CONFORMED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended Commission File Number
SEPTEMBER 30, 1997 I-4795
MLX CORP.
(Exact name of registrant as specified in its charter)
GEORGIA 38-0811650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 CENTER PLACE, NORCROSS, GEORGIA 30093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 798-0677
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 XX
No ___
The number of shares outstanding of the Registrant's Common Stock, par
value $.01, as of the close of business on September 30, 1997 was
2,617,584.
<PAGE>
PART I - FINANCIAL INFORMATION
BALANCE SHEETS (UNAUDITED)
MLX CORP.
<TABLE>
September 30 December 31
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $36,490 $37,927
Prepaid expenses 19 46
------- -------
TOTAL CURRENT ASSETS 36,509 37,973
EQUIPMENT AND OTHER ASSETS 2 4
TAX ESCROW FUNDS 1,509 1,454
------- -------
TOTAL ASSETS $38,020 $39,431
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued compensation and benefits $ 150 $ 103
Other accrued liabilities and expenses 340 280
Accrued taxes 262 286
------- -------
TOTAL CURRENT LIABILITIES 752 669
OTHER LONG-TERM LIABILITIES 2,030 1,998
SHAREHOLDERS' EQUITY
Common stock, $.01 par value -
authorized 38,500,000 shares; 2,618,000 shares outstanding 26 26
Capital in excess of par value 73,165 73,165
Retained earnings deficit (37,953) (36,427)
------- -------
TOTAL SHAREHOLDERS' EQUITY 35,238 36,764
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $38,020 $39,431
======= =======
</TABLE>
Dollars in thousands
See notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
MLX CORP.
<TABLE>
For the Nine Months Ended
September 30
1997 1996
<S> <C> <C>
NET SALES $ -- $ --
General and administrative expenses (698) (806)
Stock Appreciation Rights compensation (2,225) --
------- ------
OPERATING LOSS (2,923) (806)
Interest income 1,397 1,396
------- ------
EARNINGS (LOSS) BEFORE INCOME TAXES (1,526) 590
PROVISION FOR INCOME TAXES:
Federal income taxes due and payable -- (12)
Charge in lieu of federal income taxes -- (201)
------- -------
NET EARNINGS (LOSS) $(1,526) $ 377
======= =======
EARNINGS (LOSS) PER SHARE $ (0.58) $ 0.14
======= =======
AVERAGE OUTSTANDING COMMON SHARES AND DILUTIVE OPTIONS 2,618 2,751
======= =======
</TABLE>
Dollars in thousands, except per share data
See notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
MLX CORP.
<TABLE>
For the Quarter Ended
September 30
1997 1996
<S> <C> <C>
NET SALES $ -- $ --
General and administrative expenses (230) (270)
------- -------
OPERATING LOSS (230) (270)
Interest income 484 472
------- -------
EARNINGS BEFORE INCOME TAXES 254 202
PROVISION FOR INCOME TAXES:
Federal income taxes due and payable -- (5)
Charge in lieu of federal income taxes -- (69)
------- -------
NET EARNINGS $ 254 $ 128
======= =======
EARNINGS PER SHARE $ 0.10 $ 0.05
======= =======
AVERAGE OUTSTANDING COMMON SHARES AND DILUTIVE OPTIONS 2,645 2,761
======= =======
</TABLE>
Dollars in thousands, except per share data
See notes to financial statements
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
MLX CORP.
<TABLE>
For the Nine Months Ended
September 30
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(1,526) $ 377
Adjustments to reconcile net earnings (loss) to net cash
(used in) provided by operating activities:
Charge in lieu of federal income taxes -- 201
Change in operating assets and liabilities:
Prepaid expenses 27 62
Accrued expenses and other 117 103
------- -------
Net cash (used in) provided by operating activities (1,382) 743
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in escrow funds for warranties and taxes (55) (205)
------- -------
Net cash used in investing activities (55) (205)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised -- 25
------- -------
Net cash provided by financing activities -- 25
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,437) 563
Cash and cash equivalents at January 1 37,927 32,903
------- -------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $36,490 $33,466
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Federal taxes paid on income $ 2 $ 32
</TABLE>
Dollars in thousands
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MLX CORP.
The financial statements have been prepared by the Registrant without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to
those rules and regulations. These financial statements should be read
in conjunction with the Consolidated Financial Statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996.
In the opinion of the Registrant, the accompanying financial
statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
of the Registrant as of September 30, 1997 and December 31, 1996 and
the results of operations for the quarters and nine months ended
September 30, 1997 and 1996 and cash flows for the nine months ended
September 30, 1997 and 1996.
Note A - Income Taxes
At January 1, 1997, the Registrant had available net operating loss
carryforwards of approximately $275 million which are available to
offset future taxable income for federal income tax purposes.
Accordingly, the Company has a federal tax liability only for
Alternative Minimum Tax amounts and the charge in lieu of federal
income taxes included in the statement of operations for the quarter
and nine months ended September 30, 1996 is not accruable or payable.
The following table illustrates the effect of this pro forma charge on
the Company's earnings and earnings per share for the respective
periods (in thousands, except per share data).
<TABLE>
Quarter Ended September 30 Nine months ended September 30
1997 1996 1997 1996
<S> <C> <C>
Net earnings (loss) $ 254 $ 128 $(1,526) $ 377
Charge in lieu of federal income
taxes which is not accruable or payable -- 69 -- 201
------ ------ ------- -----
Total earnings (loss) $ 254 $ 197 $(1,526) $ 578
====== ====== ======= =====
Total earnings (loss) per share $ 0.10 $ 0.07 $ (0.58) $0.21
====== ====== ======= =====
</TABLE>
Note B - Proposed Merger Transaction
On October 20, 1997, the Registrant entered into a definitive
agreement to merge with Morton Metalcraft Holding Co. ("Morton").
Morton is headquartered in Morton, Illinois and is a contract
manufacturer and supplier of high-quality fabricated sheet metal
components and subassemblies for construction, agricultural and
industrial equipment manufacturers located primarily in the Midwestern
and Southeastern United States.
The proposed merger transaction reflects an enterprise valuation of
Morton of approximately $81.1 million, which includes the issuance of
1,332,323 shares of MLX common stock , a cash payment of $20 million
to the current holders of Morton common stock and the assumption of
Morton's debt. In addition, the transaction contemplates the approval
of stock options for 667,677 shares of MLX common stock to members of
Morton management.
The merger is subject to approval by a majority of the common
shareholders of MLX and certain other customary conditions and will be
voted on at a special meeting of the MLX shareholders expected to be
held in late December 1997. If the transaction is approved by the MLX
shareholders and consummated thereafter, Morton will merge with and
into MLX, with MLX being the surviving corporation. The business and
operation of the combined companies will be substantially the same as
the business and operation of Morton prior to the merger. For
accounting and financial reporting purposes, the merger will be
treated as a purchase by Morton of MLX.
<PAGE>
MLX prepared and filed on October 21, 1997 with the Securities and
Exchange Commission a preliminary proxy statement containing
additional information regarding the merger, including pro-forma
condensed combined financial statements. When approved, the proxy
statement will be furnished to shareholders of MLX in advance of the
special meeting.
Note C - Stock Appreciation Rights Compensation
On February 12, 1997, the Registrant's Board of Directors approved the
conversion of all the common stock options held by its former Chief
Executive Officer to stock appreciation rights (SARs), and all such
SARs were exercised as of that date. The resulting liability under
this agreement amounted to $2.2 million and was paid in February 1997.
The compensation expense from this transaction is reported in the
accompanying statement of operations for the nine months ended
September 30, 1997. As of September 30, 1997, the Company's employees
have outstanding options to purchase 50,000 shares of common stock.
Note D - Accounting Policy Not Yet Adopted
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted
on December 31, 1998. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will
be excluded. The new standard is not expected to have a material
effect on earnings per share.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Basis of Discussion: The accompanying financial statements report the
financial condition and results of operations of the Registrant only.
Since the divestiture of the S.K. Wellman subsidiary on June 30, 1995,
the Registrant has no recurring revenues or operating subsidiaries. In
the short-term, the Company has invested the proceeds of the Wellman
transaction in short-term repurchase instruments managed by selected
commercial banks. The Company is actively engaged in an acquisition
search.
Operations: The general and administrative expenses of the Registrant
are incurred for acquisition search, compensation, occupancy,
shareholder costs (such as printing, distribution and stock transfer
fees) and legal and professional matters.
The Company considers its business to be that of seeking to acquire an
operating business that meets its financial acquisition criteria.
Accordingly, the Company believes that it is not an investment company
as defined by the Investment Company Act of 1940 (the "Act") and
prepared and submitted an application in 1996 to the Securities and
Exchange Commission (the "Commission") requesting an exemption from
certain provisions of the Act until December 31, 1997. On May 19,
1997, the Commission issued an exemptive order pursuant to Sections
6(c) and 6(e) of the Act, which exempts MLX from all provisions of the
Act except Sections 9, 17(a), 17(d) (modified as described in the
application), 17(e), 17(f) (modified as described in the application),
and 36 through 53, through December 31, 1997. MLX and other persons,
in their transactions and relations with MLX, are subject to such
excepted sections of the Act as if MLX were a registered investment
company under the Act. The implementation of the exemptive order did
not require MLX to change or modify any of its existing practices or
policies.
On October 27, 1997, MLX submitted a new application, identical to the
existing one, asking for an extension of the exemptive period through
December 31, 1998. This new application was prepared and filed as a
precautionary measure in case the Morton acquisition is not completed
by December 31, 1997.
<PAGE>
If MLX has not entered into a binding agreement to acquire an
operating business or completed the proposed Morton transaction by
December 31, 1997, MLX could be required to register under the Act and
would thereafter be subject to regulation thereunder. This action
would add complexity to the Company's pursuit of its acquisition
strategy, add to the administrative expenses of the Company and
fundamentally alter the presentation of the Company's financial
statements.
Liquidity and Capital Resources: At September 30, 1997, the Registrant
had working capital of $35.8 million, consisting principally of cash
and short-term investments of $36.5 million, and estimated short-term
obligations for income taxes, transaction expenses and compensation of
$0.8 million. The Company's short-term investments at September 30,
1997 consisted principally of repurchase arrangements collateralized
by U.S. Treasury and federal agency obligations.
In connection with the sale of Wellman in 1995, the Company funded an
escrow fund amounting to $1.3 million relating to certain estimated
income tax obligations arising from the sale.
The Company's common stock is quoted on the OTC Electronic Bulletin
Board under the trading symbol "MLXR."
The Registrant believes that its current financial resources are
adequate to meet its projected operating needs in 1997.
Proposed Merger Transaction: On October 20, 1997, the Company entered
into a definitive agreement to merge with Morton Metalcraft Holding
Co. ("Morton"), a contract manufacturer and supplier of fabricated
sheet metal components and subassemblies to original equipment
manufacturers in the construction, agricultural and industrial
equipment industries. The transaction is subject to approval by a
majority of MLX common shareholders and reflects an enterprise
valuation of Morton of approximately $81.1 million. If the proposal is
approved and consummated, the business and operations of the
combined companies will be substantially the same as that of Morton
prior to the merger.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 - Agreement and Plan of Merger
dated October 20, 1997 (incorporated herein
by reference to the Registrant's Proxy
Statement filed with the Commission on
October 21, 1997)
(b) Exhibit 10.2* - Securities Purchase
Agreement dated October 20, 1997
(c) Exhibit 27* - Financial Data Schedule
(d) Reports on Form 8-K:
None
*Filed with this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: NOVEMBER 7, 1997 MLX CORP
BY: /S/THOMAS C. WAGGONER
Thomas C. Waggoner
Chief Executive Officer and
President
<PAGE>
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated October 20, 1997, among MLX Corp., a
Georgia corporation ("Buyer"), and the holders (the "Selling
Securityholders") of shares of common stock ("Common Stock"), par
value $0.01 per share, of Morton Metalcraft Holding Co., a Delaware
Corporation (the "Company"), and options and warrants to acquire
shares of Common Stock (such shares of Common Stock, warrants and
options, the "Company Securities").
Pursuant to an Agreement and Plan of Merger dated as of
October 20, 1997 (the "Merger Agreement"), among Buyer and the
Company, the Company shall be merged with and into Buyer (the
"Merger"), with Buyer being the surviving corporation (hereinafter
referred to as the "Surviving Corporation").
Pursuant to Section 5.9 of the Merger Agreement, prior to
the Effective Time (as defined in the Merger Agreement), the Company
will be recapitalized (the "Recapitalization") as set forth in the
Merger Agreement.
Each Selling Securityholder is the record and beneficial
owner of the Company Securities set forth opposite such Selling
Securityholder's name on Exhibit A hereto. As a result of the
Recapitalization, each Selling Securityholder will become the record
and beneficial owner of the newly issued securities of the Company
(the "Recap Company Securities") set forth opposite such Selling
Securityholder's name on Exhibit B hereto. Each Selling
Securityholder wishes to sell the Recap Company Securities (all such
Recap Company Securities of all Selling Securityholders herein
referred to as the "Sale Securities") set forth opposite such
<PAGE>
Selling Stockholder's name on Exhibit C hereto and Buyer wishes to
purchase all such Sale Securities upon the terms and subject to the
conditions of this Agreement. Capitalized terms used herein but not
otherwise defined shall have the meanings given them in Section 11.1
hereof.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
1. Sale and Purchase of Sale Securities.
1.1 Sale and Purchase of Sale Securities. At the
Closing (as hereinafter defined), (i) each Selling Securityholder
shall sell, and Buyer shall purchase all of the Sale Securities of
such Selling Securityholder, free of any Liens, (ii) each Selling
Securityholder shall deliver or cause to be delivered to Buyer
certificates representing all of such Sale Securities accompanied by
stock or warrant powers, as the case may be, duly executed in blank,
in proper form for transfer, and with all appropriate stock transfer
tax stamps affixed, and (iii) Buyer shall deliver the Purchase Price
(as hereinafter defined) to the Selling Securityholders in accordance
with Section 1.2 below.
1.2 Purchase Price. The aggregate purchase price for
the Sale Securities (the "Purchase Price") shall be the aggregate of
all the purchase prices shown on Exhibit C. Buyer shall pay to each
of the Selling Securityholders in immediately available funds,
pursuant to written instructions provided by each Selling
Securityholder at or prior to the Closing, the amount of the payment
set forth opposite
<PAGE>
such Selling Securityholder's name on Exhibit C, against receipt of
the Sale Securities of such Selling Stockholder set forth on Exhibit C
hereto.
2. Closing; Closing Date. The closing of the purchase and
sale of the Sale Securities (the "Closing") shall take place
immediately prior to the Effective Time (as defined in the Merger
Agreement) on satisfaction or waiver of the conditions set forth in
Article 4 hereof at such place and time as the parties may agree in
writing (such time and date being referred to herein as the "Closing
Date").
3. Representations and Warranties of Selling
Securityholders. Each Selling Securityholder severally, and not
jointly, represents and warrants to Buyer as follows:
3.1 Title to the Company Securities. Except as set
forth on Schedule 3.1, as of the date hereof, such Selling
Securityholder owns of record, free and clear of any Lien, such
Company Securities set forth opposite such Selling Stockholder's name
on Exhibit A hereto.
3.2 Title to the Recap Company Securities. As of the
Closing Date and assuming the consummation of the Recapitalization in
accordance with the Merger Agreement, such Selling Securityholder
shall own of record, free and clear of any Lien, such Recap Company
Securities set forth opposite such Selling Stockholder's name on
Exhibit B hereto. Any Liens set forth on Schedule 3.1 regarding such
Selling Stockholder's Company Securities shall no longer be in effect
as of the Closing Date.
<PAGE>
3.3 Title to the Sale Securities. As of the Closing
Date and assuming the consummation of the Recapitalization in
accordance with the Merger Agreement, such Selling Securityholder
shall own of record, free and clear of any Lien, such Sale Securities
set forth opposite such Selling Stockholder's name on Exhibit C
hereto, and, upon delivery of and payment for such Sale Securities by
Buyer as herein provided, such Selling Securityholder will convey to
Buyer good and valid title thereto, free and clear of any Lien. Any
Liens set forth on Schedule 3.1 regarding such Selling Stockholder's
Sale Securities shall no longer be in effect as of the Closing Date.
<PAGE>
3.4 Authority to Execute and Perform Agreement. Such
Selling Securityholder has the full legal right, power and all
authority required to enter into, execute and deliver this Agreement
and to perform fully such Selling Securityholder's obligations
hereunder. This Agreement has been duly executed and delivered by
such Selling Securityholder and (assuming the due authorization,
execution and delivery hereof by Buyer) is a legal, valid and binding
obligation of such Selling Securityholder enforceable against such
Selling Securityholder in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights and to general equity
principles (regardless of whether enforcement is sought in a
proceeding at law or in equity).
3.5 Noncontravention. Except as set forth on Schedule
3.5, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by such Selling
Securityholder will not
<PAGE>
(i) contravene such Selling Securityholder's charter, articles or
certificate of incorporation or by-laws, as applicable; (ii) violate,
or cause such Selling Securityholder to be in default under, any
provision of law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to such
Selling Securityholder; (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which such Selling Securityholder is
a party or by which it or its properties may be bound or affected; or
(iv) result in, or require, the creation or imposition of any Lien
upon or with respect to any of the properties now owned by such
Selling Securityholder.
3.6 Representations and Warranties on Closing Date.
The representations and warranties of such Selling Stockholder
contained in this Article 3 shall be true and correct on and as of the
Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date.
4. Representations and Warranties of Buyer. Buyer
represents and warrants to each Selling Securityholder as follows:
4.1 Authority to Execute and Perform Agreement. Buyer
has the full legal right, power and all authority required to enter
into, execute and deliver this Agreement and to perform fully Buyer's
obligations hereunder. This Agreement has been duly executed and
delivered by Buyer and (assuming the due authorization, execution and
delivery hereof by the Selling Securityholders) is a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance
with its
<PAGE>
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors'
rights and to general equity principles (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.2 Noncontravention. Except as set forth on Schedule
4.2, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Buyer will not
(i) contravene Buyer's charter, articles or certificate of
incorporation or by-laws; (ii) violate, or cause Buyer to be in
default under, any provision of law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Buyer; (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which Buyer is a party or by which
it or its properties may be bound or affected; or result in, or
require, the creation or imposition of any Lien upon or with respect
to any of the properties now owned by Buyer.
5. Conditions Precedent to the Obligation of Buyer to
Close. The obligation of Buyer to enter into and complete the Closing
is subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which
may be waived by it:
5.1 Consummation of the Merger. All conditions
precedent to the consummation of the Merger shall have been fulfilled
by the parties to the Merger Agreement.
<PAGE>
5.2 Representations and Warranties. The
representations and warranties of the Selling Securityholders
contained in this Agreement shall be true and correct on and as of the
Closing Date with the same force and effect as though made on
and as of the Closing Date.
6. Conditions Precedent to the Obligation of the Selling
Securityholders to Close. The obligation of each of the Selling
Securityholders to enter into and complete the Closing is subject,
at the option of such Selling Securityholder, to the fulfillment on or
prior to the Closing Date of the following conditions, any one or more
of which may be waived by it:
6.1 Consummation of the Merger. All conditions
precedent to the consummation of the Merger shall have been fulfilled
by the parties to the Merger Agreement, the Buyer shall in good faith
expect the Effective Time under the Merger Agreement to occur
immediately after the Closing hereunder and no amendment or other
modification to the Merger Agreement shall have been made which would
increase the merger consideration thereunder or otherwise adversely
affect the rights of any of the Selling Securityholders hereunder.
6.2 Shareholders' Agreement. The Shareholders'
Agreement, dated as of March 20, 1995, among the Company, Morton
Metalcraft Co., William D. Morton and the Purchasers (as defined
therein) party thereto shall have been terminated simultaneously with
the Closing of this Agreement.
6.3 Shareholders' Agreement. The Shareholders'
Agreement, dated as of January 25, 1995, as amended as of July 11,
1997, among the Company, Morton Metalcraft Co., William D. Morton and
the Noteholders (as
<PAGE>
defined therein) party thereto shall have been terminated
simultaneously with the Closing of this Agreement.
6.4 Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement
shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
6.5 Recapitalization. The Recapitalization shall have
been consummated by the Company and as a result thereof the Company's
capital structure shall be as set forth on Exhibit B hereto.
6.6 Prepayment of Certain Debt of the Company. On or
immediately after the Closing Date, the Company shall have prepaid the
indebtedness owed to each of Connecticut General Life Insurance
Company ("CGLIC"), as beneficial owner (CIG & CO. being the registered
owner) and CIGNA Mezzanine Partners III, L.P. ("CMP"; CMP and CGLIC
collectively being referred to as, "CIGNA"), as beneficial owner (CIG
& CO. being the registered owner) pursuant to the Company's 11.50%
Senior Notes due January 31, 2005 (the "CIGNA Notes"), in the
aggregate outstanding principal amount of $25,000,000 such prepayment
being accompanied with a prepayment premium of $250,000, all accrued
and unpaid interest due on the CIGNA Notes on the Closing Date and all
other amounts due and owing under those separate Note Purchase
Agreements, dated as of January 25, 1997, between the Company and each
of CGLIC and CMP, and the Company and Buyer shall have taken or caused
to be taken all actions required to be taken by each of them on or
immediately after the
<PAGE>
Closing Date pursuant to that certain Note Redemption Agreement, dated
as of October 20, 1997, between, the Company, Morton Metalcraft Co.,
Buyer and CIGNA.
7. Covenants.
7.1 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
its reasonable best efforts (to the extent within the control of any
party hereto) to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the
transactions contemplated by the Merger Agreement.
7.2 Survival of Representations and Warranties of the
Selling Securityholders After Closing. Notwithstanding any right of
Buyer to investigate and notwithstanding any knowledge of facts
determined or determinable by Buyer pursuant to such investigation or
right of investigation, Buyer has the right to rely fully upon the
representations and warranties of the Selling Securityholders
contained in this Agreement. Notwithstanding any waiver by Buyer of
any condition precedent to its obligation to close, all
representations and warranties shall survive the execution and
delivery of this Agreement and the Closing hereunder.
7.3 Survival of Representations and Warranties of
Buyer After Closing. Notwithstanding any right of the Selling
Securityholders to investigate and notwithstanding any knowledge of
facts determined or determinable by the Selling Securityholders
pursuant to such investigation or right of investigation, the Selling
Securityholders have the right to rely fully upon the representations
and warranties of Buyer contained in this Agreement. Notwithstanding
any waiver by the Selling
<PAGE>
Securityholders of any condition precedent to its obligation to close,
all representations and warranties shall survive the execution and
delivery of this Agreement and the Closing hereunder.
7.4 Selling Securityholder Restrictions. Each Selling
Securityholder hereby agrees to waive all restrictions (whether
transfer or otherwise) applicable to the shares of such Selling
Securityholder to the extent necessary to facilitate the consummation
of the transactions contemplated by this Agreement. Each Selling
Securityholder hereby further agrees that any agreements containing
any such restrictions as they apply to the Sale Securities shall
terminate upon the consummation of the transaction contemplated by
this Agreement.
8. Indemnification.
8.1 Indemnification by Selling Securityholders. Each
Selling Securityholder hereby agrees that such Selling Securityholder
shall be severally, and not jointly, liable to and shall indemnify,
defend and hold harmless Buyer, its Affiliates (including the
Surviving Corporation) and their respective directors, officers,
employees, Affiliates, successors and assigns pursuant to this
Agreement from and against any and all loss, cost, damage or expense
(including reasonable fees of counsel) whatsoever based upon, arising
out of or otherwise resulting from any breach of any representation or
warranty of such Selling Securityholder, or breach of any covenant or
obligation of such Selling Securityholder or enforcement by Buyer of
its rights agasint such Selling Securityholders hereunder, in either
case, contained in this Agreement. Nothing in the Limited
Indemnification Agreement, dated October 17, 1997 (the
"Indemnification
<PAGE>
Agreement"), among Buyer and certain of the Selling Securityholders
shall limit the general liability of Selling Securityholders under
this Agreement.
8.2 Indemnification by Buyer. Buyer hereby agrees
that Buyer shall be liable to and shall indemnify, defend and hold
harmless each Selling Securityholder, its Affiliates and their
respective directors, officers, employees, Affiliates, successors and
assigns pursuant to this Agreement from and against any and all loss,
cost, damage or expense (including reasonable fees of counsel)
whatsoever based upon, arising out of or otherwise resulting from any
breach of any representation or warranty of Buyer, or breach of any
covenant or obligation of Buyer or enforcement by any Selling
Securityholder of its rights hereunder, in either case, contained in
this Agreement. Nothing in the Limited Indemnification Agreement shall
limit the general liability of Buyer under this Agreement.
9. Additional Parties. The parties to this Agreement
agree that additional Selling Securityholders ("Additional Selling
Securityholders") may be added as parties to this Agreement prior to
the Closing by such Additional Selling Securityholders agreeing in
writing to be bound by the provisions of this Agreement, such addition
to be made without the necessity of any action by the parties hereto.
10. Termination of Agreement.
This Agreement shall terminate prior to the Closing as
follows:
(a) upon the termination of the
Merger Agreement; or
(b) at any time on or prior to the
Closing Date, by mutual written consent of the Selling Securityholders
and Buyer.
<PAGE>
If this Agreement is terminated as provided herein no party
hereto shall have any liability or further obligation to any other
party under the terms of this Agreement except for the intentional or
willful violation of, or willful misstatement contained in, the
representations and warranties of such parties contained in this
Agreement.
11. Miscellaneous.
11.1 Certain Definitions. (a) As used in this
Agreement, the following terms have the following meanings:
(i) "Affiliate" means, with respect to any
Person, any other Person controlling, controlled by or under common
control with, or the parents, spouse, lineal descendants or
beneficiaries of, such Person.
(ii) "Lien" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction
or limitation whatsoever (other than restrictions imposed by
applicable securities laws).
(iii) "Person" means any individual, corporation,
limited liability company, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
11.2 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail, postage
prepaid. Any such notice shall be deemed given when so delivered
personally,
<PAGE>
telegraphed, telexed or sent by facsimile transmission or, if mailed,
five days after the date of deposit in the United States mails, as
follows:
(a) if to Buyer, to:
MLX Corp.
1000 Center Place
Norcross, Georgia 30093
Attention: Thomas C. Waggoner
Telecopy: (770) 798-0633
with a copy to:
Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert M. Hirsh, Esq.
Facsimile: (212) 757-3990
(b) if to a Selling Securityholder, to the
address set forth on Exhibit D hereto.
Any party may by notice given in accordance with this Section to the
other parties designate another address or Person for receipt of
notices hereunder.
11.3 Entire Agreement. This Agreement contains the
entire agreement among the parties with respect to the purchase of the
Sale Securities and supersedes all prior agreements, written or oral,
with respect thereto.
11.4 Waivers and Amendments. This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms
hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance.
No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any
<PAGE>
waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of
any other such right, power or privilege.
11.5 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware.
11.6 Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties and
their respective successors and legal representatives. This Agreement
is not assignable, except that Buyer may assign its rights hereunder
to any of its Affiliates.
11.7 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
11.8 Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all of the parties hereto.
11.9 Headings. The headings in this Agreement are
for reference only, and shall not affect the interpretation of this
Agreement.
11.10 Severability of Provisions. If any provision or
any portion of any provision of this Agreement, or the application of
any such provision or any portion thereof to any Person or
circumstance, shall be held invalid or unenforceable, the remaining
portion of such provision and the remaining provisions of this
Agreement,
<PAGE>
and the application of such provision or portion of such provision as
is held invalid or unenforceable to Persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not
be affected thereby.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
MLX CORP.
By:
Name:
Title:
William D. Morton
Brian L. Geiger
Daryl R. Lindemann
Brian R. Doolittle
David M. Stratton
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Mark W. Mealy
Reid G. Leggett
Frederic H. Garner
Katherine D. Garner
Edward P. Imbrogno
Thomas L. Temple
Stephen E. Cummings
John T. Johnston III
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Robert G. Calton III
Kelly L. Katterhagen
William A. Morrisett
Matthew S. Rankowitz
John H. Grigg
Shannon G. Smith
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Nancy B. Conner
Charles H. Conner, Jr.
Charles H. Conner, Jr., as
custodian for Lindsay A. Conner
Charles H. Conner, Jr., as
custodian for Bryan B. Conner
<PAGE>
Schedule 3.1
Liens
Outstanding Options to Purchase
1. Warrant Agreement dated January 25, 1995, between Morton
Metalcraft Holding Co. and Connecticut General Life Insurance Company
and Cigna Mezzanine Partners III, L.P., as amended July 11, 1997, for
72,000 shares of common stock.
2. Executive Stock Option Agreement between Morton Metalcraft
Holding Co. And William D. Morton dated February 15, 1995, as amended
on October 8, 1997, for 7,000 shares of the Company.
3. Executive Stock Option Agreement between Morton Metalcraft
Holding Co. And Brian L. Geiger dated August 31, 1989, as amended on
February 15, 1995, for 9,000 shares of the Company.
4. Executive Stock Option Agreement between Morton Metalcraft
Holding Co. And Daryl R. Lindemann dated September 7, 1990, as amended
on February 15, 1995, for 9,000 shares of the Company.
5. Executive Stock Option Agreement between Morton Metalcraft
Holding Co. and Brian R. Doolittle dated July 13, 1992, as amended on
February 15, 1995, for 9,000 shares of the Company.
6. Executive Stock Option Agreement between Morton Metalcraft
Holding Co. and David M. Stratton dated August 31, 1989, as amended on
February 15, 1995, for 9,000 shares of the Company.
7. Executive Stock Option Agreement between Morton Metalcraft
Holding Co., William D. Morton and Robert J. Janeczko dated May 8,
1995, as amended on October 8, 1997, for 5,000 shares of the Company.
8. Amended and Restated Director Option Agreement dated
February 15, 1995, between Morton Metalcraft Holding Co., William D.
Morton and Fred W. Broling for 30,000 shares of the Company.
Outstanding Shareholder Agreements.
1. Shareholders' Agreement dated as of March 20, 1995, among
Morton Metalcraft Holding Co., Morton Metalcraft Co., William D.
Morton and listed Purchasers.
2. Shareholders' Agreement dated as of January 25, 1995, among
Morton Metalcraft Holding Co., Morton Metalcraft Co., Connecticut
General Life Insurance Company, Cigna Mezzanine Partners III, L.P., as
amended July 11, 1997.
<PAGE>
Bowles Hollowell Conner & Co. shareholders
1. Purchaser Representative Agreement dated as of March 20,
1995, among Charles Conner, Mark W. Mealy, Edward P. Imbrogno, and the
other listed Purchasers.
<PAGE>
Schedule 3.5
Defaults
1. Note and Warrant Purchase Agreements dated January 25, 1995,
by and among Morton Metalcraft Co., Morton Metalcraft Holding Co.,
Connecticut General Life Insurance Company and Cigna Mezzanine
Partners III, L.P., as amended July 11, 1997, adding Morton Metalcraft
Co. of North Carolina.
2. Loan and Security Agreement dated as of January 31, 1995,
between Morton Metalcraft Co. and Barclays Business Credit, Inc., as
amended by the First Amendment dated December 15, 1995, and as further
amended by the Second Amendment dated July 11, 1997, noting Fleet
Capital Corporation as successor-in-interest to Barclays and adding
Morton Metalcraft Co. of North Carolina.
3. Warrant Agreement dated January 25, 1995, between Morton
Metalcraft Holding Co. and Connecticut General Life Insurance Company
and Cigna Mezzanine Partners III, L.P., as amended July 11, 1997, for
72,000 shares of common stock.
4. Shareholders' Agreement dated as of March 20, 1995, among
Morton Metalcraft Holding Co., Morton Metalcraft Co., William D.
Morton and listed Purchasers.
5. Shareholders' Agreement dated as of January 25, 1995, among
Morton Metalcraft Holding Co., Morton Metalcraft Co., Connecticut
General Life Insurance Company, Cigna Mezzanine Partners III, L.P., as
amended July 11, 1997.
6. Stock Option Agreements 2 through 8 listed on Schedule 3.1
to the Securities Purchase Agreement.
7. Purchaser Representative Agreement dated as of March 20,
1995, among Charles Conner, Mark W. Mealy, Edward P. Imbrogno, and the
other listed Purchasers.
<PAGE>
Schedule 4.2
Non-contravention
None.
<PAGE>
EXHIBIT A
Selling Securityholders
<TABLE>
Person Shares Owned Options Owned[superscript 1] Warrants Owned
<S> <C> <C> <C>
William D. Morton 174,000
Mark W. Mealy 6,840
Nancy B. Conner 2,160
Charles H. Conner, Jr. 2,160
Charles H. Conner, Jr.,
as custodian for
Lindsay A. Conner 2,160
Charles H. Conner, Jr.,
as custodian for
Bryan B. Conner 2,160
Reid G. Legget 5,760
Frederic H. Garner 1,200
Katherine D. Garner 1,200
Edward P. Imbrogno 1,800
Thomas L. Temple 1,800
Stephen E. Cummings 1,200
John T. Johnston III 1,200
Robert G. Calton III 1,200
Kelly L. Katterhagen 1,200
William A. Morrisett 1,200
Matthew S. Rankowitz 1,200
John H. Grigg 960
Shannon G. Smith 600
Brian L. Geiger 9,000
Daryl R. Lindemann 9,000
Brian R. Doolittle 9,000
David M. Stratton 9,000
Connecticut General Life
Insurance Company, as
beneficial owner (with
CIG & CO being
registered owner) 23,791.56
Cigna Mezzanine Partners
III, L.P., as
beneficial owner (with
CIG & CO being
registered owner) 48,205.44
------- ------ ---------
TOTAL 210,000 43,000 72,000
</TABLE>
[superscript 1] Fred W. Boling and Robert J. Janeczko hold 30,000 and
5,000 options, respectively, but are not Selling Securityholders.
<PAGE>
EXHIBIT B
Recap Company Selling Securityholders
<TABLE>
Shares of Shares of
Class A Class B Options Warrants
Person Stock Owned Stock Owned Owned[superscript 1] Owned
<S> <C> <C> <C> <C>
William D. Morton 1,511,111 100,000 64,815
Mark W. Mealy, 63,333
Nancy B. Conner 20,000
Charles H. Conner, Jr. 20,000
Charles H. Conner, Jr.,
as custodian for
Lindsay A. Conner 20,000
Charles H. Conner, Jr.,
as custodian for
Bryan B. Conner 20,000
Reid G. Legget 53,333
Frederic H. Garner 11,111
Katherine D. Garner 11,111
Edward P. Imbrogno 16,667
Thomas L. Temple 16,667
Stephen E. Cummings 11,111
John T. Johnston III 11,111
Robert G. Calton III 11,111
Kelly L. Katterhagen 11,111
William A. Morrisett 11,111
Matthew S. Rankowitz 11,111
John H. Grigg 8,889
Shannon G. Smith 5,556
Brian L. Geiger 83,333
Daryl R. Lindemann 83,333
Brian R. Doolittle 83,333
David M. Stratton 83,333
Connecticut General Life
Insurance Company, as
beneficial owner (with
CIG & CO being
registered owner) 220,320
Cigna Mezzanine Partners
III, L.P., as
beneficial owner (with
CIG & CO being
registered owner) 446,347
--------- ------- ------- -------
TOTAL 1,844,444 100,000 398,147 666,667
</TABLE>
[superscript 1] Fred W. Boling and Robert J. Janeczko hold 277,778 and
46,296 options, respectively, following the recapitalization, but are
not Selling Securityholders.
<PAGE>
EXHIBIT C
Sale of Recap Company Securities
<TABLE>
Shares of
Class A Options Warrants Purchase
Person Stock Sold Sold Sold Price[superscript 1]
<S> <C> <C> <C> <C>
William D. Morton 292,121 4,381,820
Mark W. Mealy, 50,000 750,000
Nancy B. Conner 20,000 300,000
Charles H. Conner, Jr. 20,000 300,000
Charles H. Conner, Jr.,
as custodian for
Lindsay A. Conner 20,000 300,000
Charles H. Conner, Jr.,
as custodian for
Bryan B. Conner 20,000 300,000
Reid G. Legget 53,333 799,995
Frederic H. Garner 11,111 166,665
Katherine D. Garner 11,111 166,665
Edward P. Imbrogno 16,667 250,005
Thomas L. Temple 16,667 250,005
Stephen E. Cummings 11,111 166,665
John T. Johnston III 11,111 166,665
Robert G. Calton III 11,111 166,665
Kelly L. Katterhagen 11,111 166,665
William A. Morrisett 11,111 166,665
Matthew S. Rankowitz 11,111 166,665
John H. Grigg 8,889 133,335
Shannon G. Smith 5,556 83,340
Brian L. Geiger 13,636 203,072
Daryl R. Lindemann 13,636 203,072
Brian R. Doolittle 13,636 201,600
David M. Stratton 13,636 203,072
Connecticut General Life
Insurance Company, as
beneficial owner (with
CIG & CO being
registered owner) 220,320 3,304,324
Cigna Mezzanine Partners
III, L.P., as
beneficial owner (with
CIG & CO being
registered owner) 446,347 6,694,236
------- ------ ------- ----------
TOTAL 612,121 54,544 666,667 19,991,196
</TABLE>
[superscript 1] The numbers in this column are based upon the
calculations provided by Rob Wright on October 14, 1997.
<PAGE>
EXHIBIT D
Names and Addresses of Selling Securityholders
Person Address
William D. Morton 2660 North Morton Avenue
Morton, IL 61550
Mark W. Mealy 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Nancy B. Connor 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Charles H. Conner, Jr. 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Lindsay A. Conner 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Bryan B. Conner 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Reid G. Leggett 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Frederic H. Garner 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Katherine D. Garner 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Edward P. Imbrogno 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Thomas L. Temple 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Stephen E. Cummings 227 West Trade Street, Suite 2400
Charlotte, NC 28202
John T. Johnston III 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Robert G. Calton III 227 West Trade Street, Suite 2400
Charlotte, NC 28202
<PAGE>
Kelly L. Katterhagen 227 West Trade Street, Suite 2400
Charlotte, NC 28202
William A. Morrisett 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Matthew S. Rankowitz 227 West Trade Street, Suite 2400
Charlotte, NC 28202
John H. Grigg 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Shannon G. Smith 227 West Trade Street, Suite 2400
Charlotte, NC 28202
Brian L. Geiger 29501 Allentown Road
Mackinaw, IL 61755
Daryl R. Lindemann 52 Maple Ridge Drive
Morton, IL 61550
Brian R. Doolittle 86 Maple Ridge Drive
Morton, IL 61550
David M. Stratton c/o Morton Metalcraft Co., Inc.
2080 East Williams Street
P.O. Box 918
Apex, NC 27502
Connecticut General Life Insurance CIG & Co.
Company, as beneficial owner c/o CIGNA Investments, Inc.
(with CIG & CO being registered 900 Cottage Grove Road
owner) Hartford, CT 06152-2206
ATTN: Securities Accounting
S-206
Cigna Mezzanine Partners III, L.P., CIG & Co.
as beneficial owner (with CIG c/o CIGNA Investments, Inc.
& CO being registered owner) 900 Cottage Grove Road
Hartford, CT 06152-2206
ATTN: Securities Accounting
S-206
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 36,490
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,509
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,020
<CURRENT-LIABILITIES> 752
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 35,212
<TOTAL-LIABILITY-AND-EQUITY> 38,020
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,526)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,526)
<EPS-PRIMARY> (0.58)
<EPS-DILUTED> (0.58)
</TABLE>
