AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ARVIN INDUSTRIES, INC. ARVIN CAPITAL I
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS SPECIFIED IN
SPECIFIED IN ITS CHARTER) ITS CHARTER)
INDIANA DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
35-0550190 TO BE APPLIED FOR
(IRS EMPLOYER IDENTIFICATION NO.) (IRS EMPLOYER IDENTIFICATION NO.)
ONE NOBLITT PLAZA
BOX 3000
COLUMBUS, INDIANA 47202-3000
(812) 379-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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RONALD R. SNYDER
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ARVIN INDUSTRIES, INC.
ONE NOBLITT PLAZA
BOX 3000
COLUMBUS, INDIANA 47202-3000
(812) 379-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO: PAUL W. THEISS
FREDERICK L. HARTMANN MAYER, BROWN & PLATT
SCHIFF HARDIN & WAITE 190 SOUTH LASALLE STREET
7200 SEARS TOWER CHICAGO, ILLINOIS 60603
CHICAGO, ILLINOIS 60606 ---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practical after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) (2) (3) FEE
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Preferred Securities of Arvin
Capital I....................... $100,000,000 $30,304
Junior Subordinated Deferrable
Interest Debentures of Arvin
Industries,
Inc. (4)........................
Guarantees of Preferred
Securities of Arvin Capital I by
Arvin Industries, Inc. (5)......
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(1) Such indeterminate number of Preferred Securities of Arvin Capital I, and
such indeterminate principal amount of Junior Subordinated Deferrable
Interest Debentures of Arvin Industries, Inc., as may be issued at
indeterminate prices.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The aggregate public offering price of the Preferred
Securities of Arvin Capital I and the Junior Subordinated Deferrable
Interest Debentures of Arvin Industries, Inc. registered hereby will not
exceed $100,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) The Junior Subordinated Deferrable Interest Debentures will be purchased
by Arvin Capital I with the proceeds of the sale of the Preferred
Securities and may later be distributed to the holders of Preferred
Securities upon a dissolution of Arvin Capital I. No separate
consideration will be received for the issuance of the Junior Subordinated
Deferrable Interest Debentures. Pursuant to Rule 457, no separate fee is
payable with respect to the Junior Subordinated Deferrable Interest
Debentures.
(5) Includes back-up undertakings, consisting of obligations of Arvin
Industries, Inc. to provide certain indemnities in respect of, and pay and
be responsible for certain expenses and debts of Arvin Capital I. No
separate consideration will be received for the Guarantees or any back-up
undertakings. Pursuant to Rule 457, no separate fee is payable with
respect to the Guarantees.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 23, 1996
PROSPECTUS
4,000,000 PREFERRED SECURITIES
ARVIN CAPITAL I
(LOGO)
% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ARVIN INDUSTRIES, INC.
-----------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of Arvin Capital I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"). Arvin Industries, Inc., an Indiana corporation
("Arvin" or the "Company"), will directly or indirectly own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of the Trust. The Trust exists for the sole purpose of issuing
the Preferred Securities and Common Securities and investing the
(continued on next page)
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SEE "RISK FACTORS" COMMENCING ON PAGE 9 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS
OF THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "New York Stock Exchange"). If so approved, trading
of the Preferred Securities on the New York Stock Exchange is expected to
commence within a 30-day period after the date of this Prospectus. See
"Underwriting."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) COMMISSION (2) TRUST (3)(4)
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Per Preferred Security........... $25.00 (3) $25.00
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Total............................ $100,000,000 (3) $100,000,000
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(1) Plus accrued distributions, if any, from , 1997.
(2) The Trust and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, Arvin has
agreed to pay to the Underwriters, as compensation (the "Underwriters'
Compensation") for their arranging the investment therein of such proceeds,
$ per Preferred Security (or $ in the aggregate); provided, that such
compensation for sales of 10,000 or more Preferred Securities to a single
purchaser will be $ per Preferred Security. Therefore, to the extent of
such sales, the actual amount of Underwriters' Compensation will be less
than the aggregate amount specified in the preceding sentence. See
"Underwriting."
(4) Expenses of the offering which are payable by Arvin are estimated to be
$ .
-----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company, on or about
, 1997.
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MERRILL LYNCH & CO. LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
-----------
The date of this Prospectus is , 1996.
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
(continued from previous page)
proceeds thereof in an equivalent amount of % Junior Subordinated Deferrable
Interest Debentures due 2037 (the "Subordinated Debentures") of Arvin. Upon an
event of default under the Declaration (as defined herein), the holders of the
Preferred Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions and payments
upon liquidation, redemption and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30, and December 31 of
each year, commencing , 1997 ("distributions"). The distribution
rate and the distribution and other payment dates for the Preferred Securities
will correspond to the interest rate and interest and other payment dates on
the Subordinated Debentures, which, along with interest and principal payments
received on the Subordinated Debentures, will be the only assets of the Trust.
As a result, if principal or interest is not paid on the Subordinated
Debentures, no amounts will be paid on the Preferred Securities. The payment
of distributions out of moneys held by the Trust and payments on liquidation
of the Trust or the redemption of Preferred Securities, as set forth below,
are guaranteed by the Company (the "Guarantee") if and to the extent the Trust
has funds available therefor. The Company's obligations under the Guarantee,
taken together with its back-up undertakings, consisting of obligations of the
Company (including the obligation to pay expenses of the Trust) as set forth
in the Declaration, the Indenture (as defined herein) and the Subordinated
Debentures issued to the Trust, provide a full and unconditional guarantee by
the Company of payments due on the Preferred Securities. See "Effect of
Obligations Under the Subordinated Debentures and the Guarantee" and
"Description of the Guarantee." If the Company does not make principal or
interest payments on the Subordinated Debentures as a result of the Company's
election to extend the interest payment period on the Subordinated Debentures
as described below, or otherwise, the Trust will not have sufficient funds to
make distributions on the Preferred Securities, in which event the Guarantee
will not apply to such distributions until the Company has made such principal
or interest payments. The obligations of the Company under the Subordinated
Debentures are unsecured and will be subordinate and junior in right of
payment, to the extent set forth herein, to all existing and future Senior
Indebtedness (as defined herein) of the Company. At September 29, 1996, the
aggregate amount of Senior Indebtedness was approximately $472 million. The
Company's obligations under the Subordinated Debentures will also be
effectively subordinated to all existing and future obligations of Arvin's
subsidiaries.
The Company has the right to defer payments of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures, from time to time, for up to 20 consecutive quarters (each, an
"Extension Period") provided that no Extension Period may extend beyond the
Maturity Date (as defined herein). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of % per annum
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths throughout the term of
the Subordinated Debentures. See "Risk Factors--Option to Extend Interest
Payment Period" and "--Tax Consequences of Extension of Interest Payment
Period," "Description of the Subordinated Debentures--Option to Extend
Interest Payment Period," and "United States Federal Income Taxation--Original
Issue Discount."
The Subordinated Debentures are redeemable prior to maturity at the option
of the Company (i) in whole or in part, from time to time, on or after
, 2002, or (ii) at any time in whole (but not in part) upon the
occurrence and continuation of a Tax Event (as defined herein). If the Company
redeems Subordinated Debentures, the Trust must redeem Trust Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so redeemed at $25 per Preferred Security plus accrued
and unpaid distributions thereon to the date fixed for redemption (the
"Redemption Price"). See "Description of the Preferred Securities--Mandatory
Redemption" and --"Tax Event Redemption." The outstanding Preferred Securities
will be redeemed upon maturity of the Subordinated Debentures. The
Subordinated Debentures mature on , 2037.
At any time, the Company will have the right to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities, on a pro rata basis, in liquidation of the
Trust. If the Company elects to dissolve the Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Trust Securities
in liquidation of the Trust, the Company will use its best efforts to have the
Subordinated Debentures listed on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed. See "Description of the
Preferred Securities--Distribution of the Subordinated Debentures."
In the event of the involuntary or voluntary liquidation, dissolution,
winding up or termination of the Trust, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security, solely out
of the assets of the Trust available for distribution to such holders, after
payment (or provision for payment) of all liabilities to creditors, a
liquidation amount of $25 plus accrued and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection
with such liquidation, dissolution, winding up or termination, the
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution upon Dissolution."
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by Arvin and the Trust with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Trust Securities, the Subordinated
Debentures and the Guarantee (the "Offered Securities"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Company, the Trust and the Offered Securities. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC or incorporated by
reference herein are not necessarily complete, and, in each instance,
reference is made to the copy of such document so filed for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference.
Arvin is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Reports, proxy statements and other information filed by Arvin with the SEC
may be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's Regional Offices located at Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and at the 13th Floor, Seven World
Trade Center, New York, New York 10048. Copies of such material may be
obtained from the public reference section of the SEC, 450 Fifth Street, N.W.
Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements
and other information concerning Arvin may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, on
which exchanges certain of the Company's securities are listed. Such
information may also be accessed electronically by means of the SEC's home
page on the World Wide Web located at http://www.sec.gov.
No separate financial statements of the Trust have been included or
incorporated by reference herein. Arvin does not believe that such financial
statements would be material to holders of the Preferred Securities because
(i) all of the voting securities of the Trust will be owned, directly or
indirectly, by Arvin, a reporting company under the Exchange Act, (ii) the
Trust has no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of the
Trust and investing the proceeds thereof in Subordinated Debentures issued by
Arvin, and (iii) the obligations of the Trust under the Preferred Securities
are, if and to the extent that the Trust has funds available to meet such
obligations, fully and unconditionally guaranteed by Arvin. See "Description
of the Subordinated Debentures" and "Description of the Guarantee."
The Trust is not currently subject to the informational reporting
requirements of the Exchange Act. The Trust will become subject to such
requirements upon the effectiveness of the Registration Statement, although it
intends to seek and expects to receive exemptions therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by Arvin with the SEC pursuant to
the Exchange Act are incorporated herein by reference:
1. Arvin's Annual Report on Form 10-K for the year ended December 31,
1995;
2. Arvin's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996 and September 29, 1996; and
3. Arvin's two Current Reports on Form 8-K, both dated May 10, 1996.
All documents subsequently filed by Arvin pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Preferred Securities offered
3
hereby, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Arvin will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated in this Prospectus by reference (other than exhibits to such
documents which are not specifically incorporated by reference into the
information that this Prospectus incorporates). Requests for such copies
should be directed to John W. Brown, Vice President--Public Relations, Arvin
Industries, Inc., P.O. Box 3000, Columbus, Indiana 47202-3000, telephone 812-
379-3000.
4
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements appearing elsewhere, or incorporated by reference, in
this Prospectus.
THE COMPANY
Arvin Industries, Inc. is a leading worldwide manufacturer of vehicle exhaust
systems and ride control products for both original equipment and replacement
customers. Since its founding in 1919, Arvin has grown through internal
development, acquisitions and a number of international joint ventures. At
September 29, 1996, the Company had total assets of approximately $1.4 billion
and shareholders' equity of approximately $415 million.
THE TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) a declaration of trust executed by the Company as sponsor (the
"Sponsor") of the Trust and the trustees of the Trust (the "Trustees") and (ii)
the filing of a certificate of trust with the Secretary of State of the State
of Delaware on December 18, 1996. The Trust exists for the exclusive purposes
of (i) issuing and selling the Preferred Securities and Common Securities, (ii)
using the gross proceeds from the sale of the Trust Securities to acquire the
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. All of the Common Securities will be directly
or indirectly owned by the Company. The Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Preferred Securities,
except that, if a Declaration Event of Default (as defined herein) has occurred
and is continuing, the rights of the holders of the Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the
Preferred Securities. The Company will acquire Common Securities in an
aggregate liquidation amount equal to at least 3% of the total capital of the
Trust.
The Trust's affairs will be conducted by the Trustees appointed by the
Company as the holder of all of the Common Securities. The Company, as the
holder of the Common Securities will be entitled to appoint, remove or replace
any of, or increase or reduce the number of, the Trustees. The duties and
obligations of the Trustees shall be governed by the Declaration (as defined
herein). The Trust will initially have three Trustees. Two of the initial
Trustees (the "Administrative Trustees") will be employees or officers of or
otherwise affiliated with the Company. The third initial Trustee (the
"Institutional Trustee") will be Wilmington Trust Company, which shall act as
institutional trustee and as indenture trustee for the purposes of compliance
with the provisions of Trust Indenture Act of 1939, as amended. The Company
will pay all fees and expenses related to the Trust and the offering of the
Trust Securities.
The principal corporate trust office of the Institutional Trustee, Wilmington
Trust Company, is at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Corporate Trust Administration. The address for the
Trust is c/o Arvin Industries, Inc., the Sponsor of the Trust, at the Company's
corporate headquarters located at One Noblitt Plaza, Box 3000, Columbus,
Indiana 47202-3000; telephone 812-379-3000.
5
THE OFFERING
Preferred Securities Offered. 4,000,000 % Trust Originated Preferred
Securities evidencing preferred undivided beneficial interests in the assets of
the Trust. Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions at an annual rate of % of the liquidation
amount of $25 per Preferred Security, accruing from the date of original
issuance and payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year commencing on , 1997. The distribution
rate and the distribution and other payment dates for the Preferred Securities
will correspond to the interest rate and interest and other payment dates on
the Subordinated Debentures, which, along with interest and principal payments
received on the Subordinated Debentures, will be the only assets of the Trust.
As a result, if principal or interest is not paid on the Subordinated
Debentures, no amounts will be paid on the Preferred Securities. See "Risk
Factors--Ranking of Subordinate Obligations under the Guarantee and
Subordinated Debentures" and "Description of the Preferred Securities."
Subordinated Debentures. The Trust will invest the proceeds from the issuance
of the Preferred Securities and Common Securities in an equivalent amount of %
Subordinated Debentures of the Company. The Subordinated Debentures will rank
subordinate and junior in right of payment to all Senior Indebtedness of Arvin.
The Company's obligations under the Subordinated Debentures will also be
effectively subordinated to all existing and future obligations of Arvin's
subsidiaries. There are no terms that limit Arvin's ability to incur additional
Senior Indebtedness. See "Description of the Subordinated Debentures--
Subordination."
Guarantee. Payment of distributions out of moneys held by the Trust, and
payments on liquidation of the Trust or the redemption of Preferred Securities,
are guaranteed by Arvin if and to the extent the Trust has funds available
therefor. If the Company does not make principal or interest payments on the
Subordinated Debentures, the Trust will not have sufficient funds to make
distributions on the Preferred Securities, in which event the guarantee shall
not apply to such distribution until the Trust has sufficient funds available
therefor. See "Description of the Guarantee" and "Effect of Obligations under
the Subordinated Debentures and the Guarantee." The obligations of Arvin under
the Guarantee are subordinate and junior in right of payment to all other
liabilities of Arvin and pari passu with the most senior preferred stock, if
any, issued from time to time by the Company. See "Risk Factors--Ranking of
Subordinate Obligations under the Guarantee and Subordinated Debentures" and
"Description of the Guarantee."
Right to Defer Interest. The Company has the right to defer payments of
interest on the Subordinated Debentures by extending the interest payment
period on the Subordinated Debentures, from time to time, for up to 20
consecutive quarters. If interest payments on the Subordinated Debentures are
so deferred, distributions on the Preferred Securities will also be deferred.
During any Extension Period, distributions will continue to accrue with
interest thereon (to the extent permitted by applicable law) as described
herein. There could be multiple Extension Periods of varying lengths during the
term of the Subordinated Debentures. During an Extension Period, holders of
Preferred Securities will be required to include deferred interest income
allocated to their Preferred Securities in their gross income (as original
issue discount ("OID")) even though the cash payments attributable thereto have
not been made. See "Description of the Subordinated Debentures--Option to
Extend Interest Payment Period" and "United States Federal Income Taxation--
Original Issue Discount."
Redemption. The Subordinated Debentures are redeemable by the Company (in
whole or, from time to time, in part) on or after , 2002, or at any
time, in whole but not in part, upon the occurrence of a Tax Event. If the
Subordinated Debentures are redeemed, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so redeemed. The Trust Securities will be
redeemed upon maturity of the Subordinated Debentures. See "Description of the
Preferred Securities--Mandatory Redemption" and "--Tax Event Redemption."
Right to Dissolve the Trust. At any time, the Company will have the right to
dissolve the Trust and, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, cause the Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the Trust.
If the Subordinated
6
Debentures are distributed to the holders of the Preferred Securities, the
Company will use its best efforts to have the Subordinated Debentures listed on
the New York Stock Exchange or on such other exchange as the Preferred
Securities are then listed. See "Description of the Preferred Securities--
Distribution of the Subordinated Debentures."
Use Of Proceeds. The proceeds from the sale of Preferred Securities by the
Trust will be invested in the Subordinated Debentures of the Company. The
Company expects to use a portion of the net proceeds from the sale of such
Subordinated Debentures to the Trust to repay approximately $ million of
short-term bank borrowings incurred in connection with the Company's December
27, 1996 redemption of its outstanding 7 1/2% Convertible Subordinated
Debentures due 2014 and for general corporate purposes. Such general corporate
purposes may include the Company's exercise of options (which are exercisable
beginning in early 1997) to purchase the remaining ownership interests in
several entities conducting business in the European automotive components
markets. If the Company exercises the options, the amount of payments required
will not be known for several months, but is currently expected to be
approximately $30 million. Until net proceeds are used for this purpose, they
may be applied to reduce the Company's outstanding short-term bank borrowings.
The Company's short-term bank borrowings at , 1996 bear interest at a
weighted average interest rate of percent and are due .
7
SUMMARY FINANCIAL INFORMATION
The following summary financial information should be read in conjunction
with the consolidated financial statements of the Company and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. See "Incorporation of Certain Documents by Reference." The
summary operating results, financial position and cash flow information for and
as of the end of each of the fiscal years in the five-year period ended
December 31, 1995, are derived from the audited consolidated financial
statements of the Company. Amounts for 1994 and prior periods have been
restated for discontinued operations. The summary operating results, financial
position and cash flow information for and as of the end of each of the nine-
month periods ended September 29, 1996 and October 1, 1995 have been derived
from the unaudited consolidated financial statements of the Company and in the
opinion of management include all adjustments which are necessary to present
fairly the operating results, financial position and cash flow of the Company
for the periods and at the dates presented. Except for the restructuring and
special charges and credits described in the Company's Quarterly Report on Form
10-Q for the quarter ended September 29, 1996 and in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, all such adjustments
are of a normal recurring nature. The summary financial information for the
nine-month period ended September 29, 1996 is not necessarily indicative of the
results to be expected for the full year ending December 29, 1996.
AT OR FOR THE
NINE-MONTH
PERIOD ENDED AT OR FOR THE FISCAL YEAR ENDED
------------------- --------------------------------------------------
SEPT. 29, OCT. 1, DEC. 31, JAN. 1, JAN. 2, JAN. 3, DEC. 29,
1996 1995 1995 1995 1994 1993 1991
--------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
(UNAUDITED)
OPERATING RESULTS (1)
Net sales.............. $1,652.0 $1,465.9 $1,966.4 $1,849.5 $1,640.8 $1,587.2 $1,373.4
Operating income (2)... 93.4 69.8 99.5 104.1 113.1 107.9 77.5
Net interest expense... 29.3 31.5 41.2 40.1 33.0 34.1 36.5
Earnings from
continuing operations. 28.3 10.5 17.9 24.6 38.4 36.4 17.9
FINANCIAL POSITION
Cash and equivalents... $ 25.7 $ 56.2 $ 15.2 $ 11.1 $ 35.1 $ 6.4 $ 5.5
Total assets........... 1,429.8 1,341.0 1,291.0 1,231.5 1,175.5 1,110.6 1,086.2
Total debt............. 416.0 460.8 402.3 441.4 440.1 409.1 369.9
Shareholders' equity... 414.8 395.3 395.1 396.3 420.6 398.4(3) 374.1
CASH FLOW
Depreciation and
amortization.......... $ 58.9 $ 56.9 $ 74.9 $ 78.2 $ 70.0 $ 68.9 $ 63.8
Capital expenditures
(net)................. 48.1 61.6 98.6 103.7 82.7 98.6 72.6
RATIOS
Operating income margin
(2)................... 5.7% 4.8% 5.1% 5.6% 6.9% 6.8% 5.6%
Operating income(2)/Net
interest expense...... 3.2 to 1 2.2 to 1 2.4 to 1 2.6 to 1 3.4 to 1 3.2 to 1 2.1 to 1
Total debt/Operating
income (2)............ 4.5 to 1 6.6 to 1 4.0 to 1 4.2 to 1 3.9 to 1 3.8 to 1 4.8 to 1
Total debt/Total
capitalization........ 48.1% 51.8% 48.5% 50.7% 49.3% 50.3% 49.1%
- --------
(1) From continuing operations.
(2) Reflects income from continuing operations prior to expenses unrelated to
segments.
(3) The Company adopted FAS 106 and FAS 112 in 1992 and recorded a $33.5
million charge net of tax, which is not reflected in operating income but
is reflected in shareholders' equity.
8
RISK FACTORS
Prospective purchasers of Preferred Securities should consider carefully all
of the information contained in this Prospectus including the information in
the documents incorporated by reference and, in particular, should evaluate
the specific factors set forth below for risks involved with an investment in
the Preferred Securities.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED
DEBENTURES
The Company's obligations under the Guarantee are unsecured and will be
subordinate and junior in right of payment to all other liabilities of Arvin
and pari passu with the most senior preferred stock, if any, issued from time
to time by Arvin. The obligations of the Company under the Subordinated
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness of Arvin and pari passu with obligations to or
rights of Arvin's general unsecured creditors other than holders of Senior
Indebtedness. As of September 29, 1996, Senior Indebtedness aggregated
approximately $472 million. The Company's obligations under the Subordinated
Debentures will also be effectively subordinated to all existing and furture
obligations of Arvin's subsidiaries. There are no terms in the Preferred
Securities, the Subordinated Debentures or the Guarantee that limit Arvin's
ability to incur additional indebtedness, including indebtedness that ranks
senior to the Subordinated Debentures and the Guarantee. See "Description of
the Guarantee--Status of the Guarantee" and "Description of the Subordinated
Debentures--Subordination."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default occurs and is continuing, then the holders
of Preferred Securities would rely on the enforcement by the Institutional
Trustee of its rights as a holder of the Subordinated Debentures against
Arvin. In addition, the holders of a majority in liquidation amount of the
Preferred Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as a holder of
the Subordinated Debentures. If the Institutional Trustee fails to enforce its
rights with respect to the Subordinated Debentures held by the Trust to the
fullest extent permitted by law, any record holder of Preferred Securities may
institute legal proceedings directly against the Company to enforce the
Institutional Trustee's rights under such Subordinated Debentures without
first instituting any legal proceedings against such Institutional Trustee or
any other person or entity. In addition, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Subordinated Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a record holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of payment to such holder of the principal of or interest on the
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities held by such holder (a "Direct
Action") on or after the respective due dates specified in the Subordinated
Debentures. In connection with such Direct Action, Arvin will be subrogated to
the rights of such record holder of Preferred Securities to the extent of any
payment made by Arvin to such holder of Preferred Securities in such Direct
Action. The record holder in the case of the issuance of one or more global
Preferred Securities certificates will be The Depository Trust Company acting
at the direction of the beneficial owners of the Preferred Securities. See
"Description of the Preferred Securities--Declaration Events of Default."
TRUST DISTRIBUTIONS DEPENDENT ON THE COMPANY'S PAYMENTS ON SUBORDINATED
DEBENTURES
The Trust's ability to make distributions and other payments on the
Preferred Securities is entirely dependent upon the Company making interest
and other payments on the Subordinated Debentures. If the Company does not
make payments on the Subordinated Debentures for any reason, including as a
result of the Company's election to defer the payment of interest on the
Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures, the Trust will not make payments on the Trust
Securities. In such an event, holders of the Preferred Securities would not be
able to rely on the Guarantee because distributions
9
and other payments on the Preferred Securities are subject to the Guarantee
only if and to the extent that the Trust has funds available therefor. See
"Description of the Guarantee--General" and "Effect of Obligations under the
Subordinated Debentures and the Guarantee."
FACTORS AFFECTING PRODUCTION VOLUMES; CYCLICALITY
Historically, the North American and European automotive industries have
experienced periodic, cyclical downturns, most recently in the 1991-92
calendar years in North America and in the 1993-94 calendar years in Europe.
No assurance can be given as to when the next cyclical downturn will occur or
as to the duration or severity thereof. North American production and European
production, which accounted for approximately 58% and 32%, respectively, of
the Company's consolidated sales in fiscal 1995, could face a significant
decline in production volumes as a result of rising interest rates, a general
economic downturn, rising fuel prices or general fuel unavailability,
legislative changes, environmental concerns, emissions and safety issues,
labor and/or trade disruptions or other factors. In addition, a prolonged
strike at a major original equipment customer of the Company would likely
result in a significant decline in original equipment production volumes. A
significant decline in such production volumes as a result of a strike, the
loss of a principal customer or any of the other factors described above could
have a material adverse effect on the Company and consequently on its ability
to make payments on the Subordinated Debentures.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debentures by extending the interest payment period at any
time, and from time to time, on the Subordinated Debentures. As a consequence
of such an extension, quarterly distributions on the Preferred Securities
would be deferred (but despite such deferral, to the extent permitted by law,
would continue to accrue with interest thereon compounded quarterly) by the
Trust during any such extended interest payment period. The Company has the
right to defer payments of interest on the Subordinated Debentures, from time
to time, but no Extension Period may be more than 20 consecutive quarters or
extend beyond the Maturity Date (as defined herein) of the Subordinated
Debentures. There could be multiple Extension Periods of varying lengths
during the term of the Subordinated Debentures. In the event that the Company
exercises its right to defer interest payments, then, prior to the payment of
all accrued interest on outstanding Subordinated Debentures, (a) the Company
shall not declare or pay any dividend on, or make any distribution with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock, (b) the Company shall not, directly or
indirectly, and shall not allow any of its subsidiaries to, make any payment
of interest, principal or premium, if any, on or repay, repurchase or redeem
any debt securities issued by the Company that rank pari passu with or junior
to the Subordinated Debentures, and (c) the Company shall not make guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee);
provided, however, that the restriction in clause (a) above does not apply (i)
to repurchases or acquisitions of common shares of the Company as contemplated
by any employment arrangement, benefit plan or other similar contract with or
for the benefit of employees, officers or directors entered into in the
ordinary course of business, (ii) as a result of an exchange or conversion of
any class or series of the Company's capital stock for common shares, provided
that such class or series of the Company's capital stock was outstanding prior
to the date upon which the Company gives notice of its election of such
Extension Period, (iii) to the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, provided
that such capital stock or security was outstanding prior to the date upon
which the Company gives notice of its election of such Extension Period, or
(iv) to the payment of any stock dividend by the Company where the dividend is
paid in the form of the same stock as that on which the dividend is paid.
Prior to the termination of any such Extension Period, the Company may further
extend the interest payment period; provided that each Extension Period, if
any, may not exceed 20 consecutive quarters or extend beyond the Maturity Date
of the Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. At the end of the
Extension Period, Arvin will pay all interest accrued and unpaid on the
Subordinated Debentures to the holders
10
in whose names the Subordinated Debentures are registered on the first record
date after the end of the Extension Period. The Company has no current
intention of exercising its right to defer payments of interest by extending
the interest payment period on the Subordinated Debentures. However, should the
Company determine to exercise such right in the future, the market price of the
Preferred Securities is likely to be adversely affected. See "Description of
the Preferred Securities--Distributions" and "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIOD
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
accrue income (as original issue discount ("OID")) in respect of the deferred
interest allocable to its Preferred Securities for United States federal income
tax purposes. Such income will be allocated but not distributed to holders of
the Preferred Securities. As a result, each such holder of Preferred Securities
will recognize income for United States federal income tax purposes in advance
of the receipt of cash and will not receive the cash from the Trust related to
such income if such holder disposes of its Preferred Securities prior to the
record date for the date on which distributions of such amounts are made. A
holder that disposes of its Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. In addition, as a result of the
existence of the Company's right to defer interest payments, the market price
of the Preferred Securities (which represent an undivided beneficial interest
in the Subordinated Debentures) may be more volatile than other securities on
which OID accrues that do not have such rights. See "United States Federal
Income Taxation--Original Issue Discount."
TAX EVENT REDEMPTION
Upon the occurrence of a Tax Event, the Company will have the right to redeem
the Subordinated Debentures, in whole (but not in part), in which event the
Trust will redeem all outstanding Trust Securities. See "Description of the
Preferred Securities--Tax Event Redemption."
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, the Company will have the right to dissolve the Trust and, after
satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in liquidation of the Trust. Under current
United States federal income tax law and interpretation and assuming, as
expected, that the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures should not be a taxable event to holders of the
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to the holders of the Preferred Securities. In
addition, a dissolution of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "United
States Federal Income Taxation--Receipt of Subordinated Debentures or Cash upon
Dissolution of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
Because holders of Preferred Securities may receive Subordinated Debentures
upon any election by the Company to dissolve the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Preferred
Securities, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debentures and should
review carefully all the information regarding the Subordinated Debentures and
the Company contained in this Prospectus. See "Description of the Preferred
Securities--Distribution of the Subordinated Debentures" and "Description of
the Subordinated Debentures."
11
PROPOSED TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's fiscal 1997 budget proposal, was
released. The Bill would, among other things, treat as equity, instruments
issued by a corporation that have a maximum term of more than 20 years and
that are not shown as indebtedness on the consolidated balance sheet of the
issuer. The above-described provisions of the Bill were proposed to be
effective generally for instruments issued on or after December 7, 1995.
However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways
and Means Committees issued a joint statement (the "Joint Statement") to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, would be no earlier than the date of
appropriate Congressional action. In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives
Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department
officials concurring with the views expressed in the Joint Statement. Under
current law, the Subordinated Debentures will be treated as indebtedness of
the Company and the Company will be able to deduct interest on the
Subordinated Debentures beneficially held by the holders of the Preferred
Securities. However, if the provision of the Bill regarding a 20-year term is
enacted with retroactive effect with regard to the Subordinated Debentures,
the Company will not be entitled to an interest deduction with respect to the
Subordinated Debentures. There can be no assurance that current or future
legislative proposals, adverse judicial decisions, final legislation or
official administrative pronouncements will not affect the ability of the
Company to deduct interest on the Subordinated Debentures, giving rise to a
Tax Event which would permit the Company to cause the redemption of the
Preferred Securities prior to , 2002 (the first date on which the
Company would otherwise be able to cause a redemption of the Preferred
Securities). See "Description of the Preferred Securities--Tax Event
Redemption" and "United States Federal Income Taxation."
PREPAYMENT CONSIDERATIONS
At the option of the Company, the Subordinated Debentures may be redeemed,
in whole or in part, at any time on or after , 2002, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date. See "Description of the
Subordinated Debentures--Optional Redemption." Investors in the Preferred
Securities should assume that the Company will exercise its redemption option
if the Company is able to refinance at a lower interest rate or it is
otherwise in the interest of the Company to redeem the Subordinated
Debentures. If Subordinated Debentures are redeemed, the Trust must redeem
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of Subordinated Debentures so redeemed. See "Description of
the Preferred Securities--Mandatory Redemption."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have only limited voting rights,
primarily in connection with directing the activities of the Institutional
Trustee as the holder of the Subordinated Debentures. Such holders will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, the Trustees. Voting rights with respect to Trustee matters are
vested exclusively in the holder of the Common Securities. See "Description of
the Preferred Securities--Voting Rights."
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debentures through the
date of disposition in income as ordinary income (i.e., OID), and to add such
amount to his adjusted tax basis in his pro rata share of the underlying
Subordinated Debentures deemed disposed of. To the extent the selling price is
less than the holder's adjusted tax basis (which will include, in the form of
OID, all accrued but unpaid interest), a holder will recognize a capital loss.
Subject
12
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "United
States Federal Income Taxation--Original Issue Discount" and "--Sales of
Preferred Securities."
ABSENCE OF PUBLIC MARKET FOR SECURITIES
Since the Preferred Securities will be newly issued, there is no current
market for them. The Company will apply for listing of the Preferred
Securities on the New York Stock Exchange, but there can be no assurance that
the applicable listing requirements of such exchange will be met. There can be
no assurance that there will be an active trading market for the Preferred
Securities.
THE TRUST
Arvin Capital I is a statutory business trust created under Delaware law
pursuant to a declaration of trust, dated as of December 18, 1996, and the
filing of a certificate of trust with the Secretary of State of the State of
Delaware on December 18, 1996. Such declaration will be amended and restated
in its entirety (as so amended and restated, the "Declaration") by execution
of an Amended and Restated Declaration of Trust substantially in the form
filed as an exhibit to the Registration Statement of which this Prospectus is
a part. The Declaration will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance
of the Preferred Securities, the purchasers thereof will own all of the
Preferred Securities. See "Description of the Preferred Securities."
Simultaneously with the issuance of the Preferred Securities, Arvin will
acquire Common Securities in an aggregate liquidation amount equal to at least
3% of the total capital of the Trust. The Trust exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in the Subordinated Debentures and (iii) engaging in only
those other activities necessary or incidental thereto. The Trust has a term
of approximately 55 years, but may dissolve earlier as provided in the
Declaration.
Pursuant to the Declaration, the number of Trustees will initially be three.
Under the Declaration, Arvin, as holder of a majority in liquidation amount of
the Common Securities, will have the right to increase or decrease, from time
to time, the number of Trustees. The Declaration further provides, however,
that there must always be (i) one Trustee which is either a resident of the
State of Delaware or an entity which has its principal place of business in
Delaware (the "Delaware Trustee"), (ii) at least one Trustee who is an
employee or officer of, or is affiliated with, Arvin (an "Administrative
Trustee"), and (iii) one Trustee which is a financial institution with
combined capital and surplus of at least $50,000,000 and which acts as
institutional trustee and as indenture trustee for purposes of compliance with
the Trust Indenture Act. The same entity may serve as Delaware Trustee and
Institutional Trustee. Initially, Wilmington Trust Company, a Delaware banking
corporation, will be the Institutional Trustee until removed or replaced by
the holder of the Common Securities. For purposes of compliance with the
provisions of the Trust Indenture Act, Wilmington Trust Company will also act
as trustee (the "Guarantee Trustee") under the Guarantee and as the Debt
Trustee (as defined herein) under the Indenture. See "Description of the
Guarantee" and "Description of the Preferred Securities--Voting Rights."
The Institutional Trustee will hold title to the Subordinated Debentures for
the benefit of the holders of the Trust Securities, and the Institutional
Trustee will have the power to exercise all rights, powers and privileges of a
holder of Subordinated Debentures under the Indenture. In addition, the
Institutional Trustee will maintain exclusive control of a segregated non-
interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debentures for the benefit of the holders
of the Trust Securities. The Institutional Trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the Preferred Securities. The Company, as the direct or indirect holder of all
the Common Securities, will have the right (subject to the terms of the
Declaration) to appoint, remove or replace any Trustee and to increase or
decrease the number of Trustees; provided, that (i) if the Institutional
Trustee does not have its principal place of business in Delaware, the number
of Trustees shall
13
be at least three, and (ii) there will always be at least one Administrative
Trustee, one Institutional Trustee which satisfies the requirements of the
Trust Indenture Act, and one Trustee who, if a natural person, is a resident
of Delaware or, if not a natural person, is an entity which has its principal
place of business in Delaware, as required under the Delaware Business Trust
Act (the "Trust Act"). Arvin will pay all fees and expenses related to the
Trust and the offering of the Trust Securities. See "Description of the
Subordinated Debentures--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Trust Act and the Trust Indenture Act. See "Description of
the Preferred Securities."
THE COMPANY
OVERVIEW
Arvin is a diversified international manufacturer and supplier of automotive
parts and a variety of other products through operating entities in the U.S.
and numerous other countries. The Company is a worldwide leader in automotive
exhaust systems and ride control products for the original equipment ("OE")
and replacement markets. The Company's consolidated revenues were
approximately $2 billion in fiscal 1995.
Since its founding in 1919, Arvin has grown through internal development,
acquisitions and a number of international joint ventures. In recent years,
the Company's strategy has been to strengthen its automotive parts businesses
by achieving a mix of sales to both original equipment manufacturers ("OEMs")
and replacement market parts suppliers on a global basis. Recently, management
has implemented a series of strategic initiatives to increase the Company's
global competitive position within the automotive parts marketplace.
The Company classifies its business based on the two primary markets it
serves: Automotive Original Equipment and Automotive Replacement. In fiscal
1995, Arvin derived approximately 68% of its total revenues from the OE
market, with the remaining 32% coming from replacement market sales.
THE AUTOMOTIVE ORIGINAL EQUIPMENT SEGMENT
The principal products and primary customers of the Automotive Original
Equipment segment are set forth below. The Company believes that it is the
leading exhaust system supplier to OE customers in North America and Europe,
and among the top three OE ride control suppliers in these markets.
PRINCIPAL PRODUCTS PRIMARY CUSTOMERS
------------------ -----------------
Exhaust Systems Chrysler Nissan
--Mufflers Fiat Renault
--Exhaust and Tail Pipes Ford Saturn
--Catalytic Converters General Motors TRW (airbag sensors)
--Tubular Manifolds Honda Toyota/Nummi
Ride Control Products Mazda Volkswagen/SEAT
--Shock Absorbers Mercedes Benz Volvo
--Struts Mitsubishi
Gas Springs
Vacuum Actuators
Metal Tubular Parts
Coated Coil Steel and Aluminum
Press-Molded Thermoplastics
Vinyl-Metal Stampings
14
Arvin's OE segment has undergone a significant transformation in the last
decade, moving to a fully integrated engineering, development and production
operation. This transformation has been driven by the shift in customer
requirements and a change in the capabilities required to be a successful,
long term participant in this market.
Arvin competes with other independent parts suppliers and with
manufacturers' captive parts operations. The Company has significantly
enhanced its delivery capabilities geographically since the late 1980s through
both acquisitions and the formation of a number of international joint
ventures. Arvin believes that its aggressive capital spending program has
resulted in world-class manufacturing operations, capable of delivering
outstanding value and quality to its customers.
THE AUTOMOTIVE REPLACEMENT SEGMENT
The principal products, brand names and primary customers of the Automotive
Replacement segment are set forth below. The Company believes that it is among
the top two replacement exhaust and ride control manufacturers in both North
America and Europe.
PRINCIPAL PRODUCTS BRAND NAMES PRIMARY CUSTOMERS
------------------ ----------- -----------------
Mufflers Mufflers Retailers
Maremont Sears
Exhaust and Tail Pipes Cherry Bomb Canadian Tire
TIMAX Pep Boys
Catalytic Converters ANSA AutoZone
ROSI
Shock Absorbers TESH Wholesale Distributors
Parts, Inc.
MacPherson Struts Shock Absorbers United Auto Parts
Gabriel General Parts
Gas Springs
Gas Springs Installers
Strong Arm Meineke
Kwik-Fit
The Company's replacement market operations compete with both OEMs and
independent suppliers in North America and Europe, and serve the market
through its own sales force as well as a network of manufacturers'
representatives. The Company's competitive position has been enhanced by
rigorous attention to lead time reduction, with some product offerings
dropping from seven days to about one day. The foregoing has enabled the
Company to increase its order fill rate and to provide quick order turnaround
through more responsive manufacturing operations. These enhanced manufacturing
processes have also had a positive impact on the cost and quality of the
product.
15
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
September 29, 1996, and as adjusted to reflect the application of the
estimated net proceeds from the sale of the Preferred Securities. See "Use of
Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
AT SEPTEMBER 29,
1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN
THOUSANDS)
Short-term debt (including current maturities of long-
term debt).............................................. $ 59,650 $ 23,453
Long-term debt:
Capitalized lease obligations.......................... 3,899 3,899
7.94% notes due 2005................................... 50,000 50,000
6 7/8% notes due 2001.................................. 74,904 74,904
9.8%-9.9% medium term notes due 1998................... 45,000 45,000
10% medium term notes due 2000......................... 49,768 49,768
7 1/2% convertible subordinated debentures due 2014.... 63,803 --
9 1/8% sinking fund debentures due 2017................ 28,424 28,424
10 3/8% euro-sterling notes due 2018................... 36,541 36,541
Other.................................................. 3,962 3,962
-------- --------
Total long-term debt..................................... 356,301 292,498
Company-obligated mandatorily redeemable preferred
securities of trust
subsidiary (1).......................................... -- 100,000
Shareholders' equity:
Capital stock:
Common shares ($2.50 par value)........................ 60,681 60,681
Capital in excess of par value......................... 207,784 207,784
Retained earnings...................................... 211,717 210,794
Cumulative translation adjustment...................... (24,991) (24,991)
Common shares in treasury (at cost).................... (40,359) (40,359)
-------- --------
Total shareholders' equity............................... 414,832 413,909
-------- --------
Total capitalization..................................... $830,783 $829,860
======== ========
- --------
(1) As described herein, the sole asset of the Trust will be the % Junior
Subordinated Deferrable Interest Debentures due 2037 of Arvin with a
principal amount of approximately $103,100,000, and upon redemption of
such debt, the Preferred Securities will be mandatorily redeemable.
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth the Company's ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and preferred stock
dividends for the periods indicated:
NINE-MONTH PERIOD
ENDED FISCAL YEAR ENDED
----------------- -----------------------------------------
SEPT. 29, OCT. 1, DEC. 31, JAN. 1, JAN. 2, JAN. 3, DEC. 29,
1996 1995 1995 1995 1994 1993 1991
--------- ------- -------- ------- ------- ------- --------
Ratio of Earnings to
Fixed Charges.......... 2.3 1.6 1.6 1.8 2.5 2.3 1.7
Ratio of Earnings to
Combined Fixed Charges
and Preferred
Dividends.............. 2.3 1.6 1.6 1.8 2.5 1.9 1.3
16
For purposes of calculating the ratios, "earnings" consist of earnings from
continuing operations before income taxes, adjusted for the portion of fixed
charges deducted from such earnings. "Fixed charges" consist of interest on
all indebtedness (including capital lease obligations and capitalized
interest), amortization of debt expense and the percentage of rental expense
on operating leases deemed representative of the interest factor. The ratios
of earnings to fixed charges, before special charges, for the nine months
ended September 29, 1996 and October 1, 1995 were 2.5 and 1.9 to 1,
respectively. The ratios of earnings to fixed charges, before the
restructuring and special charges, for the 1995 and 1994 fiscal years were 1.9
and 2.4 to 1, respectively. The above computations do not include any fixed
charges related to the Company's guarantee of debt for Calspan SRL
Corporation. The debt guarantee was $18.0 million at September 29, 1996 and
$21.7 million at December 31, 1995.
A statement setting forth the computation of the unaudited ratios of
earnings to fixed charges and earnings to combined fixed charges and preferred
dividends is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements with the Preferred Securities accounted for and
captioned in the consolidated balance sheet directly above shareholders'
equity.
USE OF PROCEEDS
The Trust will use all proceeds from the sale of the Preferred Securities to
purchase the Subordinated Debentures from the Company. Arvin intends to use
the net proceeds from the sale of the Subordinated Debentures to repay
approximately $ million of short-term bank borrowings incurred in
connection with the Company's December 27, 1996 redemption of its outstanding
7 1/2% Convertible Subordinated Debentures due 2014, and for general corporate
purposes. Such general corporate purposes may include the Company's exercise
of options (which are exercisable beginning in early 1997) to purchase the
remaining ownership interests in several entities conducting business in the
European automotive components markets. If the Company exercises the options,
the amount of payments required will not be known for several months, but is
currently expected to be approximately $30 million. Until net proceeds are
used for this purpose, they may be applied to reduce the Company's outstanding
short-term bank borrowings. The Company's short-term bank borrowings at
, 1996 bear interest at a weighted average interest rate of
percent and are due .
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, Wilmington Trust Company, will act
as indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration (including the annex and exhibits
thereto), and those required to be made part of the Declaration by the Trust
Indenture Act. The following summary of the principal terms and provisions of
the Preferred Securities does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the Declaration (a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part), the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Administrative Trustees to issue, on behalf
of the Trust, the Trust Securities, which represent undivided beneficial
interests in the assets of the Trust. The Common Securities will have
17
equivalent terms to and will rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon
the occurrence and during the continuance of a Declaration Event of Default
(as defined herein), the rights of the holders of the Common Securities to
receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. In addition, holders of the Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint,
remove or replace any of the Trustees. All of the Common Securities will be
directly or indirectly owned by the Company.
The Declaration does not permit the issuance by the Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Trust. Pursuant to the Declaration, the Institutional Trustee will hold the
Subordinated Debentures purchased by the Trust for the benefit of the holders
of the Trust Securities. The payment of distributions out of money held by the
Trust, and payments upon redemption of the Preferred Securities or liquidation
of the Trust, are guaranteed by Arvin to the extent described under
"Description of the Guarantee." The Guarantee, when taken together with the
back-up undertakings, consisting of obligations of the Company (including the
obligation to pay expenses of the Trust) set forth in the Declaration, the
Indenture and the Subordinated Debentures issued to the Trust, provide a full
and unconditional guarantee by the Company of the Preferred Securities. The
Guarantee will be held by Wilmington Trust Company, the Guarantee Trustee, for
the benefit of the holders of the Preferred Securities. The Guarantee only
covers payment of distributions when the Company has made the corresponding
payment of interest or principal on the Subordinated Debentures held by the
Trust. In the absence of such payment of interest or principal, the remedy of
a holder of Preferred Securities is to vote to direct the Institutional
Trustee to enforce the Institutional Trustee's rights as the holder of the
Subordinated Debentures or, under certain circumstances, to take direct action
against the Company. See "--Declaration Events of Default," "--Voting Rights,"
"Description of the Guarantee" and "Effect of Obligations under the
Subordinated Debentures and the Guarantee."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will (to the extent
permitted by applicable law) bear interest thereon from and including the last
day of such quarter at the rate per annum of % thereof compounded
quarterly. The term "distributions" as used herein includes any such interest
payable unless otherwise stated. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a full quarter, on the basis of the
actual number of days elapsed in such 90-day quarter.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1997, and will be payable quarterly in arrears on March
31, June 30, September 30, and December 31 of each year, commencing
1997, when, as and if available for payment, and will be made by the
Institutional Trustee, except as otherwise described below. Distributions
payable in the first payment period will be computed on the basis of
days.
Arvin has the right under the Indenture to defer payments of interest on the
Subordinated Debentures by extending the interest payment period from time to
time on the Subordinated Debentures, which right, if exercised, would defer
quarterly distributions on the Preferred Securities (although to the extent
permitted by law, such distributions would continue to accrue with interest
since interest would continue to accrue on the Subordinated Debentures) during
any such Extension Period. The Company has the right to defer payments of
interest on the Subordinated Debentures, from time to time, for up to 20
consecutive quarters, provided that no Extension Period may extend beyond the
Maturity Date of the Subordinated Debentures. There could be multiple
Extension Periods of varying lengths during the term of the Subordinated
Debentures. In the event that the Company exercises this right, then during
any Extension Period (a) the Company shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not, directly or indirectly, and shall not allow any
18
of its subsidiaries to, make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company that rank pari passu with or junior to the Subordinated Debentures,
and (c) the Company shall not make any guarantee payments with respect to the
foregoing; provided, however, that the restriction in clause (a) above does
not apply (i) to repurchases or acquisitions of common shares of the Company
as contemplated by any employment arrangement, benefit plan or similar
contract with or for the benefit of employees, officers or directors entered
into in the ordinary course of business, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for common
shares, provided that such class or series of the Company's capital stock was
outstanding prior to the date upon which the Company gives notice of its
election of such Extension Period, (iii) to the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, provided that such capital stock or security was outstanding
prior to the date upon which the Company gives notice of its election of such
Extension Period, or (iv) to the payment of any stock dividend by the Company
where the dividend is paid in the form of the same stock as that on which the
dividend is being paid. Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period; provided that each
Extension Period, if any, may not exceed 20 consecutive quarters and may not
extend beyond the Maturity Date of the Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
Arvin may commence a new Extension Period, subject to the above requirements.
See "Description of the Subordinated Debentures--Interest" and "--Option to
Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record
of the Preferred Securities as they appear on the books and records of the
Trust on the record date next following the termination of such deferral
period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from Arvin on the Subordinated Debentures. See "Description
of the Subordinated Debentures." The payment of distributions out of moneys
held by the Trust is guaranteed by Arvin to the extent set forth under
"Description of the Guarantee." The Guarantee, when taken together with the
back-up undertakings, consisting of obligations of the Company (including the
obligation to pay expenses of the Trust) as set forth in the Declaration, the
Indenture and the Subordinated Debentures issued to the Trust, provides a full
and unconditional guarantee by the Company of the Preferred Securities.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in global
form, will be one Business Day (as defined below) prior to the relevant
payment dates. Such distributions will be paid through the Institutional
Trustee who will hold amounts received in respect of the Subordinated
Debentures in the Property Account for the benefit of the holders of the Trust
Securities. Subject to any applicable laws and regulations and the provisions
of the Declaration, each such payment will be made as described under "--Book-
Entry Issuance--The Depository Trust Company." In the event that the Preferred
Securities do not continue to remain in global form, the relevant record dates
for the Preferred Securities shall conform to the rules of any securities
exchange on which the securities are listed and, if none, shall be selected by
the Administrative Trustees, which dates shall be at least one Business Day
but less than 60 Business Days prior to the relevant payment dates.
Distributions payable on any Preferred Securities that are not punctually paid
on any distribution payment date, as a result of the Company's having failed
to make a payment under the Subordinated Debentures, will cease to be payable
to the person in whose name such Preferred Securities are registered on the
relevant record date, and such defaulted distribution will instead be payable
to the person in whose name such Preferred Securities are registered on the
special record date or other specified date determined in accordance with the
Indenture. In the event that any date on which distributions are to be made on
the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on
19
such date. A "Business Day" shall mean any day other than a day on which state
or federal banking institutions in New York, New York or Wilmington, Delaware,
are authorized or required by law to close.
MANDATORY REDEMPTION
The Subordinated Debentures will mature on , 2037, and may be
redeemed, in whole or in part, at any time on or after , 2002,
or at any time in whole (but not in part) upon the occurrence of a Tax Event.
See "Description of the Subordinated Debentures." Upon the repayment of the
Subordinated Debentures, whether at maturity or upon redemption, the proceeds
from such repayment or redemption shall simultaneously be applied to redeem
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Debentures so repaid or redeemed at the
Redemption Price; provided, that holders of Trust Securities shall be given
not less than 30 nor more than 60 days notice of such redemption. See
"Description of the Subordinated Debentures--Optional Redemption." In the
event that fewer than all of the outstanding Trust Securities are to be
redeemed, the Trust Securities will be redeemed pro rata to each holder
according to the aggregate liquidation amount of Trust Securities held by the
relevant holder in relation to the aggregate liquidation amount of all Trust
Securities outstanding. See "--Book-Entry Issuance--The Depository Trust
Company" for a description of procedures of The Depository Trust Company in
the event of redemption.
TAX EVENT REDEMPTION
"Tax Event" means that the Administrative Trustees shall have received an
opinion of an independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such pronouncement or decision is announced on or after the
date of original issuance of the Preferred Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date thereof, subject to United States federal income tax with respect to
interest accrued or received on the Subordinated Debentures, (ii) the Trust
is, or will be within 90 days after the date thereof, subject to more than a
de minimis amount of taxes, duties or other governmental charges, or (iii)
interest payable to the Trust on the Subordinated Debentures is not, or within
90 days of the date thereof, will not be deductible, in whole or in part, by
the Company for United States federal income tax purposes.
If, at any time, a Tax Event shall occur and be continuing, the Company
shall have the right, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinated Debentures, in whole (but not in part), for cash
within 90 days following the occurrence of such Tax Event, and, following such
redemption, all Trust Securities shall be redeemed by the Trust at the
Redemption Price.
DISTRIBUTION OF THE SUBORDINATED DEBENTURES
At any time, the Company will have the right to dissolve the Trust and,
after satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Under current
United States federal income tax law and interpretation and assuming, as
expected, that the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures should not be a taxable event to holders of the
Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to the holders of the Preferred Securities. In
addition, a dissolution of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "United
States Federal Income Taxation--Receipt of Subordinated Debentures or Cash
upon Dissolution of the Trust."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Subordinated Debentures to be listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed.
20
After the date for any distribution of Subordinated Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, and (ii) the record holders of the Preferred
Securities will receive a registered global certificate or certificates
representing the Subordinated Debentures to be delivered upon such
distribution in exchange for the Preferred Securities held by such holders.
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Subordinated Debentures that an investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered hereby.
On March 19, 1996, the Bill, the revenue portion of President Clinton's
fiscal 1997 budget proposal, was released. The Bill would, among other things,
treat as equity, instruments issued by a corporation that have a maximum term
of more than 20 years and that are not shown as indebtedness on the
consolidated balance sheet of the issuer. The above-described provisions of
the Bill were proposed to be effective generally for instruments issued on or
after December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued the Joint Statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, would be no earlier than the date of
appropriate Congressional action. In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives
Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department
officials concurring with the views expressed in the Joint Statement. Under
current law, it is likely that the Subordinated Debentures will be treated as
indebtedness of the Company and the Company will be able to deduct interest on
the Subordinated Debentures beneficially held by the holders of the Preferred
Securities. However, if the provision of the Bill regarding a 20-year term is
enacted with retroactive effect with regard to the Subordinated Debentures,
the Company will not be entitled to an interest deduction with respect to the
Subordinated Debentures. There can be no assurance that current or future
legislative proposals, adverse judicial decisions, final legislation or
official administrative pronouncements will not affect the ability of the
Company to deduct interest on the Subordinated Debentures, giving rise to a
Tax Event which would permit the Company to cause the redemption of the
Preferred Securities prior to , 2002 (the first date on which
the Company would otherwise be able to cause a redemption of the Preferred
Securities). See "--Tax Event Redemption" and "United States Federal Income
Taxation."
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that Arvin has paid to the Institutional
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Subordinated Debentures, the Trust will irrevocably deposit
with the Depositary (as defined herein) funds sufficient to pay the applicable
Redemption Price and will give the Depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of the Preferred
Securities. See "--Book-Entry Issuance-- The Depository Trust Company." If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of the Preferred
Securities so called for redemption will cease, except the right of the
holders of such Preferred Securities to receive the Redemption Price but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that
21
the Company fails to repay the Subordinated Debentures on maturity or payment
of the Redemption Price in respect of Preferred Securities is improperly
withheld or refused and not paid either by the Trust, or by Arvin pursuant to
the Guarantee, distributions on such Preferred Securities will continue to
accrue at the then applicable rate from the original redemption date to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described under
"--Book-Entry Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by a national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company, pursuant to the Indenture, will only redeem the Subordinated
Debentures in whole and, as a result, the Trust may only redeem the Preferred
Securities in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Arvin or its subsidiaries may at any
time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), holders of the
Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors of the Trust as required
by applicable law, distributions in an amount equal to the aggregate of the
stated liquidation amount of $25 per Preferred Security plus accrued and
unpaid distributions thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such Liquidation, Subordinated
Debentures in an aggregate stated principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Preferred Securities have been distributed on a
pro rata basis to the holders of the Preferred Securities in exchange for such
Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holder of the Common Securities will be entitled to receive distributions upon
any such liquidation pro rata with the holders of the Preferred Securities,
except that if a Declaration Event of Default has occurred and is continuing,
the Preferred Securities shall have a preference over the Common Securities
with regard to such distributions.
The Guarantee, when taken together with the back-up undertakings, consisting
of obligations of the Company (including the obligation to pay expenses of the
Trust) as set forth in the Declaration, the Indenture and the Subordinated
Debentures issued to the Trust, provide a full and unconditional guarantee by
the Company of the Preferred Securities.
DISSOLUTION
Pursuant to the Declaration, the Trust shall dissolve upon the earliest of
(i) , 2052, (ii) the bankruptcy of the Sponsor, (iii) the
filing of a certificate of dissolution or its equivalent with respect to the
Sponsor, the filing of a certificate of cancellation with respect to the Trust
after obtaining the consent of the holders of at least a majority in
liquidation amount of the Trust Securities or the revocation of the charter of
the Sponsor and the expiration of 90 days after the date of revocation without
a reinstatement thereof, (iv) at the election of the Sponsor, upon
satisfaction of the liabilities of creditors of the Trust as required by
applicable law, provided that all of the Subordinated Debentures shall have
been distributed to holders of the Preferred Securities in liquidation of the
Trust, (v) the entry of a decree of a judicial dissolution of the Sponsor or
the Trust, or (vi) the redemption of all the Trust Securities.
22
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"); provided, that pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Event of Default with respect to the Preferred Securities has been
so cured, waived, or otherwise eliminated, the Institutional Trustee will be
deemed to be acting solely on behalf of the holders of the Preferred
Securities and only the holders of the Preferred Securities will have the
right to direct the Institutional Trustee with respect to certain matters
under the Declaration, and therefore the Indenture.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee, as the sole holder of the Subordinated Debentures, will have the
right under the Indenture to declare the principal of and interest on the
Subordinated Debentures to be immediately due and payable. The principal
amount of the Subordinated Debentures will become immediately due and payable,
without any declaration or other action by the Institutional Trustee or any
other person, upon the occurrence of certain Indenture Events of Default
relating to the voluntary or involuntary bankruptcy of the Company. Each of
the Company and the Administrative Trustees, on behalf of the Trust, are
required to file annually with the Institutional Trustee an officer's
certificate as to the compliance of the Company and the Trust with all
conditions and covenants under the Declaration.
If the Institutional Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by the Trust to the fullest extent permitted by
law, any record holder of Preferred Securities may institute legal proceedings
directly against the Company to enforce the Institutional Trustee's rights
under such Subordinated Debentures without first instituting any legal
proceedings against such Insitutional Trustee or any other person or entity.
In addition, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest,
principal or other required payments on the Subordinated Debentures issued to
the Trust on the date such interest, principal or other payment is otherwise
payable, then a record holder of Preferred Securities may institute a
proceeding directly against the Company for enforcement of payment on
Subordinated Debentures, on or after the respective due dates specified in the
Subordinated Debentures, having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities held by such holder. In
connection with such Direct Action, the Company will be subrogated to the
rights of such record holder of Preferred Securities to the extent of any
payment made by the Company to such record holder of Preferred Securities. The
record holder in the case of the issuance of one or more global Preferred
Securities certificates will be The Depository Trust Company acting at the
direction of the beneficial owners of the Preferred Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantee--Modification of the Guarantee;
Assignment" and as otherwise required by law and the Declaration, the holders
of the Preferred Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Subordinated Debentures, to (i)
exercise the remedies available under the Indenture with respect to the
Subordinated Debentures, (ii) waive any past Indenture Event of Default that
is waivable under the Indenture, or (iii) exercise any right to rescind or
annul a declaration that the principal of all the Subordinated Debentures
shall be due and payable or consent to any amendment, modification or
termination of the Indenture or the Subordinated Debentures, where such
consent would be required; provided, however, that, where a consent or
23
action under the Indenture would require the consent or act of the holders of
greater than a majority in principal amount of Subordinated Debentures
affected thereby (a "Super-Majority"), the Institutional Trustee may only give
such consent or take such action at the written direction of the holders of at
least the proportion in liquidation amount of the Preferred Securities which
the relevant Super-Majority represents of the aggregate principal amount of
the Subordinated Debentures outstanding. The Institutional Trustee shall
notify all holders of the Preferred Securities of any notice of default
received from the Indenture Trustee with respect to the Subordinated
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect
that, as a result of such action, the Trust will not fail to be classified as
a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Securities
with respect to such amendment, modification or termination and shall vote
with respect to such amendment, modification or termination as directed by a
majority in liquidation amount of the Trust Securities voting together as a
single class; provided, however, that where a consent under the Indenture
would require the consent of a Super-Majority, the Institutional Trustee may
only give such consent at the direction of the holders of at least the
proportion in liquidation amount of the Trust Securities which the relevant
Super-Majority represents of the aggregate principal amount of the
Subordinated Debentures outstanding. The Institutional Trustee shall not take
any such action in accordance with the directions of the holders of the Trust
Securities unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, the Trust will not
fail to be classified as a grantor trust for the purposes of United States
federal income tax.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Administrative Trustees will cause a notice
of any meeting at which holders of Preferred Securities are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by Arvin or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Arvin, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Issuance--The Depository
Trust Company."
Holders of the Preferred Securities will have no rights to appoint or remove
the Trustees, who may be appointed, removed or replaced solely by Arvin as the
direct or indirect holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the
Administrative Trustees (and in certain circumstances the Institutional
Trustee), provided that, if any proposed amendment provides for, or the
24
Administrative Trustees otherwise propose to effect, (i) any action that would
materially adversely affect the powers, preferences or special rights of the
holders of Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities voting together as a single class will be entitled to vote on
such amendment or proposal, and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation
amount of the Trust Securities affected thereby; provided, that, if any
amendment or proposal referred to in clause (i) above would materially
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of a majority in liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise materially adversely affect the
powers of the Institutional Trustee in contravention of the Trust Indenture
Act or (iii) cause the Trust to be deemed an "investment company" which is
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as otherwise described in the Declaration. The Trust may,
with the consent of the Administrative Trustees and without the consent of the
holders of the Trust Securities or the Institutional Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State of the United States; provided, that (i) if the
Trust is not the survivor, such successor entity either (x) expressly assumes
all of the obligations of the Trust under the Trust Securities or (y)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Trust Securities (the "Successor Securities"), so long
as the Successor Securities rank the same as the Trust Securities rank with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly acknowledges a trustee of such successor
entity possessing the same powers and duties as the Institutional Trustee as
the holder of the Subordinated Debentures, (iii) the Preferred Securities or
any Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
with another organization on which the Preferred Securities are then listed or
quoted, (iv) such merger, consolidation, amalgamation or replacement does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interests in the new
entity), (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, Arvin has received an opinion of an independent counsel to the
Trust experienced in such matters to the effect that, (A) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interests in the new entity), (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act and (C) the Trust will continue to be classified as
a grantor trust for federal income tax purposes, and (viii) Arvin guarantees
the obligations of such successor entity under the Successor Securities at
least to the extent provided by the Guarantee. Notwithstanding the foregoing,
the Trust shall not, except with the consent of holders of 100 percent in
liquidation amount of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if such
consolidation, amalgamation, merger or replacement would cause the Trust or
the Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes.
25
EXPENSES AND TAXES
In the Indenture, the Company has agreed to pay all costs and expenses of
the Trust (including costs and expenses relating to the organization of the
Trust and the offering, sale and issuance of the Trust Securities, the fees
and expenses of the Trustees and the costs and expenses relating to the
operation of the Trust) and to pay any and all taxes and all costs and
expenses with respect thereto (other than United States withholding taxes) to
which the Trust might become subject. The foregoing obligations of the Company
under the Indenture are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against the
Company, and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Trust or any other person
before proceeding against the Company. The Company has also agreed in the
Indenture to execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
BOOK-ENTRY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Preferred Securities. The Preferred Securities will
initially be issued as fully-registered securities registered in the name of
Cede & Co. (DTC's nominee). One or more fully-registered global Preferred
Securities certificates, representing the total aggregate number of Preferred
Securities, will be issued and will be delivered to DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
DTC has advised the Company and the Trust that it is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant ("Indirect Participants"). The rules applicable to
DTC and its Participants are on file with the SEC.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct Participants' and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities with DTC and their
26
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Preferred Securities. DTC's records reflect only the identity of the Direct
Participants to whose accounts such Preferred Securities are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of Beneficial
Owners that are their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount
of the interest of each Direct Participant the Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an omnibus proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy). The Company and the Trust believe that the arrangements
among DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name," and will be the responsibility of such Participants and not of
DTC, the Trust or Arvin, subject to any statutory or regulatory requirements
to the contrary that may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trust, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Administrative Trustees (with the
consent of the Company) may decide to discontinue use of the system of book-
entry transfers through DTC (or any successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, the Company
will appoint a paying agent with respect to the Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Arvin and the Trust believe to be
reliable, but neither the Company nor the Trust takes responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set
27
forth in the Declaration and the Indenture, in the terms of the Trust
Securities or in the Trust Indenture Act and, after default, shall exercise
the same degree of care and skill as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the
Institutional Trustee is under no obligation to exercise any of the powers
vested in it by the Declaration at the request of any holder of Preferred
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The holders
of Preferred Securities will not be required to offer such indemnity in the
event such holders, by exercising their voting rights, direct the
Institutional Trustee to take any action it is empowered to take under the
Declaration following a Declaration Event of Default. The Institutional
Trustee also serves as trustee under the Guarantee and the Indenture. The
Company and its affiliates may have banking relationships with the
Institutional Trustee in the ordinary course of business.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities represented by a Global
Security (as defined herein) shall be made to DTC, which shall credit the
relevant accounts at DTC on the applicable distribution dates. In the event
that the certificates for the Preferred Securities are not in book-entry form,
the Trust will maintain an office or agency in the Borough of Manhattan, New
York, New York, where the Preferred Securities may be presented for payment
("Paying Agent"). If Arvin fails to appoint or maintain another entity as
Paying Agent, the Institutional Trustee will act as such.
In the event that the Preferred Securities do not remain in book-entry form,
registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Administrative Trustees may require) in respect of any tax or
other government charges that may be imposed in relation to it. The Trust will
not be required to register or cause to be registered the transfer of
Preferred Securities after such Preferred Securities have been called for
redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the Trust
in such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Subordinated
Debentures will be treated as indebtedness of Arvin for United States federal
income tax purposes. In this connection, Arvin and the Administrative Trustees
are authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the amended and restated articles of
incorporation of Arvin, that each of the Company and the Administrative
Trustees determine in their discretion to be necessary or desirable to achieve
such end, as long as such action does not adversely affect the interests of
the holders of the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive or similar rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by Arvin for the benefit of the holders from
time to time of the Preferred Securities. The Guarantee will be qualified as
an indenture under the Trust Indenture Act. The Guarantee Trustee, Wilmington
Trust Company, will act as independent indenture trustee for Trust Indenture
Act purposes under the Guarantee. The terms of the Guarantee will be those set
forth in the Guarantee and those made part of the Guarantee by the Trust
Indenture
28
Act. The summary of certain provisions of the Guarantee does not purport to be
complete and is subject to and qualified in its entirety by reference to the
provisions of the form of Guarantee, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part,
and the Trust Indenture Act. The Guarantee will be held by the Guarantee
Trustee for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full to the holders of the
Preferred Securities the Guarantee Payments (as defined herein) (except to the
extent paid by the Trust), as and when due, regardless of any defense, right
of set-off or counterclaim that the Trust may have or assert. The following
payments or distributions with respect to the Preferred Securities to the
extent not paid by the Trust (the "Guarantee Payments") will be subject to the
Guarantee (without duplication): (i) any accrued and unpaid distributions that
are required to be paid on the Preferred Securities, to the extent the Trust
shall have funds available therefor, (ii) the Redemption Price, including all
accrued and unpaid distributions to the date of the redemption, to the extent
the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Subordinated Debentures to the holders of
Preferred Securities or the redemption of all of the Preferred Securities upon
maturity or redemption of the Subordinated Debentures), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on such Preferred Securities to the date of payment, to the extent the Trust
has funds available therefor, and (b) the amount of assets of the Trust
remaining for distribution to holders of Preferred Securities in liquidation
of the Trust. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by Arvin to the holders of
Preferred Securities or by causing the Trust to pay such amounts to such
holders.
The Guarantee will not apply to any payment of distributions on the
Preferred Securities except to the extent the Trust shall have funds available
therefor. If Arvin does not make interest or principal payments on the
Subordinated Debentures purchased by the Trust, the Trust will not pay
distributions on the Preferred Securities issued by the Trust and will not
have funds available therefor.
Arvin will also irrevocably and unconditionally agree to guarantee the
obligations of the Trust with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Guarantee, except that upon
the occurrence and during the continuation of an Event of Default under the
Indenture, holders of Preferred Securities under the Guarantee shall have
priority over holders of Common Securities under the Common Securities
Guarantee with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, Arvin will covenant that, so long as any Preferred
Securities remain outstanding, if there shall have occurred any event of
default under the Guarantee or a Declaration Event of Default, then (a) Arvin
shall not declare or pay any dividend on, make any distribution with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock, (b) Arvin shall not, directly or indirectly, and
shall not allow any of its subsidiaries to, make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company that rank pari passu with or junior to the
Subordinated Debentures and (c) the Company shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee);
provided, however, that the restriction in clause (a) above does not apply (i)
to repurchases or acquisitions of common shares of the Company as contemplated
by any employment arrangement, benefit plan or other similar contract with or
for the benefit of employees, officers or directors entered into in the
ordinary course of business, (ii) as a result of an exchange or conversion of
any class or series of Arvin capital stock for Arvin common shares, provided
that such class or series of Arvin capital stock was outstanding prior to the
occurrence of such event of default under the Guarantee or such Declaration
Event of Default, (iii) to the purchase of fractional interests in shares of
the Company's capital stock pursuant to
29
conversion or exchange provisions of such Company capital stock or the
security being converted or exchanged, provided that such Arvin capital stock
or security was outstanding prior to the occurrence of such event of default
under the Guarantee or such Declaration Event of Default, or (iv) to the
payment of any stock dividend where the dividend is paid in the form of the
same stock as that on which the dividend is paid.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent of such holders
will be required), the Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities is set forth under "Description of the
Preferred Securities--Voting Rights." All guarantees and agreements contained
in the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders
of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any record holder
of Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. In addition, if the Company has failed to make
a Guarantee Payment, a record holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Guarantee
for such payment to the record holder of the Preferred Securities of the
principal of or interest on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures, and the amount
of the payment will be based on the holder's pro rata share of the amount due
and owing on all of the Preferred Securities. The Company has waived any right
or remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Company. The
record holder in the case of the issuance of one or more global Preferred
Securities certificates will be DTC acting at the direction of its Direct
Participants, who in turn will be acting at the direction of the beneficial
owners of the Preferred Securities.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default, shall exercise the same degree of care and skill as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provisions, the Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Guarantee at the request of any holder of
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby. The Guarantee
Trustee also serves as Institutional Trustee and Debt Trustee. The Company and
its affiliates may have a banking relationship with the Guarantee Trustee in
the ordinary course of business.
30
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Preferred Securities (a) upon full
payment of the Redemption Price of all Preferred Securities, (b) upon
distribution of the Subordinated Debentures held by the Trust to the holders
of all the Preferred Securities, or (c) upon full payment of the amounts
payable in accordance with the Declaration upon dissolution of the Trust. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Preferred Securities must restore payment of
any sums paid under such Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Arvin and will rank
(i) subordinate and junior in right of payment to all other liabilities of
Arvin, including the Subordinated Debentures, except those liabilities of
Arvin made pari passu or subordinate by their terms, (ii) pari passu with the
most senior preferred stock, if any, now or hereafter issued by Arvin and with
any guarantee now or hereafter entered into by Arvin in respect of any
preferred stock of any affiliate of Arvin, and (iii) senior to Arvin's common
shares. The terms of the Preferred Securities provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the guarantee without
instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the terms of the Subordinated Debentures
in which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. The following summary of the principal terms does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, dated as of , 1996, between Arvin
and Wilmington Trust Company, as Trustee (the "Debt Trustee"), as supplemented
by a First Supplemental Indenture, dated as of , 1996 (as so
supplemented, the "Indenture"), the forms of which are filed as Exhibits to
the Registration Statement of which this Prospectus forms a part. The terms of
the Subordinated Debentures will include those stated in the Indenture and
those made a part of the Indenture by reference to the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Indenture.
The Company will have the right, at any time, to dissolve the Trust and,
after satisfaction of the liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. See "Description
of the Preferred Securities--Distribution of the Subordinated Debentures."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, Arvin will use its best efforts to have the Subordinated
Debentures listed on the New York Stock Exchange or on such other exchange on
which the Preferred Securities are then listed.
GENERAL
The Subordinated Debentures will be issued as unsecured subordinated debt
under the Indenture. The Indenture does not limit the aggregate principal
amount of debt securities which may be issued thereunder and
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provides that the debt securities may be issued thereunder from time to time
in one or more series. However, the Subordinated Debentures, as a separate
series of debt securities, will be limited in aggregate principal amount to
$103,100,000, such amount being the sum of the aggregate stated liquidation
amount of the Preferred Securities and the Common Securities.
The Subordinated Debentures are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon
including Additional Interest (as defined herein), if any, on ,
2037.
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, the Company
presently anticipates that such Subordinated Debentures will initially be
issued in the form of one or more Global Securities. As described herein,
under certain limited circumstances, Subordinated Debentures may be issued in
certificated form in exchange for a Global Security. See "--Book-Entry and
Settlement." In the event that Subordinated Debentures are issued in
certificated form, such Subordinated Debentures will be in denominations of
$25 and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on Subordinated Debentures issued as a
Global Security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a Paying Agent for the Subordinated Debentures.
In the event Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Subordinated
Debentures will be registrable and Subordinated Debentures will be
exchangeable for Subordinated Debentures of other denominations of a like
aggregate principal amount at the corporate trust office of the Debt Trustee
in Wilmington, Delaware; provided, that payment of interest may be made at the
option of Arvin by check mailed to the address of the persons entitled
thereto. Notwithstanding the foregoing, so long as the holder of any
Subordinated Debentures is the Institutional Trustee, the payment of principal
and interest on the Subordinated Debentures held by the Institutional Trustee
will be made at such place and to such account as may be designated by the
Institutional Trustee.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or similar transaction involving Arvin that may adversely affect
such holders.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of Arvin, whether now
existing or hereafter incurred. No payment of principal (including redemption
payments, if any), premium, if any, or interest on, the Subordinated
Debentures may be made if (i) any Senior Indebtedness of Arvin is not paid
when due, and any applicable grace period with respect to such default has
ended and such default has not been cured or waived or ceased to exist, or
(ii) the maturity of any Senior Indebtedness of Arvin has been accelerated
because of a default. Upon any payment by or distribution of assets of Arvin
to creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership
or other proceedings, all amounts due on all Senior Indebtedness of Arvin must
be paid in full, or payment provided for in money in accordance with its
terms, before the holders of Subordinated Debentures are entitled to receive
or retain any payment. Upon payment in full of all amounts due on Senior
Indebtedness then outstanding, the rights of the holders of the Subordinated
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness of Arvin to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Subordinated Debentures are
paid in full.
The term "Senior Indebtedness" means, with respect to Arvin, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of
Arvin for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by Arvin, (ii) all
capital lease obligations of Arvin, (iii) all obligations of Arvin issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of Arvin and all obligations of Arvin under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (iv) all obligations of Arvin for the reimbursement
32
on any letter of credit, banker's acceptance, security purchase facility or
similar credit transaction, (v) all obligations of the type referred to in
clauses (i) through (iv) above of other persons for the payment of which Arvin
is responsible or liable as obligor, guarantor or otherwise, (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of Arvin (whether or not
such obligation is assumed by Arvin) and (vii) all obligations of the Company
under guarantees in respect of operating lease payments of its subsidiaries or
under guarantees in respect of the obligations of any trust, partnership or
other entity that has been or is established as a lease financing entity of
the Company ("a Lease Financing Entity") which guarantees were, in either
case, incurred in connection with the issuance by such Lease Financing Entity
of indebtedness or other securities, except in each case for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Debentures, and (2) any indebtedness between or among the Company
and its affiliates, including all other debt securities and guarantees in
respect of those debt securities (other than guarantees referred to in clause
(vii) above) issued to any trust, or a trustee of such trust, partnership or
other entity affiliated with Arvin that is a financing vehicle of Arvin (a
"financing entity") in connection with the issuance by such financing entity
of securities that are similar to the Preferred Securities. Such Senior
Indebtedness shall continue to be Senior Indebtedness and be entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by Arvin. As of September 29, 1996, Senior Indebtedness of
Arvin aggregated approximately $472 million. The Company's obligations under
the Subordinated Debentures will also be effectively subordinated to all
existing and future obligations of Arvin's subsidiaries.
CERTAIN COVENANTS OF THE COMPANY
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default or (ii) Arvin shall be in default with respect to
its payment of any obligations under the Guarantee or the Common Securities
Guarantee, or (iii) Arvin shall have given notice of its election to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period, and such period, or any extension thereof, shall be
continuing, then (a) the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not, directly or indirectly, and shall not allow any of its subsidiaries
to, make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company that rank pari
passu with or junior to the Subordinated Debentures, and (c) Arvin shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee); provided, however, that the restriction in clause (a) above
does not apply (i) to repurchases or acquisitions of common shares of the
Company as contemplated by any employment arrangement, benefit plan or similar
contract with or for the benefit of employees, officers or directors entered
into in the ordinary course of business, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for common
shares, provided that such class or series of the Company's capital stock was
outstanding prior to the occurrence of such Indenture Event of Default, (iii)
to the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, provided that such capital stock
or security was outstanding prior to the occurrence of such Indenture Event of
Default, or (iv) to the payment of any stock dividend by the Company where the
dividend is paid in the form of the same stock as that on which the dividend
is paid.
For so long as the Trust Securities remain outstanding, Arvin will covenant
(i) to directly or indirectly maintain 100% ownership of the Common Securities
of the Trust; provided, however, that any permitted successor of Arvin under
the Indenture may succeed to the Company's ownership of such Common
Securities, (ii) not to cause, as sponsor of the Trust, or to permit, as
holder of the Common Securities, the dissolution, winding-up or termination of
the Trust, except in connection with a distribution of the Subordinated
Debentures as provided in the Declaration and in connection with certain
mergers, consolidations or amalgamations, each as
33
permitted by the Declaration, and (iii) to use its reasonable efforts to cause
the Trust (a) to remain a statutory business trust, except in connection with
the distribution of Subordinated Debentures to the holders of Trust Securities
upon dissolution of the Trust, the redemption of all of the Trust Securities
of the Trust, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration, and (b) to otherwise continue to be classified
for United States federal income tax purposes as a grantor trust.
OPTIONAL REDEMPTION
Arvin shall have the right to redeem the Subordinated Debentures, (i) in
whole or in part, from time to time, on or after , 2002, or (ii)
at any time in whole (but not in part) within 90 days following the occurrence
of a Tax Event, upon not less than 30 nor more than 60-days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. See "Description of the Preferred Securities--Tax Event
Redemption." If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Subordinated Debentures would result in the
delisting of the Preferred Securities by such exchange on which the Preferred
Securities are then listed, Arvin may only redeem the Subordinated Debentures
in whole. Arvin is also prohibited from redeeming the Subordinated Debentures
in part unless all accrued but unpaid interest has been paid on all
outstanding Subordinated Debentures for all quarterly interest periods
terminating on or prior to the redemption date.
PROPOSED TAX LEGISLATION
Certain tax law changes have been proposed that may, if enacted, deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Subordinated Debentures. See "United States Federal
Income Taxation--Proposed Tax Law Changes."
INTEREST
Each Subordinated Debenture shall bear interest at the rate of % per
annum from the original date of issuance, payable quarterly in arrears on
March 31, June 30, September 30, and December 31 of each year (each an
"Interest Payment Date"), commencing , 1997, to the person in
whose name such Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Subordinated Debentures shall not
continue to remain in book-entry form, Arvin shall have the right to select
record dates, which shall be more than one Business Day prior to the Interest
Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 90-day
period. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, then such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Arvin shall have the right at any time, and from time to time, to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period for a period not exceeding 20 consecutive quarters (but not
beyond the maturity date of the Subordinated Debentures), at the end of which
Extension Period, Arvin shall pay all interest then accrued and unpaid
(including any Additional Interest) together with interest thereon compounded
quarterly at the rate specified for the Subordinated Debentures to the extent
permitted by applicable law ("Compound Interest"). In the event the Company
exercises this right, then during any Extension Period, (a) the Company shall
not declare or pay any dividend on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock, (b) the Company shall not, directly or indirectly, and
shall not allow any of its subsidiaries to, make any payment
34
of interest, principal or premium, if any, on or repay, repurchase or redeem
any debt securities issued by the Company that rank pari passu with or junior
to the Subordinated Debentures and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee); provided, however, that, the restriction in clause (a) above does
not apply (i) to repurchases or acquisitions of common shares of the Company
as contemplated by any employment arrangement, benefit plan or other similar
contract with or for the benefit of employees, officers or directors entered
into in the ordinary course of business, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for common
shares, provided that such class or series of the Company's capital stock was
outstanding prior to the date upon which the Company gives notice of its
election of such Extension Period, (iii) to the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such Company capital stock or the security being
converted or exchanged, provided that such capital stock or security was
outstanding prior to the date upon which the Company gives notice of its
election of such Extension Period, or (iv) to the payment of any stock
dividend by the Company where the dividend is paid in the form of the same
stock as that on which the dividend is paid. Prior to the termination of any
such Extension Period, Arvin may further defer payments of interest by
extending the interest payment period; provided, however, that, such Extension
Period, including all such previous and further extensions, may not exceed 20
consecutive quarters or extend beyond the maturity date of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, Arvin may commence a new Extension Period, subject to
the requirements set forth in this section. No interest during an Extension
Period, except at the end thereof, shall be due and payable. At the end of the
Extension Period, Arvin will pay all interest accrued and unpaid on the
Subordinated Debentures, including any Additional Interest and Compound
Interest, to the holders in whose names the Subordinated Debentures are
registered on the first record date after the end of the Extension Period.
Arvin has no present intention of exercising its right to defer payments of
interest by extending the interest payment period on the Subordinated
Debentures. See "--Certain Covenants to the Company."
If the Institutional Trustee shall be the sole holder of the Subordinated
Debentures, Arvin shall give the Administrative Trustees and the Institutional
Trustee notice of its election of such Extension Period at least one Business
Day before the earlier of (i) the date distributions on the Preferred
Securities are payable or (ii) the date the Administrative Trustees are
required to give notice to the New York Stock Exchange (or other applicable
self-regulatory organization) or to holders of the Preferred Securities of the
record date or the date such distribution is payable. The Administrative
Trustees shall give notice of Arvin's selection of such Extension Period to
the holders of the Preferred Securities. If the Institutional Trustee shall
not be the sole holder of the Subordinated Debentures, Arvin shall give the
holders of the Subordinated Debentures notice of its election of such
Extension Period ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date upon which Arvin is required to give notice to
the New York Stock Exchange (or other applicable self-regulatory organization)
or to holders of the Subordinated Debentures of the record or payment date of
such related interest payment.
ADDITIONAL INTEREST
If at any time the Trust or the Institutional Trustee shall be required to
pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, then, in any such case, Arvin will pay as additional
interest ("Additional Interest") on the Subordinated Debentures such
additional amounts as shall be required so that the net amounts received and
retained by the Trust after paying any such taxes, duties, assessments or
other governmental charges will equal the amounts the Trust and the
Institutional Trustee would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of
Default" with respect to the Subordinated Debentures:
(a) default in payment of interest on the Subordinated Debentures,
including any Additional Interest in respect thereof, when due and
continuance of such default for a period of 30 days; provided, however,
that a valid extension of the interest payment period by Arvin shall not
constitute a default in the payment of interest for this purpose; or
35
(b) default in payment of principal or premium, if any, on the
Subordinated Debentures when due whether at maturity, upon redemption, by
declaration or otherwise; or
(c) failure to observe or perform any other covenant or agreement with
respect to the Subordinated Debentures contained in the Indenture or
established pursuant thereto for 90 days after written notice of such
failure shall have given to Arvin by the Debt Trustee or to Arvin and the
Debt Trustee by the holders of at least 25% in principal amount of the
outstanding Subordinated Debentures; or
(d) certain events of bankruptcy or reorganization of the Company; or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the Trust, except in connection with the distribution of Subordinated
Debentures to the holders of Preferred Securities upon dissolution of the
Trust, the redemption of all outstanding Trust Securities of the Trust and
certain mergers, consolidations or amalgamations permitted by the
Declaration.
The Indenture provides that if an Event of Default described in clauses (a),
(b), (c) and (e) of the preceding paragraph occurs and is continuing with
respect to the Subordinated Debentures, either the Debt Trustee or the holders
of not less than 25% in aggregate principal amount of the outstanding
Subordinated Debentures may declare, by written notice to the Company, the
principal of all of the Subordinated Debentures immediately due and payable.
If an Event of Default described in clause (d) of the preceding paragraph
occurs and is continuing, then the principal amount of the Subordinated
Debentures, together with the principal amount of all other series of debt
securities issued under the Indenture, will become immediately due and
payable, without any declaration or action on the part of the Debt Trustee or
any holder of the Subordinated Debentures.
Under the Indenture, the holders of a majority in aggregate principal amount
of the Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debt
Trustee with respect to the Subordinated Debentures. The holders of a majority
in aggregate principal amount of the Subordinated Debentures may also waive,
on behalf of the holders of all of the Subordinated Debentures, any past
default, except (i) a default in the payment of principal, premium, if any, or
interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal due, otherwise than by
acceleration, and any applicable premium has been deposited with the Debt
Trustee) or (ii) a default in the covenants described in the first paragraph
under "--Certain Covenants of the Company." The holders of a majority in
aggregate principal amount of the Subordinated Debentures may annul any
declaration accelerating the maturity of the Subordinated Debentures made in
accordance with the preceding paragraph and waive the default on which such
acceleration was based if the default has been cured and a sum sufficient to
pay all matured installments of interest, principal due (other than by
acceleration) and premium, if any, on the Subordinated Debentures has been
deposited with the Debt Trustee.
Upon the occurrence of an Event of Default under the Indenture, holders of a
majority in principal amount of the Preferred Securities will have the right
to direct the Institutional Trustee to exercise its rights and remedies under
the Indenture as sole holder of the Subordinated Debentures. In addition, if
the Event of Default is due to the failure of the Company to pay interest or
principal on the Subordinated Debentures, when due, holders of the Preferred
Securities may institute a Direct Action against the Company. See "Description
of the Preferred Securities--Declaration Event of Default," "--Voting Rights,"
and "Effect of Obligations under the Subordinated Debentures and the
Guarantee."
BOOK-ENTRY AND SETTLEMENT
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, the Company
anticipates that the Subordinated Debentures will be issued in the form of one
or more global certificates (each a "Global Security") registered in the name
of the Depositary or its nominee. Except under the limited circumstances
described below, Subordinated Debentures represented by the Global Security
will not be exchangeable for, and will not otherwise be issuable as,
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or to a successor depositary or its nominee.
36
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debentures shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee or to a successor
Depositary or its nominee. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary or if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest to
exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will
act as securities depositary for the Subordinated Debentures. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Preferred Securities--Book-Entry Issuance--The Depository
Trust Company." As of the date of this Prospectus, the description therein of
DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC. Arvin may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable
or unwilling to continue as a depositary for the Global Securities.
None of Arvin, the Trust, the Institutional Trustee, the Debt Trustee, any
paying agent and any other agent of Arvin, the Institutional Trustee or the
Debt Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies Arvin that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed or (iii) Arvin, in its sole discretion,
determines that such Global Security shall be so exchangeable. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Subordinated Debentures registered in such names as the
Depositary shall direct. It is expected that such directions will be based
upon instructions received by the Depositary from its Participants with
respect to ownership of beneficial interests in such Global Security.
In the event the Subordinated Debentures are not represented by one or more
Global Securities, certificates evidencing Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon duly executed) or exchange, at the corporate trust office of the Debt
Trustee or such other location designated by Arvin for such purpose with
respect to the Subordinated Debentures without service charge and upon payment
of any taxes and other governmental charges as described in the Indenture.
Arvin has initially appointed the Debt Trustee as security registrar with
respect to the Subordinated Debentures. Arvin may at any time rescind the
designation of any such security registrar or approve a change in the location
through which any such security registrar acts, except that Arvin will be
required to maintain a transfer agent at the place of payment. Arvin may at
any time designate additional transfer agents with respect to the Subordinated
Debentures.
37
In the event of any redemption in part, Arvin shall not be required to (i)
issue, exchange or register the transfer of Subordinated Debentures during a
period beginning at the opening of business 15 days before the date of the
mailing of a notice of redemption of less than all of the Subordinated
Debentures and ending at the close of business on the date of such mailing and
(ii) register the transfer of or exchange any Subordinated Debentures called
for redemption.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting Arvin and the Debt Trustee,
with the consent of the holders of at least a majority in principal amount of
the Subordinated Debentures (and any other series of subordinated debt
securities under the Indenture affected thereby), to modify the Indenture or
any supplemental indenture affecting the rights of the holders of the
Subordinated Debentures; provided that no such modification may, without the
consent of the holder of each outstanding Subordinated Debenture (or, if
applicable, other series of subordinated debt securities) affected thereby,
(i) extend the fixed maturity of the Subordinated Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof or
(ii) reduce the aforesaid percentage of Subordinated Debentures the consent of
the holders of which is required for any such modification without the consent
of the holders of each Subordinated Debenture affected. In the event that the
consent of the Institutional Trustee, as holder of the Subordinated
Debentures, is required with respect to any modification or amendment, the
Institutional Trustee is required, under the Declaration, to request the
direction of the holders of the Trust Securities with respect to such
modification or amendment and to vote on such matter as directed by the
holders of a majority in liquidation amount of the Trust Securities. See
"Description of the Preferred Securities--Voting Rights."
In addition, Arvin and the Debt Trustee may execute, without the consent of
holders of the Subordinated Debentures, any supplemental indenture for certain
other customary purposes, including the creation of any new series of debt
securities.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with, or merge into, any corporation or
convey or transfer its properties and assets substantially as an entirety to
any entity unless (a) the successor entity is a corporation organized under
the laws of any state in the United States or the District of Columbia and
expressly assumes the obligations of the Company under the Indenture, and (b)
immediately thereafter no Event of Default and no event which, after notice or
lapse of time, or both, would become an Event of Default under the Indenture
shall have occurred and be continuing. Upon any such consolidation, merger,
conveyance or transfer, the successor corporation shall succeed to, and be
substituted for, the Company under the Indenture and thereafter the
predecessor corporation shall be relieved of all obligations and covenants
under the Indenture and the Subordinated Debentures.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option, will be
discharged from any and all obligations in respect of the Subordinated
Debentures (except for certain obligations to register the transfer or
exchange of Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain paying agencies and hold moneys for payment
in trust) if the Company deposits, in trust with the Debt Trustee, money or
U.S. government obligations which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money, in an
amount sufficient to pay all the principal of, and interest and premium, if
any, on, the Subordinated Debentures on the dates such payments are due in
accordance with the terms of such Subordinated Debentures. To exercise any
such option, the Company is required to deliver to the Debt Trustee an opinion
of counsel, based upon then applicable U.S. federal income tax law, to the
effect that the deposit and related defeasance would not cause the holders of
the Subordinated Debentures of such series to recognize income, gain or loss
for federal income tax purposes and will be subject to United States federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance or discharge had not
occurred.
38
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties
as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care and skill as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provision,
the Debt Trustee is under no obligation to exercise any of the powers vested
in it by the Indenture at the request of any holder of Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the Debt Trustee, upon the occurrence of an
Indenture Event of Default, from the obligation to exercise the rights and
powers vested in it by the Indenture and to use, in such exercise, the same
degree of care and skill as a prudent individual would use in the conduct of
his or her own affairs. The Debt Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance
of its duties if the Debt Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
The Company and its affiliates may have normal banking relationships with
the Debt Trustee in the ordinary course of business.
MISCELLANEOUS
The Indenture provides that Arvin will pay all fees and expenses related to
(i) the offering of the Trust Securities and the Subordinated Debentures and
(ii) the organization, operation and termination of the Trust, including the
fees and expenses of the Trustees.
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of Arvin; provided that, in the event of any such assignment, Arvin
will remain liable for all such obligations. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. The Indenture provides that it
may not otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to (i)
issue the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, (ii) invest the proceeds from such issuance and sale in
the Subordinated Debentures and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because: (i) the
aggregate principal amount of Subordinated Debentures will be equal to the sum
of the aggregate liquidation amount of the Trust Securities; (ii) the interest
rate and the interest and other payment dates on the Subordinated Debentures
will match the distribution rate and distribution and other payment dates for
the Preferred Securities; (iii) Arvin shall pay any costs, expenses, debts and
obligations (other than with respect to the Trust Securities) related to the
Trust and (iv) the Declaration provides that the Trustees shall not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by Arvin as and to the extent set
39
forth under "Description of the Guarantee." If Arvin does not make interest
and/or principal payments on the Subordinated Debentures purchased by the
Trust, the Trust will not have sufficient funds to pay distributions on the
Preferred Securities. The Guarantee will not apply to the payment of
distributions and other payments on the Preferred Securities unless and until
the Trust has sufficient funds to make such distributions or other payments.
The Guarantee will constitute an unsecured obligation of the Company and will
rank (i) subordinate and junior in right of payment to all other liabilities
of the Company except those made pari passu or subordinate by their terms,
(ii) pari passu with the most senior preferred stock now or hereafter issued
by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred stock of any affiliate of the Company and
(iii) senior to the Company's common shares.
The Guarantee, when taken together with the back-up undertakings, consisting
of obligations of the Company as set forth in the Declaration (including the
obligation to pay expenses of the Trust), the Indenture and the Subordinated
Debentures issued to the Trust, provide a full and unconditional guarantee by
the Company of the Preferred Securities. If the Guarantee Trustee fails to
enforce the Guarantee, any record holder of Preferred Securities may institute
a legal proceeding directly against the Company to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity. In addition, if the Company has failed to make a Guarantee Payment, a
record holder of Preferred Securities may directly institute a proceeding
against the Company for enforcement of the Guarantee for such payment to the
record holder of the Preferred Securities of the principal of or interest on
the Subordinated Debentures on or after the respective due dates specified in
the Subordinated Debentures, and the amount of the payment will be based on
the holder's pro rata share of the amount due and owing on all of the
Preferred Securities. The Company has waived any right or remedy to require
that any action be brought first against the Trust or any other person or
entity before proceeding directly against the Company. The record holder in
the case of the issuance of one or more global Preferred Securities
certificates will be DTC acting at the direction of its Direct Participants,
who in turn will be acting at the direction of the beneficial owners of the
Preferred Securities.
If the Institutional Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by the Trust to the fullest extent permitted by
law, any record holder of Preferred Securities may institute legal proceedings
directly against the Company to enforce the Institutional Trustee's rights
under the Subordinated Debentures without first instituting any legal
proceedings against the Institutional Trustee or any other person or entity.
In addition, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest,
principal or other required payment on the Subordinated Debentures on the date
such interest, principal or other payment is otherwise payable, then a record
holder of Preferred Securities may institute Direct Action against the Company
for enforcement of payment on the Subordinated Debentures on or after the
respective due dates specified in the Subordinated Debentures. To the extent
the Company makes a payment to a record holder of Preferred Securities in
connection with proceedings by such record holder directly against the
Company, the Company will be subrogated to the rights of the record holder of
Preferred Securities to the extent of payments made by the Company to the
record holder. The record holder in the case of the issuance of one or more
global Preferred Securities certificates will be DTC acting at the direction
of its Direct Participants, who in turn will be acting at the direction of the
beneficial owners of the Preferred Securities.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of Schiff Hardin & Waite, special tax counsel to the Company
and the Trust, the following is a summary of certain of the material United
States federal income tax consequences of the purchase, ownership and
disposition of Preferred Securities. Unless otherwise stated, this summary
deals only with Preferred Securities held as capital assets by holders who
purchase the Preferred Securities upon original issuance ("Initial
40
Holders"). It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in
a "straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. Dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of
Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the
Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
In connection with the issuance of the Subordinated Debentures, Schiff
Hardin & Waite, special tax counsel to the Company and the Trust, will render
its opinion generally to the effect that under then current law and assuming
full compliance with the terms of the Indenture (and certain other documents),
and based on certain facts and assumptions contained in such opinion, the
Subordinated Debentures will be classified for United States federal income
tax purposes as indebtedness of Arvin.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Schiff Hardin &
Waite, special tax counsel to the Company and the Trust, will render its
opinion generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a
corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Subordinated Debentures, and each holder will be required to
include in its gross income any OID accrued with respect to its allocable
share of those Subordinated Debentures.
ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Subordinated Debt
Securities, to defer payments of interest by extending interest payment
periods for up to 20 quarters, all of the stated interest payments on the
Subordinated Debentures will be treated as "original issue discount." Holders
of debt instruments issued with OID must include that discount in income on an
economic accrual basis before the receipt of cash attributable to the
interest, regardless of their method of tax accounting. Generally, all of a
holder's taxable interest income with respect to the Subordinated Debentures
will be accounted for as OID, and actual distributions of stated interest will
not be separately reported as taxable income. The amount of OID that accrues
in any month will approximately equal the amount of the interest that accrues
on the Subordinated Debentures in that month at the stated interest rate. In
the event that the interest payment period is extended, holders will continue
to accrue OID approximately equal to the amount of the interest payment due at
the end of the extended interest payment period on an economic accrual basis
over the length of the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
41
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Subordinated Debentures with
market discount or acquisition premium as such phrases are defined for United
States federal income tax purposes. Such holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership
and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON DISSOLUTION OF THE TRUST
At any time, the Company will have the right to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to holders
in exchange for the Trust Securities and in liquidation of the Trust. See
"Description of the Preferred Securities--Distribution of the Subordinated
Debentures." Under current law, such a distribution, for United States federal
income tax purposes, would be treated as a non-taxable event to each holder,
and each holder would receive an aggregate tax basis in the Subordinated
Debentures equal to such holder's aggregate tax basis in its Preferred
Securities. A holder's holding period in the Subordinated Debentures so
received upon dissolution of the Trust would include the period during which
the Preferred Securities were held by such holder. If, however, the related
special event is a Tax Event which results in the Trust being treated as an
association taxable as a corporation, the distribution would likely constitute
a taxable event to holders of the Preferred Securities.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Subordinated Debentures may be redeemed for cash
and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder could recognize gain or loss
as if it sold such redeemed Preferred Securities for cash. See "--Sales of
Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities
and the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includable in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Such gain or loss generally will be a capital gain or
loss and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Subordinated Debentures. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Subordinated Debentures
through the date of disposition in income as ordinary income, and to add such
amount to his adjusted tax basis in his pro rata share of the underlying
Subordinated Debentures deemed disposed of. To the extent the selling price is
less than the holder's adjusted tax basis (which will include, in the form of
OID, all accrued but unpaid interest) a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of Preferred Securities that is not a U.S. person. For
purposes of this discussion, a "U.S. person" means a citizen or resident of
the United States, a corporation or partnership created or organized in the
United States or under the law of the United States or of any State or
political subdivision of the foregoing, any estate whose income is includible
in gross income for U.S. federal income tax purposes regardless of its source
or a "United States Trust." A
42
"United States Trust" is (a) for taxable years beginning after December 31,
1996, or if the trustee elects to apply the following definition to an earlier
taxable year, any trust if, and only if, (i) a court within the United States
is able to exercise primary supervision over the administration of the trust
and (ii) one or more U.S. trustees have the authority to control all
substantial decisions of the trust, and (b) for all other taxable years, any
trust whose income is includible in gross income for United States federal
income tax purposes regardless of its source.
Under present United States federal income tax law: (i) payments by the
Trust or any of its paying agents to any holder of a Preferred Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Preferred Security does not actually or constructively own 10 percent or more
of the total combined voting power of all classes of stock of Arvin entitled
to vote, (b) the beneficial owner of the Preferred Security is not a
controlled foreign corporation that is related to the Company through stock
ownership, and (c) either (A) the beneficial owner of the Preferred Security
certifies to the Trust or its agent, under penalties of perjury, that it is
not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"Financial Institution"), and holds the Preferred Security in such capacity,
that certifies to the Trust or its agent, under penalties of perjury, that
such statement has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and furnishes the
Trust or its agent with a copy thereof; and (ii) a United States Alien Holder
of a Preferred Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of a
Preferred Security.
Gain recognized on the disposition of Preferred Securities will be subject
to United States federal income tax if (i) such gain is effectively connected
with a trade or business conducted by such United States Alien Holder within
the United States (in which case the branch profits tax may also apply if the
United States Alien Holder is a foreign corporation), or (ii) in the case of a
United States Alien Holder that is an individual, such United States Alien
Holder is present in the United States for a period or periods aggregating 183
days or more in the taxable year of the sale or exchange and certain other
conditions are met.
If a United States Alien Holder is engaged in a trade or business within the
United States and interest (including original issue discount) and premium, if
any, on Preferred Securities is effectively connected with the conduct of such
trade or business, such United States Alien Holder may be subject to United
States federal income tax on such interest (including original issue discount)
and premium at ordinary federal income tax rates on a net basis (in which case
the branch profits tax may also apply if the United States Alien Holder is a
foreign corporation).
On April 15, 1996, proposed Treasury Regulations (the "Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of United States Alien Holders, including changing the
certification requirements. The Proposed Regulations are generally proposed to
be effective for payments after 1997, regardless of the issue date of the note
with respect to which such payments were made. It cannot be predicted at this
time whether the Proposed Regulations will become effective as proposed or
what, if any, modifications may be made to them.
PROPOSED TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996, the revenue
portion of President Clinton's fiscal 1997 budget proposal, was released. The
Bill would, among other things, treat as equity, instruments issued by a
corporation that have a maximum term of more than 20 years and that are not
shown as indebtedness on the consolidated balance sheet of the issuer. The
above-described provisions of the Bill were proposed to be effective generally
for instruments issued on or after December 7, 1995. However, on March 29,
1996, the Chairmen of the Senate Finance and House Ways and Means Committees
issued the Joint Statement to the effect that it was their intention that the
effective date of the President's legislative proposals, if adopted, would be
no earlier than the date of appropriate Congressional action. In addition,
subsequent to the publication of the Joint Statement, Senator Daniel Patrick
Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to
43
Treasury Department officials concurring with the views expressed in the Joint
Statement. Under current law, the Subordinated Debentures will be treated as
indebtedness of the Company and the Company will be able to deduct interest on
the Subordinated Debentures beneficially held by the holders of the Preferred
Securities. However, if the provision of the Bill regarding a 20-year term is
enacted with retroactive effect with regard to the Subordinated Debentures,
the Company will not be entitled to an interest deduction with respect to the
Subordinated Debentures. There can be no assurance that current or future
legislative proposals, adverse judicial decisions, final legislation or
official administrative pronouncements will not affect the ability of the
Company to deduct interest on the Subordinated Debentures, giving rise to a
Tax Event which would permit the Company to cause the redemption of the
Preferred Securities prior to , 2002 (the first date on which
the Company would otherwise be able to cause a redemption of Preferred
Securities) as described more fully under "Description of Preferred
Securities--Tax Event Redemption."
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers
Inc., Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc., PaineWebber
Incorporated and Salomon Brothers Inc are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the Preferred Securities offered hereby if
any of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Lehman Brothers Inc.................................
Dean Witter Reynolds Inc............................
A.G. Edwards & Sons, Inc............................
PaineWebber Incorporated............................
Salomon Brothers Inc................................
---------
Total.......................................... 4,000,000
=========
44
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per Preferred Security, provided that such
concession for sales of 10,000 or more Preferred Securities to any single
purchaser will be $ per Preferred Security. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of Arvin, the
Underwriting Agreement provides that Arvin will agree to pay as compensation
("Underwriters' Compensation") to the Underwriters for the Underwriters'
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $ per Preferred Security (or $ in the
aggregate) for the accounts of the several Underwriters, provided that such
compensation for sales of 10,000 or more Preferred Securities to any single
purchaser will be $ per Preferred Security. Therefore, to the extent of such
sales, the actual amount of Underwriters' Compensation will be less than the
aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of the pricing of the Preferred
Securities, neither the Trust nor Arvin will, without the prior written
consent of the Representatives, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
any Preferred Securities, any security convertible into or exchangeable into
or exercisable for Preferred Securities or the Subordinated Debentures or any
debentures substantially similar to the Subordinated Debentures or any equity
securities substantially similar to the Preferred Securities (except for the
Subordinated Debentures and the Preferred Securities offered hereby).
Application will be made to list the Preferred Securities on the New York
Stock Exchange. If approved, trading of the Preferred Securities on the New
York Stock Exchange is expected to commence within a 30-day period after the
date of this Prospectus. The Representatives have advised the Trust that the
Underwriters intend to make a market in the Preferred Securities prior to the
commencement of trading on the New York Stock Exchange. The Underwriters will
have no obligation to make a market in the Preferred Securities, however, and
may cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
Arvin and the Trust have agreed to indemnify the Underwriters against, or to
contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities
Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Arvin in the ordinary course of business.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company and the Trust by
Schiff Hardin & Waite, Chicago, Illinois, and for the Underwriters by Mayer,
Brown & Platt, Chicago, Illinois. Certain matters of Delaware law relating to
the validity of the Preferred Securities will be passed upon by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the
Company and the Trust.
45
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of Arvin Industries, Inc. for the
year ended December 31, 1995 include the financial statements of
Space Industries International, Inc. (an approximately 70% owned subsidiary)
through September 29, 1995, the date of its sale. The financial statements of
the Company have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, and, with respect to the financial
statements of Space Industries International, Inc. as of January 1, 1995 and
for the years ended January 1, 1995 and January 2, 1994, in reliance on the
report of KPMG Peat Marwick LLP, independent accountants, given on the
authority of such firms as experts in auditing and accounting.
46
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR THE UN-
DERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
PAGE
----
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 9
The Trust................................................................. 13
The Company............................................................... 14
Capitalization............................................................ 16
Ratios of Earnings to Fixed Charges And Earnings to Combined Fixed Charges
and Preferred Dividends.................................................. 16
Accounting Treatment...................................................... 17
Use of Proceeds........................................................... 17
Description of the Preferred Securities................................... 17
Description of the Guarantee.............................................. 28
Description of the Subordinated Debentures................................ 31
Effect of Obligations Under the Subordinated Debentures and the Guarantee. 39
United States Federal Income Taxation..................................... 40
Underwriting.............................................................. 44
Legal Matters............................................................. 45
Experts................................................................... 46
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000
PREFERRED SECURITIES
(LOGO)
ARVIN CAPITAL I
% TRUST ORIGINATED
PREFERRED SECURITIESSM ("TOPRSSM")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
ARVIN INDUSTRIES, INC.
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
An itemized statement of the estimated amount of the expenses, other than
underwriting discounts and commissions, incurred and to be incurred by Arvin
Industries, Inc. ("Arvin") in connection with the issuance and distribution of
the Securities registered pursuant to this registration statement is as
follows:
Securities and Exchange Commission filing fee.................... $30,304
Printing and engraving expenses.................................. *
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Trustee and agent fees and expenses.............................. *
Rating agency fees............................................... *
Blue sky fees, expenses and legal fees........................... *
Listing Fees..................................................... *
NASD filing fees and expenses.................................... *
Miscellaneous.................................................... *
-------
Total *
=======
- --------
*To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 8 of the Amended and Restated By-Laws of Arvin, as amended, and
Article 10 of its Restated Articles of Incorporation, as amended, both provide
for indemnification of officers and directors of Arvin against expenses
incurred by any of them in certain stated proceedings and under certain stated
conditions.
Chapter 37 of the Indiana Business Corporation Law authorizes every Indiana
corporation to indemnify its officers and directors under certain
circumstances against liability incurred in connection with the defense of
proceedings in which they are made parties, or threatened to be made parties,
by reason of such relationship to the corporation, except where they are
adjudged liable for specific types of negligence or misconduct in the
performance of their duties to the corporation. Chapter 37 also requires every
Indiana corporation to indemnify any of its directors and, unless such
corporation's articles of incorporation provide otherwise, any of its officers
who were wholly successful, on the merits or otherwise, in the defense of any
such proceeding against reasonable expenses incurred by such director in
connection with such proceeding.
Officers and directors of Arvin are presently covered by insurance which
(with certain exceptions and within certain limitations) indemnifies them
against any losses or liabilities arising from any alleged "wrongful act,"
including any breach of duty, neglect, error, misstatement, misleading
statement, omission or other acts done or wrongfully attempted.
The Declaration of Trust of Arvin Capital I (the "Trust") provides that to
the fullest extent permitted by applicable law, the Sponsor shall indemnify
and hold harmless each of the Administrative Trustees of the Trust, any
Affiliate of any such Administrative Trustee, any officer, director,
shareholder, member, partner, employee, representative or agent of any such
Administrative Trustee, or any employee or agent of the Trust or its
Affiliates (each a "Company Indemnified Person"), from and against any loss,
damage or claim incurred by such Company Indemnified Person by reason of any
act or omission performed or omitted by such Company Indemnified Person in
good faith on behalf of the Trust and in a manner such Company Indemnified
Person reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was illegal. The Declaration of Trust
also provides that, to the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Company Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action suit or proceeding upon receipt by the Company of any
undertaking by or on behalf of the Company Indemnified Person to repay
II-1
such amount if it shall be determined that the Company Indemnified Person is
not entitled to be indemnified as authorized in the Declaration of Trust. The
Declaration of Trust further provides that no Company Indemnified Person shall
be liable, responsible or accountable in damages or otherwise to the Trust or
any Covered Person (as defined therein) or for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such Company
Indemnified Person in good faith on behalf of the Trust and in a manner such
Company Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Company Indemnified Person by the Declaration of
Trust or by law, except that a Company Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Company Indemnified
Person's gross negligence or willful misconduct with respect to acts or
omissions. In addition, certain sections of the form of Purchase Agreement
filed as an Exhibit hereto provides for indemnification of the Registrants and
their directors and officers by the underwriters or agents against certain
liabilities, including certain liabilities under the 1933 Act.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* Form of Purchase Agreement for offering of Preferred Secu-
rities
4.1 Certificate of Trust of Arvin Capital I
4.2 Declaration of Trust of Arvin Capital I
4.3 Form of Amended and Restated Declaration of Trust of Arvin
Capital I
4.4 Form of Indenture between Arvin Industries, Inc. and Wil-
mington Trust Company, as Trustee
4.5 Form of Supplemental Indenture between Arvin Industries,
Inc. and Wilmington Trust Company, as Trustee in connec-
tion with the issuance of the Junior Subordinated Defer-
rable Interest Debentures
4.6 Form of Preferred Security Certificate (included in Ex-
hibit 4.3)
4.7 Form of Preferred Securities Guarantee Agreement
4.8 Form of Junior Subordinated Deferrable Interest Debenture
(included in Exhibit 4.5)
5.1* Opinion of Schiff Hardin & Waite
5.2* Opinion of Richards, Layton & Finger, P.A.
8.1* Opinion of Schiff Hardin & Waite
12.1 Computations of Ratio of Earnings to Fixed Charges and Ra-
tio of Earnings to Combined Fixed Charges and Preferred
Dividends
23.1 Consent of Price Waterhouse LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3* Consent of Schiff Hardin & Waite (included in Exhibits 5.1
and 8.1)
23.4* Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
24.1 Powers of Attorney (included on the signature page and in
Exhibit 4.2)
25.1* Statement of Eligibility on Form T-1 under the Trust In-
denture Act of 1939, as amended, of Wilmington Trust Com-
pany, as Debt Trustee under the Indenture
25.2* Statement of Eligibility on Form T-1 under the Trust In-
denture Act of 1939, as amended, of Wilmington Trust Com-
pany, as Institutional Trustee under the Declaration of
Trust of Arvin Capital I
25.3* Statement of Eligibility on Form T-1 under the Trust In-
denture Act of 1939, as amended, of Wilmington Trust Com-
pany, as Preferred Guarantee Trustee under the Preferred
Securities Guarantee for the benefit of the holders of
Preferred Securities of Arvin Capital I
- --------
*To be filed by amendment.
II-2
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(a) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of a registrant's annual report pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(c) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 15 above, or
otherwise, the registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrants of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
II-3
POWER OF ATTORNEY
Each person whose signature appears below appoints Byron O. Pond, Ronald R.
Snyder and Richard A. Smith, or any of them, as such person's true and lawful
attorneys to execute in the name of each such person, and to file, any
amendments to this registration statement that any of such attorneys shall
deem necessary or advisable in connection with the registration of the
securities of the Registrant that are subject to this registration statement,
which amendments may make such changes in such registration statement as any
of the above-named attorneys deems appropriate, and to comply with the
undertakings of the Registrant made in connection with this registration
statement; and each of the undersigned hereby ratifies all that any of said
attorneys shall do or cause to be done by virtue thereof.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
ARVIN INDUSTRIES, INC., CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS AND STATE OF
INDIANA, ON THIS 20TH DAY OF DECEMBER, 1996.
Arvin Industries, Inc.
Byron O. Pond
By: _________________________________
Byron O. Pond
Chairman and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
Byron O. Pond Chairman and Chief Executive December 20, 1996
____________________________________ Officer
Byron O. Pond
Richard A . Smith Vice President-Finance, December 20, 1996
. __________________________________ Chief Financial Officer
Richard A. Smith and Director
William M. Lowe Controller and Chief December 14, 1996
____________________________________ Accounting Officer
William M. Lowe
Joseph P. Allen Director December 20, 1996
____________________________________
Joseph P. Allen
James K. Baker Director December 16, 1996
____________________________________
James K. Baker
Steven C. Beering Director December 10, 1996
____________________________________
Steven C. Beering
Joseph P. Flannery Director December 12, 1996
____________________________________
Joseph P. Flannery
II-4
SIGNATURE TITLE DATE
--------- ----- ----
William D. George, Jr. Director December 10, 1996
____________________________________
William D. George, Jr.
Ivan W. Gorr Director December 12, 1996
____________________________________
Ivan W. Gorr
Richard W. Hanselman Director December 20, 1996
____________________________________
Richard W. Hanselman
V. William Hunt Director December 16, 1996
____________________________________
V. William Hunt
Don J. Kacek Director December 20, 1996
____________________________________
Don J. Kacek
Frederick R. Meyer Director December 10, 1996
____________________________________
Frederick R. Meyer
Arthur R. Velasquez Director December 10, 1996
____________________________________
Arthur R. Velasquez
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
ARVIN CAPITAL I, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS AND STATE OF INDIANA, ON
THIS 20TH DAY OF DECEMBER, 1996.
Arvin Capital I
By Arvin Industries, Inc.
Richard A. Smith
By: _________________________________
Richard A. Smith, Vice
President--Finance and Chief
Financial Officer
II-6
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
1.1* Form of Purchase Agreement for offering of Preferred
Securities
4.1 Certificate of Trust of Arvin Capital I
4.2 Declaration of Trust of Arvin Capital I
4.3 Form of Amended and Restated Declaration of Trust of
Arvin Capital I
4.4 Form of Indenture between Arvin Industries, Inc. and
Wilmington Trust Company, as Trustee
4.5 Form of Supplemental Indenture between Arvin Indus-
tries, Inc. and Wilmington Trust Company, as Trustee
in connection with the issuance of the Junior Subordi-
nated Deferrable Interest Debentures
4.6 Form of Preferred Security Certificate (included in Ex-
hibit 4.3)
4.7 Form of Preferred Securities Guarantee Agreement
4.8 Form of Junior Subordinated Deferrable Interest Deben-
ture (included in Exhibit 4.5)
5.1* Opinion of Schiff Hardin & Waite
5.2* Opinion of Richards, Layton & Finger, P.A.
8.1* Opinion of Schiff Hardin & Waite
12.1 Computations of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Pre-
ferred Dividends
23.1 Consent of Price Waterhouse LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3* Consent of Schiff Hardin & Waite (included in Exhibits
5.1 and 8.1)
23.4* Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
24.1 Powers of Attorney (included on the signature page and
in Exhibit 4.2).
25.1* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as Debt Trustee under the Indenture
25.2* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as Institutional Trustee under the Declara-
tion of Trust of Arvin Capital I
25.3* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as Preferred Guarantee Trustee under the Pre-
ferred Securities Guarantee for the benefit of the
holders of Preferred Securities of Arvin Capital I
- --------
*To be filed by amendment.