<PAGE>
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
OR
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number I-4795
MLX CORP.
(Exact name of registrant as specified in its charter)
Georgia 38-0811650
(State or other jurisdiction of incorporation or
organization)(I.R.S. Employer Identification No.)
1000 Center Place, Norcross, Georgia 30093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404)798-0677
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:Common
Stock, $.01 par value
Indicate by check mark whether the Registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section Number 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of Registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendments to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates
of the Registrant was $7,244,000 as of March 1, 1994, based on
the bid (asked) price as reported on the NASDAQ Small Cap Market.
The number of shares outstanding of the Registrant's Common
Stock, par value $.01, as of the close of business on March 1,
1994 was 2,535,950.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part I, II & IV hereof incorporate information by
reference from Registrant's 1993 Annual Report to Shareholders, a
copy of which is filed with the Commission as Exhibit 13 hereto.
Portions of Part III hereof incorporate information by reference
from Registrant's definitive Proxy Statement to be filed with the
Commission no later than 120 days after the close of the
Registrant's fiscal year ended December 31, 1993 in connection
with Registrant's 1994 Annual Meeting of Shareholders.
<PAGE>
PART I
Item 1. Business.
(A) General Development of Business The
Registrant is engaged in the design and
manufacture of high-energy friction materials
which are used primarily in aircraft brakes
and heavy equipment brakes, transmission and
clutches.
Reference is made to the information set forth in the
Registrant's 1993 Annual Report to Shareholders under
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion
of the development of the business since January 1,
1993, which information is incorporated herein by
reference.
In June 1993, the Company merged with and into a
wholly-owned subsidiary in order to reincorporate in
the State of Georgia. This transaction was approved by
the Company's shareholders at the annual meeting of
shareholders on June 2, 1993.
(B) Financial Information About Industry Segments Reference
is made to information set forth in Note J of the Notes
to Consolidated Financial Statements in the
Registrant's 1993 Annual Report to Shareholders, which
information is incorporated herein by reference.
(C) Narrative Description of Business Reference is made to
the information set forth in "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" under "Other Data" contained in the
Registrant's 1993 Annual Report to Shareholders, which
information is incorporated herein by reference.
Additional information concerning the business of the
Registrant follows.
General: Today, MLX owns and manages the S. K. Wellman
("Wellman") subsidiary. Wellman is one of the world's
leading manufacturers of high-energy friction
materials. The friction materials manufactured and sold
by Wellman are used in a variety of applications which
require material which will withstand and function
under extreme conditions of high energy and heat. These
types of conditions exist in aircraft brakes and heavy
equipment brakes, transmissions and clutches. Wellman
has manufacturing facilities located in Brook Park,
Ohio; LaVergne, Tennessee; Concord, Ontario, Canada;
and Orzinuovi, Italy. Wellman also has administrative
offices and research facilities located in Solon, Ohio
and sales and/or distribution offices in Madison,
Wisconsin; Peoria, Illinois; Detroit, Michigan;
Cleveland, Ohio; Akron, Ohio; Edmonton, Alberta,
Canada; Vancouver, British Columbia, Canada; Concord,
Ontario, Canada; and Orzinuovi, Italy. At December
<PAGE>
31, 1993 Wellman had 511 employees. Approximately
213 of these employees were covered under collective
bargaining agreements which expire on April 22, 1994.
MLX provides managerial and administrative support to
Wellman. This support is provided in the areas of
strategic management, income tax compliance, legal
strategy and capital and lending resources.
Products: The friction materials manufactured by
Wellman are made of a variety of materials, including
metallic (either copper or iron based), graphitic,
ceramic, and composite fiber (paper). These friction
materials are used in commercial, military and general
aviation aircraft brakes; friction disks for use in
automatic and power shift transmissions; and clutch
buttons, which are used as the main contact point
between the engine and transmission. Wellman also
manufactures other types of clutch facings and opposing
disks to complement its clutch button business. Raw
materials used by Wellman are available from multiple
sources.
Customers: Wellman's customers for the aircraft brake
friction materials are primarily aircraft wheel and
brake manufacturers. Wellman's principal customers for
its friction disks are heavy equipment manufacturers
such as Caterpillar Inc., John Deere & Company, and the
Allison Division of General Motors Corporation. The
principal customers for its clutch buttons are heavy
equipment component suppliers such as Dana
Corporation. More than 80% of friction disk and clutch
button production is sold to original equipment
manufacturers with the balance sold to end users (under
the "Velvetouch" tradename) through distributors and
equipment rebuilders.
Competition: The Registrant believes that the domestic
market for the products that it manufactures is
approximately $200 million and that the total
worldwide approximates $300 million. The Registrant
believes that it is either the largest or the second
largest manufacturer of each of the products it
sells, with market share ranging between 20% and 60% of
such markets. In each of its markets, the Registrant
competes with a number of companies; however, there are
only one or two competitors in each of its markets
which are comparable in size to the Registrant.
Competition is primarily based upon the ability to
engineer a product which meets the customers'
specifications, consistent quality, price and delivery.
Research and Development: Research, product
development and engineering are an important aspect of
Wellman's business. Each of Wellman's products are
specifically engineered to meet a customer's
applications. The Registrant believes that it has the
most extensive research, development and engineering
capabilities and testing equipment in the industry.
Product research, development and engineering
expenditures for Wellman were approximately $3,365,000
in 1993, $3,164,000 in 1992 and $3,344,000 in 1991.
<PAGE>
(D) Financial Information About Foreign and Domestic
Operations and Export Sales Reference is made to
the information set forth in Note J of the Notes
to Consolidated Financial Statements in the
Registrant's 1993 Annual Report to Shareholders,
which information is incorporated herein by
reference.
Item 2. Properties.
The Registrant and its consolidated subsidiaries utilize the
following properties.
<TABLE>
<CAPTION>
Square
Location How Held Footage Utilization
<S> <C> <C> <C>
Brook Park,Ohio Owned1 111,000 Manufacturing
Cleveland, Ohio Leased 14,300 Materials Storage
Akron, Ohio Leased 20,400 Distribution
Solon, Ohio Owned1 50,000 Administration &
rearch
LaVergne, Tennessee Owned1 76,100 Manufacturing
Concord, Ontario, Leased1 15,200 Manufacturing &
Canada distribution
Orzinuovi, Italy Owned 65,000 Manufacturing &
sales
Norcross, Georgia Leased 3,000 Executive &
administration
</TABLE>
Management believes that none of the leased facilities is
critical to its operations. The leases are generally for an
initial term of five years and generally contain one or more
renewal option periods. Management considers the properties to be
suitable for their present use.
Item 3. Legal Proceedings.
An interpleader action was filed in the U.S. District Court for
the Northern District of Georgia on October 9, 1992, by Mr.
Alfred R. Glancy III, a director of the Company, as the custodian
of the shares of Common Stock held pursuant to a Voting Trust.
Mr. Glancy requested that the court determine whether or not the
Voting Trust was effectively terminated as a result of the
actions of one of the trustees of the Voting Trust. Upon Mr.
Glancy's motion, the interpleader action was dismissed with
prejudice on March 11, 1994. Mr Glancy has indicated that he will
distribute the trust shares to their beneficial owners, and the
Company has agreed to permit the Voting Trust to terminate. The
Company agreed to the termination of the Voting Trust prior to
its scheduled expiration (June 30, 1994) because the adoption of
share transfer restrictions at last year's annual meeting of
shareholders obviated the need for the trust.
[FN]
<F1>1 These facilities and equipment at these locations are a
portion of the collateral securing the Senior Lending Facility
due in 1997 (S. K. Wellman) described in Note D of the Notes to
the Consolidated Financial Statements contained in the
Registrant's 1993 Annual Report to Shareholders.
<PAGE>
Other than the interpleader action described above, the
Registrant is unaware of any litigation which is expected to have
a material effect on the results of operations or financial
condition of the Registrant.
Item 4. Submission of Matters to a Vote of Security
Holders
No response under this item is required.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Reference is made to the information set forth in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" under "Market, Share Ownership and Dividend
Information" in the Registrant's 1993 Annual Report to
Shareholders, which information is incorporated herein by
reference.
Item 6. Selected Financial Data.
Reference is made to the information set forth in "Financial
Review" under "Selected Financial Information" in the
Registrant's 1993 Annual Report to Shareholders, which
information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Reference is made to the information set forth under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1993 Annual Report to
Shareholders, which information is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the information set forth under
"Consolidated Financial Statements" in the Registrant's 1993
Annual Report to Shareholders, which information is incorporated
herein by reference.
Reference is made to the information set forth under "Quarterly
Data" in the Registrant's 1993 Annual Report to Shareholders,
which information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
No response under this item is required.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the
Registrant.
For information with respect to Directors and Executive Officers
of the Registrant, the Registrant incorporates by reference
herein the information appearing under the caption, "Business
Experience of Directors and Executive Officers" and, with respect
to compliance with Item 405 of Regulation S-K, "Security
Ownership of Certain Beneficial Owners" under the table
containing the "Amount and Nature of Beneficial Ownership" of
executive officers and directors contained in the Registrant's
definitive Proxy Statement to be filed with the Commission no
later than 120 days after the close of the Registrant's fiscal
year ended December 31, 1993 in connection with the Registrant's
1994 Annual Meeting of Shareholders.
Item 11. Executive Compensation.
Registrant incorporates by reference herein information appearing
under the caption "Remuneration of Directors and Executive
Officers" contained in the Registrant's definitive Proxy
Statement to be filed with the Commission no later than 120 days
after the close of the Registrant's fiscal year ended December
31, 1993 in connection with the Registrant's 1994 Annual Meeting
of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Registrant incorporates by reference herein information appearing
under the caption "Security Ownership of Certain Beneficial
Owners" contained in the Registrant's definitive Proxy Statement
to be filed with the Commission no later than 120 days after the
close of the Registrant's fiscal year ended December 31, 1993 in
connection with the Registrant's 1994 Annual Meeting of
Shareholders.
Item 13. Certain Relationships and Related Transactions.
Registrant incorporates by reference herein information appearing
under the caption "Employment Agreements With Executive Officers"
and "Compensation Committee Interlocks and Related Transactions'
contained in the Registrant's definitive Proxy Statement to be
filed with the Commission no later than 120 days after the close
of the Registrant's fiscal year ended December 31, 1993 in
connection with the Registrant's 1994 Annual Meeting of
Shareholders.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) Documents Filed as part of the Report.
(1) The following consolidated financial
statements of the Registrant and its
subsidiaries, included in its 1993 Annual
Report to Shareholders, are incorporated in
Item 8 herein by reference:
Consolidated Balance Sheets at December 31,
1993 and 1992.
Consolidated Statements of Operations for the
years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the
years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1993,
1992 and 1991.
Notes to Consolidated Financial Statements -
December 31, 1993.
(2) The following consolidated financial
statement schedules of the Registrant and its
subsidiaries are included in Item 14(d):
Schedule III - Condensed Financial
Information of
Registrant
Schedule V - Property, Plant and
Equipment
Schedule VI - Accumulated Depreciation,
Depletion, and
Amortization of
Prroperty, Plant and
Equipment
Schedule VIII - Valuation and Qualifying
Accounts
Schedule IX - Short Term Borrowings
Schedule X - Supplementary Income
Statement Information
All other schedules for which provision is made in
the applicable accounting regulation of the
Securities and Exchange Commission are not
required under the related instruction or are
inapplicable, and therefore have been omitted.
<PAGE>
(3) Exhibits required by Item 601 of Regulation
S-K:
Exhibit 3.1 & 4.1 - Articles of
Incorporation of the
Registrant, as
amended
(incorporated herein
by reference to
Exhibit 3.1 to the
Registrant's Report
on Form 10-Q for the
quarter ended June
30, 1993).
Exhibit 3.2 & 4.2 - By-Laws of the
Registrant
(incorporated herein
by reference to
Exhibit 3.2 to the
Registrant's Report
on Form 10-Q for the
quarter ended June
30, 1993).
Exhibit 4.3 & 9.1 - Voting Trust
Agreement dated
Deecember 11, 1984
(incorporated herein
by reference to
Exhibit 4.3 to the
Registrant's Report
on Form 10-K for the
fiscal year ended
December 31, 1991).
Exhibit 4.4 & 9.2 - Amendment No. 1
dated October 26,
1987 to the Voting
Trust Agreement
dated December 11,
1984 (incorporated
herein by reference
to Exhibit 4.3 to
the Registrant's
Report on Form 10-K
for the fiscal year
ended December 31,
1991).
Exhibit 4.5 & 9.3 - Amendment No. 2,
dated April 2, 1991,
to the Voting Trust
Agreement dated
December 11, 1984
(incorporated herein
by reference to
Exhibit 4.3 to the
Registrant's Report
on Form 10-K for the
fiscal year ended
December 31, 1991).
Exhibit 4.6 - Restricted Transfer
Trust Agreement
dated October 10,
1986 (incorporated
herein by reference
to Exhibit 4.3 to
the Registrant's
Report on Form 10-K
for the fiscal year
ended December 31,
1991).
Exhibit 4.7 - Amendment No. 1
dated October 26,
1987 to the
Restricted Transfer
Trust Agreement
dated October 10,
1986 (incorporated
herein by reference
to Exhibit 4.3 to
the Registrant's
Report on Form 10-K
for the fiscal year
ended December 31,
1991).
<PAGE>
Exhibit 4.8 - Amendment No. 2
dated June 4, 1990
to the Restricted
Transfer Trust
Agreement dated
October 10, 1986
(incorporated herein
by reference to
Exhibit 4.3 to the
Registrant's Report
on Form 10-K for the
fiscal year ended
December 31, 1991).
Exhibit 4.9* - MLX Exchange
Agreement dated as
of April 13, 1990,
as amended and
restated as of March
19, 1992, as amended
and restated as of
April 21, 1993,
among the
Registrant, the
Lenders listed
therein, and Morgan
Guaranty Trust
Company of New York,
as Bond Agent.
Exhibit 4.10 - MLX Limited
Guarantee, dated as
of March 19, 1992
(incorporated herein
by reference to
Exhibit 2.17 to the
Registrant's Current
Report on Form 8-K,
dated April 10,
1992).
Exhibit 4.11 - Management Services
Agreement, dated as
of March 19, 1992,
between the
Registrant and
Pameco Holdings,
Inc. (incorporated
herein by reference
to Exhibit 2.16 of
Registrant's Current
Report on Form 8-K
dated April 10,
1992).
Exhibit 4.12 - Amendment to
Management Services
Agreement, dated as
of November 30,
1992, between the
Registrant and
Pameco Holdings,
Inc. (incorporated
herein by reference
to Exhibit 4.12 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.13 - Nomination
Agreement, dated as
of December 15,
1992, among the
Registrant and the
Investors listed
therein
(incorporated herein
by reference to
Exhibit 4.13 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.14 - Exchange Agreement,
dated as of January
15, 1993, among MLX
Corp. and the
Investors listed
therein
(incorporated herein
by reference to
Exhibit 4.14 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
<PAGE>
Exhibit 4.15 - Loan and Security
Agreement, dated as
of January 15, 1993,
between S.K. Wellman
Limited, Inc. and
Barclays Business
Credit, Inc.
(incorporated herein
by reference to
Exhibit 4.15 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.16 - First Amendment to
Loan and Security
Agreement, dated as
of February 19,
1993, between S.K.
Wellman Limited,
Inc. and Barclays
Business Credit,
Inc. (incorporated
herein by reference
to Exhibit 4.16 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.17 - Second Amendment to
Loan and Security
Agreement, dated as
of March 15, 1993,
between S.K. Wellman
Limited, Inc. and
Barclays Business
Credit, Inc.
(incorporated herein
by reference to
Exhibit 4.17 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.18 - Stock Pledge
Agreement (S.K.
Wellman S.p.A.),
dated as of January
15, 1993 between The
S.K. Wellman Corp.
and Barclays
Business Credit,
Inc. (incorporated
herein by reference
to Exhibit 4.18 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.19 - Stock Pledge
Agreement (S.K.
Wellman S.p.A.),
dated as of January
15, 1993, between
S.K. Wellman
Limited, Inc. and
Barclays Business
Credit, Inc.
(incorporated herein
by reference to
Exhibit 4.19 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.20 - Stock Pledge Agreeme
(The S.K. Wellman
Company of Canada
Limited), dated as
of January 15, 1993,
between The S.K.
Wellman Corp. and
Barclays Business
Credit, Inc.
(incorporated herein
by reference to
Exhibit 4.20 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
<PAGE>
Exhibit 4.21 - Patent Collateral
Assignment and
Security Agreement,
dated as of January
15, 1993, between
The S.K. Wellman
Corp. and Barclays
Business Credit,
Inc. (incorporated
herein by reference
to Exhibit 4.21 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.22 - Trademark Security
Agreement, dated as
of January 15, 1993,
between The S.K.
Wellman Corp. and
Barclays Business
Credit, Inc.
(incorporated herein
by reference to
Exhibit 4.22 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 4.23* - Exchange Agreement
dated as of April 2,
1993 among MLX Corp.
and the Bondholders
Listed Herein.
Exhibit 10.1# - Employment Agreement
dated February 10,
1991, between the
Registrant and Brian
R. Esher
(incorporated herein
by reference to
Exhibit 10.1 to the
Registrant's Report
on Form 10-K for the
fiscal year ended
December 31, 1990).
Exhibit 10.2# - First Amendment to
Employment
Agreement, dated as
of March 19, 1992,
between the
Registrant and Brian
Esher.
Exhibit 10.3 - Severance/Consulting
Agreement dated
January 14, 1991,
between the
Registrant and
William P. Panny
(incorporated herein
by reference to
Exhibit 10.3 to the
Registrant's Report
on Form 10-K for the
fiscal year ended
December 31, 1990).
<PAGE>
Exhibit 10.4 - Purchase Agreement,
dated as of March
19, 1992, among the
Registrant, Pameco
Holdings, Inc., and
Pameco Corporation
(incorporated herein
by reference to
Exhibit 2.1 of
Registrant's Current
Report on Form 8-K
dated April 10,
1992).
Exhibit 10.5# - MLX Corp. Stock
Option Plan, dated
as of December 29,
1989 (incorporated
herein by reference
to Exhibit 10.5 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 10.6# - Senior Management
Discretionary Bonus
Plan, dated as of
January 21, 1992
(incorporated herein
by reeference to
Exhibit 10.6 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 13* - 1993 Annual Report
to Shareholders of
the Registrant. With
the exception of
information
expressly
incorporated herein
by reference, the
1993 Annual Report
is not deemed to be
filed with the
Commission.
Exhibit 21 - Subsidiaries of the
Registrant
(incorporated herein
by reference to
Exhibit 22 of
Registrant's Report
on Form 10-K for the
year ended December
31, 1992).
Exhibit 24* - Consent of
Independent
Accountants.
_____________
[FN]
*Filed with this Report on Form 10-K
#Management compensatory plan or arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Registrant during the quarter ended December 31,
1993.
<PAGE>
SIGNATURES
Pursuant to the requirement's of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
MLX Corp.
Dated: March 11, 1994 By: /s/ Thomas C. Waggoner
Thomas C. Waggoner
Vice President &
Chief Financial Officer
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant, and in the capacities indicated, on
March 11, 1994.
Signature Title
/s/ BRIAN R. ESHER Chairman of the Board,
President & Chief
Executive Officer
(Principal Executive
Officer) and Director
/s/ THOMAS C. WAGGONER Vice President & Chief
Financial Officer
(Principal Financial &
Accounting Officer)
/s/ WILLEM F.P. de VOGEL Director
/s/ ALFRED R. GLANCY III Director
/s/ S. STERLING McMILLAN III Director
/s/ J. WILLIAM UHRIG Director
/s/ W. JOHN ROBERTS Director
/s/ H. WHITNEY WAGNER Director
<PAGE>
Report of Independent Auditors
Board of Directors
MLX Corp.
We have audited the consolidated balance sheets of MLX Corp. and
subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended
December 31, 1993. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of MLX Corp. and subsidiaries at December 31,
1993 and 1992, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income
taxes and postretirement benefits.
ERNST & YOUNG
March 11, 1994
Atlanta, Georgia
<PAGE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT MLX Corp.
December 31, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS 1993 1992
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 695 $ 413
Dividend receivable from subsidiary - 2,523
Prepaid expenses and other - 115
Total Current Assets 695 3,051
Investment in Subsidiaries* 12,612 13,571
Other Assets:
Leasehold improvements and equipment - net 7 47
Intangible assets - net 415 345
Other 1 1
Total Other Assets 423 393
$13,730 $17,015
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6 $ 10
Payables to subsidiaries* - 1
Other accrued liabilities 1,083 1,022
Current portion of long-term debt - 718
Federal income taxes payable 150 -
Dividends payable on Series A Preferred Stock 638 -
Total Current Liabilities 1,877 1,751
Long-Term Liabilities:
Minority interest notes payabl - 2,384
Zero coupon bonds 1,005 9,472
Note payable to bank - 3,302
Variable Rate Subordinated Note 1,397 -
Note payable to subsidiary* 2,127 1,950
4,529 17,108
Shareholders' Equity:
Preferred stock 6,981 5,100
Common stock 25 254
Capital in excess of par value 60,551 57,319
Retained earnings deficit since December 11, 1984 (58,836) (63,629)
8,721 (956)
Other equity deductions (1,397) (888)
Total Shareholders' Equity 7,324 (1,844)
$13,730 $17,015
<FN>
*Eliminated in consolidation.
</TABLE>
<PAGE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (cont.) MLX Corp.
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIO 1993 1992 1991
<S> <C> <C> <C>
Revenues:
Interest and other income $ 125 $ 348 $ 384
Dividends from subsidiaries* 5,900 - 5,002
Management fees from subsidiarie 950 600 1,650
Management fee from related party 82 470 -
Total Revenues 7,057 1,418 7,036
Expenses:
General and administrative expenses 1,355 1,408 2,006
Interest expense:
Subsidiary indebtedness* 151 295 377
Other indebtedness 366 1,334 1,595
Earnings (loss) before taxes, equity in
earnings (losses) of subsidiaries,
discontinued operations and
extraordinary item 5,185 (1,619) 3,058
Charge in lieu of federal
income taxes (1,243) (1,110) -
Provision for federal AMT taxes (150) - -
Credit for subsidiary tax sharing 1,360 2,129 876
Earnings (loss) before equity in earnings
(losses) of subsidiaries, discontinued
operations and extraordinary item 5,152 (600) 3,934
Equity in earnings (losses) of
subsidiaries, after payment
of dividends* (3,113) 1,985 (18,233)
Loss on disposal of discontinued
operations - - (8,935)
Extraordinary gain on early retirement
of debt (net of charge in lieu of federal
income taxes of $1,869 in 1993 and $1,661
in 1992) 3,627 4,124 -
Net earnings (loss) $ 5,666 $ 5,509 $(23,234)
CONDENSED STATEMENTS OF CASH FLOWS
Net Cash Provided by Operating Activities $ 254 $ 1,211 $ 215
Investing Activities:
Purchase of property - - (24)
Financing Activities:
Proceeds from sale of common stock - - 78
Dividends and advances from subsidiary 6,538 - -
Reduction of debt (6,510) (1,835) (661)
28 (1,835) (583)
Increase (Decrease) in cash $ 282 $ (624) $ (392)
<FN>
* Eliminated in consolidation.
</TABLE>
<PAGE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
MLX CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Charges Balance at
Classification Beginning of Additions at Cost Retirements Add (deduct) End of
Period (1) Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land and improvements $ 1,192,000 $ 0 $ 0 $ (13,000) $ 1,179,000
Buildings and improvements 6,934,000 83,000 0 (84,000) 6,933,000
Machinery and equipment 14,883,000 1,835,000 (68,000) (643,000) 16,007,000
Construction in process 631,000 (98,000) 0 0 533,000
$23,640,000 $1,820,000 $(68,000) $ (740,000) $24,652,000
Year ended December 31, 1992:
Land and improvements $ 1,219,000 $ 0 $ 0 $ (27,000) $ 1,192,000
Buildings and improvements 7,114,000 0 (5,000) (175,000) 6,934,000
Machinery and equipment 15,342,000 907,000 (110,000) (1,256,000) 14,883,000
Construction in process 409,000 222,000 0 0 631,000
$24,084,000 $1,129,000 $(115,000) $(1,458,000) $23,640,000
Year ended December 31, 1991:
Land and improvements $ 1,216,000 $ 5,000 $ 0 $ (2,000) $ 1,219,000
Buildings and improvements 7,205,000 43,000 (120,000) (14,000) 7,114,000
Machinery and equipment 14,337,000 1,238,000 (144,000) (89,000) 15,342,000
Construction in process 301,000 108,000 0 0 409,000
$23,059,000 $1,394,000 $(264,000) $ (105,000) $24,084,000
<FN>
<F1> (1) Foreign translation adjustments.
</TABLE>
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
MLX CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Additions Charged Other Charges Balance at
Classification Beginning of to Costs and Retirements Add (deduct) End of
Period Expemses (1) Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land and improvements $ 59,000 $ 22,000 $ 0 $ 0 $ 81,000
Buildings and improvements 1,751,000 359,000 0 (15,000) 2,095,000
Machinery and equipment 9,553,000 1,372,000 (60,000) (453,000) 10,412,000
$11,363,000 $1,753,000 $ (60,000) $ (468,000) $12,588,000
Year ended December 31, 1992:
Land and improvements $ 42,000 $ 17,000 $ 0 $ 0 $ 59,000
Buildings and improvements 1,439,000 341,000 (5,000) (24,000) 1,751,000
Machinery and equipment 8,576,000 1,811,000 (91,000) (743,000) 9,553,000
$10,057,000 $2,169,000 $ (96,000) $ (767,000) $11,363,000
Year ended December 31, 1991:
Land and improvements $ 25,000 $ 17,000 $ 0 $ 0 $ 42,000
Buildings and improvements 1,188,000 353,000 (98,000) (4,000) 1,439,000
Machinery and equipment 6,834,000 1,896,000 (114,000) (40,000) 8,576,000
$ 8,047,000 $2,266,000 $(212,000) $ (44,000) $10,057,000
<FN>
<F1> (1) Foreign translation adjustments
</TABLE>
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
MLX CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Beginning Charged to Costs Charged to Other Deductions-Describe Balance at End
Description of Period and Expenses Accounts-Describe (1) of Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Reserve and allowances
deducted from
asset accounts
Valuation allowance
for deferred
tax assets - $124,000,000 - $3,000,000 $121,000,000
<FN>
<F1> (1) Reduction in net operating loss carryover due to offset against taxable income.
</TABLE>
<PAGE>
SCHEDULE IX - SHORT-TERM BORROWINGS
MLX CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Amount Average Amount Weighted
Balance at Weighted Outstanding Outstanding Average Interest
Catagory of Aggregate End of Average During the During the Rate During
Short-Term Borrowings Period Interest Rate Period Period (1) the Period (2)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Revolving Credit Facility $2,345,036 9.82% $4,424,605 $2,968,932 9.05%
Year ended December 31, 1992:
Revolving Credit Facility $1,332,180(3) 8.49% $4,368,019 $2,334,262 8.50%
Revolving Credit Facility 0(3) 15.60% 3,224,550 1,896,970 15.60%
Year ended December 31, 1991:
Revolving Credit Facility $4,368,019(3) 8.95% $10,027,000 $7,023,309 9.75%
Revolving Credit Facility 3,224,550(3) 14.50% 3,592,339 3,230,969 14.50%
<FN>
<F1> (1)Average amount outstanding computed by dividing calendar month end loan balances plus
previous year-end balance by 13.
<F2> (2)The weighted average interest rate during the period was computed by dividing the actual
interest expense by average short-term debt outstanding.
<F3> (3)The revolving credit facilities expired in 1993. The facilities were replaced by a new lender
in early 1993. The new facility expires in 1997.
</TABLE>
<PAGE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
MLX CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B
ITEM Charged to Costs and Expenses
Year ended December 31
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $1,111,000 $1,086,000 $ 768,000
Depreciation and amortization of
intangible assets, preoperating costs
and similar deferrals $ 919,000 $1,252,000 $1,356,000
Taxes other than payroll and
income taxes (A) (A) (A)
Royalties (A) (A) (A)
Advertising costs (A) (A) (A)
<FN>
(A) Expense amount represents less than 1% of total sales.
</TABLE>
COVER
[DESCRIPTION]
GRAPHIC #1: Artwork - MLX Logo
1993 ANNUAL REPORT MLX CORP.
<PAGE>
CORPORATE PROFILE
Formed as a result of a reorganization in 1984, MLX Corp is today
a publicly held company owned by an estimated 11,000 beneficial
shareholders. MLX owns and manages the S.K. Wellman group of
specialty friction materials businesses and seeks to diversify
and grow by expanding internally and acquiring other businesses
with a similar strategy. MLX has a federal net operating loss
carryforward exceeding $300 million to offset federal taxable
income from its investments.
The S.K. Wellman subsidiaries are engaged in the global
design and manufacture of specialty friction and related
products intended for use in extremely demanding environments.
Wellman produces friction components under very precise
tolerances for use in brake, clutch and transmission applications
in heavy equipment, farm machinery, military equipment,
recreational vehicles, trains and over the road trucks as well as
brake applications for commercial and military aircraft. Wellman
participates in both the original equipment and replacement
markets and relies on an extensive research and development and
engineering staff to continually provide improved products and
performance to its Fortune 500 and international customers.
Table of contents
Financial Highlights 1
Letter to Shareholders 2
About S.K. Wellman 4
Five Year Financial Review 6
Management's Discussion and Analysis 7
Consolidated Financial Statements and Notes 10
Report of Independent Auditors 23
Corporate Data 24
The Year In Review IBC
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1992 1991
(in 000's except per share data)
<S> <C> <C> <C>
Net Sales $ 57,036 $ 53,862 $ 50,714
Operating Earnings 6,218 5,373 3,738
Interest Expense, net (2,100) (2,612) (3,399)
Earnings from Continuing Operations 2,039 1,385 57
Net Earnings 5,666 5,509 (23,234)
Earnings per Share from Continuing Operations
(Net of Dividends and Accretion on
Preferred Stock) $ 0.45 $ 0.55 $ 0.02
Long-Term Debt 14,845 25,711 39,385
Shareholders' Equity (Deficit) 7,324 (1,844) (14,252)
</TABLE>
Earnings per share data have been restated to reflect the 1993 one for
ten reverse stock split.
[DESCRIPTION]
GRAPHIC #2: (3) Bar Graphs: Revenues, in thousands; Net Tangible Shareholders'
Equity, in thousands; Earnings from Continuing Operations, in thousands.
[FN]
*Includes intangible assets of the RACGroup
(discontinued as of December 31, 1991).
<PAGE>
LETTER TO SHAREHOLDERS
1993 was an outstanding year for your Company. We achieved a
record annual sales level (excluding the discontinued
operations), and in all areas of our business -- debt reduction,
profits, asset management, new product development, quality,
customer service levels and shareholder services -- we had a very
active and productive year. Finally, and very importantly, we
were able for the first time in over two years to turn our
attention away from financial restructuring obligations and focus
full time on operations and expansion opportunities.
This focus, coupled with the performance of our S.K. Wellman
operating team, has resulted in the numerous positive financial
trends which you see displayed in graphs throughout this annual
report.
Our consolidated sales level in 1993 of $57.0 million is a
record sales performance for the Company (excluding the
discontinued operations). This represents an increase of $3.2
million or 5.9% over the 1992 performance. This was not a
"one-quarter" phenomenon. Instead, it was a steady growth trend
achieved through new product introductions, diversification and
aggressive marketing. In fact, by year end we had exceeded
comparable, prior-year quarterly sales for seven consecutive
quarters. This revenue growth, combined with our on-going cost
control and production efficiency efforts, enabled us to
significantly improve our operating earnings performance in
1993. Our operating earnings level of $6.2 million in 1993 is an
increase of 15.7% over that of 1992 and represents the fourth
consecutive year of improvement in this measure. This achievement
is an annualized growth rate of 31% in operating earnings since
1989.
1993 also represented a significant turning point for MLX as
we achieved an attractive, balanced capital structure after our
numerous financial restructuring efforts which had gone on for
years. As a result of the 1992 disposition of the unprofitable
Refrigeration and Air Conditioning Group, the program to exchange
Series A Preferred Stock for our Zero Coupon Bonds and on-going
profitable operations, your Company was able to achieve positive
net tangible shareholders' equity for the first time since MLX
began active operations in 1986. At the same time, these efforts
resulted in a consolidated debt level of only $14.8 million --
our lowest level since MLX began active operations.
Also in 1993, we completed three transactions which were
approved by our shareholders at our most recent annual meeting in
June. First, effective June 25, 1993, we executed a one for ten
reverse stock split coupled with a reincorporation of MLX as a
Georgia corporation. This was designed to reduce our
administrative costs for periodic reporting and to set the stage
for relisting on the NASDAQ exchange. At this same time, we
implemented certain shareholder-approved transfer restrictions on
our common stock which are aimed at safeguarding our $339
million net operating loss carryforward which can be used to
offset future taxes. Outside of our friction-related operating
companies, this net operating loss carryforward is our most
significant asset.
[DESCRIPTION]
GRAPHIC #3: (1) Bar Graph Chart: Long-Term Debt, in thousands, for
years 1989 through 1993.
<PAGE>
We were pleased to report to you this year in our third
quarter report to shareholders that we regained our listing on
the NASDAQ Small Cap Market under the trading symbol "MLXR." This
should provide you with a more active and efficient market for
your share transactions. We hope to qualify for listing on the
NASDAQ National Market System during 1994 which will further
enhance our common stock listing.
A large measure of our success in 1993, as in prior years,
can be attributed to our operating team at S.K. Wellman headed up
by Ron Grambo. Ron's 35 years of experience in the specialty
friction business and the skill and motivation of his operating
team represent a strong, strategic advantage enjoyed by S.K.
Wellman.
I am especially proud of the fact that we have achieved the
attractive operating results of 1993 without relying on the
nonrecurring effects of financial restructuring. Instead, I
believe we have based these positive trends on a solid
operating foundation -- including skilled operating personnel, a
commitment to research and development, efficient production
operations and a renewed focus on market responsiveness. This
places us in a strong position to go forward. At the same time,
we have strengthened our balance sheet and have addressed the
financial exposures related to certain employee benefit plans.
We expect to significantly increase our capital spending in
1994 with a goal of achieving additional production efficiencies
and flexibilities as well as continuing expansion into new
product areas at S.K. Wellman. We plan to continue to broaden our
product lines and capabilities.
In addition, we will continue to evaluate acquisition
opportunities as they arise. We have developed specific criteria
for this purpose and plan to critically evaluate target companies
- -- both within the specialty friction industry and in other
areas.
We are pleased to announce that in 1993 we added two new
members to our board of directors. Both William Uhrig and Whitney
Wagner are affiliated with Three Cities Research, Inc., a
significant shareholder, and they bring a wealth of financial and
strategic experience to our board.
We hope that you are as pleased with the 1993 operating
results as we are here at MLX, and we thank you for your
continued support.
Sincerely,
[SIGNATURE]
Name and Title: Brian R. Esher
Chairman, President and Chief Executive Officer
March 11, 1994
[DESCRIPTION]
GRAPHIC #4: (1) Bar Graph Chart: Latest Twelve Months Results, in
thousands, showing Operating Earnings and Income Before
Extraordinary Item.
[DESCRIPTION]
GRAPHIC #5: Photo and Caption: Thomas C. Waggoner (left), Brian R. Esher
(center) and Ronald E. Grambo (right)
<PAGE>
S. K. WELLMAN
S.K. Wellman is a leading global designer and manufacturer
of high-energy friction materials and related products. The
Company operates manufacturing plants in Brook Park, Ohio;
LaVergne, Tennessee; and Orzinuovi, Italy and a remanufacturing
facility in Concord, Ontario. The Company is headquartered in
Solon, Ohio where it has an extensive research and development
and administrative facility.
S.K. Wellman supplies its products to world-class
manufacturers in the construction, aircraft, farming,
transportation, logging and mining industries. It also sells its
products under the "Velvetouch" brand to rebuilders and other
users through an extensive distribution network which sells and
supports the Company's products in over 30 countries around
the world.
In 1994 S.K. Wellman is celebrating its 70th year of
providing high- performance friction materials to its customers.
Throughout the years, the Company has built a solid reputation of
providing quality and innovation in products used in brakes,
clutches, transmissions and other friction-related areas.
Wellman has been successful because it has developed
strategic, competitive advantages in certain critical areas.
These include research and development, quality assurance,
customer relations and engineering and production expertise.
[DESCRIPTION]
GRAPHIC #6: Photo and Caption: Employees at the LaVergne, Tennessee plant
celebrate receiving the John Deere Supplier Quality
Certification Award. (L-R) Edna Young, Brenda Patterson,
Clarence Williams and Jim Fields.
RESEARCH AND DEVELOPMENT
Research and development is a critical component of
providing ever improving friction materials and products to solve
customer needs. Wellman annually spends more than $3 million on
research and development applications and manufacturing
engineering and boasts a trained staff of 40 highly experienced
team members in these areas. These professionals develop new
friction materials to meet specific application demands, develop
cost-efficient manufacturing processes and work with our
customers to plan for the evolution of their product technology
and assist them in finding solutions to their needs.
While all of the Wellman manufacturing locations include
engineering and R&D support functions, the primary research and
development effort takes place in the world headquarters facility
in Solon, Ohio. Portions of this 50,000 square foot facility are
specifically designed to house this research function --including
testing bays where dynamometer equipment can simulate our product
under application conditions and automatically capture and
evaluate the test data. These dynamometers represent millions of
dollars of capital investment dedicated to serving and supporting
our customer application needs.
[DESCRIPTION]
GRAPHIC #7: (1) Bar Chart: R&D AND ENGINEERING EXPENDITURES, % of
sales
QUALITY ASSURANCE
Most of S.K. Wellman's major customers require periodic
certifications of their principal suppliers to insure that both
manufacturer and supplier are meeting a common quality objective.
These certifications are conducted on-site and cover areas such
as:
EDI Order Transfer Total Quality Management Employee
Training Continuous Improvement
Parts Traceability Production Planning
Just in Time Delivery Capability Statistical Process Control
Engineering and Technical Support Materials Control and Handling
<PAGE>
S.K. Wellman holds supplier quality certifications from
world-class manufacturers such as Caterpillar Inc., Clark Hurth
Components Company, Deere & Company, B.F. Goodrich, and Ford New
Holland, Inc.
PARTNERSHIPS WITH CUSTOMERS
The key to S.K. Wellman's success for 70 years is its
dedication and focus on meeting customer needs and on providing
our customers with continuous improvements in products and
performance. Part of the Wellman strategy in this area includes
being involved in active partnerships with its customers. To meet
this objective, Wellman engineers are closely involved with
customers at the concept stage and contribute ideas to
the customer's product program. This cooperative role now extends
to having our personnel involved on customer task forces to solve
specific performance problems and develop test criteria. This can
easily be a long-term commitment since many major product items
require years in development and certification.
[DESCRIPTION]
GRAPHIC #8: Photo and Caption: Richard E. Dowell, Director of Organic R&D
(left) and Horst Becker, Director of Metallic R&D (right) examine dynamometer
test results with Technician Ronald F. Fhay. (seated)
EXPERIENCED WELLMAN TEAM
Our most valuable asset at S.K. Wellman is our team of
skilled employees who year after year have dedicated themselves
to our principles of customer satisfaction, continuous
operational improvement and our relentless pursuit of
technological breakthroughs in friction materials. This team
includes an executive staff with a combined average experience of
18 years and a skilled hourly work force with an average tenure
of over 9 years. This vast pool of expertise results in a
continuous flow of new and innovative product solutions with the
highest standards of quality and service excellence.
[DESCRIPTION]
GRAPHIC #9: Artwork: 70 Year Gold Banner
[DESCRIPTION]
GRAPHIC #10: Photo and Caption: The S.K. Wellman management team includes:
(seated L-R) Ronald E. Grambo, Thomas W. Hites, James W. Feldhouse, Brian
R. Esher and Giovanni Cipolla. (standing L-R) Frederic A. Kowalcyk, Thomas C.
Waggoner, Anthony M. Gambatese and Douglas O. Firman.
<PAGE>
FINANCIAL REVIEW
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years ended December 31 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Operating Data
Net sales $57,036 $53,862 $50,714 $55,228 $55,981
Gross margin 13,862 12,586 10,711 13,329 16,965
Operating expenses (excluding
restructuring and other
nonrecurring costs) 7,644 7,213 6,973 8,811 8,819
Operating earnings (loss)
S.K. Wellman 6,541 5,712 4,563 5,473 9,594
Corporate (323) (339) (825) (955) (1,448)
Restructuring and other
nonrecurring costs -- -- -- (660) (6,040)
Total operating earnings 6,218 5,373 3,738 3,858 2,106
Interest expense, net (2,100) (2,612) (3,399) (3,333) (2,396)
Other income (expense) (162) 367 (75) 331 (93)
Income taxes (1,917) (1,428) (7) (413) (585)
Minority interests -- (315) (200) (310) (680)
Earnings (loss) from
continuing operatio 2,039 1,385 57 133 (1,648)
Discontinued operatio -- -- (23,291) (26,505) (10,607)
Extraordinary gain on early
retirement of debt 3,627 4,124 -- -- --
Net earnings (loss) $ 5,666 5,509 $(23,234) (26,372) $(12,255)
Discontinued Operations
Net sales $ -- $ -- $333,279 $394,849 $405,988
Gross margin -- -- 83,820 97,101 109,761
Operating expenses -- -- (81,090) (105,488) (90,718)
Other expenses -- -- (17,086) (18,118) (29,650)
Loss on disposal -- -- (8,935) -- --
Net loss from
discontinued operations $ -- $ -- $(23,291) $(26,505) $(10,607)
Financial Position
Working capital $ 8,990 $ 9,752 $ 10,331 $ 14,589 $ 13,856
Depreciation and amortization 2,671 3,421 3,622 3,396 3,158
Total assets 33,761 33,128 41,718 47,945 46,562
Long-term liabilities 17,053 26,631 40,980 46,253 20,280
Minority interests -- -- 2,045 1,845 1,724
Shareholders' equity (deficit) 7,324 (1,844) (14,252) 8,852 23,112
Per Share Data
Average common shares
outstanding and dilutive
options 2,620 2,541 2,540 2,268 1,697
Earnings (loss) per share:
Continuing operations $ 0.45 $ 0.55 $ 0.02 $ 0.06 $ (0.97)
Discontinued operations -- -- (9.17) (11.69) (6.25)
Extraordinary gain on
early retirement of debt 1.38 1.62 -- -- --
Total $ 1.83 $ 2.17 $ (9.15) $ (11.63) $ (7.22)
<FN>
Dollars in thousands (except earnings per share data)
Earnings per share data have been restated to reflect the
1993 one for ten reverse stock split.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Basis of Presentation -- Effective June 25, 1993, MLX implemented
a one for ten reverse stock split as approved by shareholders at
the 1993 annual meeting of shareholders. Historical per share
data in the consolidated financial statements and in the
discussion below have been retroactively adjusted to reflect this
reverse split.
On March 19, 1992 MLX sold its investment in its Refrigeration
and Air Conditioning Group (RAC Group). The RAC Group has been
reported as a discontinued operation in accordance with APB
Opinion No. 30. Accordingly, the results of continuing operations
and balance sheet reported in the consolidated financial
statements and discussed below are those of the consolidated
group (MLX Corp. and the S.K. Wellman subsidiary) as it is now
comprised.
1993 vs. 1992 -- Revenues for S.K. Wellman in 1993 were $57.0
million compared to a 1992 level of $53.9 million, an increase of
5.9%. This increase resulted principally from higher sales of
transmission and clutch components for use in construction
equipment, farm machinery and on-highway hauling vehicles. In
addition, after-market sales increased by 15.4% compared to 1992
due to higher demand for sales for U.S. military applications and
to export customers.
1993 sales of aircraft brake components decreased by
approximately 10.5% compared to 1992 due to lower mid-year demand
from commercial airline customers.
In addition, reported 1993 sales from the Italian plant, as
expressed in U.S.dollars, decreased by $700,000, or 7.3%,
compared to 1992. However, if the weighted average currency
exchange rate for 1992 had remained constant in 1993, reported
1993 sales from this plant would have increased by $1.7 million,
or 18%.
The gross margin achieved in 1993 increased to 24.3%
compared to 23.4% in 1992. This favorable result was due
principally to improved efficiencies in production operations
which offset the unfavorable shift in product mix away from
higher margin commercial aircraft products.
Consolidated selling, general and administrative expenses
for 1993 rose by 6% to $7.6 million compared to $7.2 million in
1992. At S.K. Wellman, such expenses rose by a nominal amount to
$6.3 million. At MLX Corp. charges in this area increased to $1.3
million (from $1.1 million in 1992) since 1992 had a nonrecurring
credit of $675,000 resulting from a change in estimate in
medical claim reserves which was partially offset by a charge of
$450,000 for potential litigation and professional obligations.
Consolidated interest expense dropped from $2.6 million in
1992 to $2.1 million in 1993. The interest incurred at S.K.
Wellman rose to $1.7 million in 1993 (compared to $1.3 million in
1992) as a result of amounts borrowed to pay off the MLX senior
term loan and the minority interest obligations. At MLX the
interest charge dropped to $400,000 in 1993 (compared to $1.3
million in 1992) due to the pay off of the senior term loan and
the exchange of certain of the Zero Coupon Bonds for Series A
Preferred Stock.
Included in the results for 1993 is an extraordinary gain
from early retirement of debt of $3.6 million resulting from the
exchange in the second quarter of Series A Preferred Stock and
1993 Variable Rate Notes for certain of the remaining Zero Coupon
Bonds. The gain is reported net of a charge in lieu of federal
income taxes of $1.9 million and is discussed in Note B of the
Notes to Consolidated Financial Statements.
Earnings applicable to common stock for 1993 have been
reduced for dividend and accretion obligations on the Series A
Preferred Stock issued as of December 31, 1992 and April 22,
1993.
In 1993, the Company had earnings before extraordinary items
of $2.0 million, $0.45 per share (net of obligations on the
Series A Preferred Stock), and net income of $5.7 million, or
$1.83 per share. In 1992, the Company had earnings before
extraordinary item of $1.4 million, or $0.55 per share, and net
income of $5.5 million, or $2.17 per share.
The Company is able to offset substantially all of its
federal taxable income with its pre-reorganization tax loss
carryforwards and therefore has a federal tax liability only for
Alternative Minimum Tax amounts. Accordingly, the charge in lieu
of federal income taxes included in the statements of operations
for the years ended December 31, 1993 and 1992 is not accruable
or payable. These pro-forma charges for 1993 and 1992 (excluding
the pro-forma charge provided for extraordinary gains) were $1.2
million and $1.1 million, respectively. The following table
illustrates the effect of this pro-forma charge on the Company's
earnings from continuing operations and earnings per share. There
was no such pro-forma charge for 1991.
<TABLE>
<CAPTION>
Dollars in thousands (except per share data) 1993 1992 1991
<S> <C> <C> <C>
Earnings from Continuing Operations
(before extraordinary item) $2,039 $1,385 $ 57
Less Dividends and Accretion on
Preferred Stock (873) -- --
Plus Pro-forma Federal Tax Charge Not
Due or Payable 1,243 1,110 --
Total Earnings $2,409 $2,495 $ 57
Total Earnings per Common Share $ 0.92 $ 0.98 $0.02
</TABLE>
<PAGE>
1992 vs. 1991 -- Revenues for S.K. Wellman in 1992 were $53.9
million compared to revenues of $50.7 million for 1991, an
increase of 6.3%. This increase resulted from higher sales of
transmission products and from higher sales of clutch
components used in on-highway hauling vehicles.
These increases were partially offset by the scheduled
termination of a military contract for providing aircraft brake
components. Because of this termination, overall sales of
aircraft components to both commercial and military
applications were down by 5.2%.
In addition, export sales of sintered discs from the Italian
plant increased by 11% and the sales of cellulose fiber discs
from the Italian plant continued to increase (20% over 1991
levels) consistent with a long-term trend in such sales.
Margins at S.K. Wellman in 1992 increased to 23.4% compared
to 21.1% in 1991. This improvement resulted from favorable shifts
in product mix and from improved efficiencies in plant operations
resulting in lower scrap rates, lower labor charges and higher
production yields.
Consolidated selling, general and administrative expenses
for 1992 rose by 3.4% to $7.2 million compared to $7.0 million in
1991. At S.K. Wellman such expenses were $6.1 million (compared
to $5.9 million in 1991). At MLX Corp., changes in estimates in
medical claim reserves resulted in a credit to expense of
$675,000 in 1992 while no such credit occurred in 1991. The
expenses in 1992 also included a nonrecurring charge of $450,000
for potential legal and professional obligations.
Consolidated interest expense in 1992 dropped to $2.6
million from $3.4 million in 1991. The interest incurred at S.K.
Wellman in 1992 ($1.3 million) decreased from the 1991 amount of
$1.9 million due to lower average borrowings. At MLX Corp.,
interest dropped from $1.5 million in 1991 to $1.3 million in
1992 due principally to the reduction in the effective accretion
rate on the Zero Coupon Bonds.
Included in the 1992 results is an extraordinary gain of
$4.1 million resulting from the exchange (effective December 31,
1992) of Preferred Stock for Zero Coupon Bonds and MLX senior
term loan as discussed in Note B of the Notes to Consolidated
Financial Statements.
In 1992, the Company had earnings before extraordinary item
of $1.4 million or $0.55 per share and net income of $5.5 million
or $2.17 per share. In 1991, the Company had net income from
continuing operations of $57,000 or $0.02 per share.
FINANCIAL POSITION AND LIQUIDITY
Consolidated working capital at December 31, 1993 was $9.0
million compared to $9.8 million at December 31, 1992. This
decrease resulted from a continuing focus on lower inventory
levels and the liability (reported as short-term) for dividends
payable on Series A Preferred Stock.
S.K. Wellman finances its operations with cash from
operations and the use of a senior credit facility. In 1993 the
Company successfully executed a new senior credit agreement with
a new lender which extends through January 1997. During 1993, the
proceeds from this facility were used to pay down certain
obligations of MLX Corp. and to replace the previous senior
facility and the two Industrial Revenue Bonds.
The 1993 senior credit facility has three term components
with varying amortization obligations through maturities ranging
from July 1995 to January 1997. In addition, there is a revolving
loan component with a limit of $7.2 million, subject to certain
availability formulas, and an expiration date of January 1997.
The amount available under the revolving loan facility at
December 31, 1993 was $5.1 million which exceeded the amount
outstanding on that date by $2.8 million. Management believes
that the existing lending facilities provide adequate working
capital resources for its anticipated needs in 1994.
The 1993 senior credit facility limits cash dividends and
loans which S.K. Wellman may make to MLX Corp. Under the most
restrictive covenants, retained earnings in the amount of
approximately $2 million were free from limitations on the
payment of dividends to MLX Corp. at December 31, 1993.
The Zero Coupon Bonds were originally issued in 1990 and
were subsequently amended in connection with the sale of the RAC
Group in 1992. As of the end of 1993, approximately 94.2% of
these bonds had been exchanged for 1993 Variable Rate Notes and
shares of Series A Preferred Stock. The remaining outstanding
Zero Coupon Bonds mature in 2002 and require no payments of
principal or interest until maturity except in very limited
circumstances. Early redemption of the Bonds is at the Company's
option.
The Series A Preferred Stock was issued as of December 31,
1992 and April 22, 1993 and provides for dividend rates which
commence at prime plus 2.5% (but not less than 9%) and escalate
gradually to a peak of prime plus 7% (but not less than 14%) for
all periods after January 1, 1999. The dividend rate at December
31, 1993 was 9%. Dividends accumulate in arrears unless paid, and
the redemption of the Preferred Stock is solely at the option of
the Company.
The 1993 Variable Rate Notes were issued in April 1993 in
exchange for certain of the Zero Coupon Bonds. The notes have an
escalating interest rate feature (currently at 9%) and mature in
2002. The agreement governing the Notes requires that interest
due on the Notes be paid (on a pro-rata basis) whenever dividends
on the Series A Preferred Stock are paid.
Effective December 31, 1992 the Company purchased the 13.7%
minority interest in its S.K. Wellman subsidiary under the terms
of the agreement. Notes were issued to the holders of such
minority interests, and these notes were paid off in February and
December 1993.
The Company adopted Statement of Financial Accounting
Standards No. 106 in the first quarter of 1993 on a prospective
basis to account for certain retiree health benefits. The
adoption of this standard is expected to increase annual benefit
costs by approximately $27,000.
OTHER DATA
Capital Expenditures -- Capital expenditures in 1993 amounted to $1.8
million, all of which pertains to S.K. Wellman. These expenditures were
made to improve quality control procedures, expand existing new production
<PAGE>
capabilities in other areas and to automate certain engineering
design steps. In 1992, capital expenditures amounted to $1.1 million
for capital projects which enhanced research and development
capabilities, reduced scrap rates and increased worker safety.
There were no material commitments for capital expenditures
outstanding at December 31, 1993. The expected level of capital
expenditures for 1994 is approximately $2.5 million.
Seasonality -- Sales of S.K. Wellman generally do not follow a
seasonal pattern. However, extended holiday shutdowns of major
customer production sites can result in minor reductions in sales
volume in the third and fourth quarters for the European
operation and in the fourth quarter for the North American
operation.
Backlog -- The backlog of unshipped orders for the ensuing three
months (the period which generally represents a firm customer
commitment) at December 31, 1993 was $13.0 million. At December
31, 1992, the backlog for such period was $12.2 million.
Employees -- At December 31, 1993 the Company had 511 employees
compared to 483 at December 31, 1992. Approximately 213 are
covered by collective bargaining agreements as of December 31,
1993.
Environmental Status -- In connection with the loan application
procedures for the new senior lender, S.K. Wellman performed
certain tests for environmental contamination for each of the
three owned U.S. operating sites. These tests revealed minor
surface contamination at one site and no other condition
requiring remediation. In 1993 the Company removed this
contaminated soil following specific disposal guidelines. Costs
incurred in connection with the removal were not significant.
Market, Share Ownership and Dividend Information -- As of
December 31, 1993 (and commencing on August 30, 1993) the
Company's common shares were traded in the NASDAQ Small Cap
Market under the trading symbol "MLXR". From January 26, 1993
until August 30, 1993, the Company's shares were traded on the
Domestic OTC Electronic Bulletin Board regulated by NASD.
Prior to that time and commencing on March 27, 1992, the
Company's shares were traded on the NASDAQ Small Cap Market.
Prior to that date the Company's shares were traded on the NASDAQ
National Market.
As of December 31, 1993 the Company estimated there were
approximately 7,100 shareholders of record of its common stock.
In addition, the Company believes that there are approximately
3,100 shareholders whose shares are registered in names of
nominees.
In connection with the reverse stock split implemented in
June 1993, approximately 3,200 shareholders who held fewer than
10 pre-split shares were eliminated as shareholders and given the
right to redeem their shares at $1 each.
MLX's current policy is to retain earnings to finance future
growth and for debt repayment, and accordingly, does not expect
to pay any cash dividends on its common stock in the foreseeable
future. In addition, certain covenants relating to indebtedness
of MLX and S.K. Wellman prohibit the payment of common stock cash
dividends.
QUARTERLY DATA (Unaudited)
<TABLE>
<CAPTION>
In thousands, except per share data 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $ 14,4628 $ 14,143 $ 13,892 $ 14,573
Operating earnings 1,534 1,452 1,717 1,515
Extraordinary gain on
early retirement of debt -- 3,627 -- --
Net earnings 375 4,221 672 398
Earnings applicable to
common stockholders 195 3,982 430 186
Net earnings per common share:
Continuing operations $ 0.08 $ 0.13 $ 0.16 $ 0.07
Extraordinary gain on
early retirement of debt -- 1.37 -- --
Total $ 0.08 $ 1.50 $ 0.16 $ 0.07
Stock price range per
common share $9.38-3.13 $9.38-5.00 $9.00-4.25 $5.75-4.13
Trading Volume 73 45 64 55
1992
Net sales $ 12,385 $ 13,923 $ 13,786 $ 13,768
Operating earnings 958 1,557 1,410 1,448
Extraordinary gain on
early retirement of debt -- -- -- 4,124
Net earnings (loss) (36) 349 484 4,712
Earnings applicable to
common stockholders (36) 349 484 4,712
Net earnings per common share:
Continuing operations $ (0.01) $ 0.14 $ 0.19 $ 0.23
Extraordinary gain on
early retirement of debt __ __ __ 1.62
Total $ (0.01) $ 0.14 $ 0.19 $ 1.85
Stock price range per
common share $ 8.80-2.50 $5.00-1.90 $4.10-1.90 $5.00-3.40
Trading Volume N/A N/A N/A 96
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MLX Corp. and Subsidiaries
December 31 1993 1992
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 985 $ 667
Accounts receivable 8,357 8,273
Inventories 8,449 8,888
Prepaid expenses and other current assets 583 265
Total Current Assets 18,374 18,093
Property, Plant and Equipment, net 12,064 12,277
Intangible Assets, net 2,785 2,732
Other Assets 538 26
Total Assets $33,761 $33,128
Current Liabilities
Accounts payable $ 3,362 $ 3,033
Accrued compensation and benefits 2,809 2,458
Other accrued liabilities and expenses 1,969 1,607
Accrued taxes 553 525
Dividends payable on Series A Preferred Stock 638 --
Current portion of long-term debt 53 718
Total Current Liabilities 9,384 8,341
Long-Term Debt 14,792 24,993
Other Long-Term Liabilities 2,261 1,638
Shareholders' Equity
Preferred Stock, no par value --
authorized 1,500,000 shares; none outstanding -- --
Preferred stock, Series A, $30 par value --
authorized 500,000 shares; 264,000 shares
outstanding (200,000 shares in 1992) 6,981 5,100
Common stock, $.01 par value --
authorized 38,500,000 shares; 2,536,000
shares outstanding (25,415,000
shares in 1992) 25 254
Capital in excess of par value 60,551 57,319
Retained earnings deficit since
December 11, 1984 (58,836) (63,629)
8,721 (956)
Other equity adjustments (1,397) (888)
Total Shareholders' Equity (Deficit) 7,324 (1,844)
Total Liabilities and
Shareholders' Equity $ 33,761 $ 33,128
<FN>
See notes to consolidated financial statements
Dollars in thousands (except per share data)
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MLX Corp. and Subsidiaries
Years ended December 31 1993 1992 1991
<S> <C> <C> <C>
Net Sales $57,036 $53,862 $50,714
Costs and Expenses
Cost of products sold 43,174 41,276 40,003
Selling, general and
administrative expenses 7,644 7,213 6,973
50,818 48,4489 46,976
Operating Earnings From
Continuing Operations 6,218 5,373 3,738
Interest expense (net of interest
income of $39 in 1993, $30 in 1992
and $140 in 1991) (2,100) (2,612) (3,399)
Other income (expense) (162) 36 (75)
Earnings Before Income Taxes,
Minority Interests, and
Extraordinary Item 3,956 3,128 264
Provision for Income Taxes:
Federal taxes due and payable 150 - -
Charge in lieu of federal
income taxes 1,243 1,110 -
Foreign, state and local
income taxes 524 318 7
Minority interests in net
earnings of consolidated
subsidiaries - 315 200
Earnings from Continuing Operations 2,039 1,385 57
Discontinued Operations:
Loss from operations - - (14,356)
Loss on disposal of business - - (8,935)
Loss From Discontinued Operations - - (23,291)
Extraordinary gain on early
retirement of debt (net of
charge in lieu of federal
income taxes of $1,869 in 1993
and $1,661 in 1992) 3,627 4,124 -
Net Earnings (Loss) 5,666 5,509 (23,234)
Dividends and Accretion on
Preferred Stock (873) - -
Earnings Applicable to Common Stock $4,793 $5,509 $(23,234)
Earnings (Loss) per Share:
Earnings 6from continuing
operations (net of dividends and
accretion on preferred stock) $ 0.45 $ 0.55 $ 0.02
Loss from discontinued operations - - (9.17)
Extraordinary gain on early
retirement of debt 1.38 1.62 -
Net Earnings (Loss) $ 1.83 $ 2.17 $ (9.15)
Average Outstanding Common
Shares and Dilutive Options 2,620 2,541 2,540
<FN>
See notes to consolidated financial statements
Dollars in thousands (except per share data)
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MLX Corp. and Subsidiaries
Years Ended December 31 1993 1992 1991
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Earnings from continuing operations $5,666 $ 5,509 $ 57
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating activities
from continuing operations:
Extraordinary gain on early
retirement of debt (5,496) (5,785) -
Charge in lieu of federal
income taxes 3,112 2,771 -
Depreciation and amortization 2,671 3,421 3,622
Minority interests in net
earnings of consolidated
subsidiaries - 315 200
Changes in operating assets
and liabilities of continuing
operations:
Accounts receivable (84) (2) (212)
Inventories and prepaid expenses (390) 1,264 3,111
Accounts payable and accrued
expenses 1,630 (1,094) (1,728)
Other (1,053) (919) 97
Net cash provided by operating
activities from continuing
operations 6,056 5,480 5,147
Net cash used in operating
activities from discontinued
operations - - (6,750)
Net cash provided by (used in)
operating activities. 6,056 5,480 (1,603)
Cash Flows From Investing Activities:
Purchase of property, plant and
equipment (1,820) (1,129) (1,384)
Repurchase of minority interests - - (40)
Investing cash flows from
discontinued operations - - 677
Net cash used in investing activities (1,820) (1,129) (747)
Cash Flows From Financing Activities:
Borrowings on long-term debt 10,740 - -
Repayment of debt (14,611) (6,460) (6,134)
Financing cash flows from
discontinued operations - - 9,887
Other (47) - 78
Net cash provided by (used in)
financing activities (3,918) (6,460) 3,831
Net increase (decrease) in cash
and cash equivalents 318 (2,109) 1,481
Cash and cash equivalents at
January 1 667 2,776 5,127
Cash and Cash Equivalents at
December 31 (including cash of
discontinued operations of $3,832
in 1991). $ 985 $ 667 $ 6,608
<FN>
See notes to consolidated financial statements
Dollars in thousands
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MLX Corp. and Subsidiaries
Series A Capital in Retained Other
Preferred Common Excess of Earnings Equity
Stock Stock Par Value Deficit Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1991 $ -- $ 254 $54,528 $(45,904) $ (26) $ 8,852
Issuance of 40,023
shares of common
stock in connection
with employee stock
purchase plan -- -- 20 -- 58 78
Foreign currency
translation
adjustment -- -- -- -- 52 52
Net loss -- -- -- (23,234) -- (23,234)
Balances at
December 31, 1991 -- 254 54,548 (69,138) 84 (14,252)
Issuance of 200,000
shares of preferred
stock in connection
with the retirement
of debt 5,100 -- -- -- -- 5,100
Foreign currency
translation
adjustment -- -- -- -- (972) (972)
Benefit of pre-
reorganization tax
loss carryforwards -- -- 2,771 -- -- 2,771
Net earnings -- -- -- 5,509 -- 5,509
Balances at
December 31, 1992 5,100 254 57,319 (63,629) (888) (1,844)
Issuance of 64,000
shares of preferred
stock in connection
with the retirement
of debt 1,646 -- -- -- -- 1,646
Dividends and
accretion on
preferred stock 235 -- -- (873) -- (638)
Foreign currency
translation
adjustment -- -- -- -- (509) (509)
Benefit of pre-
reorganization tax
loss carryforwards -- -- 3,112 -- -- 3,112
One for ten reverse
stock split -- (229) 118 -- -- (111)
Stock options
exercised -- -- 2 -- -- 2
Net earnings -- -- -- 5,666 -- 5,666
Balances at
December 31, 1993 $6,981 $ 25 $60,551 $(58,836) $(1,397) $7,324
<FN>
See notes to consolidated financial statements
Dollars in thousands
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The financial statements
include the accounts of MLX Corp. (MLX or the Company) and
its wholly-owned subsidiaries. The wholly-owned subsidiaries
include S.K. Wellman Limited, Inc. (S.K. Wellman -- the principle
entity of the Company's specialty friction materials
manufacturing group) and each of its wholly-owned subsidiaries.
Upon consolidation, all significant intercompany accounts and
transactions have been eliminated.
Cash Equivalents: Cash equivalents consist of
investments in short-term asset management accounts. Such
investments are stated at cost plus accrued interest which
approximates market value. For purposes of the accompanying
Consolidated Statements of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
Inventories: Inventories are stated at the lower of cost
or market. Cost is determined by the first-in, first-out (FIFO)
method. The components of inventories are as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
<S> <C> <C>
Manufactured goods $ 2,298 $ 2,350
Raw materials and work in progress 6,151 6,538
$ 8,449 $ 8,888
</TABLE>
Property, Plant and Equipment: Properties are
recorded at cost and include expenditures for additions
and major improvements. Expenditures for repairs and
maintenance are charged to operations as incurred.
Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of
the respective assets. The components of property, plant
and equipment are as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
<S> <C> <C>
Land and improvements $ 1,179 $ 1,192
Buildings and leasehold
improvements 6,933 6,934
Machinery and equipment 16,007 14,883
Construction in progress 533 631
24,652 23,640
Accumulated depreciation
and amortization (12,588) (11,363)
$ 12,064 $ 12,277
</TABLE>
Accrued Insurance: The Company sponsors funded health and
workers' compensation plans for the majority of its employees.
Premiums are based on experience and accrued insurance is based
on a pre-calculated contractual obligation to the insurance
company. During 1991 and a portion of 1992 the Company was
self-insured for both health and workers' compensation claims.
Health accruals under the previous plan were based on
current claims plus estimates of incurred but not reported
claims. In 1992 the Company recorded income of $675,000
related to a change in its estimate of necessary claims
accrual due to better than expected claims experience.
<PAGE>
Intangible Assets: Intangible assets are amortized using
the straight-line method over the average lives indicated in the
following table. The components of intangible assets are as
follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 Life
<S> <C> <C> <C>
Excess of cost of acquired
businesses over the fair value
of the net assets acquired $ 2,445 $ 2,324 10 years
Deferred financing costs 1,509 580 11 years
Proprietary formulations
and patents 1,806 1,806 10 years
Pension costs 1,018 1,014 15 years
6,778 5,724
Accumulated amortization (3,993) (2,992)
$ 2,785 $ 2,732
</TABLE>
Accounting Changes: Effective January 1, 1993, the
Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The
adoption of Statement 109 did not have an impact on the
Company's financial position or results of operations.
Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106,
"Employers Accounting for Postretirement Benefits Other
Than Pensions" which requires the projected future costs
of providing postretirement health care benefits be
recognized as an expense as employees render service
instead of when benefits are paid. The Company has elected
to recognize the transition obligation on a prospective
basis. The transition obligation (approximately $540,000
at January 1, 1993) for prior service costs at the time of
adoption of the Standard is being amortized into general
and administrative expense over 20 years.
Federal Income Taxes: Any tax benefits resulting from the
utilization of the Company's federal net operating
loss or other carryforwards existing at December 11, 1984,
the date of confirmation of the Plan of Reorganization
(Confirmation Date), are excluded from operations and
credited to capital in excess of par value in the year
such tax benefits are realized.
Earnings (Loss) Per Common Share: Primary earnings
(loss) per common share is based on the weighted average
number of shares outstanding during each year and dilutive
common stock equivalents. Earnings applicable to common
stock is determined by adjusting net earnings (loss) for
dividends and accretion on preferred stock.
Reclassifications: Certain reclassifications have been made
in the 1992 financial statements to conform with the
1993 presentation.
NOTE B - GAIN ON EARLY RETIREMENT OF DEBT
Effective December 31, 1992, the Company exchanged shares
of its Series A Preferred Stock (see Note F) with an
approximate fair value of $5.1 million (face value of $6.0
million) for Zero Coupon Bonds with a carrying value of
$7.7 million and a portion of the MLX Senior Term Loan
with a carrying value of $3.1 million. In addition, senior
term loan with a carrying value of $2.6 million was
replaced with a note for $2.5 million (since repaid). The
resulting net gain on early retirement of debt of $4.1
million was reported as of December 31, 1992 as an
extraordinary item.
During the quarter ended June 30, 1993, the Company
exchanged shares of its Series A Preferred Stock (see Note
F) with an approximate fair value of $1.6 million (face
value of $1.9 million) and 1993 Variable Rate Notes with
an approximate fair value of $1.4 million for Zero Coupon
Bonds with a carrying value of $8.5 million. The resulting
net gain on early retirement of debt of $3.6 million was
reported in the quarter ended June 30, 1993 as an
extraordinary item.
NOTE C - DISCONTINUED OPERATIONS
On March 19, 1992 the Company reached an agreement with
its Refrigeration & Air Conditioning (RAC) Group senior
lenders (the Lenders) and a third party investment group,
which included a director, (the Buyers) to sell its equity
interest in its RAC Group for $40 million and certain
other concessions. The proceeds of this sale were
transferred to the Lenders in exchange for the release of
the Company's guarantee of $52 million of debt owed to the
Lenders, satisfaction of all remaining RAC Group
obligations under previous lending agreements, and
modification of certain terms of the MLX Senior Term Loan
and Zero Coupon Bonds.
The divestiture of the RAC Group resulted in a loss on
disposal of $8.9 million in 1991. This loss represented
the Company's investment in the RAC Group on December 31,
1991.
The accompanying consolidated financial statements reflect
the operating results and cash flows of the discontinued
operations separately from continuing operations for all
years presented.
<PAGE>
NOTE C - DISCONTINUED OPERATIONS (continued)
The operating results of the discontinued operations
were as follows for the year ended December 31, 1991:
<TABLE>
<CAPTION>
In thousands
<S> <C>
Net sales $333,279
Loss from operations before income taxes (13,974)
Income taxes (382)
Loss from discontinued operations $(14,356)
</TABLE>
The following table provides supplemental information
pertaining to the discontinued operations included in the
Consolidated Statement of Cash Flows for the year ended
December 31, 1991:
<TABLE>
In thousands
<S> <C>
Cash Flows from Operating Activities:
Net loss from discontinued operations $(23,291)
Adjustments to reconcile net loss to
net cash used in discontinued operating
activities:
Depreciation and amortization 5,127
Loss on disposal of discontinued operations 8,935
Changes in operating assets and liabilities:
Accounts receivable 6,802
Inventories and prepaid expenses (3,575)
Other (748)
Net cash used in operating activities $ (6,750)
Cash Flows from Investing Activities:
Proceeds from sale of property,
plant and equipment $ 1,534
Purchase of property, plant and equipment (857)
Net cash provided by financing activities $ 677
Cash Flows from Financing Activities:
Proceeds from issuance of debt $ 10,498
Repayment of debt (719)
Other 108
Net cash provided by financing activities $ 9,887
</TABLE>
MLX entered into an agreement with the Buyers pursuant to
which MLX shares management, operational, and administrative
functions with the RAC Group (renamed Pameco Corporation). The
costs for such services are also shared. MLX received $81,500
(net of amounts paid) in 1993 and $470,000 in 1992 from Pameco
Corporation which is included as a reduction of selling, general
and administrative expenses in the accompanying Consolidated
Statements of Operations.
<PAGE>
NOTE D - LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<S> <C> <C>
In thousands 1993 1992
S.K. Wellman:
North American Revolving Credit Facility $ -- $ 1,332
1993 Senior Credit Facility:
Revolving credit facility 2,345 --
Real Estate term facility 6,450 --
Mezzanine component 1,350 --
Equipment term note 420 --
Seller note, due 1995 1,703 1,703
Industrial Development Revenue Bonds -- 6,800
Note Payable to Bank 175 --
MLX:
Zero coupon bonds net of unamortized
discount of $147 in 1993 and $1,566 in 1992 1,005 9,471
Senior term loan -- 4,021
Variable rate subordinated notes 1,397 --
Notes payable to former minority
interest holders -- 2,384
14,845 25,711
Less current portion of debt (53) (718)
$14,792 $24,993
</TABLE>
S.K. Wellman: S.K. Wellman's primary credit facility
at December 31, 1993 was the 1993 senior credit facility
which provides for four borrowing components with varying
rates and repayment obligations. It is secured by a lien
of substantially all the North American assets of S.K.
Wellman and a pledge of the common stock of the Italian
subsidiary. The loan and security agreement for the 1993
senior credit facility requires S.K. Wellman to, among
other things, maintain certain levels of working capital,
net worth and profitability. This agreement also limits
cash dividends and loans to MLX Corp. Under the most
restrictive covenants, retained earnings in the amount of
approximately $2 million were free from limitations on the
payment of dividends to MLX Corp. at December 31, 1993. In
December 1993 the loan and security agreement was amended
to extend the expiration of the facility through January
1997.
The 1993 senior credit facility has a revolving credit
component with a maximum borrowing limit of $7.2 million
which expires in January 1997. This revolving loan bears
interest at prime rate plus 2.0% (dropping to prime plus
1.5% after certain conditions are met). The amount which
may be borrowed is subject to certain availability
formulas regarding accounts receivable and inventory.
The 1993 senior credit facility also includes a real
estate term loan component with an initial balance of $7.3
million. This loan requires monthly amortization ranging
from $87,000 to $122,000 with any remaining unpaid balance
payable in January 1997. The loan bears an initial
interest rate of prime plus 2.25% which drops to prime
plus 1.75% after certain conditions are met. The 1993
senior credit facility also includes a $2 million 30-month
mezzanine term facility (expiring in July 1995) with
monthly amortization requirements of $67,000 and an
interest rate of prime plus 3.5%. This facility may be
prepaid, under certain circumstances, with no penalty.
The 1993 senior credit facility has an additional line of
credit intended to fund capital expenditures up to a
maximum of $1.5 million. At December 31, 1993 $420,000 was
outstanding under the arrangement. This note bears
interest at rates equal to those of the revolving credit
facility and requires monthly amortization payments of
$7,500 with any remaining unpaid balance payable in
January 1997. Advances may be made at any time until
January 1995.
The proceeds of the note payable to a bank were used to fund
certain capital expenditures in Italy. The note
bears interest at 9%, is unsecured, and is due in varying
quarterly installments through December 1996.
The seller note bears interest at 8%, which is payable
semi-annually by S.K. Wellman's Italian subsidiary. MLX
and S.K. Wellman have guaranteed the Italian subsidiary's
performance under this note.
The North American revolving credit facility was
terminated on January 15, 1993 and replaced with the 1993
senior credit facility which has more favorable terms and
maturities.
The Industrial Development Revenue Bonds were repaid
in February 1993 with proceeds from and in connection with
the execution of the 1993 senior credit facility.
MLX: The Company has outstanding Zero Coupon Bonds
with a maturity date of March 2002. As of December 1992
and April 1993 certain of the Bonds were exchanged for MLX
Series A Preferred Stock (see Note B) and Variable Rate
Notes. Subsequent to these exchanges, Zero Coupon Bonds
with a net carrying value at December 31, 1993 of $1.0
million remain outstanding. Such Bonds have a maturity
value of $1.2 million and have an accretion rate of 1.7%
for financial reporting purposes. The redemption value of
the Bonds remaining after the exchange was $553,000 at
December 31, 1993.
<PAGE>
NOTE D - LONG-TERM DEBT (continued)
In April 1993 MLX issued variable rate subordinated notes to
certain holders of its Zero Coupon Bonds (See Note B). These
notes, which are unsecured, bear interest at an initial rate of
the prime rate plus 2.5% (8.5% at December 31, 1993) but not less
than 9%, increasing to a maximum rate of the prime rate plus 7%,
but not less than 14% on January 1, 1999. The notes were
initially recorded at their estimated fair value and are
being increased to the redemption value of $1,444,000
during the period from date of issuance until March 19,
2002 (date of maturity). The notes are due in 2002 or, on
a pro-rata basis, whenever shares of the Series A Preferred Stock
are repurchased.
Effective December 31, 1992, a portion of the MLX
senior term loan with a net carrying value of $3.1 million
was exchanged for MLX Series A Preferred Stock (see Note
B). In connection with the execution of the 1993 senior
credit facility at S.K. Wellman, sufficient funds were
transferred to MLX to pay off all remaining balances of
principal and interest under this loan.
Effective December 31, 1992, MLX executed notes for
$2.4 million to holders of the minority interests in its
S.K. Wellman Limited, Inc. subsidiary to purchase their
minority holdings. In connection with the execution of the
1993 senior credit facility these notes were paid down by
$1.9 million. In December 1993 all remaining principal and
interest obligations on these notes were paid off with
funds transferred from S. K. Wellman.
Aggregate maturities and other required reductions of debt
for the next five years are: 1994 - $53,000; 1995 -
$3.4 million; 1996 - $1.2 million; 1997 - $7.7 million;
and 1998 - none. The Company intends to pay installments
due in 1994 with borrowings under the revolving credit
facility. Accordingly, such amounts have been classified
as long-term.
Interest paid was $1.5 million in 1993, $1.2 million
in 1992, and $2.5 million in 1991.
NOTE E - REVERSE STOCK SPLIT
On June 2, 1993, the stockholders authorized a reverse stock
split whereby each 10 common shares owned prior to the reverse
stock split became one common share. The reverse stock split was
implemented on June 25, 1993, and fractional common shares
(approximately 62,000 common shares) were or will be repurchased
for $1.00 per share.
All references in the financial statements with regard to
average number of shares of common stock and related
prices and per share amounts have been restated to reflect
the one for ten reverse stock split.
NOTE F - SHAREHOLDERS' EQUITY AND STOCK OPTIONS
The assets and liabilities of foreign operations are
translated into U.S. dollars at current exchange rates
with the resulting cumulative translation adjustment,
$(1,127,000) at December 31, 1993 and $(617,000) at
December 31, 1992, recorded as a separate component of
shareholders' equity. Exchange adjustments resulting from
foreign currency translations included in other income
(expense) in the accompanying Consolidated Statements of
Operations were $(255,000) in 1993, $(461,000) in 1992,
and $(154,000) in 1991.
The Company has a stock option plan which provides
that options may be granted to key employees, including
officers and directors, to purchase common stock at a
price not less than market value on the date the option is
granted. The stock options are exercisable over periods
not exceeding 5 years. A summary of transactions under the
plan is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
Number Price Per Number Price Per Number Price Per
of Shares Share of Shares Share of Shares Share
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 87,000 $2.50-33.70 75,490 $5.00-33.70 76,475 $14.40-33.70
Granted 11,800 4.25-8.44 86,000 2.50 71,290 5.00-8.80
Exercised (867) 2.50-8.44 -- -- -- --
Canceled for
reissuance1 -- -- (24,450) 5.00-31.30 -- --
Canceled (3,200) 2.50-33.70 (50,040) 5.00-33.70 (72,275) 14.40-31.30
Outstanding at end
of year 94,733 $2.50-8.44 87,000 $2.50-33.70 75,490 $ 5.00-33.70
At December 31:
Exercisable 58,834 29,665 27,320
Reserved for future
grant 17,151 25,750 37,260
<FN>
<F1>1 As a result of the sale of the RAC Group in March of 1992,
certain options held by employees of that group were canceled.
Options were also canceled for MLX employees and reissued at the
market price as of the new date of issuance. Certain other key
employees of MLX were also issued options during 1992.
</TABLE>
<PAGE>
On February 11, 1991, MLX issued options to its Chief
Executive Officer (CEO) to acquire 190,400 shares of the
Company's common stock at $5.00 per share (the market value at
date of grant), which are not reflected in the table above. At
December 31, 1993, all such options are exercisable and will
expire in February 1998. The options contain a clause that in the
event that any new or existing shareholders increase their
percentage ownership interest of the Company's common stock by 5%
or more, the options are immediately converted to a Stock
Appreciation Rights (SAR). The 1992 transaction described in Note
B caused an ownership change in excess of 5%. Therefore, at the
transaction date the CEO held an SAR. Following the conversion of
the options to an SAR, the MLX Board (excluding the CEO) voted to
terminate the SAR and restore the options in accordance with the
terms of the CEO's option agreement.
The Company is authorized to issue up to 500,000 shares
designated as Series A Preferred Stock with a par value and
liquidation preference of $30 per share. The Series A Preferred
Stock is non-voting. Cumulative dividends on the Series A
Preferred Stock are payable when, and if declared, at an initial
rate of the prime rate plus 2.5% (8.5% at December 31, 1993), but
not less than 9%, increasing to a maximum rate of the prime rate
plus 7%, but not less than 14% on January 1, 1999. The dividend
rate will be 1% greater than the rate reflected above for any
period after March 31, 1994 during which dividends for more than
one quarter remain unpaid. The Series A Preferred Stock is
redeemable at the option of the Company at any time at a cash
redemption price equal to $30 per share plus any and all
cumulative dividends accrued and unpaid on the date of
redemption.
An aggregate of 264,000 shares of Series A Preferred
Stock was issued (see Note B) to certain holders of Zero Coupon
Bonds as of December 1992 and April 1993. The Series A Preferred
Stock was initially recorded at its estimated fair value and is
being increased to the redemption price of $30 per share during
the period from date of issuance until January 1, 1999
(commencement of maximum annual dividend rate). The annual
accretion, based on the interest method, is charged to retained
earnings and amounted to $235,000 in 1993.
NOTE G - INCOME TAXES
Effective January 1, 1993, the Company adopted the
liability method of accounting for income taxes as required by
FASB Statement 109, "Accounting for Income Taxes."
At December 31, 1993, MLX has net operating loss
carryforwards, existing as of the Confirmation Date, of
approximately $280 million which are available to offset future
taxable income for federal income tax purposes. Such
carryforwards expire as follows: $19.4 million in 1995, $41.3
million in 1996, $144.3 million in 1997, $1.2 million in 1998 and
$73.8 million in 1999. Also available are investment tax credit
carryforwards, existing as of the Confirmation Date, of
approximately $800,000 which expire in 1994. Any tax benefit
derived from the utilization of these net operating loss and
investment tax credit carryforwards is excluded from operations
and credited to capital in excess of par value in the year
such tax benefits are utilized.
Subsequent to the Confirmation Date, the Company has
available (for federal income tax purposes), net operating
loss carryforwards of approximately $59.2 million, which
expire as follows: $2.7 million in 2000, $2.2 million in
2002, $5.0 million in 2005, $2.0 million in 2006 and $47.3
million in 2007.
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
In thousands 1993 1992 1991
Charge in Lieu of Federal Income Taxes:
Continuing Operations $1,243 $1,110 $ --
Extraordinary Gain 1,869 1,661 --
Total $3,112 $2,771 $ --
Federal Alternative Minimum Taxes $ 150 $ -- $ --
Foreign, State and Local Income Taxes:
Foreign $ 168 $ (82) $ (188)
State and Local 356 400 195
Total $ 524 $ 318 $ 7
</TABLE>
The charge in lieu of federal income taxes in 1993 and 1992
is computed by applying the statutory rate to earnings before
income taxes adjusted for items which are not deductible
(includable) for income tax purposes of ($2,000) in 1993 and
$617,000 in 1992 (principally results from foreign operations and
goodwill amortization) and further adjusted for foreign, state
and local taxes.
<PAGE>
NOTE G - INCOME TAXES (continued)
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax assets as of December 31, 1993 are as follows (in
thousands):
<TABLE>
<S> <C>
Federal Net Operating Loss Carryforward $ 115,000
State Net Operating Loss Carryforward 3,000
Reserves and Other 3,000
Total 121,000
Valuation Allowance for Deferred Tax Assets (121,000)
Net Deferred Tax Assets $ --
</TABLE>
The valuation allowance for deferred tax assets decreased $3
million from January 1, 1993.
Undistributed earnings of the Company's foreign subsidiaries
were not significant at December 31, 1993. These earnings are
considered to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form
of dividends or otherwise, the Company would be subject to both
U.S. income taxes and withholding taxes payable to various
foreign countries.
Cash paid for foreign, state and local taxes amounted to
$504,000, $500,000 and $293,000 in 1993, 1992 and 1991,
respectively.
NOTE H - EMPLOYEE BENEFIT
The Company and its subsidiaries sponsor a defined
contribution plan which covers a majority of their employees.
This plan provides for voluntary employee contributions, a
matching Company contribution and a discretionary Company
contribution. Expenses from continuing operations related to this
plan were $470,000, $128,000 and $104,000 in 1993, 1992 and 1991,
respectively.
The Company and certain of its subsidiaries sponsor two
non-contributory defined benefit pension plans covering certain
of their U.S. and Canadian employees. Benefits under one plan are
based on compensation during the years immediately preceding
retirement. Under the other plan, the benefits are based on a
fixed annual benefit for each year of credited service. It is the
Company's policy to make contributions to these plans sufficient
to meet minimum funding requirements of the applicable laws and
regulations, plus such additional amounts, if any, as the
Company's actuarial consultants advise to be appropriate. Plan
assets consist principally of equity securities and fixed income
instruments. In 1992 the Company terminated one of its defined
benefit plans and recognized a curtailment gain of $200,000. The
Company settled the obligation under the plan in 1993, which
resulted in a loss of $230,000. A summary of the components of
net periodic pension costs for the plans is as follows:
<TABLE>
<S> <C> <C> <C>
In thousands 1993 1992 1991
Service cost $ 105 $ 344 $ 434
Interest cost 259 439 428
Actual return on plan assets (281) (197) (324)
Net amortization and deferral 88 (90) 83
$ 171 $ 496 $ 621
Assumptions used were:
Weighted average discount rate 7.44% 8.03% 8.07%
Rate of increase in compensation levels -- 6.00% 6.00%
Weighted average expected long-term
rate of return on assets 8.63% 8.66% 8.30%
</TABLE>
<PAGE>
The following table presents the funded status and amounts
recognized in the consolidated balance sheets at December 31,
1993 and 1992 related to the defined benefit plans:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
In thousands Benefits Exceed Assets Benefits Exceed Assets
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligations $ (423) $(1,407) $ (405) $(4,467)
Accumulated benefit
obligations $ (434) $(1,613) $ (416) $(4,815)
Projected benefit
obligations $ (537) $(1,613) $ (518) $(4,815)
Plan assets at fair value 1,012 984 907 3,547
Projected benefit obligations
less than (in excess of)
plan assets 475 (629) 389 (1,268)
Unrecognized net loss 93 86 188 108
Prior service cost not yet
recognized in net periodic
pension cost -- 200 -- 220
Unrecognized net obligation
at January 1 (284) 214 (320) 95
Adjustment required to
recognize minimum liability -- (500) -- (423)
Prepaid (accrued) pension
cost at December 31 $ 284 $ (629) $ 257 $(1,268)
</TABLE>
The Company provides a fixed non-contributory benefit
towards postretirement health care for certain of its U.S.
subsidiary's retired union employees. The weighted average
discount rate used in determining the accumulated postretirement
benefit obligation was 7%. Postretirement benefit costs amounted
to $62,000 for the year ended December 31, 1993. Postretirement
benefit cost for 1992, which was recorded on a cash basis, has
not been restated. Such amounts for 1992 are not considered
significant.
NOTE I - LEASES
The Company leases certain office and warehouse facilities
and equipment under noncancellable operating leases. Rental
expense from continuing operations for 1993, 1992 and 1991
approximated $312,000, $351,000, and $442,000, respectively.
Future minimum lease commitments for continuing operations under
these agreements which have an original or existing term in
excess of one year as of December 31, 1993 are: 1994 - $275,000;
1995 - $214,000; 1996 - $130,000; 1997 - $74,000; and 1998 -
$1,000.
<PAGE>
NOTE J - SEGMENT INFORMATION
The Company's continuing operations are engaged in the
design, manufacture and sale of high-energy friction materials
which are used primarily in jet aircraft brakes and heavy
equipment brakes, transmissions and clutches. The following table
presents geographic segment information for the years ended
December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
Other
In thousands Corporate United States Italy Foreign Consolidated
<S> <C> <C> <C> <C> <C>
1993:
Net Sales $ -- $46,923 $8,487 $1,626 $57,036
Inter-area sales to
affiliates -- 853 3 292 1,148
Earnings (loss) from
continuing operations (888) 2,943 (66) 50 2,039
Identifiable assets 1,119 23,253 7,521 1,868 33,761
1992:
Net Sales $ -- $42,987 $9,157 $1,718 $53,862
Inter-area sales to
affiliates -- 731 82 139 952
Earnings (loss) from
continuing operations (601) 2,291 (428) 123 1,385
Identifiable assets 921 22,824 7,494 1,889 33,128
1991:
Net Sales $ -- $40,374 $8,271 $2,069 $50,714
Inter-area sales to
affiliates -- 581 -- 192 773
Earnings (loss) from
continuing operations (1,205) 1,390 (74) (54) 57
Identifiable assets 5,687 24,444 9,609 1,978 41,718
</TABLE>
Inter-area sales to affiliates represent products which are
transferred between geographic areas on a basis intended to
approximate the market value of the products. Inter-area sales to
affiliates are not included in the net sales of each geographic
segment.
Earnings (loss) from continuing operations by geographic
area is defined as sales less all expenses (excluding
extraordinary gain on early retirement of debt).
Identifiable assets are those assets used exclusively in
the operations of each geographic area. Corporate assets consist
principally of cash and cash equivalents, prepaid expenses and
intangible assets.
Product research, development, and engineering expenses
were $3.4 million, $3.2 million and $3.3 million in 1993, 1992
and 1991, respectively. As a percent of sales, these expenditures
were 5.9%, 5.9% and 6.6%, respectively.
The percentage of net sales to major customers was as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Customer A 16% 15% 15%
Customer B 9% 12% 12%
Customer C 14% 14% 11%
Customer D 9% 9% 8%
</TABLE>
The Company manufactures and sells sintered friction
materials to original equipment manufacturers, aircraft component
and aftermarket customers. The Company's customers are not
concentrated in any specific geographic region. The Company
performs ongoing evaluations of its customers' financial
condition and generally does not require collateral. Receivables
generally are due within 60 days. Credit losses consistently have
been within the range of management's expectations.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MLXCorp.
We have audited the accompanying consolidated balance sheets
of MLX Corp. and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of MLX Corp. and subsidiaries at December 31,
1993 and 1992, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note A to the financial statements, in 1993
the Company changed its method of accounting for income taxes and
postretirement benefits.
SIGNATURE
March 11, 1994
Atlanta, Georgia
<PAGE>
CORPORATE DATA
BOARD OF DIRECTORS
Brian R. Esher Alfred R. Glancy III(1)(2)
Chairman of the Board, President Chairman, President and Chief
& Chief Executive
Executive Officer of the Company Officer, MCN Corporation
W.John Roberts(1)(2) S. Sterling McMillan, III(1)
Retired Senior Vice President-Finance Vice Chairman, Greenleaf Capital
and Treasurer, Amerisure Companies Management, Inc.
Willem F.P. de Vogel(2) J. William Uhrig(1)
President, Three Cities Research, Inc. Managing Director, Three Cities
Research, Inc.
H. Whitney Wagner (1) Member of Audit Committee
Managing Director, Three Cities (2) Member of Compensation
Research, Inc. Committee
MLX CORPORATE MANAGEMENT
Brian R. Esher Thomas C. Waggoner
Chairman of the Board, President & Chief Vice President & Chief Financial
Executive Officer Officer
James D. Askren, II Theodore R. Kallgren
Vice President, Secretary & Legal Counsel Vice President, Finance & Treasurer
S.K. WELLMAN OPERATING MANAGEMENT
Ronald E. Grambo Frederic A. Kowalcyk
President Vice President, Velvetouch Division
James W. Feldhouse Anthony M. Gambatese
Vice President, Operations Vice President, Sales
Thomas W. Hites Douglas O. Firman
Vice President, Human Resources Corporate Controller
Giovanni Cipolla Gail D. Terry
General Manager, European Operations Operations Manager, Canada
CORPORATE DATA
Executive Office Legal Counsel
1000 Center Place Kilpatrick & Cody
Norcross, Georgia 30093 Atlanta, Georgia
Independent Auditors Stock Transfer Agent & Registrar
Ernst & Young American Stock Transfer & Trust
Atlanta, Georgia Company
New York, New York
MLX Corp. common stock is traded in the NASDAQ Small Cap Market
under the symbol "MLXR"
For more information about the Company or to obtain a copy of the
Company's annual report on Form 10-K, contact the Investor
Relations Department at (404) 798-0677 or write to MLX Corp.,
1000 Center Place, Norcross, Georgia 30093.
The annual meeting of shareholders of MLX Corp. will be held on
May 4, 1994 at 10:00 a.m. at the Georgia International
Convention Center, 1902 Sullivan Road, College Park, Georgia
(adjacent to the Sheraton Gateway at the Atlanta airport).
<PAGE>
THE YEAR IN REVIEW
Financial Performance
*Achieved a sales level for 1993 of $57.0 million surpassing the
previous record set in 1988 (net of discontinued operations).
This was achieved in spite of the effects of the Lire/Dollar
currency exchange ratio which served to reduce our reported
European sales.
*Ended 1993 having exceeded the comparable prior year quarter
sales level for seven consecutive quarters.
*Reduced consolidated long-term debt for both MLX and Wellman to
its lowest level since MLX commenced active operations in 1986.
The year end level of long-term debt was $14.8 million.
*Recorded operating earnings of $6.2 million to achieve a
cumulative annualized growth rate of 31% in this measure since
1989.
*Emphasized working capital management and achieved inventory
turns of 4.9 compared to 4.3 in 1992.
Major Transactions
*Exchanged shares of Series APreferred Stock and Variable Rate
Notes for Zero Coupon Bonds with a carrying value of $8.5 million
resulting in an extraordinary gain, net of taxes, of $3.6
million.
*Met the NASDAQ listing qualifications and regained the
Company's listing on the NASDAQ Small Cap Market under the
trading symbol "MLXR" -- providing our shareholders with a more
efficient and active trading market for their shares.
*Repaid or replaced various debt obligations at both MLX and
Wellman to simplify our financing structure and eliminate out of
date covenant restrictions.
*Executed a one for ten reverse stock split to reduce
administrative expenses and facilitate the NASDAQ relisting.
This was linked with the Company's reincorporation in Georgia to
further reduce administrative expenses.
*Implemented the shareholder-approved transfer restrictions on
the Company's common stock to further safeguard the Company's
$339 million net operating loss carryforward.
Domestic and International Operations
*Successfully executed a new senior credit agreement at Wellman
to gain more favorable terms and maturity features. Proceeds were
used to repay the Wellman Industrial Revenue Bonds and to finance
capital expenditures to gain operating efficiencies.
*Continued to invest in our research and development and
engineering capabilities by funding expenditures exceeding $3.0
million for the fourth consecutive year.
*Expanded our production capabilities for clutch components by
increasing and modernizing our facilities at our Brook Park, Ohio
site.
*Strengthened the Wellman marketing and product development
functions to emphasize responsiveness to market opportunities.
<PAGE>
MLX Corp. World Headquarters
1000 Center Place
Norcross, Georgia 30093
(404) 798-0677
FAX (404) 798-0633
S.K. Wellman World Headquarters
6180 Cochran Road
Solon, Ohio 44139
(216) 498-2275
FAX (216) 498-2290
[DESCRIPTION]
GRAPHIC #11: Artwork - MLX Logo
[DESCRIPTION]
APPENDIX: Listing of 1993 Annual Report Graphics
GRAPHIC #1: Artwork - MLX Logo
WHERE: Located on Cover
GRAPHIC #2: Artwork - (3) Bar Graph Charts: Revenues, in thousands;
Net Tangible Shareholders' Equity, in thousands; and
Earnings From Continuing Operations, in thousands
WHERE: Located on Page 1, Financial Highlights
GRAPHIC #3: Artwork - (1) Bar Graph Chart: Long-Term Debt, in thousands,
for the years 1989 through 1993
WHERE: Located on Page 2, first page of Letter to Shareholders'
GRAPHIC #4: Artwork - (1) Bar Graph Chart: Latest Twelve Month Results,
in thousands, Showing Operating Earnings and Income Before
Extraordinary Item
WHERE: Located on Page 3, second page of Letter to Shareholders'
GRAPHIC #5: Photo and Caption: Thomas C. Waggoner (left), Brain R. Esher
(center) and Ronald E. Grambo (right)
WHERE: Located on Page 3, second page of Letter to Shareholders'
GRAPHIC #6: Photo and Caption: Employees at the LaVergne, Tennessee plant
celebrate receiving the John Deere Supplier Quality Certification
Award. (L-R) Edna Young, Brenda Patterson, Clarence Williams and
Jim Fields.
WHERE: Located on Page 4, first page of S.K. Wellman profile
GRAPHIC #7: Artwork - (1) Bar Graph Chart: R&D and Engineering Expenditures,
% of sales
WHERE: Located on Page 4, first page of S.K. Wellman profile
GRAPHIC #8: Photo and Caption: Richard E. Dowell, Director of Organic R&D
(left) and Horst Becker, Director of Metallic R&D (right)
examine dynamometer test results with Technician Ronald F. Fhay
(seated)
WHERE: Located on Page 5, second page of S.K. Wellman profile
GRAPHIC #9: Artwork - 70 Year Gold & Blue Banner
WHERE: Located on Page 5, second page of S.K. Wellman profile
GRAPHIC #10: Photo and Caption: The S.K. Wellman management team includes:
(seated L-R) Ronald E. Grambo, Thomas W. Hites, James W.
Feldhouse, Brian R. Esher and Giovanni Cipolla. (standing L-R)
Frederic A. Kowalcyk, Thomas C. Waggoner, Anthony M. Gambatese
and Douglas O. Firman.
WHERE: Located on Page 5, second page of S.K. Wellman profile
GRAPHIC #11: Artwork - MLX Logo
WHERE: Located on Back Cover
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 No. 33-32841 and No. 33-13130) pertaining
to the MLX Corp. Stock Option Plan and in the related
Prospectuses of our report dated March 11, 1994, with respect to
the consolidated financial statements and schedules of MLX Corp.
included in the Annual Report on Form 10-K for the year ended
December 31, 1993.
ERNST & YOUNG
March 24, 1994
Atlanta, Georgia
<PAGE>
EXCHANGE AGREEMENT
Dated as of April 2, 1993
among
MLX CORP.
and
THE BONDHOLDERS LISTED HEREIN
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. AUTHORIZATION AND EXCHANGE CLOSING. . . . . . . 4
ARTICLE 3. CONDITIONS TO CLOSING . . . . . . . . . . . . . 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MLX . . . . . 5
ARTICLE 5. REPRESENTATIONS OF EACH HOLDER. . . . . . . . . 7
ARTICLE 6. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 7
ARTICLE 7. TRANSFER RESTRICTIONS ON 1993 BONDS . . . . . . 8
ARTICLE 8. SUBORDINATION OF 1993 BONDS . . . . . . . . . . 9
ARTICLE 9. OPTIONAL PREPAYMENTS. . . . . . . . . . . . . . 12
ARTICLE 10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . 12
ARTICLE 11. EXCHANGE OF 1993 BONDS. . . . . . . . . . . . . 13
ARTICLE 12. REPLACEMENT OF 1993 BONDS . . . . . . . . . . . 13
ARTICLE 13. EXPENSES. . . . . . . . . . . . . . . . . . . . 14
ARTICLE 14. AMENDMENTS AND WAIVERS. . . . . . . . . . . . . 14
ARTICLE 15. NOTICES . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 16. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES, ETC.. . . . . . . . . . . . . . . . 14
ARTICLE 17. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . 15
ARTICLE 18. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . 15
ARTICLE 19. HEADINGS. . . . . . . . . . . . . . . . . . . . 15
ARTICLE 20. GOVERNING LAW . . . . . . . . . . . . . . . . . 15
ARTICLE 21. COUNTERPARTS. . . . . . . . . . . . . . . . . . 15
ARTICLE 22. SEVERABILITY. . . . . . . . . . . . . . . . . . 15
<PAGE>
EXHIBIT A FORM OF VARIABLE RATE SUBORDINATED BONDS
SCHEDULE 1 PRINCIPAL AMOUNT OF 1993 BONDS TO BE ISSUED AND
ZERO COUPON BONDS TO BE EXCHANGED AND REDEEMED
<PAGE>
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT is dated as of April 2, 1993,
and is entered into among MLX CORP. and the persons listed on the
signature pages hereof under the caption "BONDHOLDERS"
(collectively, together with other persons who may acquire 1993
Bonds in exchange for Zero Coupon Bonds, the "Bondholders").
WHEREAS, the Bondholders are holders of certain Zero
Coupon Bonds issued by MLX pursuant to that certain MLX Exchange
Agreement dated as of April 13, 1990, as amended and restated as
of March 19, 1992 (the "Original Exchange Agreement"); and
WHEREAS, the parties hereto wish to exchange certain of
the Zero Coupon Bonds for newly-issued Variable Rate Subordinated
Bonds issued by MLX pursuant to the terms and conditions
contained herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
The following terms, as used herein, have the following
respective meanings:
"Accredited Investors" has the meaning ascribed to such
term in Rule 501(a) under the Securities Act.
"Affiliate" has the meaning given to such term in Rule
12b-2 under the Exchange Act, but no Holder or any Affiliate of a
Holder shall be deemed to be an Affiliate of MLX for purposes of
this Agreement.
"Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are
authorized by law to close.
"Closing" means the issuance of 1993 Bonds by MLX in
exchange for the Zero Coupon Bonds of the Holders as described in
Section 2.3 hereof.
"Closing Date" means the date on which any Closing
hereunder occurs.
"Commission" means the Securities and Exchange
Commission and any other similar or successor agency of the
federal government administering the Securities Act or the
Exchange Act.
<PAGE>
"Credit Agreement" means that certain Loan and Security
Agreement dated January 15, 1993 among Barclays Business Credit
Inc., S.K. Wellman Limited, Inc. and The S.K. Wellman Corp. as
the same may be amended, modified, supplemented or restated from
time to time.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable and employee
payroll and benefits arising in the ordinary course of business,
(iv), all obligations of such Person as lessee under capital
leases, (v) all obligations, whether contingent or non-
contingent, of such Person to reimburse any bank or other Person
in respect of amounts paid or payable under a letter of credit or
similar instrument, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by
such Person, and (vii) all Debt of others guaranteed by such
Person.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Friction" means S.K. Wellman Limited, Inc. f/k/a
SinterMet Corporation, a Michigan corporation, and its
successors.
"Holder" means any Bondholder and any transferee of any
such holder that is bound by the provisions of this Agreement or
a like agreement pursuant to which 1993 Bonds are issued in
exchange for Zero Coupon Bonds.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this
Agreement, any Person shall be deemed to own subject to a Lien
any asset which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"MLX" or the "Company" means MLX Corp., a Michigan
corporation, and its successors.
"1993 Bonds" means the (i) Variable Rate Subordinated
Bonds, aggregating $1,443,804 in principal amount, issued
pursuant to this Exchange Agreement to the Bondholders signatory
hereto, and the (ii) Variable Rate Subordinated Bonds, if any,
issued pursuant to a like exchange agreement in exchange for Zero
<PAGE>
Coupon Bonds to one or more Bondholders, each of which shall be
in substantially the form of Exhibit A hereto.
"Original Exchange Agreement" means the MLX Exchange
Agreement dated as of April 13, 1990, as amended and restated as
of March 19, 1992, among MLX and the Bondholders and Bond Agent
that are parties thereto.
"Outstanding" means, when used with reference to the
1993 Bonds at any time, all 1993 Bonds theretofore duly issued
except (i) 1993 Bonds theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for transfer, exchange or
replacement, in respect of which replacement 1993 Bonds have been
issued by MLX, (ii) 1993 Bonds surrendered to MLX for prepayment
pursuant to Article 11 of this Agreement, (iii) 1993 Bonds
theretofore paid in full and (iv) 1993 Bonds theretofore
cancelled by MLX.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Preferred Shares" means shares of MLX's Series A
Preferred Stock, par value and liquidation preference $30.00 per
share, whether outstanding on the date hereof or subsequently
issued in exchange for Zero Coupon Bonds.
"Required Bondholders" means, on any date, registered
Holders of (in the aggregate) in excess of 50% of the aggregate
principal amount of 1993 Bonds Outstanding on such date.
"Required Holders" means, on any date, Holders of (in
the aggregate) in excess of 66 2/3% of the Outstanding Preferred
Shares and 1993 Bonds, considered collectively, with each $30.00
of principal amount of 1993 Bonds being equal to one Preferred
Share for purposes of calculating such percentage.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Indebtedness" means any and all obligations of
MLX (including, without limitation, any interest that accrues
after the filing of a petition initiating any voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar
law that is allowed by the applicable bankruptcy court),
reimbursement obligations, fees, commissions and other amounts
under or with respect to (A) the Credit Agreement, (B) the
Subordinated Promissory Notes, each dated January 15, 1993,
originally issued by the Company to Teribe Limited and National
City Venture Corporation, in the principal amounts of $2,022,222
<PAGE>
and $592,363, respectively, and (C) any refinancing, renewal,
replacement or substitution of the foregoing agreements or notes.
"Subsidiary" means, in the case of any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by
such Person.
"Zero Coupon Bonds" means the Secured Subordinated Zero
Coupon Bonds of MLX issued pursuant to the Original Exchange
Agreement, as such Bonds have been amended from time to time.
ARTICLE 2. AUTHORIZATION AND EXCHANGE CLOSING
2.1 Authorization of 1993 Bonds. MLX will authorize
the issuance of an aggregate of up to $1,443,804 principal amount
of 1993 Bonds to the Bondholders signatory hereto prior to or
simultaneously with the Closing hereunder. Such 1993 Bonds shall
be in substantially the form set forth as Exhibit A attached
hereto.
2.2 Exchange of 1993 Bonds for Zero Coupon Bonds.
Subject to the terms and conditions set forth herein, and in
reliance upon the representations, warranties and agreements set
forth herein, each Bondholder shall deliver to MLX the
certificate or certificates evidencing the entire principal
amount of Zero Coupon Bonds that is set forth opposite such
Bondholder's name on Schedule 1 hereto on the Closing Date, and
thereupon MLX will, in consideration thereof, cancel such Zero
Coupon Bonds and issue to each Bondholder the principal amount of
1993 Bonds set forth opposite such Bondholder's name on Schedule
1 hereto.
2.3 The Closing. The delivery of the Zero Coupon
Bonds by the Bondholders and the simultaneous issuance and
delivery of the 1993 Bonds by MLX (the "Closing") shall take
place at one or more closings as soon as practicable after one or
more of the Bondholders have executed and delivered this
Agreement and the other conditions to the Closing set forth in
Article 3 hereof have been satisfied with respect to such
Bondholders, at the offices of Kilpatrick & Cody, Atlanta,
Georgia, or at such other place or on such other date as may be
mutually agreeable to MLX and the Bondholders, but in no event
later than April 7, 1993. The exchange or redemption of any
Bonds may take place pursuant to the terms and conditions of this
Agreement at a time subsequent to any other Closing hereunder if
the Company and the Bondholder so elect. The date and time of
any particular Closing as finally determined pursuant to this
Section is referred to herein as the "Closing Date."
<PAGE>
ARTICLE 3. CONDITIONS TO CLOSING
This Exchange Agreement will become effective as of a
particular Closing Date with respect to the parties to such
closing if and only if the following conditions precedent are
satisfied or waived by the applicable Bondholders or by MLX as
applicable:
(i) MLX and the Bondholders shall have received duly
executed counterparts hereof signed by each of the parties
hereto;
(ii) the representations and warranties of MLX
contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same effect
as though made on and as of the Closing Date;
(iii) all corporate and other proceedings in
connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be in
form and substance satisfactory to MLX and the Bondholders;
(iv) the Bondholders shall have received such other
documents, in form and substance satisfactory to them, as to
the matters incident to the transactions contemplated hereby
as the Bondholders may reasonably request;
(v) the Articles of Incorporation of the Company shall
have been amended to provide that any vote, consent, demand
or action referred to in Section 6 of the Resolutions
contained in the Certificate of Amendment dated January 8,
1993 shall be made or taken by the Required Holders rather
than by 66 2/3% of the Preferred Shares;
(vi) counsel to The Equitable Life Assurance Society of
the United States and The Equitable Variable Life Insurance
Company, shall have received payment in full by certified or
bank check of all of its fees and expenses not in excess of
$15,000.00; and
(viii) that certain Exchange Agreement, dated January
15, 1993, among MLX and certain holders of Zero Coupon Bonds
other than the Bondholders hereunder shall be in full force
and effect, shall not have been amended or modified without
the consent of the Required Bondholders, and the closing
thereunder shall have occurred in accordance with the terms
thereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MLX
MLX represents and warrants as of the date of this
Agreement and as of the Closing Date that:
<PAGE>
4.1 Corporate Existence and Power. Each of MLX and
its Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its organization and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
4.2 Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by MLX of
this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default
under, any provision of applicable United States federal,
Michigan or other law or regulation or of its certificate or
articles of incorporation or by-laws or of any agreement,
judgment, injunction, order, decree or other instrument binding
upon it or result in the creation or imposition of any Lien on
any of its assets. MLX has all requisite corporate power and
authority to enter into this Agreement and to carry out the
provisions and satisfy the conditions of this Agreement.
4.3 1993 Bonds. The 1993 Bonds to be issued and
delivered to the Holders pursuant to the terms of this Agreement,
when so issued and delivered, will be validly authorized and
issued and will constitute valid and binding obligations of the
Company, enforceable in accordance with their terms.
4.4 Binding Effect. This Agreement constitutes a
valid and binding agreement of MLX enforceable against MLX in
accordance with its terms except as (i) the enforceability
thereof may be limited by any applicable bankruptcy, insolvency
or other similar law affecting the enforceability of creditors'
rights generally and (ii) rights with respect thereto may be
limited by equitable principles of general applicability.
4.5 SEC Documents. MLX is subject to the reporting
requirements of Section 13 of the Exchange Act and has filed the
following documents pursuant to such requirements: (i) its Annual
Report on Form 10-K for its fiscal year ended December 31, 1991;
(ii) the Proxy Statement for its annual meeting of shareholders
held on May 20, 1992; (iii) its Quarterly Reports on Form 10-Q
for the quarters ended March 31, June 30 and September 30, 1992;
and (iv) its Current Report on Form 8-K dated April 10, 1992.
Said reports and proxy statement include all regular and periodic
reports and proxy statements required to be filed by MLX with the
Commission since December 31, 1991 and are herein collectively
called the "MLX SEC Documents." MLX has also provided the
Bondholders with copies of all the press releases issued by MLX
since November 1, 1992.
<PAGE>
As of their respective dates, the MLX SEC Documents
complied in all material respects with the requirements of the
Exchange Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein not misleading. The financial
statements contained in the MLX SEC Documents were prepared in
accordance with generally accepted accounting principles
consistently applied and present fairly the financial condition
of MLX as of the dates thereof and the results of its operations
for the periods covered thereby. Since the date of the Annual
Report on Form 10-K referred to in the foregoing clause (i),
there have been no material changes in the business, operations,
financial condition or properties of MLX required to be reported
to the Commission other than changes referred to in subsequent
MLX SEC Documents, and MLX does not know of any material fact
relating to its business which it has not disclosed to the
Bondholders in writing or in the MLX SEC Documents which
materially affects adversely or, so far as MLX can now reasonably
foresee, will materially affect adversely, the business,
prospects, operations, financial condition or principal
properties of MLX and its Subsidiaries or the ability of MLX to
perform its obligations under this Agreement.
ARTICLE 5. REPRESENTATIONS OF EACH HOLDER
Each Holder hereby represents that:
5.1 Accredited Investor Status. Such Holder is an
Accredited Investor and will acquire the 1993 Bonds for its own
account, for investment and not with a view to the distribution
thereof, other than to Affiliates who are Accredited Investors,
nor with any present intention of distributing the same, other
than to Affiliates who are Accredited Investors; provided that
the disposition of property by the Bondholders shall at all times
be and remain within their control.
5.2 Unregistered Securities. Such Holder understands
that the 1993 Bonds have not been registered under the Securities
Act or registered or qualified under any state securities or
"blue sky" laws by reason of their issuance in a transaction
which does not require registration under the Securities Act or
registration or qualification under the securities or "blue sky"
laws of any state, and that such 1993 Bonds may be sold only if
registered under the Securities Act and registered or qualified
under applicable state securities or "blue sky" laws or exempt
from such registration or qualification.
5.3 Access to Information. Such Holder has been
furnished with the information it has requested from MLX and has
had an opportunity to discuss with officers of MLX the business
and financial affairs of MLX.
<PAGE>
ARTICLE 6. ADDITIONAL AGREEMENTS
6.1 Consents of Required Holders.
Without the affirmative vote or written consent, in
person or by proxy, of the Required Holders, and, in the case of
the Section 6.1(7) only, the affirmative vote or written consent,
in person or by proxy, of both the Required Holders and the
Required Bondholders:
(1) neither MLX nor any Subsidiary shall authorize or
issue any shares of stock of any class or series on a parity
with, or having priority over, the Preferred Shares;
(2) MLX shall not amend or repeal any provisions of,
or add any provision to, its Articles of Incorporation or
By-Laws that would affect adversely the rights, preferences
or privileges of the Preferred Shares or the 1993 Bonds;
(3) neither MLX nor any Subsidiary shall declare or
pay any dividend, make any distribution, repurchase or
redeem any shares of capital stock (other than Preferred
Shares), except to the extent that such dividend or other
payment is made to MLX or a Subsidiary;
(4) neither MLX nor any Subsidiary shall dispose of
all or substantially all of its respective assets;
(5) neither MLX nor any Subsidiary shall acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets or stock of, or by any
other manner, any business or corporation, partnership,
association or other entity or division thereof, or
otherwise acquire or agree to acquire any assets otherwise
than in the ordinary course of business, other than any such
acquisition for a total purchase price not in excess of
$500,000;
(6) MLX shall not, and shall not agree to, amend or
waive any provision of the Credit Agreement, or incur any
additional indebtedness for borrowed money or purchase money
indebtedness or guarantee any such indebtedness, if to do so
would materially adversely affect MLX's ability to pay
interest on and otherwise satisfy its obligations with
respect to the 1993 Bonds; and
(7) neither MLX nor any Subsidiary shall increase the
amount of indebtedness under the Credit Agreement or incur
any additional indebtedness for borrowed money or purchase
money indebtedness or guarantee any such indebtedness except
for any such indebtedness in an aggregate amount not
exceeding $500,000.
<PAGE>
6.2 No Redemption of Zero Coupon Bonds. Neither MLX
nor any of its Subsidiaries shall redeem or repurchase any of the
Zero Coupon Bonds outstanding after giving effect to the
transactions contemplated by this Agreement unless, concurrently
with any such redemption or repurchase, the same principal amount
of 1993 Bonds, or, if the aggregate principal amount of 1993
Bonds then outstanding is less than the aggregate principal
amount of Zero Coupon Bonds being redeemed or repurchased, all of
the 1993 Bonds then outstanding, are redeemed or repurchased.
6.3 No Amendment of Zero Coupon Bonds. MLX shall not
amend, supplement or alter the terms and conditions of the Zero
Coupon Bonds or the Original Exchange Agreement so as to (i)
accelerate the maturity date of the Zero Coupon Bonds, (ii)
increase the interest rate payable on the Zero Coupon Bonds,
(iii) increase the principal amount of the Zero Coupon Bonds,
(iv) accelerate the principal amortization of the Zero Coupon
Bonds, (v) provide for payments of principal other than as
provided in the Zero Coupon Bonds as constituted on the date
hereof, (vi) provide for the payment of expenses incident to a
Zero Offer (as defined in Section 6.4) in excess of $15,000, or
(vii) improve the priority accorded the Zero Coupon Bonds vis-a-
vis the 1993 Bonds.
6.4 Other Zero Coupon Bond Transactions. If MLX shall
at any time offer to any holder of Zero Coupon Bonds the right,
or receive an offer (which it desires to accept), to exchange or
effect any other transaction in respect of the Zero Coupon Bonds
(other than for a redemption or repurchase, which is governed by
Section 6.2 hereof, any such transaction being referred to as the
"Zero Offer"), then at the same time as MLX makes such offer, or
simultaneously with the receipt of any such offer, MLX shall make
an offer to the Bondholders signatory hereto, on a basis
consistent with the exchange or conversion rate upon which the
Zero Coupon Bonds are exchanged for 1993 Bonds pursuant to this
Agreement, to amend the terms and conditions of the 1993 Bonds so
that such Bondholders shall be entitled to receive the same
economic benefits (including, but not limited to, rate of
amortization and priority of payment) to be accorded to the then
holders of the Zero Coupon Bonds; provided, that if the Zero
Coupon Bonds are converted into equity securities, the offer
shall be to amend the 1993 Bonds to provide for the same economic
benefits to be accorded under the equity securities while
retaining a fixed maturity date and denomination as debt as the
1993 Bonds. Such Bondholders shall have a period of 30 days
after receipt of such offer from MLX to either accept or reject
in writing the offer made by MLX without modification or
amendment, which written acceptance or rejection must be received
by MLX on or before 5:00 p.m., local time, of such 30th day at
the address provided for notice herein, as the same may be
changed from time to time. If neither a written acceptance nor
written rejection is received by such time, then the Bondholder
<PAGE>
in whose favor this right is extended shall be deemed to have
rejected such offer and shall thereafter have no further right to
receive the benefit of such offer, and MLX shall be free to
consummate the transactions provided for in the offer. Such
written rejection or deemed rejection shall be final, conclusive
and binding upon the Bondholders signatory hereto and shall
extinguish any and all rights, remedies or other recourse of
whatever nature, whether provided at law, in equity or pursuant
to this Agreement, to thereafter dispute anything whatsoever in
connection with the Zero Offer.
6.5 Waivers. The Bondholders hereby waive any Default
or Event of Default that may arise or be deemed to arise under
the Original Exchange Agreement (or under any Collateral Document
or Related Document referred to therein or executed in connection
therewith) as a result of the transactions contemplated by this
Agreement, or by that certain Exchange Agreement, dated January
15, 1993, among MLX and certain holders of Zero Coupon Bonds
other than the Bondholders hereunder, or by that certain
Securities Purchase Agreement, dated as of December 15, 1992,
among MLX and certain holders of securities of MLX.
6.6 Financial Information. MLX shall deliver to each
of the Bondholders:
(1) (i) as soon as available, and in any event within 90
days after the end of each fiscal year of MLX, a consolidated
balance sheet of MLX and its consolidated Subsidiaries as at the
end of such fiscal year and the related consolidated statements
of operations and cash flow and consolidated statement of change
in shareholders' equity for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal
year, such consolidated financial statements to be reported on by
Ernst & Young or other independent accountants of nationally
recognized standing; and (ii) as soon as available, and in any
event within 90 days after the end of each fiscal year of
Friction, a consolidated balance sheet of Friction and its
consolidated subsidiaries as at the end of such fiscal year and
the related consolidated statements of operations and cash flow
and consolidated statement of change in shareholders' equity for
such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, such consolidated
financial statements to be reported on by Ernst & Young or other
independent accountants of nationally recognized standing; and
(2) (i) as soon as available, and in any event within 45
days after the end of each of the first three quarters of each
fiscal year of MLX, a consolidated balance sheet of MLX and its
consolidated Subsidiaries as at the end of such fiscal year and
the related consolidated statements of operations for such
quarter and for the portion of MLX's fiscal year ended at the end
of such quarter and cash flow for such portion of such fiscal
<PAGE>
year and the corresponding portion of MLX's previous fiscal year,
all certified (subject to normal year-end adjustments) as to
fairness of presentation, conformity with generally accepted
accounting principles and consistency by the chief financial
officer or the chief accounting officer of MLX; and (ii) as soon
as available, and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of Friction,
a consolidated balance sheet of Friction and its consolidated
subsidiaries as at the end of such fiscal year and the related
consolidated statements of operations for such quarter and for
the portion of Friction's fiscal year ended at the end of such
quarter and cash flow for such portion of such fiscal year and
the corresponding portion of Friction's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness
of presentation, conformity with generally accepted accounting
principles and consistency by the chief financial officer or the
chief accounting officer of Friction.
6.7 Interest on 1993 Bonds and Dividends on Preferred
Shares. Interest, dividends and other payments or distributions
in respect of the 1993 Bonds and the Preferred Shares shall be
paid pro rata on the 1993 Bonds and the Preferred Shares,
respectively, whenever a payment of interest, dividends and other
payments or distributions in respect of the 1993 Bonds and the
Preferred Shares is made on either. When interest has not been
paid currently on the 1993 this Bonds, all interest payable on
the 1993 Bonds and all dividends declared upon the Preferred
Shares, and any other preferred stock issued in exchange for Zero
Coupon Bonds, shall be paid or declared, as the case may be, pro
rata on the 1993 Bonds and the Preferred Shares so that the
amount of interest paid per 1993 Bond and dividends declared per
Preferred Share shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per Preferred Share and
accrued interest on the 1993 Bonds bear to each other. For
purposes of this Section 6.7, each $30.00 of principal amount of
the 1993 Bonds shall be deemed to be equivalent to one Preferred
Share.
ARTICLE 7. TRANSFER RESTRICTIONS ON 1993 BONDS
7.1 Securities Act Transfer Restrictions. No Holder
of 1993 Bonds shall sell or otherwise transfer or dispose of such
1993 Bonds, or any interest therein, except (i) to an Affiliate
that agrees to be bound by the provisions of this Agreement, (ii)
to any Accredited Investor that represents to MLX that it is
acquiring such Bonds for investment and not with a view to the
distribution thereof and that agrees to be bound by the provi-
sions of this Agreement, (iii) pursuant to Rule 144 or other
exemption from registration under the Securities Act or (iv)
pursuant to a registration statement covering such 1993 Bonds
that has been declared effective under the Securities Act. Prior
to any proposed transfer the holder shall give notice to MLX of
<PAGE>
such holder's intention to effect such transfer, which notice
shall describe the manner and circumstances of the proposed
transfer in reasonable detail and, if reasonably requested by
MLX, shall (except in the case of transfers by any holder to an
Affiliate) be accompanied by an opinion of counsel for such
holder or other counsel reasonably satisfactory to MLX addressed
to MLX and to the effect that the proposed transfer thereof may
be effected without registration under the Securities Act.
7.2 Restrictive Legends. Each certificate representing
1993 Bonds issued pursuant to this Agreement shall, unless such
requirement is waived by MLX, include a legend in substantially
the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD UNLESS
IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN COMPLIANCE
WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE EXCHANGE
AGREEMENT DATED AS OF APRIL 2, 19939, A COPY OF WHICH MAY BE
OBTAINED FROM MLX AT ITS PRINCIPAL EXECUTIVE OFFICES."
ARTICLE 8. SUBORDINATION OF 1993 BONDS
8.1 Agreement to Be Bound. Each holder of a 1993 Bond
by his acceptance thereof covenants and agrees that the 1993
Bonds shall be issued subject to the provisions contained in this
Article 8 and each Person holding any 1993 Bond, whether upon
original issue or upon transfer or assignment thereof, accepts
and agrees to be bound by such provisions. All 1993 Bonds shall,
to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
8.2 Priority of Senior Indebtedness. No payment or
prepayment of any principal of or interest on the 1993 Bonds
shall be made, nor shall assets be applied to the repurchase,
redemption or retirement of the 1993 Bonds, if, at the time of
such payment, prepayment, repurchase, redemption or retirement or
immediately after giving effect thereto, (i) there shall exist a
default in the payment or mandatory prepayment of any amount due
on or in respect of any Senior Indebtedness or (ii) there shall
exist an event of default (other than a default in the payment of
any amount due) with respect to any Senior Indebtedness, as such
terms are defined in any instrument or agreement under which such
Senior Indebtedness is outstanding, permitting the holders
thereof to accelerate the maturity thereof.
8.3 Acceleration of 1993 Bonds; Insolvency. Upon (i)
any acceleration of the principal amount due on the 1993 Bonds or
(ii) any payment or distribution of assets of MLX of any kind or
character, whether in cash, property or securities, to creditors
<PAGE>
upon any dissolution or winding up or total or partial
liquidation or reorganization of MLX, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due or to become due upon all Senior
Indebtedness shall first be paid in full, or payment thereof duly
provided for, before the holders of the 1993 Bonds shall be
entitled to receive or retain any assets so paid or distributed
in respect thereof. Upon any such dissolution or winding up or
liquidation or reorganization, any payment or distribution of
assets of MLX of any kind or character, whether in cash, property
or securities, to which the holders of the 1993 Bonds would be
entitled but for these provisions shall be paid by MLX or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or
the person making such payment or distribution, or by the holders
of the 1993 Bonds if received by them or it, directly to the
holders of Senior Indebtedness (pro rata to each of such holders
on the basis of the respective amounts of Senior Indebtedness
held by such holders or their representatives), to the extent
necessary to pay all such Senior Indebtedness in full, in moneys
or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the holders of the
1993 Bonds.
If, notwithstanding the provisions of the preceding
paragraph or of Section 8.2, any such payment or distribution of
assets of MLX of any kind or character, whether in cash, property
or securities, shall be received by the holders of the 1993 Bonds
while a default or event of default of the types referred to in
Section 8.3 has occurred and is continuing or in connection with
the acceleration of the 1993 Bonds or the dissolution, winding
up, liquidation or reorganization of MLX before all Senior
Indebtedness is paid in full, or provision made for such payment,
in accordance with its terms, such payment or distribution shall
be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing
any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Indebtedness.
The foregoing subordination provisions shall be for the
benefit of the holders of the Senior Indebtedness and may be
enforced directly by such holders against the holders of the 1993
Bonds.
8.4 Subrogation. Subject to the indefeasible payment
in cash in full of all Senior Indebtedness, the holders of the
<PAGE>
1993 Bonds (together with the holders of any other Debt of MLX
which is not subordinate in right of payment to the 1993 Bonds
and by its terms grants such right of subrogation to the holders
thereof) shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of
assets of MLX made on the Senior Indebtedness until the principal
and accrued interest of the 1993 Bonds shall be paid in full;
and, for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holders of the 1993 Bonds
would be entitled except for these provisions shall, as among
MLX, its creditors other than the holders of Senior Indebtedness,
and the holders of 1993 Bonds, be deemed to be a payment by MLX
to or on account of Senior Indebtedness, it being understood that
these provisions are and are intended solely for the purpose of
defining the relative rights of the holders of the 1993 Bonds, on
the one hand, and the holders of Senior Indebtedness, on the
other hand.
8.5 Obligations Unaffected. Nothing contained in this
Article or in the 1993 Bonds is intended to or shall impair as
among MLX, its creditors other than the holders of Senior
Indebtedness and the holders of the 1993 Bonds, the obligation of
MLX, which shall be absolute and unconditional, to pay to the
holders of the 1993 Bonds the principal of and accrued interest
on the 1993 Bonds, as and when the same shall become due and
payable in accordance with their terms, or to affect the relative
rights of the holders of the 1993 Bonds and creditors of MLX
other than the holders of Senior Indebtedness, nor shall anything
herein prevent any holder of the 1993 Bonds from exercising all
remedies otherwise permitted by applicable law upon the
occurrence of a default under this Agreement, subject to rights,
if any, under this Article of the holders of Senior Indebtedness
in respect of cash, property or securities of MLX received upon
the exercise of any such remedy.
8.6 Reliance of Holders of Senior Indebtedness. Each
holder of the 1993 Bonds by his acceptance thereof shall be
deemed to acknowledge and agree that the subordination provisions
of this Article are, and are intended to be, an inducement and a
consideration of each holder of any Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after
the issuance of such 1993 Bonds, to acquire and hold, or to
continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied
on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 9. OPTIONAL PREPAYMENTS
MLX may, upon at least three Business Days notice to
the Holder thereof, prepay the 1993 Bonds, in whole at any time,
<PAGE>
or from time to time in part, in principal amounts aggregating
$100,000 or any larger multiple of $100,000, at a price per 1993
Bond equal to the principal amount thereof outstanding plus all
interest accrued thereon on the date of prepayment. Any notice
given pursuant to this Article and received by the Holder after
11:00 a.m. (New York City time) on any Business Day shall be
deemed to have been received on the next Business Day. Each such
optional prepayment shall be applied to prepay ratably the 1993
Bonds of all holders of outstanding 1993 Bonds pro rata based on
the aggregate principal amounts of outstanding 1993 Bonds held by
each holder. If a 1993 Bond is redeemed only in part, a new bond
shall be delivered by MLX to the holder thereof in exchange
therefor at no cost to the holder in the principal amount not
redeemed.
ARTICLE 10. EVENTS OF DEFAULT
The following events shall constitute events of default
("Events of Default"):
(a) If MLX shall fail to pay when due any principal of
any 1993 Bond, then, in such event, such principal amount of
each 1993 Bond shall thereupon become and be immediately due
and payable, anything in this Agreement or in any of the
1993 Bonds contained notwithstanding, although no amount
shall be paid thereon if prohibited by Article 8.
(b) If MLX shall fail to observe or perform any
covenant contained in Section 6.2, 6.3, 6.4, 6.6 or 6.7
hereof, and (i) in respect of any of Section 6.2, 6.3, 6.4
or 6.7, such failure shall have continued uncured for 30
days, and (ii) in respect of Section 6.6, such failure shall
have continued uncured for 30 days after MLX receives
written notice from the Required Bondholders of such
failure, the principal amount of each 1993 Bond shall
thereupon become and be immediately due and payable,
anything in this Agreement or in any of the 1993 Bonds
contained notwithstanding, although no amount shall be paid
thereon if prohibited by Article 8.
(c) If MLX shall fail to observe or perform in any
material manner any covenant contained in Section 6.1
hereof, then the Required Holders may, for so long as such
Event of Default continues, deliver written notice to MLX of
such Event of Default and MLX will have 30 days from the
delivery of such notice to cure such default. If MLX fails
to cure the default within such period, then the Required
Holders may demand, at any time within 30 days from the
expiration of the cure period of MLX, that MLX redeem and
repurchase all of the outstanding Preferred Shares and 1993
Bonds at a cash purchase price with respect to the 1993
Bonds that is equal to the aggregate principal amount
<PAGE>
outstanding and all interest accrued thereon and unpaid on
the date of redemption. Such redemption will take place
within 30 days of the delivery of such redemption demand by
the Required Holders. Notwithstanding the foregoing, MLX
shall not be obligated to repurchase any 1993 Bonds if
prohibited by Article 8 of this Agreement. If the Required
Holders do not demand that the 1993 Bonds be repurchased, or
if such repurchase is prohibited by Article 8 of this
Agreement, then the interest rate payable on the 1993 Bonds
shall be one percent (1%) higher than the rate otherwise
provided for in the 1993 Bond from the date of delivery to
MLX of the Required Holders' notice of default until such
time as the default is cured or the 1993 Bonds are
repurchased.
(d) If (i) MLX becomes insolvent; (ii) MLX commences a
voluntary case under the Federal Bankruptcy Code, or a
petition is brought by MLX seeking similar relief or
alleging that it is insolvent or unable to pay its debts as
they mature; or (iii) a proceeding under the Federal
Bankruptcy Code is instituted against MLX and an order for
relief is entered in such proceeding or such proceeding is
consented to or acquiesced in by MLX or is not dismissed
within 60 days of the date upon which it was instituted, or
a petition is otherwise brought against MLX seeking similar
relief or alleging that it is insolvent, or unable to pay
its debts as they mature, and such petition is consented to
or acquiesced in by MLX or is not dismissed within 60 days
of the date upon which it was brought, then the principal
of, interest accrued on and other amounts payable under each
1993 Bond then Outstanding shall automatically become and be
due and payable immediately, anything in this Agreement or
in any of the 1993 Bonds contained notwithstanding, although
no amount shall be paid thereon if prohibited by Article 8.
ARTICLE 11. EXCHANGE OF MLX BONDS
Subject to Section 7.1, at the request at any time of
any holder of one or more of the 1993 Bonds to MLX, MLX at its
expense (except for any transfer tax or any other tax arising out
of the exchange) will issue in exchange therefor new 1993 Bonds,
in such denomination or denominations of $100,000 or any larger
multiple of $100,000 (plus one 1993 Bond in a lesser
denomination, if required) as such holder may request, in an
aggregate principal amount equal to the aggregate principal
amount of the 1993 Bond or 1993 Bonds surrendered and
substantially in the form thereof, dated the date of the 1993
Bond or 1993 Bonds so surrendered and payable to such person or
persons or order as may be designated by such holder.
<PAGE>
ARTICLE 12. REPLACEMENT OF 1993 BONDS
Upon receipt of evidence satisfactory to MLX of the
loss, theft, destruction or mutilation of any 1993 Bond and, in
the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity satisfactory to MLX, or in the case of any
such mutilation, upon surrender and cancellation of such 1993
Bond, MLX will issue a new 1993 Bond of like tenor as if the
lost, stolen, destroyed or mutilated 1993 Bond were then
surrendered for exchange in lieu of such lost, stolen, destroyed
or mutilated 1993 Bond.
ARTICLE 13. EXPENSES
All of the expenses incurred by MLX in connection with
the authorization, preparation, execution and performance of its
obligations under this Agreement, including without limitation,
all fees and expenses of its agents, representative, counsel and
accountants shall be paid by MLX. All of the expenses incurred
by any of the Holders in connection with the authorization,
preparation, execution, performance and enforcement of this
Agreement shall be paid by such Holder, other than fees, expenses
and disbursements of legal counsel to the Bondholders who are
signatory hereto up to aggregate amount not to exceed $15,000,
which shall be paid by MLX.
ARTICLE 14. AMENDMENTS AND WAIVERS
This Agreement may be amended with the consent of MLX
and the Required Bondholders. Any requirement or condition
contained in this Agreement may be waived by the Holder or
Holders intended to be benefited by such requirement or condition
without the consent of any other Holder or Holders.
ARTICLE 15. NOTICES
All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to
such party at its address or telex number set forth on the
signature pages hereof or such other address or telex number as
such party may hereafter specify for the purpose by notice to the
Holder and MLX. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Article and the
appropriate answerback is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, (iii) if
given by telecopier, when such communication is transmitted to
the telecopier number specified in this Article 15 and the sender
of such communication has received verbal confirmation of its
receipt or (iv) if given by any other means, when delivered at
the address specified in this Article.
<PAGE>
ARTICLE 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All agreements, representations and warranties
contained herein shall survive the execution and delivery of this
Agreement, any investigation at any time made by the Holders or
on the Holders' behalf, and the issuance of the Preferred Shares
and any disposition thereof. All statements contained in any
certificate or other instrument delivered by or on behalf of MLX
pursuant hereto shall constitute representations and warranties
by MLX hereunder.
ARTICLE 17. ENTIRE AGREEMENT
This Agreement and the 1993 Bonds embody the entire
agreement and understanding between the Holders and MLX and
supersede all prior agreements and understandings relating to the
subject matter hereof.
ARTICLE 18. SUCCESSORS AND ASSIGNS
All covenants and agreements in this Agreement
contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of the parties hereto whether so expressed or not.
ARTICLE 19. HEADINGS
The headings of the articles and sections of this
Agreement have been inserted for convenience of reference only
and shall in no way restrict or otherwise modify any of the terms
or provisions hereof.
ARTICLE 20. GOVERNING LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
ARTICLE 21. COUNTERPARTS
This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
ARTICLE 22. SEVERABILITY
Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof or thereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the date first above written.
MLX CORP.
By:
Title:
5305 Oakbrook Parkway
Norcross, Georgia 30093
Telecopy: (404) 279-4261
Attention: Thomas Waggoner
THE BONDHOLDERS:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By:
Title:
1285 Avenue of the Americas
19th Floor
New York, New York 10019
Telecopier: (212) 554-1230
Attention: Kate Kutasi
THE EQUITABLE VARIABLE LIFE
INSURANCE COMPANY
By:
Title:
1285 Avenue of the Americas
19th Floor
New York, New York 10019
Telecopy: (212) 554-1230
Attention: Kate Kutasi
<PAGE>
EXHIBIT A
TO THE
EXCHANGE AGREEMENT
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED
UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
MLX CORP.
Variable Rate Subordinated Bonds Due 2002
New York, New York
For value received, MLX CORP., a Michigan corporation
("MLX"), promises to pay to
or registered assigns, the principal sum of
($ ) on March 19, 2002 in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts. The
principal amount due hereunder shall be repaid from time to time
as and at the time that shares of MLX's Series A Preferred Stock
(the "Preferred Shares") are redeemed, in each case in an amount
that is sufficient to repay that percentage of the then
outstanding principal amount of this Bond which is equal to the
percentage that the Preferred Shares being redeemed represent of
the aggregate shares of Series A Preferred Stock then
outstanding.
The principal of this Bond shall bear interest at the
rate per annum (computed on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days elapsed)
reflected below from time to time in effect for the corresponding
period:
<TABLE>
<CAPTION>
Period Interest Rate
<S> <C>
Date of issuance
to 12/31/94 Prime Rate plus 2.5%, but not less than 9%
1995 Prime Rate plus 3.5%, but not less than 10%
1996 Prime Rate plus 3.5%, but not less than 11%
1997 Prime Rate plus 5.0%, but not less than 12%
1998 Prime Rate plus 6.0%, but not less than 13%
January 1, 1999
and beyond Prime Rate plus 7.0%, but not less than 14%
</TABLE>
Provided, that the interest rate will be 1% greater than the rate
reflected above for any period after March 31, 1994 during which
interest that has accrued with respect to more than one calendar
quarter remains unpaid. The failure to pay interest as provided
<PAGE>
hereunder shall not constitute an event of default hereunder and
shall give the Holder of this Bond no rights other than the right
to accrue a greater rate of interest as described in the
immediately preceding sentence, including the right to accelerate
payment of the principal amount of this Bond.
Interest will accrue from the date of original issuance
and will be payable in cash quarterly on March 31, June 30,
September 30 and December 31, of each year, with the first
payment on March 31, 1993.
As used herein, the term "Prime Rate" shall mean the
rate of interest announced by Barclays Bank PLC, or its
successor, from time to time as its Prime Rate. For purposes of
calculating the interest rate hereunder, the Prime Rate of such
bank in effect at the close of business on the first business day
of each period described above shall be the Prime Rate hereunder
for such entire period. In the event the Prime Rate is
discontinued as a standard, MLX shall designate a comparable
reference rate as a substitute therefor.
This Bond is one of a duly authorized issue of Variable
Rate Subordinated Bonds issued pursuant to the Exchange Agreement
dated as of April 2, 1993 (as thereafter amended, the "Exchange
Agreement") among MLX and the Bondholders listed therein.
This Bond is subject to the provisions of and is
entitled to the benefits of the Exchange Agreement. The Exchange
Agreement provides, inter alia, for optional prepayments of the
principal of the Bonds from time to time, in each case at a price
equal to the principal amount outstanding and accrued interest
thereon at the date of prepayment. In addition, the payment of
the principal of and interest on this Bond is subordinated in
right of payment to the prior payment in full of certain other
obligations of MLX to the extent and manner set forth in the
Exchange Agreement. Each holder of this Bond, by accepting the
same, agrees to and shall be bound by the provisions of the
Exchange Agreement.
No reference herein to the Exchange Agreement and no
provision hereof or thereof shall alter or impair the obligation
of MLX, which is absolute and unconditional, to pay the principal
hereof and interest herein described.
This Bond is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of New York.
MLX may treat the person in whose name this Bond is
registered as the owner and holder of this bond for the purpose
of receiving payments on this Bond and for all other purposes
<PAGE>
whatsoever and MLX shall not be affected by any notice to the
contrary.
IN WITNESS WHEREOF, MLX CORP. has caused this Bond to
be dated, and to be executed on its behalf by its officer
thereunto duly authorized and its corporate seal to be hereunto
duly affixed.
MLX CORP.
[Corporate Seal] By
Title:
<PAGE>
MLX EXCHANGE AGREEMENT
Dated as of April 13, 1990
(as amended and restated as of March 19, 1992)
as amended and restated
as of April 21, 1993
among
MLX CORP.,
and
THE HOLDERS LISTED HEREIN
<PAGE>
AMENDED AND RESTATED
MLX EXCHANGE AGREEMENT
MLX EXCHANGE AGREEMENT dated as of April 13, 1990, as
amended and restated as of April 21, 1993, among MLX CORP. and
the BONDHOLDERS listed on the signature pages hereof under the
caption "BONDHOLDERS."
WHEREAS, certain of the parties hereto originally
entered into the MLX Exchange Agreement dated as of April 13,
1990 (the "Original Exchange Agreement"); and
WHEREAS, the MLX Bonds referred to below and 8,500,000
shares of MLX Common Stock have been issued pursuant to the
Original Exchange Agreement; and
WHEREAS, the Original Exchange Agreement was amended
and restated as of March 19, 1992 (the Original Exchange
Agreement, as so amended and restated being hereafter referred to
as the "Existing Exchange Agreement"); and
WHEREAS, each Bondholder owns the MLX Bonds set forth
opposite its name on Schedule 1 hereto; and
WHEREAS, the parties hereto wish to amend the Existing
Exchange Agreement, effective as of the date hereof, to make
mutually satisfactory changes in the terms of the Existing
Exchange Agreement and, solely for the convenience of the parties
hereto, to restate the Existing Exchange Agreement as so amended;
NOW, THEREFORE, the parties hereto amend and restate
the Existing Exchange Agreement in its entirety as set forth
herein.
ARTICLE 1. DEFINITIONS
The following terms, as used herein, have the following
respective meanings:
"Accredited Investors" has the meaning ascribed to such
term in Rule 501(a) under the Securities Act.
"Accreted Amount" means with respect to any MLX Bond at
any date on which such amount is calculated (a "Calculation
Date") an amount equal to the sum of (i) the Issue Price of such
MLX Bond plus (ii) the accrued amortization of the Accruing Issue
Discount of such MLX Bond calculated using a constant rate of
interest per annum compounded daily and computed by the Company
in accordance with generally accepted accounting principles
<PAGE>
consistently applied from and including date hereof to but
excluding the Calculation Date.
"Accruing Issue Discount" means, with respect to any
MLX Bond, the difference between the Issue Price of such MLX Bond
and the principal amount of such MLX Bond.
"Affiliate" has the meaning given to such term in Rule
12b-2 under the Exchange Act, but no Holder or any affiliate of a
Holder shall be deemed to be an Affiliate of MLX for purposes of
this Agreement.
"Agreement" means the Existing Exchange Agreement dated
as of April 13, 1990, as amended and restated as of the date
hereof among MLX and the Bondholders listed herein.
"Base Rate" means, for any day, a rate per annum equal
to the higher of (i) the Prime Rate for such day and (ii) the sum
of 1/2% plus the Federal Funds Rate for such day.
"Bondholder" means, as the context may require, any
holder of MLX Bonds and any transferee of any such holder that is
bound by the provisions of this Agreement.
"Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are
authorized by law to close.
"Collateral Agent" means, with respect to any
Collateral Document, Morgan Guaranty Trust Company of New York as
collateral agent under or with respect to such Collateral
Document, and its successors in such capacity.
"Collateral Documents" means the MLX (Friction) Pledge
Agreement, the Security Agreement, the Insurance Policy (as
defined in the Security Agreement), and all supplementary
assignments, pledge agreements or other documents delivered to
the Collateral Agent pursuant thereto in order to evidence and
perfect the pledges, security interests and mortgages granted
therein, including, without limiting the foregoing, Form UCC-l
financing statements, all as amended or modified from time to
time.
"Commission" means the Securities and Exchange
Commission and any other similar or successor agency of the
federal government administering the Securities Act or the
Exchange Act.
"Consolidated Subsidiary" means, as to any Person at
any date, any Subsidiary or other entity the accounts of which'
<PAGE>
would be consolidated with those of such Person in its
consolidated financial statements as of such date.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable and employee
payroll and benefits arising in the ordinary course of business,
(iv) all obligations of such Person as lessee under capital
leases, (v) all obligations, whether contingent or non-
contingent, of such Person to reimburse any bank or other Person
in respect of amounts paid or payable under a letter of credit or
similar instrument, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by
such Person, and (vii) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or waived,
constitute an Event of Default.
"Demand Registration" means any registration of
Registrable Shares under the Securities Act by MLX initiated at
the request of Holders of Registrable Shares pursuant to Section
7.1.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, or any successor statute.
"Event of Default" has the meaning set forth in Article
11.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Friction" means SinterMet Corporation, a Michigan
corporation, and its successors.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or
<PAGE>
otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" means, as the context may require, any
Bondholder, any holder of the Shares and any transferee of any
such holder that is bound by the provisions of this Agreement.
"Initial Aggregate Principal Amount" means $20,000,000.
"Issue Price" means, with respect to any MLX Bond, the
amount which bears the same proportion to $8,186,074.03 as the
principal amount of such MLX Bond bears to the Initial Aggregate
Principal Amount.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this
Agreement, any person shall be deemed to own subject to a Lien
any asset which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"MLX" or the "Company" means MLX Corp., a Michigan
Corporation, and its successors.
"MLX Bonds" means the Secured Subordinated Zero Coupon
Bonds of MLX issued pursuant to the Original Exchange Agreement,
as such Bonds have been and shall be amended pursuant to the
Existing Exchange Agreement and this Agreement, and substantially
in the form of Exhibit A hereto.
"MLX Common Stock" means the common stock, par value
$0.01 per share, of MLX.
"MLX (Friction) Pledge Agreement" means the MLX
(Friction) Pledge Agreement dated as of April 13, 1990 between
MLX and the CollateraL Agent as amended and restated as of the
date hereof.
"Net Cash Proceeds" means, with respect to any
Prepayment Event described in clauses (a)l (c), (d) and (e) of
the definition of that term, an amount equal to the excess of (i)
cash proceeds received by MLX from or in respect of such
Prepayment Event (including any cash proceeds received as income
or other proceeds of any noncash proceeds from or in respect of
<PAGE>
such event) less (x) any expenses reasonably incurred by MLX in
respect of such event and (y) any taxes paid or payable by MLX
(as estimated by the chief financial officer of MLX) in respect
of any such transaction over (ii) the amounts necessary to
satisfy any cash collateral requirements or prepayment
requirements relating to Debt and means with respect to any
Prepayment Event described in clause (b) of the definition of
that term, an amount equal to the excess of cash proceeds
received by MLX from or in respect of such Prepayment Event.
"Outstanding" means, when used with reference to the
MLX Bonds at any time, all MLX Bonds theretofore duly issued
except (i) MLX Bonds theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for transfer, exchange or
replacement, in respect of which replacement MLX Bonds have been
issued by MLX, (ii) MLX Bonds surrendered to MLX for prepayment
pursuant to Article 11, (iii) MLX Bonds theretofore paid in full
and (iv) MLX Bonds theretofore cancelled by MLX; provided that,
for the purpose of determining whether holders of the requisite
principal amount of MLX Bonds have made or concurred in any
declaration, waiver, consent, approval, notice, annulment of
acceleration or other communication under this Agreement or any
MLX Bonds, MLX Bonds registered in the name of, as well as MLX
Bonds owned beneficially by, MLX, any Subsidiary or any Affiliate
of either shall not be deemed to be Outstanding.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Prepayment Event" means (a) any sale, transfer or
other disposition of any asset of MLX other than (i) accounts
receivable of MLX arising prior to 1984 and in an amount not
exceeding $1,000,000 in the aggregate and (ii) any sales of
assets of MLX in the ordinary course of its business for an
amount not exceeding $100,000 in the aggregate since the date
hereof, (b) the receipt by MLX of any dividend or other
distribution on any shares of capital stock of Friction, (c) the
issuance, sale, transfer or other disposition of any shares of
capital stock of Friction, or (d) the issuance, sale, transfer or
other disposition of any shares of capital stock of MLX.
"Registrable Shares" means (i) the Shares (and any
shares of MLX Common Stock issued in exchange or substitution
therefor) and (ii) any shares of MLX Common Stock issued upon a
reclassification or issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of, Shares; provided that Shares
<PAGE>
which are Restricted Shares shall not be Registrable Shares for
purposes of this Agreement prior to April 30, 1994.
"Registration Expenses" means all expenses incurred in
connection with a registration of any Registrable Shares under
the Securities Act, including, without limitation, (i) all
Commission and securities exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all
fees and expenses of complying with securities or "blue sky" laws
as required by Section 7.3(iv) (including reasonable fees and
disbursements of counsel for the underwriters in connection with
"blue sky" qualifications of Registrable Shares being sold by
holders of such Registrable Shares), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses
incurred in connection with the listing of such Registrable
Shares on any securities exchange pursuant to Section 7.3(x)
hereof, (v) the fees and disbursements of counsel for MLX and its
independent public accountants, including the expenses of any
special audits or comfort letters required for such registration,
(vi) the fees and disbursements of one separate firm of attorneys
(plus local counsel if appropriate) for all the Selling
Shareholders, (vii) any fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities and
(viii) the reasonable fees and expenses of any special experts
retained in connection with any registration; provided that
Registration Expenses shall not include any underwriting or
selling discounts or commissions or any transfer taxes in
connection with any offer and sale of MLX Common Stock pursuant
to a registration statement under the Securities Act, which
discounts, commissions and transfer taxes shall be paid by each
Person offering MLX Common Stock pursuant to such registration
statement, including each Selling Shareholder and MLX (if MLX
Common Stock is being offered for its own account) pro rata based
on the number of shares of MLX Common Stock so registered to
which such discounts, commissions and transfer taxes relate.
"Regulation Y Holder" means any Holder that is subject
to the provisions of Regulation Y of the Board of Governors of
the Federal Reserve System (12 CFR 225) or any successor to such
regulation, and any Affiliate of such Holder, so long as such
Person shall hold Registrable Shares.
"Required Bondholders" means on any date registered
holders of (in the aggregate) in excess of 50% of the aggregate
principal amount of MLX Bonds outstanding on such date.
"Restricted Shares" means 50% of the Shares received by
a Holder pursuant to the Original Exchange Agreement and held by
such Holder prior to March 31, 1991.
<PAGE>
"Securities" means collectively, the MLX Bonds and the
Shares.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Agreement" means the security Agreement dated
as of April 30, 1991, as amended and restated as of the date
hereof.
"Selling Shareholders" means Holders of Registrable
Shares requesting registration of all or a portion of such
Registrable Shares pursuant to Section 7.1 or 7.2 in connection
with an offer and sale thereof.
"Senior Indebtedness" means any and all obligations of
MLX (including, without limitation, obligations to pay principal,
interest (including, without limitation, any interest that
accrues after the filing of a petition initiating any proceeding
referred to in paragraphs (a) and (b) of Article 11 hereof and is
allowed by the applicable bankruptcy court), reimbursement
obligations, fees, commissions and other amounts) under or with
respect to Debt that is not, by its terms, subordinated in right
of payment to the Debt evidenced by the MLX Bonds.
"Shares" means the 8,500,000 shares of MLX Common stock
issued by MLX pursuant to the Original Exchange Agreement.
"Subsidiary" means, in the case of any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by
such Person.
"Transfer Agent and Registrar" means American Stock
Transfer & Trust Company, as Transfer Agent and Registrar for the
MLX Common Stock, and its successors in such capacity.
ARTICLE 2. WAIVER OF DEFAULTS; RELEASE OF SECURITY
2.1 Waiver. The Bondholders signing on the signature
pages hereof, in their capacity as the holders of in excess of
eighty percent (80%) of the aggregate principal amount of the
Outstanding MLX Bonds and on behalf of all Bondholders, hereby
waive any and all Defaults, Events of Default or other violations
or breaches of the Existing Exchange Agreement, any Collateral
Document or Related Document (as defined in the Existing Exchange
Agreement), in each case arising on or prior to the date hereof.
<PAGE>
2.2 Release of Security. The Bondholders signing on
the signature pages hereof, in their capacity as the holders of
in excess of eighty percent (80%) of the aggregate principal
amount of the Outstanding MLX Bonds and on behalf of all
Bondholders, hereby release and discharge any and all of the
Bondholders' right, title and interest in and to any and all
assets or properties provided by MLX as collateral security for
its obligations hereunder pursuant to the Security Agreement, the
MLX (Friction) Pledge Agreement and the other Collateral
Documents. The undersigned Bondholders shall take all such
action as may be reasonably necessary to cause the Collateral
Agent to release and discharge any and all of such collateral
security as it may hold or have the benefit of, whether directly
or indirectly, under, pursuant or with respect to any Collateral
Document, and shall issue such orders and directions to the
Collateral Agent as may be reasonably necessary to effect the
release and discharge of such collateral security pursuant
hereto; MLX shall reasonably cooperate with such Bondholders in
this regard.
2.3 Effectiveness. On and after the date hereof the
rights and obligations of MLX and the Bondholders shall be
governed by this Amended and Restated Exchange Agreement.
2.4 Deemed Amendment of MLX Bonds. Effective the date
hereof, the MLX Bonds will be deemed amended as set forth on
Exhibit A hereto.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MLX
MLX represents and warrants as of the date hereof that:
3.1 Corporate Existence and Power. Each of MLX and
its Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its organization and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
3.2 Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by MLX of
this Agreement is within its corporate powers have been duly
authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default
under, any provision of applicable United States federal,
Michigan or other law or regulation or of its certificate of
incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it or
result in the creation or imposition of any Lien on any of its
assets. MLX has all requisite corporate power and authority to
<PAGE>
enter into this Agreement, to carry out the provisions and
conditions of this Agreement and the MLX Bonds and to amend the
MLX Bonds as provided by this Agreement.
3.3 Binding Effect. This Agreement and the MLX Bonds
constitutes a valid and binding agreement of MLX, in each case
enforceable in accordance with their respective terms except as
(i) the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other similar law affecting the
enforceability of creditors rights generally and (ii) rights with
respect thereto may be limited by equitable principles of general
applicability.
3.4 No Conflicting Requirements. After giving effect
to this Agreement, neither MLX nor any of its Subsidiaries is in
violation of, or in default under, any term or provision of any
charter, by-law, mortgage, indenture, agreement, instrument,
statute, rule, regulation, judgment, decree, order, writ or
injunction applicable to it, which violations or defaults in the
aggregate could reasonably be expected to materially and
adversely affect the business, properties, financial position or
results of operations of MLX and its Subsidiaries, considered as
a whole.
3.5 Registration Rights. Except as set forth in
Article 7 hereof, MLX is under no obligation (whether upon the
occurrence of certain events or otherwise) to register under the
Securities Act any of its outstanding shares of MLX Common Stock.
3.6 Registration of Securities. Subject to the
accuracy of the Holders' representations and warranties in
Article 4, the amendment of the MLX Bonds pursuant to the terms
of this Agreement do not require registration under the
Securities Act or registration or qualification under any
applicable state "blue sky" or securities laws.
ARTICLE 4. REPRESENTATIONS OF EACH HOLDER AND CERTAIN
BONDHOLDERS
Each Holder hereby represents that:
4.1 Such Holder is an Accredited Investor and acquired
the Securities for its own account, for investment and not with a
view to the distribution thereof, other than to Affiliates who
are Accredited Investors, nor with any present intention of
distributing the same, other than to Affiliates who are
Accredited Investors.
4.2 Such Holder understands that the Securities have
not been registered under the Securities Act or registered or
qualified under any state securities or "blue sky" laws by reason
<PAGE>
of their issuance in a transaction which does not require
registration under the Securities Act or registration or
qualification under the securities or "blue sky" laws of any
state, and that such Securities may be sold only if registered
under the Securities Act and registered or qualified under
applicable state securities or "blue sky" laws or exempt from
such registration or qualification.
4.3 Such Holder has been furnished with the
information it has requested from MLX and has had an opportunity
to discuss with officers of MLX the business and financial
affairs of MLX.
4.4 Such Bondholder is the legal and beneficial owner
of that aggregate principal amount of MLX Bonds Outstanding as of
the date hereof set forth opposite its respective name on
Schedule 1 hereto.
ARTICLE 5. COVENANTS OF MLX
From the date hereof, MLX agrees that, so long as MLX
has any obligation hereunder or under any MLX Bond:
5.1 Information. MLX will deliver to each of the
Holders, within 15 days after it files them with the Commission,
copies of its annual report and of the other information,
documents and reports as MLX is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
5.2 Compliance with Laws. MLX will comply, and will
cause each of its Subsidiaries to comply, with all applicable
laws, ordinances, rules, regulations and requirements of
governmental authorities (including, without limitation, ERISA
and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by
appropriate proceedings or where such noncompliance, together
with all other non-compliances, would not have a materially
adverse effect on MLX and its Subsidiaries, taken as a whole, or
on the ability of MLX to perform its obligations hereunder or
under the MLX Bonds.
ARTICLE 6. TRANSFER RESTRICTIONS ON SECURITIES
6.1 Securities Act Transfer Restrictions on all
Securities. Subject to Sections 6.3 and 6.4, no Holder of
Securities (other than holders of MLX Common Stock sold pursuant
to an effective registration statement or pursuant to Rule 144
under the Securities Act) shall sell or otherwise transfer or
dispose of such Securities, or any interest therein, except (i)
to an Affiliate that agrees to be bound by the provisions of this
<PAGE>
Agreement, (ii) to any Accredited Investor that represents to MLX
that it is acquiring such Securities for investment and not with
a view to the distribution thereof and that agrees to be bound by
the provisions of this Agreement, (iii) pursuant to Rule 144 or
other exemption from registration under the Securities Act or
(iv) in the case of the Shares, pursuant to a registration
statement covering such Shares that has been declared effective
under the Securities Act. Prior to any proposed transfer the
holder shall give notice to MLX of such holder's intention to
effect such transfer, which notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail and,
if reasonably requested by MLX, shall (except in the case of
transfers by any holder to an Affiliate) be accompanied by an
opinion of special counsel for such holder or other counsel
reasonably satisfactory to MLX addressed to MLX and to the effect
that the proposed transfer thereof may be effected without
registration under the Securities Act.
6.2 Restrictive Legends. Each certificate
representing Securities issued pursuant to this Agreement (other
than in connection with the sale of any Securities pursuant to an
effective registration statement or pursuant to Rule 144 under
the Securities Act) shall include a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD
UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN
ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER
SET FORTH IN THE MLX EXCHANGE AGREEMENT DATED AS OF
APRIL 13, 1990, AS AMENDED AND RESTATED AS OF MARCH 19,
1992 AND APRIL 22, 1993 AND AS FURTHER AMENDED FROM
TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM MLX
AT ITS PRINCIPAL EXECUTIVE OFFICES."
6.3 Special Transfer on Restricted Shares. No holder
of Restricted Shares shall, prior to April 30, 1994, sell or
otherwise transfer or dispose of such Restricted Shares, or any
interest therein, except to a Tax Affiliate of such Holder. For
purposes of this Section 6.3, "Tax Affiliate" means any member of
an affiliate group of corporations for purposes of Section
1504(a) of the Code, including for such purposes any Corporation
listed in Section 1504(b) of the Code.
6.4 Additional Restrictions on Transfer by Regulation
Y Holders.
(a) Without limiting the provisions of Sections 6.1,
6.2 and 6.3, no Regulation Y Holder may transfer any of the
Shares except (i) to MLX; (ii) to any Affiliate of such
<PAGE>
Regulation Y Holder; (iii) in a registered offering or pursuant
to Rule 144 under the Securities Act; (iv) in connection with any
merger, consolidation or reorganization of MLX or any sale of at
least a majority of the outstanding MLX Common Stock (excluding,
for purposes of calculating such majority, the shares of MLX
Common Stock proposed to be transferred by such Regulation Y
Holder); (v) to any other Person (a "Third Party"), provided that
in the case of transfers to Third Parties, if counsel to such
Regulation Y Holder shall have advised such Regulation Y Holder
that it is necessary in order to comply with any law or
regulation applicable to such Regulation Y Holder, (A) such
Regulation Y Holder shall have first offered to MLX the right to
purchase all of such shares of MLX Common Stock, pursuant to a
written offer which shall have been open to acceptance for a
period of at least 10 days, for cash at a price not exceeding the
price obtainable in the private sale to such Third Party and (B)
such Regulation Y Holder shall not knowingly make any such sale
to a Third Party of more than 2% of the shares of MLX Common
Stock then outstanding; or (vi) upon the advice of counsel to
such Regulation Y Holder that such transfer is permitted under
the laws and regulations applicable to such Regulation Y Holder.
(b) If it becomes unlawful for any Regulation Y Holder
to continue to hold some or all of the shares of MLX Common Stock
held by it, or restrictions are imposed on any such Regulation Y
Holder by any statute, regulation or governmental authority
which, in the reasonable judgment of such Regulation Y Holder,
make it unduly burdensome to continue to hold such shares of MLX
Common Stock, such Regulation Y Holder may, subject to the
provisions of Sections 6.1, 6.2 and 6.3 sell or otherwise dispose
of its shares of MLX Common Stock, and MLX agrees to assist such
Regulation Y Holder in disposing of such shares in a prompt and
orderly manner.
(c) Notwithstanding any other provision of this
Agreement to the contrary, without the prior written consent of
each Regulation Y Holder affected thereby, MLX will not directly
or indirectly purchase, redeem, retire or otherwise acquire for
value any shares of MLX Common Stock if as a result of such
purchase, redemption, retirement or other acquisition such
Regulation Y Holder will own more than 24.99% of the shares of
MLX Common Stock then outstanding.
ARTICLE 7. REGISTRATION RIGHTS
7.1 Demand Registration.
(a) If at any time or from time to time, Holders of at
least a majority of the outstanding Registrable Shares request in
writing that MLX file a registration statement (on such form and
<PAGE>
containing such information as any managing underwriter or
underwriters for the proposed offering may reasonably request)
under the Securities Act with respect to the offering and sale by
such Holders of such Registrable Shares, MLX shall promptly give
written notice of such request to each Holder of Registrable
Shares and shall offer to each such Holder the opportunity to
include in such registration statement the number of Registrable
Shares owned by such Holder. Within 30 days after receipt of
such notice, Holders wishing to have Registrable Shares included
in such registration statement shall deliver to MLX a Stock
Pricing Schedule in customary form, and MLX shall include in such
registration statement the applicable number of Registrable
Shares set forth in each such Holder's Stock Pricing Schedule.
MLX shall thereafter forthwith, and in any event not more than 60
days after its receipt of such notice, file such registration
statement and use its good faith best efforts to cause it to be
promptly declared effective by the Commission so as to permit or
facilitate the sale or distribution of all or such portion of the
number of Registrable Shares requested to be registered.
Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering shall advise MLX in writing (and
deliver a copy thereof to each Holder requesting registration of
Registrable Shares) that, in its opinion, the marketing factors
require a limitation of the number of Registrable Shares to be
offered and sold, then the Registrable Shares to be offered shall
be reduced pro rata to that number of Registrable Shares that
such managing underwriter or underwriters believes will not
jeopardize the success of the offering. The managing underwriter
or underwriters for any offering pursuant to this Section shall
be selected by Holders of a majority of the Registrable Shares
being offered in such offering and shall be reasonably acceptable
to MLX.
(b) MLX shall not be required to file more than three
registration statements pursuant to the provisions of paragraph
(a) hereof; provided that no registration statement will be
counted against this limit unless (i) with respect to such
registration statement, MLX has complied with all of the
applicable conditions specified in Section 7.3 (and with respect
to subsections (iv) and (xii) of Section 7.3, without regard to
any "best efforts" or similar qualification if the failure to
comply with either of such sections materially interfered with
the proposed offering) and (ii) such registration statement has
become effective and the Registrable Shares of the Holders
included in such registration statement at the time it became
effective have actually been sold thereunder. Notwithstanding
the foregoing, if any Demand Registration occurs prior to April
30, 1994, the Holders of Registrable Shares shall have the right
to request one additional Demand Registration, which additional
Demand Registration shall not count as the second Demand
Registration or the third Demand Registration for purposes of
<PAGE>
Section 7.1(c). Registration Expenses relating to such
additional Demand Registration shall be paid by MLX.
(c) Registration Expenses shall be (i) paid by MLX in
the case of the first Demand Registration, (ii) paid by the
Selling Shareholders in the case of the second Demand
Registration and (iii) divided equally between MLX, on the one
hand, and the Selling Shareholders, on the other hand in the case
of the third Demand Registration; provided that if any Demand
Registration occurs prior to April 30, 1994, Registration
Expenses with respect to the first request for registration of
Restricted Shares occurring after April 30, 1994 shall be paid by
MLX and shall not be counted as a Demand Registration for
purposes of this paragraph (c). Registration Expenses with
respect to any Demand Registration that are to be paid by Selling
Shareholders shall be divided pro rata among such Selling
Shareholders according to the number of Registrable Shares of
each such Selling Shareholder that was registered pursuant to
paragraph (a) hereof.
(d) No demand may be made by Holders of Registrable
Shares under this Section during the period from the receipt by
such Holders of a notice from MLX under Section 7.2 to the effect
that MLX proposes to register shares of MLX Common Stock for its
own account until the earlier of (i) 45 days after the
effectiveness of a registration statement initiated by MLX under
Section 7.2 and (ii) the date on which MLX shall have abandoned
any such registration statement; provided that Holders of
Registrable Shares shall have been offered the opportunity to
include shares of MLX Common Stock in such registration statement
in accordance with Section 7.2; and provided further that MLX
shall during such period be using its good faith best efforts to
cause such registration statement to promptly become effective.
7.2 Piggy-back Registration. If at any time or from
time to time MLX proposes to register under the Securities Act
any shares of MLX Common Stock in connection with a cash
underwritten offering for its own account (other than in
connection with an exchange offer or a registration statement on
Forms S-4, S-8 or other similar forms), then MLX shall in each
case give written notice of such proposed filing to each Holder
of Registrable Shares and such notice shall offer to such Holder
the opportunity to include in such registration statement such
number of Registrable Shares as such Holder may request. Within
30 days after receipt of such notice, Holders wishing to have
Registrable Shares included in such registration statement shall
deliver to MLX a Stock Pricing Schedule in the form of Exhibit B
hereto, and MLX shall include in such registration statement the
applicable number of Registrable Shares set forth in each such
Holder's Stock Pricing Schedule. Notwithstanding the foregoing,
if the managing underwriter or underwriters of such offering
<PAGE>
shall advise MLX in writing (and shall deliver a copy thereof to
such Selling Shareholders) that, in its opinion, the marketing
factors require a limitation of the number of Registrable Shares
to be offered and sold, then the Registrable Shares to be offered
for the account of such Holders shall, together with the shares
of MLX Common Stock to be offered by all other Persons (including
MLX), be reduced pro rata based on the number of shares of MLX
Common Stock proposed to be included in the registration
statement by all Persons, including such Selling Shareholders.
7.3 Preparation and Filing. Whenever MLX is required
to, or to use its best efforts to, effect the registration of any
Registrable Shares in connection with an offer and sale thereof
by Selling Shareholders, MLX will as expeditiously as possible:
(i) prepare and file with the Commission a
registration statement with respect to such Registrable
Shares and use its best efforts to cause such registration
statement to promptly become and remain effective for the
period set forth in clause (ii) below and promptly notify
the Selling Shareholders (x) when such registration
statement becomes effective, (y) when a post effective
amendment to such registration statement becomes effective
and (z) of any request by the Commission for any amendment
or supplement to such registration statement or any
prospectus relating thereto or for additional information;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities
covered by such registration statement for a period of not
less than 90 days after the effective date of such
registration statement to the extent necessary to permit the
completion of the sale or distribution of such securities
within such period; provided that if MLX shall take any
action with respect to the acquisition of the stock or
assets of any business entity that would require MLX to
amend any prospectus included in a registration statement
which becomes effective under the provisions hereof by
including financial statements which conform to the
requirements of Regulation S-X promulgated by the
Commission, the Selling Shareholders shall suspend the
offering or sale of such Registrable Shares for a period not
to exceed 45 days so that MLX may prepare such financial
statements (which MLX shall prepare as promptly as possible)
and the 90-day period referred to above in this paragraph
(ii) shall be extended for a period equal to such delay;
<PAGE>
(iii) furnish to each Selling Shareholder, prior to
filing a registration statement, copies of such registration
statement as proposed to be filed and thereafter such number
of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such
registration statement (including each preliminary
prospectus), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which MLX shall have filed with the Commission
and financial statements, reports and proxy statements
mailed to shareholders of MLX as such Selling Shareholder
may reasonably request in order to facilitate the
disposition of the Registrable Shares being offered by such
Selling Shareholder;
(iv) use its best efforts to register or qualify, not
later than the effective date of any filed registration
statement, the Registrable Shares covered by such
registration statement under the securities or "blue sky"
laws of such jurisdictions as each Selling Shareholder
reasonably requests; provided that MLX will not be required
to (i) qualify to do business as a foreign corporation or as
a dealer in any jurisdiction where it is not so qualified,
(ii) subject itself to taxation in any jurisdiction where it
is not subject to taxation, (iii) consent to general service
of process in any jurisdiction where it is not subject to
general service of process or (iv) take any action that
would subject it to service of process in suits other than
those arising out of the offer or sale of the Registrable
Shares covered by the registration statement;
(v) make available, upon reasonable notice and during
business hours, for inspection by the managing underwriter
or underwriters for the Selling Shareholders (and their
counsel and counsel for the Selling Shareholders)
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents, agreements and
properties of MLX (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due
diligence responsibility, and cause MLX's officers,
directors and employees to supply all information reasonably
requested by any such Inspector in connection with the
registration statement;
(vi) obtain a comfort letter from MLX's independent
public accountants dated within five business days prior to
the effective date of the registration statement (and as of
such other dates as such Selling Shareholders managing
underwriter or underwriters may reasonably request) in
customary form and covering such matters of the type
customarily covered by such comfort letters as such managing
underwriter or underwriters reasonably requests;
<PAGE>
(vii) obtain an opinion of counsel dated the effective
date of the registration statement (and as of such other
dates as such Selling Shareholders' managing underwriter or
underwriters may reasonably request) in customary form and
covering such matters of the type customarily covered by
such opinions as counsel designated by such managing
underwriter or underwriters reasonably requests;
(viii) during the period when the registration
statement is required to be effective, notify each Selling
Shareholder of the happening of any event as a result of
which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
MLX will forthwith prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus will
not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(ix) in the case of an underwritten offering, enter
into an underwriting agreement containing customary terms,
including, without limitation, such indemnity and
contribution provisions and any managing underwriter or
underwriters customarily requires or may reasonably require;
(x) cause such Registrable Shares to be traded on each
securities exchange on which similar securities issued by
MLX are then traded; provided that the applicable listing
requirements are satisfied;
(xi) refrain from filing any registration statement to
register MLX Common Stock for its own account or for the
account of any other security holder during the period
commencing with the receipt of the written request from the
Selling Shareholders to file a registration statement and
ending 60 days after such registration statement is declared
effective by the Commission; and
(xii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make available to its securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective
date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the
Securities Act.
<PAGE>
Each Selling Shareholder shall timely furnish to MLX
such information regarding the distribution of such Registrable
Shares as MLX may from time to time reasonably request.
Each Selling Shareholder agrees that upon receipt of
any notice from MLX of the happening of any event of the kind
described in paragraph (viii) above, it will forthwith
discontinue disposition of Registrable Shares pursuant to the
registration statement covering such Registrable Shares until
such Selling Shareholder's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph
(viii) above. If MLX gives any such notice, MLX shall keep any
such registration statement effective for that number of
additional days equal to the number of days during the period
from and including the date of the giving of such notice pursuant
to paragraph (viii) above to and including the date on which
copies of such supplemented or amended prospectus are made
available to such Selling Shareholders.
7.4 Indemnification.
(a) MLX will indemnify and hold harmless, to the
full extent permitted by law, each Selling Shareholder, its
directors and officers and each person who controls each Selling
Shareholder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) against and from all
losses, claims, damages, liabilities and amounts paid in
settlement of any claim, action or proceeding (which settlement
may not be effected without MLX's prior written consent, which
consent shall not be unreasonably withheld), arising from or
based upon any untrue or alleged untrue statement of a material
fact contained in any registration statement, prospectus or
preliminary prospectus, or any amendment thereof or supplement
thereto, or arising from or based upon any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case
of a prospectus, in the light of the circumstances under which
they were made) not misleading, and MLX shall reimburse any
indemnified party for all expenses (including, without
limitation, reasonable attorney's fees and expenses as incurred,
subject to the limitations specified in paragraph (c) hereof)
incurred by it or on its behalf in connection with investigating
or defending any such claim, action or proceeding; provided, that
MLX will not be liable in any such case to the extent that any
such loss, claim, damage, liability, amount paid in settlement of
any claim, action or proceeding or expense arises from or is
based upon any untrue or alleged untrue statement or omission or
alleged omission made in such registration statement, such
prospectus or preliminary prospectus or such post-effective
amendment or supplement in reliance upon and in conformity with
information furnished in writing to MLX by or on behalf of such
<PAGE>
Selling Shareholder, its directors, officers or controlling
persons (or any underwriters acting on behalf of such Selling
Shareholder) specifically for use in the preparation thereof.
MLX will indemnify and hold harmless the underwriters for the
offering, their directors and officers and each person who
controls such underwriters (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of a
Selling Shareholder. The foregoing indemnification with respect
to any preliminary prospectus shall not inure to the benefit of
any Selling Shareholder or underwriter (or to the benefit of any
person controlling such Selling Shareholder or underwriter) from
whom the person asserting any such losses, claims, damages,
liabilities, amounts paid in settlement of any claim, action or
proceeding or expenses purchased Registrable Shares offered by
such Selling Shareholder if a copy of the final prospectus had
not been sent or given to such person at or prior to the written
confirmation of the sale of such Registrable Shares to such
person and the untrue statement or omission of a material fact
contained in such preliminary prospectus was corrected in the
final prospectus and MLX has furnished such Selling Shareholder
or underwriter with a sufficient number of copies of such final
prospectus. This indemnity shall be in addition to, and not in
lieu of, any liability which MLX otherwise may have.
(b) Each Selling Shareholder will furnish to MLX as
promptly as MLX may reasonably request in writing such
information with respect to such Selling Shareholder as MLX
reasonably requests for use in connection with any registration
statement or prospectus and MLX may exclude from registration any
Registrable Shares of a Selling Shareholder who refuses or fails
timely to provide such information. Each Selling Shareholder
will indemnify and hold harmless, to the full extent permitted by
law, MLX, its directors and officers and each person who controls
MLX (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and each duly authorized person
who acts on behalf of MLX and its respective directors and
officers, against and from any losses, claims, damages,
liabilities and amounts paid in settlement of any claim, action
or proceeding (which settlement may not be effected without such
Selling Shareholder's prior written consent, which consent shall
not be unreasonably withheld) arising from or based upon any
untrue or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be
stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus, in the light of
the circumstances under which they were made) not misleading, and
each Selling Shareholder shall reimburse any indemnified party
for all expenses (including, without limitation, reasonable
attorney's fees and expenses as incurred, subject to the
<PAGE>
limitations specified in paragraph (c) hereof) incurred by it or
on its behalf in connection with any such claim, action or
proceeding; but only to the extent that any such loss, claim,
damage, liability, amount paid in settlement of any claim, action
of proceeding or expense arises from or is based upon any untrue
or alleged untrue statement or omission or alleged omission made
in such registration statement, such prospectus or preliminary
prospectus or such post-effective amendment or supplement in
reliance upon and in conformity with information furnished in
writing to MLX by or on behalf of such Selling Shareholder
specifically for use in the preparation thereof. This indemnity
shall be in addition to, and not in lieu of, any liability which
the Selling Shareholder may otherwise have. The liability of any
Selling Shareholder under this paragraph shall not exceed the
initial public offering price of the Registrable Shares sold by
such Selling Shareholder.
(c) Any person entitled to indemnification hereunder
agrees to give prompt written notice to the indemnifying party
after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such person will claim
indemnification or contribution pursuant to this Section 7.4(c)
(but the failure to do so will not relieve the indemnifying party
of any liability that it may have to such indemnified party). If
the indemnifying party assumes the defense of a claim, it will
not be obligated to pay the fees and expenses of counsel to the
indemnified party with respect to such claim, unless (i) the
indemnifying party shall not have retained counsel to represent
the indemnified party within a reasonable time after the
indemnified party shall have notified the indemnifying party of
the commencement of such action, suit or proceeding or
investigation or (ii) the indemnifying and indemnified parties
are both named parties to any such action (including any
impleaded parties) and the indemnified party has reasonably
concluded that there may be one or more legal defenses available
to it which are different from or in addition to those available
to the indemnifying party (in each case such indemnified party
shall promptly notify the indemnifying party in writing that it
intends to employ separate counsel at the expense of the
indemnifying party). If the indemnified party so notifies the
indemnifying party that the indemnified party intends to employ
separate counsel, the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel; provided,
that the indemnifying party shall not be responsible for more
than one separate firm of attorneys (plus local counsel if
appropriate) for all the Selling Shareholders or for MLX, their
respective directors and officers, and those persons who control
such Selling Shareholders or MLX, as the case may be. The
indemnifying party will not be subject to any liability for any
<PAGE>
settlement made without its consent, which consent will not
unreasonably be withheld.
(d) If the indemnification or reimbursement provided
for in this Section from the indemnifying party is unavailable to
an indemnified party hereunder in respect of any losses, claims,
damages, liabilities, amounts paid in settlement of claims,
actions or proceedings or expenses referred to therein as subject
to indemnification, then the indemnifying party, in lieu of
indemnifying or reimbursing such indemnified party, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities,
amounts paid in settlement of claims, actions or proceedings or
expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties
in connection with the actions which resulted in such losses,
claims, damages, liabilities, amounts paid in settlement of
claims, actions or proceedings or expenses, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact,
has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities,
amounts paid in settlement of claims, actions or proceedings and
expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4(d) were determined by
pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred
to in the second sentence of this Section 7.4(d). No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
7.5 Compliance with Reporting Requirements. With a
view to making available to holders of Securities the benefits of
certain rules and regulations of the Commission which may at any
time permit the sale of Securities to the public without
registration, MLX agrees to (i) make and keep public information
available as such terms are used and defined in Rule 144 under
the Securities Act; (ii) use its best efforts to file with the
Commission in a timely manner all reports required to be filed
pursuant to Sections 13 or 15 of the Exchange Act; and (iii)
<PAGE>
furnish to each holder of Securities promptly upon request a
written statement by MLX as to its compliance with the reporting
requirements referred to in Rule 144(c)(1) and a copy of such
other reports of the type contemplated by Rule 144(c)(1) as any
holder of Securities may reasonably request in availing itself of
any rule or regulation of the Commission with respect to the sale
by such holder of any Securities without registration.
ARTICLE 8. RIGHTS OF CERTAIN SHAREHOLDERS
8.1 Exchange Rights. Any Regulation Y Holder of
voting MLX Common Stock may, from time to time by notice to MLX,
exchange shares of voting MLX Common Stock for an equal number of
shares of nonvoting MLX Common Stock which shall have terms,
rights and preferences substantially identical to the Shares
initially issued hereunder other than the voting rights. In
addition, any Holder of nonvoting MLX Common Stock may from time
to time by notice to MLX exchange shares of nonvoting MLX Common
Stock for an equal number of shares of voting MLX Common Stock
which shall have terms, rights and preferences substantially
identical to the Shares initially issued hereunder; provided that
no Holder of nonvoting MLX Common Stock may exchange nonvoting
MLX Common Stock for voting MLX Common Stock to the extent that,
as a result of such exchange, such Holder and its Affiliates
would directly or indirectly, own, control or have power to vote
a greater number of shares of MLX Common Stock than, in the
opinion of such Holder, such Holder would have the power to vote
under any law, regulation, rule or other requirement of any
governmental authority at the time applicable to such Holder and
its Affiliates. Upon receipt of any such notice, and in any
event not later than ten days thereafter, MLX shall instruct the
Transfer Agent and Registrar to deliver to such Holder new
certificates representing the number of shares of voting or
nonvoting MLX Common Stock, as the case may be, requested by such
Holder against delivery by such Holder to the Transfer Agent and
Registrar of certificates representing the voting or nonvoting
MLX Common Stock, as the case may be, to be exchanged therefor.
Without limiting the provisions of Section 8.2, MLX's obligations
under this Section 8.1 shall be limited to the number of shares
of MLX Common Stock authorized for issuance at the time any
Regulation Y Holder gives notice in accordance with this Section
8.1.
8.2 Authorized and Reserved Shares of MLX Common
Stock. MLX hereby represents that (i) 4,585,168 shares of MLX
Common Stock issuable pursuant to this Article 8 have been duly
authorized and reserved for issuance upon notice from a
Regulation Y Holder as provided herein and are issuable without
any further action other than as specified in this Article 8,
(ii) by no later than the completion of the next regular or
<PAGE>
special meeting of the holders of MLX Common Stock, upon
applicable shareholder approval, all shares of MLX Common Stock
issuable pursuant to this Article 8 will have been duly
authorized and reserved for issuance upon notice from a
Regulation Y Holder as provided herein and will be issuable
without any further action other than as specified in this
Article 8, and (iii) when issued in accordance with this Article
8, all shares of MLX Common Stock referred to in clauses (i) and
(ii) will have been validly issued and will be fully paid and
non-assessable, and the issuance of such shares is not and will
not be subject to any preemptive or similar rights.
ARTICLE 9. SUBORDINATION OF MLX BONDS
9.1 Agreement to Be Bound. Each holder of an MLX Bond
by his acceptance thereof covenants and agrees that the MLX Bonds
shall be issued subject to the provisions contained in this
Article 9 and each Person holding any MLX Bond, whether upon
original issue or upon transfer or assignment thereof, accepts
and agrees to be bound by such provisions. All MLX Bonds shall,
to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
9.2 Priority of Senior Indebtedness. No payment or
prepayment of any principal of the MLX Bonds shall be made, nor
shall assets be applied to the repurchase, redemption or
retirement of the MLX Bonds, if, at the time of such payment,
prepayment, repurchase, redemption or retirement or immediately
after giving effect thereto, (i) there shall exist a default in
the payment or mandatory prepayment of any amount due on or in
respect of any Senior Indebtedness or (ii) there shall exist an
event of default (other than a default in the payment of any
amount due) with respect to any Senior Indebtedness, as such
terms are defined in any instrument or agreement under which such
Senior Indebtedness is outstanding, permitting the holders
thereof to accelerate the maturity thereof.
9.3 Acceleration of MLX Bonds; Insolvency. Upon (i)
any acceleration of the principal amount or Accreted Amount due
on the MLX Bonds or (ii) any payment or distribution of assets of
MLX of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding up or
total or partial liquidation or reorganization of MLX, whether
voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become
due upon all Senior Indebtedness shall first be paid in full, or
payment thereof duly provided for, before the holders of the MLX
Bonds shall be entitled to receive or retain any assets so paid
or distributed in respect thereof. Upon any such dissolution or
<PAGE>
winding up or liquidation or reorganization, any payment or
distribution of assets of MLX of any kind or character, whether
in cash, property or securities, to which the holders of the MLX
Bonds would be entitled but for these provisions shall be paid by
MLX or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or the person making such payment or distribution,
or by the holders of the MLX Bonds if received by them or it,
directly to the holders of Senior Indebtedness (pro rata to each
of such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders or their representatives), to
the extent necessary to pay all such Senior Indebtedness in full,
in moneys or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the
holders of the MLX Bonds.
If, notwithstanding the provisions of the preceding
paragraph or of Section 9.2, any such payment or distribution of
assets of MLX of any kind or character, whether in cash, property
or securities, shall be received by the holders of the MLX Bonds
while a default or event of default of the types referred to in
Section 9.3 has occurred and is continuing or in connection with
the acceleration of the MLX Bonds or the dissolution, winding up,
liquidation or reorganization of MLX before all Senior
Indebtedness is paid in full, or provision made for such payment
in accordance with its terms, such payment or distribution shall
be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing
any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Indebtedness.
The foregoing subordination provisions shall be for the
benefit of the holders of the Senior Indebtedness and may be
enforced directly by such holders against the holders of the MLX
Bonds.
9.4 Subrogation. Subject to the indefeasible payment
in cash in full of all Senior Indebtedness, the holders of the
MLX Bonds shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of
assets of MLX made on the Senior Indebtedness until the principal
of the MLX Bonds shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash, property or securities to which
the holders of the MLX Bonds would be entitled except for these
<PAGE>
provisions shall, as among MLX, its creditors other than the
holders of Senior Indebtedness, and the holders of MLX Bonds, be
deemed to be a payment by MLX to or on account of Senior
Indebtedness, it being understood that these provisions are and
are intended solely for the purpose of defining the relative
rights of the holders of the MLX Bonds, on the one hand, and the
holders of Senior Indebtedness, on the other hand.
9.5 Obligations Unaffected. Nothing contained in this
Article or in the MLX Bonds is intended to or shall impair as
among MLX, its creditors other than the holders of Senior
Indebtedness and the holders of the MLX Bonds, the obligation of
MLX, which shall be absolute and unconditional, to pay to the
holders of the MLX Bonds the principal of the MLX Bonds, as and
when the same shall become due and payable in accordance with
their terms, or to affect the relative rights of the holders of
the MLX Bonds and creditors of MLX other than the holders of
Senior Indebtedness, nor shall anything herein prevent any holder
of the MLX Bonds from exercising all remedies otherwise permitted
by applicable law upon the occurrence of a default under this
Agreement, subject to rights, if any, under this Article of the
holders Senior Indebtedness in respect of cash, property or
securities of MLX received upon the exercise of any such remedy.
9.6 Reliance of Holders of Senior Indebtedness. Each
holder of the MLX Bonds by his acceptance thereof shall be deemed
to acknowledge and agree that the subordination provisions of
this Article are, and are intended to be, an inducement and a
consideration of each holder of any Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after
the issuance of such MLX Bonds, to acquire and hold, or to
continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied
on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 10. PREPAYMENTS
10.1 Optional Prepayments. MLX may, upon at least
three Business Days' notice to the Bond holders, prepay the.MLX
Bonds, in whole at any time, or from time to time in part, at a
price per MLX Bond equal to the Accreted Amount thereof on the
date of prepayment; provided that no optional prepayments shall
be permitted hereunder as long as there remain any amounts owing
by MLX in respect of Senior Indebtedness. Any notice given
pursuant to this subsection and received by a Bondholder after
11:00 a.m. (Atlanta time) on any Business Day shall be deemed to
have been received by such Bondholder on the next Business Day.
<PAGE>
10.2 Mandatory Prepayment. MLX shall (i) notify the
Bondholder (as far in advance as possible, but in any event not
later than the date of receipt of Net Cash Proceeds in respect
thereof) of the occurrence of a Prepayment Event in respect of
which MLX shall receive Net Cash Proceeds and of the amount of
such Net Cash Proceeds and (ii) immediately upon receipt thereof
pay such Net Cash Proceeds to the Bondholders for the prepayment
of MLX Bonds. Each mandatory prepayment shall be made at a price
per MLX Bond equal to the Accreted Amount thereof on the date of
prepayment.
10.3 Application of Proceeds of Prepayment. Any
prepayment pursuant to this Article shall be made on a date (a
"Prepayment Date") designated by MLX in its notice to the
Bondholders pursuant to Section 10.1 or 10.2, as the case may be,
which date shall be a Business Day not less than one day after
the date of such notice and shall, subject to Article 9, be
applied to redeem that aggregate principal amount of MLX Bonds
which has the same proportion to the aggregate principal amount
of MLX Bonds then Outstanding on such date as the amount of such
prepayment bears to the aggregate Accreted Amount on such date of
all MLX Bonds then Outstanding. If an MLX Bond is redeemed only
in part, a new MLX Bond shall be delivered by MLX to the holder
thereof in exchange therefor at no cost to the holder in the
principal amount not redeemed.
ARTICLE 11. EVENTS OF DEFAULT
If any one or more of the following events ("Events of
Default") shall occur and be continuing:
(a) MLX or any of its Subsidiaries shall (i) commence
a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
(ii) shall consent to any such relief or to the appointment
of or taking possession by any such official in an
involuntary case or other proceeding commenced against it,
or (iii) shall make a general assignment for the benefit of
creditors, or (iv) shall fail generally to pay its debts as
they become due, or (v) shall take any corporate action to
authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be
commenced against MLX or any of its Subsidiaries seeking
liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other
<PAGE>
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90
days; or an order for relief shall be entered against MLX or
any of its Subsidiaries under the federal bankruptcy laws as
now or hereafter in effect;
then, and in every such event, the Required Bondholders may, by
notice to MLX, declare the Accreted Amount of each MLX Bond then
Outstanding to be due and payable immediately. Upon such
declaration, such Accreted Amount of each MLX Bond shall
thereupon become and be immediately due and payable, anything in
this Agreement or in any of the MLX Bonds contained
notwithstanding, although no amount shall be paid thereon if
prohibited by Article 9.
ARTICLE 12. INTEREST UPON DEFAULT IN PAYMENT
OR PREPAYMENT OF PRINCIPAL
If MLX shall default in the payment or prepayment of
the Accreted Amount of any MLX Bond, whether upon acceleration,
maturity or otherwise, such overdue Accreted Amount of such MLX
Bond shall bear interest at a rate per annum (compounded daily
and computed on the basis of a year of 365 or 366 days, as the
case may be, for the actual number of days elapsed) equal to the
sum of 4% plus the Base Rate. Such interest shall accrue from
and including the date of such default to but excluding the date
on which such Accreted Amount of such MLX Bond is paid and shall
be payable on demand.
ARTICLE 13. EXCHANGE OF MLX BONDS
Subject to Section 6.1, at the request at any time of
any holder of one or more of the MLX Bonds to MLX, MLX at its
expense (except for any transfer tax or any other tax arising out
of the exchange) will issue in exchange therefor new MLX Bonds,
in such denomination or denominations of $100,000 or any larger
multiple of $100,000 (plus one MLX Bond in a lesser denomination,
if required) as such holder may request, in an aggregate
principal amount equal to the aggregate principal amount of the
MLX Bond or MLX Bonds surrendered and substantially in the form
thereof, dated the date of the MLX Bond or MLX Bonds so
surrendered and payable to such person or persons or order as may
be designated by such holder.
<PAGE>
ARTICLE 14. REPLACEMENT OF MLX BONDS
Upon receipt of evidence satisfactory to MLX of the
loss, theft, destruction or mutilation of any MLX Bond and, in
the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity satisfactory to MLX, or in the case of any
such mutilation, upon surrender and cancellation of such MLX
Bond, MLX will issue a new MLX Bond of like tenor as if the lost,
stolen, destroyed or mutilated MLX Bond were then surrendered for
exchange in lieu of such lost, stolen, destroyed or mutilated MLX
Bond.
ARTICLE 15. AMENDMENTS AND WAIVERS
This Agreement may be amended (or any provision hereof
waived) with the consent of MLX and the Required Bondholders;
provided that no such amendment or waiver shall (i) change the
amount of or the date for any payment with respect to any MLX
Bond without the consent of the holder of the MLX Bond so
affected and MLX, (ii) change the percentage of MLX Bonds, the
holders of which are required to take any action under any
provision of this Agreement, change this Article 15 or change the
definitions of "Accreted Amount", "Accruing Issue Discount" or
"Issue Price" without the consent of the holders of all the MLX
Bonds then Outstanding and MLX, or (iii) amend any provision of
Article 11 without the consent of holders of 80% or more of the
aggregate principal amount of MLX Bonds outstanding on such date
and MLX; and provided, further, that the provisions of Article 7
may be amended or waived with the consent of MLX and the Holders
of at least 66 2/3% in number of the Registrable Shares (the
"Required Holders") and after all of MLX's obligations to the
Bondholders (as holders of MLX Bonds) hereunder and under the MLX
Bonds have been satisfied in full, the provisions of this
Agreement (other than Article 7) may be amended or waived with
the consent of MLX and the Required Holders. MLX and each holder
of MLX Bonds then or thereafter Outstanding shall be bound by any
amendment or waiver effected in accordance with the provisions of
this Article, whether or not such MLX Bond shall have been marked
to indicate such modification, but any MLX Bond issued thereafter
shall bear a notation as to any such modification. Promptly
after obtaining the written consent of the holders herein
required, MLX shall transmit a copy of such modification to all
of the holders of the MLX Bonds then Outstanding.
ARTICLE 16. HOME OFFICE PAYMENT
As long as any payee named in the MLX Bonds outstanding
on the date hereof shall be the holder of any MLX Bond, MLX will
make payments of principal by check payable to the order of the
<PAGE>
holder of any such MLX Bond duly mailed or delivered to the
Bondholders at the Bondholders' address specified on the
signature pages hereof or, if not so specified, at the address
appearing on the Company's records, or at such other address as
the Bondholders may designate in writing to MLX, or, if requested
by the Bondholder or other institutional holder of the MLX Bonds,
by wire transfer to its (or its nominee's) account at any bank or
trust company in the United States of America, notwithstanding
any contrary provision herein or in any MLX Bond with respect to
the place of payment. All such payments shall be made in federal
or other immediately available funds. The Bondholders agree
that, on or before the date any MLX Bond is assigned or
transferred, they will notify MLX of the name and address of the
transferee of such MLX Bond.
ARTICLE 17. NOTICES
All notices, requests and other communications to any
party hereunder or any Bondholder shall be in writing (including
bank wire, telex, facsimile transmission or similar writing) and
shall be given to such party at its address or telex number set
forth on the signature pages hereof or such other address or
telex number as such party may hereafter specify for the purpose
by notice to such party or Bondholder. Each such notice, request
or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in
this Article and the appropriate answerback is received, (ii) if
given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid, (iii) if given by telecopier, when such communication
is transmitted to the telecopier number specified in this Article
17 and the sender of such communication has received verbal
confirmation of its receipt or (iv) if given by any other means,
when delivered at the address specified in this Article.
ARTICLE 18. ENTIRE AGREEMENT
This Agreement and the MLX Bonds embody the entire
agreement and understanding between the Holders and MLX and
supersede all prior agreements and understandings relating to the
subject matter hereof.
ARTICLE 19. SUCCESSORS AND ASSIGNS
All covenants and agreements in this Agreement
contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of the parties hereto whether so expressed or not.
<PAGE>
ARTICLE 20. HEADINGS
The headings of the articles and sections of this
Agreement have been inserted for convenience of reference only
and shall in no way restrict or otherwise modify any of the terms
or provisions hereof.
ARTICLE 21. GOVERNING LAW
THIS AGREEMENT AND EACH MLX BOND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA.
ARTICLE 22. COUNTERPARTS
This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
ARTICLE 23. SEVERABILITY
Any provision hereof or of the MLX Bonds which is
prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof or thereof, and any
such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the date first above written.
MLX CORP
By
Title:
5305 Oakbrook Parkway
Norcross, GA 30093
Telecopier: (404) 279-4200
<PAGE>
AIG CAPITAL CORP.
By
Title:
70 Pine Street
New York, New York 10270
Telecopier: (212) 425-8366
US WEST FINANCIAL SERVICES, INC.
By
Title:
14785 Preston Road, Suite 350
Dallas, Texas 75240
Telecopier: (214) 851-7499
TERBEM LIMITED
MITVEST LIMITED
TINVEST LIMITED
BOBST INVESTMENT CORP.
TCR INTERNATIONAL PARTNERS, L.P.
By
Title:
c/o Three Cities Research, Inc.
135 East 57th Street
New York, New York 10022
Attention: Portfolio Management
Telecopier: (212) 980-1142
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Principal
Amount
<S> <C>
AIG Capital Corp. $574,114.00
US West Financial Services, Inc. 577,952.00
Terbem Limited 2,413,087.00
Mitvest Limited 322,762.00
Tinvest Limited 1,379,075.00
Bobst Investment Corp. 410,788.00
TCR International Partners, L.P. 1,157,232.00
$6,835,010.00
</TABLE>
<PAGE>
EXHIBIT A
TO THE
MLX EXCHANGE AGREEMENT
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED
UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
THIS SECURITY WAS ISSUED ON MARCH 19, 1992 AT AN ISSUE PRICE OF
$409.4013 FOR EACH $1,000 ORIGINAL PRINCIPAL AMOUNT.
ACCORDINGLY, (i) THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT
("OID") FOR EACH $1,000 ORIGINAL PRINCIPAL AMOUNT OF THIS
SECURITY IS $590.5987 AND (ii) THE YIELD TO MATURITY FOR PURPOSES
OF ALLOCATING OID IS 0.024457% COMPOUNDED DAILY.
MLX CORP.
Subordinated Zero Coupon Bonds Due 2002
Atlanta, Georgia
For value received, MLX CORP., a Michigan corporation
("MLX"), promises to pay to
or registered assigns, the principal sum of
($ ) on March 19, 2002 in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
The principal of this Bond shall not bear interest
except in the case of a default in payment or prepayment of
principal, whether upon acceleration, maturity or otherwise, and
in such case the Accreted Amount (as defined by reference in the
MLX Exchange Agreement) of this Bond shall bear interest at a
rate per annum (compounded daily and computed on the basis of a
year of 365 or 366 days, as the case may be, for the actual
number of days elapsed) equal to the sum of 4% plus the Base Rate
(as defined in the MLX Exchange Agreement). Such interest shall
accrue from and including the date of such default to but
excluding the date on which such defaulted amount is paid and
shall be payable on demand. Payment on account of the principal
of and any such interest on this Bond shall be paid by check
mailed, or wire transfer as provided in the MLX Exchange
<PAGE>
Agreement (as hereinafter defined), to the registered address
designated by the holder hereof for such purpose.
This Bond is one of a duly authorized issue of
Subordinated Zero Coupon Bonds, aggregating $20,000,000 in
principal amount, issued pursuant to the MLX Exchange Agreement
dated as of April 13, 1990 as amended and restated as of April
22, 1993 (as thereafter amended, the "Exchange Agreement") among
MLX and the Bondholders listed therein.
This Bond is subject to the provisions of and is
entitled to the benefits of the MLX Exchange Agreement. The MLX
Exchange Agreement provides, inter alia, for mandatory
prepayments of the principal of the MLX Bonds from time to time
upon the occurrence of certain events at a price equal to the
Accreted Amount thereof at the date of prepayment. In addition,
the payment of the principal of and interest, if any, on this
Bond is subordinated in right of payment to the prior payment in
full of certain other obligations of MLX to the extent and manner
set forth in the MLX Exchange Agreement. Each holder of this
Bond, by accepting the same, agrees to and shall be bound by the
provisions of the MLX Exchange Agreement.
If an Event of Default, as defined in the MLX Exchange
Agreement, shall occur and be continuing, the Accreted Amount of
this Bond may be declared due and payable in the manner and with
the effect provided in the MLX Exchange Agreement.
No reference herein to the MLX Exchange Agreement and
no provision hereof or thereof shall alter or impair the
obligation of MLX, which is absolute and unconditional, to pay
the principal thereof and interest, if any, hereon described.
This Bond is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of Georgia.
MLX may treat the person in whose name this Bond is
registered as the owner and holder of this Bond for the purpose
of receiving payments on this Bond and for all other purposes
whatsoever and MLX shall not be affected by any notice to the
contrary.
IN WITNESS WHEREOF, MLX CORP. has caused this Bond to
be dated, and to be executed on its behalf by its officer
thereunto duly authorized and its corporate seal to be hereunto
duly affixed.
MLX CORP.
[Corporate Seal] By
Title:
