 3,342,200 398,100 3,740,300
(1) Consisting of the following forty-one facilities:
North American facilities (approximately 4,066,900 square feet):
Springfield, MO; Fort Scott, KS; Alliance, NE; Eldora, IA; McCook, NE;
Davenport, IA (2); Bucyrus, OH; Buffalo, NY; Elmira, NY; Vero Beach, FL;
Stillwell, OK; Tulsa, OK; Henderson, NC; Kenly, NC; Sacramento, CA;
Newark, NJ; Greensboro, NC; Mexico City, Mexico; Plano, TX; Mississauga,
Ontario, Canada (2); Cobourg, Ontario, Canada; Grand Island, NY; Costa
Mesa, CA; Manitowoc, WI (2); Barrie, Ontario, Canada; Red Wing, MN and
El Paso, TX.
International Facilities (approximately 827,800 square feet):
Halesowen, U.K.; Torino, Italy (2); Barcelona, Spain; Treforest, Wales,
UK; Lacoruna, Spain; Rastatt, Germany; Pinneberg, Germany; Nice, France;
Perth, Australia; Sydney, Australia; and Adelaide, Australia.
<PAGE>23
(2) Consisting of the following thirty-four facilities:
North American facilities (approximately 1,666,700 square feet):
Walterboro, SC; Williston, SC; Ocala, FL; Ft. Worth, TX; Springdale, AR;
Weston, Ontario, Canada; Easley, SC; Lexington, TN; Tulsa, OK;
Mississauga, Ontario, Canada; Detroit, MI and Big Rapids, MI.
International facilities (approximately 2,073,600 square feet): Torino,
Italy (2); Baudour, Belgium; Chieti, Italy; Manopello, Italy; Varberg,
Sweden; Ulricehamn, Sweden; Blidsberg, Sweden: Valperga, Italy;
Follonica, Italy; Melbourne, Australia; Juatuba, Brazil; Sao Paulo,
Brazil; Cordoba, Argentina; Orbey, France; Fraize, France; Chateauroux,
France; Scarperio, Italy; Reggio Emilia, Italy; Rieti, Itally;
Villefranche Sor Saone, France; Valdobbiadene, Italy.
The Company also owns or leases various small production facilities,
sales offices, distribution and research centers which are not included in the
above list of properties.
The Company believes that its existing facilities have sufficient
capacity to meet its anticipated needs in each of its industry segments for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
One of the Company's subsidiaries has been named as a defendant in a
number of litigation actions related to product supplied to one of the
subsidiary's customers. The parties seek damages related to alleged defects
in certain hose products manufactured by the subsidiary and included by the
customer in its retail gasoline fuel delivery systems. The Company believes
it has good and valid defenses against the claims, and has submitted a
counter-claim against the customer.
The Company is also involved in various other legal issues. In the
opinion of the Company's management, the ultimate cost to resolve these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
<PAGE>24
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
- --------------------------------------------------------------------------
MATTERS
-------
The Company's Common Stock is listed on the New York Stock Exchange
(Symbol: IV). The following table sets forth, for the fiscal periods
indicated, the high and low closing sale prices per share of the Company's
Common Stock as reported by the New York Stock Exchange.
Fiscal 1999 Fiscal 1998
---------------- ----------------
Low High Low High
--- ---- --- ----
1st Quarter $20.438 $24.063 $22.143 $25.000
2nd Quarter $14.188 $22.000 $23.250 $25.438
3rd Quarter $13.250 $16.875 $22.000 $28.000
4th Quarter $12.688 $16.875 $20.250 $23.500
As of February 28, 1999, the approximate number of holders of record of
the Company's Common Stock was 1,900.
The Company declared total cash dividends of $.21 and $.17 per share
during fiscal 1999 and 1998, respectively.
<PAGE>25
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
FIVE YEAR SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
Fiscal Year Ended the Last Day of February,
------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995(a)
------ -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales from
continuing operations $1,948,600 $1,844,300 $1,717,900 $1,422,500 $1,168,300
========== ========== ========== ========== ==========
Operating income (b) $ 196,200 $ 207,900 $ 191,000 $ 156,300 $ 124,500
========== ========== ========== ========== ==========
Repositioning and
restructuring charges $ 63,800 $ - $ 112,500 $ - $ -
========== ========== ========== ========== ==========
Interest expense $ 53,900 $ 49,700 $ 45,800 $ 42,500 $ 42,500
========== ========== ========== ========== ==========
Income from continuing
operations (c):
Before repositioning
and restructuring
charges $ 91,100 $ 97,800 $ 88,600 $ 69,400 $ 50,500
Repositioning and
restructuring charges (38,700) - (67,500) - -
---------- --------- --------- --------- ----------
Total continuing 52,400 97,800 21,100 69,400 50,500
---------- --------- --------- --------- ----------
Income from discontinued
operations (c):
Before divestitures 4,100 11,400 17,500 23,000 17,400
Gain (loss) on
divestitures (6,300) - 17,500 - -
---------- --------- --------- --------- ----------
Total discontinued (2,200) 11,400 35,000 23,000 17,400
---------- --------- --------- --------- ----------
Extraordinary loss (c) (2,600) (10,600) - - (1,100)
---------- --------- --------- --------- ----------
NET INCOME $ 47,600 $ 98,600 $ 56,100 $ 92,400 $ 66,800
========== ========= ========= ========= ==========
Basic earnings per share:
Continuing operations:
Before repositioning
and restructuring
charges $ 1.60 $ 1.52 $ 1.34 $ 1.05 $ .94
Repositioning and
restructuring charges (.68) - (1.02) - -
--------- --------- --------- -------- ---------
Total continuing .92 1.52 .32 1.05 .94
--------- --------- --------- -------- ---------
Discontinued operations:
Before divestitures .07 .18 .26 .35 .33
Gain (loss) on
divestitures (.11) - .26 - -
--------- --------- --------- -------- ---------
Total discontinued (.04) .18 .52 .35 .33
--------- --------- --------- -------- ---------
Extraordinary loss (.04) (.16) - - (.02)
--------- --------- --------- -------- ---------
NET INCOME $ .84 $ 1.54 $ .84 $ 1.40 $ 1.25
========= ========= ========= ======== =========
</TABLE>
<PAGE>26
<TABLE>
<CAPTION>
Fiscal Year Ended the Last Day of February,
--------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995(a)
---- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Diluted earnings per share:
Continuing operations:
Before repositioning
and restructuring
charges $ 1.51 $ 1.49 $ 1.33 $ 1.04 $ .89
Repositioning and
restructuring charges (.59) - (1.01) - -
-------- --------- -------- -------- -------
Total continuing .92 1.49 .32 1.04 .89
-------- --------- -------- -------- -------
Discontinued operations:
Before divestitures .06 .17 .26 .35 .28
Gain (loss) on
divestitures (.09) - .26 - -
-------- --------- -------- -------- -------
Total discontinued (.03) .17 .52 .35 .28
-------- --------- -------- -------- -------
Extraordinary items (.04) (.16) - - (.02)
-------- --------- -------- -------- -------
NET INCOME $ .85 $ 1.50 $ .84 $ 1.39 $ 1.15
======== ========= ======== ======== =======
Cash dividends paid
per share $ .21 $ .17 $ .14 $ .11 $ .10
======== ========= ======== ======== =======
Weighted average number of
shares outstanding:
Basic 56,900 64,100 66,300 66,200 53,600
Diluted 65,500 67,400 66,700 66,600 60,700
As of the Last Day of February,
1999 1998 1997 1996 1995
Balance Sheet Data:
Working capital $ 490,600 $ 458,400 $ 364,600 $ 404,900 $ 379,700
Total assets $2,079,700 $2,420,500 $1,974,600 $2,013,100 $1,846,400
Long-term debt $ 797,500 $ 793,900 $ 528,500 $ 642,500 $ 610,700
Stockholders' equity $ 596,700 $ 752,000 $ 758,400 $ 725,500 $ 635,500
</TABLE>
[FN]
____________________________
(a) Restated to reflect discontinued operations.
(b) Income from continuing operations before repositioning and restructuring
charges, interest expense and taxes.
(c) Net of related tax effects.
</FN>
<PAGE>27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
The Company's short-term capital needs are met by cash generated through
operations, and supplemented by borrowings under various credit facilities to
the extent required. During fiscal 1999, the Company's operating performance
(income from continuing operations before repositioning charge and non-cash
items, plus operating working capital changes) generated cash of $219.5
million, a 39% increase over the $157.8 million generated in fiscal 1998. The
fiscal 1998 amount represents an increase of $51.5 million (48%) over the
$106.3 million generated in fiscal 1997.
Excluding cash and current financial indebtedness, the Company's working
capital investment was $422.7 million at February 28, 1999, a net decrease of
$121.7 million (22%) in comparison to $544.4 million at February 28, 1998. The
decrease is primarily attributable to the elimination of the working capital
investment of divested operations of $92.5 million. The remaining $29.2
million decrease in the Company's working capital investment is attributable
to the Company-wide emphasis on cash flow generation and maximizing the
Company's return on assets employed. Management anticipates its working
capital investment will be reduced further during fiscal 2000 as a result of
the completion of its repositioning program and continuing positive effects of
its emphasis on cash flow generation and return on assets employed. The
working capital investment at February 28, 1998 represents an increase of
$91.8 million (20%) in comparison to the total at February 28, 1997.
Capital expenditures related to continuing operations in fiscal 1999 were
$77.3 million, which was lower than depreciation and amortization expense of
$80.5 million for the year, and reflects a decrease of $59.1 million in
comparison to the level of fiscal 1998's capital expenditures. The reduced
level of expenditures relates primarily to the Company's return to more normal
levels as the Company completed its restructuring plan and its European and
South American expansion efforts. Capital expenditures related to continuing
operations in fiscal 1998 were $136.4 million, which exceeded depreciation and
amortization expense of $66.3 million for the year, and reflects an increase
of $42.9 million over fiscal 1997's expenditures of $93.5 million. The
increased level of expenditures in fiscal 1998 and 1997 relate primarily to
the Company's restructuring efforts, and secondarily to new facilities and
equipment required to support new products and markets, including increased
business opportunities in Europe and South America. Management anticipates
the Company's capital expenditure requirements will continue at the current
levels in fiscal 2000.
<PAGE>28
Cash provided by earnings in fiscal 1999 was sufficient to fund the Company's
capital expenditure investments, as well as the cash requirements of its
repositioning and restructuring efforts during the fiscal year. Management
believes that cash generated from earnings will be more than sufficient to
fund such needs for the foreseeable future. Management intends to utilize
such excess, plus funds generated as a result of the Company's anticipated
further reduction in its working capital investment, as well as its existing
cash and short-term investments, to help fund the repurchase of its Common
Stock, to make further debt reductions and/or to help fund future strategic
acquisitions.
In addition to the activity identified above, other investment activities of
the Company during the past few years include the following:
- - In February 1999, as part of the Company's strategy to improve its
return on assets employed, the Company sold its Automotive Filter
Business for $276.0 million. The purchase price was paid in cash, less
the assumption of approximately $6.4 million of debt, and is subject to
adjustment based upon an audit of the closing balance sheet in
accordance with provisions of the related purchase agreement. Near the
end of fiscal 1999 the Company also sold several smaller stand-alone
business units for net cash consideration of approximately $16.0
million.
- - During the latter part of fiscal 1997, the Company began to realign and
refocus its operations, including the closure of certain facilities and
the termination of approximately 1,700 employees, with a net reduction
of approximately 1,000 employee positions. In that regard, the Company
recognized a restructuring charge of $112.5 million in fiscal 1997
(including $60.7 million of non-cash charges). During fiscal 1999, the
Company began to reposition its automotive aftermarket business, and
made certain other strategic decisions relative to its personnel
requirements, inventory management practices, facility utilization and
non-core lines of business. During this period the Company also
completed the remaining facility rationalization related to its fiscal
1997 restructuring plan. As a result of these activities, the Company
recognized a repositioning charge in fiscal 1999 in the amount of $66.0
million, with $63.8 million related to continuing operations, and the
balance related to discontinued operations. Approximately $25.0
million of the charge relates to non-cash items, including $12.1
million related to inventory, and the balance related primarily to the
impairment of the value of certain fixed assets. As of February 28,
1999, approximately $28.0 million of these charges remain to be
expended, the substantial part of which will be expended over the next
18 months.
<PAGE>29
- - In May 1998, the Company announced the completion of its 7.3 million
share repurchase program approved by the Board of Directors in March
1997. The stock was purchased at an average price of $22.00 per share,
for a total cost of $160.8 million, with approximately 3.8 million
shares repurchased and retired during fiscal 1999 at an average cost of
$21.00 per share, or approximately $80.4 million. Upon completion of
that program, the Board of directors approved the purchase of an
additional ten million shares. Through February 28, 1999 the Company
acquired and retired approximately 5.7 million shares under the May
1998 program at an average cost of $17.17 per share, or a total cost of
approximately $97.8 million. Total purchases under both authorizations
in fiscal 1999 were approximately 9.5 million shares at an average cost
of $18.71 per share, or a total cost of approximately $178.2 million.
Subsequent to February 28, 1999, the Company acquired and retired the
remaining 4.3 million shares remaining under the May 1998 program at an
average cost of $15.75 per share, or a total cost of approximately
$67.7 million. The ten million shares acquired under the May 1998
program were acquired at an average cost of $16.55 per share, or a
total cost of approximately $165.5 million. Upon completion of the May
1998 program in May 1999, the Company's Board of directors approved the
purchase of an additional ten million shares. It is expected that such
shares will be purchased in the open market, or through privately
negotiated transactions, at prices which the Company considers to be
attractive.
- - In April 1999, the Company acquired the net assets of Lombardini FIM
S.p.A., an Italian-based manufacturer of small gasoline and diesel
engines for $148 million, consisting of $42 million in cash and the
assumption of $106 million of existing debt. Lombardini produces small
engines of up to 50kw (65 horsepower) in power and competes in various
markets, supplying engines to agricultural, marine, automotive,
electrical generation and home and lawn care markets, primarily in
Europe. It also exports its products to North America, Africa, Latin
America and Asia. Lombardini will be managed as a part of the
Company's Automotive Business Segment.
- - During fiscal 1998, the Company acquired the net assets of LPI Systemes
Moteurs S.A. (LPI) for a net cash purchase price of approximately $60
million. LPI, based in France, manufactures plastic air admission
systems which include air intake manifolds and cooling modules produced
by injection molding, welding and blow molding technologies. LPI is
included in the Company's Automotive Business Segment. The Company
also made a number of smaller acquisitions in Europe and Australia
during fiscal 1998 for a total cost of approximately $30 million.
- - During fiscal 1997, 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 Signs and
Eagle Signal businesses and certain other non-operating assets. In
fiscal 1998, the Company sold its Gulton Data Systems and LFE
Industrial Systems businesses. The total of all of these divestitures
generated gross proceeds of approximately $313 million.
<PAGE>30
- - At the beginning of fiscal 1997, the Company acquired the net assets of
Imperial Eastman for a cash purchase price of approximately $78
million. Imperial Eastman is a manufacturer and marketer of a broad
range of thermoplastic hydraulic and pneumatic hose assemblies, and
steel and brass couplings, adapters and fittings for both high and low
pressure applications. Imperial Eastman is included in the Company's
Industrial Business Segment.
The Company's long-term capital needs are met by cash generated from earnings,
bank financing, and public debt and equity offerings. Recent long-term
financing activities include the following:
- - The Company used a portion of the net proceeds from the divestitures
completed near the end of fiscal 1999 to reduce outstanding senior
indebtedness under the Company's Credit Agreement and domestic demand
lines which were primarily used to fund the Company's stock repurchase
program during fiscal 1999. The excess proceeds were invested in
short-term bank deposits and money market instruments, and will
ultimately be used to help fund future debt reductions, common stock
repurchases and/or strategic acquisitions.
- - In October 1997, the Company completed the private placement of $275
million principal amount of its 4-3/4% Convertible Subordinated Notes
due 2004 (and subsequently exchanged them for equivalent notes
registered under the Securities Act of 1933, as exchanged, the 4-3/4%
Notes). The 4-3/4% Notes are convertible into the Company's Common
Stock at a price of $32.8125 per share, subject to anti-dilution
adjustments.
- - In August 1997, the Company completed the private placement of $250
million principal amount of its 7-1/2% Senior Subordinated Notes due
2007 (and subsequently exchanged them for equivalent notes registered
under the Securities Act of 1933, as exchanged, the 7-1/2% Notes) at a
purchase price of 99.471% of their face amount.
- - The Company used a portion of the net proceeds from the divestiture
transactions completed during fiscal 1997 to reduce outstanding senior
indebtedness under the Company's Credit Agreement and domestic demand
lines, and to refinance its $258 million principal amount of 8-3/4%
Senior Subordinated Notes due April 1, 2003 (the 8-3/4% Notes). During
fiscal 1998, $184.9 million of the 8-3/4% Notes were acquired in open-
market purchases and the remaining $73.1 million of the 8-3/4% Notes
were called and redeemed on April 2, 1998.
<PAGE>31
- - In March 1996, the Company entered into a $500 million, five-year non-
amortizing revolving credit facility (the "Credit Agreement") with
various financial institutions. The proceeds of the initial borrowings
under the Credit Agreement were used to repay amounts outstanding under
the Company's previously existing credit agreements.
- - In March 1996, the Company also completed the sale of $250 million
principal amount of its 7-3/4% Senior Subordinated Notes due 2006 (the
7-3/4% Notes). The net proceeds from the sale of the 7-3/4% Notes were
used to reduce outstanding indebtedness under the Credit Agreement.
As of February 28, 1999, the Company had borrowing availability under its
Credit Agreement of $500 million and availability under its various other
domestic and foreign demand lines of credit of approximately $225 million.
Foreign Currency
The Company does not hold or issue derivatives for trading purposes and is not
a party to leveraged derivatives transactions. The Company's sales from
foreign locations and exports are significant; therefore, the Company does
enter into foreign currency forward contracts from time-to-time as a hedge for
certain existing or anticipated business transactions denominated in various
foreign currencies. The maximum notional amount of foreign currency forward
contracts outstanding at any one time during fiscal 1999 was not significant.
Results of Operations
The Company classifies its operations into the following two business
segments:
(i) Automotive, which includes the design, manufacture and
distribution of power transmission, fuel and fluid handling and
air-intake systems and components for the global automotive
aftermarket and OEM (original equipment manufacturers) market;
and
(ii) Industrial, which includes the design, manufacture and
distribution of power and fluid management systems and components
for industrial OEM and distribution markets worldwide,
transportation, specialty filtration and other products.
The results of operations of LPI, Imperial Eastman and the smaller
acquisitions made during the periods, have been included in the Company's
results of operations from their respective dates of acquisition.
The following discussion of the Company's results of operations is based on
the table below, which presents the Company's results of operations separate
from the Company's repositioning and restructuring charges and segregates the
results related to the Company's discontinued operations from the results of
the Company's continuing operations for all periods presented (dollars in
thousands):
<PAGE>32
<TABLE>
<CAPTION>
Years Ended The Last Day of February
------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
(As Restated)
Net sales from continuing operations $1,948,600 $1,844,300 $1,717,900
---------- ---------- ----------
Operating costs:
Cost of products sold (before restructuring
and repositioning charges) 1,312,900 1,225,000 1,147,700
Selling and administration 305,700 297,700 281,100
Research and development 53,300 47,400 39,900
Depreciation and amortization 80,500 66,300 58,200
--------- --------- ---------
Total operating costs 1,752,400 1,636,400 1,526,900
--------- --------- ---------
Operating income 196,200 207,900 191,000
Interest expense 53,900 49,700 45,800
--------- --------- ---------
Income from continuing operations,
before provision for taxes 142,300 158,200 145,200
Provision for taxes 51,200 60,400 56,600
--------- --------- ---------
Income from continuing operations, before
repositioning and restructuring charges 91,100 97,800 88,600
Repositioning and restructuring charges,
net of taxes (represents pretax charges of
$63.8 million and $112.5 million in
1999 and 1997, respectively) (38,700) - (67,500)
--------- --------- ---------
Income from continuing operations 52,400 97,800 21,100
--------- --------- ---------
Income from discontinued operations:
Income from operations, net of taxes 4,100 11,400 17,500
Gain (loss) on divestitures, net of taxes (6,300) - 17,500
--------- --------- ---------
Income (loss) from discontinued operations (2,200) 11,400 35,000
--------- --------- ---------
Extraordinary loss from early extinguishment
of debt, net of tax benefits (2,600) (10,600) -
--------- --------- ---------
NET INCOME $ 47,600 $ 98,600 $ 56,100
========== ========== ==========
</TABLE>
On a consolidated basis, net sales from continuing operations increased $104.3
million (6%) in fiscal 1999 in comparison to fiscal 1998. The increase was
primarily attributable to the Automotive Segment's internal sales growth and
the inclusion of the results of operations of LPI and several smaller
acquisitions made in fiscal 1999 and the latter half of fiscal 1998.
In the Company's Automotive Segment, net sales in fiscal 1999 increased $96.9
million (11%) in comparison to fiscal 1998. Internal sales growth, after
adjusting for the LPI and smaller acquisitions, was $56.8 million (6%). The
internal growth was lead by the Segment's OEM/OES Sector, which increased
approximately $52.2 million (7%) in fiscal 1999 in comparison to fiscal 1998.
OEM/OES growth of 10% was driven primarily by the International markets, with
a slower rate of growth of 2.4% in the U.S. The U.S. growth was somewhat
hampered by the GM strike which occurred earlier in the fiscal year. In the
Aftermarket Sector, internal sales growth was $4.6 million (2%) in fiscal 1999
in comparison to fiscal 1998. The internal growth in this Sector was led by
growth in the U.S., which offset a slight decline in the International
aftermarket.
<PAGE>33
In the Industrial Segment, net sales in fiscal 1999 increased $7.4 million
(1%) in comparison to fiscal 1998. Internal sales, after adjusting for
smaller acquisitions in the Power Transmission and Fluid Transfer Sector,
experienced a reduction amounting to $29.3 million (5%) for fiscal 1999 in
comparison to fiscal 1998. Such reduction was primarily attributable to a
significant decline in the global agricultural equipment markets in the last
half of the fiscal year, along with weak petroleum and petrochemical markets
experienced throughout the year. These reductions were offset by record sales
in the Segment's Transportation Sector, which increased 6% over comparable
fiscal 1998. The Segment's Specialty Filter Sector also contributed to the
increase, with internal sales growth of approximately 3% in fiscal 1999 as
compared to fiscal 1998.
In fiscal 1998, consolidated net sales from continuing operations increased
$126.4 million (7%) in comparison to fiscal 1997. Such sales were negatively
effected by approximately $60.0 million as a result of unfavorable foreign
currency exchange rate movements during fiscal 1998. If exchange rates in
fiscal 1998 had remained consistent with the rates in effect in fiscal 1997,
net sales from continuing operations in fiscal 1998 would have increased
approximately 11% in comparison to fiscal 1997. The increase in fiscal 1998's
sales was primarily attributable to internal growth, and to a lesser extent to
the inclusion of the results of operations of LPI and several smaller
acquisitions from their respective dates of acquisition.
In the Company's Automotive Segment, net sales in fiscal 1998 increased $107.1
million (14%) in comparison to fiscal 1997. Internal sales growth in fiscal
1998, was approximately 6% in comparison to fiscal 1997. Such growth was
primarily generated by the Segment's Automotive OEM Sector, with OEM growth in
the U.S. leading the way. The negative movements in foreign currency exchange
rates during fiscal 1998 related primarily to the Automotive Segment's OEM
business. In the Aftermarket Sector, internal sales decreased nominally in
fiscal 1998 in comparison to fiscal 1997.
In the Company's Industrial Segment, net sales in fiscal 1998 increased $19.3
million (2%) in comparison to fiscal 1997. Internal sales growth in fiscal
1998 was approximately 2% in comparison to fiscal 1997. This increase was led
by the Segment's Power Transmission and Fluid Transfer, and Transportation
Sectors in the U.S. The Industrial Segment's Power Transmission and Fluid
Transfer operations outside of the U.S. remained relatively flat, year over
year.
Cost of products sold as a percentage of consolidated net sales were 67.4%,
66.4%, and 66.8% in fiscal 1999, 1998 and 1997, respectively. The increase in
fiscal 1999 is primarily attributable to the effects in the first half of
fiscal 1999 of duplicative costs and inefficiencies incurred due to additional
time required to complete the Company's restructuring program. The Company
also experienced a negative effect on earnings from the General Motors strike
during fiscal 1999. The Company began to experience improved margins in the
latter half of fiscal 1999, upon the substantial completion of its
restructuring plan.
<PAGE>34
Selling and administration costs as a percentage of consolidated net sales
were 15.7%, 16.1% and 16.4% in fiscal 1999, 1998 and 1997, respectively. The
reduced level of costs reflects operating efficiencies achieved from the
integration of the operations acquired and the reorganization of the Company's
business segments. The lower level of costs also indicates the benefits of
the Company's continued emphasis on cost control.
Research and development costs increased by $5.9 million (12%) in fiscal 1999
in comparison to fiscal 1998, which in turn increased by $7.5 million (19%) in
comparison to fiscal 1997. As a percentage of consolidated net sales, such
costs were approximately 2.7%, 2.6% and 2.3% in fiscal 1999, 1998 and 1997,
respectively. This increased level of investment reflects the Company's
continuing emphasis on new product development, resulting from a number of new
product and systems initiatives which the Company is pursuing, as well as the
introduction of new technology to the North American Automotive OEM market
from acquisitions in Europe.
Depreciation and amortization expense increased by $14.2 million (21%) in
fiscal 1999 in comparison to fiscal 1998, which in turn increased by $8.1
million (14%) in comparison to fiscal 1997. The increases are attributable to
increased levels of capital equipment expenditures in fiscal 1998 and 1997 to
support the Company's restructuring efforts, as well as new facilities and
equipment required to support new products and markets and increased business
opportunities in Europe and South America. To a lesser extent, additional
goodwill amortization related to acquisitions in the latter part of fiscal
1998, also contributed to the increase.
The above mentioned items resulted in the following operating income from
continuing operations (before the repositioning and restructuring charge) for
each of the fiscal years presented (dollars in millions):
1999 1998 1997
---------------- --------------- --------------
% Of % Of % Of
Related Related Related
Amount Sales Amount Sales Amount Sales
------ ------- ------ ------- ------ -------
OPERATING INCOME
Automotive $101.0 10.2% $104.1 11.6% $ 91.8 11.7%
Industrial 109.5 11.4% 119.6 12.6% 118.6 12.7%
------ ------ ------
Total operating
income before
corporate expenses 210.5 10.8% 223.7 12.1% 210.4 12.2%
Corporate expenses (14.3) (0.7)% (15.8) (0.8)% (19.4) (1.1)%
------ ----- ------ ----- ------ -----
Operating income $196.2 10.1% $207.9 11.3% $191.0 11.1%
====== ===== ====== ===== ====== =====
<PAGE>35
The $63.8 repositioning charge in fiscal 1999 relates to the Company's
decision to reposition its Automotive Aftermarket business, and make certain
other strategic decisions relative to its personnel requirements, inventory
management practices, facility utilization and non-core lines of business.
The effect of this charge, after taxes, reduced income from continuing
operations by $38.7 million, or $.59 per diluted share of Common Stock.
The $112.5 million restructuring charge recognized in fiscal 1997 relates to
the Company's decision to realign and refocus its operations. The effect of
this charge, after taxes, reduced income from continuing operations by $67.5
million, or $1.01 per diluted share of Common Stock.
Interest expense in fiscal 1999 increased $4.2 million (8%) over fiscal 1998,
which in turn increased $3.9 million (9%) over fiscal 1997. The increase is
primarily due to borrowings incurred to finance the Company's stock repurchase
program and the acquisition of LPI and several smaller acquisitions in fiscal
1999 and the latter part of fiscal 1998. This increase was partially offset
by the benefits of proceeds from asset divestitures and reduced rates on the
Company's domestic debt, primarily related to the issuance of the 7-1/2% and
4-3/4% Notes in the latter part of fiscal 1998 to refinance higher rate debt.
The increase in fiscal 1998 is primarily the result of increased borrowings
required to finance the Imperial Eastman and other smaller acquisitions.
Interest expense also reflects the benefits of amounts allocated to
discontinued operations, which amounted to $13.1 million, $11.9 million and
$13.2 million in fiscal 1999, 1998 and 1997, respectively.
The effective tax rate as a percentage of pre-tax accounting income for fiscal
1999 reflects an expense of 36.0%, compared to an expense of approximately
38.2% and 39.0% in fiscal 1998 and 1997, respectively. The decrease in the
effective tax rate in fiscal 1999 as compared to fiscal 1998 and 1997 is
primarily the result of a more favorable mix of foreign income, as well as the
benefits of certain tax planning strategies.
The Company's income from continuing operations in fiscal 1999, 1998 and 1997
was made up of the following elements (dollars in thousands, except per share
amounts):
1999 1998 1997
---- ---- ----
Elements of the Company's income from
continuing operations:
Before repositioning/restructuring charges $ 91,100 $97,800 $ 88,600
Repositioning/restructuring charges (38,700) - (67,500)
-------- ------- --------
Income from continuing operations $ 52,400 $97,800 $ 21,100
======== ======= ========
Diluted income per share from
continuing operations:
Before repositioning/restructuring charges $ 1.51 $ 1.49 $ 1.33
Repositioning/restructuring charges (.59) - (1.01)
-------- ------- --------
Income from continuing operations $ .92 $ 1.49 $ .32
======== ======= ========
<PAGE>36
Income from continuing operations in fiscal 1999 (before the repositioning
charge) decreased $6.7 million (7%) over the comparable amount for fiscal
1998, which in turn increased $9.2 million (10%) over fiscal 1997 (before the
restructuring charge). On a diluted per share basis, such amount for fiscal
1999 represents an increase of $.02 (1%) over the comparable amount for fiscal
1998, which in turn increased $.16 (12%) over fiscal 1997. The diluted per
share increase in fiscal 1999 is a result of reduced weighted average shares
outstanding as a result of the Company's stock repurchase program, which more
than offset the effect of the decrease in income from continuing operations.
Impact of Inflation
The competitive environment in which the Company operates makes it extremely
difficult to pass on increased costs to its customers. In many instances, the
Company is not able to increase its prices at all, and in certain situations
is forced to reduce its selling prices. This environment makes it critical
for the Company to be able to operate in a continuously more efficient manner.
The Company must also work closely with its suppliers to minimize price
increases and push for pricing improvements in the same manner that its
customers demand of the Company.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer software programs being written
using two digits rather than four to define the applicable year. Any of the
Company's software programs, computer hardware or equipment that have date-
sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices,
manufacture products or engage in other normal business activities.
The Company has developed a formal plan to ensure that all of its significant
date-sensitive computer software and hardware systems ("Information
Technology") and other equipment utilized in its various manufacturing,
distribution and administration activities (utilizing embedded chips or
software..."Operating Equipment") will be Year 2000 compliant and operational
on a timely basis. The plan addresses all of the Company's locations
throughout the world, and includes a review of computer applications that
connect elements of the Company's business directly to its customers and
suppliers. The plan also includes an assessment process to determine that the
Company's significant customers and suppliers ("Third-Party Activities") will
also be Year 2000 compliant.
The Company's plan to resolve the Year 2000 Issue includes four major phases -
assessment, remediation, testing, and implementation. The Company has
substantially completed the assessment phase of its plan for all of its
significant Information Technology and Operating Equipment that it believes
could be affected by the Year 2000 Issue. Based upon its assessment, the
Company concluded that it would be necessary to reprogram and/or replace
certain of its Information Technology. The Company also determined that
certain of its Operating Equipment would also require modifications to make
sure they remain operational.
<PAGE>37
For its Information Technology exposures, the Company is approximately 98%
complete on the remediation phase for all of its significant systems, and
estimates that it will complete software reprogramming and/or replacement by
the end of the first quarter of fiscal 2000. To date, the Company has
completed approximately 95% of its testing and has implemented approximately
90% of the required remediation for such systems. The testing and
implementation phases are targeted to be substantially completed during the
second quarter of fiscal 2000.
The remediation of Operating Equipment is approximately 90% complete,and the
Company is targeting substantial completion of its related remediation efforts
by the end of the first quarter of fiscal 2000. Testing and implementation of
the affected equipment is also targeted to be substantially completed during
the second quarter of fiscal 2000.
With respect to Third-Party Activities, the Company has made inquiries of its
significant customers and suppliers and, at the present time, is not aware of
problems that would materially impact the Company's operations. However, the
Company has no means of ensuring that these customers and suppliers (and in
turn their customers and suppliers) will be Year 2000 compliant in a timely
manner. The inability of these parties to successfully resolve their Year
2000 issues could have a material adverse effect on the Company.
The Company is utilizing both internal and external resources to reprogram or
replace, test, and implement the required Year 2000 modifications. The
Company's total cost to address the Year 2000 Issue is estimated at $9.3
million and is being funded through operating cash flow. The elements of such
costs are as follows (amounts in thousands):
Incurred
Through Costs Yet Total
February 28, To Be Estimated
1999 Incurred Cost
----------- -------- ---------
Capital expenditures related to
new systems and equipment $1,600 $1,500 $ 3,100
Operating expenses related to
modifications of existing
systems and equipment 4,600 1,600 6,200
------ ------ -------
Total costs $6,200 $3,100 $ 9,300
====== ====== =======
The Company's plan to complete its Year 2000 modifications is based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
and other factors. Management does not believe that the cost of achieving
Year 2000 compliance will significantly impact the results of the Company's
operations or its financial position. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially
from those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
codes, the ability of the Company's significant customers and suppliers (and,
in turn, their significant customers and suppliers) to also achieve Year 2000
compliance, and similar uncertainties.
<PAGE>38
The Company presently believes that with modifications and replacement of
existing hardware and software, and continued contact with its significant
customers and suppliers, problems related to the Year 2000 Issue can be
mitigated. However, if such modifications and replacements are not
successfully completed, and if the Year 2000 plans of its significant
customers and suppliers are not completed on a timely basis, the Year 2000
Issue could have a material adverse effect on the Company's results of
operations, cash flows and financial condition.
Euro Conversion
On January 1, 1999, the Euro became the common currency of eleven of the
fifteen member states of the European Union. After the introduction of the
Euro, the national currencies will remain legal tender in the participating
countries until mid-calendar-year 2002. During the dual currency phase,
businesses must be capable of conducting commercial transactions in either the
Euro or the national currency. After the dual currency phase, all businesses
in participating countries must conduct all transactions in the Euro and must
convert their financial records and reports to be Euro-based. The Company
expects that all its facilities will be capable of complying with the Euro
conversion timetable and with customer requirements for quoting and billing in
Euro dollars. The Company's information technology systems are currently
meeting the dual currency phase requirements, and it is anticipated that the
final phase of the Euro conversion will not have a negative effect on the
Company.
Forward-Looking Information
This Management's Discussion and Analysis and other sections of this Annual
Report contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, as well as management's beliefs and assumptions. Words such
as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
("Future Factors") which are difficult to predict. Therefore, actual outcomes
and results may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
The Future Factors that may affect the operations, performance and results of
the Company's businesses include the following:
a. general economic and competitive conditions in the markets and
countries in which the Company operates, and the risks inherent
in international operations;
b. the Company's ability to continue to control and reduce its costs
of production;
c. the level of consumer demand for new vehicles equipped with the
Company's products;
<PAGE>39
d. 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;
e. the effect of changes in the distribution channels for the
Company's aftermarket and industrial products;
f. 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 U.S. and other
countries with whom they transact business; and
g. the successful completion of the Company's Year 2000 plan, as
well as the plans of its significant customers and suppliers.
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.
<PAGE>40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Index to Financial Statements
Page
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 28, 1999 41
Consolidated Balance Sheets at February 28, 1999
and 1998 42
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1999 43
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1999 44
Consolidated Statements of Comprehensive Income
for each of the three fiscal years in the period
ended February 28, 1999 45
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1999 46
Notes to Consolidated Financial Statements 47
<PAGE>41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity, comprehensive income
and cash flows present fairly, in all material respects, the financial
position of Mark IV Industries, Inc. and Subsidiaries (the "Company") as of
February 28, 1999 and 1998, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended February 28,
1999, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Rochester, New York
March 22, 1999
<PAGE>42
MARK IV INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1999 and 1998
(Dollars in Thousands)
ASSETS 1999 1998
---- ----
Current Assets:
Cash and short-term investments $ 125,700 $ 120,900
Accounts receivable 406,000 466,400
Inventories 297,600 393,400
Other current assets 133,300 105,600
---------- ----------
Total current assets 962,600 1,086,300
Pension and other non-current assets 185,500 226,600
Property, plant and equipment, net 562,300 668,400
Cost in excess of net assets acquired 369,300 439,200
---------- ----------
TOTAL ASSETS $2,079,700 $2,420,500
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities $ 57,800 $ 133,800
8-3/4% Notes, called for redemption - 73,100
Accounts payable 219,900 222,400
Compensation related liabilities 79,000 75,500
Accrued interest 23,200 28,600
Other current liabilities 92,100 94,500
---------- ----------
Total current liabilities 472,000 627,900
---------- ----------
Long-Term Debt:
Senior debt 24,700 21,400
Subordinated debt 772,800 772,500
---------- ----------
Total long-term debt 797,500 793,900
---------- ----------
Other non-current liabilities 213,500 246,700
---------- ----------
Stockholders' Equity:
Preferred stock - $.01 par value;
Authorized 10 million shares;
No issued shares - -
Common stock - $.01 par value;
Authorized 200 million shares;
Issued 53.4 million shares in 1999 and
62.9 million shares in 1998 500 600
Additional paid-in capital 440,700 617,800
Retained earnings 203,300 167,100
Foreign currency translation adjustment (47,800) (33,500)
---------- ----------
Total stockholders' equity 596,700 752,000
---------- ----------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $2,079,700 $2,420,500
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>43
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 and 1997
(Amounts in Thousands, Except Per Share Data)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
(As Restated)
Net sales from continuing operations $1,948,600 $1,844,300 $1,717,900
---------- ---------- ----------
Operating costs:
Cost of products sold (including $63.8
million and $112.5 million related to
repositioning and restructuring charges
in 1999 and 1997, respectively) 1,376,700 1,225,000 1,260,200
Selling and administration 305,700 297,700 281,100
Research and development 53,300 47,400 39,900
Depreciation and amortization 80,500 66,300 58,200
---------- ---------- ----------
Total operating costs 1,816,200 1,636,400 1,639,400
---------- ---------- ----------
Operating income 132,400 207,900 78,500
Interest expense 53,900 49,700 45,800
---------- ---------- ----------
Income from continuing operations,
before provision for taxes 78,500 158,200 32,700
Provision for taxes 26,100 60,400 11,600
---------- ---------- ----------
Income from continuing operations 52,400 97,800 21,100
---------- ---------- ----------
Income from discontinued operations:
Income from operations, net of taxes 4,100 11,400 17,500
Gain (loss) on divestitures, net of taxes (6,300) - 17,500
---------- ---------- ----------
Income (loss) from discontinued operations (2,200) 11,400 35,000
---------- ---------- ----------
Extraordinary loss from early extinguishment
of debt, net of tax benefits (2,600) (10,600) -
---------- ---------- ----------
NET INCOME $ 47,600 $ 98,600 $ 56,100
========== ========== ==========
Net income per share of common stock:
Basic:
Income from continuing operations $ .92 $ 1.52 $ .32
Income (loss) from discontinued operations (.04) .18 .52
Extraordinary loss (.04) (.16) -
---------- ---------- ----------
NET INCOME $ .84 $ 1.54 $ .84
========== ========== ==========
Diluted:
Income from continuing operations $ .92 $ 1.49 $ .32
Income (loss) from discontinued operations (.03) .17 .52
Extraordinary loss (.04) (.16) -
---------- ---------- ----------
NET INCOME $ .85 $ 1.50 $ .84
========== ========== ==========
Weighted average number of shares outstanding:
Basic 56,900 64,100 66,300
========== ========== ==========
Diluted 65,500 67,400 66,700
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>44
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(Dollars in Thousands, Except Per Share Data)
Foreign
Additional Currency
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment
------ --------- -------- ----------
<S> <C> <C> <C> <C>
Balance at February 29, 1996 $ 600 $617,600 $109,700 $ (2,400)
Net income for fiscal 1997 56,100
Cash dividends of $.138 per share (9,100)
Stock dividend of 5% 100 77,300 (77,400)
Restricted stock amortization 1,300
Stock options activity,
including related tax benefits 300
Translation adjustment (15,700)
------- -------- ------- --------
Balance at February 28, 1997 700 696,500 79,300 (18,100)
Net income for fiscal 1998 98,600
Cash dividends of $.17 per share (10,800)
Purchase and retirement of
3,474,420 shares of Common
Stock (average cost of
$23.14 per share) (100) (80,300)
Restricted stock amortization 1,300
Stock options activity,
including related tax benefits 300
Translation adjustment (15,400)
------- -------- ------- -------
Balance at February 28, 1998 600 617,800 167,100 (33,500)
Net income for fiscal 1999 47,600
Cash dividends of $.205 per share (11,400)
Purchase and retirement of
9,520,925 shares of Common
Stock (average cost of
$18.71 per share) (100) (178,100)
Restricted stock amortization 700
Stock options activity,
including related tax benefits 300
Translation adjustment (14,300)
------- -------- -------- --------
Balance at February 28, 1999 $ 500 $440,700 $203,300 $(47,800)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>45
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(Dollars in Thousands)
1999 1998 1997
-------- -------- --------
Net income $ 47,600 $ 98,600 $ 56,100
Balance sheet effect of foreign
currency translation adjustments (14,300) (15,400) (15,700)
-------- -------- --------
Comprehensive net income $ 33,300 $ 83,200 $ 40,400
======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>46
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(Dollars in Thousands)
1999 1998 1997
---- ----- ----
<S> <C> <C> <C>
(As Restated)
Cash flows from operating activities:
Income from continuing operations $ 52,400 $ 97,800 $ 21,100
Items not affecting cash:
Depreciation and amortization 80,500 66,300 58,200
Deferred income taxes 34,700 47,200 15,800
Pension income, net of other items (22,700) (15,100) (5,900)
Repositioning and restructuring
charges, net of tax 5,800 - 36,400
Changes in assets and liabilities, net
of effects of acquired and
divested businesses:
Accounts receivable (5,800) (39,300) (37,500)
Inventories 15,900 (10,100) (33,800)
Other assets (500) (5,400) (20,000)
Accounts payable and other liabilities (24,300) (53,400) 9,400
-------- -------- --------
Net cash provided by continuing
operating activities 136,000 88,000 43,700
Net cash provided by
discontinued operations 18,600 22,400 17,200
Extraordinary items before deferred charges (3,300) (11,700) -
-------- -------- --------
Net cash provided by operating activities 151,300 98,700 60,900
-------- -------- --------
Cash flows from investing activities:
Acquisitions - continuing operations (8,300) (82,700) (95,200)
Acquisitions - discontinued operations - (7,500) -
Divestitures and asset sales 271,900 36,700 276,600
Purchase of plant and equipment, net:
Continuing operations (77,300) (134,500) (90,700)
Discontinued operations (3,500) (19,000) (20,200)
-------- -------- --------
Net cash provided by (used in)
investing activities 182,800 (207,000) 70,500
-------- -------- --------
Cash flows from financing activities:
Credit agreement borrowings, net - - (97,300)
Issuance of subordinated debt, net of fees - 515,400 -
Retirement of subordinated debt (73,100) (184,900) -
Other changes in long-term debt, net 11,100 1,400 (16,700)
Changes in short-term bank borrowings (83,800) (13,100) (8,200)
Common stock transactions (178,100) (80,100) 300
Cash dividends paid (11,400) (10,800) (9,100)
Discontinued operations 6,000 - -
-------- --------- --------
Net cash provided by (used in)
financing activities (329,300) 227,900 (131,000)
-------- --------- --------
Net increase in cash and
short-term investments 4,800 119,600 400
Cash and short-term investments:
Beginning of the year 120,900 1,300 900
-------- -------- --------
End of the year $125,700 $120,900 $ 1,300
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>47
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and its Significant Accounting Policies
The Company
Mark IV Industries, Inc. and Subsidiaries (the Company) is a diversified
manufacturer of proprietary and other products, with operations primarily in
automotive and industrial power and fluid transfer businesses.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries. All significant intercompany transactions have been
eliminated. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which requires
management to make estimates and assumptions that affect the reported and
contingent amounts of assets and liabilities as of the date of such financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. It should be recognized that the actual results could
differ from those estimates.
Cash and Short-term Investments
Short-term investments consist of temporary bank deposits and money market
instruments with various financial institutions, and such items represent the
substantial part of the cash and short-term investments as of February 28,
1999 and 1998. For purposes of cash flows, the Company considers overnight
investments as cash equivalents. The Company paid interest of approximately
$75.4 million, $58.0 million and $62.0 million in fiscal 1999, 1998 and 1997,
respectively. The Company paid income taxes of approximately $33.9 million,
$27.0 million and $26.0 million in fiscal 1999, 1998 and 1997, respectively.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of periodic temporary investments of excess
cash and trade receivables. The Company places its temporary excess cash and
short-term investments in temporary bank deposits and high quality short-term
money market instruments through several high credit quality financial
institutions. The credit risk associated with trade receivables is minimal
due to the Company's large customer base and ongoing control procedures which
monitor the creditworthiness of customers. Historically, the Company has not
experienced significant losses on trade receivables.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
primarily on the last-in, first-out (LIFO) method.
<PAGE>48
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment
The Company provides for depreciation of plant and equipment primarily on the
straight-line method over its useful life. The cost of property, plant and
equipment retired or otherwise disposed of, and the accumulated depreciation
thereon, are eliminated from the asset and related accumulated depreciation
accounts, and any resulting gain or loss is reflected in income.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized on the straight-
line method over 40 years. The Company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business.
Foreign Currency
The assets and liabilities of the Company's international subsidiaries are
translated at year-end exchange rates, and resulting gains and losses are
accumulated as a separate component of stockholders' equity. Foreign currency
transactions are included in income as realized. The Company enters into
foreign currency forward contracts as a hedge for certain existing or
anticipated business transactions denominated in foreign currencies. Gains or
losses on contracts related to existing business transactions are deferred and
recognized as the related transactions are completed, while those related to
anticipated transactions are recognized as of the balance sheet date. The
Company does not hold or issue derivatives for trading purposes and is not a
party to leveraged derivatives transactions.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 - Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133). SFAS No. 133 standardized the
accounting for derivative instruments by requiring them to be recognized as
balance sheet assets or liabilities, measured at their fair market value.
Certain criteria have been established by SFAS No. 133 to determine if a
derivative is designated and qualifies as a hedge. Changes in the fair value
of derivatives that do not meet hedge accounting criteria in SFAS No. 133 are
required to be reported in earnings. SFAS No. 133 will be effective for the
Company's fiscal year ending February 28, 2001. Management is in the process
of assessing the impact of its SFAS No. 133 adoption; however, it anticipates
the effect on its financial statements will not be significant.
<PAGE>49
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment Reporting
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 - Disclosures about Segments of an Enterprise and Related
Information (SFAS No. 131). The new Statement supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise, replacing the
"industry segment" approach with the "management" approach. The management
approach defines the Company's reportable business segments based upon the
internal organization used by management for making operating decisions and
assessing overall performance. SFAS No. 131 also requires disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS No. 131 did not affect results of operations or financial position of the
Company. It also did not have a significant effect on the Company's
disclosure of its segment information, as its segments had previously been
presented consistent with the current management approach required by SFAS No.
131 (as identified in Note 13).
Earnings Per Share of Common Stock
The Company adopted Statement of Financial Accounting Standards No. 128 -
Earnings Per Share (SFAS No. 128) in the fourth quarter of fiscal 1998. SFAS
No. 128 is intended to simplify the earnings per share computations and make
them more comparable from company to company.
Basic earnings per share is calculated on the basis of the weighted average
number of shares outstanding, adjusted for subsequent stock distributions.
Diluted earnings per share, in addition to the weighted average determined for
basic earnings per share, includes common stock equivalents which would arise
from the exercise of stock options using the treasury stock method, and
assumes the conversion of the Company's 4-3/4% Convertible Subordinated Notes
for the period outstanding since their issuance in October 1997.
Stock-Based Compensation
Companies are required to either recognize compensation expense for grants of
stock options, or provide pro forma disclosures relative to what the effect of
such accounting recognition would have been. The Company has chosen not to
recognize compensation expense for options granted under its Incentive Stock
Option Plans, and the related pro forma information has been presented in Note
12 to these consolidated financial statements. Tax benefits received by the
Company upon the exercise and subsequent sale of the options by its employees
are recognized as an increase in additional paid-in capital as they occur.
Reclassifications
Certain reclassifications of 1998 and 1997 financial statements and related
footnote amounts have been made to conform with the 1999 presentation.
<PAGE>50
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restructuring and Repositioning Charges
During the latter part of fiscal 1997, the Company began to realign and
refocus its operations, including the closure of certain facilities and the
termination of approximately 1,700 employees, with a net reduction of
approximately 1,000 employee positions. The restructuring was substantially
completed in fiscal 1999. In that regard, the Company recognized a
restructuring charge of $112.5 million in fiscal 1997 (including $60.7 million
of non-cash charges), and such amount has been included in cost of products
sold in the accompanying consolidated statement of income. As of February 28,
1999, approximately $12.0 million of this charge remains to be expended,
related primarily to the run-out of severance and lease commitments.
During fiscal 1999, the Company began to reposition its automotive aftermarket
business, and made certain other strategic decisions relative to its personnel
requirements, inventory management practices, facility utilization and non-
core lines of business. During this period the Company also completed the
remaining facility rationalization related to its fiscal 1997 restructuring
plan, as discussed above. As a result of these developments, the Company
recognized a charge in fiscal 1999 in the amount of $66.0 million, with $63.8
related to continuing operations, and the balance related to discontinued
operations. The amount charged to continuing operations has been included in
the cost of products sold, and is made up of the following elements (dollars
in thousands):
Amounts Balance
Expended or Remaining
Adjusted at
Initial During February 28,
Charge Fiscal 1999 1999
------ ----------- -----------
Continuing Operations:
Non-cash charges $24,800 $(24,800) $ -
Costs to complete the fiscal
1997 restructuring plan 21,900 (21,900) -
Facility closing and lease
run-out costs 7,500 (300) 7,200
Severance and other costs 9,600 (500) 9,100
------- -------- -------
Total costs related to
continuing operations 63,800 (47,500) 16,300
Discontinued operations 2,200 (2,200) -
------- -------- -------
Total costs $66,000 $(49,700) $16,300
======= ======== =======
The non-cash charge includes $12.1 million related to inventory, with the
balance related primarily to the impairment of the value of certain fixed
assets. The after-tax effect of the charge reduced income from continuing
operations by $38.7 million and reduced diluted income per share from
continuing operations by $.59 in fiscal 1999.
<PAGE>51
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions and Divestitures
In October 1997, the Company acquired the net assets of LPI Systemes Moteurs
S.A. (LPI) for a net cash purchase price of approximately $60.0 million. LPI,
based in France, manufactures plastic air admission systems which include air
intake manifolds and cooling modules produced by injection molding, welding
and blow molding technologies. LPI is included in the Company's Automotive
business segment. The Company also made a number of smaller acquisitions in
Europe, Australia and South America during fiscal 1999 and 1998.
In fiscal 1997, the Company acquired the net assets of Imperial Eastman for a
cash purchase price of approximately $78.0 million. Imperial Eastman is a
manufacturer and marketer of a broad range of thermoplastic hydraulic and
pneumatic hose assemblies and steel and brass couplings, adapters and fittings
for both high and low pressure applications. Imperial Eastman is included in
the Company's Industrial business segment.
On February 26, 1999, the Company completed the sale of its Automotive Filter
Business for $276.0 million. The purchase price was paid in cash, less the
assumption of approximately $6.4 million of debt, and is subject to adjustment
based upon an audit of the Closing Balance Sheet in accordance with the
provisions of the related Purchase Agreement. The Company's Automotive Filter
Business was part of its Automotive business segment. Near the end of fiscal
1999, the Company also sold several smaller stand-alone business units for net
cash consideration of approximately $16.0 million.
The results of operations of these separate units have been segregated from
the Company's continuing operations and accounted for as discontinued
operations in the accompanying consolidated statements of income and cash
flows for fiscal 1999. The consolidated statements of income and cash flows
for fiscal 1998 and 1997 have been restated to reflect such discontinued
operations in a manner consistent with the presentation for fiscal 1999. The
results of operations of these discontinued businesses up to their respective
disposal dates were as follows (dollars in thousands):
1999 1998 1997
---- ---- ----
Sales $363,000 $365,900 $358,100
======== ======== ========
Income before interest
and taxes $ 19,200 $ 30,400 $ 32,200
Interest expense allocated (13,100) (11,900) (13,200)
Provision for taxes (2,000) (7,100) (7,400)
-------- -------- --------
Income from discontinued
operations $ 4,100 $ 11,400 $ 11,600
======== ======== ========
In fiscal 1998, the Company sold its Data Systems and LFE Industrial Systems
businesses. Such businesses were included in the results of operations of the
Company's Industrial segment through their respective disposal dates.
In fiscal 1997, the Company sold its Professional Audio business, as well as a
number of other non-core businesses. The results of operations for such
divested businesses have been presented as discontinued operations in the
Company's consolidated statements of income through their respective disposal
dates.
<PAGE>52
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts Receivable and Inventories
Accounts receivable are reflected net of allowances for doubtful accounts of
$9.6 million and $13.6 million at February 28, 1999 and 1998, respectively.
The amount at February 28, 1998 includes $2.4 million related to discontinued
operations.
Inventories consist of the following at February 28, 1999 and 1998 (dollars in
thousands):
1999 1998
---- ----
Raw materials $ 76,200 $ 86,200
Work-in-process 51,600 73,000
Finished goods 169,800 234,200
-------- --------
Total $297,600 $393,400
======== ========
The total at February 28, 1998 includes $66.0 million related to discontinued
operations.
As a result of the fair value determination of inventories required by the
purchase method of accounting for acquired companies as of their acquisition
date, LIFO costs exceed historical FIFO costs by approximately $31.8 million
and $38.7 million at February 28, 1999 and 1998, respectively. The excess at
February 28, 1998 includes approximately $9.2 million related to discontinued
operations.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost and consist of the following
at February 28, 1999 and 1998 (dollars in thousands):
1999 1998
---- ----
Land and land improvements $ 24,900 $ 25,900
Buildings 174,700 179,900
Machinery and equipment 599,200 658,000
-------- --------
Total property, plant and equipment 798,800 863,800
Less accumulated depreciation 236,500 195,400
-------- --------
Property, plant and equipment, net $562,300 $668,400
======== ========
The net amount at February 28, 1998 includes $111.3 million related to
discontinued operations.
Depreciation expense related to continuing operations was approximately $68.6
million, $56.1 million and $48.1 million in fiscal 1999, 1998 and 1997,
respectively.
6. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $54.3 million and $51.1 million at February 28,
1999 and 1998, respectively. Cost in excess of net assets acquired at
February 28, 1999 reflects approximately $12.9 million related to the
Company's acquisitions in fiscal 1999, as well as final purchase accounting
for acquisitions completed in fiscal 1998. Cost in excess of net assets
acquired at February 28, 1999 also reflects the elimination of approximately
$64.1 million related to discontinued operations. Amortization expense related
to continuing operations was approximately $10.4 million, $8.7 million and
$7.9 million in fiscal 1999, 1998 and 1997, respectively.
<PAGE>53
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Long-Term Debt
Long-term debt consists of the following at February 28, 1999 and 1998
(dollars in thousands):
1999 1998
---- ----
Senior debt:
Credit Agreement $ - $ -
Other items 42,400 31,200
---------- ----------
Total senior debt 42,400 31,200
Less current maturities (17,700) (9,800)
---------- ----------
Net senior debt 24,700 21,400
---------- ----------
Subordinated debt:
4-3/4% Convertible Subordinated Notes 275,000 275,000
7-1/2% Senior Subordinated Notes 248,900 248,800
7-3/4% Senior Subordinated Notes 248,900 248,700
8-3/4% Senior Subordinated Notes - 73,100
---------- ----------
Total subordinated debt 772,800 845,600
Less current portion - (73,100)
---------- ----------
Net subordinated debt 772,800 772,500
---------- ----------
Total long-term debt 797,500 793,900
Stockholders' equity 596,700 752,000
---------- ----------
Total capitalization $1,394,200 $1,545,900
========== ==========
Long-term debt as a percentage
of total capitalization 57.2% 51.4%
========== ==========
The Company's primary credit agreement (the Credit Agreement) provides for a
non-amortizing revolving credit facility through March 2001, with borrowing
availability of $400 million under a domestic facility (the Domestic Credit
Facility) and $100 million under a multi-currency facility (the Multi-Currency
Credit Facility). The Multi-Currency Credit Facility permits borrowings to be
made in U.S. dollars as well as specified foreign currencies.
Borrowings under the Domestic Credit Facility bear interest at an annual rate
equal to, at the Company's option, either (i) the greater of (a) the reference
rate of the agent acting on behalf of the various banks or (b) the Federal
Funds Rate plus 0.50% or (ii) LIBOR plus a margin (the Applicable Margin)
ranging from 0.225% to 0.35% depending upon the Company's consolidated
leverage ratio, as determined on a quarterly basis. Borrowings under the
Multi-Currency Credit Facility bear interest at the LIBOR rate for the
currency of each loan plus the Applicable Margin. The Company is also
required to pay a commitment fee at an annual rate ranging from 0.125% to
0.20% of the total borrowing availability under the Credit Agreement (the
Facility Fee Rate), determined on the basis of the same consolidated leverage
ratio. Based upon the Company's consolidated leverage ratio as of February
28, 1999, the Applicable Margin and Facility Fee Rate are 0.225% and 0.15%,
respectively.
The Credit Agreement contains customary covenants, including those requiring
the maintenance of specified consolidated interest coverage and leverage
ratios and amounts of consolidated net worth. Borrowings under the Credit
Agreement are guaranteed by the Company's significant domestic and
international subsidiaries and are collateralized by a pledge of the capital
stock of each of such subsidiaries.
<PAGE>54
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1997, the Company completed the private placement of $275 million
principal amount of its 4-3/4% Convertible Subordinated Notes due 2004 (and
subsequently exchanged them for equivalent notes registered under the
Securities Act of 1933, as exchanged, the 4-3/4% Notes). The 4-3/4% Notes are
convertible into the Company's Common Stock at a price of $32.8125 per share,
subject to anti-dilution adjustments. The 4-3/4% Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness and senior subordinated notes.
In August 1997, the Company completed the private placement of $250 million
principal amount of its 7-1/2% Senior Subordinated Notes due 2007 (and
subsequently exchanged them for equivalent notes registered under the
Securities Act of 1933, as exchanged, the 7-1/2% Notes) at a purchase price of
99.471% of their face amount. The 7-1/2% Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness, and rank the same in right of payment
as the Company's 7-3/4% Senior Subordinated Notes.
The 7-3/4% Notes are due 2006 and are general unsecured obligations of the
Company. The 7-3/4% Notes are subordinated in right of payment to all
existing and future senior indebtedness, and rank the same in right of payment
as the Company's 7-1/2% Notes.
The Company used a portion of the net proceeds from the transactions described
above to reduce outstanding senior indebtedness under the Company's Credit
Agreement and domestic demand lines, and to refinance $184.9 million of its
$258 million principal amount of 8-3/4% Senior Subordinated Notes due April 1,
2003 (the 8-3/4% Notes). The Company recognized an extraordinary charge in
fiscal 1998 of $10.6 million, net of $6.5 million of tax benefits, for the
early extinguishment of debt. The remaining $73.1 million principal amount of
the 8-3/4% Notes were called for redemption on April 2, 1998 at 104.375% of
principal amount, resulting in an extraordinary charge in fiscal 1999 of $2.6
million, net of $1.4 million of tax benefits.
Based on market quotes and interest rates currently available to the Company
for debt with similar terms and remaining maturities, the aggregate fair value
of total long-term debt at February 28, 1999 and 1998 was approximately $726
million and $794 million, respectively.
Annual maturities of long-term debt for the next five fiscal years are
approximately: 2000 - $17.7 million; 2001 - $6.8 million; 2002 - $5.4 million;
2003 - $5.8 million; 2004 - $2.4 million.
8. Leases
The Company has operating leases which expire at various dates through 2010
with, in some instances, cost escalation and renewal provisions. Total rental
expense under operating leases related to continuing operations was
approximately $13.9 million, $13.2 million and $15.0 million in fiscal 1999,
1998 and 1997, respectively. Future minimum rental payments under operating
leases are approximately: 2000-$10.0 million; 2001-$9.3 million; 2002-$9.1
million; 2003-$8.5 million; 2004-$7.1 million; and 2005 and thereafter - $18.6
million.
<PAGE>55
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income Taxes
Income from continuing operations, before provision for taxes, and the related
provision for taxes for fiscal 1999, 1998 and 1997 consists of the following
(dollars in thousands):
1999 1998 1997
---- ---- ----
Income before provision for taxes:
United States $ 87,300 $ 98,000 $ 77,000
International 55,000 60,200 68,200
Repositioning/restructuring charge (63,800) - (112,500)
-------- -------- --------
Total $ 78,500 $158,200 $ 32,700
======== ======== ========
Provision for taxes:
Currently payable:
United States $ 1,500 $ 1,500 $ 22,000
International 15,000 17,800 18,800
Repositioning/restructuring related (6,100) (6,100) (31,700)
-------- -------- --------
Total currently payable 10,400 13,200 9,100
-------- -------- --------
Deferred:
United States 29,900 35,900 6,800
International 4,800 5,200 9,000
Repositioning/restructuring related (19,000) 6,100 (13,300)
-------- -------- --------
Total deferred 15,700 47,200 2,500
-------- -------- --------
Total provision for taxes $ 26,100 $ 60,400 $ 11,600
======== ======== ========
The provision for taxes on income from continuing operations for fiscal 1999,
1998 and 1997 differs from the amount computed using the United States
statutory income tax rate as follows (dollars in thousands):
1999 1998 1997
---- ---- ----
Expected tax at United States
statutory income tax rate $27,500 $55,400 $ 11,500
Permanent differences 1,000 2,200 2,000
State and local income taxes 1,200 2,000 (1,000)
International tax rate differences
and other items, net (3,600) 800 (900)
------- ------- --------
Total provision for taxes $26,100 $60,400 $ 11,600
======= ======= ========
<PAGE>56
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) consist of the following at
February 28, 1999 and 1998 (dollars in thousands):
1999 1998
------ ------
Current:
Tax credit carryforwards $ 19,500 $ 18,400
International items, net 13,500 15,200
Insurance related liabilities 11,700 10,200
Repositioning/restructuring liabilities 11,300 6,600
Compensation related liabilities 4,900 6,600
Other current items 3,600 (11,600)
-------- --------
Net current asset $ 64,500 $ 45,400
======== ========
Non-current:
Fixed and intangible assets $(39,500) $(53,100)
Pension and postretirement related items (28,400) (18,200)
Capital and operating loss carryforwards 34,100 13,900
Other non-current items (100) (12,000)
-------- --------
Total non-current liability (33,900) (69,400)
Valuation allowance (14,000) -
-------- --------
Net non-current liability $(47,900) $(69,400)
======== ========
Based on the Company's history of prior operating earnings and its
expectations for the future, management of the Company has determined that it
is more likely than not that operating income will be sufficient to enable it
to realize its deferred tax assets, including tax credit carryforwards which
begin to expire in 2007. The undistributed earnings of the Company's
international subsidiaries have been reinvested in each country, and are not
expected to be remitted back to the parent company. The valuation allowance
represents a reserve for the capital loss carryforwards. Such losses, which
expire in 2004, may be used to offset future capital gains.
10. Pension and Other Postretirement Benefit Plans
Information concerning the Company's defined benefit pension plans consists of
the following (dollars in thousands):
Defined Benefit Pension Plans
-----------------------------
1999 1998 1997
Change in Plan Assets: ---- ---- ----
Fair value of plan assets at
the beginning of the year $ 471,400 $ 418,000 $ 366,400
Acquisitions - - 20,800
Actual return on plan assets (22,800) 95,000 57,300
Benefits paid (34,000) (41,600) (26,500)
--------- --------- ---------
Fair value of plan assets at
the end of the year $ 414,600 $ 471,400 $ 418,000
========= ========= =========
<PAGE>57
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Defined Benefit Pension Plans
-----------------------------
1999 1998 1997
---- ---- ----
Change in Benefit Obligations:
Benefit obligations at the
beginning of the year $(356,000) $(337,100) $(303,100)
Acquisitions - - (24,500)
Service cost (5,200) (4,800) (5,600)
Interest cost (24,000) (23,800) (23,300)
Curtailment gains (losses) 6,000 (400) (2,400)
Special termination benefits - - (16,000)
Change in the discount rate - (17,900) -
Other actuarial gains (losses) (15,300) (13,600) 11,300
Benefits paid 34,000 41,600 26,500
--------- --------- ---------
Benefit obligations at the
end of the year $(360,500) $(356,000) $(337,100)
========= ========= =========
Funded Status Reconciliation:
Funded status $ 54,100 $ 115,400 $ 80,900
Unrecognized actuarial losses 96,100 12,600 30,900
Unrecognized prior service costs 1,500 1,700 1,100
--------- --------- ---------
Prepaid benefit recognized in the
consolidated balance sheet
at the end of the year $ 151,700 $ 129,700 $ 112,900
========= ========= =========
Components of Net Pension Income
(Expense):
Service cost $ (5,200) $ (4,800) $ (5,600)
Interest cost (24,000) (23,800) (23,300)
Expected return on plan assets 52,300 45,700 42,900
Curtailment losses - (400) (2,400)
Special termination benefits - - (16,000)
Amortization of unrecognized losses - - (1,000)
--------- --------- ---------
Net pension income (expense)
for the year $ 23,100 $ 16,700 $ (5,400)
========= ========= =========
Plan assets include Common Stock of the Company with a total market value of
$30.4 million as of February 28, 1999. The special termination benefits of
$16.0 million in fiscal 1997 relate to the Company's restructuring activities,
as discussed in Note 2. The net pension income identified above includes
service cost expense related to discontinued operations of approximately $1.3
million, $1.2 million and $1.1 million in fiscal 1999, 1998 and 1997,
respectively.
<PAGE>58
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning the Company's other postretirement benefit plans
consists of the following (dollars in thousands):
Other Postretirement Benefit Plans
----------------------------------
1999 1998 1997
---- ---- ----
Change in Benefit Obligations:
Benefit obligations at the
beginning of the year $ (95,600) $ (88,200) $ (84,100)
Acquisitions - - (4,100)
Service cost (600) (500) (600)
Interest cost (6,300) (6,200) (6,200)
Curtailment gains 6,900 - 2,900
Change in the discount rate - (3,500) -
Other actuarial losses (1,700) (7,300) (5,100)
Benefits paid 11,300 10,100 9,000
--------- --------- ---------
Benefit obligations at the
end of the year $ (86,000) $ (95,600) $ (88,200)
========= ========= =========
Funded Status Reconciliation:
Funded status $ (86,000) $ (95,600) $ (88,200)
Unrecognized actuarial losses 22,200 29,300 18,300
Unrecognized prior service costs (400) (900) (300)
--------- --------- ---------
Accrued liability recognized
in the consolidated balance
sheet at the end of the year $ (64,200) $ (67,200) $ (70,200)
========= ========= =========
Components of Expense for Other
Postretirement Benefits:
Service cost $ (600) $ (500) $ (600)
Interest cost (6,300) (6,200) (6,200)
Curtailment gains - - 2,900
Amortization of unrecognized losses (1,300) (600) (100)
-------- --------- ---------
Net expense for the year $ (8,200) $ (7,300) $ (4,000)
======== ========= =========
The weighted average actuarial assumptions utilized in determining the above
amounts for the defined benefit and other postretirement benefit plans as of
the end of the year were as follows:
Expected return on plan assets 11.5% 11.5% 11.5%
Discount rate 7.0% 7.0% 7.5%
Rate of compensation increase 3.0% 4.0% 4.0%
<PAGE>59
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's other postretirement benefit plans identified above provide
health and life insurance benefits to a number of existing retirees from
certain of its operations under the provisions of a number of different plans.
Contributions currently required to be paid by the retirees towards the cost
of such plans range from zero to 100%. The Company also has a number of
active employees who might receive such benefits upon their retirement.
Relative to the above financial information, the actuarial valuations assume a
medical cost trend rate of 7% for fiscal 2000, decreasing by 1% per year to an
ultimate level of 4.5% in fiscal 2002. In that regard, the impact of a 1%
change in the health care cost trend rate would change the benefit obligations
by $1.7 million and change the total service and interest cost components by
approximately $100,000.
The Company also has defined contribution pension plans for a significant
number of its employees in the United States, as well as for certain of its
employees outside of the United States. The Company's contributions to these
plans are based on various percentages of compensation, and in some instances
are based upon the amount of the employees' contributions to the plans. The
annual cost of these plans related to continuing operations amounted to
approximately $11.6 million, $12.9 million and $14.5 million in fiscal 1999,
1998 and 1997, respectively, the substantial part of which was funded
currently.
11. Net Income Per Share
Following is a reconciliation of net income and weighted average common shares
outstanding for purposes of calculating basic and diluted net income per
share:
Basic Net Income Per Share 1999 1998 1997
-------------------------- ---- ---- ----
Net income $47,600 $ 98,600 $56,100
======= ======== =======
Weighted average
common shares outstanding 56,900 64,100 66,300
======= ======== =======
Basic net income per share $ .84 $ 1.54 $ .84
======= ======== =======
Diluted Net Income Per Share
----------------------------
Net income $47,600 $ 98,600 $56,100
After-tax equivalent of interest
expense on 4-3/4% convertible
subordinated notes 8,000 2,700 -
------- -------- -------
Income for purposes of computing
diluted net income per share $55,600 $101,300 $56,100
======= ======== =======
Weighted average common
shares outstanding 56,900 64,100 66,300
Dilutive stock options 200 500 400
Weighted average assumed conversion of
4-3/4% convertible subordinated notes 8,400 2,800 -
------- -------- -------
Weighted average common shares
outstanding for purposes of computing
diluted net income per share 65,500 67,400 66,700
======= ======== =======
Diluted net income per share $ .85 $ 1.50 $ .84
======= ======== =======
The weighted average diluted common shares outstanding for fiscal 1999
excludes the dilutive effect of approximately 900,000 options, since such
options have an exercise price in excess of the average market value of the
Company's Common Stock during the fiscal year.
<PAGE>60
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Stockholders' Equity and Stock Options
The Company has a Shareholders' Rights Plan under which Rights were
distributed as a dividend at a rate of one Right for each share of Common
Stock held. Each Right entitles the holder to buy one one-hundredth of a
newly-issued share of the Company's Series A Junior Participating Preferred
Stock at an exercise price of $80.00 per share. If an acquiring person
beneficially owns 20% or more of the Company's Common Stock or the Company is
a party to a business combination which is not approved by the Company's Board
of Directors, each Right (other than those held by the acquiring person) will
entitle the holder to receive, upon exercise, shares of Common Stock of the
Company or of the surviving company with a value equal to two times the
exercise price of the Right.
In May 1998, the Company announced completion of its 7.3 million share
repurchase program approved by the Board of Directors in March 1997. The
stock was purchased at an average price of $22.00 per share, for a total cost
of $160.8 million, with approximately 3.8 million shares repurchased and
retired during fiscal 1999 at an average cost of $21.00 per share, or
approximately $80.4 million. Upon completion of that program, the Board of
Directors approved the purchase of an additional ten million shares. It is
expected that such shares will be purchased in the open-market, or through
privately negotiated transactions, at prices which the Company considers to be
attractive. Through February 28, 1999 the Company acquired and retired
approximately 5.7 million shares under the new program at an average cost of
$17.17 per share, or a total cost of approximately $97.8 million. Total
purchases under both authorizations in fiscal 1999 were approximately 9.5
million shares at an average cost of $18.71 per share, or a total cost of
approximately $178.2 million. Subsequent to February 28, 1999, the Company
acquired approximately 3.6 million additional shares, at an average cost of
$15.14 per share, or a total cost of approximately $55.1 million.
Under the Company's Restricted Stock Plan, there are approximately 26,900
restricted shares outstanding under various awards as of February 28, 1999.
Approximately 276,000 shares remain available for issuance under the Plan as
of that date. The fair market value of restricted stock awards as of the date
of grant is recognized as it is earned over the restriction period (normally 5
years), with approximately $0.7 million, $1.3 million and $1.3 million
recognized as expense in fiscal 1999, 1998 and 1997, respectively.
The Company's qualified Incentive Stock Option Plans provide for granting
options to key employees to allow them to purchase the Company's Common Stock
at an exercise price equal to 100% of the market price on the date of grant.
The options may be exercised in cumulative annual increments of 25% commencing
one year after the date of grant, and have a maximum duration of ten years.
There were approximately 2.4 million and 3.2 million shares reserved for the
future granting of options as of February 28, 1999 and 1998, respectively.
<PAGE>61
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the status of all of the Company's stock option
transactions for fiscal 1999, 1998 and 1997 (share amounts in thousands):
1999 1998 1997
----------------- ---------------- -----------------
Weighted Weighted Weighted
Average Average Average
Option Option Option Option Option Option
Shares Price Shares Price Shares Price
------ ------ ------ ------- ------ -------
Balance at
beginning
of year 1,638 $16.85 1,421 $15.11 1,841 $14.08
Activity during
the year:
Granted 827 $17.48 357 $22.26 - -
Exercised (72) $ 8.90 (136) $12.89 (410) $10.45
Canceled (53) $18.27 (4) $16.62 (10) $16.15
---- ---- ----
Balance at
end of year:
Outstanding 2,340 $17.28 1,638 $16.85 1,421 $15.11
===== ===== =====
Exercisable 1,064 $16.13 850 $14.80 684 $13.60
===== ===== =====
At February 28, 1999, approximately 590,400 of the options outstanding have a
weighted average remaining life of approximately 5 years, and are exercisable
at prices ranging primarily from $10.28 to $16.74 per share. The remaining
1,749,600 options outstanding have a weighted average remaining life of
approximately 8 years and are exercisable at prices ranging from $12.68 to
$22.26 per share. The 827,000 and 357,000 options granted during fiscal 1999
and 1998, had a weighted average fair value of approximately $10.00 per share
for Corporate Officers and $5.00 per share for other employees. For purposes
of estimating such fair value, the Company utilized the Black-Scholes option
pricing model, and the following valuation assumptions:
Options Granted to Options Granted to
Corporate Officers Other Employees
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
Pricing
volatility factor 32.9% 30.5% 26.8% 24.0%
Option
expiration term 10 years 10 years 4 years 4 years
Risk-free interest
rate range 4.7% to 5.6% 6.3% to 6.9% 4.6% to 5.5% 6.6% to 6.9%
Annual dividend
yield .9% to 1.6% .7% .9% to 1.6% .7%
<PAGE>62
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for stock options
in the accompanying consolidated financial statements. If the Company had
recognized compensation expense for the options based upon the values
identified above, earnings for fiscal 1999, 1998 and 1997 would have changed
as follows (amounts in thousands, except per share data):
Pro Forma Earnings (Unaudited)
------------------------------
1999 1998 1997
---- ---- ----
Net income, as reported $ 47,600 $ 98,600 $ 56,100
Compensation expense related
to options granted (3,200) (2,200) (1,300)
Tax benefit of compensation expense 1,100 800 500
-------- -------- --------
Net income, as adjusted $ 45,500 $ 97,200 $ 55,300
======== ======== ========
Basic net income per share, as reported $ .84 $ 1.54 $ .84
======== ======== ========
Basic net income per share, as adjusted $ .80 $ 1.52 $ .83
======== ======== ========
Diluted net income per share, as reported $ .85 $ 1.50 $ .84
======== ======== ========
Diluted net income per share, as adjusted $ .82 $ 1.48 $ .83
======== ======== ========
13. Business Segment Information
The Company's Business Segments are organized on the basis of common
management, and are identified as follows:
(i) Automotive, which includes the design, manufacture and
distribution of power transmission, fuel and fluid handling and
air-intake systems and components for the global automotive
aftermarket and OEM (original equipment manufacturers) market;
and
(ii) Industrial, which includes the design, manufacture and
distribution of power and fluid management systems and components
for industrial OEM and distribution markets worldwide,
transportation, specialty filtration and other products.
The prior year's segment information has been restated for the effects of the
Company's discontinued operations and to present the information required by
SFAS No. 131.
Executive management evaluates the performance of its Business Segments and
allocates resources to them primarily based upon their operating income, and
exclusive of interest expense and income taxes. The accounting policies of
the Segments are the same as those described in Note 1. Segment data includes
goodwill amortization as well as an allocation of net pension income.
<PAGE>63
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning the Company's Business Segments for fiscal 1999, 1998
and 1997 is as follows (dollars in thousands):
1999 1998 1997
---- ---- ----
NET SALES TO CUSTOMERS
Automotive $ 990,800 $ 893,900 $ 786,800
Industrial 957,800 950,400 931,100
---------- ---------- ----------
Total related to
continuing operations $1,948,600 $1,844,300 $1,717,900
========== ========== ==========
OPERATING INCOME
Automotive $ 101,000 $ 104,100 $ 91,800
Industrial 109,500 119,600 118,600
---------- ---------- ----------
Management's measure of the
segments' operating performance 210,500 223,700 210,400
Repositioning/restructuring charges (63,800) - (112,500)
General corporate expense (14,300) (15,800) (19,400)
Interest expense (53,900) (49,700) (45,800)
Provisions for taxes (26,100) (60,400) (11,600)
---------- ---------- ----------
Income from continuing operations $ 52,400 $ 97,800 $ 21,100
========== ========== ==========
DEPRECIATION AND AMORTIZATION EXPENSE
Automotive $ (42,100) $ (32,100) $ (26,600)
Industrial (35,400) (30,500) (27,900)
General corporate (3,000) (3,700) (3,700)
---------- ---------- ----------
Total related to
continuing operations $ (80,500) $ (66,300) $ (58,200)
========== ========== ==========
NON-CASH PENSION AND RELATED INCOME, NET
Automotive $ 11,400 $ 7,600 $ 3,000
Industrial 11,300 7,500 2,900
---------- ---------- ----------
Total related to
continuing operations $ 22,700 $ 15,100 $ 5,900
========== ========== ==========
IDENTIFIABLE ASSETS
Automotive $ 974,500 $ 934,300 $ 690,200
Industrial 951,600 961,900 905,600
---------- ---------- ----------
Total identifiable assets
of the segments 1,926,100 1,896,200 1,595,800
General corporate assets 153,600 146,000 32,800
---------- ---------- ----------
Total assets related to
continuing operations 2,079,700 2,042,200 1,628,600
Discontinued operations - 378,300 346,000
---------- ---------- ----------
Total consolidated $2,079,700 $2,420,500 $1,974,600
========== ========== ==========
CAPITAL OUTLAYS
Automotive $ 40,800 $ 72,600 $ 52,600
Industrial 36,500 63,800 40,900
---------- ---------- ----------
Total related to
continuing operations $ 77,300 $ 136,400 $ 93,500
========== ========== ==========
<PAGE>64
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's revenues by product type, and the segments they relate to, are
as follows (dollars in thousands):
Segment 1999 1998 1997
------- ---- ---- ----
Power Transmission Both $ 557,300 $ 547,400 $ 521,500
Fuel and Fluid Handling Both 915,300 887,200 810,100
Air-Intake Systems Automotive 66,800 24,100 -
Specialty Filtration
Products and Systems Industrial 128,500 118,100 118,800
Other Products Industrial 280,700 267,500 267,500
---------- ---------- ----------
Net sales from
continuing operations $1,948,600 $1,844,300 $1,717,900
========== ========== ==========
The Company's operations outside of the United States are located primarily in
Europe, and to a lesser extent in Canada, Latin America and the Far East.
Information concerning the Company's operations by geographic area for fiscal
1999, 1998 and 1997 is as follows (dollars in thousands):
1999 1998 1997
NET SALES FROM ---- ---- ----
CONTINUING OPERATIONS
United States $1,276,800 $1,231,700 $1,164,100
Italy 260,300 249,800 221,400
Other International 411,500 362,800 332,400
---------- ---------- ----------
Total related to
continuing operations $1,948,600 $1,844,300 $1,717,900
========== ========== ==========
IDENTIFIABLE LONG-LIVED ASSETS
United States $ 720,700 $ 739,100 $ 668,300
Italy 138,100 120,400 109,200
Other International 258,300 240,800 132,600
---------- ---------- ----------
Total related to
continuing operations 1,117,100 1,100,300 910,100
Discontinued operations - 233,900 219,000
---------- ---------- ----------
Total consolidated $1,117,100 $1,334,200 $1,129,100
========== ========== ==========
The net sales to customers reflect the sales of the continuing operating units
originating in each geographic area to unaffiliated customers. Export sales
of continuing operating units from the United States to unaffiliated customers
were $143.9 million, $110.4 million, and $94.9 million in fiscal 1999, 1998
and 1997, respectively. Sales between geographic areas are accounted for at
prices which are competitive with prices charged to unaffiliated customers.
Inter-segment sales are not material.
<PAGE>65
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Quarterly Financial Data and Information (Unaudited)
The following table sets forth the Company's unaudited results of operations
for each of the fiscal quarters in the years ended February 28, 1999 and 1998
(amounts in thousands, except per share data):
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Fiscal 1999
- -----------
Continuing operations:
Net sales $509,700 $484,200 $490,500 $464,200 $1,948,600
======== ======== ======== ======== ==========
Gross profit (a) $163,300 $153,300 $164,100 $155,000 $ 635,700
======== ======== ======== ======== ==========
Operating income before
repositioning charge $ 51,700 $ 44,400 $ 54,500 $ 45,600 $ 196,200
Repositioning charge - - (63,800) - (63,800)
-------- -------- -------- -------- ----------
Operating income (loss) 51,700 44,400 (9,300) 45,600 132,400
Interest expense (12,600) (13,600) (14,200) (13,500) (53,900)
Provision for taxes (14,000) (11,200) 10,600 (11,500) (26,100)
-------- -------- -------- -------- ----------
Total continuing 25,100 19,600 (12,900) 20,600 52,400
Discontinued operations 1,800 1,300 (100) (5,200) (2,200)
Extraordinary loss (2,600) - - - (2,600)
-------- -------- -------- -------- ----------
Net income (loss) $ 24,300 $ 20,900 $(13,000) $ 15,400 $ 47,600
======== ======== ======== ======== ==========
Basic earnings
per share (b):
Continuing operations:
Before repositioning
charge $ .41 $ .34 $ .47 $ .38 $ 1.60
Repositioning charge - - (.71) - (.68)
-------- ------- -------- -------- ---------
Total continuing .41 .34 (.24) .38 .92
Discontinued operations .03 .02 - (.10) (.04)
Extraordinary loss (.04) - - - (.04)
--------- ------- -------- -------- ---------
Net income (loss) $ .40 $ .36 $ (.24) $ .28 $ .84
========= ======= ======== ======== =========
Diluted earnings
per share (b)(c):
Continuing operations:
Before repositioning
charge $ .39 $ .33 $ .44 $ .36 $ 1.51
Repositioning charge - - (.68) - (.59)
-------- ------- -------- -------- --------
Total continuing .39 .33 (.24) .36 .92
Discontinued operations .02 .02 - (.08) (.03)
Extraordinary loss (.04) - - - (.04)
-------- ------- -------- -------- --------
Net income (loss) $ .37 $ .35 $ (.24) $ .28 $ .85
======== ======= ======== ======== ========
<PAGE>66
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -----
Fiscal 1998
- -----------
Continuing operations:
Net sales $471,800 $432,600 $476,500 $463,400 $1,844,300
======== ======== ======== ======== ==========
Gross profit (a) $160,100 $147,500 $161,100 $150,600 $ 619,300
======== ======== ======== ======== ==========
Operating income $ 56,500 $ 51,800 $ 54,700 $ 44,900 $ 207,900
Interest expense (11,200) (12,900) (14,200) (11,400) (49,700)
Provision for taxes (17,600) (15,100) (15,400) (12,300) (60,400)
-------- -------- -------- -------- ----------
Total continuing 27,700 23,800 25,100 21,200 97,800
Discontinued operations 2,400 3,700 2,200 3,100 11,400
Extraordinary loss - - (10,600) - (10,600)
-------- -------- -------- -------- ----------
Net income $ 30,100 $ 27,500 $ 16,700 $ 24,300 $ 98,600
======== ======== ======== ======== ==========
Basic earnings
per share (b):
Continuing operations $ .42 $ .37 $ .39 $ .33 $ 1.52
Discontinued operations .04 .06 .04 .05 .18
Extraordinary loss - - (.16) - (.16)
-------- -------- -------- -------- ----------
Net income $ .46 $ .43 $ .27 $ .38 $ 1.54
======== ======== ======== ======== ==========
Diluted earnings
per share (b):
Continuing operations $ .42 $ .37 $ .38 $ .32 $ 1.49
Discontinued operations .04 .06 .04 .04 .17
Extraordinary loss - - (.16) - (.16)
-------- -------- -------- -------- ----------
Net income $ .46 $ .43 $ .26 $ .36 $ 1.50
======== ======== ======== ======== ==========
___________________________________
(a) Excludes depreciation expense (and repositioning charge in fiscal 1999).
(b) The sum of quarterly amounts do not equal the fiscal year amount due to
the weighted effect of stock repurchases during the year and rounding
differences, as well as the anti-dilution limitations referred to in
Note "c".
(c) As a result of the net loss in the third quarter, the full effect of the
common stock equivalents would be anti-dilutive to earnings from
continuing operations. Therefore, the diluted amounts are limited
to be no more than the basic amounts for the quarter.
<PAGE>67
15. Legal and Environmental Matters
One of the Company's subsidiaries has been named as a defendant in a number of
litigation actions related to product supplied to one of the subsidiary's
customers. The parties seek damages related to alleged defects in certain
hose products manufactured by the subsidiary and included by the customer in
its retail gasoline fuel delivery systems. The Company believes it has good
and valid defenses against the claims, and has submitted a counter-claim
against the customer.
The Company is also involved in various other legal and environmental-related
issues. The Company believes that it has adequately provided for costs to be
expended in the future relative to its existing environmental related
obligations, the reserves for which have not been discounted to their present
value. In the opinion of the Company's management, the ultimate cost to
resolve these matters will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
PART III
Items 10-13
- -----------
The information required for Items 10, 11, 12 and 13 is incorporated
herein by reference to the information set forth in the definitive Proxy
Statement for the Company's 1999 Annual Meeting of Stockholders which will be
filed with the Securities and Exchange Commission not later than 120 days
after February 28, 1999.
<PAGE>68
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
Page
(a) (1) Financial Statements
--------------------
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 28, 1999 41
Consolidated Balance Sheets at February 28, 1999
and 1998 42
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1999 43
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1999 44
Consolidated Statements of Comprehensive Income
for each of the three fiscal years in the period
ended February 28, 1999 45
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1999 46
Notes to Consolidated Financial Statements 47
(2) Financial Statement Schedule
----------------------------
Report of Independent Accountants
for each of the three fiscal years in the
period ended February 28, 1999 73
II. Valuation and Qualifying Accounts 74
All other schedules and statements have been omitted as the
required information is inapplicable or is presented in the
financial statements or notes thereto.
<PAGE>69
(b) Reports on Form 8-K
The following reports were filed pertaining to events occurring during the
quarter ended February 28, 1999.
(1) A current report on Form 8-K dated February 26, 1999, was filed
to Report under Item 2 and Item 7, for the Company's disposition
of its Automotive Filter Business to Arvin Industries, Inc.
(2) A current Report on Form 8-K dated april 20, 1999, was filed to
report under Item 5, the Company's unaudited Consolidated
Balance Sheets as of February 28, 1999 and 1998, and unaudited
Income Statement data for the fiscal years ended February 28,
1999, 1998 and 1997. The unaudited financial information was
filed as a prelude to the Registrant's Audited Financial
Statements included elsewhere herein.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994,
as filed with the SEC on such date (incorporated by reference to
the exhibit (c)(1) to Schedule 14D-1 (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase by and among Mark IV Industries, Inc., Mark IV
Acquisition corp., and Purolator Products Company, as revised,
incorporated by reference to exhibit (a)(1) to Amendment No. 1
to Schedule 14D-1 (Tender Offer) dated October 11, 1994, as
filed with the SEC on such date.
2.3 Purchase Agreement by and between Mark IV Industries, Inc. and
Arvin Industries, Inc. dated February 8, 1999 (incorporated by
reference to the Exhibit 10.1 to the Company's Form 8-K dated
February 26, 1999).
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the Company's Registration
Statement No. 33-45215 on Form S-3, as filed with the SEC on
January 24, 1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q dated
July 1, 1997).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3, dated August 6, 1991).
<PAGE>70
4.3 Conformed copy of the Indenture, dated as of March 11, 1996,
between Mark IV Industries, Inc. and Fleet National Bank as
Trustee; including the form of Senior Subordinated Notes due
April 1, 2006 (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated March 6, 1996).
4.4 Conformed copy of the Indenture, dated as of August 11, 1997,
between Mark IV Industries, Inc, as issuer and Marine Midland
Bank, as trustee; including the form of Senior Subordinated
Notes due September 1, 2007 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
August 25, 1997).
4.5 Conformed copy of the Indenture, dated as of October 29, 1997,
between Mark IV Industries, Inc., as issuer and The Bank of New
York, as trustee; including the form of Convertible Subordinated
Notes due November 1, 2004 (incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated November
6, 1997).
Executive Compensation Plans and Arrangements (10.1 -10.21)
-----------------------------------------------------------
10.1 Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero (incorporated by reference to Exhibit 10.1 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.2 Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.3 Employment Agreement dated March 1, 1995 between the Company and
William P. Montague (incorporated by reference to Exhibit 10.4
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.4 Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook (incorporated by reference to Exhibit 10.5 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.5 Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.6 Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds (incorporated by reference to Exhibit 10.7
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
<PAGE>71
10.7 Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.8 Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco"), Dayco Europe, A.B. and Kurt J.
Johansson (incorporated by reference to Exhibit 10.10 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.9 Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert (incorporated by reference to Exhibit
10.11 to the Company's Annual Report or Form 10-K for the fiscal
year ended February 28, 1995).
10.10 * Employment Agreement dated May 1, 1997 between the Company,
Dayco and Richard F. Bing.
10.11 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
10.12 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March
30, 1994 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1994).
10.13 Mark IV Industries, Inc. and Subsidiaries 1996 Incentive Stock
Option Plan effective April 24, 1996 (incorporated by reference
to Exhibit 10.13 to the Company's Annual Report on Form 10-K
dated February 28, 1998).
10.14 Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report or Form
10-K for the fiscal year ended February 28, 1995).
10.15 Amendment and Restatement of the Mark IV Industries, Inc.
Executive Bonus Plan effective March 1, 1995 (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K dated February 28, 1998).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 * Fourth Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
January 1, 1999.
<PAGE>72
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19 First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report or Form 10-K for
the fiscal year ended February 28, 1995).
10.20 Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994 (incorporated by reference to Exhibit 10.20 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.21 Executive Loan Program (Incorporated by reference to Exhibit
10.20 to the Company's Annual Report on Form 10-K for the Fiscal
year ended February 28, 1997).
Other Material Contract Exhibits
--------------------------------
10.22 Conformed copy of the Credit Agreement, dated as of March 8,
1996, among the Registrant and Dayco PTI S.p.A., as Borrowers,
certain other subsidiaries of the Registrant, as Guarantors,
various banks and financial institutions, Chemical Bank, as
Administrator and Bid Agent, Bank of America National Trust and
Savings Association, as Documentation Agent, and BA Securities,
Inc. and Chemical Securities, Inc. as Arrangers (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated March 6, 1996).
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
______________________
* Filed herewith by direct transmission pursuant to the EDGAR program.
<PAGE>73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
Our report on the consolidated financial statements of Mark IV Industries,
Inc. and Subsidiaries as of February 28, 1999 and 1998 and for each of the
three fiscal years in the period ended February 28, 1999, is included in Item
8 of this Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule
listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information required
to be included therein.
PricewaterhouseCoopers LLP
Rochester, New York
March 22, 1999
<PAGE>74
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Charged Deductions
Beginning (Credited) Accounts Ending
Classifications Balance to Expense Charged Off Other(a) Balance
- ---------------- ---------- ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1999
- ----------------------------
Allowance for doubtful
accounts $ 13,600,000 $3,300,000 $(4,200,000) $(3,100,000) $ 9,600,000
============ ========== ============ ============ ===========
Year ended February 28, 1998
- ----------------------------
Allowance for doubtful
accounts $ 14,700,000 $3,300,000 $(4,400,000) $ - $13,600,000
============ ========== ============ ============ ===========
Year ended February 28, 1997
- ----------------------------
Allowance for doubtful
accounts $ 16,700,000 $4,800,000 $(4,700,000) $(2,100,000) $14,700,000
============ ========== ============ ============ ===========
(a) Represents the following
February February February
28, 1999 28, 1998 28, 1997
-------- -------- --------
Reserve at date of acquisition of subsidiary $ 100,000 $ 200,000 $ 500,000
Reclassification from other reserves - - 200,000
Reserves of discontinued operations disposed (3,200,000) - (2,400,000)
Foreign currency translation adjustment - (200,000) (400,000)
----------- --------- -----------
$(3,100,000) $ - $(2,100,000)
=========== ========= ===========
</TABLE>
<PAGE>75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARK IV INDUSTRIES, INC.
By: /s/ Sal H. Alfiero
------------------------------
Sal H. Alfiero, Chairman of the
Board and Chief Executive Officer
Dated: May 28, 1999
- --------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Sal H. Alfiero Chairman of the Board May 28, 1999
- ----------------------- and Chief Executive Officer ------------
Sal H. Alfiero
/s/ William P. Montague President, Director May 28, 1999
- ----------------------- ------------
William P. Montague
/s/ John J. Byrne Vice President and May 28, 1999
- ----------------------- Chief Financial Officer ------------
John J. Byrne
/s/ Richard L. Grenolds Vice President and May 28, 1999
- ----------------------- Chief Accounting Officer ------------
Richard L. Grenolds
/s/ Gerald S. Lippes Secretary and Director May 28, 1999
- ----------------------- ------------
Gerald S. Lippes
/s/ Clement R. Arrison Director May 28, 1999
- ----------------------- ------------
Clement R. Arrison
<PAGE>76
Exhibit Index
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994,
as filed with the SEC on such date (incorporated by reference to
the exhibit (c)(1) to Schedule 14D-1 (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase by and among Mark IV Industries, Inc., Mark IV
Acquisition corp., and Purolator Products Company, as revised,
incorporated by reference to exhibit (a)(1) to Amendment No. 1
to Schedule 14D-1 (Tender Offer) dated October 11, 1994, as
filed with the SEC on such date.
2.3 Purchase Agreement by and between Mark IV Industries, Inc. and
Arvin Industries, Inc. dated February 8, 1999 (incorporated by
reference to the Exhibit 10.1 to the Company's Form 8-K dated
February 26, 1999).
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the Company's Registration
Statement No. 33-45215 on Form S-3, as filed with the SEC on
January 24, 1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q dated
July 1, 1997).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3, dated August 6, 1991).
4.3 Conformed copy of the Indenture, dated as of March 11, 1996,
between Mark IV Industries, Inc. and Fleet National Bank as
Trustee; including the form of Senior Subordinated Notes due
April 1, 2006 (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated March 6, 1996).
4.4 Conformed copy of the Indenture, dated as of August 11, 1997,
between Mark IV Industries, Inc, as issuer and Marine Midland
Bank, as trustee; including the form of Senior Subordinated
Notes due September 1, 2007 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
August 25, 1997).
4.5 Conformed copy of the Indenture, dated as of October 29, 1997,
between Mark IV Industries, Inc., as issuer and The Bank of New
York, as trustee; including the form of Convertible Subordinated
Notes due November 1, 2004 (incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated November
6, 1997).
<PAGE>77
Executive Compensation Plans and Arrangements (10.1 -10.21)
10.1 Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero (incorporated by reference to Exhibit 10.1 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.2 Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.3 Employment Agreement dated March 1, 1995 between the Company and
William P. Montague (incorporated by reference to Exhibit 10.4
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.4 Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook (incorporated by reference to Exhibit 10.5 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.5 Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.6 Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds (incorporated by reference to Exhibit 10.7
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.7 Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.8 Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco"), Dayco Europe, A.B. and Kurt J.
Johansson (incorporated by reference to Exhibit 10.10 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.9 Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert (incorporated by reference to Exhibit
10.11 to the Company's Annual Report or Form 10-K for the fiscal
year ended February 28, 1995).
10.10 * Employment Agreement dated May 1, 1997 between the Company,
Dayco and Richard F. Bing.
10.11 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
<PAGE>78
10.12 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March
30, 1994 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1994).
10.13 Mark IV Industries, Inc. and Subsidiaries 1996 Incentive Stock
Option Plan effective April 24, 1996 (incorporated by reference
to Exhibit 10.13 to the Company's Annual Report on Form 10-K
dated February 28, 1998).
10.14 Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report or Form
10-K for the fiscal year ended February 28, 1995).
10.15 Amendment and Restatement of the Mark IV Industries, Inc.
Executive Bonus Plan effective March 1, 1995 (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K dated February 28, 1998).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 * Fourth Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
January 1, 1999.
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19 First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report or Form 10-K for
the fiscal year ended February 28, 1995).
10.20 Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994 (incorporated by reference to Exhibit 10.20 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.21 Executive Loan Program (Incorporated by reference to Exhibit
10.20 to the Company's Annual Report on Form 10-K for the Fiscal
year ended February 28, 1997).
<PAGE>79
Other Material Contract Exhibits
--------------------------------
10.22 Conformed copy of the Credit Agreement, dated as of March 8,
1996, among the Registrant and Dayco PTI S.p.A., as Borrowers,
certain other subsidiaries of the Registrant, as Guarantors,
various banks and financial institutions, Chemical Bank, as
Administrator and Bid Agent, Bank of America National Trust and
Savings Association, as Documentation Agent, and BA Securities,
Inc. and Chemical Securities, Inc. as Arrangers (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated March 6, 1996).
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
* Filed herewith by direct transmission pursuant to the EDGAR program.
Exhibit 10.10
-------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of this 1st day of May, 1997, by and between MARK
IV INDUSTRIES, INC., a Delaware corporation, with offices at 501 John James
Audubon Parkway, Amherst, New York 14228 ("Mark IV"), Dayco Products, Inc., a
Delaware corporation with offices at One Prestige Place, Miamisburg, Ohio
45342 ("Dayco"), (Mark IV and Dayco being sometimes hereinafter collectively
referred to as the "Corporations") and Richard F. Bing, an individual residing
at 1941 Alda Court, Centreville, Ohio 45459 (the "Executive").
RECITALS:
WHEREAS, the Executive is expected to make a major contribution to the
profitability, growth and financial strength of each of the Corporations; and
WHEREAS, the Corporations have determined that retaining the services of
the Executive is in their respective best interests and in the best interests
of the stockholders of Mark IV and, accordingly, the Corporations desire to
secure the services of the Executive on behalf of the Corporations;
CONSIDERATION:
NOW, THEREFORE, in consideration of the conditions and covenants set
forth in this Agreement, the parties hereto agree as follows:
ARTICLE 1.
Employment and Duties
1.01 Employment. The Corporations hereby agree to, and do hereby
employ the Executive, and the Executive hereby agrees to and does hereby
accept employment, by Mark IV, as Vice President of Mark IV, and by Dayco, as
President of the Industrial Division of Dayco ("Dayco Industrial"). It is
contemplated that the Executive will continue to serve as Vice President of
Mark IV and President of Dayco Industrial subject to the provisions of this
Agreement and the right of the Board of Directors of Mark IV and Dayco to
elect new officers.
1.02 Duties. During the period of his employment under this Agreement,
the Executive shall perform such executive duties and responsibilities as may
be assigned to him, from time to time, by the Board of Directors of Mark IV
and the Board of Directors of Dayco (as the case may be) and shall be subject,
at all times, to the control of the applicable Board of Directors. The
Executive shall devote substantially full time and energies to the supervision
and management of the business and affairs of the Industrial Division of Mark
IV ("Mark IV Industrial") and Dayco Industrial and to the furtherance of their
respective interests. The Executive shall report directly to the President of
Mark IV Industrial or such other officer of Mark IV as may be designated by
the Chief Executive Officer of Mark IV. The Corporations shall not require
the Executive to perform services hereunder outside the Dayton, Ohio
metropolitan area with such frequency or duration as would require the
Executive to move his residence from the Dayton area.
<PAGE>1
ARTICLE 2.
Compensation and Fringe Benefits
2.01 Base Salary. During the period of the Executive's employment
hereunder, the Corporations shall pay to the Executive an annual salary ("Base
Salary") of $225,000, payable in substantially equal monthly installments. The
Board of Directors of Mark IV, through its Compensation Committee, shall in
good faith review the Base Salary of the Executive on an annual basis. For
purposes of determining the Executive's rights under any plans, programs,
arrangements or benefits provided to the Executive pursuant to this Agreement,
the full amount of any cash bonuses payable to the Executive shall be deemed
to be paid by Dayco.
2.02 Bonuses. The Executive shall be entitled to participate in all
current and deferred worldwide bonus and incentive compensation programs which
may be maintained, from time to time, by Dayco for its executive officers.
2.03 Reimbursement of Expenses. Dayco shall reimburse the Executive
for all reasonable expenses which the Executive may, from time to time, incur
on its behalf in the performance of his responsibilities and duties under this
Agreement, provided that the Executive accounts to Dayco for such expenses in
the manner prescribed by Dayco.
2.04 Mark IV Executive Fringe Benefits. The Executive shall be
permitted to participate under the terms of (a) the Mark IV Industries, Inc.
and Subsidiaries 1992 Incentive Stock Option Plan, as amended; and any other
incentive stock option plan which may from time to time be established by Mark
IV Industries, Inc.; and (b) the Non-Qualified Plan of Deferred Incentive
Compensation for Executives of Certain Operating Divisions and Subsidiaries of
Mark IV Industries, Inc., as amended (hereinafter the "Deferred Comp. Plan").
Except as otherwise expressly provided for above in this Section 2.04, the
Executive shall not be permitted to participate in or receive any benefits
under the terms of any plan, program or arrangement maintained or contributed
to by Mark IV for Mark IV employees.
2.05 Deferred Comp. Plan. During the term of this Agreement, the
Executive shall be permitted to defer the receipt of payment of all or any
portion of the Base Salary to which the Executive is entitled under the terms
of this Agreement and to defer the receipt of payment of all or any portion of
the amount of any bonuses or other incentive compensation (which is otherwise
payable immediately) to which the Executive may become entitled under the
terms of this Agreement or any bonus or incentive compensation plan maintained
by Dayco, all in the manner permitted for certain specified executives
pursuant to the terms of the Deferred Comp Plan. In addition, during the term
of this Agreement, the Executive shall be entitled to receive his
proportionate share of any amounts allocated annually by the Compensation
Committee of the Board of Directors of Mark IV to participants in the Deferred
Comp Plan whose principal place of employment is Dayco's corporate
headquarters.
<PAGE>2
2.06 Tax Qualified Plans. The Executive shall be entitled to
participate in the Mark IV Savings & Retirement Plan (the "Master 401(k)
Plan") (a master profit sharing/401(k) plan maintained by Mark IV for certain
employees of certain of its subsidiaries) as applicable to salaried employees
of Dayco, and all other tax-qualified pension, profit sharing or retirement
plans maintained, from time to time, by either of the Corporations for
salaried employees of Dayco.
2.07 Medical Benefits. Dayco currently provides salaried employees of
Dayco (hereinafter referred to as "Dayco Salaried Employees") and certain
retired salaried employees of Dayco (hereinafter referred to as "Retired Dayco
Salaried Employees") with group medical insurance type protection against
certain costs and expenses relating to medical services and treatments
provided to such Dayco Salaried Employees (or Retired Dayco Salaried
Employees), their spouses and their dependents under a group medical program
maintained by the Corporations (such group medical program being hereinafter
the "Dayco Medical Plan"). In connection with the maintenance and
administration of the Dayco Medical Plan, the Corporations calculate and
establish, on an annual basis, an amount which, generally, is equal to the
expected per capita cost of maintaining the Dayco Medical Plan for such year
and which is used by the Corporations in determining the amount of the
contributions which the Corporations will require from Dayco Salaried
Employees (and Retired Dayco Salaried Employees) in order to provide such
Dayco Salaried Employees (and Retired Dayco Salaried Employees) the group
medical insurance type coverage provided by the Dayco Medical Plan (such
amount being hereinafter referred to as a "Premium"). During the term of this
Agreement, the Corporations shall provide the Executive, his spouse and his
dependents with the same type of group medical insurance coverage which is
provided to Dayco Salaried Employees under the terms of the Dayco Medical
Plan; provided that neither of the Corporations shall have any obligation to
provide such group medical insurance type coverage to the Executive, his
spouse and his dependents unless the Executive pays to Dayco, on a monthly
basis, the same portion of the Premium (hereinafter the "Employee Portion")
which all other Dayco Salaried Employees are required to pay for such group
medical insurance type coverage.
2.08 Group Welfare Benefits. During the period of the Executive's
employment under the terms of this Agreement, the Executive shall be eligible
to participate in the Mark IV Industries, Inc. and Subsidiaries Group Welfare
Benefit Program as applicable to Dayco Salaried Employees (hereinafter the
"Flex Choice Plan"). As provided for by the terms of the Flex Choice Plan,
the Executive shall be entitled to elect to receive one or more of the
following benefits under the terms of the group welfare benefit programs which
are contained within the Flex Choice Plan and available to Dayco Salaried
Employees: (a) group medical insurance type coverage under the Dayco Medical
Plan; (b) dental insurance coverage; (c) employee life insurance coverage; (d)
accidental death and dismemberment insurance coverage; (e) dependent life
insurance coverage; (f) long term disability insurance coverage; (g) health
care spending account benefits; and (h) dependent care spending account
benefits. In the event that the Flex Choice Plan is amended during the term of
this Agreement to increase or reduce the number or type of group welfare
benefit programs available to Dayco Salaried Employees, the Executive shall be
entitled to elect to receive one or more of the new group welfare benefit
programs which are available under the terms of the Flex Choice Plan.
<PAGE>3
Notwithstanding the foregoing, the Corporations shall have no obligation to
maintain or provide any such group welfare benefits to the Executive unless
the Executive pays to Dayco, on a monthly basis, the Employee Portion of any
costs associated with the maintenance and provision of such group welfare
benefits to the same extent that such Employee Portion is paid by all other
Dayco Salaried Employees and determined, from time to time, under the
provisions of the Flex Choice Plan. The Corporations shall also pay all
premiums necessary to maintain a business travel accident insurance policy for
the Executive with coverage and benefits which are at least reasonably
comparable to the business travel accident insurance coverage in effect for
the Executive as of the date of this Agreement.
2.09 Continuation of Medical Benefits and Insurance Coverage. (a) If
the Executive retires from his employment with the Corporations as permitted
by Section 3.05 hereof, the Corporations shall have no obligation to continue
to provide any life, medical, disability or other insurance coverage to the
Executive except to the extent that Dayco provides life insurance and retiree
medical insurance type coverage for its Retired Dayco Salaried Employees. In
the event that the Executive elects to receive retiree medical insurance type
coverage under the Dayco Medical Plan, the Corporations shall provide such
retiree medical insurance type coverage to the Executive, his spouse and
dependents; provided that, the Executive pays to Dayco on a monthly basis, the
portion of the Premium due in connection with the provision of such retiree
medical insurance type coverage under the Dayco Medical Plan to the same
extent that such portion of the Premium is required to be paid by all other
Retired Dayco Salaried Employees. In the event that the Executive elects to
receive the life insurance coverage which is available to Retired Dayco
Salaried Employees, the Corporations shall provide such life insurance
protection to the Executive provided that the Executive pays to Dayco the
portion of any life insurance premiums due in connection with the maintenance
of such life insurance coverage to the same extent that such portion of such
life insurance premiums is paid by all other Retired Dayco Salaried Employees.
(b) If the Executive's employment with the Corporations is
terminated by either of the Corporations either for cause, as permitted by
Section 3.02 hereof, or without cause, as permitted by Section 3.03 hereof,
following the Executive's termination, the Corporations shall take such action
as may be necessary to cause group meidical insurance type coverage which is
at least reasonably comparable to the group medical insurance type coverage
which was in effect under the Dayco Medical Plan for the Executive, his spouse
and dependents immediately prior to the termination of his employment, to be
continued for a period of one (1) year following the date on which the
Executive's employment with the Corporations is terminated. Notwithstanding
the foregoing, the Corporations shall not be obligated to continue to provide
such group medical insurance type coverage to the Executive, his spouse and
dependents unless, in the event the Executive's employment is terminated by
either of the Corporations for cause (as permitted by Section 3.02 hereof),
the Executive pays to Dayco, on a monthly basis, the full amount of the
Premium which is payable with respect to the provision of such group medical
insurance type coverage to a Dayco Salaried Employee and, in the event the
Executive's employment is terminated by either of the Corporations without
cause (as permitted by Section 3.03 hereof), the Executive pays to Dayco on a
monthly basis, an amount which shall not exceed the Employee Portion
<PAGE>4
(determined at the time such group medical insurance type coverage is
provided) of the Premium payable by Dayco Salaried Employees, for the group
medical insurance type coverage which is then being provided to such Dayco
Salaried Employees. At the end of the one (1) year period following the date
on which the Executive's employment with the Corporations is terminated
(without cause) or, if earlier, at such time that the Corporations terminate
the group medical insurance type coverage required to be provided to the
Executive hereunder by reason of the Executive's failure to pay the Employee
Portion of the Premiums described above, the Executive shall be entitled to
elect to receive continuation coverage with respect to such medical insurance
coverage in accordance with the applicable provisions of Section 4980B of the
Internal Revenue Code of 1986, as applicable continuation coverage provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(c) If the Executive's employment with the Corporations is
terminated as a result of his suffering of a Total and Permanent Disability as
described in Section 6.04 hereof, following the Executive's termination, the
Corporations shall provide group medical insurance type coverage to the
Executive, his spouse and dependents which is the same as the group medical
insurance type coverage which is provided under the Dayco Medical Plan to
Dayco Salaried Employees; provided that, the Corporations shall have no
obligation to provide such group medical insurance type coverage to the
Executive, his spouse and dependents unless the Executive pays to Dayco, on a
monthly basis, an amount which shall not exceed the Employee Portion
(determined at the time such medical insurance coverage is provided) of the
Premium payable by Dayco Salaried Employees for the group medical insurance
type coverage which is then being provided to such Dayco Salaried Employees.
Provided that the Executive continues to pay Dayco the amount described in the
preceding sentence, the Corporations shall continue to provide such group
medical insurance type coverage to the Executive, his spouse and dependents
after the date he suffers from a Total and Permanent Disability until the
earlier of the date that the Executive qualifies for Social Security
Disability Insurance benefits, including Medicare, or the date the Executive
attains age 65. Notwithstanding the foregoing, if Dayco provides group
medical insurance type coverage under the Dayco Medical Plan for its Retired
Dayco Salaried Employees which is more valuable than the group medical
insurance type coverage provided to the Executive under Medicare, the
Corporations shall, at the earlier of the date the Executive qualifies for
Medicare and the date the Executive attains age 65, provide the Executive the
same group medical insurance type coverage which is provided by Dayco for such
Retired Dayco Salaried Employees provided that the Executive pays to Dayco the
portion of the Premiums due from Retired Dayco Salaried Employees with respect
to such group medical insurance type coverage as described Section 2.09(a)
above.
(d) If the Executive incurs a Change in Control Termination as
defined in Section 7.01 hereof, the Corporations shall continue to maintain
and pay, for the life of the Executive, any premiums due for life insurance
coverage in an amount which is at least reasonably comparable to the life
insurance coverage which was provided to the Executive immediately prior to
the Executive's Change in Control Termination provided that the Executive
shall continue to be obligated during such period to pay to the Corporations
the Employee Portion of the premiums due for such insurance coverage as
<PAGE>5
determined at the time the Executive's Change in Control Termination occurs.
In addition, if the Executive incurs a Change in Control Termination as
defined in Section 7.01 hereof, the Corporations shall take any such action as
may be necessary to continue to provide group medical insurance type coverage
to the Executive, his spouse and dependents for life which is at least
reasonably comparable to the group medical insurance type coverage which was
in effect for the Executive under the Dayco Medical Plan immediately prior to
the Executive's Change in Control Termination; provided that, the Executive
shall continue to be obligated during such period, to pay to the Corporations,
the Employee Portion of the Premiums due for any such group medical insurance
type coverage as determined at the time the Executive's Change in Control
Termination occurs.
2.10 Vacation and Other Benefits. During each full year of the
Executive's employment hereunder, the Executive shall be entitled to paid
vacations as prescribed in Dayco's vacation policy based on all years of the
Executive's service with Dayco. In addition, the Executive shall be entitled
to receive such other employee benefit plans as may, from time to time, be
provided by either of the Corporations.
ARTICLE 3.
Term and Termination
3.01 Term. The period of employment of the Executive under this
Agreement shall commence May 1, 1997 and continue through April 30, 2000.
Thereafter, unless otherwise terminated by either of the Corporations pursuant
to Section 3.03 hereof, effective May 1, 2000 and on each May 1 thereafter,
the term of this Agreement shall automatically be renewed for an additional
period of twelve (12) months.
3.02 Termination For Cause. Notwithstanding the provisions of Section
3.01 hereof, each of the Corporations may terminate the Executive's employment
hereunder at any time for cause, by delivering to the Executive a written
notice of termination setting forth the date on which such termination is to
be effective and specifying in reasonable detail the facts and circumstances
claimed to provide a basis for the termination.
For purposes of this Agreement, each Corporation shall have
"cause" to terminate the Executive's employment hereunder upon the
Executive's: (a) willful and continued failure to substantially perform his
duties hereunder other than any such failure resulting from the Executive's
incapacity due to physical or mental illness; (b) illegal or criminal conduct;
(c) intentional falsification of records or reports or any other act or acts
of dishonesty constituting a felony and resulting, or intended to result,
directly or indirectly, in personal gain or enrichment of the Executive at the
expense of either of the Corporations; (d) excessive and/or chronic use of
alcohol, narcotics or other controlled substances (other than under the
supervision of a licensed physician); or (e) willful engagement in gross
misconduct materially injurious to either of the Corporations.
<PAGE>6
3.03 Termination Without Cause. Notwithstanding anything to the
contrary contained in Section 3.01 hereof, each of the Corporations may, at
any time on or after the date hereof, terminate the Executive's employment,
without cause, by delivering a written notice of termination to the Executive
which sets forth the date on which such termination is to be effective;
provided that, the effective date of any such termination shall not be less
than ninety (90) days following the date on which such written notice of
termination is delivered to the Executive.
3.04 Termination by the Executive. Notwithstanding anything to the
contrary contained in Section 3.01 hereof, the Executive may terminate his
employment hereunder at any time by delivering a written notice of termination
to either of the Corporations which sets forth the date on which such
termination is to be effective; provided that, the effective date of any such
termination shall not be less than ninety (90) days following the date on
which such written notice of termination is delivered to either of the
Corporations.
3.05 Retirement. The Executive may retire from his employment with the
Corporations at any time following his attainment of age sixty (60) by
delivering to either of the Corporations a written notice of his intent to
terminate his employment with either of the Corporations and retire, which
written notice sets forth the date on which such retirement (and its related
termination of employment) is to be effective; provided that, the effective
date of such retirement shall not be less than thirty (30) days following the
date on which such written notice of termination is delivered to either of the
Corporations.
3.06 Effect of Notice of Intent to Terminate. Upon delivery by either
of the Corporations to the Executive of a written notice of intent to
terminate, the Executive's employment with both of the Corporations shall be
terminated, effective at the time stated in such written notice of intent to
terminate. In addition, upon the Executive's delivery to either of the
Corporations of a written notice of intent to terminate (whether or not such
termination is intended to be a retirement) the Executive's employment with
both the Corporations shall be terminated effective at the time stated in such
written notice of intent to terminate.
ARTICLE 4.
Confidentiality; Non-Compete Provisions
4.01 Confidentiality. During the period of the Executive's employment
hereunder and for a period of ten (10) years following the termination of the
Executive's employment for any reason whatsoever (including, without
limitation, retirement, a "for cause" termination or any other voluntary or
involuntary termination), the Executive agrees that he will not, without the
written consent of the Board of Directors of Mark IV, disclose to any person
<PAGE>7
(other than a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by the Executive of his duties as an
executive of the Corporations or to a person as required by any order or
process of any court or regulatory agency) any material confidential
information obtained by the Executive while in the employ of the Corporations
with respect to any management strategies, policies or techniques or with
respect to any products, improvements, formulae, designs or styles, processes,
customers, methods of distribution, or methods of manufacture of any of the
Corporations; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by either of the Corporations.
4.02 Non-Compete. During the period of eighteen (18) months after the
date of termination of the Executive's employment hereunder, for any reason
whatsoever (including, without limitation, retirement, "for cause" termination
or any other voluntary or involuntary termination), the Executive will not,
directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director or otherwise with, or have any financial interest
in, or aid or assist anyone else in the conduct of, any business which
competes with any business conducted by either of the Corporations or with any
group, division or subsidiary of either of the Corporations in any geographic
area where such business is being conducted at the time of such termination
(any such business being hereinafter referred to as a "Competitive
Operation"). Ownership by the Executive of 2% or less of the voting stock of
any publicly held corporation shall not constitute a violation of this Section
4.02.
4.03 Competitive Operation. For purposes of Section 4.02 hereof: (a)
a business shall not be deemed to be a Competitive Operation unless: (i) 25%
or more of the consolidated gross sales and operating revenues, of either of
the Corporations is derived from such business; or (ii) 25% or more of the
consolidated net income of either of the Corporations is derived from such
business; or (iii) 25% or more of the consolidated assets of either of the
Corporations are devoted to such business; and (b) a business which is
conducted by either of the Corporations at the time of the Executive's
termination and which subsequently is sold or discontinued by either of the
Corporations shall not, subsequent to the date of such sale or discontinuance,
be deemed to be a Competitive Operation within the meaning of Section 4.02.
<PAGE>8
ARTICLE 5.
Death Benefits
5.01 Death Benefits. If the Executive dies during the term of his
employment hereunder, in addition to any death benefits payable under the
terms of any life insurance policies maintained by the Corporations on the
life of the Executive, any death benefits payable on account of the death of
the Executive under the terms of the Deferred Comp Plan, and any death
benefits payable on account of the death of the Executive under the terms of
any tax qualified retirement plans maintained by the Corporations, the
Corporations shall pay to such person, firm, corporation, trust or other
entity which shall, from time to time, be designated by the Executive to
either of the Corporations, in writing, as the intended recipient of death
benefits provided for under the terms of this Agreement (such person, firm,
corporation, trust or other entity being hereinafter referred to as the
Executive's "Beneficiary") a death benefit equal to 50% of the Executive's
Base Salary at the rate in effect on the date of the Executive's death. In
addition, if Dayco pays a bonus to its executive officers for the fiscal year
of Mark IV in which the Executive's death occurs, at the time Dayco pays such
bonuses to its executive officers for such fiscal year: (a) if the Executive's
death occurs during the first six (6) months of Mark IV's fiscal year, the
Corporations shall pay to the Executive's Beneficiary, an amount equal to
fifty percent (50%) of the amount of the bonus which would have been payable
to the Executive pursuant to the bonus plans referred to in Section 2.02
hereof for the fiscal year of Mark IV in which the Executive's death occurs;
and (b) if the Executive's death occurs at any time after the first six (6)
months of Mark IV's fiscal year, the Corporations shall pay to the Executive's
Beneficiary, an amount equal to the amount of the bonus which would have been
payable to the Executive pursuant to the bonus plans referred to in Section
2.02 hereof for the fiscal year of Mark IV in which the Executive's death
occurs.
5.02 Continuation of Medical Insurance Coverage. If the Executive
dies prior to the termination of his employment and if, at the time of the
Executive's death, the Executive's spouse or dependents are still living, the
Corporations shall take such action as may be necessary to provide group
medical insurance type coverage to the Executive's spouse and dependents which
is at least reasonably comparable to the group medical insurance type
coverage, if any, which was in effect for the Executive, his spouse and
dependents under the Dayco Medical Plan immediately prior to the Executive's
death, to be continued for the Executive's spouse and dependents for a period
of one (1) year following the date of the Executive's death; provided that the
Corporations shall not be obligated to continue to provide such group medical
insurance type coverage to the Executive's spouse and dependents unless the
Executive's spouse pays to Dayco, on a monthly basis, an amount which shall
not exceed the Employee Portion (determined at the time such group medical
insurance type coverage is provided) of the Premium payable by Dayco Salaried
Employees for the group medical insurance type coverage which is then being
provided to such Dayco Salaried Employees. At the end of the one (1) year
period following the date of the Executive's death or, if earlier, at such
time that the Corporations terminate the group medical insurance type coverage
<PAGE>9
required to be provided to the Executive's spouse and dependents hereunder by
reason of the failure of the Executive's spouse to pay the Employee Portion of
the Premium described above, the Executive's spouse and dependents shall be
entitled to elect to receive continuation coverage with respect to such
medical insurance in accordance with the applicable provisions of Section
4980B of the Internal Revenue Code of 1986, as amended, and the applicable
continuation coverage provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
ARTICLE 6.
Disability Benefits
6.01 Short-Term Disability. Except as otherwise provided in Section
6.02 hereof, in the event the Executive becomes disabled and is unable to
perform his duties hereunder, there shall be no reduction in the amount of the
Executive's Base Salary or any other benefits payable to him under this
Agreement.
6.02 Long-Term Disability. If, during the term of this Agreement, it
is determined that the Executive suffers from a Total and Permanent Disability
(as hereinafter defined), then, effective on the last day of the month in
which such determination is made, the Executive's employment hereunder shall
be deemed to be terminated. Upon such termination, unless a Change in Control
(as defined in Section 7.02 hereof) has occurred within the three (3) year
period preceding such termination and the Executive, as permitted by Section
7.01 hereof, has elected, in writing, to receive payment of the Change in
Control benefits described in Article 7 of this Agreement, the Corporations
shall pay to the Executive in equal monthly installments, for each twelve (12)
month period beginning on the day immediately following the date of such
termination and any anniversary thereof (an "Anniversary Date"), until the
Executive's 65th birthday, an amount equal to, his Base Salary, at the rate in
effect on the date his employment is terminated, up to a maximum of $150,000
per year (adjusted as set forth below), less the amounts of all social
security, retirement or disability benefits payable to the Executive for each
such twelve (12) month period by any agency of the United States Government or
the State of Ohio.
In addition to the foregoing, in the event the Executive's
employment with the Corporations is terminated as a result of his suffering of
a Total and Permanent Disability, the Corporation shall continue to provide
group medical insurance type coverage to the Executive as required by Section
2.09(c) hereof.
6.03 Cost of Living Adjustment. On each Anniversary Date, the $150,000
per year limit contained in Section 6.02 shall be adjusted on a cumulative
basis for each annual increase in the U. S. Department of Labor Bureau of
Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical
Workers, New York, New York, 1982-84 = 100 measured between the month prior to
the first month in which such compensation payments were made and the month
prior to the commencement of each such successive year.
<PAGE>10
6.04 Determination of Total and Permanent Disability. Any question as
to the existence or extent of disability of the Executive upon which the
Executive and the Corporations cannot agree shall be determined by a qualified
independent physician selected by the Executive and approved by the
Corporations (or, if the Executive is unable to make such selection, as
selected by any adult member of his immediate family). For purposes of this
Agreement, the Executive shall be deemed to suffer from a Total and Permanent
Disability if it is determined that the Executive is physically or mentally
unable to substantially perform his duties under this Agreement for a period
of twelve (12) consecutive months. The determination of any question as to
disability under this Section 6.04 by such physician shall be made in writing
to the Corporations and to the Executive and shall be final and conclusive for
all purposes of this Agreement.
ARTICLE 7.
Change in Control Benefits
7.01 Change in Control Termination. The Corporations will provide or
cause to be provided to the Executive the rights and benefits described in
Section 7.03 hereof in the event that, during the term of this Agreement
(including any renewal terms), the Executive's employment by the Corporations
is terminated at any time within three (3) years following a "Change in
Control" (as hereinafter defined) either:
(a) by either of the Corporations for any reason other than the
Executive's fraudulent conduct in connection with his employment by the
Corporations or conviction of a felony; or
(b) by the Executive following the occurrence of any of the
following events:
(i) the assignment to the Executive of any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such Change in Control;
(ii) a reduction of the Executive's Base Salary, bonuses or
other compensation or benefits from those types or amounts in effect
immediately prior to the Change in Control; or
(iii) the relocation of the principal executive offices of
either of the Corporations or a change in the duties of the Executive which
requires the Executive to move his residence from its Dayton, Ohio
metropolitan area; or
(c) by the Executive, if he shall determine in good faith that
due to a Change in Control, he is no longer able to effectively discharge his
duties under this Agreement.
<PAGE>11
For purposes of this Agreement, if the Executive's employment with
the Corporations is terminated after the occurrence of a Change in Control (as
hereinafter defined) for any of the reasons described above in this Section
7.01, such termination of employment shall hereinafter be referred to as a
"Change in Control Termination."
In the event that the Executive's employment with either of the
Corporations is terminated within three (3) years following a Change in
Control and, following the date the Executive's employment with either of the
Corporations is terminated, it is determined (in accordance with Section 6.04
hereof) that, at the time the Executive's employment with either of the
Corporations was terminated, the Executive suffered from a Total and Permanent
Disability (as defined in Section 6.04 hereof), the Executive shall have the
right to elect, in writing, to receive the Change in Control benefits provided
for by this Article 7 or the disability benefits provided for by Section 6.02
hereof. Upon receipt by either of the Corporations of such written election
from the Executive, the Corporations shall pay (or cause to be paid) to the
Executive, the Change in Control benefits provided for by this Article 7 or
the disability benefits provided for by Section 6.02 hereof, whichever is
elected by the Executive. The Corporations shall not be entitled to object to
or contest their obligations to make any such payments (or cause such payments
to be made) or the Executive's right to make any such election on the grounds
that the Executive suffered from a Total and Permanent Disability at the time
his employment was terminated. In addition, if the Executive has attained at
least age sixty (60) and the Executive elects to terminate his employment with
the Corporations for any of the reasons set forth above in this Section 7.01
and within three (3) years following the occurrence of a Change in Control,
the Corporations shall have no right to object to or challenge the right of an
Executive to receive any payments provided for under this Article 7 on the
grounds that the Executive was otherwise entitled to retire from his
employment with the Corporation pursuant to Section 3.05 hereof.
7.02 Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if: (a) any consolidation or merger
of Mark IV is consummated, as a result of which, Mark IV is not the continuing
or surviving corporation, or pursuant to which shares of Mark IV's common
stock would be converted into cash, securities or other property, other than a
merger of Mark IV in which the holders of Mark IV's common stock immediately
prior to the merger have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger, or (b) any
consolidation or merger of Dayco is consummated, as a result of which, Dayco
is not the continuing or surviving corporation or pursuant to which shares of
Dayco's common stock would be converted to cash, securities or other property
other than a merger of Dayco in which Mark IV, immediately following such
merger, directly or indirectly owns not less than fifty-one percent (51%) of
the issued and outstanding common stock of the surviving corporation; (c) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of Mark IV
is consummated, or (d) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
<PAGE>12
of the assets of Dayco is consummated except any such transaction or series of
transactions which result in the transfer of all or substantially all the
assets of Dayco to Mark IV or any direct or indirect wholly owned subsidiaries
of Mark IV; or (e) the stockholders of Mark IV approve any plan or proposal
for the liquidation or dissolution of Mark IV; or (f) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") but excluding Mark IV and each of Mark IV's
officers and directors, whether individually or collectively), shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of 20% or more of Mark IV's outstanding common stock or more than fifty
percent (50%) of Dayco's outstanding common stock other than as a result of an
initial public offering of the common stock of Dayco pursuant to a
registration statement filed with the United States Securities and Exchange
Commission under the applicable provisions of the Securities Act of 1993, as
amended; or (g) during any period of three (3) consecutive years, individuals
who at the beginning of such period constitute the entire Board of Directors
of Mark IV shall cease for any reason to constitute a majority thereof unless
the election, or the nomination for election by Mark IV's stockholders, of
each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
7.03 Payments on Change in Control Termination.
(a) If a Change in Control Termination occurs prior to the end
of the first year of the Executive's employment hereunder, the Corporations
shall pay to the Executive within ten (10) days after the date of such Change
in Control Termination, a lump sum payment equal to three (3) times the sum
of: (i) the Base Salary of the Executive in effect on the date of such Change
in Control Termination; and (ii) the annualized amount of all bonuses awarded
to or received by the Executive pursuant to Section 2.02 hereof prior to the
Change in Control Termination, or, if no bonus has been awarded to or received
by the Executive prior to the Change in Control Termination, the amount of the
bonuses which would have been awarded to or received by the Executive on an
annualized basis pursuant to Section 2.02 hereof with respect to the fiscal
year of Mark IV in which the Change in Control Termination occurs, assuming
the Executive's employment with the Corporations continued through the end of
such fiscal year (the annualized amount of the bonus awarded to or received by
the Executive or to be awarded to or received by the Executive with respect to
the fiscal year of Mark IV in which the Change in Control Termination occurs
being hereinafter referred to as the "Initial Bonus");
(b) If a Change in Control Termination occurs after the end of
the first year of the Executive's employment hereunder but prior to the end of
the second year of the Executive's employment hereunder, the Corporations
shall pay to the Executive within ten (10) days after the date of such Change
in Control Termination, a lump sum payment equal to three (3) times the sum
of: (i) the average of the Base Salary of the Executive in effect during the
<PAGE>13
Executive's employment hereunder; and (ii) the average of the sum of: (A)
Initial Bonus; and (B) the amount of all bonuses awarded to or received by the
Executive under Section 2.02 hereof during the second year of the Executive's
employment hereunder, or, if no bonus has been awarded to or received by the
Executive during the second year of the Executive's employment hereunder, the
amount of the bonuses which would have been awarded to or received by the
Executive on an annualized basis pursuant to Section 2.02 hereof with respect
to the fiscal year of Mark IV in which the Change in Control Termination
occurs, assuming the Executive's employment with the Corporations continued
through the end of such fiscal year (the amount of the bonus awarded to or
received by the Executive or to be awarded to or received by the Executive
with respect to the fiscal year of Mark IV in which the Change in Control
Termination occurs being hereinafter referred to as the "Second Bonus");
(c) If a Change in Control Termination occurs after the end of
the second year of the Executive's employment hereunder but prior to the end
of the third year of the Executive's employment hereunder, the Corporations
shall pay the Executive within ten (10) days after the date of such Change in
Control Termination, a lump sum payment equal to three (3) times the sum of:
(i) the average of the Base Salary of the Executive in effect during the
Executive's employment hereunder; and (ii) the average of the sum of: (A) the
amount of the Initial Bonus; (B) the Second Bonus; and (C) the amount of all
bonuses awarded to or received by the Executive under Section 2.02 hereof
during the third year of the Executive's employment hereunder, or, if no bonus
has been awarded to or received by the Executive during the third year of the
Executive's employment hereunder, the amount of the bonuses which would have
been awarded to or received by the Executive on an annualized basis pursuant
to Section 2.02 hereof with respect to the fiscal year of Mark IV in which the
Change in Control Termination occurs, assuming the Executive's employment with
the Corporations continued through the end of such fiscal year; and
(d) If a Change in Control Termination occurs after the end of
the third year of the Executive's employment hereunder, the Corporations shall
pay to the Executive within ten (10) days after the date of such Change in
Control Termination, a lump sum payment equal to three (3) times the sum of:
(i) the average of the Base Salary of the Executive in effect during the three
(3) year period ending on the date the Change in Control Termination occurs;
and (ii) the average of the amount of all bonuses awarded to or received by
the Executive pursuant to Section 2.02 hereof during the three (3) year period
ending on the date of the Change in Control Termination.
7.04 Effect of Deferred Compensation. The amounts payable to the
Executive pursuant to Section 7.03 hereof shall be determined based on the
amount of the Base Salary and the amount of any bonus which is payable to the
Executive, whether or not the Executive actually receives payment of such Base
Salary or bonus as a result of a deferral made by the Executive of the receipt
of payment of any portion of such Base Salary or bonus as permitted by the
terms of the Deferred Comp. Plan as applicable to the Executive.
<PAGE>14
7.05 Benefits Upon Death. If the Executive dies following a Change
in Control Termination but prior to the payment of the applicable lump sum
provided for in Section 7.03 above, the Corporations shall pay the applicable
lump sum described in Section 7.03 hereof to the Executive's Beneficiary (as
described in Section 5.01 hereof) within ten (10) days following receipt by
either of the Corporations of payment instructions from such Beneficiary.
7.06 Effect of Change in Control Termination on Other Benefits.
(a) The occurrence of a Change in Control Termination with respect
to the Executive shall not affect the Executive's right to receive any
payments due to the Executive under the terms of the Master 401(k) Plan, the
Deferred Comp. Plan or any other tax qualified or other retirement plan which
the Executive is a participant in. All such payments will be made in
accordance with the provisions of the applicable document containing the terms
of the Master 401(k) Plan, the Deferred Comp. Plan and any other such tax
qualified or other retirement plan.
(b) The occurrence of a Change in Control Termination with
respect to the Executive shall not affect the obligation of the Corporations
under Section 2.09 hereof to continue to pay all premiums needed to maintain
policies of life insurance for the Executive and to continue to provide group
medical insurance type coverage for the benefit of the Executive for the rest
of the Executive's life in amounts at least reasonably comparable to the group
medical insurance type coverage which was in effect for the Executive and the
policies of such life insurance maintained by the Corporation for the benefit
of the Executive as of the date of the Executive's Change in Control
Termination.
(c) Except as set forth in Sections 7.06(a) and (b) hereof, any
payments required to be made to the Executive or his Beneficiary pursuant to
Sections 7.03 and 7.05 hereof shall, when received by the Executive, or his
Beneficiary, be in lieu of any payments otherwise provided with respect to the
Executive's termination of employment under any other severance pay or other
similar plan or policy maintained by the Corporations. The Corporations may,
in their sole discretion, change, replace or eliminate the Dayco Medical Plan
and any retirement plan or insurance policy described in Sections 7.06(a) and
(b) above at any time, but shall not do so after a Change in Control in a
manner which would prevent the Executive from receiving any benefit which he
would otherwise have been entitled to receive either immediately preceding the
Change of Control or immediately preceding a Change in Control Termination.
7.07 Certain Additional Payments by the Corporations. (a) Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by either of the Corporations to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended or any similar section (the "Code")
or any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties being hereinafter collectively
<PAGE>15
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7.07(c) hereof, all
determinations required to be made under this Section 7.07, including whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall
be made by Coopers & Lybrand, L.L.P. or any other nationally recognized firm
of certified public accountants (the "Accounting Firm" ) which shall provide
detailed supporting calculations both to each of the Corporations and to the
Executive within 15 business days of termination of the Executive's employment
under this Agreement, if applicable, or such earlier time as is requested by
the Executive or either of the Corporations. When calculating the amount of
the Gross-Up Payment, the Executive shall be deemed to pay:
(i) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar year in which the
Gross-Up Payment is to be made, and
(ii) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state and local
taxes if paid in such year.
If the Accounting Firm has performed services for the person, entity or
group who caused the Change of Control, as described in Section 7.02 hereof or
any affiliate thereof, the Executive may select an alternative accounting firm
from any nationally recognized firm of certified public accountants. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with an opinion that he has substantial authority
not to report any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm shall be binding upon each of the
Corporations and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Corporations should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporations exhaust their remedies pursuant
to Section 7.07(c) hereof, and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Corporations to or for the benefit of the Executive.
<PAGE>16
(c) The Executive shall notify each of the Corporations in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by either of the Corporations of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after the Executive knows of such claim and shall apprise each
of the Corporations of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the thirty-day period following the date on which it
gives such notice to the Corporations (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If either
of the Corporations notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive shall:
(i) give the Corporations any information reasonably
requested by either of the Corporations relating to such claim,
(ii) take such action in connection with contesting such
claim as either of the Corporations shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by either of the
Corporations,
(iii)cooperate with the Corporations in good faith in order
effectively to contest such claim, and
(iv) permit each of the Corporations to participate in any
proceedings relating to such claim; provided, however, that the Corporations
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
7.07(c), the Corporations shall control all proceedings taken in connection
with such contest and, at their sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at their sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the
Corporations shall determine; provided, however, that if either of the
Corporations directs the Executive to pay such claim and sue for a refund, the
Corporations shall advance the amount of such payment to the Executive, on an
interest free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statue of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
<PAGE>17
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Corporations' control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Corporations pursuant to Section 7.07(c) hereof, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the compliance by the Corporations with the requirements of
Section 7.07(c)) promptly pay to the Corporations the amount of such refund
(together with any interest paid or credited thereon by the taxing authority
after deducting any taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Corporations pursuant to Section
7.07(c) hereof, a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Corporations do not
notify the Executive in writing of their intent to contest such denial of
refund prior to the expiration of thirty days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid under Section 7.07(a) hereof. The
forgiveness of such advance shall be considered part of the Gross-Up Payment
and subject to gross-up for any taxes (including interest or penalties)
associated therewith.
ARTICLE 8.
Severance and Effects of Termination
8.01 Effect of Termination for Cause. In the event the Executive's
employment with the Corporations is terminated by either of the Corporations
for cause pursuant to the provisions of Section 3.02 hereof, the Corporations
shall pay to the Executive any monthly installment of his Base Salary which is
accrued and unpaid as of the date of the Executive's termination at the
monthly rate then in effect and, thereafter, except as otherwise provided for
by Sections 2.09, 8.06 and 8.07 hereof, the Corporations shall have no further
obligation to pay the Executive any additional Base Salary, compensation or
bonuses, no further obligation to provide the Executive any medical, life,
disability or other insurance benefits hereunder and no further obligation to
pay or provide any other benefits provided to the Executive hereunder.
8.02 Effect of Voluntary Termination. In the event that the Executive
voluntarily terminates his employment with the Corporations as provided for by
Section 3.04 hereof, the Corporations shall pay to the Executive any monthly
installment of his Base Salary which is accrued and unpaid as of the date of
the Executive's termination at the monthly rate then in effect and,
thereafter, the Corporations shall have no further obligation to pay the
Executive any additional Base Salary, compensation or bonuses, no further
obligation to provide any medical, life, disability or other insurance
benefits to the Executive hereunder, and, except as otherwise provided under
the terms of Sections 8.06 and 8.07 hereof, no further obligation to pay any
other benefits provided to the Executive hereunder.
<PAGE>18
8.03 Effect of Termination Without Cause. In the event the Executive's
employment with the Corporations is terminated by either of the Corporations,
without cause, pursuant to Section 3.03 hereof, the Corporations shall,
(except as otherwise provided by Section 8.05 hereof), pay the Executive an
amount equal to the sum of: (a) one and one-half (1.5) times his Base Salary
at the rate then in effect (such amount being hereinafter referred to as the
"Base Salary Severance Payment"); (b) a pro-rata portion (determined on the
basis of the number of months the Executive was employed by the Corporations
during the fiscal year of Mark IV in which the Executive's employment is
terminated) of the amount, if any, of all bonuses which would have been
payable to the Executive had he continued in the employ of the Corporations
until the end of the fiscal year of Mark IV in which the Executive's
employment is terminated without cause (such amount being hereinafter referred
to as the "Bonus Severance Payment"); and (c) any amounts with respect to
which the Executive is deemed to be vested under the terms of the Deferred
Comp. Plan (such amount being hereinafter referred to as the "Deferred Comp.
Severance Payment"). For purposes of this Section 8.03, (w) the Base Salary
Severance Payment shall be paid to the Executive in eighteen (18)
substantially equal consecutive monthly installments beginning on the first
day of the first calendar month following the date the Executive's employment
with the Corporations is terminated; (x) the Bonus Severance Payment, if any,
shall be paid to the Executive in one lump sum payment at the time bonuses are
paid to salaried employees of Dayco for the fiscal year of Mark IV in which
the Executive's employment is terminated; and (y) the Deferred Comp. Severance
Payment shall be paid to the Executive at the time and in the manner provided
for in the Deferred Comp. Plan. In addition, if the Executive's employment
with any of the Corporations is terminated by any of the Corporations, without
cause, pursuant to Section 3.03 hereof, except as otherwise provided above and
in Sections 2.09 and 8.07 hereof, the Corporations shall have no further
obligation following the Executive's termination to pay the Executive any
additional Base Salary, compensation or bonuses, no further obligation to
provide any medical, life, disability or other insurance benefits to the
Executive hereunder and no further obligation to pay to the Executive any
other benefits otherwise provided to the Executive hereunder.
8.04 Effect of Retirement. In the event the Executive terminates his
employment with the Corporations by reason of his retirement as provided for
in Section 3.05 hereof, the Corporations shall pay to the Executive any
monthly installment of his Base Salary which is accrued and unpaid as of the
date of the Executive's retirement at the monthly rate then in effect plus an
amount equal to the amount of all bonuses which would have been payable to the
Executive by the Corporations pursuant to Section 2.02 hereof if the Executive
had remained in the employ of the Corporations until the end of the fiscal
year of Mark IV in which the Executive retires and assuming that average
monthly earnings of Dayco and Mark IV for the portion of Mark IV's fiscal year
which has elapsed prior to the date the Executive retires continues at such
rate after the Executive retires through the end of the fiscal year of Mark IV
in which the Executive retires. In addition, in the event the Executive
terminates his employment with the Corporations by reason of his retirement as
<PAGE>19
provided for in Section 3.05 hereof, the Corporations shall provide the
Executive group medical insurance type coverage which is the same as the group
medical insurance type coverage provided by Dayco to Retired Dayco Salaried
Employees under the terms of the Dayco Medical Plan provided that the
Executive pays to the Corporations the portion of the Premiums which is
required to be paid by all other Retired Dayco Salaried Employees in
connection with the provision of such group medical insurance type coverage as
described in the first paragraph of Section 2.09 hereof. Thereafter, except as
otherwise provided for above in this Section 8.04 and except as otherwise
provided in Sections 8.06 and 8.07 hereof, the Corporations shall have no
further obligation to pay the Executive any additional Base Salary,
compensation, bonuses or other benefits provided to the Executive hereunder.
8.05 Special Rules Relating to IPO's. Notwithstanding anything to the
contrary contained in this Agreement, in the event that the Executive's
employment with Mark IV is terminated in connection with an initial public
offering of the common stock of Dayco as described in Section 7.02(f) hereof,
and, in connection with such initial public offering, the Executive remains
the President of Dayco Industrial, such termination shall, for purposes of
determining the Executive's rights upon a termination of employment, be deemed
to be a voluntary termination of employment by the Executive pursuant to
Section 3.04 hereof. In addition if, in connection with an initial public
offering of common stock of Dayco as described in Section 7.02(f) hereof, the
Executive rejects an offer from Dayco to be employed by Dayco as President of
Dayco Industrial upon terms which are at least reasonably comparable to the
terms of this Agreement and, in connection with the Executive's rejection of
such offer of employment, the Executive terminates his employment with the
Corporations or the Executive's employment with the Corporations is terminated
by the Corporations, without cause, as permitted by Section 3.03 hereof,
notwithstanding anything to the contrary contained in Section 8.03 hereof,
upon the occurrence of such termination, the Corporations shall pay to the
Executive any monthly installment of his Base Salary which is accrued and
unpaid as of the date of the Executive's termination at the monthly rate then
in effect and, thereafter, except as otherwise provided by Sections 2.09(a),
8.06 and 8.07 hereof, the Corporations shall have no further obligation to pay
the Executive any additional Base Salary, compensation or bonuses, no further
obligation to provide any medical, life, disability or other insurance
benefits to the Executive hereunder, and no further obligation to pay any
other benefits to the Executive hereunder.
8.06 Non-Qualified Deferred Compensation Plan Payments. Upon
termination of the Executive's employment with the Corporations for any
reason, the Executive shall be entitled to payment in full of the vested
portion, determined at the time the Executive's employment with the
Corporations is terminated, of the vested portion of all amounts payable to
the Executive under the terms of the Deferred Comp. Plan. Payment of such
vested portion of the amounts payable to the Executive under the terms of the
Deferred Comp. Plan shall be made at the time and in the manner provided for
by the terms of the Deferred Comp. Plan.
<PAGE>20
8.07 Retirement Plan Payments. Nothing in this Agreement shall be
deemed to limit the Executive's rights to receive or the obligations of the
Corporations to pay or provide for the Executive and his beneficiaries, any
continuation coverage as required by ERISA or any retirement or other benefits
accrued by the Executive at any time under the terms of any retirement plans
maintained by the Corporations which are subject to the requirements of ERISA
and satisfy the requirements of Section 401 of the Code.
ARTICLE 9.
Miscellaneous
9.01 Litigation Expenses. In the event that any dispute shall arise
under this Agreement between the Executive and either of the Corporation which
is related to the Change in Control Termination provisions of Article 7
hereof, the Corporations shall be responsible for the payment of all
reasonable expenses of all parties to such dispute, including reasonable
attorney fees, regardless of the outcome thereof.
9.02 Amendments. This Agreement may not be amended or modified orally,
and no provision hereof may be waived, except in a writing signed by the
parties hereto.
9.03 Assignment. This Agreement cannot be assigned by either party
hereto except with the written consent of the other.
9.04 Prior Agreements. This Agreement shall supersede and replace any
and all prior agreements between either of the Corporations and the Executive,
whether express or implied. Except as specifically provided herein, nothing
contained in this Agreement shall be construed to constitute a waiver by the
Executive of any rights or claims under any existing pension or retirement
plans of either of the Corporations.
9.05 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the personal representatives and successors in interest of the
Executive and any successors in interest of either of the Corporations.
9.06 No Duplication. Each of the Corporations shall be jointly and
severally liable for providing the Executive the compensation and benefits
provided for by this Agreement. Notwithstanding the foregoing, the Executive
shall not be entitled to payment of duplicate benefits or compensation from
each of the Corporations and the payment once, by any or all of the
Corporations, of the compensation and benefits to be provided to the Executive
hereunder shall be deemed to fully satisfy the obligations of the Corporations
hereunder.
9.07 Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such State except with respect to the
internal affairs of the Corporations and their respective stockholders, which
shall be governed by the General Corporation Law of the State of Delaware.
<PAGE>21
9.08 Notices. All notices and other communications given pursuant to
this Agreement shall be deemed to have been properly given or delivered if
hand-delivered, or if mailed, by certified mail or registered mail postage
prepaid, addressed to the Executive at the address first above written or if
to either of the Corporations, at their respective addresses first above
written with a copy to the attention of Gerald S. Lippes, Secretary, 700
Guaranty Building, Buffalo, New York 14202. Notwithstanding anything to the
contrary contained in this agreement, delivery of any notice or communication
by the Executive to either of the Corporations shall be deemed and construed
to be effective as a delivery of such notice or other communication to each of
the Corporations. From time to time, any party hereto may designate by
written notice any other address or party to which such notice or
communication or copies thereof shall be sent.
9.09 Severability of Provisions. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and this Agreement shall be interpreted as if such invalid,
illegal or unenforceable provision was not contained herein.
9.10 Headings. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and each of the Corporations
have caused this Agreement to be executed as of the day and year first above
written.
MARK IV INDUSTRIES, INC.
By: /s/ William P. Montague /s/ Richard F. Bing
----------------------- ---------------------
Name: William P. Montague Richard F. Bing
Title: President
DAYCO PRODUCTS, INC.
By: /s/ Bruce A. McNiel
- -------------------------------
Name: Bruce A. McNiel
Title: President
Exhibit 10.17
NON-QUALIFIED PLAN OF DEFERRED COMPENSATION OF
MARK IV INDUSTRIES, INC.
________________________________
Fourth Amendment and Restatement
_________________________________
Effective January 1, 1999
<PAGE>1
NON-QUALIFIED PLAN OF DEFERRED COMPENSATION
OF
MARK IV INDUSTRIES, INC.
_______________________________________
Fourth Amendment and Restatement
______________________________________
WHEREAS, Mark IV Industries, Inc., a Delaware corporation
having its principal place of business at One Town Centre, John
James Audubon Parkway, Amherst, New York ("Mark IV") adopted a non-
qualified plan of deferred compensation known as the "Non-
Qualified Plan of Deferred Compensation of Mark IV Industries,
Inc." (the "Plan") effective February 20, 1990 in order to provide
a select group of its highly compensated management employees the
same amount of retirement income such highly compensated
management employees would have been entitled to receive if the
provisions of the Internal Revenue Code as amended by the Tax
Reform Act of 1986, did not require Mark IV to change the manner
in which it administered a tax qualified retirement plan
maintained by Mark IV for the benefit of certain of its employees
and known as the Mark IV Retirement Savings Plan (now known as the
Mark IV Savings & Retirement Plan) and a tax qualified defined
contribution pension plan known as the Mark IV Industries, Inc.
and Subsidiaries Master Defined Contribution Pension Plan (which
plan was merged into the Mark IV Savings & Retirement Plan
effective January 1, 1993); and
WHEREAS, the Plan provides for the hypothetical investment of
amounts hypothetically credited to accounts established to
maintain records of the amounts payable to Participants in the
Plan; and
WHEREAS, Mark IV amended and restated the Plan effective
December 1, 1991 to provide that the value of the accounts of
certain Participants will be equal to the greater of the amount
hypothetically allocated to the account of the Participant
together with interest thereon and the value of common stock of
Mark IV which is to be hypothetically allocated to the account of
such Participant, and to make certain other conforming changes to
the Plan; and
WHEREAS, Mark IV amended and restated the Plan effective
December 16, 1992, to provide certain Participants the opportunity
to defer the receipt of payment of any bonus or other incentive
compensation which they may be entitled to receive under the terms
of certain executive bonus arrangements and to provide that the
amount of the incentive bonus, if any, which the Participant
defers shall be credited with hypothetical earnings and paid in
accordance with the terms of this Plan; and
<PAGE>2
WHEREAS, Mark IV amended and restated the Plan effective
September 1, 1993, to provide that certain Participants shall be
permitted to defer the receipt of all or any part of the salary or
wages they are entitled to receive and to provide that the amount
of the salary or wages deferred by the Participant, if any, shall
be credited with hypothetical earnings and paid in accordance with
the terms of this Plan; and
WHEREAS, effective January 1, 1996, Mark IV began
administering the Plan in a manner which provided for the
allocation of hypothetical matching contributions to the accounts
of Participants that deferred the receipt of their compensation
pursuant to the Plan; and
WHEREAS, due to the size of the Accounts of certain
Participants, Mark IV has now determined that it is appropriate to
limit the aggregate amount of the compensation and bonuses which
may be deferred by Participants and, in certain cases, to require
a portion of the amount of the compensation and bonuses deferred
by Participants to be distributed immediately; and
WHEREAS, Mark IV desires to amend the Plan to reflect
miscellaneous changes in the manner in which the Plan is
administered, to provide a limitation on the aggregate amount of
compensation and bonuses which may be deferred by Plan
Participants and to require that distributions be made to certain
Participants with respect to the amount of compensation and
bonuses deferred by such Participants;
NOW, THEREFORE, Mark IV hereby adopts the following as the
Fourth Amendment and Restatement of the Plan effective as of
January 1, 1999:
<PAGE>3
TABLE OF CONTENTS
Section Page
Section 1 Definitions 1
Section 2 Eligibility 9
Section 3 Annual Deferred Compensation Commitment,
Compensation Deferrals and Matching Contributions 10
Section 4 Distributions 28
Section 5 Trust Established Upon Change in Control 42
Section 6 Administration 44
Section 7 Amendment, Termination and Merger 47
Section 8 Miscellaneous 48
<PAGE>1
SECTION 1.
Definitions
1.01 Account means the account or accounts established and
maintained by the Committee (as hereinafter defined) for each
Participant (as hereinafter defined) to reflect the amount of the
deferred compensation payable to each Participant under the terms
of this Plan and, in the event a Trust Fund (as hereinafter
defined) is established pursuant to Section 5.01 hereof, to
reflect the interest of each Participant in the Trust Fund.
1.02 Affiliate means any corporation under common control
with Mark IV within the meaning of Internal Revenue Code Section
414(b) and any trade or business (whether or not incorporated)
under common control with Mark IV within the meaning of Internal
Revenue Code Section 414(c).
1.03 Anniversary Date means March 1 of each year.
1.04 Annual Allocation Account means a sub-account maintained
by the Committee within each Participant's Account for each Plan
Year (as hereinafter defined) with respect to which an Annual
Deferred Compensation Commitment (as hereinafter defined) is to be
made, which sub-account is established by the Committee for the
purpose of valuing the total aggregate amount of each of the
Annual Deferred Compensation Commitments made by Mark IV to the
Participant's Account together with any earnings thereon as
provided for in this Plan.
1.05 Annual Deferred Compensation Commitment means, for each
Plan Year, the total amount of the deferred compensation which
Mark IV has agreed and committed to allocate and pay with respect
to such Plan Year, to each of the Participants in the Plan,
excluding: (a) interest; (b) the amount of any Compensation
Deferrals (as hereinafter defined) which are deferred at the
option of a Participant; and (c) the amount of any Matching
Contributions relating to Compensation Deferrals made by a
Participant (as hereinafter defined).
1.06 Applicable Interest Rate means: (a) for each Plan Year,
a rate of interest equal to one hundred twenty percent (120%) of
the average of the Federal long-term interest rates established by
the Secretary of the Treasury pursuant to the provisions of
Section 1274 of the Internal Revenue Code and the regulations
thereunder for the months of March, June, September and December
of the calendar year which ends within the Plan Year; and (b) for
each calendar year, a rate of interest equal to one hundred twenty
percent (120%) of the average of the Federal long term interest
rates established by the Secretary of the Treasury pursuant to the
provisions of Section 1274 of the Internal Revenue Code and the
regulations thereunder for the months of March, June, September
and December of such calendar year.
<PAGE>2
1.07 Authorized Absence means a leave of absence from the
Employer (as hereinafter defined) or any Affiliate for a period
not exceeding twenty-four (24) months or absence to enter the
Armed Services of the United States during a period of national
emergency or at any time through the operation of a compulsory
military service law of the United States. Leaves of absence may
be granted in the event of illness or accident of an Eligible
Employee (as hereinafter defined) or a member of his family or for
the continuation of the training or education of the Eligible
Employee. For purposes of this Plan, an Eligible Employee who
leaves on an Authorized Absence shall not be deemed to have
incurred a termination of employment with the Employer or any
Affiliate solely by reason of his leaving on such Authorized
Absence. However, the failure of any Eligible Employee to return
to active employment with the Employer or any Affiliate after a
leave of absence or authorized extension thereof or during the
period after his separation from military service in which his
reemployment rights are guaranteed by law shall be deemed a
termination of employment at the later of the date of commencement
of such leave of absence or such military leave or the date for
which he was last credited with an Hour of Service (as hereinafter
defined). Leaves of absence shall be granted in accordance with
the Employer's normal policies and practices in a uniform and non-
discriminatory manner.
1.08 Beneficiary means any person or persons designated, in
writing, by a Participant to share in the benefits of the Plan
after his death, or if none, his spouse, or, if neither, his
estate.
1.09 Break in Service means each Plan Year during which an
Eligible Employee has completed no more than 500 Hours of Service
due to a termination of employment with the Employer and any
Affiliate. A termination of employment shall not occur upon a
Participant's transfer between the employment of the Employer and
any Affiliate.
In the case of an Eligible Employee who is absent from
work for any period by reason of:
(a) the pregnancy of the Eligible Employee;
(b) the birth of a child of the Eligible Employee;
(c) the placement of a child with the Eligible Employee
in connection with the adoption of such child by such Eligible
Employee; or
(d) the need to care for such child for a period
beginning immediately following the birth or placement of such
child with such Eligible Employee;
<PAGE>3
such Eligible Employee shall receive an Hour of Service for each
Hour of Service which the Eligible Employee would have been
credited with during the period of such absence had the Eligible
Employee not been absent. If the Committee is unable to determine
the number of Hours of Service which the Eligible Employee would
have been credited with had such Eligible Employee not been
absent, such Eligible Employee shall be credited with 8 Hours of
Service per work day of such absence. Notwithstanding the
foregoing, an Eligible Employee shall not be credited with more
than the number of Hours of Service required to prevent such
Eligible Employee from incurring a Break in Service nor be
credited with more than 501 Hours of Service by reason of any
absence described in this paragraph. The Hours of Service
credited under this paragraph shall be credited in the computation
period in which the absence begins if the crediting is necessary
to prevent the Eligible Employee from incurring a Break in Service
in that computation period or, in all other cases, in the
following computation period. The provisions of this paragraph
shall be used solely for purposes of determining whether an
Eligible Employee has incurred a Break in Service for vesting
purposes.
1.10 Board of Directors means the Board of Directors of Mark
IV.
1.11 Committee means the administrative committee, referred
to in Section 6.01, designated by the Board of Directors of Mark
IV to administer the Plan.
1.12 Compensation means: (a) for purposes of determining the
amount which a Participant shall be entitled to defer the receipt
of pursuant to Section 3.02 hereof, an amount equal to the total
salary or wages paid or payable by an Employer to a Participant at
the Participant's regular rate for services actually rendered
during the calendar year ending within the Plan Year including
overtime and including bonuses which are payable with respect to
services performed during the fiscal year of the Employer in which
such calendar year ends but which bonuses are paid after the end
of such calendar year (whether or not such salary, wages, overtime
or bonuses are actually paid as a result of the Participant's
election to defer receipt of such Compensation) but excluding: (i)
the amount, if any, of the compensation or wages of the
Participant which are contributed on behalf of the Participant to
the Mark IV Savings & Retirement Plan; (ii) the amount, if any, of
the compensation or wages of the Participant which are contributed
on behalf of the Participant to any cafeteria plan established
and/or maintained by the Employer pursuant to Section 125 of the
Internal Revenue Code; and (iii) the amount of the Annual Deferred
Compensation Commitment allocated to the Account of a Participant
under this Plan or any other contributions or benefits made to or
for the benefit of any Participant under any other pension, profit
sharing, insurance, hospitalization or other plan or policy
maintained by the Employer for the benefit of any such
Participant; and (b) for purposes of determining the amount of the
Annual Deferred Compensation Commitment to be allocated to the
Account of a Participant pursuant to Section 3.04 hereof, an
<PAGE>4
amount equal to: (i) total salary or wages paid or payable by the
Employer to a Participant at his regular rate for services
actually rendered during the calendar year ending within the Plan
Year including overtime and including estimated bonuses which will
be payable with respect to services performed during the fiscal
year of the Employer in which such calendar year ends but which
bonuses are paid after the end of such calendar year (whether or
not such salary, wages, overtime or bonuses are actually paid as a
result of the Participant's election to defer the receipt of such
Compensation) minus the amount, if any, of bonuses paid during
such calendar year which are attributable to services provided by
the Employee during the fiscal year of the Employer which ends
during the immediately preceding calendar year; (ii) the amount,
if any, of the compensation or wages of the Participant which are
contributed on behalf of the Participant to the Mark IV Savings &
Retirement Plan; (iii) the amount, if any, of the compensation or
wages of the Participant which are contributed on behalf of the
Participant to any cafeteria plan established and/or maintained by
the Employer pursuant to Section 125 of the Internal Revenue Code;
minus the portion, if any, of the amount of the compensation or
wages contributed on behalf of the Participant to the cafeteria
plan maintained by the Participant's employer to the extent that
such compensation or wages are used for the payment of group term
life insurance premiums under the cafeteria plan; (iv) the amount,
if any which is included in the taxable income of a Participant as
a result of the lapsing of any restrictions on transferability of
common stock of Mark IV which has been issued to the Participant
pursuant to the terms of the Mark IV Industries, Inc. 1992
Restricted Stock Plan; and (v) the amount, if any, of ordinary
income realized by a Participant in connection with the exercise
of any stock options granted to the Participant under the terms of
any incentive stock option plan which is maintained by Mark IV or
in connection with the sale by the Participant of any stock of
Mark IV which is acquired by the Participant pursuant to the terms
of any such Plan; but excluding any portion of the Annual Deferred
Compensation Commitment allocated to the Account of a Participant
under this Plan or any other contributions or benefits made to or
for the benefit of any Participant under any other pension, profit
sharing, insurance, hospitalization or other plan or policy
maintained by the Employer for the benefit of any such Eligible
Employee. The decision of the Committee as to what constitutes
Compensation within the meaning of the foregoing definitions shall
be conclusive.
1.13 Compensation Deferral means, for the Plan Year ending
February 28, 1993, for the four (4) month period beginning
September 1, 1993 and ending December 31, 1993 and for each
calendar year beginning on or after January 1, 1994, the amount,
if any, of the Compensation payable to a Participant which the
Participant has elected to defer the receipt of payment of
pursuant to Section 3.02 hereof and which Mark IV has agreed and
committed to allocate and pay to such Participant in the future
under the terms of this Plan.
<PAGE>5
1.14 Compensation Deferral Account means a sub-account
maintained by the Committee within the Account of each Participant
that has made a Compensation Deferral, which sub-account is
established by the Committee for the purpose of valuing the amount
of the Compensation Deferrals made by the Participant together
with any earnings thereon as provided for in this Plan.
1.15 Dollar Value means, except as otherwise specifically
provided in Section 3.10 hereof, an amount equal to the sum of:
(a) the dollar amount credited to a Participant's Account, if any,
under the terms of the Plan, determined as of November 30, 1991
including the interest credited thereon as provided for in this
Plan; and (b) the total of the dollar amounts credited after
November 30, 1991 to each of the Annual Allocation Accounts, the
Compensation Deferral Account and the Matching Contributions
Account (as hereinafter defined) contained within the
Participant's Account including the interest credited thereon as
provided for in this Plan.
1.16 Effective Date means February 20, 1990.
1.17 Eligible Employee means each executive officer of the
Employer.
1.18 Employer means Mark IV Industries, Inc. and any other
corporation or other business entity affiliated with Mark IV which
is a successor in interest to such corporation or which,
hereafter, with the approval of the Board of Directors of Mark IV,
adopts the provisions and obligations of the Plan with respect to
its employees by resolution of its own Board of Directors or
similar governing body.
1.19 ERISA means the Employee Retirement Income Security Act
of 1974, as amended, and corresponding provisions of future laws,
as amended.
1.20 Fiduciary means any person with respect to the Plan to
the extent:
(a) He exercises any discretionary authority or
discretionary control respecting management of the Plan or
exercises any authority or control respecting management or
disposition of its assets;
(b) He renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or
other property of the Plan or has any authority or responsibility
to do so; or
(c) He has any discretionary authority or discretionary
responsibility in the administration of the Plan.
<PAGE>6
This term also includes persons designated by the
Committee to carry out fiduciary responsibilities under the Plan.
A Fiduciary may serve in more than one fiduciary capacity
(including service as both Trustee and Committee) with respect to
this Plan.
1.21 Hour of Service means each hour for which an Eligible
Employee is paid, or entitled to payment, by the Employer or any
Affiliate for the performance of duties. In addition, an Hour of
Service means each hour for which an Eligible Employee is paid, or
entitled to payment, directly or indirectly by the Employer or any
Affiliate on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, an Employer or
Affiliate approved sick or disability leave, layoff, leave of
absence, military leave or jury duty. Notwithstanding the above,
the hours required to be credited to an Eligible Employee pursuant
to the provisions of the preceding sentence shall not include
hours for which payment is made or due under a plan maintained
solely for the purpose of complying with applicable Workers'
Compensation laws, or Unemployment Compensation or disability
insurance laws, and no more than 501 hours shall be credited to an
Eligible Employee on account of any single continuous period
during which the Eligible Employee performs no duties. In
addition, no hours shall be credited for a payment which solely
reimburses an Eligible Employee for medical or medically related
expenses incurred by the Eligible Employee.
An Hour of Service also means each hour for which back
pay, irrespective of mitigation of damages, has been either
awarded or agreed to by the Employer or any Affiliate; provided,
however, that in no event shall the same hours be credited under
both this paragraph and the other paragraphs of this Section 1.21.
The computation period to which Hours of Service shall
be credited and the number of Hours of Service to be credited for
reasons other than the performance of duties shall be determined
under Title 29, Subchapter C, Section 2530.200b(b) and (c) of Code
of Federal Regulations, which is hereby incorporated by reference.
Hours of Service shall be determined from records maintained by
the Employer or Affiliate.
1.22 Internal Revenue Code, Code and IRC each mean the
Internal Revenue Code of 1986, as amended.
1.23 Investment Manager means that person so designated by
the Committee to manage and invest designated Plan assets, who
acknowledges his acceptance in writing and who is either: (a)
registered in good standing as an Investment Adviser under the
Investment Advisers Act of 1940; (b) a bank, as defined in that
Act; or (c) an insurance company qualified to perform investment
management services under the laws of more than one state.
1.24 Mark IV Savings & Retirement Plan means a master profit
sharing/401(k) plan established effective March 1, 1987 and
maintained by Mark IV Industries, Inc. and any successor plan to
such master profit sharing/401(k) plan.
<PAGE>7
1.25 Matching Contributions means, for each Plan Year beginning on
or after March 1, 1996, the amount which Mark IV has agreed and
committed to allocate and pay with respect to such Plan Year, to
each of the Participants in the Plan, which amount is determined
pursuant to the provisions of Section 3.03 hereof, and is based on
the amount of the Compensation deferred by the Participant on
whose behalf such allocation is made, reduced by the amount, if
any, of matching contributions made on behalf of the Participant
under the terms of the Mark IV Savings & Retirement Plan.
1.26 Matching Contributions Account means a sub-account maintained
by the Committee within each Participant's Account for the purpose
of valuing the total amount of the Matching Contributions
allocated to the Participant's Account together with any earnings
thereon as provided for in this Plan.
1.27 Participant means any Eligible Employee of the Employer who
becomes a participant in the Plan.
1.28 Phantom Stock means the shares of common stock of Mark IV, if
any, which are hypothetically allocated to a Participant's Account
pursuant to the terms of this Plan.
1.29 Plan means this non-qualified plan of deferred compensation
known as the Non-Qualified Plan of Deferred Compensation of Mark
IV Industries, Inc.
1.30 Plan Year means the 12 consecutive month period beginning on
March 1 of each calendar year.
1.31 Share Value means an amount equal to: (a) the sum of: (i) the
number of shares of Phantom Stock, if any, credited to a
Participant's Account as of November 30, 1991 under the terms of
this Plan; and (ii) the total of the number of shares of Phantom
Stock, if any, credited after November 30, 1991 to each of the
Annual Allocation Accounts, the Compensation Deferral Account and
the Matching Contributions Account contained within the
Participant's Account; multiplied by (b) the applicable price per
share of common stock of Mark IV as determined pursuant to Section
3.07 hereof.
1.32 Taxable Wage Base means, for each Plan Year, the maximum
amount of earnings which may be considered wages under Internal
Revenue Code Section 3121(a)(1), determined as of the last day of
the calendar year ending with or within the Plan Year.
1.33 Trust Fund means one or more trust funds which may be
established by Mark IV pursuant to this Plan, and all the assets
at any time held by the Trustee (as hereinafter defined) of such
trust funds.
<PAGE>8
1.34 Trustee means the person or persons, firm or corporation
designated by the Board of Directors of Mark IV to serve as
Trustee of any Trust Fund which may be created pursuant to the
provisions of this Plan, and who, by joining in the execution of
the agreement creating such Trust Fund or any amendments
thereunder, signifies his acceptance of the Trust Fund and any
person or persons, firm or corporation duly appointed as successor
Trustee.
1.35 Valuation Date means the last day of February of each
calendar year.
1.36 Year of Service means each Plan Year in which the Eligible
Employee has not less than 1,000 Hours of Service.
<PAGE>9
SECTION 2.
Eligibility
2.01 Employees Eligible. The Committee shall determine which
Eligible Employees will participate in the Plan and the
determination of the Committee concerning which Eligible Employees
shall participate in the Plan shall be conclusive and binding on
all persons. An Eligible Employee shall become a Participant in
the Plan on the date that the Committee gives such Eligible
Employee written notice that he or she has become a Participant in
the Plan.
2.02 Participation Form. The Committee shall furnish each
Eligible Employee who becomes a Participant in the Plan with a
form containing such information as the Committee may desire,
including, but not limited to, date of birth of the Eligible
Employee, and the Beneficiary designation of such Eligible
Employee.
<PAGE>10
SECTION 3.
Annual Deferred Compensation Commitment,
Compensation Deferrals and Matching Contributions
3.01 Participant's Account. (a) The Committee shall establish
and maintain an Account in the name of each Participant to which
the Committee shall credit the amount of each Annual Deferred
Compensation Commitment made on behalf of the Participant pursuant
to the provisions of Section 3.04 hereof, the amount, if any, of
Compensation Deferrals made by the Participant pursuant to Section
3.02 hereof and the amount, if any, of Matching Contributions made
on behalf of the Participant pursuant to Section 3.03 hereof
together with interest thereon as determined by Section 3.10
hereof and, if applicable, Phantom Stock as determined pursuant to
Section 3.06 hereof.
(b) Beginning with the Plan Year ending on February 29,
1992 and for each calendar year thereafter in which an Annual
Deferred Compensation Commitment is made pursuant to this Plan,
the Committee shall establish and maintain, within each
Participant's Account, an Annual Allocation Account in the name of
such Participant which shall be credited with the amount of the
Annual Deferred Compensation Commitment to be made on behalf of
such Participant for such Plan Year as determined pursuant to
Section 3.04 hereof together with interest thereon as determined
pursuant to Section 3.10 hereof and, if applicable, the number of
shares of Phantom Stock determined pursuant to Section 3.06
hereof.
(c) Beginning with the Plan Year ending February 28,
1993 and for each calendar year beginning on or after January 1,
1994, in which a Participant makes a Compensation Deferral
pursuant to this Plan, the Committee shall establish and maintain,
within each Participant's Account, a Compensation Deferral Account
in the name of such Participant which shall be credited with the
amount of such Participant's Compensation Deferral pursuant to the
terms of the Deferred Compensation Election Form executed by the
Participant and effective for such calendar year, together with
interest thereon as determined pursuant to Section 3.10 hereof and
the number of shares of Phantom Stock determined pursuant to
Section 3.06 hereof.
(d) Beginning with the Plan Year ending February 28,
1997 and for each Plan Year thereafter in which a Participant
makes a Compensation Deferral pursuant to this Plan, the Committee
shall establish and maintain within each such Participant's
Account, a Matching Contributions Account in the name of such
Participant which shall be credited with the amount of the
Matching Contributions, if any, to be made to the Participant's
Account with respect to the Compensation Deferral made by the
Participant for the calendar year which ends within such Plan
Year, together with interest thereon as determined pursuant to
Section 3.10 hereof and the number of shares of Phantom Stock as
determined pursuant to Section 3.06 hereof.
<PAGE>11
(e) In the event a Trust Fund is established pursuant to Section
5.01 hereof, the Committee shall cause the Trustee to establish
and maintain, within the Trust Fund, an Account in the name of
each Participant. At the time the Trust Fund is established, the
Trustee shall credit the Account of each Participant with an
amount equal to the greater of the Dollar Value and, if
applicable, the Share Value of the Participant's Account
determined as of the date the Trust Fund is established and,
thereafter, the Committee shall credit such Participant's Account
with the Participant's share of the net earnings of the Trust Fund
and charge such Participant's Account with the net losses of the
Trust Fund and distributions from the Trust Fund made on the
Participant's behalf. In the event that this Plan is continued by
Mark IV or its successor following the establishment of a Trust
Fund, the Committee shall cause the Trustee to establish a
Compensation Deferral Account within the Account of a Participant
that is eligible to make a Compensation Deferral, which
Compensation Deferral Account shall be credited with the amount of
Compensation Deferrals made to the Plan by the Participant
together with earnings or losses thereon. In addition, if the
Plan is continued by Mark IV or its successor following the
establishment of a Trust Fund, the Committee shall cause the
Trustee to establish within each Participant's Account in the
Trust Fund, a Matching Contributions Account in the name of such
Participant which shall be credited with the Matching
Contributions, if any, to be made to the Participant's Account
with respect to the amount of the Compensation Deferral made by
the Participant together with the earnings or losses thereon.
Finally, if the Plan is continued by Mark IV or its successor
following the establishment of a Trust Fund, for each Plan Year
following the establishment of the Trust Fund, the Committee shall
cause the Trustee to establish within each Participant's Account
in the Trust Fund, an Annual Allocation Account in the name of
such Participant which shall be credited with such Participant's
share of the Annual Deferred Compensation Commitment for such Plan
Year together with all earnings or losses thereon.
(f) In addition to the above, in the event that a Trust Fund is
established pursuant to Section 5.01 hereof, whether or not this
Plan is continued by Mark IV or its successor following the
establishment of the Trust Fund, the Committee shall continue to
maintain the Account which was maintained for each Participant
prior to the establishment of the Trust Fund and, in the event
that the Plan is continued by Mark IV or its successor following
the establishment of the Trust Fund, the Committee shall establish
an Account for each Eligible Employee that becomes a Participant
in the Plan after the establishment of the Trust Fund. Immediately
following the establishment of a Trust Fund pursuant to Section
5.01 hereof, the amount contained in the Account established for
each Participant under the terms of this Plan shall,
notwithstanding anything to the contrary contained in this Plan,
be equal to the greater of the Dollar Value and, if applicable,
the Share Value of the Participant's Account determined as of the
date the Trust Fund is established. Thereafter, the Committee
shall credit the amounts contained in such Account with interest
in the manner described in Section 3.10 hereof. In the event that
<PAGE>12
this Plan is continued by Mark IV or its successor following the
establishment of a Trust Fund, the Account described in this
Section 3.01(f) shall be credited with an amount equal to the
amount of any Compensation Deferrals made by the Participant, any
Matching Contributions made in connection with such Compensation
Deferrals and the amount of the Participant's share of the Annual
Deferred Compensation Commitment made by Mark IV or its successor
for each Plan Year. All such additional amounts credited to the
Account of a Participant after a Trust Fund has been established,
pursuant to Section 5.01 hereof, shall be credited with interest
in the manner described in Section 3.10 hereof. For purposes of
this Plan, if a Change in Control occurs and a Trust Fund is
established, the Account which the Committee is required to
continue to maintain for each Participant pursuant to this Section
3.01(f) is sometimes hereinafter referred to as the Participant's
"Phantom Account."
3.02 Compensation Deferrals. For each Plan Year beginning
with the Plan Year ending February 28, 1993, each Participant may
elect to defer his receipt of payment of all or any part of the
bonus or other incentive compensation to which he is entitled as
provided for pursuant to the terms of the executive bonus and
other incentive plans of Mark IV. If a Participant makes a
Compensation Deferral with respect to his bonus or other incentive
compensation payable in connection with the services he has
provided to the Employer for any Plan Year ending on or after
February 28, 1993, the amount of the bonus or other incentive
compensation which the Participant has elected to defer the
receipt of shall not be paid to the Participant by his Employer
except as provided for hereunder.
For the four (4) month period beginning September 1,
1993 and ending December 31, 1993, and for each calendar year
beginning on or after January 1, 1994, each Participant may elect
to defer the receipt of payment of all or any part of the salary
or wages, to which he is entitled. If a Participant makes a
Compensation Deferral with respect to the salary or wages to which
he is entitled for the four (4) month period beginning September
1, 1993 and ending December 31, 1993 or for any calendar year
thereafter, the portion of the salary or wages which the
Participant has elected to defer the receipt of shall not be paid
by his Employer except as provided for hereunder.
The total amount of the Compensation Deferrals made by a
Participant (which shall include the total amount of the salary,
wages, bonus or other incentive compensation which the Participant
has elected to defer the receipt of payment of) together with any
earnings thereon as provided by Section 3.10 hereof, shall
represent the amount which Mark IV has agreed to pay to the
Participant that makes such Compensation Deferral and, unless a
Trust Fund is established pursuant to Section 5.01 hereof, no
segregation of any assets of Mark IV for the purpose of paying the
amount such Compensation Deferral and any earnings thereon shall
be required.
<PAGE>13
Notwithstanding anything to the contrary contained in
the preceding provisions of this Section 3.02, and notwithstanding
anything to the contrary contained in any Participant's Deferred
Compensation Election Form, effective January 1, 1999, in no event
shall any Participant be permitted to defer any portion of his
Compensation (including, but not limited to, any portion of his
salary, wages, bonus or other incentive compensation) if and to
the extent that, after giving effect to any such Compensation
Deferral, the Dollar Value of the Participant's Compensation
Deferral Account would exceed the Dollar Value of the
Participant's Compensation Deferral Account, determined as of
December 31, 1998, together with interest thereon calculated in
the manner provided for in the following paragraph. For purposes
of this Plan, the Dollar Value of a Participant's Compensation
Deferral Account, determined as of December 31, 1998 together with
interest thereon as hereinafter provided shall, with respect to
such Participant, be referred to as the "Participant's
Compensation Deferral Limit".
For purposes of determining the amount of a
Participant's Compensation Deferral Limit, as of December 31,
1999, the Dollar Value of the Participant's Compensation Deferral
Account determined as of December 31, 1998, shall be increased by
an amount equal to the Applicable Interest Rate for the calendar
year ending December 31, 1998 multiplied by the Dollar Value of
the Participant's Compensation Deferral Account determined as of
December 31, 1998. Such Participant's Compensation Deferral Limit
shall be effective for the period from January 1, 2000 through
December 31, 2000. Effective January 1, 2001 and each January 1
thereafter, the Participant's Compensation Deferral Limit shall be
equal to the Participant's Compensation Deferral Limit in effect
as of the immediately preceding January 1, increased by an amount
equal to the Applicable Interest Rate for the immediately
preceding calendar year multiplied by the Participant's
Compensation Deferral Limit in effect as of the immediately
preceding January 1.
A Participant may make a Compensation Deferral by
executing and delivering to the Committee, a form, supplied by the
Committee, which provides a description of the amount of the
salary or wages which the Participant elects to defer the receipt
of together with a description of the portion of the bonus or
other incentive compensation which the Participant elects to defer
the receipt of (a "Deferred Compensation Election Form"). The
Deferred Compensation Election Form shall also contain a statement
of the period of time over which payment of the Participant's
salary, wages, bonus or other incentive compensation is to be
deferred (which period of time may extend beyond the Participant's
Normal Retirement Date and may be different for separate and
distinct portions (identified by the Participant) of the salary or
<PAGE>14
wages, bonus or incentive compensation which the Participant has
elected to defer). The Deferred Compensation Election Form shall
provide, among other things, that the Participant's election to
defer the receipt of payment of the salary or wages otherwise
payable to the Participant is irrevocable for the calendar year
for which the election is made, that the Participant's election to
defer the receipt of payment of any bonus or other incentive
compensation payable to the Participant is irrevocable and that
the Participant waives his right to make any claim for payment of
the salary, wages, bonus or other incentive compensation which the
Participant has elected to defer except to the extent such amount
is payable pursuant to this Plan.
Notwithstanding the provisions of the preceding
paragraph, a Participant's election to defer the receipt of any
portion of his salary or wages shall be effective only for the
calendar year immediately following the date the Participant
delivers his Deferred Compensation Election Form to the Committee
and a Participant's election to defer the receipt of any portion
of the bonus or other incentive compensation to which he may be
entitled shall be effective only for the bonus or other incentive
compensation which is payable as of the end of the Plan Year which
begins after the date the Participant delivers his Deferred
Compensation Election Form to the Committee. Therefore, in the
event a Participant desires to defer the receipt of any portion of
the salary or wages which he is otherwise entitled to for a
calendar year following the calendar year in which payment of the
Participant's salary or wages has been deferred, the Participant
must execute and deliver a new Deferred Compensation Election Form
to the Committee within the time set forth in the following
paragraph. In addition, in the event a Participant desires to
defer the receipt of any portion of the bonus or other incentive
compensation he is entitled to for a Plan Year following the Plan
Year in which any portion of his bonus or other incentive
compensation was deferred, the Participant must execute and
deliver a new Deferred Compensation Election Form to the Committee
within the time set forth in the following paragraph.
If a Participant desires to defer a portion of his
Compensation effective September 1, 1993, the Participant must
deliver an executed Deferred Compensation Election Form to the
Committee on or before September 1, 1993. If a Participant
desires to defer the receipt of any portion of his salary or wages
for any calendar year beginning on or after January 1, 1994, the
Participant must deliver an executed Deferred Compensation
Election Form containing a statement of the Participant's intent
to defer a portion of his salary or wages to the Committee on or
before December 31 of the calendar year preceding the calendar
year in which the Participant desires to have the receipt of such
Compensation deferred. If a Participant desires to defer the
receipt of any portion of his bonus or other incentive
compensation for any of Mark IV's fiscal years beginning with the
<PAGE>15
fiscal year ending February 28, 1994, the Participant must deliver
an executed Deferred Compensation Election Form containing a
statement of the Participant's intent to defer such bonus to the
Committee on or before the beginning of the fiscal year of Mark IV
with respect to which the bonus which the Participant desires to
defer is payable.
3.03 Matching Contributions. For each Plan Year beginning
with the Plan Year ending February 28, 1997, Mark IV shall, with
respect to each such Plan Year, allocate to the Matching
Contributions Account of each Participant that has elected to make
a Compensation Deferral, Matching Contributions in an amount equal
to fifty percent (50%) of the amount of the Compensation which the
Participant has deferred his receipt of for the calendar year
ending immediately prior to the end of such Plan Year pursuant to
such Compensation Deferral; provided that, for purposes of
determining the amount of the Matching Contributions to be
allocated to the Matching Contributions Account of a Participant:
(a) the maximum amount of the Participant's Compensation which is
to be used for purposes of determining the amount of the Matching
Contributions to be made to the Participant's Matching
Contributions Account shall be equal to the lesser of: (i) six
percent (6%) of the Participant's Compensation; (ii) the actual
amount of the Compensation deferred by the Participant pursuant to
a Compensation Deferral made for the calendar year ending
immediately prior to such Plan Year; and (iii) the maximum dollar
amount of the compensation which is permitted to be deferred by
participants in the Mark IV Savings & Retirement Plan as more
particularly established by the Secretary of the Treasury with
respect to the limitations of Section 401(k)(II)(B) of the Code;
and (b) the maximum amount of Matching Contributions allocated to
the Matching Contributions Account of a Participant for a Plan
Year shall be equal to: (i) fifty percent (50%) of the maximum
amount of the Compensation which may be used for purposes of
determining the amount of Matching Contributions to be made to a
Participant's Matching Contributions Account (as more particularly
described in Section 3.03(a) above); reduced by (ii) the amount,
if any, of the matching contributions made on behalf of such
Participant under the terms of the Mark IV Savings & Retirement
Plan, determined as of the end of the calendar year which ends
within such Plan Year ends.
The total amount of Matching Contributions allocated to
the Account of a Participant together with any earnings thereon as
provided for by Section 3.10 hereof, shall represent the amount
which Mark IV has agreed to pay to a Participant that has made a
Compensation Deferral and, unless a Trust Fund is established
pursuant to Section 5.01 hereof, no segregation of any assets of
Mark IV for the purpose of paying the amount of such Matching
Contributions and any earnings thereon shall be required.
3.04 Determination of Annual Deferred Compensation
Commitment. (a) For each Plan Year (including the Plan Year
ending on February 28, 1990) and not later than the time
prescribed by law for filing the Federal Income Tax Return of Mark
IV for the fiscal year of Mark IV in which such Plan Year ends
(including extensions thereof), the amount of the Annual Deferred
Compensation Commitment to be allocated among the Participants in
the Plan that were employed by the Employer as of the end of the
Plan Year ending with or within such fiscal year shall be
<PAGE>16
determined in the manner set forth in this Section 3.04. The
amount of the Annual Deferred Compensation Commitment for any Plan
Year together with earnings thereon as provided by Section 3.10
hereof, shall represent the amount which Mark IV has (subject to
the vesting provisions of this Plan) agreed to pay to Participants
in the Plan as of the end of the Plan Year for which such Annual
Deferred Compensation Commitment has been made and, unless a Trust
Fund is established pursuant to Section 5.01 hereof, no
segregation of any assets of Mark IV for the purpose of paying
such Annual Deferred Compensation Commitment shall be required.
(b) The amount of the Annual Deferred Compensation
Commitment which shall be allocated to the Account of each
Participant for a Plan Year shall be equal to the sum of:
(i) an amount equal to four percent (4%) of the
amount by which the Compensation of such Participant exceeds the
lesser of: (A)(I) for the Plan Years ending prior to March 1,
1994, an amount equal to $200,000 or such other amount as may be
established by the Secretary of the Treasury under IRC Section
401(a)(17); and (II) for Plan Years beginning March 1, 1994 and
thereafter, an amount equal to $150,000 or such other amount as
may be established by the Secretary of the Treasury under IRC
Section 401(a)(17); and (B) for Plan Years beginning March 1, 1993
and thereafter, the actual amount of Compensation (within the
meaning of Section 1.12(b) hereof) paid to the Participant during
the calendar year ending within the Plan Year;
(ii) an amount equal to that percentage of each
Participant's Compensation (within the meaning of Section 1.12(b)
hereof) in excess of the Taxable Wage Base for the Plan Year for
which the Annual Deferred Compensation Commitment is being made,
which percentage equals the rate of tax provided for by IRC
Section 3111(a) as determined on the last day of the calendar year
ending with or within such Plan Year.
3.05 Time of Allocation. For purposes of determining the
Dollar Value of a Participant's Account: (a) the amount of the
Annual Deferred Compensation Commitment to be allocated to the
Account of a Participant for a Plan Year shall be deemed to be
allocated to such Participant's Account, and to the Annual
Allocation Account established for such Plan Year, as of the end
of such Plan Year; (b) the amount of the salary or wages deferred
by a Participant in connection with a Compensation Deferral shall
be deemed to be credited to the Participant's Account and the
Compensation Deferral Account established for the Participant as
of the end of the calendar month during which the services giving
rise to such salary or wages were performed; (c) the amount of any
bonus or other incentive compensation deferred by a Participant in
connection with a Compensation Deferral shall be deemed to be
<PAGE>17
credited to such Participant's Account, and to the Compensation
Deferral Account established for the Participant as of the end of
the Plan Year ending with or within the fiscal year of the Company
with respect to which such bonus or other incentive compensation
is payable; and (d) the amount of the Matching Contributions to be
allocated to a Participant's Account and the Matching
Contributions Account established for the Participant shall be
deemed to be credited to the Participant's Account and the
Participant's Matching Contributions Account as of the end of the
Plan Year ending with or within the fiscal year of the Company
with respect to which the Compensation Deferral which formed the
basis for such Matching Contributions was made. For purposes of
determining the Share Value of a Participant's Account as of the
end of any Plan Year, the number of shares of Phantom Stock to be
allocated to the Account of a Participant for a Plan Year shall be
deemed to be allocated to such Participant's Account, to the
Participant's Compensation Deferral Account, if any, to such
Participant's Matching Contributions Account, if any, and to the
Annual Allocation Account established for such Plan Year, as of
the end of such Plan Year.
3.06 Allocations of Phantom Stock. If the Dollar Value of a
Participant's Account determined as of November 30, 1991 exceeds
$25,000, the Committee shall allocate to the Account of such
Participant, as of December 1, 1991, the number of shares of
Phantom Stock which could be purchased at a price per share
determined in accordance with Section 3.07 hereof using the Dollar
Value of the Participant's Account determined as of November 30,
1991.
In addition, if the Dollar Value of a Participant's
Account determined as of November 30, 1991 was less than $25,000
but the Dollar Value of such Participant's Account determined as
of the end of any Plan Year thereafter exceeds $25,000, (including
the amount, if any, of the portion of the Annual Deferred
Compensation Commitment to be allocated to the Participant's
Annual Allocation Account for such Plan Year, the amount, if any,
of the Compensation Deferrals credited to the Participant's
Compensation Deferral Account as of the end of such Plan Year and
the amount, if any, of Matching Contributions credited to the
Participant's Matching Contributions Account as of the end of such
Plan Year), for the first Plan Year in which the Dollar Value of
the Participant's Account exceeds $25,000, the Committee shall
allocate to such Participant's Account as of the end of such Plan
Year, the number of shares of Phantom Stock which could be
purchased at a price per share determined in accordance with
Section 3.07 hereof using the Dollar Value of the Participant's
Account determined as of the end of such Plan Year. For purposes
of this paragraph, the number of shares of Phantom Stock allocated
to the Participant's Account as of the end of such Plan Year shall
be allocated by the Committee among the various sub-accounts
established by the Committee for the Participant in proportion to
the respective Dollar Values of such sub-accounts.
<PAGE>18
Beginning with the Plan Year ending February 29, 1992,
for the Plan Year ending February 28, 1993 and for each Plan Year
thereafter, unless a Trust Fund has been established pursuant to
Section 5.01 hereof, if the Dollar Value of a Participant's
Account exceeds $25,000, the Committee shall credit the Annual
Allocation Account to be established for such Participant with the
number of shares of Phantom Stock which could be purchased at a
price per share determined pursuant to Section 3.07 hereof using
an amount equal to the portion of the Annual Deferred Compensation
Commitment which is to be allocated to such Participant's Annual
Allocation Account for such Plan Year. In addition, if the Dollar
Value of a Participant's Account exceeds $25,000, as of the end of
each calendar month, the Committee shall credit the Participant's
Compensation Deferral Account with the number of shares of Phantom
Stock, if any, which could be purchased at a price per share
determined pursuant to Section 3.07 hereof using the amount of
salary or wages, if any, deferred by the Participant in connection
with the services performed by such Participant for such calendar
month and, as of the end of each Plan Year, the Committee shall
credit the Participant's Compensation Deferral Account with the
number of shares of Phantom Stock, if any, which could be
purchased at a price per share determined pursuant to Section 3.07
hereof using the amount of the bonus or other incentive
compensation, if any, deferred by the Participant with respect to
services performed by the Participant during such Plan Year.
Finally, if the Dollar Value of a Participant's Account exceeds
$25,000, and the Participant is entitled to have Matching
Contributions made to a Matching Contributions Account established
for such Participant, as of the end of the Plan Year with respect
to which Matching Contributions are to be allocated to the
Participant's Matching Contributions Account, the Committee shall
credit the Participant's Matching Contributions Account with the
number of shares of Phantom Stock which could be purchased at a
price per share determined pursuant to Section 3.07 hereof using
the amount, if any, of the Matching Contributions required to be
credited to the Participant's Matching Contributions Account with
respect to each such Plan Year.
3.07 Pricing of Mark IV Common Stock. For purposes of
determining the number of shares of Phantom Stock, if any, to be
allocated to the Account of a Participant as of December 1, 1991,
the price per share of common stock of Mark IV shall be deemed to
be the average of the closing prices per share of common stock of
Mark IV during the month of November, 1991, as determined from the
closing prices per share of common stock of Mark IV as reported by
the New York Stock Exchange Composite Index for such month.
For purposes of determining the number of shares of
Phantom Stock, if any, to be allocated to the Account of a
Participant, as of the end of any calendar month in connection
with the salary or wages deferred by the Participant during such
calendar year as provided for by Section 3.02 hereof, the price
per share of common stock of Mark IV shall be deemed to be the
average of the closing prices per share of common stock of Mark IV
<PAGE>19
during such calendar month as determined from the closing prices
per share of common stock of Mark IV. For purposes of determining
the number of shares of Phantom Stock, if any, to be allocated to
the Account of a Participant as of the end of each Plan Year with
respect to the bonus or other incentive compensation deferred by
the Participant or Matching Contributions to be made to a
Participant's Matching Contributions Account as provided for by
Section 3.03 hereof, the price per share of common stock of Mark
IV shall be deemed to be the average of the closing prices per
share of common stock of Mark IV during the month of February of
the Plan Year for which such bonus or other incentive compensation
was deferred and the Plan Year with respect to which such Matching
Contributions are to be made. For purposes of determining the
number of shares of Phantom Stock, if any, to be allocated to the
Account of a Participant, as of the end of each Plan Year in
connection with any Annual Deferred Compensation Commitment
allocated to the Participant's Account as of the end of such Plan
Year pursuant to Section 3.05 hereof, the price per share of
common stock of Mark IV shall be deemed to be the average of the
closing prices per share of common stock of Mark IV during the
month of February for the Plan Year for which the Annual Deferred
Compensation Commitment is to be made. For purposes of
determining the average of the closing prices per share of common
stock of Mark IV as required by this paragraph, such closing
prices shall be determined from the closing prices per share of
common stock of Mark IV reported by the New York Stock Exchange
Composite Index for such month. Notwithstanding the foregoing, if
any shares of Phantom Stock are to be allocated to the Account of
a Participant in connection with any salary or wages deferred by
the Participant at any time after December 31, 1998, in connection
with any Matching Contributions to be allocated to the
Participant's Account at any time after December 31, 1998 or in
connection with any Annual Deferred Compensation Commitment to be
allocated to the Account of a Participant at any time after
December 31, 1998, the price per share of common stock of Mark IV
which shall be used to determine the number of shares of Phantom
Stock to be allocated to the Participant's Account shall be deemed
to be the closing price per share, as reported by the New York
Stock Exchange Composite Index on the last day that the New York
Stock Exchange is open for trading in the calendar year
immediately preceding the calendar year in which any such amounts
are to be allocated to the Participant's Account.
For purposes of determining the amount of the funds to
be transferred to any Trust Fund established pursuant to Section
5.01 hereof, the price per share of common stock of Mark IV shall
be the closing price per share of common stock of Mark IV on the
day a Change in Control (as defined in Section 5.03 hereof)
occurs, as reported by the New York Stock Exchange Composite
Index.
<PAGE>20
For purposes of determining the Share Value of a
Participant's Account, if the Participant's employment with the
Employer is voluntarily or involuntarily terminated for any reason
including, but not limited to, the Participant's retirement, death
or suffering of a total and permanent disability, the price per
share of common stock of Mark IV shall be deemed to be the average
of the closing prices per share of common stock of Mark IV as
reported by the New York Stock Exchange Composite Index for the
thirty (30) day period ending on the day the Participant's
employment with the Employer is terminated.
If, pursuant to Section 4.05 hereof, a Participant has
elected to receive payment of all or any portion of the
Participant's Account attributable to Compensation Deferrals while
the Participant is still employed by the Employer, for purposes of
determining the Share Value of such portion of the Participant's
Account, if any, at the time or times for payment of such portion
of the Participant's Account, the price per share of the common
stock of Mark IV shall be deemed to be the average of the closing
prices per share of common stock of Mark IV during the calendar
month ending immediately prior to the date for payment of all or
any such portion of the Participant's Account as determined by the
closing prices per share of common stock of Mark IV for such
period as reported by the New York Stock Exchange Composite Index
for such month.
3.08 Anti-Dilution Provisions. The aggregate number of
shares of Phantom Stock allocated to a Participant's Account shall
be adjusted proportionately in the event of any change, increase
or decrease in the total number of issued and outstanding shares
of common stock of Mark IV or any change in classification of the
shares of common stock of Mark IV without the receipt of
consideration by Mark IV as a result of any stock split, reverse
stock split or other consolidation of shares of common stock of
Mark IV or as a result of any payment of a stock dividend,
recapitalization, reclassification or other adjustment in the
capital of Mark IV without receipt of consideration by Mark IV.
3.09 Fractional Shares and Dividends. In the event that any
cash dividends are paid with respect to any Phantom Stock
allocated to a Participant's Account, an amount equal to the
amount of the cash dividends which would be payable with respect
to the number of shares of Phantom Stock contained in the
Participant's Account shall be allocated by the Committee to the
Participant's Account as of the date for payment of such cash
dividends specified by Mark IV in the resolution authorizing the
payment of such cash dividends. Such cash dividends shall be
allocated among the respective sub-accounts established by the
Committee for the Participant in proportion to the number of
shares of Phantom Stock contained in such sub-accounts.
In addition, if any fractional shares of common stock of
Mark IV would result from the allocation of a portion of any
Annual Deferred Compensation Commitment to a Participant's
Account, from the crediting of any Compensation Deferral to a
Participant's Account, from the crediting of any Matching
<PAGE>21
Contributions to the Participant's Matching Contributions Account
or in connection with any change in the total number of issued and
outstanding shares of common stock of Mark IV without the receipt
of compensation by Mark IV, an amount equal to such fractional
share of common stock of Mark IV shall be allocated to the Annual
Allocation Account, Compensation Deferral Account or Matching
Contributions Account, as the case may be, established for the
Plan Year in which such fractional share becomes allocable to the
Participant's Account.
3.10 Allocation of Interest. Subject to the provisions of
the following paragraphs, as of the end of each Plan Year, the
Committee shall increase the Dollar Value of each Participant's
Account by an amount equal to the Applicable Interest Rate for
such Plan Year multiplied by the Dollar Value of such
Participant's Account determined as of the end of the immediately
preceding Plan Year. In addition, if a Participant has elected to
defer the receipt of all or any portion of his salary or wages by
making a Compensation Deferral, as of the end of each Plan Year,
the Committee shall increase the Dollar Value of each
Participant's Account by an amount equal to the amount of interest
which would have been earned by applying the Applicable Interest
Rate for the immediately preceding Plan Year (adjusted to reflect
periods of less than one year) to each of the monthly allocations
of the salary or wages deferred by the Participant during the Plan
Year but only for the period between the date a monthly allocation
of the Participant's salary or wages is made to the Participant's
Compensation Deferral Account and the end of the Plan Year. For
purposes of this Section 3.10, the amount of the interest to be
allocated to the Participant's Account as of the end of such Plan
Year (excluding interest to be allocated with respect to
Compensation Deferrals made by the Participant during the Plan
Year) shall be allocated among the respective sub-accounts
established by the Committee for the Participant in proportion to
the Dollar Values of such sub-accounts, determined as of the end
of the preceding Plan Year. Notwithstanding the foregoing, the
proportion of a Participant's Annual Allocation Account,
Compensation Deferral Account or Matching Contributions Account,
if any, which is attributable to cash dividends which would be
payable with respect to the shares of common stock of Mark IV
allocated to the Participant's Annual Allocation Account,
Compensation Deferral Account or Matching Contributions Account,
respectively, shall only be increased by the Applicable Interest
Rate for the immediately preceding Plan Year (adjusted for periods
of less than one year) for the period between the date such cash
dividends would be allocated to the Participant's Annual
Allocation Account, Compensation Deferral Account or Matching
Contributions Account, respectively, and the end of the Plan Year.
If a Participant's employment with the Employer is
terminated on account of his death, retirement or suffering of a
Total and Permanent Disability, the Committee shall increase the
Dollar Value of such a Participant's Account by an amount equal to
the amount of interest which would have been earned by the Dollar
Value of the Participants' Account determined as of the end of the
<PAGE>22
Plan Year ending prior to the Participant's death, retirement or
Total and Permanent Disability and applying the Applicable
Interest Rate for such immediately preceding Plan Year (adjusted
to reflect periods of less than one year) to such Dollar Value for
the period from the end of such Plan Year to the date the
Participant's employment with the Employer is terminated on
account of the Participant's retirement, death or suffering of a
Total and Permanent Disability. In addition, if a Participant has
elected to make Compensation Deferrals and the Participant's
employment with the Employer is terminated on account of his
death, retirement or suffering of a Total and Permanent
Disability, the Committee shall increase the Dollar Value of such
Participant's Account by an amount equal to the amount of interest
which would have been earned by applying the Applicable Interest
Rate for the immediately preceding Plan Year (adjusted to reflect
periods of less than one year) to each of the monthly allocations
of salary or wages made to the Participant's Compensation Deferral
Account for the period between the date such monthly allocation is
made to the Participant's Compensation Deferral Account, and the
date the Participant's employment with the Employer is terminated
on account of his retirement, death or suffering of a Total and
Permanent Disability.
As soon as practicable following the termination of a
Participant's employment with the Employer on account of death,
retirement or Total and Permanent Disability, the Committee shall
compare the Dollar Value of the Participant's Account determined
as of the date of the Participant's retirement, death or Total and
Permanent Disability (including the amount of any interest thereon
as provided for by the preceding paragraph) with the Share Value
of the Participant's Account determined as of the date of the
Participant's retirement, death or Total and Permanent Disability
and the greater of such values shall, thereafter, be deemed the
Dollar Value of the Participant's Account determined as of the
date the Participant's employment with the Employer is terminated
on account of the Participant's death, retirement or Total and
Permanent Disability. As of the end of the Plan Year in which the
Participant's employment with the Employer is terminated on
account of the Participant's retirement, death or Total and
Permanent Disability, the Dollar Value of the Participant's
Account determined as of the date the Participant's employment
with the Employer is terminated as a result of the Participant's
retirement, death or Total and Permanent Disability (which Dollar
Value is determined pursuant to the preceding sentence) shall be
increased by multiplying the Applicable Interest Rate for the
immediately preceding Plan Year (adjusted to reflect the period
between the date the Participant's employment with the Employer is
terminated and the end of the Plan Year) by the Dollar Value of
the Participant's Account determined as of the date the
Participant's employment with the Employer is terminated as a
result of his retirement, death or Total and Permanent Disability.
As of the end of each Plan Year thereafter, the Dollar Value of
the Account of a Participant whose employment with the Employer
has been terminated on account of his death, retirement or
<PAGE>23
suffering of a Total and Permanent Disability, shall be increased
by an amount equal to the Dollar Value of the Participant's
Account determined as of the end of the immediately preceding Plan
Year multiplied by the Applicable Interest Rate for the
immediately preceding Plan Year. In addition, in the Plan Year in
which the Dollar Value of the Account of a Participant whose
employment has been terminated as a result of death, retirement or
a Total and Permanent Disability is to be distributed, the Dollar
Value of such Participant's Account determined as of the end of
the Plan Year ending immediately prior to the distribution of such
Participant's Account, shall be increased by an amount equal to
the Applicable Interest Rate for the immediately preceding Plan
Year, adjusted to reflect the period between the end of the Plan
Year and the end of the calendar month immediately preceding the
calendar month in which the Participant's Account is to be
distributed, multiplied by the Dollar Value of the Participant's
Account for the immediately preceding Plan Year.
If a Participant's employment with the Employer is
terminated for any reason prior to his death, retirement or
suffering of a Total and Permanent Disability, the Share Value of
the Participant's Account, if any, shall be determined as provided
in Section 3.06 hereof, and the Committee shall compare the Dollar
Value of the Participant's Account determined as of the end of the
immediately preceding calendar month with the Share Value of the
Participant's Account as of the end of the immediately preceding
calendar month and the greater of such values shall, thereafter,
be deemed the Dollar Value of such Participant's Account
determined as of the date the Participant's employment with the
Employer is terminated. Thereafter, the Participant's Account
shall be credited with interest during the period beginning on the
date the Participant's employment with the Employer is terminated
and ending on the last day of the calendar month ending
immediately before the calendar month in which the Participant's
Account is distributed. The amount of such interest for any such
period shall be equal to the Applicable Interest Rate for the
immediately preceding Plan Year multiplied by the Dollar Value of
the Participant's Account determined as of the end of the
immediately preceding Plan Year. For purposes of this paragraph,
the amount of interest to be allocated to the Participant's
Account as of the end of a Plan Year shall be allocated among the
respective sub-accounts established by the Committee for the
Participant in proportion to the Dollar Values of such sub-
accounts, determined as of the end of the preceding Plan Year.
Upon the occurrence of a Change in Control as defined in
Section 5.03 hereof, the Committee shall increase the Dollar Value
of each Participant's Account by an amount equal to the amount of
interest which would have been earned by the Dollar Value of such
Participant's Account determined as of the end of the Plan Year
ending prior to the Change in Control and applying the Applicable
Interest Rate for such immediately preceding Plan Year to such
Dollar Value for the period from the end of such Plan Year to the
date on which the Change in Control occurs. In addition, upon the
<PAGE>24
occurrence of a Change in Control, the Committee shall increase
the Dollar Value of the Account of a Participant that has elected
to make Compensation Deferrals by an amount equal to the amount of
interest, if any, which would have been earned by applying the
Applicable Interest Rate for the immediately preceding Plan Year
(adjusted for periods of less than one year) to each of the
monthly allocations of salary or wages, if any, made to the
Participant's Compensation Deferral Account for the period between
the date such monthly allocation is made to the Participant's
Compensation Deferral Account and the date the Change in Control
occurs.
If a Trust Fund has been established pursuant to Section
5.01 hereof, each Participant's Account in the Trust Fund shall be
credited or charged with its proportionate share of the earnings
or losses of the Trust Fund. In addition, if a Trust Fund is
established pursuant to Section 5.01 hereof, the Committee shall
compare the Dollar Value of each Participant's Account determined
as of the date the Change in Control occurs (as determined
pursuant to the preceding paragraph) with the Share Value of the
Participant's Account determined as of the date the Change in
Control occurs and the greater of such values shall, thereafter be
deemed to be the initial Dollar Value of the Participant's Phantom
Account which the Committee is required to continue to maintain
pursuant to Section 3.01(f). As of the end of the Plan Year in
which the Change in Control occurs, the Dollar Value of the
Participant's Phantom Account determined as of the date the Change
in Control occurs (which Dollar Value is determined pursuant to
the preceding sentence) shall be increased by multiplying the
Applicable Interest Rate for the immediately preceding Plan Year
(adjusted to reflect the period between the date the Change in
Control occurs and the end of the Plan Year) by the Dollar Value
of the Participant's Phantom Account determined as of the date the
Change in Control occurs. As of the end of each Plan Year
thereafter, the Dollar Value of the Phantom Account of each
Participant shall be increased by an amount equal to the Dollar
Value of the Participant's Phantom Account determined as of the
end of the immediately preceding Plan Year multiplied by the
Applicable Interest Rate for the immediately preceding Plan Year.
In addition, in the Plan Year in which the Dollar Value of the
Account of a Participant is to be distributed, the Dollar Value of
such Participant's Phantom Account determined as of the end of the
Plan Year ending immediately prior to the distribution of such
Participant's Account, shall be increased by an amount equal to
the Applicable Interest Rate for the immediately preceding Plan
Year, adjusted to reflect the period between the end of the Plan
Year and the end of the calendar month immediately preceding the
calendar month in which the Participant's Account is to be
distributed, multiplied by the Dollar Value of the Participant's
Phantom Account for the immediately preceding Plan Year.
In the event that Mark IV or its successor elects to
continue this Plan after the occurrence of a Change in Control,
the Committee shall increase the Dollar Value of any Compensation
<PAGE>25
Deferral, any Matching Contributions and any portion of any annual
Deferred Compensation Commitment allocated to the Participant's
Phantom Account after the occurrence of a Change in Control by the
Applicable Interest Rate for the immediately preceding Plan Year
in the same manner that the Dollar Value of the Participant's
Account is adjusted prior to the occurrence of a Change in Control
as provided for in the first paragraph of this Section 3.10.
3.11 Allocation of Forfeitures. As of each Valuation Date,
the Committee shall allocate the amounts, if any, forfeited in
accordance with Section 4.07 hereof among the Accounts of the
several Participants as if said amounts were an additional Annual
Deferred Compensation Commitment of Mark IV with respect to the
Plan Year of containing such Valuation Date.
3.12 Participants Eligible for Allocation. Except as
otherwise provided by Section 3.12 hereof, for purposes of Section
3.04 hereof, the term "Participant" shall only include those
Participants who: (a) have completed at least 1,000 Hours of
Service with the Employer during the Plan Year for which the
allocation of the Annual Deferred Compensation Commitment is to be
made; and (b) are employed by the Employer on the last day of the
Plan Year for which the allocation of the Annual Deferred
Compensation Commitment is to be made.
3.13 Allocation Does Not Vest Any Interest. The fact that an
amount is credited to the Account of a Participant shall not vest
in such Participant or any Beneficiary any right, title or
interest in any assets of Mark IV except at such time or times and
upon the terms and conditions herein provided. In addition, in
the event a Trust Fund is established pursuant to Section 5.01
hereof, the fact that an amount is credited to the Account of a
Participant shall not vest in such Participant or any Beneficiary
any right, title or interest in the assets of the Trust Fund
except at such time or times and upon the terms and conditions
provided herein.
3.14 Contributions. (a) In the event a Trust Fund is
established pursuant to Section 5.01 hereof and, following the
establishment of such Trust Fund, Mark IV or its successor elects
to continue this Plan, for each Plan Year in which an Annual
Deferred Compensation Commitment is made under this Plan and not
later than the time prescribed by law for filing of the Federal
Income Tax Return of Mark IV or its successor, Mark IV or its
successor shall make a contribution to the Trust Fund in an amount
equal to the Annual Deferred Compensation Commitment for such Plan
Year.
(b) In the event a Trust Fund is established pursuant
to Section 5.01 hereof and, following the establishment of such
Trust Fund, Mark IV or its successor elects to continue this Plan,
for each Plan Year in which a Participant makes a Compensation
Deferral, Mark IV or its successor shall, within fifteen (15) days
<PAGE>26
following the end of the calendar month in which any portion of
the Participant's Compensation is to be allocated to his
Compensation Deferral Account, contribute to the Trust Fund an
amount equal to the Compensation Deferrals made for such calendar
month.
(c) In the event a Trust Fund is established pursuant
to Section 5.01 hereof and, following the establishment of such
Trust Fund, Mark IV or its successor elects to continue the Plan,
for each Plan Year in which a Participant makes a Compensation
Deferral with respect to which the Participant is entitled to
receive an allocation of Matching Contributions, Mark IV or its
successor shall make a contribution to the Trust Fund in an amount
equal to the total amount of the Matching Contributions required
to be allocated to the Accounts of Participants that have made
Compensation Deferrals for such Plan Year no later than the time
prescribed by law for filing of the Federal Income Tax Return of
Mark IV or its successor for the fiscal year of Mark IV or its
successor with or within which such Plan Year ends.
(d) In the event a Trust Fund is established pursuant
to Section 5.01 hereof, at the end of each Plan Year following the
establishment of such Trust Fund, Mark IV or its successor shall,
(whether or not Mark IV or its successor has elected to continue
the Plan), make a contribution to the Trust Fund on behalf of each
Participant in an amount equal to the amount, if any, by which the
Dollar Value of the Participant's Phantom Account, determined as
of the end of such Plan Year, exceeds the value of the
Participant's Account in the Trust Fund determined (pursuant to
Section 3.15 below) as of the end of such Plan Year. Such
contribution shall be made no later than the time prescribed by
law for the filing of the Federal Income Tax Return of Mark IV or
its successor for the fiscal year of Mark IV or its successor with
or within which such Plan Year ends.
3.15 Valuation of Trust Fund. In the event a Trust Fund is
established pursuant to Section 5.01 hereof, as of each Valuation
Date, the Trustee shall determine the net worth of the assets of
the Trust Fund and report such value to the Committee in writing.
In determining such net worth, the Trustee shall value the assets
of the Trust Fund at their fair market value as of such Valuation
Date and shall deduct all fees and expenses chargeable to the
Trust Fund. Such valuation shall not include the portion of any
Compensation Deferral for such Plan Year which is attributable to
the Participant's election to defer receipt of his bonus or other
incentive compensation (including any earnings of the Trust Fund
attributable to the compensation or bonus deferred by the
Participant) nor shall such valuation include any Matching
Contributions to be made by Mark IV or its successor with respect
to Compensation Deferrals made by a Participant nor shall such
valuation include any contributions to be made by Mark IV or its
successor to reflect the Annual Deferred Compensation Commitment
for the Plan Year ending on such Valuation Date. The Committee
shall then adjust the net credit balance in the Accounts of all
Participants upward or downward, pro rata, so that the total of
<PAGE>27
such net credit balances will equal such net worth of the Trust
Fund as of such Valuation Date. Finally, the Committee shall add
to the Account of each Participant, the portion of the
contribution, if any, to be made by Mark IV or its successor to
reflect the Annual Deferred Compensation Commitment for the Plan
Year ending on such Valuation Date to which the Participant is
entitled pursuant to Section 3.04 hereof, the amount, if any, of
the Participant's Compensation Deferral (including any earnings of
the Trust Fund attributable to such Compensation Deferral) and the
amount, if any, of the Matching Contributions which are required
to be credited to the Participants Account with respect to such
Compensation Deferral.
3.16 Statement of Account. As soon as practicable following
the end of each Plan Year, the Committee shall deliver to each
Participant a statement of the Dollar Value and, if applicable,
the Share Value of his Account including a statement of: (a) the
amount of the Annual Deferred Compensation Commitment to be
allocated to his Annual Allocation Account for such Plan Year; (b)
the portion of the Participant's Compensation Deferral which is
attributable to the Participant's deferral of salary or wages and
which has been allocated to the Participant's Compensation
Deferral Account for the Plan Year; (c) the portion of the
Participant's Compensation Deferral which is attributable to the
Participant's deferral of his bonus or other incentive
compensation and which is to be allocated to the Participant's
Compensation Deferral Account as soon as practicable following the
end of such Plan Year; (d) the amount of the Matching
Contributions allocated to the Participant's Matching
Contributions Account for the Plan Year; (e) the number of shares
of Phantom Stock, if any, to be allocated to his Annual Allocation
Account and, if applicable, his Compensation Deferral Account, and
if applicable, his Matching Contributions Account for such Plan
Year; (f) the Dollar Value of the Participant's Account (including
the Dollar Value of the vested and non-vested portions of the
Participant's Account) together with a statement of the interest
to be allocated to such Participant's Account for such Plan Year
and the manner in which such interest is to be allocated among the
respective sub-accounts established by the Committee for the
Participant in connection with its administration of the Plan; and
(g) the Share Value, if any, of the Participant's Account
(including the Share Value of the vested and non-vested portions
of the Participant's Account). In addition, if a Trust Fund has
been established pursuant to Section 5.01 hereof, the Committee
shall, whether or not Mark IV or its successor has elected to
continue this Plan, deliver to each Plan Participant no later than
thirty (30) days following the end of each Plan Year, a written
statement of the value of each such Participant's Account in the
Trust Fund, determined as of the end of the Plan Year and a
written statement of the value of each such Participant's Phantom
Account determined as of the end of the Plan Year.
<PAGE>28
SECTION 4.
Distributions
4.01 Retirement. Every Participant shall retire for purposes
of this Plan upon his termination of employment on his normal
retirement date or his deferred retirement date, as such dates are
defined below, and shall continue to participate until his actual
retirement. Notwithstanding anything to the contrary contained in
Section 4.04 hereof, upon a Participant's retirement, the Dollar
Value and, if applicable, the Share Value of his Account shall
become fully and nonforfeitably vested and his participation
hereunder shall cease.
Subject to the provisions of the following paragraph, as
soon as practicable following a Participant's retirement, the
Committee shall direct Mark IV to distribute to the Participant in
one lump sum payment in cash or immediately available funds, an
amount equal to the Dollar Value of the Participant's Account
which, as determined pursuant to Section 3.10 hereof, is equal to
the greater of the Dollar Value of the Participant's Account and
the Share Value of the Participant's Account determined as of the
Participant's retirement.
Notwithstanding the foregoing, a Participant may, no
later than January 31, 1999 or, if later, the date of the
Participant's sixty first (61st) birthday, file a written election
with the Committee providing that the value of his Account
determined as of his retirement date (together with interest
thereon as hereinafter provided) shall be paid to him in ten (10)
annual installments, the first of which installments shall be paid
to the Participant no later than thirty (30) days following the
Participant's retirement date. If a Participant makes such an
election, such election shall be irrevocable and, upon the
approval by the Committee of such election, the Participant's
Account shall be paid to him in ten (10) annual installments
beginning no later than thirty (30) days following the
Participant's retirement date and continuing each year thereafter
no later than thirty (30) days following each anniversary of the
Participant's retirement date. The amount of such installment
payment shall be equal to the portion of the Participant's Account
determined as follows:
Years Following Portion of Account
Retirement to be Distributed
0 1/10
1 1/9
2 1/8
3 1/7
4 1/6
5 1/5
6 1/4
7 1/3
8 1/2
9 1/1
<PAGE>29
If the Participant elects to receive payment of his Account in
installments as provide for above, as of the end of each Plan Year
following the Participant's retirement in which a distribution is
made to the Participant, the Dollar Value of the Participant's
Account shall be increased by an amount equal to the sum of: (1)
Applicable Interest Rate for the immediately preceding Plan Year,
adjusted to reflect the period between the end of the immediately
preceding Plan Year and the date on which an installment is
distributed to the Participant multiplied by the Dollar Value of
the Participant's Account determined as of the end of the
immediately preceding Plan Year; and (2) the Applicable Interest
Rate for the Plan year in which the installment distribution is
made, adjusted to reflect the period from the date of the
distribution to the Participant to the end of the Plan Year,
multiplied by: (a) the value of the Participant's Account
determined as of the end of the immediately preceding Plan Year;
plus (b) the amount of interest to be credited to the Dollar Value
of the Participant's Account pursuant to (1) above in this
paragraph; minus (c) the amount of the distribution made to the
Participant for the Plan Year.
If a Participant that elects to receive payment of his
Account in installments as provided for above dies prior to the
distribution to such Participant of the entire amount contained in
his Account, the balance of the Participant's Account shall be
distributed to the Participant's Beneficiary or, if none, to the
Participant's estate within sixty (60) days following the
Participant's death.
If a Trust Fund has been established pursuant to Section
5.01 hereof, following a Participant's retirement, unless the
Participant has elected to receive payment of his Account in
installments as provided for above, the Committee shall direct the
Trustee to distribute to the Participant in one lump sum payment
in cash or immediately available funds, the value of such
Participant's Account within the Trust Fund, determined as of the
preceding Valuation Date. In addition, if the value of the
Participant's Account in the Trust Fund is less than the value of
the Participant's Phantom Account, following a Participant's
retirement, the Committee shall direct Mark IV or its successor to
distribute to the Participant in one lump sum payment in cash or
immediately available funds, an amount equal to the amount by
which the value of the Participant's Phantom Account, exceeds the
value of the Participant's Account in the Trust Fund. The
payments required to be made to a Participant pursuant to this
paragraph shall be delivered to the Participant no later than
sixty (60) days following the date the Participant retires from
employment with the Employer.
If a Trust Fund has been established pursuant to Section
5.01 hereof and the Participant has elected to receive payment of
the value of his Account in installments as permitted above, the
<PAGE>30
Committee shall direct the Trustee to distribute the Participant's
Account to the Participant in the manner described above for a
distribution of the Participant's Account in installments. In
such event, as of the end of each Plan Year following the date of
the Participant's retirement, the value of the Participant's
Phantom Account shall be increased in the same manner that the
value of the Participant's Account is to be increased as provided
for above.
For purposes of this Plan:
(a) Normal Retirement Date means the first day of the first
calendar month next following such Participant's fifty-fifth
(55th) birthday; and
(b) Deferred Retirement Date means the first day of the
month after such Participant actually leaves the service of the
Employer, provided it is subsequent to his Normal Retirement Date.
4.02 (a) Death Notwithstanding anything to the contrary
contained in Section 4.04 hereof, upon the death of a Participant
before retirement or other termination of employment, the Dollar
Value and, if applicable, the Share Value of his Account shall
become fully and nonforfeitably vested. As soon as practicable
thereafter, the Committee shall direct Mark IV to distribute to
any surviving Beneficiary designated by the Participant, or, if
none, to the Participant's surviving spouse, or if neither to the
Participant's estate, in one lump sum payment in cash or
immediately available funds, an amount equal to the Dollar Value
of the deceased Participant's Account which, as determined
pursuant to Section 3.10 hereof, is equal to the greater of the
Dollar Value of the Participant's Account and the Share Value of
the Participant's Account, determined as of the date of the
Participant's death.
If a Trust Fund has been established pursuant to Section
5.01 hereof, following a Participant's death, the Committee shall
direct the Trustee to distribute to any surviving Beneficiary
designated by the Participant, or, if none, to the Participant's
surviving spouse, or, if neither, to the Participant's estate, in
one lump sum payment in cash or immediately available funds, the
value of such Participant's Account within the Trust Fund
determined as of the preceding Valuation Date. In addition, if
the value of the Participant's Account in the Trust Fund is less
than the value of the Participant's Phantom Account, following the
Participant's death, the Committee shall direct Mark IV or its
successor to distribute to the Participant in one lump sum payment
in cash or immediately available funds, an amount equal to the
amount by which the value of the Participant's Phantom Account,
exceeds the value of the Participant's Account in the Trust Fund.
The payments required to be made pursuant to this paragraph shall
be delivered to the Participant's Beneficiary, or if none to the
Participant's surviving spouse, or if neither to the Participant's
estate no later than 60 days following the Participant's death.
<PAGE>31
(b) Proof of Death The Committee may require such
proper proof of death and such evidence of the right of any person
to receive payment of a deceased Participant's Account as the
Committee may deem desirable. The Committee's determination shall
be conclusive.
(c) Designation of Beneficiary Each Eligible
Employee, upon becoming a Participant, may designate a Beneficiary
of his own choosing and may, in addition, name a contingent
Beneficiary. Such designation shall be made in a form
satisfactory to the Committee. Any Participant may at any time
revoke or change his Beneficiary designation by filing written
notice with the Committee.
4.03 (a) Disability. Notwithstanding anything to the
contrary contained in Section 4.04 hereof in the event of a
Participant's Total and Permanent Disability before retirement or
other termination of employment, the Dollar Value and, if
applicable, the Share Value of his Account shall become fully and
nonforfeitably vested. As soon as practicable following the date
it is determined that a Participant suffers from a total and
permanent disability, the Committee shall direct Mark IV, to
distribute and pay to the Participant in one lump sum payment in
cash or immediately available funds, an amount equal to the Dollar
Value of the Participant's Account which, as determined pursuant
to Section 3.10 hereof, is equal to the greater of the Dollar
Value of the Participant's Account and the Share Value of the
Participant's Account, determined as of the date the Participant
suffers a Total and Permanent Disability.
If a Trust Fund has been established pursuant to Section
5.01 hereof, after it is determined that the Participant suffers
from a Total and Permanent Disability, the Committee shall direct
the Trustee to distribute and pay to the Participant in one lump
sum payment in cash or immediately available funds, an amount
equal to the value of such Participant's Account within the Trust
Fund determined as of the preceding Valuation Date. In addition,
if the value of the Participant's Account in the Trust Fund is
less than the value of the Participant's Phantom Account,
following the date on which it is determined that the Participant
suffers from a Total and Permanent Disability, the Committee shall
direct Mark IV or its successor to distribute to the Participant
in one lump sum payment in cash or immediately available funds, an
amount equal to the amount by which the value of the Participant's
Phantom Account, exceeds the value of Participant's Phantom
Account in the Trust Fund. The payments required to be made
pursuant to this paragraph shall be delivered to the Participant
no later than 60 days following the date it is determined that the
Participant suffers from a Total and Permanent Disability.
(b) Total and Permanent Disability. For purposes of
this Plan, Total and Permanent Disability shall mean a presumably
permanent physical or mental condition of a Participant resulting
<PAGE>32
from a bodily injury or disease or mental disorder which renders
him incapable of continuing in the employment of the Employer or
any Affiliate.
(c) Determination of Total and Permanent Disability.
The total and permanent disability of any Participant shall be
determined by a licensed physician in accordance with uniform
principles consistently applied, upon the basis of independent
medically determined evidence.
4.04 Vesting. Each Participant in the employ of the Employer
on December 1, 1991 shall at all times have a 100% vested interest
in the entire Dollar Value and the entire Share Value, if any, of
his Account including the Dollar Value and Share Value, if any, of
his Account determined as of December 1, 1991, and the Dollar
Value and Share Value, if any, of his Account attributable to
amounts credited to each of his Annual Allocation Accounts under
the terms of this Plan with respect to any additional allocations
made to each of the Participant's Annual Allocation Accounts after
December 1, 1991. In addition, each Participant shall at all
times have a 100% vested interest in the Dollar Value and the
Share Value, if any, of his Account attributable to amounts
credited to his Compensation Deferral Account.
Each Participant that first performs an Hour of Service
for the Employer at any time on or after December 2, 1991 shall,
upon completion by such a Participant of five (5) Years of
Service, acquire a 100% vested interest in the portion of his
Account which is attributable to the Annual Deferred Compensation
Commitment made to his Account together with any interest or
earnings thereon and the portion of his Account which is
attributable to any Matching Contributions made to his Account
together with any interest or earnings thereon. Unless a Change
in Control shall have occurred prior to the termination of a
Participant's employment, if the employment of such a Participant
who is first employed by the Employer on or after December 2,
1991, is terminated for any reason other than death or disability
prior to the date such Participant completes at least five (5)
Years of Service, the portion of such Participant's Account which
is attributable to Annual Deferred Compensation Commitments made
to his Account together with any interest or earnings thereon and
the portion of his Account which is attributable to Matching
Contributions made to his Account together with interest or
earnings thereon shall be forfeited and applied to the Accounts of
all other Participants in the manner provided for in Section 3.11
hereof.
In addition to the above, a Participant shall become
fully and nonforfeitably vested in the entire Dollar Value and,
the entire Share Value, if any, of his Account upon the occurrence
of a Change in Control as defined in Section 5.03 hereof,
including any Dollar Value or Share Value attributable to amounts
credited to the Participant's Account following the Change in
Control.
<PAGE>33
For purposes of this Section 4.04, Years of Service shall be
determined on the basis of the Plan Year. All Years of Service of
an Eligible Employee with the Employer and any Affiliate shall be
taken into account. However, in determining a Participant's
vested interest in any of his Annual Allocation Accounts
subsequent to the rehiring of a terminated Eligible Employee who
has incurred a Break in Service, Years of Service completed by a
Participant prior to such Break in Service shall not be counted
under the following circumstances:
(a) if the Eligible Employee fails to complete a Year
of Service after his rehiring; or
(b) if the Eligible Employee incurred five (5)
consecutive Breaks in Service and had no vested interest in the
value of his Account at the time of his termination of employment.
4.05 Distribution of Compensation Deferrals. A Participant
shall be entitled to receive payment of all or any portion of the
amount of his Compensation Deferral for a Plan Year together with
any earnings thereon (but not any Matching Contributions
attributable to such Compensation Deferral) at the time or times
specified in the Deferred Compensation Election Form executed by
the Participant with respect to such Plan Year notwithstanding the
fact that the Participant is actively employed by the Employer at
the time such payment is to be made to the Participant. As soon
as practicable following the date specified by the Participant in
his Deferred Compensation Election Form (and, in no event later
than ten (10) days following such date), the Committee shall
distribute and pay to the Participant in one (1) lump sum payment
in cash or immediately available funds, the percentage, specified
in the Participant's Deferred Compensation Election Form, of the
Dollar Value or the Share Value, whichever is greater, of the
Participant's Compensation Deferral made in connection with such
Deferred Compensation Election Form. If a Participant's Deferred
Compensation Election Form provides for the partial payment to a
Participant of the Participant's Compensation Deferral, the Dollar
Value and the Share Value of the Participant's Compensation
Deferral Account shall be reduced in an amount equal to the
percentage of the Compensation Deferral that is to be paid to the
Participant.
Notwithstanding anything to the contrary contained in
the Deferred Compensation Election Form of a Participant, if the
Dollar Value or the Share Value of a Participant's Compensation
Deferral Account exceeds Two Million Dollars ($2,000,000) as of
December 31, 1998, the Committee shall, no later than January 30,
1999, distribute and pay to such Participant in one lump sum
payment an amount equal to one half of the Dollar Value or the
Share Value, whichever is greater, of the Participant's
Compensation Deferral Account determined as of December 31, 1998.
Following such distribution, the Dollar Value and the Share Value
of the Participant's Compensation Deferral Account and the
<PAGE>34
Participant's Account shall be reduced accordingly.
If a Trust Fund has been established pursuant to Section
5.01 hereof, at the time a Participant is entitled to payment of
all or any portion of his Compensation Deferral for a Plan Year
together with any earnings thereon as provided for in the Deferred
Compensation Election Form executed by the Participant for such
Plan Year, the Committee shall direct the Trustee to distribute to
the Participant in one (1) lump sum payment in cash or immediately
available funds, the portion of the Participant's Phantom Account
which is attributable to the portion of the Compensation Deferral
which the Participant is entitled to receive payment of together
with any earnings (or less any losses) of the Trust Fund
attributable to such amount. In addition, if the value of the
portion of the Participant's Compensation Deferral Account in the
Trust Fund which is attributable to the Compensation Deferral
which is to be distributed to the Participant is less than the
value of the portion of the Participant's Phantom Account which is
attributable to the Compensation Deferral which is to be
distributed to the Participant, following the date on which the
Participant is entitled to receive payment of a Compensation
Deferral, the Committee shall direct Mark IV or its successor to
distribute to the Participant in one lump sum payment in cash or
immediately available funds, an amount equal to the amount by
which the value of the portion of the Participant's Phantom
Account which is attributable to the Compensation Deferral which
is to be distributed to the Participant (including the earnings on
such Compensation Deferral) exceeds the value of the portion of
the Participant's Compensation Deferral Account in the Trust Fund
which is attributable to the Compensation Deferral (together with
any earnings thereon) which is to be distributed to the
Participant.
4.06 Termination of Employment and Distribution of Vested
Benefits. Upon a Participant's voluntary or involuntary
termination of employment with the Employer and any Affiliate with
a vested interest in his Account other than by reason of
retirement, death or disability, the Dollar Value, as determined
pursuant to Section 3.10 hereof, of the vested portion of such
Participant's Account, if any, shall be distributed to, or in the
case of the Participant's death, on behalf of, the Participant
within sixty (60) days following the date the Participant's
employment with the Employer is terminated. As soon as
practicable after such former Participant is entitled to
distribution as provided in the preceding sentence, the Committee
shall direct Mark IV to distribute the Dollar Value of the vested
portion of the Participant's Account as determined pursuant to
Section 3.10 hereof together with any earnings thereon to such
former Participant or his Beneficiary in one lump sum payment in
cash or immediately available funds. If a Trust Fund has been
established pursuant to Section 5.01 hereof, following the date a
former Participant is entitled to a distribution as provided in
this Section 4.06, the Committee shall direct the Trustee to
<PAGE>35
distribute to or on behalf of the Participant in one lump sum
payment in cash or immediately available funds, an amount equal to
the value of the vested portion of the Participant's Account
within the Trust Fund. In addition, if the value of the vested
portion of the Participant's Account in the Trust Fund is less
than the value of the vested portion of the Participant's Phantom
Account, the Committee shall direct Mark IV or its successor to
distribute to the Participant, in one lump sum payment no later
than sixty (60) days following the date the Participant's
employment with Mark IV or its successor is terminated, in cash or
immediately available funds, an amount equal to the amount by
which the value of the vested portion of the Participant's Phantom
Account exceeds the vested portion of the Participant's Account in
the Trust Fund. Payments required to be made from the Trust Fund
to or on behalf of a former Participant as provided in this
paragraph shall be made no later than sixty (60) days following
the date the Participant's employment with the Employer is
terminated. During the period between the date a Participant's
employment with the Employer is terminated and the date the
Participant's Account is to be distributed, the Participant's
Account shall be credited with interest as provided in Section
3.10 or, if a Trust Fund has been established pursuant to Section
5.01, the Participant's Account shall be credited or charged with
its proportionate share of the earnings or losses of the Trust
Fund.
At the time a former Participant is entitled to
distribution, according to its records, the Committee shall send,
by registered or certified mail directed to his address last known
to the Committee, a notice informing him as to his rights with
respect to any amounts held for him and requesting confirmation of
his address and age. Each Participant and former Participant has
the obligation to keep the Committee informed of his address. In
the event the Committee is unable to locate such former
Participant within four (4) years, the amount held for his benefit
shall be forfeited; provided, however, if a claim is made by the
Participant or his Beneficiary for the forfeited amount, such
amount shall be reinstated into his Account.
4.07 Forfeitures. If a Participant terminates his employment
with the Employer before he has acquired a 100% vested interest in
any portion of any of his Account attributable to Annual Deferred
Compensation Commitments together with interest or earnings
thereon and any portion of his Account attributable to Matching
Contributions together with interest and earnings thereon, the
portion of such Participant's Account which is not vested, shall
be forfeited as of the end of the first Plan Year in which the
Participant incurs a Break in Service and, as of the end of the
first Plan Year in which the Participant incurs a Break in
Service, an amount equal to the greater of the Dollar Value or the
Share Value of the portion of such Participant's Account which is
not vested shall be reallocated among the Accounts of the
remaining Participants in accordance with Section 3.11 hereof.
For purposes of determining the amount to be reallocated among the
<PAGE>36
Accounts of the remaining Participants, if any portion of an
Account which is to be forfeited pursuant to this Section 4.07 was
allocated to the purchase of Phantom Stock and the Participant's
employment with the Employer is terminated at any time prior to
January 1, 1999, the price per share of such Phantom Stock which
shall be used for purposes of determining the Share Value of such
Participant's Account and for purposes of reallocating the portion
of the Participant's Account among the remaining Participants
shall equal the average of the closing prices per share of common
stock of Mark IV during the month of February for the Plan Year in
which such Account is to be forfeited as determined from the
closing prices per share of common stock of Mark IV reported by
the New York Stock Exchange Composite Index for such month.
If any portion of the Account of a Participant which is to be
forfeited was allocated to the purchase of Phantom Stock and the
Participant's employment with the Employer is terminated at any
time after December 31, 1998, the price per share of such Phantom
Stock which shall be used for purposes of determining the Share
Value of such Participant's Account and for purposes of
reallocating the portion of the Participant's Account among the
remaining Participants shall equal the average of the closing
prices per share of common stock of Mark IV during the month of
December if the calendar year ending prior to the calendar year in
which the Participant's Account is to be forfeited, as determined
for the closing prices per share of common stock of Mark IV
reported by the New York Stock Exchange Composite Index for such
month.
If a Participant's employment with his Employer is
terminated before he acquires a one hundred percent (100%) vested
interest in the portion of his Account attributable to Annual
Deferred Compensation Commitments and the portion of his Account
attributable to Matching Contributions, and, at the time of such
Participant's termination of employment, a Trust Fund has been
established pursuant to Section 5.01 hereof, the value within the
Trust Fund portion of his Account attributable to Annual Deferred
Compensation Commitments and the portion of his Account
attributable to Matching Contributions, shall be maintained in a
suspense account within the Trust Fund until the end of the first
Plan Year in which the Participant incurs a Break in Service, at
which time, the amount of such suspense account shall be forfeited
and reallocated among the accounts of the remaining Participants
in accordance with Section 3.11. Such suspense account shall be
for accounting purposes only, shall not require a segregation of
assets within the Trust Fund to such Account and shall not share
in the gains, losses, income or expenses of the Trust Fund. The
amount of the assets necessary to maintain the suspense account
shall be deemed an expense chargeable to the Trust Fund. The
Committee shall maintain records so that each former Participant's
share of the suspense account is clearly identifiable.
If the terminated Participant returns to the employ of
the Employer or any Affiliate before he has incurred five (5)
<PAGE>37
consecutive one year Breaks in Service, the amount previously
forfeited by the Participant shall not be restored to such
Participant's Account.
4.08 Certain Additional Payments by Mark IV. (a) If and to
the extent that any payment made to a Participant pursuant to this
Plan is attributable to the portion of the Participant's Account
which is attributable to the value of each of the Annual
Allocation Accounts contained in the Participant's Account or to
the value of any Matching Contributions Account contained in the
Participant's Account (such portion of such payment or payments
being hereinafter referred to individually as a "Top Hat Payment"
and collectively as "Top Hat Payments") and the amount of any such
Top Hat Payment or Top Hat Payments would be subject to any income
taxes, excise taxes or other taxes imposed on such payment under
the terms of the Internal Revenue Code or otherwise imposed on any
such payment by any state or local government (the aggregate
amount of all such income taxes, excise taxes and other taxes,
together with any interest or penalties relating to such income
taxes, excise taxes or other taxes being hereinafter referred to
as "Taxes") then a Participant shall be entitled to receive an
additional payment (hereinafter a "Gross Up Payment") in an amount
such that after payment by a Participant of all Taxes (including
all Taxes payable on the Gross Up Payment), the Participant
retains an amount of the Gross Up Payment equal to the Taxes
imposed upon the Top Hat Payment.
(b) If a Change in Control occurs and, in connection
with any payment or distribution made pursuant to this Plan as a
result of the occurrence of such Change in Control, any amounts
payable to a Participant pursuant to this Plan are subject to
payment of an excise tax under Section 4999 of the Code
(hereinafter the "Excise Taxes"), the Participant shall, at the
time such Participant receives any payment or distribution
pursuant to the terms of this Plan, receive an additional payment
(in addition to the Gross Up Payment, if any, which is payable to
the Participant pursuant to Section 4.08(a) above) (such
additional payment being hereinafter referred to as a "Change in
Control Gross Up") in an amount such that, after the payment by
the Participant of all Taxes (including Excise Taxes) imposed on
all payments payable to the Participant under the terms of the
Plan (including the Gross Up Payment, the Change in Control Gross
Up, any Taxes or Excise Taxes payable on the Gross Up Payment and
any Taxes or Excise Taxes payable on the Change in Control Gross
Up), the Participant will retain an amount equal to the Taxes
imposed on the Top Hat Payment and the Excise Taxes payable on all
amounts payable to the Participant pursuant to the Plan.
(c) Subject to the provisions of Section 4.08(d)
hereof, all determinations required to be made under this Section
4.08, including whether a Gross-Up Payment or a Change in Control
Gross Up is required, the amount of such Gross-Up Payment and the
amount of any such Change in Control Gross Up, shall be made by
PricewaterhouseCoopers or any other nationally recognized firm of
<PAGE>38
certified public accountants (the "Accounting Firm") which shall
provide detailed supporting calculations both to Mark IV or its
successor and a Participant within 15 business days of termination
of a Participant's employment with Mark IV or its successor, if
applicable, or such earlier time as is requested by the
Participant or Mark IV. When calculating the amount of the Gross-
Up Payment and the Change in Control Gross Up, a Participant shall
be deemed to pay:
(i) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar year in
which the Gross-Up Payment or the Change in Control Gross Up (as
the case may be) is to be made, and
(ii) any applicable state and local income taxes at
the highest applicable marginal rate of taxation for the calendar
year in which the Gross-Up Payment or the Change in Control Gross
Up (as the case may be) is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year.
If a Change in Control as described in Section 5.03
hereof has occurred and the Accounting Firm has performed services
for the person, entity or group who caused the Change of Control,
or any affiliate thereof, a Participant may select an alternative
accounting firm from any nationally recognized firm of certified
public accountants. If the Accounting Firm determines that no
excise taxes are payable by a Participant, it shall furnish a
Participant with an opinion that he has substantial authority not
to report any excise tax on his federal income tax return. Any
determination by the Accounting Firm shall be binding upon Mark IV
and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that a Change in Control Gross Up which will not have been made by
Mark IV should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that
Mark IV or its successor exhausts it remedies pursuant to Section
4.08(d) hereof, and a Participant thereafter is required to make a
payment of any excise tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Mark IV or its successor to
or for the benefit of a Participant.
(d) The Participant shall notify Mark IV or its
successor in writing of any claim by the Internal Revenue Service
that, if successful, would require Mark IV or its successor to
increase the amount of the Change in Control Gross Up. Such
notification shall be given as soon as practicable but no later
than ten business days after a Participant knows of such claim and
shall apprise Mark IV or its successor of the nature of such claim
and the date on which such claim is requested to be paid. A
<PAGE>39
Participant shall not pay such claim prior to the expiration of
the thirty-day period following the date on which it gives such
notice to Mark IV or its successor (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If Mark IV or its successor notifies a Participant in
writing prior to the expiration of such period that it desires to
contest such claim, a Participant shall:
(i) give Mark IV or its successor any information
reasonably requested by Mark IV or its successor relating to such
claim;
(ii) take such action in connection with contesting
such claim as Mark IV or its successor shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by Mark IV or its successor;
(iii) cooperate with Mark IV or its successor in
good faith in order to effectively contest such claim; and
(iv) permit Mark IV or its successor to participate
in any proceedings relating to such claim;
provided, however, that Mark IV or its successor shall bear and
pay directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold a Participant harmless, on an after-tax basis,
for any excise tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 4.08(d), Mark IV or its
successor shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its
sole option, either direct a Participant to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and a Participant agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as Mark
IV or its successor shall determine; provided, however, that if
Mark IV or its successor directs the Participant to pay such claim
and sue for a refund, Mark IV or its successor shall advance the
amount of such payment to the Participant, on an interest free
basis and shall indemnify and hold the Participant harmless, on
an after-tax basis, from any excise tax or income tax, including
interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the
statue of limitations relating to payment of taxes for the taxable
<PAGE>40
year of a Participant with respect to which such contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, the control by Mark IV or its successor of the
contest shall be limited to issues with respect to which a Change
in Control Gross Up would be payable hereunder and a Participant
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(e) If, after the receipt by a Participant of an amount
advanced by Mark IV or its successor pursuant to Section 4.08(d)
hereof, a Participant becomes entitled to receive any refund with
respect to such claim, a Participant shall (subject to the
compliance by Mark IV or its successor with the requirements of
Section 4.08(d)) promptly pay to Mark IV or its successor the
amount of such refund (together with any interest paid or credited
thereon by the taxing authority after deducting any taxes
applicable thereto). If, after the receipt by a Participant of an
amount advanced by Mark IV or its successor pursuant to Section
4.08(d) hereof, a determination is made that a Participant shall
not be entitled to any refund with respect to such claim and Mark
IV or its successor does not notify a Participant in writing of
its intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of the Change in Control Gross Up required to
be paid under Section 4.08(a) or Section 4.08(b) hereof. The
forgiveness of such advance shall be considered part of the Change
in Control Gross Up and subject to gross-up for any taxes
(including interest or penalties) associated therewith.
4.09 Effects of Vesting. Each Participant, upon: (a)
acquiring a vested interest in his Account pursuant to the terms
of this Plan; and (b) otherwise satisfying the requirements for
payment and distribution of his Account pursuant to the terms of
this Plan, shall have a valid and enforceable claim against Mark
IV for payment of the amount described in the applicable
provisions of this Plan together with the amount of any applicable
Gross-Up Payment. Notwithstanding the foregoing, no Participant,
spouse or Beneficiary shall have any interest in any particular
assets of Mark IV by reason of the right to receive deferred
compensation under this Plan until such time that the
Participant's spouse or Beneficiary obtains a judgment against
Mark IV or its successor requiring payment of amounts described in
the Plan, and any such Participant, spouse or Beneficiary shall
have only the rights of a general unsecured creditor of Mark IV
with respect to any deferred compensation payable under this Plan.
4.10 No Duplication of Benefits. It is the intent of Mark IV
and each Employer that the deferred compensation to be provided
under this Plan shall, with respect to the employment of an
Eligible Employee by the Employer during the periods this Plan is
in effect, supersede any other deferred compensation to which an
<PAGE>41
Eligible Employee is entitled under the terms of any written
employment agreement between any Employer and such Eligible
Employee, covering periods of such Eligible Employee's employment
with the Employer during the periods with respect to which this
Plan is in effect except for deferred compensation which is or may
be provided to the Employee under the terms of any "tax qualified"
pension, profit sharing or 401(k) plan and any compensation which
a Participant may be deemed to earn by virtue of stock option and
restricted stock awards which may be granted to the Participant.
<PAGE>42
SECTION 5.
Trust Established Upon Change in Control
5.01 Establishment of Trust. Upon the occurrence of a Change
in Control (as hereinafter defined), Mark IV or its successor
shall establish a Trust Fund for the purpose of holding and
investing assets of Mark IV to be used for payment of the deferred
compensation to be provided to Participants under this Plan. The
terms and conditions of the agreement containing the terms of the
Trust Fund shall be consistent with the terms and conditions
required by rulings and regulations of the Internal Revenue
Service for a trust to be classified as a "Rabbi Trust" within the
scope of Internal Revenue Service Private Letter Ruling No.
8113017 and Internal Revenue Service Private Letter Ruling No.
8907034 such that the amounts payable under this Plan will not be
immediately taxable to the Participants to whom such amounts are
payable under the terms of this Plan by virtue of the
establishment of such Trust Fund and contribution of assets
thereto or by virtue of the acquisition by any such Participants
of a vested interest in the deferred compensation payable
hereunder.
5.02 Contributions to Trust. Promptly following the
occurrence of a Change in Control (as hereinafter defined), but in
any event not later than sixty (60) days following the occurrence
of the Change in Control, Mark IV or its successor shall determine
for each Participant, the Dollar Value and the Share Value of the
Participant's Account as of the date the Change in Control occurs.
Thereafter, no later than ten (10) days following the date on
which the Dollar Value and the Share Value of a Participant's
Account are determined, Mark IV or its successor shall pay to the
Trustee, to be held pursuant to the Trust Fund, cash or
immediately available funds in an amount which, for each
Participant, is equal to the greater of the Dollar Value and the
Share Value of the Participant's Account determined as of the date
the Change in Control occurs. In addition, following the
occurrence of a Change in Control, Mark IV or its successor shall
make the contributions to the Trust Fund required by Section 3.15
hereof.
5.03 Change in Control. For purposes of this Plan, a Change
in Control shall occur if: (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act")) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act) of more than
twenty percent (20%) of the then outstanding voting stock of Mark
IV, otherwise than through a transaction arranged by, or
consummated with the prior approval of its Board of Directors; or
(b) during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors (and any new director whose election to the Board of
Directors or whose nomination for election by Mark IV's
shareholders was approved by a vote of at least two thirds (2/3)
of the directors then still in office who either were directors at
<PAGE>43
the beginning of such period or whose election or nomination for
election was previously so approved) (hereinafter referred to as
the "Continuing Directors") cease for any reason to constitute a
majority thereof; or (c) the shareholders of Mark IV approve a
merger or consolidation of Mark IV with any other corporation,
other than a merger or consolidation which would result in the
voting securities of Mark IV immediately prior thereto continuing
to represent (either by remaining outstanding or being converted
into voting securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the voting
securities of Mark IV or such surviving entity outstanding
immediately after such merger or consolidation (provided, however,
that if prior to the merger or consolidation, the Board of
Directors adopts a resolution that is approved by a majority of
the Continuing Directors providing that such merger or
consolidation shall not constitute a "change in control" for
purposes of the Plan, then such a merger or consolidation shall
not constitute a "change in control"), or (d) the shareholders of
Mark IV approve an agreement for the sale or disposition by Mark
IV or all or substantially all the assets of Mark IV.
Notwithstanding the provisions of Sections 7.01 and 7.02 hereof,
the foregoing provisions of Sections 5.01, 5.02 and 5.03 hereof
may not be amended within three (3) years following a "change in
control" without the written consent of a majority in both number
and interest of the Participants who are actively employed by the
Employer, both immediately prior to the "change in control" and at
the date of such amendment.
5.04 Investment Policy. In determining its investments
hereunder, the Trustee or any duly appointed Investment Manager
shall consider the short and long range needs of the Plan
communicated to them by the Committee. Benefits may be provided
through any combination of investment media designated to provide
the requisite liquidity, growth and security appropriate to this
Plan.
5.05 Trustee Responsibilities. Following the establishment
of a Trust pursuant to Section 5.01 hereof, the Trustee appointed
to administer the Trust Fund shall be deemed a Fiduciary and shall
discharge his duties for the exclusive benefit of Participants in
the Plan.
<PAGE>44
SECTION 6.
Administration
6.01 The Committee. The Compensation Committee of the Board
of Directors of Mark IV shall be the administrative committee
which administers the Plan as the plan administrator. The
Committee shall be the named fiduciary of the Plan with respect to
Plan administration and, if a Trust Fund is established pursuant
to Section 5.01 hereof, the Committee shall be a named fiduciary
with respect to the appointment of an Investment Manager to manage
any assets of the Plan. Any member of the Committee may resign by
delivering his written resignation to the Board of Directors.
Vacancies arising by resignation, death, removal or otherwise
shall be filled by the Board of Directors of Mark IV. If at any
time no members are currently serving as the Committee, or if no
Committee is appointed, the Board of Directors of Mark IV shall be
deemed to be the Committee.
6.02 General Duties and Responsibilities. The Committee
shall administer the Plan in accordance with its terms and shall
have all powers necessary to carry out the provisions of the Plan.
Any interpretation, construction or determination made in good
faith shall be final and conclusive. The Committee may correct
any defect, supply any omission, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or
advisable to carry out the purpose of this Plan. The Committee as
named fiduciary may employ attorneys, accountants and such other
advisors to advise it with respect to its duties and obligations
as it deems appropriate.
6.03 Funding Policy. In the event a Trust Fund is
established pursuant to Section 5.01 hereof, the Committee shall
establish a funding policy and method consistent with the
requirements of law and designed to protect the interests of Plan
Participants. The Committee shall thereafter review, and if
necessary, change such funding policy and method.
6.04 Allocation and Delegation of Responsibilities. As the
named fiduciary, the Committee may engage agents to assist it in
carrying out its functions hereunder. The Committee members are
expressly authorized to allocate among themselves and/or delegate
to other named persons or parties, fiduciary responsibilities,
other than Trustee responsibilities. In the event a Trust Fund is
established pursuant to Section 5.01 hereof, the Committee may
appoint an Investment Manager and delegate to him the authority to
manage, acquire, invest or dispose of all or any part of the Trust
Fund assets. With regard to the assets entrusted to his care, the
Investment Manager shall provide written instructions and
directions to the Trustee, who shall in turn, be entitled to rely
thereon. Appointments and delegations shall be evidenced by a
signed written document, which must be retained with the other
Plan documents.
<PAGE>45
6.05 Bonding. The Committee shall be responsible for
procuring bonding for any persons dealing with the Plan or its
assets as may be required by law or by this Plan.
6.06 Records, Reporting and Disclosure. The Committee shall
maintain all the records necessary for the administration of the
Plan. The Committee shall also be responsible for preparing and
filing such annual reports and tax forms as may be required by
law. The Committee shall furnish and/or make available for
inspection by each Participant covered under the Plan and to each
Beneficiary who is entitled to receive benefits under the Plan,
such information and reports as may be required by law.
6.07 Expenses and Compensation. The expenses necessary to
administer the Plan shall be borne by Mark IV and, if necessary,
shall be reimbursed to the Plan. In the event a Trust Fund is
established pursuant to Section 5.01 hereof, upon the failure of
Mark IV to pay said expenses, the Trustee shall pay said expenses
out of the Plan assets. Expenses include, but are not limited to,
those involved in retaining necessary professional assistance from
an attorney, an accountant, an actuary, or an investment advisor.
The Employer shall furnish the Committee with such clerical and
other assistance as is necessary in the performance of its duties.
The Committee, with the approval of Mark IV, may receive
reasonable compensation for services rendered in administering
this Plan, provided the member performing the services is not a
full-time employee of any Employer whose employees are
participants in this Plan.
6.08 Information from Mark IV. To enable the Committee to
perform its functions, Mark IV shall supply full and timely
information to the Committee on all matters relating to the
Compensation of all Participants, their employment, their
retirement, death, disability or termination of employment, and
such other pertinent facts as the Committee may require. The
Committee shall advise the Trustee of such of the foregoing facts
as may be pertinent to the Trustee's duties under the Plan. The
Committee is entitled to rely on such information as is supplied
by Mark IV and shall have no duty or responsibility to verify such
information.
6.09 Multiple Signatures. In the event that more than one
person has been duly nominated to serve on the Committee, one
signature may be relied upon by any interested party as conclusive
evidence that the Committee has duly authorized the action therein
set forth and as representing the will of and binding upon the
whole Committee. No person receiving such documents or written
instructions and acting in good faith and in reliance thereon
shall be obliged to ascertain the validity of such action under
the terms of this Plan and Trust. The Committee shall act by a
majority of its members at the time in office and such action may
be taken either by a vote at a meeting or in writing without a
meeting.
<PAGE>46
6.10 General Fiduciary Liability. Mark IV, its Board of
Directors, the Committee, the Trustee and any Fiduciary with
respect to this Plan and, if applicable, the Trust Fund created
pursuant hereto shall not be liable for any actions taken or
omitted by any of them except for such acts involving gross
negligence or willful misconduct of the party to be charged and
except as required by ERISA. Nothing contained in this Section
6.10 shall be deemed to release, discharge or otherwise limit the
liability of Mark IV, or, if a Trust Fund is established pursuant
to Section 5.01 hereof, the liability of the Trust Fund and any
successor in interest to Mark IV for payment to Participants of
the amounts described in this Plan.
6.11 Liability Insurance. The Committee may purchase, as an
authorized expense of the Plan, liability insurance for the Plan
and/or for its Fiduciaries to cover liability or losses occurring
by reason of the act or omission of a Fiduciary, providing such
insurance contract permits recourse by an Insurer against the
Fiduciary in the case of breach of fiduciary obligation by such
Fiduciary. Any Fiduciary may purchase on behalf of himself,
insurance to protect himself in the event of a breach of fiduciary
duty and Mark IV may also purchase insurance to cover the
potential liability of one or more persons who serve in a
fiduciary capacity with regard to this Plan.
6.12 Benefit Claims Procedures. The Committee shall
establish a benefit claims procedure. Such procedure shall
provide for the filing of claims for benefits, adequate notice in
writing to any Participant or Beneficiary whose claim for benefits
has been denied, setting forth the specific reasons for such
denial and written in a manner calculated to be understood by the
Participant, and afford a reasonable opportunity to any
Participant whose claim for benefits has been denied for a full
and fair review by the Committee of the decision denying the
claim.
<PAGE>47
SECTION 7.
Amendment, Termination and Merger
7.01 Amendment. Subject to the limitation on the right to
amend this Plan contained in Section 5.03 hereof, the Board of
Directors of Mark IV shall have the right at any time and from
time to time without the consent of any Participant or Beneficiary
to amend, in whole or in part, any or all of the provisions of
this Plan. Notwithstanding the foregoing, no amendment to the
Plan shall be effective to the extent that it has the effect of
decreasing the value of a Participant's Account or depriving any
Participant or the Beneficiary of any Participant of any amount
payable (whether immediately or in the future) to such Participant
or Beneficiary under the terms of this Plan as in effect on the
date on which such amendment is executed.
7.02 Termination. Subject to the limitation on the right to
amend this Plan contained in Section 5.03 hereof, Mark IV, by
action of its Board of Directors shall have the right at any time
to discontinue its contributions hereunder and to terminate this
Plan. Upon complete termination of the Plan or upon the
occurrence of any event which constitutes a partial termination
pursuant to IRC Section 411(d)(3), whether by action of the Board
of Directors or otherwise, all Participants shall become fully and
nonforfeitably vested in the value of their respective Accounts;
provided, however, in the case of a partial termination, full
vesting shall only be applicable to that part of the Plan and the
Participants covered thereunder that is terminated.
7.03 Continuation of Plan by Successor. Mark IV will require
any person, firm, corporation or other entity that becomes a
successor to Mark IV, (whether direct or indirect, by purchase of
stock or assets, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Mark IV to
expressly assume and agree to perform the provisions of this Plan
as in effect at the time any such person, firm, corporation or
other entity becomes a successor to Mark IV, in the same manner
and to the same extent that Mark IV would be required to perform
it if no such succession had taken place. Unless this Plan be
sooner terminated, a successor to the business of Mark IV by
whatever form or manner resulting, may continue this Plan after
such person, firm, corporation or entity becomes a successor to
Mark IV by executing an appropriate supplemental agreement. In
the event any successor to the business of Mark IV shall not elect
to continue this Plan within ninety days after such person, firm,
corporation or other entity becomes a successor to Mark IV
(whether direct or indirect, by purchase of stock or assets,
merger, consolidation or otherwise), this Plan shall be deemed to
be terminated and the obligation to pay to each Participant the
amounts described herein at the times provided for herein shall
become fixed and binding obligations of such successor.
<PAGE>48
SECTION 8.
Miscellaneous
8.01 No Rights Created by Plan and Trust - Terms of
Employment Not Affected. Neither the establishment of the Plan or
Trust nor any modification hereof, nor the creation of any fund or
account, nor the payment of any benefits, shall be construed as
giving to any Participant, Beneficiary or other person any legal
or equitable right against the Employer or any officer or Employee
thereof, or the Trustee, or the Committee, except as herein
provided. Under no circumstances shall participation in this Plan
by an Employee constitute a contract of continuing employment or
in any manner obligate the Employer to continue the services of an
Employee.
8.02 Participants Rights Unsecured. Unless the establishment
of a Trust Fund is required pursuant to Section 5.01 hereof, the
Plan shall at all times be entirely unfunded and no provision
shall at any time be made with respect to segregating any assets
of Mark IV for payment of any distributions hereunder. The rights
of a Participant or his Beneficiary to receive a distribution
hereunder shall be an unsecured claim against the general assets
of Mark IV and neither the Participant nor his Beneficiary shall
have any rights in or against any specific assets of Mark IV
including, but not limited to, any assets contained in any Trust
Fund established pursuant to Section 5.01 hereof.
8.03 No Guaranty of Benefits. Nothing contained in this Plan
shall be deemed to constitute a guaranty by Mark IV or any other
entity or person that the assets of Mark IV will be sufficient to
pay the benefits hereunder.
8.04 Execution of Receipts and Releases. Any payment to any
Participant, or to his legal representatives or Beneficiary, in
accordance with the provisions of this Plan, shall to the extent
thereof be in full satisfaction of all claims hereunder against
the Plan, and the Committee may require such Participant, legal
representative, or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release therefor in such form as
it shall determine.
8.05 Benefits Non-Assignable. No benefit which shall be
payable to any person under this Plan, (including a Participant or
his Beneficiary), whether payable out of the general assets of
Mark IV or payable out of the Trust Fund, shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be void and no such benefit shall in any manner be
liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any such person, nor shall it be subject
to attachment or legal process for or against such person, and the
same shall not be recognized by the Committee or the Trustee,
except to such extent as may be required by law.
<PAGE>49
8.06 Construed Under Applicable Federal Law and New York Law.
This Plan shall be construed according to applicable Federal
Law and the laws of the State of New York and all provisions
hereof shall be administered according to such laws.
8.07 Masculine Gender to Include Feminine; Singular to
Include Plural. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also
used in the feminine gender in all cases where they would so
apply, and wherever any words are used herein in the singular
form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
8.08 Heading No Part of Plan. Heading of sections and
subsections of this instrument are inserted for convenience of
reference only. They constitute no part of this Plan are not to
be construed in the construction hereof.
8.09 Counterparts. This instrument may be executed in
several counterparts, each of which shall be deemed an original,
and said counterparts shall constitute but one and the same
instrument and may be sufficiently evidenced by any one
counterpart.
IN WITNESS WHEREOF, the Mark IV Industries, Inc. has
caused this Plan to be executed as of the ____ day of
_______________, 1999.
MARK IV INDUSTRIES, INC.
By________________________
EXHIBIT 21
SUBSIDIARIES
The following is a list of the subsidiaries of Mark IV Industries, Inc.
("the Company") at May 27, 1999. Except as otherwise indicated, the names of
indirectly-owned subsidiaries are indented under the names of their immediate
parent.
Dayco Products, Inc. (Delaware)
Controladora Dayco SA de C.V. (Mexico)
Dayco Products S.A. de C.V. (Mexico)
Mark IV Industries Canada Inc. (Canada)
Mark IV Air Intake Systems Partnership (Canada) (100% owned in the
aggregate by Mark IV Industries Canada Inc. and Mark IV Systemes
Moteurs S.A.)
Mark IV Industries Limited (Canada)
Mark IV Luxembourg Sarl (Luxembourg)
Dayco Europe SrL (Italy)
Nuova Eletta S.p.A. (Italy)
CTM Cinotto Tecnomeccanica S.p.A. (Italy) (99% ownership)
Dayco SACIC S.A. (Belgium)
Dayco PTI S.A. (Spain)
Dayco PTI GmbH (Germany)
Lunkoflex Iberica S.A. (Spain) (53% ownership)
Dayco F.C. S.R.L. (Italy)
Lombardini FIM S.p.A. (Italy)
Lombardini UK Limited (UK)
Lombardini Modoren GmbH (Germany)
Anonima Construzione Motori Endotermici-A.C.M.E. S.P.A.
Motoreps C.A. Barquisimento (Venezuela) (15.33% ownership)
ACME Motori S.A.- Ltd (South Africa) (15.07% ownership)
Lombardini Marine S.p.A. (Italy)
Lombardini Espana S.A. (Spain)
Dayco Ireland Holdings Limited (Ireland)
Mark IV Automotive AB (Sweden)
Dayco Sweden AB (Sweden)
Mark IV (Gibralter) Limited (Gibralter) (100% owned in the aggregate, by
Dayco Products, Inc. and Facet Holding Co., Inc.)
Mark IV Automotive Pty Ltd. (Australia)
Dayco Products Singapore Pte. Ltd (Singapore)
Dayco TSA Singapore Pte Ltd (Singapore)
Imperial Eastman LLC (Delaware)
Dayco Distributing, Inc. (Kentucky)
Woods Liquidating Corporation (Delaware)
Luminator Holding L.P. (Delaware) (100% owned, in the aggregate, by
the Company and Woods Liquidating Corporation)
Luminator Service, Inc. (New York)
Mark IV Holdings, S.A. (Belgium)
Mark IV PLC (United Kingdom)
Mark IV Ventures Ltd (United Kingdom)
Pietranera S.r.L. (Italy) (100% owned, in the aggregate, by the
Company and Armtek International Holding Company, Inc.)
F-P Technologies Holding Corp. (Delaware) (100% owned, in the aggregate,
by the Company and Mark IV Industries Ltd.)
GS Costa Mesa, Inc. (Delaware)
F-P Displays, Inc. (Massachusetts)
Mark IV Holding AG (Switzerland)
F-P Displays AG (Switzerland)
Mark IV France S.A.S. (France)
Dayco Europe S.A.R.L. (France)
Mark IV Systems Moteurs SA (France)
Gulton S.A. (France)
SLE S.A.R.L. (France)
Lombardini France S.A. (France)
Genelec S.A. (France)
K/G of Amherst, Inc. (Delaware)
Armtek International Holding Company, Inc. (Delaware)
Dayco Pacific Pty. Limited (Australia) (100% owned, in the aggregate, by
Armtek Int'l Holding Company,Inc. and Dayco Products, Inc.)
Rubicon Industrial (Australia) Pty. Ltd (Australia)
Adelaide Flexibles PTY Limited (Australia)
EN-U Technology PTY Limited (Australia)
Inter-Arc Industrial Products PTY Limited (Australia)
Novahose Industrial PTY Limited (Australia)
Seal-Tite Couplings PTY Limited (Australia)
Rubicon Industrial PTY Ltd. (Australia)
WA Industrial Rubber PTY Limited (Australia)
Imperial Eastman Pty Limited (Australia)
Mark IV Industries GmbH (Germany)
Mark IV Vertriebs GmbH (Germany)
Dayco Europe GmbH (Germany) (100% owned, in the aggregate, by Mark IV
Industries GmbH and Mark IV Industries Canada, Inc.)
Mark IV Audio Deutschland GmbH (Germany)
Eagle Funding Corporation (Delaware)
Automatic Signal/Eagle Signal Corp.(Delaware)
Mark IV Holdings Inc. (Delaware)
Mark IV Industries Overseas, Ltd. (Barbados)
Aerospace Sub, Inc. (Delaware)
Mark IV Acquisition Corp. (Delaware)
Mark IV Industries Ireland (Ireland) (100% owned, in the aggregate, by the
Company and Mark IV Holdings Inc.)
Mark IV IVHS, Inc. (Delaware)
NRD, LLC (Delaware)
NRD Inc. (New York)
Lum-Eag Holdings (Ireland)
Mark IV Automotive do Brasil Ltda. (Brasil) (100% owned, in the aggregate, by
the Company and Dayco Europe SrL)
Daytec S.A. (Brazil)
Techold Ltda (Brazil)
Tecalon Brasileira de Auto Pecas S.A. (Brazil) (100% owned in the
aggregate by Techold Ltda. and Mark IV Auto do Brazil Ltda.)
Dayco do Brasil Industria E Comercio Ltda. (Brazil) (99.9% ownership)
Dayco Argentina (Argentina) (100% owned, in the aggregate, by the Company
and Dayco Europe SrL)
Facet Holding Co., Inc. (Delaware)
Facet Industrial B.V. (Netherlands)
Purolator Filter GmbH (Germany) (100% owned, in the aggregate, by
Facet Industrial B.V. and Facet Holding Co., Inc.)
Facet Italiana S.p.A (Italy)
Facet FCE S.A.R.L. (France) (100% owned, in the aggregate, by Facet
Italiana SpA and Facet Industrial U.K. Limited)
Facet Iberica, S.A. (Spain) (100% owned, in the aggregate,
by Facet Holding Co., Inc.; Facet Italiana SpA, and Facet
Industrial U.K.)
Motor Components, LLC (Delaware)
Facet Industrial U.K. Limited (United Kingdom)
Dayco Europe Ltd (United Kingdom)
Dayco PTI Ltd (United Kingdom)
Caplugs Ltd (United Kingdom) (50% owned by Dayco PTI Ltd.)
Purolator Products Air Filtration Company (Delaware)
FACET USA, Inc. (Delaware)
George W. Dahl Company, Inc. (Delaware)
Facet Enterprises, Inc. (Delaware)
Facet Export Corporation (Delaware)
Facet Fuel Systems, Inc. (Delaware)
Mark IV Pay Agent, Inc. (Delaware)
Mark IV Acquisition Corp. (Delaware
Facet International S.A. (Switzerland) (99.7% ownership)
Lombardini U.S.A., Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
on Form S-4 (File No. 333-36013) and Form S-8 (File Nos. 33-55367, 33-56515
and 33-38425 and 33-38426) of Mark IV Industries, Inc. and Subsidiaries of
our report dated March 22, 1999, on our audits of the consolidated financial
statements and financial statement schedule of Mark IV Industries, Inc. and
Subsidiaries as of February 28, 1999 and for each of the three fiscal years
in the period ended February 28, 1999, which reports are included in this
Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Rochester, New York
May 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Mark IV Industries, Inc. and is qualified in its
entirety by reference to such financial statments.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<CASH> 125,700
<SECURITIES> 0
<RECEIVABLES> 415,600
<ALLOWANCES> 9,600
<INVENTORY> 297,600
<CURRENT-ASSETS> 962,600
<PP&E> 798,800
<DEPRECIATION> 236,500
<TOTAL-ASSETS> 2,079,700
<CURRENT-LIABILITIES> 472,000
<BONDS> 797,500
0
0
<COMMON> 500
<OTHER-SE> 596,200
<TOTAL-LIABILITY-AND-EQUITY> 2,079,700
<SALES> 1,948,600
<TOTAL-REVENUES> 1,948,600
<CGS> 1,376,700
<TOTAL-COSTS> 1,816,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,900
<INCOME-PRETAX> 78,500
<INCOME-TAX> 26,100
<INCOME-CONTINUING> 52,400
<DISCONTINUED> 2,200
<EXTRAORDINARY> 2,600
<CHANGES> 0
<NET-INCOME> 47,600
<EPS-BASIC> .84
<EPS-DILUTED> .85
</TABLE>
