SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 25, 1994
Commission file number 1-9149
THE INTERLAKE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3428543
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Warrenville Road, Lisle, Illinois 60532-4387
(Address of principal executive offices) (Zip Code)
(708) 852-8800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
----------------------- --------------------------
Common stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
Form 10-K. [ ]
Aggregate market value of common stock, $1.00 par value, held by non-affiliates
as of February 15, 1995: $47,690,998
As of February 15, 1995, 22,026,695 shares of the Registrant's common stock
were outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 25, 1994 are incorporated by reference into Part II. Portions of
the Registrant's Proxy for the 1995 Annual Meeting of Stockholders (to be
filed) are incorporated by reference into Part III.
<PAGE>
THE INTERLAKE CORPORATION
Form 10-K Annual Report 1994
Table of Contents
PART I Page
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers, Promoters and
Control Persons of the Registrant 14
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 17
Signatures 26
<PAGE>
PART I
As used herein, the term "Company" means The Interlake Corporation and its
subsidiaries. The terms "Interlake" and "Registrant" mean The Interlake
Corporation, the parent company.
ITEM 1 - BUSINESS
GENERAL
The Company is a multinational corporation engaged in the design, manufacture
and sale or distribution of products in the automotive, materials handling,
packaging, and aerospace industries. The Company's operations are divided into
two segments: Engineered Materials and Handling/Packaging Systems. For
certain information regarding these segments, including information regarding
geographic regions see Note 6 of Notes to Consolidated Financial Statements.
ENGINEERED MATERIALS
The Engineered Materials segment includes Special Materials, which produces
ferrous metal powder used to manufacture precision parts, and Aerospace
Components, which manufactures precision jet engine components and repairs jet
engine fan blades. The two units which comprise Engineered Materials generally
use proprietary and patented processes to produce high quality metal powders or
components.
SPECIAL MATERIALS
General - The Company conducts its Special Materials business through Hoeganaes
Corporation, which is the North American market leader in the production of
ferrous metal powders. Ferrous metal powder is used by customers primarily to
manufacture precision parts for automobiles, light trucks, farm and garden
equipment, heavy construction equipment, hand tools, and appliances.
Precision parts produced using powder metallurgy technology have certain cost
and design advantages over parts produced using conventional techniques such as
forging, casting, stamping or machining, as they may be manufactured with less
wasted raw material, lower labor costs and little or no additional machining.
Hoeganaes' business strategy centers on research and development of new metal
powder products, manufacturing processes and applications while maintaining a
broad product line and cost-efficient, strategically located production
facilities. Product development efforts have focused on developing a bonding
and mixing technology which bonds alloys and other additives directly to the
metal particles. This process results in a pre-mixed powder which has more
consistent metallurgical properties than a conventional premix. It also offers
manufacturing productivity benefits for the parts fabricator. This work
resulted in the launch of a proprietary, bonded pre-mix called ANCORBOND (R)
which achieved commercial acceptance. In 1994, Hoeganaes introduced a new
patented process and product called ANCORDENSE (TM) which builds on the
ANCORBOND technology and uses heat throughout the parts forming process. The
combination of special, bonded pre-mixed powders and warm compaction enables
fabricators to produce parts with metallurgical properties that previously
could be obtained only through more expensive processes. Pilot part programs
using ANCORDENSE were begun in 1994.
Hoeganaes' current products and new product development coupled with cost-
efficient manufacturing processes producing a high quality powder enable it to
maintain market leadership.
Production - Hoeganaes has two basic production processes. The first process
is atomizing, which converts scrap steel into powders through the use of an
electric furnace steel making and water atomization system. Hoeganaes has the
two largest atomizing plants in North America. The second process is direct
reduction which converts high purity iron ore into a highly porous metal
powder. Hoeganaes has the only direct reduction process facility in North
America. Hoeganaes also formulates these powders into press-ready mixes for
<PAGE>
its customers. In 1994, Hoeganaes added annealing capacity at both of its
atomizing plants. In addition, Hoeganaes produces proprietary bonded products
such as patented bonded materials like ANCORBOND and ANCORDENSE.
Market Share - The Company believes that Hoeganaes has been the largest North
American producer of ferrous metal powders for the last 25 years. Hoeganaes'
size provides it with economies of scale in production, marketing and research
and development.
Markets - The North American market for ferrous metal powders can be divided
into two segments: structural parts and non-structural applications.
Uses for structural parts comprise an estimated 80% of the North American
market for ferrous metal powders. Approximately 65% of Hoeganaes' sales are
for automotive applications, which include components for transmissions,
engines and suspension systems. For automobile applications, Hoeganaes
generally supplies metal powder to component manufacturers as opposed to
directly supplying vehicle manufacturers.
The non-structural market for ferrous metal powders generally consists of
applications in welding, chemicals, friction applications such as brake pads
and linings, and for use as a carrier agent for photocopier toner. Ferrous
metal powders are also used by pharmaceutical companies as catalysts in blood
thinning agents and for use in nutritional iron supplements.
Minority Interest - The Company owns 80% of the capital stock of Hoeganaes. The
remaining 20% is owned by Hoganas AB, a Swedish corporation. Agreements
between the owners of Hoeganaes define the structure of the Hoeganaes board of
directors, grant to each party a right of first refusal with respect to a
proposed sale of Hoeganaes stock and provide for technology exchanges and tax
sharing arrangements.
AEROSPACE COMPONENTS
The Company conducts its Aerospace Components business through Chem-tronics,
Inc., which manufactures precision jet engine ducts, rings and cases and other
large aerospace components ("Fabrication"). Chem-tronics is also a leader in
jet engine fan blade repair ("Repair"). Chem-tronics' business strategy
focuses on developing and implementing advanced manufacturing technologies to
maintain high quality standards and to satisfy customer needs on a timely
basis.
Fabrication
General - The Fabrication business is engaged in the production of precision
jet engine ducts, rings and cases and other large aerospace components used in
commercial and military aircraft engines and launch vehicles in the space
program. Chem-tronics offers its customers a vertically integrated facility,
thereby eliminating the need for numerous subcontractors for a single
component. The principal products are sold to engine manufacturers under
arrangements which generally establish Chem-tronics as the sole source. The
strategy of the Fabrication business has been to diversify and realign the
aerospace component business by reducing the dependence on a declining military
business by expanding the commercial and space segments and improving its core
technologies.
Production Processes - The primary processes used in the Fabrication business
are chemical milling, welding, forming, machining, non-destructive testing and
inspection. The Unistructure (R) chemical milling process has been used to
manufacture both military and commercial jet engine ducts and is used for
structures where strength and weight are critical. Through the Unistructure
chemical milling process unneeded metal is etched away, leaving a stiffening
rib structure on the surface of the product. This patented rib structure is
integral, or part of the surface metal itself, rather than being attached to
the surface. Products manufactured using the Unistructure process are light,
strong, easy to inspect and generally cost less to produce than products made
solely by conventional processes.
<PAGE>
Products and Customers - The Fabrication business produces titanium ducts which
are used as part of the structural framework for jet engines and for containing
the air flows used for thrust. Other products include jet engine fan
containment cases, rings, complete fan case assembly modules and complex
fabrications for large commercial turbofan engines. The primary customers of
the Fabrication business are the original equipment manufacturers of jet
engines ("OEMs"). In addition to its normal contracts for commercial and
military engine components, this business is also involved in various ongoing
space programs and is producing compressor cases for commuter aircraft jet
engines pursuant to a long-term contract.
Repair
General - The Repair business operates Federal Aviation Administration ("FAA")
approved repair facilities that serve over 100 airlines, engine overhaul
centers, and OEMs with repair capabilities for fan and compressor blades for
commercial and military jet aircraft. The Company believes that Repair has a
leading market share in commercial jet engine fan blade repair performed by
independent blade repair facilities. The cost of repairing a jet engine fan
blade generally averages 10-20% of its replacement cost. Growth in this
business through 1992 had been based on increases in market share and size but
depressed market conditions in 1993 and 1994 have led to revenue declines.
Repair Capabilities - Repair, by virtue of its FAA certification, is considered
certified by the Civil Aviation Aeronautics Board and the British Civil
Aviation Authority and is certified by all major OEMs (General Electric, Pratt
& Whitney and Rolls-Royce) to repair substantially all commercial jet engine
fan blades manufactured in the western world. Frequently, when OEMs develop a
new engine, Chem-tronics assists in modifications and improvements during the
development stage. As a result, Chem-tronics is often the first repair center
certified by the FAA for blade repair on such engines. The Company believes
this gives Chem-tronics certain competitive advantages and also believes that
Chem-tronics has a competitive advantage in terms of quality.
Customers - The Repair business services OEMs, major airlines and engine
overhaul centers.
HANDLING/PACKAGING SYSTEMS
The Handling/Packaging Systems segment is comprised of the Company's domestic
and international Handling and Packaging units. Handling designs, manufactures
and sells storage rack, shelving, and related equipment primarily for use in
warehouses, distribution centers, retail stores and for other storage
applications. The Company believes that Handling is the world's largest
manufacturer of storage rack. Packaging designs and sells machinery for
applying strapping and stitching wire, and also supplies strapping and
stitching wire for use in these machines.
HANDLING
General - Handling's operations are based regionally in North America, Europe
and Asia Pacific. They are conducted through Interlake Material Handling in
the U.S., Canada and Mexico, and under the Dexion name in Europe and Asia
Pacific. The Dexion name is well recognized in Europe, Australia, and the
Pacific Rim and provides Handling with certain marketing advantages. The
Handling operations design, manufacture, and sell storage rack, angle,
conveyors, and conveyor systems both in the U.S. and in Europe, and shelving
and office partitioning in Europe. Handling's entire product range (other than
office partitioning) is also manufactured in Australia and sold throughout Asia
Pacific. Products are also sold in South America, Africa and the Middle East.
Handling's direct sales and distribution networks allow it to satisfy the needs
of large customers and projects, as well as smaller, geographically distant
customers. Handling's design capabilities and large manufacturing capacity
enable it to undertake large scale projects where these capabilities may be
most advantageously utilized. Handling's large size allows it to realize
significant economies of scale in product development, design and
manufacturing.
<PAGE>
Products - Handling's primary product is storage rack which is used for storing
unit loads in distribution centers, warehouse facilities, retail stores, and
factory shipping and receiving departments. Storage rack can be assembled in
a variety of configurations depending on individual customer needs. Handling
offers a broad range of products, including products that allow for FIFO and
LIFO storage and retrieval, for the storage of bulky, awkwardly shaped items
(lumber, carpet rolls, furniture, etc.) and for the storage and retrieval of
very heavy items.
Handling also sells conveyors and conveyor systems which range from simple
gravity conveyors to complex belt and chain powered conveyors. In Europe and
Australia, Handling manufactures and sells angle and shelving, office storage
equipment and in Europe, partitioning for offices.
Market Share - The Company believes that Handling is the world's largest
manufacturer of storage rack, with the largest market share in the U.S., the
U.K., Belgium and Australia, and the second largest market share in Germany.
Product Development, Design and Manufacturing - In addition to competing on the
basis of cost and quality, Handling utilizes proprietary software, computer
aided design applications and its in-house structural engineering staff to
design the optimal solution for each customer's storage requirements.
Furthermore, extensive technical training for its sales staff and for third-
party distributors allows for a better assessment of customer needs.
Handling's design software is used to generate detailed bills of material which
automatically specify the size, type and quantity of all components to be used
in the project. This streamlines the selling, design and manufacturing
processes.
Handling's facilities generally purchase steel coils and then form, finish and
paint the steel for various storage applications. Steel comprises
approximately 60-70% of production cost. Handling believes it is a low cost
producer and continuing emphasis is placed on overhead and manufacturing cost
control and the efficient utilization of raw materials.
Sales and Distribution - The Company believes that Handling's domestic and
international direct sales force and extensive distributor network give it a
significant competitive advantage. Domestically, Handling is represented by a
network of over 180 distributors and a direct sales force. In the U.K.,
Handling utilizes an independent distributor network, wholly-owned distribution
centers and a direct sales force. In Germany, Handling conducts its sales
efforts exclusively through a direct sales force and wholly-owned distribution
centers. Handling believes that its direct sales force allows it to satisfy
the complex needs of large customers and applications, while its extensive
distributor network allows it to reach smaller, geographically distant
customers. Handling has pursued geographic expansion by purchasing a
distributor in Hong Kong to improve sales coverage in the rapidly growing
Northeast Asia marketplace and by establishing a sales office in the Czech
Republic.
Customers - Handling's customers are primarily engaged in the retailing and
wholesaling of food and consumer durables and non-durables and industrial
products.
PACKAGING
General - Packaging designs and sells machinery for applying steel and non-
metallic strap in the U.S., Canada and the U.K. Packaging also sells non-
metallic strap in the U.S., and both steel and non-metallic strap in the U.K.
and Canada, for use in such machines. Packaging designs, manufactures and
distributes wire stitching equipment. Many of the industries served by
Packaging are highly cyclical. As a result, Packaging has lowered or
eliminated certain fixed costs and is focusing on improving production
efficiencies in an effort to maintain profitability even during cyclical
downturns.
<PAGE>
Products and Customers - Strapping markets are segmented by strapping strength
requirements. Non-metallic products have cost, safety and other advantages,
but are currently limited by the strength of the joint. As technology has
improved, applications for non-metallic products have expanded. Due to the
safety advantages and improving strength characteristics of non-metallic
strapping, Packaging has focused its engineering and development efforts on the
non-metallic strap market. Steel strapping is used predominantly by heavy
goods manufacturers and lumber mills to bundle products or reinforce existing
packaging. The principal end-users of steel strapping are the steel, lumber,
brick, and concrete block industries. Non-metallic strapping is marketed to a
broad customer base, with primary emphasis on the corrugated, newspaper,
graphics, can, bottle, textile and distribution industries. Wire stitching
machines serve a wide customer base including the corrugated box, graphic arts,
automotive, agricultural and food industries.
A key growth area for plastic strapping is the conversion of the fiber and
lumber industries from steel to plastic strap. Research and development
efforts have been focused on developing the high-strength polyester strap these
applications require. A major U.S. acrylic fibers plant was successfully
converted to polyester strap in 1994, and other customers are targeted. In
1994, Packaging received certification from the American Association of
Railroads that enables North American lumber mills to use its polyester strap
for rail shipments.
Packaging designs strapping machines, most of which are manufactured to its
specifications by third parties. Strap produced by a given manufacturer can
generally be used with machines produced by another manufacturer; however, most
users purchase strap and machines from the same supplier.
Production - For steel strapping, Packaging purchases raw materials in the form
of steel coils which are then slit into bands. The bands are further slit into
straps of various widths. The strap is then either zinc coated or painted to
prevent rusting. Rust resistant strap is particularly important for the lumber
and brick industries where product is exposed to the elements.
For non-metallic strapping, Packaging purchases raw materials in the form of
pelletized or flake polyester and polypropylene which are often blended with
recycled materials. Non-metallic strapping is manufactured through a
continuous extrusion process. This material is then shaped and chilled, then
reheated and stretched to the appropriate width and thickness and, finally,
annealed, relaxed, either slit or embossed, cooled to minimize shrinkage and
wound into coils.
Market Share - The Company believes that the Canadian steel strapping unit has
the largest market share in Canada. The Company also believes that the U.K.
steel strapping unit has the second largest market share in its market and that
the U.K. non-metallic strapping and non-metallic machines units have leading
market shares in certain areas. In the U.S., Packaging is a leading supplier
of plastic strapping and stitching products.
Sales, Distribution and Servicing - Packaging's direct sales force services
clients in the U.S., Canada and the U.K. In the U.S., Packaging also utilizes
a network of over 350 distributors to service smaller customers. Within each
sales force, product specialists are trained to service the needs of specific
industries such as publishing or lumber. Due to the fact that most of
Packaging's customers utilize its products for high volume applications,
Packaging has an extensive field service organization to allow it to respond
rapidly to customer service needs. The Company believes that its
sales/distributor network and its field service capabilities give it
significant advantages over smaller competitors.
CUSTOMERS; ORDER BACKLOGS
Engineered Materials - Sales to General Electric and United Technologies
accounted for approximately 34% of Aerospace Components' sales, equivalent to
10% of Engineered Materials' sales and 3% of total Company sales in 1994. The
Company is a supplier to these companies and has no other significant
relationship with them. Sales to these companies are made pursuant to purchase
orders.
<PAGE>
At December 25, 1994 and December 26, 1993, the backlog of orders for
Engineered Materials was $148.4 million and $73.6 million, respectively.
Special Materials' backlog, which is generally short-term in nature, was up 51%
to a near record level. Aerospace Components' backlog increased 127% due
mainly to new multi-year fabrication orders received for commercial, military
and space applications. All orders for Engineered Materials at December 25,
1994 were believed to be firm, but approximately 42% of these orders are
subject to renegotiation. Approximately 57% of these orders are expected to be
delivered during 1995.
Handling/Packaging Systems - Handling/Packaging Systems' products are sold to a
substantial number of industrial customers, none of which individually
purchased a significant portion of the segment's output in 1994. The backlog
of orders for this segment at December 25, 1994 was $93.1 million compared with
$74.0 million at December 26, 1993 (in each case applying foreign exchange
rates at December 25, 1994), due mainly to improved order rates at all Handling
operations. Order intake at U.S. Handling reached a record level in 1994. All
orders at December 25, 1994 were believed to be firm and are expected to be
filled during 1995.
COMPETITION
Competition is vigorous in both of the Company's business segments. Factors
normally affecting competitive conditions are product quality, technological
development, price and service. The Company competes with a variety of other
entities in each of its businesses.
RESEARCH AND DEVELOPMENT
Research activities are directed towards developing primary products and
processes. Expenditures on research activities by business segment were as
follows:
1994 1993 1992
(in millions)
Engineered Materials. . . . . . $ 2.1 $ 2.1 $ 2.2
Handling/Packaging Systems. . . 1.3 1.1 .6
Total. . . . . . . . . . . $ 3.4 $ 3.2 $ 2.8
The Company believes that these amounts are adequate to maintain its
competitive positions in the businesses in which it operates.
PATENTS
The Company holds domestic and foreign patents covering certain products and
processes in both business segments. While these patents are considered
important to the ability of the segments to compete, unpatented manufacturing
expertise is considered at least as important. Future profitability of these
segments is therefore not considered dependent upon any one patent or group of
related patents.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and changing federal, state,
local and foreign environmental laws and regulations, including those relating
to the use, handling, storage, discharge and disposal of hazardous substances,
and as a result the Company is from time to time involved in administrative and
judicial proceedings and inquiries relating to environmental matters. In
addition, the Company's future capital and operating expenditures will continue
to be influenced by environmental laws and regulations; however, the Company
does not believe these expenditures are likely to have a material adverse
effect on its earnings or its ability to compete with other companies. In
1994, capital expenditures for environmental compliance were $.6 million and
the Company estimates that environmental capital spending for 1995 will be $1.4
million. In 1993, the Company incurred special nonoperating charges of $4.8
million to provide for estimated environmental liabilities in connection with
certain sites not related to its ongoing operations. (See Management's
<PAGE>
Discussion and Analysis of Results of Operations and Finanancial
Condition - Nonoperating Items, and Note 15 of Notes to Consolidated Financial
Statements.)
EMPLOYEES
At December 25, 1994 the Company employed a total of 4,536 persons, consisting
of 1,986 salaried and 2,550 hourly employees. Of the hourly employees, 57% are
represented by unions, with no single union representing a significant number
of the hourly employees. Labor contracts covering approximately 11% of hourly
employees will expire in 1995. The Company believes that it will not
experience difficulties in negotiating the renewal of these contracts.
RAW MATERIALS
The Company's principal raw materials are steel and steel scrap which are
purchased in the open market where no shortages are anticipated. The Company
also purchases large extruded metal shapes and milled products that are
available from a limited number of suppliers and high purity iron ore imported
from a limited foreign source. The Company believes these sources are adequate
to provide for the current and future needs of each of the Company's segments
and believes that, if necessary, adequate substitute supplies and suppliers
could be obtained without any material adverse effect on the Company's
operations or operating results. The Company's conclusions as to availability
and impact are based upon the Company's general knowledge of the markets for
its raw materials, and its use of alternative sources from time to time.
<PAGE>
ITEM 2 - PROPERTIES
The following are the principal properties of the Company, listed by business
unit:
<TABLE>
<CAPTION> Usable Space
Business Unit Function Owned/Leased (Square Feet)
<S> <C> <C> <C>
HOEGANAES
Riverton, NJ Manufacture iron and steel metal powder Owned 496,000
Gallatin, TN Manufacture steel metal powder Owned 168,000
Milton, PA Bonding and blending metal powder, Owned 102,000
warehouse
CHEM-TRONICS
El Cajon, CA Manufacture aerospace components and Owned 230,000*
repair of jet engine fan blades Building owned 39,000
on leased land
Tulsa, OK Repair of jet engine fan blades Leased 42,000
HANDLING
Handling North
America
Pontiac, IL Manufacture storage rack and slotted angle Owned 400,000*
Sumter, SC Manufacture storage rack Owned 250,000*
Lodi, CA Manufacture storage rack Owned 125,000*
Shepherdsville, KY Manufacture conveyors Owned 106,000*
Handling Europe
Hemel Hempstead, U.K. Manufacture storage rack, slotted angle, Building owned 353,000
shelving and partitioning on leased land
Laubach, Germany Manufacture storage rack, slotted angle, Owned 335,000
shelving, partitioning and conveyors
Gainsborough, U.K. Manufacture conveyors Building owned 103,000
on leased land
Nivelles, Belgium Manufacture storage rack and slotted angle Owned 101,000
Halle, Germany Manufacture steelwork and conveyors Owned 90,000
Kilnhurst, U.K. Manufacture storage rack Owned 89,000*
Handling Asia Pacific
Blacktown, Australia Manufacture storage rack, slotted angle, Owned 135,000*
shelving and conveyors
Wacol, Australia Manufacture shelving and wire products Owned 30,000*
PACKAGING
Scarborough, Canada Manufacture steel strap, edgeboard, Owned 135,000*
collated nails and strapping equipment
Kilnhurst, U.K. Manufacture steel strap, seals, tools and Owned 97,000
machines
Racine, WI Manufacture stitching machines Leased 70,000
Fountain Inn, SC Manufacture non-metallic strap Owned 61,000*
Hodgkins, IL Machine preparation, warehouse Leased 32,000
Maidenhead, U.K. Machine preparation, warehouse Owned 22,000
Strood, U.K. Manufacture over/under-wrappers and Leased 6,000
conveyors
</TABLE>
The properties marked with an asterisk (*) are subject to mortgages pursuant to
the bank credit agreement. In addition to the facilities described above, the
Company owns two other warehouses and leases various warehouses and sales and
administrative facilities. The Company believes that its manufacturing
facilities are properly maintained and that production capacity is adequate to
meet the requirements of the Company.
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly involved in
legal proceedings incidental to its business. Neither the Registrant nor any
of its subsidiaries is a party to any legal proceedings which are material
within the meaning of regulations of the Securities and Exchange Commission.
Additional information is contained in Notes 15 and 16 of Notes to Consolidated
Financial Statements.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for Interlake's common stock is the New York Stock
Exchange (ticker symbol: IK). The common stock is also listed on the Chicago
Stock Exchange and is admitted to unlisted trading on the Pacific Coast
Exchange and the Boston Exchange.
Interlake has not paid a dividend or made a distribution with respect to its
common stock since the third quarter of 1989. Restrictions under Interlake's
bank credit agreement (see Note 13 of Notes to Consolidated Financial
Statements) will prevent it from paying any cash dividends in 1995 or in the
foreseeable future.
On December 25, 1994, there were approximately 7,432 holders of record of
Interlake's common stock.
High and low prices of Interlake's common stock during each of the eight
calendar quarters ending on December 31, 1994 were:
1994 1993
Price Price
High Low High Low
Calendar Quarter Ended
March 31. . . . . . . . . . $3 7/8 $2 5/8 $4 3/4 $3 5/8
June 30 . . . . . . . . . . 3 1/4 2 1/8 4 3/8 3 1/8
September 30. . . . . . . . 2 5/8 1 7/8 4 5/8 3 3/8
December 31 . . . . . . . . 2 3/8 1 1/2 4 1/8 2 1/2
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
information under the same caption in the Company's 1994 Annual Report to
Shareholders.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The information required by this item is incorporated by reference to the
information under the same caption in the Company's 1994 Annual Report to
Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the
information under the same caption in the Company's 1994 Annual Report to
Shareholders.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT
(a) Information about directors and nominees required by this item is
incorporated by reference to the information under the caption
"DIRECTORS AND NOMINEES" in the Registrant's definitive proxy statement
to be filed in connection with its 1995 Annual Meeting of Shareholders.
(b) The executive officers listed below are elected annually by the Board of
Directors of the Registrant, to serve for a term of office of one year and
until their successors are elected.
Executive Name Age Officer Since Positions During Last 5 Years
W. Robert Reum 52 1982 Chairman of the Board since April
1991 and President and Chief
Executive Officer since January
1991; President and Chief
Operating Officer from August 1989
to December 1990
Craig A. Grant 47 1991 Vice President Human Resources
since May 1991; human resources
executive at The Ceco Corporation
for more than five years prior to
May 1991, of which two were as
Vice President Human Resources
Stephen Gregory 45 1989 Vice President Finance, Treasurer
and Chief Financial Officer since
December 1994; Vice President from
August 1994 to December 1994;
President of the Material Handling
Division of The Interlake
Companies, Inc. from June 1989 to
August 1994
John P. Miller 37 1993 Controller since April 1993; Vice
President Finance of the Material
Handling Division of The Interlake
Companies, Inc. from October 1989
to April 1993
Stephen R. Smith 38 1991 Vice President, Secretary and
General Counsel since January
1993; Vice President and General
Counsel from January through
December 1992; Vice President Law
from September to December 1991;
Partner in the Chicago law firm of
Hopkins & Sutter from 1987 to
September 1991
<PAGE>
The Registrant has designated the operating executives named below as
"executive officers" for purposes of certain provisions of the Securities
Exchange Act of 1934.
Executive Name Age Officer Since Positions During Last 5 Years
Brenton S. Fuller 51 1994 Chairman and Managing Director,
Dexion (Australia) Pty. Ltd. since
1976.
Robert J. Fulton 52 1994 President, Hoeganaes Corporation,
the subsidiary which produces
powdered metals, since July 1994;
Chief Executive Officer of
Micafil, Inc. and consultant to
Sterling Stainless Tube - ITT
Automotive from 1992 to 1994;
Executive Vice President and Chief
Operating Officer of Doehler-
Jarvis from 1990 to 1992
John J. Greisch 39 1991 President Material Handling Group
since December 1994; Vice
President since December 1994;
Vice President Finance, Treasurer
and Chief Financial Officer from
February 1993 to December 1994;
Vice President from January
through February 1993; Managing
Director of Dexion Group plc from
May 1991 through December 1992;
Managing Director of Dexion
Limited from February 1990 to
November 1992; Group Finance
Director of Dexion Group plc from
October 1989 to September 1990
James Legler 46 1988 President, Chem-tronics, Inc., the
subsidiary which manufactures
precision engine components and
provides jet engine component
repairs
Robert A. Pedersen 49 1986 President, Interlake Packaging
Corporation, the subsidiary which
produces and distributes
strapping, and strapping products
and equipment
Vincent E. Piacenti 47 1994 Managing Director, Dexion Limited,
since November 1992; Operations
Director, Dexion Limited, from
November 1991 to October 1992;
Vice President Operations,
Material Handling Division from
1987 to November 1991
Bernd Stiller 54 1993 Managing Director, Dexion
Continental Europe since December
1994; Managing Director, Dexion
Group plc from January 1993 to
December 1994; Managing Director,
Dexion GmbH since 1986
Daniel P. Wilson 50 1994 President Material Handling
Division, since January 1994; Vice
President Sales, Material Handling
Division, from 1988 to 1993
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated into this report by
reference to the information under the caption "Executive Compensation" in the
Registrant's definitive proxy statement to be filed in connection with its
1995 Annual Meeting of Shareholders. Notwithstanding the foregoing sentence,
the information set forth under "Executive Compensation - Report of the
Compensation Committee on Executive Compensation" and "Executive Compensation -
Performance Graph" in the Registrant's definitive proxy statement to be filed
in connection with its 1995 Annual Meeting of Shareholders is not incorporated
herein.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item and information regarding compliance
with Section 16(a) of the Securities Exchange Act of 1934 to the extent
required to be disclosed, is incorporated into this report by reference to the
information under the caption "Voting Securities and Security Ownership By
Certain Persons and Management" in the Registrant's definitive proxy statement
to be filed in connection with its 1995 Annual Meeting of Shareholders.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this
report:
Page in
Annual
1. Financial Statements Report*
Report to Independent Accountants 18
Consolidated Statement of Operations for the Years Ended
December 25, 1994, December 26, 1993 and December 27, 1992 19
Consolidated Balance Sheet at December 25, 1994 and
December 26, 1993 20
Consolidated Statement of Cash Flows for the Years Ended
December 25, 1994, December 26, 1993 and December 27, 1992 21
Consolidated Statement of Shareholders' Equity (Deficit)
for the Years Ended December 25, 1994, December 26, 1993
and December 27, 1992 22
Notes to Consolidated Financial Statements 23-38
*Incorporated by reference from the indicated pages of the 1994 Annual
Report to Shareholders
Page in
2. Financial Statement Schedules Form 10-K
Report of Independent Accountants on Financial Statement
Schedules 21
Schedule V Property, Plant and Equipment 22
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 23
Schedule VIII Valuation and Qualifying Accounts 24
Schedule X Supplementary Income Statement Information 25
All other schedules are omitted because of the absence of conditions
under which they would have been required or because the required
information is disclosed in the financial statements or notes thereto.
3. Exhibits
<TABLE>
Sequential
<CAPTION> Numbering
Exhibit System
Number Item Page Number
<S> <C>
3. Articles of Incorporation and Bylaws
3.1 Composite of the Registrant's Restated Certificate of Incorporation
as amended, incorporated by reference to Exhibit 3.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 27, 1992 (the "1992 10-K") None
<PAGE>
3.2 Bylaws of registrant as amended and restated dated August 23, 1990,
incorporated by reference to Exhibit 3(b) of the Registrant's Annual Report on
Form 10-K for the year ended December 30, 1990 (the "1990 10-K") None
4. Instruments Defining the Rights of Security Holders including
Indentures
4.1 Form of Indenture (including form of Senior Subordinated Debenture),
incorporated by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-2, File No. 33-46247, as amended (the "Debt S-2") None
4.2 Rights Agreement dated as of January 26, 1989 between the Registrant
and the First National Bank of Chicago, as Rights Agent, (the "Rights
Agreement") incorporated by reference to Exhibit 2 of the Registrant's
Registration Statement on Form 8-A dated as of January 27, 1989 None
4.3 Amendment to Rights Agreement dated as of August 15,1989,
incorporated by reference to Exhibit (a) of the Company's Form 8 dated May 22,
1990 None
4.4 Amendment to Rights Agreement dated as of May 7, 1990, incorporated
by reference to Exhibit (b) of the Company's Form 8 dated May 22, 1990 None
4.5 Form of Amendment to Rights Agreement, incorporated by reference to
Exhibit 4.5 of the Registrant's Registration Statement on Form S-2, File No.
33-46248, as amended (the "Common Stock S-2") None
4.6 Amendment to Rights Agreement dated as of April 13, 1994,
incorporated by reference to Exhibit 7 of the Company's Form 8-A/A dated April
19, 1994 None
4.7 Preferred Stock Purchase Agreement dated as of March 6, 1992 among
the Registrant and the persons listed on the Schedule of Purchasers attached
thereto, incorporated by reference to Exhibit 4.6 of the Common Stock S-2 None
4.8 Revised Form of Registration Rights Agreement among the Registrant
and the parties listed on the signature pages thereof, incorporated by
reference to Exhibit 4.4 of the Registrant's Post-Effective Amendment No. 4 to
the Registration Statement on Form S-2, File No. 33-37041 (the "IRN Post-
Effective Amendment No. 4") None
4.9 Form of Series 1 Junior Convertible Subordinated Debenture,
incorporated by reference to Exhibit 4.11 of the Common Stock S-2 None
4.10 Form of Series 2 Junior Convertible Subordinated Debenture,
incorporated by reference to Exhibit 4.12 of the Common Stock S-2 None
4.11 Series A-3 Preferred Stock Purchase Agreement dated as of May 7, 1992
by and between the Registrant and the persons listed on the signature pages
thereto, incorporated by reference to Exhibit 4.9 of the IRN Post-Effective
Amendment No. 4 None
4.12 Form of Series 3 Junior Convertible Subordinated Debenture (Exchange
Debentures relating to the Series A-3 Preferred Stock), incorporated by
reference to Exhibit 4.10 of the IRN Post-Effective Amendment No. 4 None
4.13 Stock Purchase Agreement dated November 2, 1989 between the
Registrant and LaSalle National Bank, trustee for The Interlake Corporation
Employee Stock Ownership Plan, incorporated by reference to Exhibit 10(v) of
the Registrant's Annual Report on Form 10-K for the year ended December 29, 1991
(the "1991 10-K") None
4.14 Form of Amended and Restated Credit Agreement, incorporated by
reference to Exhibit 10.15 of the IRN Post-Effective Amendment No. 4 None
<PAGE>
4.15 First Amendment, dated as of August 17, 1992, to the Amended and
Restated Credit Agreement, incorporated by reference to Exhibit 4.18 of the
1992 10-K None
4.16 Second Amendment, dated as of October 30, 1992, to the Amended
and Restated Credit Agreement, incorporated by reference to Exhibit 4.19 of the
1992 10-K None
4.17 Third Amendment, dated August 20, 1993, to the Amended and Restated
Credit Agreement, incorporated by reference to the Registrant's quarterly
report on Form 10-Q for the quarter ending September 26, 1993 None
4.18 Fourth Amendment, dated December 22, 1993, to the Amended and
Restated Credit Agreement, incorporated by reference to Exhibit 4.29 of the
Registrant's Annual Report on Form 10-K for the year ended December 26, 1993
("1993 10-K") None
4.19 Fifth Amendment, dated February 23, 1994, to the Amended and Restated
Credit Agreement, incorporated by reference to Exhibit 4.30 of the 1993 10-K None
4.20 Sixth Amendment, dated as of August 16, 1994, to the Amended and
Restated Credit Agreement _____
4.21 Seventh Amendment, dated as of January 24, 1995, to the Amended and
Restated Credit Agreement _____
4.22 Eighth Amendment, dated as of February 1, 1995, to the Amended and
Restated Credit Agreement _____
4.23 The Registrant Term Notes dated June 18, 1992, incorporated by
reference to Exhibit 4.20 of the 1992 10-K None
4.24 The Registrant Revolving Notes dated June 18, 1992, incorporated by
reference to Exhibit 4.21 of the 1992 10-K None
4.25 Subsidiary Term Notes dated June 18, 1992, incorporated by reference
to Exhibit 4.22 of the 1992 10-K None
4.26 Subsidiary Revolving Notes dated June 18, 1992, incorporated by
reference to Exhibit 4.23 of the 1992 10-K None
4.27 The Registrant Delayed Draw Notes dated June 18, 1992, incorporated
by reference to Exhibit 4.24 of the 1992 10-K None
4.28 The Registrant Deferred Term Notes dated June 18, 1992, incorporated
by reference to Exhibit 4.25 of the 1992 10-K None
4.29 The Registrant Pledge Agreement dated September 27, 1989, made by the
Registrant and accepted by Chemical Bank, along with stock certificates of the
two subsidiaries, incorporated by reference to Exhibit 10(t) of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989
(the "1989 10-K") None
4.30 Amended and Restated Security Agreement dated September 27, 1989 and
amended and restated as of August 17, 1992 between the Registrant and Chemical
Bank, incorporated by reference to Exhibit 4.27 of the 1992 10-K None
4.31 Amended and Restated Security Agreement among Certain Subsidiaries of
the Registrant and Chemical Bank dated as of September 27, 1989 and amended and
restated as of August 17, 1992, incorporated by reference to Exhibit 4.28 of
the 1992 10-K None
<PAGE>
10. Material Contracts
<F1>10.1 1995 Executive Incentive Compensation Plan _____
<F1>10.2 1994 Executive Incentive Compensation Plan, incorporated by reference
to Exhibit 10.1 of the 1993 10-K None
<F1>10.3 Key Executive Retention Program adopted February 23, 1995 _____
<F1>10.4 Form of Grant of Stock Award as of February 23, 1995 _____
<F1>10.5 Form of Agreement dated August 27, 1992 for the Cancellation and Re-
Granting of Non-Qualified Stock Options between the Registrant and U.S.
executive officers and employees, incorporated by reference to Exhibit 10.7 of
the 1992 10-K None
<F1>10.6 Form of Non-Qualified Stock Option Agreement dated January 26, 1995
between the Registrant and one executive officer _____
<F1>10.7 Form of Non-Qualified Stock Option Agreement dated January 26, 1995
between the Registrant and one foreign executive officer _____
<F1>10.8 Form of Grant of Stock Award as of May 23, 1991 - Outside Director,
incorporated by reference to Exhibit 10(a) of the 1991 10-K None
<F1>10.9 Form of Grant of Stock Award as of April 26, 1990 - Outside
Directors, incorporated by reference to Exhibit 10(a) of the 1990 10-K None
<F1>10.10 Amendment to Non-Qualified Stock Option Agreement and to Stock
Appreciation Rights granted July 23, 1987 by the Registrant to one U.S.
executive officer, incorporated by reference to Exhibit 10(i) of the 1990 10-K None
<F1>10.11 Amendment to Non-Qualified Stock Option Agreement and to Stock
Appreciation Rights granted July 28, 1988 by the Registrant to one U.S.
executive officer, incorporated by reference to Exhibit 10(j) of the 1990 10-K None
<F1>10.12 1989 Stock Incentive Program, incorporated by reference to the
proxy statement filed in connection with the Registrant's 1990 annual meeting
of shareholders None
<F1>10.13 1986 Stock Incentive Program, incorporated by reference to
Appendix D to the Registrant's Registration Statement on Form S-4 filed with
the Securities and Exchange Commission on March 26, 1986 None
10.14 Trust Agreement between the Registrant and Continental Illinois
National Bank and Trust Company of Chicago with respect to The Interlake
Corporation Restated Directors' Post-Retirement Income Plan dated September 30,
1988, incorporated by reference to Exhibit 10(p) of the Registrant's Annual
Report on Form 10-K for the year ended December 25, 1988 (the "1988 10-K") None
10.15 Trust Agreement between the Registrant and Continental Illinois
National Bank and Trust Company of Chicago with respect to the Deferred
Compensation Agreement dated May 29, 1986 (as amended August 5, 1988) between
the Registrant and Frederick C. Langenberg dated September 30, 1988,
incorporated by reference to Exhibit 10(q) of the 1988 10-K None
10.16 Form of Indemnification Agreement between the Registrant and
Outside Directors, incorporated by reference to Exhibit 10(a) of the
Registrant's Annual Report on Form 10-K for the year ending December 27, 1987
(the "1987 10-K") None
<F1>10.17 Form of Indemnification Agreement between the Registrant and
executive officers, including inside directors, incorporated by reference to
Exhibit 10(b) of the 1987 10-K None
<F1>10.18 Form of Severance Pay Agreement between the Registrant and 12
executive officers _____
<F1>10.19 Form of Severance Pay Agreement between the Registrant and two
executive officers _____
10.20 Cross Indemnification Agreement dated as of May 29, 1986,
between the Registrant and Acme Steel Company, incorporated by reference to
Exhibit 10(b) of the Registrant's Annual Report on Form 10-K for the year ended
December 28, 1986 (the "1986 10-K") None
<PAGE>
10.21 Parallel Loan Agreement dated as of May 29, 1986, between Acme
Steel Company and The Interlake Companies, Inc., as amended by letter agreement
dated June 27, 1986, incorporated by reference to Exhibit 10(c) of the 1986 10-K None
10.22 Tax Indemnification Agreement dated as of May 29, 1986, between
the Registrant and Acme Steel Company, incorporated by reference to Exhibit
10(i) of the 1986 10-K None
10.23 Deferred Compensation Agreement dated May 29, 1986, between the
Registrant and Frederick C. Langenberg, incorporated by reference to Exhibit
10(j) of the 1986 10-K None
10.24 Instrument of Assumption and Release dated May 29, 1986, between
the Registrant, W. R. Reum and Acme Steel Company, concerning an April 12, 1982
Agreement between W. R. Reum and Interlake, Inc. (n.k.a. Acme Metals, Inc.),
incorporated by reference to Exhibit 10(l) of the 1986 10-K None
13. Portions of the Annual Report to Shareholders for fiscal year ended
December 25, 1994 (With the exception of the data described in Part II, Items
6, 7 and 8, no other data appearing in the Annual Report to Shareholders for
fiscal year ended December 25, 1994, is deemed filed as part of this Form 10-K.) _____
18. Letter of Preferability from Price Waterhouse regarding change in
accounting principle in determining impairment of long-lived assets _____
22. Subsidiaries of the Registrant _____
23. Consent of Experts and Counsel None
23.1 Consent of Price Waterhouse _____
27. Financial Data Schedule -----
28. Description of Capital Stock of the Registrant, incorporated by
reference to Exhibit 28 of the 1992 10-K None
<FN>
<F1> Management contract or compensatory plan or arrangement
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of The Interlake Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 25, 1995, except as to Note 18, which is as of March 8, 1995,
appearing in the 1994 Annual Report to Shareholders of The Interlake
Corporation (which report and consolidated financial statements are incor-
porated by reference in this Annual Report on Form 10-K) also included an audit
of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K.
In our opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
As discussed in the Notes to Consolidated Financial Statements appearing in the
1994 Annual Report to Shareholders of The Interlake Corporation, the Company
changed its method of evaluating the recoverability of goodwill and other long-
lived assets in 1994 and changed its method of accounting for postretirement
benefits other than pensions and its method of accounting for income taxes in
1992.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 25, 1995
<PAGE>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION> Construction
Land Buildings Equipment in Progress Total
<S> <C> <C> <C> <C> <C>
Balance at December 29, 1991 $ 7,391 $75,795 $264,968 $8,013 $356,167
Additions at cost . . . 1,298 15,772 7,518 24,588
Retirements or sales. . (14) (5) (4,161) (4,180)
Changes in exchange rates (386) (3,235) (10,495) (338) (14,454)
Other changes-add (deduct) (128) (224) (1,059) 126 (1,285)
Balance at December 27, 1992 6,863 73,629 265,025 15,319 360,836
Additions at cost . . . 984 24,634 (11,078) 14,540
Retirements or sales. . (108) (2,682) (2,790)
Changes in exchange rates (136) (1,142) (2,058) (17) (3,353)
Other changes-add (deduct) 2 812 (859) (2) (47)
Balance at December 26, 1993 6,729 74,175 284,060 4,222 369,186
Additions at cost . . . 333 12,871 2,281 15,485
Retirements or sales. . (1) (87) (5,938) (411) (6,437)
Changes in exchange rates 218 1,367 3,237 137 4,959
Other changes-add (deduct) 9 (362) (353)
Balance at December 25, 1994 $ 6,946 $75,788 $294,239 $5,867 $382,840
</TABLE>
<PAGE>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION>
Machinery
and
Land Buildings Equipment Total
<S> <C> <C> <C> <C>
Balance at December 29, 1991 $ $29,720 $168,491 $198,211
Additions charged to costs
and expenses . . . . 2,176 18,282 20,458
Retirements . . . . . . (5) (3,523) (3,528)
Changes in exchange rates (1,379) (8,265) (9,644)
Other changes-add (deduct) (215) (665) (880)
Balance at December 27, 1992 30,297 174,320 204,617
Additions charged to costs
and expenses . . . . 2,127 17,640 19,767
Retirements . . . . . . (86) (2,244) (2,330)
Changes in exchange rates (589) (1,535) (2,124)
Other changes-add (deduct) (74) (361) (435)
Balance at December 26, 1993 31,675 187,820 219,495
Additions charged to costs
and expenses . . . . 2,144 16,992 19,136
Retirements . . . . . . (83) (4,615) (4,698)
Changes in exchange rates 615 2,354 2,969
Other changes-add (deduct) 204 204
Balance at December 25, 1994 $ $34,351 $202,755 $237,106
</TABLE>
Note: The estimated lives used in determining annual rates of depreciation
to be applied to the cost for principal classes of assets are:
Years
Buildings 30 to 50
Machinery and Equipment 3 to 18
<PAGE>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Year Expenses Accounts<F1> Deductions Year
(in thousands)
Valuation accounts deducted from assets to which they apply:
Allowance for doubtful accounts receivable
<S> <C> <C> <C> <C> <C>
Year ended
December 25, 1994 $ 2,775 $ 873 $ 89 $ (760)<F2> $ 2,977
December 26, 1993 $ 3,989 $ 179 $ 163 $(1,556)<F2> $ 2,775
December 27, 1992 $ 5,014 $ 1,283 $ 201 $(2,509)<F2> $ 3,989
<FN>
<F1> consists principally of recoveries of accounts charged off in prior
years
<F2> consists principally of uncollectible accounts charged off and foreign
exchange rate fluctuations
<CAPTION>
Amortization of goodwill
<S> <C> <C> <C> <C> <C>
Year ended
December 25, 1994 $20,141 $35,652 $ $(49,171)<F1> $ 6,622
December 26, 1993 $18,646 $ 1,495 $ $ $20,141
December 27, 1992 $14,077 $ 4,569 $ $ $18,646
<FN>
<F1> includes write-down of goodwill - see Note 2 of Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended
December 25, December 26, December 27,
1994 1993 1992
(in thousands)
Maintenance and repairs $ 17,480 $ 17,196 $ 18,451
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals * * *
Taxes, other than payroll and income
taxes (principally real estate and
personal property taxes) * * *
Royalties * * *
Advertising costs * * *
*less than 1% of total sales and revenues
<PAGE>
SIGNATURES
Pursuant to the requirements 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, thereunto duly authorized.
THE INTERLAKE CORPORATION
By ______________________
W. Robert Reum
Chairman, President and Chief
Executive Officer
March 14, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title
_______________________ Director, Chairman, President and
W. Robert Reum Chief Executive Officer
_______________________ Vice President Finance,
Stephen Gregory Treasurer and Chief Financial Officer
_______________________ Controller and Chief
John P. Miller Accounting Officer
______________________ Director
John A. Canning, Jr.
______________________ Director
James C. Cotting
______________________ Director
Arthur G. Hansen March 14, 1995
______________________ Director
John E. Jones
______________________ Director
Frederick C. Langenberg
______________________ Director
Quentin C. McKenna
______________________ Director
William G. Mitchell
______________________ Director
Erwin E. Schulze
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-4266 and 33-11428) of The Interlake Corporation
of our report dated January 25, 1995, except as to Note 18, which is as of
March 8, 1995, appearing in the 1994 Annual Report to Shareholders of The
Interlake Corporation which is incorporated by reference in this Annual Report
on Form 10-K. We also consent to the incorporation of our report on the
Financial Statement Schedules, which appears elsewhere in this Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 14, 1995
SIXTH AMENDMENT TO EXHIBIT 4.20
AMENDED AND RESTATED CREDIT AGREEMENT
SIXTH AMENDMENT (the "Amendment"), dated as of August 16, 1994, among THE
INTERLAKE CORPORATION, a Delaware corporation (the "Company"), each Subsidiary
Borrower party to the Credit Agreement referred to below, The Interlake Corpor-
ation Employee Stock Ownership Trust (the "ESOP Borrower"), acting by and
through the LaSalle National Trust, N.A. (successor to LaSalle National Bank),
not in its individual or corporate capacity, but solely in its capacity as
trustee of the ESOP Trust (the "ESOP Trustee" and together with the Company and
the Subsidiary Borrowers, the "Credit Parties"), CHEMICAL BANK, individually
and as Administrative Agent (the "Administrative Agent"), THE FIRST NATIONAL
BANK OF CHICAGO, individually and as Co-Agent (the "Co-Agent"), and the
financial institutions party to the Credit Agreement referred to below and
listed on the signature pages hereto (the "Banks"). All capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the Administrative
Agent and the Co-Agent are parties to that certain Amended and Restated Credit
Agreement dated as of September 27, 1989 and amended and restated as of May 28,
1992 and as further amended by the First Amendment dated as of August 14, 1992,
the Second Amendment and Waiver dated as of October 30, 1992, the Third Amend-
ment and Waiver dated as of August 20, 1993, the Fourth Amendment dated as of
December 22, 1993 and the Fifth Amendment dated as of February 23, 1994 (as so
amended and restated and further amended and as the same may hereafter be
amended, modified or supplemented from time to time, the "Credit Agreement");
and
WHEREAS, the Company, the Subsidiary Borrowers and the Banks wish to
amend the Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. On the Sixth Amendment Effective Date (as defined below), Section
4.04(b) of the Credit Agreement is hereby amended by deleting such Section in
its entirety and inserting in lieu thereof the following new Section:
"(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Company and the Administrative Agent promptly after the Sixth Amendment
Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 13.04
(unless the respective Bank was already a Bank hereunder immediately
prior to such assignment or transfer), on the date of such assignment or
transfer to such Bank, (i) two accurate and complete original signed
copies of Internal Revenue Service Form 4224 or 1001 (or successor
forms) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments to be made
under this Agreement and under any Note, or (ii) if the Bank is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
<PAGE>
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (i) above, (x) a certificate substantially in the form of Exhibit
A hereto (any such certificate, a "Section 4.04(b)(ii) Certificate") and
(y) two accurate and complete original signed copies of Internal Revenue
Service Form W-8 (or successor form) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax
with respect to payments of interest to be made under this Agreement and
under any Note; provided, however, that any Bank which has previously
delivered such forms which would otherwise satisfy the requirements of
this sentence shall hereafter be deemed to have complied with the
requirements of this sentence. In addition, each Bank agrees that from
time to time after the Sixth Amendment Effective Date, when a lapse in
time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the
Company and the Administrative Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or
Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and
such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from or reduction in
United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Company and
the Administrative Agent of its inability to deliver any such Form or
Certificate. Notwithstanding anything to the contrary contained in
Section 4.04(a) (x) any Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank
has not provided to the Company and Administrative Agent U.S. Internal
Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) no Borrower shall be obligated pursuant
to Section 4.04(a) hereof to gross-up payments to be made to a Bank in
respect of income or similar taxes imposed by the United States if such
Bank has not provided to the Company and the Administrative Agent the
Internal Revenue Service Forms required to be provided to the Company
and the Administrative Agent pursuant to this Section 4.04(b) or to the
extent that such Forms do not establish a complete exemption from
withholding of such taxes."
2. On the Sixth Amendment Effective Date, Section 13.04(b) of the
Credit Agreement is hereby amended by inserting at the end of the first
sentence thereof the following new proviso:
"and, provided further, that no such transfer or assignment by a
Specified Bank will be effective until recorded by the Administrative
Agent on the Register pursuant to Section 13.04(d) hereof."
3. On the Sixth Amendment Effective Date, Section 13.04(d) of the
Credit Agreement is hereby amended by inserting the following at the end
thereof:
"With respect to any Specified Bank, the Administrative Agent shall
maintain the Register, solely for purposes of this Section 13.04(d), as
an agent of each Borrower. The transfer of the Commitments and Loans of
any Specified Bank and the rights to the principal of, and interest on,
any Loans or any Loans made pursuant to such Commitments shall not be
effective until such transfer is recorded in the Register maintained by
<PAGE>
the Administrative Agent with respect to ownership of such Commitments
and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Commitments and Loans shall remain owing
to the transferor. The registration of an assignment or transfer by a
Specified Bank of all or part of its Commitments and Loans shall be
recorded by the Administrative Agent on the Register only upon the
acceptance by the Administrative Agent of a properly executed and
delivered Assignment and Acceptance pursuant to Section 13.04(b).
Coincident with the delivery by a Specified Bank of such Assignment and
Acceptance to the Administrative Agent for acceptance and registration
of an assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Specified Bank
shall surrender the Registered Note evidencing such Loan, and thereupon
one or more new Registered Notes in the same aggregate principal amount
shall be issued to the assigning or transferor Specified Bank and/or the
new Bank. The Administrative Agent shall indemnify and defend the
Borrowers for and against any and all actions, claims, costs and damages
which arise from or out of the agency relationship established by this
Section 13.04(d) other than any actions, claims, costs and damages which
result primarily from the gross negligence or willful misconduct of the
Borrowers. Subject to Section 11.02, neither the Administrative Agent
nor the Borrower shall be liable in any respect to the Banks in
connection with the maintenance of the transfer and registration system
pursuant to this Section 13.04(d)."
4. On the Sixth Amendment Effective Date Section 13.04(e) of the
Credit Agreement is hereby amended by inserting at the end thereof the
following:
"Each Bank that has executed and delivered the Sixth Amendment and
that is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) and that could become completely exempt from
withholding of any tax, assessment or other charge or levy imposed by or
on behalf of the United States of America or any taxing authority thereof
in respect of payment of Obligations due to such Bank if the Obligations
were in registered form for U.S. Federal income tax purposes may request
the Company (through the Administrative Agent), and the Company thereby
agrees, upon such Bank's satisfaction of the requirements of Sections
4.04(b), to record such Obligations in the Register and exchange any Notes
evidencing such Obligations for Notes in registered form ("Registered
Notes") for U.S. Federal income tax purposes (which form shall be in
substantially the form of Exhibit B-1, B-2, B-3, B-4, B-5, B-6, B-7, B-8,
B-9, B-10, or B-11, as the case may be, except that such Registered Notes
shall be made payable to such Bank or its registered assigns). Registered
Notes shall be deemed to be and shall be Notes for all purposes of the
Credit Agreement and the other Credit Documents. Any Bank that makes a
request pursuant to the second immediately preceding sentence and
receives Registered Notes in exchange for its Notes, together with any
subsequent transferee or assignee of such Bank, is hereinafter called a
"Specified Bank." Registered Notes may not be exchanged for Notes that
are not in registered form."
5. On the Sixth Amendment Effective Date, Section 10 of the Credit
Agreement is hereby amended by inserting therein the following new defined
terms in the appropriate alphabetical order:
"Registered Notes" shall have the meaning provided in Section
13.04(e).
"Sixth Amendment Effective Date" shall have the meaning provided in
<PAGE>
the Sixth Amendment to the Credit Agreement dated as of August 16,
1994."
"Specified Bank" shall have the meaning provided in Section
13.04(e).
6. On the Sixth Amendment Effective Date, Exhibit G to the Credit
Agreement is hereby amended by adding immediately following Section 7 thereof
the following new Section 8:
"8. Notwithstanding anything to the contrary contained herein, this
Assignment and Acceptance Agreement shall not be effective until the assignment
effected hereby is recorded by the Administrative Agent on the Register
pursuant to Section 13.04(d) of the Credit Agreement. By its execution and
delivery hereof, the Assignee hereby expressly agrees to the terms of the Sixth
Amendment to the Credit Agreement."
7. In order to induce the Banks to enter into this Amendment, each
of the Credit Parties (other than the ESOP Trustee) hereby (a) certifies that
no Default or Event of Default exists and that each of the representations,
warranties and agreements contained in Section 6 of the Credit Agreement on the
Sixth Amendment Effective Date, both before and after giving effect to this
Amendment, is true and correct in all material respects and (b) confirms that
it has and will continue to comply with all of its obligations contained in the
Credit Agreement and the other Credit Documents including with respect to each
of the Borrowers, but not limited to, all of its obligations contained in
Section 7.10(b) of the Credit Agreement.
8. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
9. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and the Administrative Agent.
10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
11. This Amendment shall become effective on the date (the "Sixth
Amendment Effective Date") when the Company, the Subsidiary Borrowers, the ESOP
Trustee, the Administrative Agent, the Co-Agents and the Required Banks shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered (including by way of telecopier) such copies to the Administrative
Agent.
12. From and after the Sixth Amendment Effective Date, all references in
the Credit Agreement and each of the Credit Documents or any other agreement to
the Credit Agreement shall be deemed to be references to such Credit Agreement
as amended hereby.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
THE INTERLAKE CORPORATION
By________________________
Title:
SUBSIDIARY BORROWERS
ACME STRAPPING INC.
By________________________
Title:
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By________________________
Title:
S.A. DEXION-REDIRACK N.V.
By________________________
Title:
DEXION INTERNATIONAL LIMITED
By________________________
Title:
PRECIS (935) LTD.
By________________________
Title:
<PAGE>
DEXION GmbH
By________________________
Title:
TWICEBONUS LIMITED
By________________________
Title:
THE INTERLAKE CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST, acting by and through
the LASALLE NATIONAL TRUST,
N.A. (successor to LaSalle
National Bank), not in its
individual or corporate
capacity (except for the
representations and warranties
contained in Section
6.01(b)(y) of the Credit
Agreement) but solely in its
capacity as ESOP Trustee
By_________________________
Title:
BANKS
CHEMICAL BANK
Individually, and as
Administrative Agent
By________________________
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By_________________________
Title:
<PAGE>
MITSUI TRUST & BANKING CO.,
LTD.
By_________________________
Title:
NATIONAL BANK OF CANADA
By_________________________
Title:
By_________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By_________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, suc-
cessor by merger to Security
Pacific National Bank
By________________________
Title:
CONTINENTAL BANK N.A.
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
<PAGE>
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
THE BANK OF NOVA SCOTIA
By_______________________
Title:
AMERICAN SAVINGS OF FLORIDA,
F.S.B.
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
GIROCREDIT BANK
By_______________________
Title:
By_______________________
Title:
<PAGE>
EATON VANCE PRIME RATE
RESERVES
By______________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By_______________________
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By_______________________
Title:
Chancellor Senior Secured
Management, Inc. as Portfolio
Advisor
PEARL STREET L.P.
By_______________________
Title:
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By________________________
Title:
DEXION GROUP PLC
By________________________
Title:
<PAGE>
EXHIBIT A
Section 4.04(b)(ii) Certificate
Reference is hereby made to the Amended and
Restated Credit Agreement dated as of September 27, 1989 and
amended and restated as of May 28, 1992 (the "Credit
Agreement"), among THE INTERLAKE CORPORATION, a Delaware
corporation, each Subsidiary Borrower (as defined in the
Credit Agreement), The Interlake Corporation Employee Stock
Ownership Trust, acting by and through the LaSalle National
Trust, N.A. (successor to LaSalle National Bank), not in its
individual or corporate capacity, but solely in its capacity
as trustee of the ESOP Trust, CHEMICAL BANK, individually and
as Administrative Agent, THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Co-Agent, and the financial institutions
party to the Credit Agreement and listed on the signature
pages thereto (as so amended and restated and further amended
and as the same may hereafter be amended, modified or
supplemented from time to time). Pursuant to the provisions
of Section 4.04(b)(ii) of the Credit Agreement, the under-
signed hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code
of 1986, as amended.
[NAME OF BANK]
By:________________________
Name:
Title:
SEVENTH AMENDMENT TO EXHIBIT 4.21
AMENDED AND RESTATED CREDIT AGREEMENT
SEVENTH AMENDMENT (the "Amendment"), dated as of January 24, 1995,
among THE INTERLAKE CORPORATION, a Delaware corporation (the "Company"), each
Subsidiary Borrower party to the Credit Agreement referred to below, The Inter-
lake Corporation Employee Stock Ownership Trust (the "ESOP Borrower"), acting
by and through the LaSalle National Trust, N.A. (successor to LaSalle National
Bank), not in its individual or corporate capacity, but solely in its capacity
as trustee of the ESOP Trust (the "ESOP Trustee" and together with the Company
and the Subsidiary Borrowers, the "Credit Parties"), CHEMICAL BANK,
individually and as Administrative Agent (the "Administrative Agent"), THE
FIRST NATIONAL BANK OF CHICAGO, individually and as Co-Agent (the "Co-Agent"),
and the financial institutions party to the Credit Agreement referred to below
and listed on the signature pages hereto (the "Banks"). All capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the Administrative
Agent and the Co-Agent are parties to that certain Amended and Restated Credit
Agreement dated as of September 27, 1989 and amended and restated as of May 28,
1992 and as further amended by the First Amendment dated as of August 14, 1992,
the Second Amendment and Waiver dated as of October 30, 1992, the Third Amend-
ment and Waiver dated as of August 20, 1993, the Fourth Amendment dated as of
December 22, 1993, the Fifth Amendment dated as of February 23, 1994 and the
Sixth Amendment dated as of August 16, 1994 (as so amended and restated and
further amended and as the same may hereafter be amended, modified or supple-
mented from time to time, the "Credit Agreement"); and
WHEREAS, the Company, the Subsidiary Borrowers and the Banks wish to
amend the Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. On the Seventh Amendment Effective Date, Section 10 is hereby
amended by deleting the definition of "Consolidated New Worth" in its entirety
and replacing it in its entirety with the following definition:
"Consolidated Net Worth" shall mean on any date of determination
thereof, shareholders' equity (including preferred stock) of the Company
and its Subsidiaries on a consolidated basis, (a) without giving effect to
the negative adjustment to the value of the assets of the Company and its
Subsidiaries located outside of the United States due solely to currency
fluctuations, provided that, to the extent that such negative adjustments
exceed $30,000,000, such excess shall be included in determining Consol-
idated Net Worth, (b) without giving effect to write-offs in the Fourth
Quarter of 1993 in respect of intangible assets up to an amount not to
exceed $42,800,000, and (c) without giving effect to write-offs in the
Fourth Quarter of 1994 in respect of intangible assets or goodwill up to
an amount not to exceed $34,200,000.
2. In order to induce the Banks to enter into this Amendment, each
<PAGE>
of the Credit Parties (other than the ESOP Trustee) hereby (a) certifies that
no Default or Event of Default exists and that each of the representations,
warranties and agreements contained in Section 6 of the Credit Agreement on the
Seventh Amendment Effective Date, both before and after giving effect to this
Amendment, is true and correct in all material respects and (b) confirms that
it has and will continue to comply with all of its obligations contained in the
Credit Agreement and the other Credit Documents including with respect to each
of the Borrowers, but not limited to, all of its obligations contained in
Section 7.10(b) of the Credit Agreement.
3. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and the Administrative Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
6. This Amendment shall become effective on the date (the "Seventh
Amendment Effective Date") when the Company, the Subsidiary Borrowers, the ESOP
Trustee, the Administrative Agent, the Co-Agents and the Required Banks shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered (including by way of telecopier) such copies to the Administrative
Agent.
7. From and after the Seventh Amendment Effective Date, all references
in the Credit Agreement and each of the Credit Documents or any other agreement
to the Credit Agreement shall be deemed to be references to such Credit
Agreement as amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
THE INTERLAKE CORPORATION
By________________________
Title:
SUBSIDIARY BORROWERS
ACME STRAPPING INC.
By________________________
Title:
<PAGE>
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By________________________
Title:
S.A. DEXION-REDIRACK N.V.
By________________________
Title:
DEXION INTERNATIONAL LIMITED
By________________________
Title:
PRECIS (935) LTD.
By________________________
Title:
DEXION GmbH
By________________________
Title:
<PAGE>
TWICEBONUS LIMITED
By________________________
Title:
THE INTERLAKE CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST, acting by and through
the LASALLE NATIONAL TRUST,
N.A. (successor to LaSalle
National Bank), not in its
individual or corporate
capacity (except for the
representations and warranties
contained in Section
6.01(b)(y) of the Credit
Agreement) but solely in its
capacity as ESOP Trustee
By_________________________
Title:
BANKS
CHEMICAL BANK
Individually, and as
Administrative Agent
By________________________
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By_________________________
Title:
MITSUI TRUST & BANKING CO.,
LTD.
By_________________________
Title:
NATIONAL BANK OF CANADA
By_________________________
Title:
<PAGE>
By_________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By_________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, suc-
cessor by merger to Security
Pacific National Bank
By________________________
Title:
CONTINENTAL BANK N.A.
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By_______________________
Title:
AMERICAN SAVINGS OF FLORIDA,
F.S.B.
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
GIROCREDIT BANK
By_______________________
Title:
By_______________________
Title:
EATON VANCE PRIME RATE
RESERVES
By______________________
Title:
<PAGE>
LEHMAN COMMERCIAL PAPER INC.
By_______________________
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By_______________________
Title:
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2, (ROSA 2)
By_________________________
Title:
Chancellor Senior Secured
Management, Inc. as Portfolio
Advisor
MERRILL LYNCH
PRIME RATE PORTFOLIO
By MERRILL LYNCH ASSET
MANAGEMENT, L.P., as
Investment Advisor
By_______________________
Title:
MFS HIGH INCOME FUND
By_______________________
Title:
EIGHTH AMENDMENT TO EXHIBIT 4.22
AMENDED AND RESTATED CREDIT AGREEMENT
EIGHTH AMENDMENT (the "Amendment"), dated as of February 1, 1995,
among THE INTERLAKE CORPORATION, a Delaware corporation (the "Company"), each
Subsidiary Borrower party to the Credit Agreement referred to below, The
Interlake Corporation Employee Stock Ownership Trust (the "ESOP Borrower"),
acting by and through the LaSalle National Trust, N.A. (successor to LaSalle
National Bank), not in its individual or corporate capacity, but solely in its
capacity as trustee of the ESOP Trust (the "ESOP Trustee" and together with the
Company and the Subsidiary Borrowers, the "Credit Parties"), CHEMICAL BANK,
individually and as Administrative Agent (the "Administrative Agent"), THE
FIRST NATIONAL BANK OF CHICAGO, individually and as Co-Agent (the "Co-Agent"),
and the financial institutions party to the Credit Agreement referred to below
and listed on the signature pages hereto (the "Banks"). All capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the Administrative
Agent and the Co-Agent are parties to that certain Amended and Restated Credit
Agreement dated as of September 27, 1989 and amended and restated as of May 28,
1992 and as further amended by the First Amendment dated as of August 14, 1992,
the Second Amendment and Waiver dated as of October 30, 1992, the Third
Amendment and Waiver dated as of August 20, 1993, the Fourth Amendment dated as
of December 22, 1993, the Fifth Amendment dated as of February 23, 1994, the
Sixth Amendment dated as of August 16, 1994 and the Seventh Amendment dated as
of January 24, 1995 (as so amended and restated and further amended and as the
same may hereafter be amended, modified or supplemented from time to time, the
"Credit Agreement"); and
WHEREAS, the Company, the Subsidiary Borrowers and the Banks wish to
amend the Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. On the Eighth Amendment Effective Date, Section 1.01(c) of the
Credit Agreement is hereby amended by (i) deleting the dollar amount of
"$20,000,000" appearing in the first proviso of the penultimate sentence
thereof and inserting in lieu thereof the dollar amount of "$15,000,000" and
(ii) adding the phrase ", minus the Priority Reduction Amount on such day"
after the words "the amounts set forth below opposite such period" appearing in
the penultimate sentence of such Section 1.01(c).
2. On the Eighth Amendment Effective Date, Section 3.03 of the
Credit Agreement is hereby amended by inserting the following new paragraph (e)
at the end of such Section:
"(e) On each date upon which a mandatory prepayment of Revolving A
Loans would be required to be made in accordance with Section
4.02(h), the Total Revolving A Commitment shall be permanently re-
duced by the amount of such required prepayment (determined as if
Revolving A Loans were outstanding on the full amount of the Total
Revolving A Commitment)."
3. On the Eighth Amendment Effective Date, Section 4.01 of the
Credit Agreement is hereby amended by inserting the following new sentence at
the end thereof:
"Notwithstanding anything contained in the foregoing to the contrary,
no prepayments of any Loans (other than Revolving A Loans) may be
made pursuant to this Section 4.01 at any time that the Priority
Amount is greater than zero."
4. On the Eighth Amendment Effective Date, Section 4.02(h) of the
Credit Agreement is hereby amended by deleting the first sentence thereof in
its entirety and inserting in lieu thereof the following:
"All amounts required to be applied in accordance with this Section
4.02(h) shall be applied: (i) first, to the repayments of the
outstanding Revolving A Loans in an aggregate amount not to exceed
the Priority Amount then in effect, (ii) second, to the repayments of
all outstanding Loans (other than ESOP Loans) pro rata among such
outstanding Loans and (iii) third, after the Total Revolving Loan
Commitment has been reduced to zero, to the extent permitted by
applicable law, to repayments of the outstanding ESOP Loans."
5. On the Eighth Amendment Effective Date, Section 8.08 of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"8.08 Capital Expenditures. The Company will not, nor will it
permit any of its Subsidiaries to, make or incur Capital Expenditures
(a) in any fiscal year after 1994, in an amount that, together with
any amounts expended pursuant to Section 8.06(xvii) in such fiscal
year, is less than $15,000,000, and (b) in any period set out below,
in excess of the amount that, together with any amounts expended
pursuant to Section 8.06(xvii) in such period, is set forth below
opposite such period:
Period Amount
Fiscal Year Ending December, 1993 $25,000,000
Fiscal Year Ending December, 1994 20,000,000
Fiscal Year Ending December, 1995
and each fiscal year thereafter 23,000,000"
6. On the Eighth Amendment Effective Date, Section 8.12 of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"8.12 Minimum Consolidated EBITDA. At the end of each period
shown below (taken as one accounting period), Consolidated EBITDA
shall be greater than the amount set forth opposite such period,
provided, that for purposes of this Section 8.12, Consolidated EBITDA
shall be determined exclusive of an amount not to exceed $4,000,000
on a cumulative basis which reflects certain charges to be taken by
the Company in connection with the St. Louis River Site:
Fiscal Period Amount
For the four quarters of 1993 $65,000,000
For the first quarter of 1994 11,300,000
For the first two quarters of 1994 29,600,000
For the first three quarters of 1994 48,800,000
For the four quarters of 1994 70,100,000
For the first quarter of 1995 15,000,000
For the first two quarters of 1995 36,000,000
For the first three quarters of 1995 58,000,000
For the four quarters of 1995 80,000,000
For the first quarter of 1996 26,200,000
For the first two quarters of 1996 52,500,000
For the first three quarters of 1996 78,700,000
For the four quarters of 1996 104,900,000
For the first quarter of 1997 28,000,000
For the first two quarters of 1997 56,000,000
For the first three quarters of 1997 84,000,000
For the four quarters of 1997 112,000,000
For the first quarter of 1998 28,000,000
For the first two quarters of 1998 56,000,000
For the first three quarters of 1998 84,000,000
For the four quarters of 1998 112,000,000
For the first quarter of 1999 28,000,000
For the first two quarters of 1999 56,000,000
For the first three quarters of 1999 84,000,000"
7. On the Eighth Amendment Effective Date, Section 10 of the Credit
Agreement is hereby amended by inserting the following new definitions in
appropriate alphabetical order:
"Priority Amount" shall mean at any time an amount, if positive,
equal to the lesser of (x) the remainder of (i) the aggregate principal
amount of all Loans (other than Revolving A Loans) repaid after the
effective date of the Eighth Amendment and on or prior to such time pur-
suant to Section 4.02(c) minus (ii) the Revolving A Loan Repayment Amount
and (y) the amount of Revolving A Loans outstanding at such time in excess
of $33,682,000.
"Priority Reduction Amount" shall mean at any time an amount equal to
the sum of (x) the Revolving A Loan Repayment Amount plus (y) the
aggregate amount of all reductions to the Total Revolving A Commitment
after the effective date of the Eighth Amendment pursuant to Section
3.02(a).
"Revolving A Loan Repayment Amount" shall mean at any time an amount
equal to the aggregate principal amount of Revolving A Loans repaid after
the effective date of the Eighth Amendment to this Agreement and on or
prior to such time pursuant to Section 4.02(h)(i).
"Second U.K. Company" shall mean a wholly-owned Subsidiary of the
Company, which shall be organized or incorporated under the laws of any of
the countries comprising the United Kingdom (or a political subdivision of
any thereof).
"Second U.K. Restructuring" shall consist of the transactions
described in Schedule XX.
8. On the Eighth Amendment Effective Date, Section 13 of the Credit
Agreement is hereby amended by adding the following new Sections 13.20 and
13.21:
"Section 13.20 Special Priority of Revolving A Banks. Notwithstand-
ing anything to the contrary contained in the Security Documents
(which are all deemed amended by this Section 13.20), the proceeds of
any Collateral obtained by the Collateral Agent upon an Event of
Default shall be applied first, after the payment of any and all
expenses and fees (including reasonable attorneys' fees and expenses)
incurred by the Collateral Agent in obtaining, taking possession of,
removing, insuring, repairing, storing and disposing of Collateral
and any and all amounts incurred by the Collateral Agent in connec-
tion therewith, to repay outstanding Revolving A Loans in an amount
equal to the Priority Amount then in effect, together with accrued
and unpaid interest, fees and other amounts then owing in connection
therewith, and thereafter as set forth in the Security Documents.
Section 13.21 Second U.K. Restructuring. Notwithstanding anything to the
contrary contained in this Agreement or any other Credit Agreement, the
Company shall be permitted to effect the Second U.K. Restructuring in
compliance with each of the actions outlined on Schedule XX (the "Second
U.K. Restructuring") on a basis satisfactory to the Administrative Agent;
provided that prior to the effectiveness of the Second U.K. Restructuring,
the Company shall have satisfied the following conditions:
(a) 99.9% of the capital stock of the Second U.K. Company
shall be pledged to the Collateral Agent, provided that the
pledge of such stock shall not be required, if in the
reasonable judgment of the Administrative Agent, it is
determined that such a pledge would preclude the Company
from realizing the tax benefits intended to be created by
the Second U.K. Restructuring;
(b) any intercompany notes made by the Second U.K. Company
and payable to The Interlake Companies, Inc. and/or Dexion
Group PLC, shall be pledged to the Collateral Agent
pursuant to (x) in the case of The Interlake Companies,
Inc., the Subsidiary U.S. Pledge Agreement dated as of
September 27, 1989 among Interlake ARD Corporation, The
Interlake Companies, Inc. and the Collateral Agent and (y)
in the case of Dexion Group PLC, the Share Charge Agreement
dated September 27, 1989 between Dexion Group PLC and the
Collateral Agent; and
(c) At the request of the Administrative Agent, the Company
shall provide to the Banks an opinion dated the date of the
Second U.K. Restructuring, from counsel (who shall be
satisfactory to the Administrative Agent) to the Company
and in form and substance reasonably satisfactory to the
Administrative Agent, covering the validity and perfection
of the pledge granted pursuant to such Company Pledge
Agreement and such other matters as the Administrative
Agent may reasonably request."
9. On the Eighth Amendment Effective Date, the Credit Agreement is
hereby amended by adding Schedule XX thereto in the form of Exhibit A hereto.
10. In order to induce the Banks to enter into this Amendment, each
of the Credit Parties (other than the ESOP Trustee) hereby, (a) certifies that
no Default or Event of Default exists and that each of the representations,
warranties and agreements contained in Section 6 of the Credit Agreement on the
Eighth Amendment Effective Date, both before and after giving effect to this
Amendment, is true and correct in all material respects and (b) confirms that
it has and will continue to comply with all of its obligations contained in the
Credit Agreement and the other Credit Documents including with respect to each
of the Borrowers, but not limited to, all of its obligations contained in
Section 7.10(b) of the Credit Agreement.
11. This Amendment is limited as specified and shall not constitute
a modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
12. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and the Administrative Agent.
13. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
14. This Amendment shall become effective on the date (the "Eighth
Amendment Effective Date") when each of the following conditions shall have
been satisfied:
(a) On or prior to the Eighth Amendment Effective Date, the Company,
the Subsidiary Borrowers, the ESOP Trustee, the Administrative Agent, the
Co-Agents and the Required Banks shall have signed a copy hereof (whether
the same or different copies) and shall have delivered (including by way
of telecopier) such copies to the Administrative Agent; and
(b) On or prior to the Eighth Amendment Effective Date, the Company
shall have paid to the Administrative Agent for pro rata distribution to
the Banks, based upon their respective Loans and Commitments, a fee equal
to 3/8 of 1% of the total amount of all outstanding Loans and Commitments
on such date.
15. From and after the Eighth Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents or any
other agreement to the Credit Agreement shall be deemed to be references to
such Credit Agreement as amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
THE INTERLAKE CORPORATION
By________________________
Title:
SUBSIDIARY BORROWERS
ACME STRAPPING INC.
By________________________
Title:
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By________________________
Title:
S.A. DEXION-REDIRACK N.V.
By________________________
Title:
DEXION INTERNATIONAL LIMITED
By________________________
Title:
PRECIS (935) LTD.
By________________________
Title:
DEXION GmbH
By________________________
Title:
TWICEBONUS LIMITED
By________________________
Title:
THE INTERLAKE CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST, acting by and through
the LASALLE NATIONAL TRUST,
N.A. (successor to LaSalle
National Bank), not in its
individual or corporate capa-
city (except for the repre-
sentations and warranties
contained in Section
6.01(b)(y) of the Credit
Agreement) but solely in its
capacity as ESOP Trustee
By_________________________
Title:
BANKS
CHEMICAL BANK
Individually, and as
Administrative Agent
By________________________
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By_________________________
Title:
MITSUI TRUST & BANKING CO.,
LTD.
By_________________________
Title:
NATIONAL BANK OF CANADA
By_________________________
Title:
By_________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By_________________________
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, successor by
merger to Security Pacific
National Bank
By________________________
Title:
BANK OF AMERICA, ILLINOIS
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
THE BANK OF NOVA SCOTIA
By_______________________
Title:
AMERICAN SAVINGS OF FLORIDA,
F.S.B.
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
DER AG SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH*
By_______________________
Title:
By_______________________
Title:
EATON VANCE PRIME RATE
RESERVES
By______________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By_______________________
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By_______________________
Title:
Chancellor Senior Secured
Management, Inc. as Portfolio
Advisor
STICHTING RESTRUCTURED
OBLIGATIONS BACKED BY SENIOR
ASSETS 2, (ROSA 2)
By_________________________
Title:
Chancellor Senior Secured
Management, Inc. as Portfolio
Advisor
MERRILL LYNCH
PRIME RATE PORTFOLIO
By MERRILL LYNCH ASSET
MANAGEMENT, L.P., as
Investment Advisor
By_______________________
Title:
MFS HIGH INCOME FUND
By_______________________
Title:
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By________________________
Title:
DEXION GROUP PLC
By________________________
Title:
* Per John Redding's instructions: Eighth Amendment
signed as Girocredit, all future amendments should read DER
AG SPARKASSEN, GRAND CAYMEN ISLAND BRANCH instead of
Girocredit.
P. Fitzgerald
3/1/95
EXHIBIT 10.1
THE INTERLAKE CORPORATION
1995 Executive Incentive Compensation Plan
Section 1. Establishment and Purpose
l.l Purpose The purpose of this Executive Incentive Compensation Plan
("Plan") is to provide meaningful incentives for the achievement of specified
Company goals.
Section 2. Definitions
2.l Definitions The following terms shall have the meanings set forth
below, unless specifically defined otherwise. When the defined meaning is
intended, the term is capitalized.
(a) "Average Controllable Working Capital to Sales Ratio" ("ACWC/S")
shall mean the ratio of the twelve-month average of Controllable
Working Capital (FIFO based) to the total annual net sales of the
Organizational Unit, except that Corporate Average Controllable
Working Capital to Sales Ratio is the ratio of the twelve-month
average Controllable Working Capital (FIFO based) of all
Organizational Units (other than Corporate) to the total annual
net sales of all such Organizational Units.
(b) "Award" shall mean the amount of incentive compensation earned
by a Participant.
(c) "Base Salary" shall mean the total of the regular monthly base
salary earned for each calendar month during the Year.
(d) "Board" shall mean the Board of Directors or the Executive
Committee of The Interlake Corporation.
(e) "Company" shall mean The Interlake Corporation, a Delaware
corporation, and any of its Organizational Units that are
designated by the Board from time to time to participate under
this Plan. Initially, the Organizational Units are as defined
in Section 3.2.
<PAGE>
(f) "Compensation Committee" shall mean the Compensation Committee
of the Board of Directors of The Interlake Corporation.
(g) "Controllable Working Capital (FIFO based)" shall be the net of
each Organizational Unit's current assets and current
liabilities (other than cash, interest-bearing and intercompany
items and income tax related accounts) invested in each such
Organizational Unit, at the end of each four or five-week
period in each Year. It includes accounts receivable,
inventories (before any reserves for LIFO), prepayments and
other current assets, minus accounts payable, accrued
liabilities, accrued salaries and wages, and taxes other than
income. Each of such current assets and current liabilities is
subject to adjustment to eliminate items which, in the opinion
of the Board, are unusual in nature, amount or both. Corporate
Controllable Working Capital is the sum of the Controllable
Working Capital of all Organizational Units other than
Corporate.
(h) "Earnings Before Interest and Taxes" or "EBIT" shall mean net
sales of continuing operations of each Organizational Unit less
cost of products sold, less selling and administrative expenses
(which shall not include any items of expenses classified by the
Corporation's Chief Financial Officer as Corporate expenses,
including any revenue or expense from intercompany transactions)
adjusted so as to exclude items of revenue and expenses which,
in the opinion of the Board, are unusual in nature, amount or
both.
(i) "EBIT Minimum" shall mean the minimum level of Earnings Before
Interest and Taxes that must be achieved before an Award for
ACWC/S performance measurement can be earned.
(j) "Employee" shall mean a regular, active, full-time salaried
Employee of the Company who is in a position meeting the defined
eligibility criteria for participation in the Plan.
<PAGE>
(k) "Incentive Group" shall mean any number of designated
Participant groupings approved by the Board, for which a maximum
incentive Award opportunity is specified.
(l) "Market Value Per Share" shall mean, the average of the high and
the low price of the Stock on the last trading date of the
calendar year (or, if there are no sales on that date, the last
preceding date on which there was a sale) on the New York Stock
Exchange Composite Transactions as reported by The Wall Street
Journal, corrected for reporting errors.
(m) "Participant" shall mean an Employee who is approved by the
Board to participate in the Plan.
(n) "Stock" shall mean common stock of The Interlake Corporation.
(o) "Year" shall mean the 1995 fiscal year of The Interlake
Corporation.
Section 3. Eligibility and Participation
3.l Eligibility Eligibility for participation in this Incentive Plan
shall be limited to those key Employees who, by the nature and scope of their
positions, regularly and directly contribute to the achievement of financial
objectives which impact the overall results or success of the Company.
3.2 Participation Participation in the Plan shall be determined based
upon the recommendation of the Chief Executive Officer, the Compensation
Committee of the Board of Directors and the approval of the Board. Participants
will be assigned to one of the following Incentive Groups within an Organiz-
ational Unit which specifies the maximum Award (as a percent of Base Salary)
that may be earned:
<PAGE>
Incentive Maximum Award
Group As A % of Base Salary
CEO 100.0%
A 70.0%
B 60.0%
C 50.0%
D 40.0%
E 30.0%
F 20.0%
The Board approves the participation of a Participant in one of the following
Organizational Units:
Chem-tronics, Inc.
Hoeganaes Corporation
Material Handling Group (a)
The Interlake Companies, Inc.
Material Hdlg Division-North American Operations (b)
The Interlake Corporation (General Mgmt & Corporate) (c)
Interlake Packaging Corporation (d)
(a) Includes all Material Handling subsidiaries and operations
worldwide.
(b) Includes both the U.S domestic operations of the Material
Handling Division of The Interlake Companies, Inc., and the
Redirack Interlake Storage Products Division of Acme Strapping,
Inc.
(c) Includes all subsidiaries.
(d) Includes all subsidiaries of The Interlake Corporation which are
under the operational control of Interlake Packaging
Corporation.
Employees approved for participation shall be notified of their Incentive Group
and Organizational Unit designation as soon after approval as is practicable.
<PAGE>
3.3 New Participants The Board or the Chief Executive Officer may
designate an Employee a Participant as a result of promotion, reassignment or
contemporaneously with becoming an Employee.
3.4 Changes In Participation During Year Contemporaneously with the
promotion, demotion or reassignment of a Participant, the Board or the Chief
Executive Officer may make one or more of the following changes:
(a) Change the Incentive Group or Organizational Unit to which the
Participant had heretofore been assigned. A Participant who is redesignated
from one Incentive Group to another (e.g., Group C to Group B), or from one
Organizational Unit to another, during a performance period, will receive an
Award based on the Participant's Base Salary during the periods of
participation in each applicable Incentive Group and/or Organizational Unit
during the performance periods.
(b) Terminate a Participant's participation in this Incentive Plan
for the remainder of the Year without otherwise affecting the employment status
of such Employee. The Employee shall be notified of such termination as soon as
practicable following such action. Said Participant's Award for the Year shall
be based upon the Participant's Base Salary during that portion of the Year
during which he was a Participant, adjusted for personal performance.
3.5 No Right to Participate No Participant or other Employee at any
time shall have a right to be selected for participation in this Plan for this
Year, despite having been approved for participation in some other year, nor
any right to be selected for participation in any plan for any other year,
despite having been selected for participation in this Plan for this Year.
Section 4. Award Determination
4.1 Establishing Participation Levels The initial Participants for
this Plan for this Year are set forth in Schedule B-3.
4.2 Performance Criteria for Corporate and Organizational Units
Performance under the Plan shall be evaluated in terms of Earnings Before
Interest and Taxes and Average Controllable Working Capital to Sales Ratio
relative to Plan for the Year. The performance measurements are defined in
Section 2.1.
<PAGE>
4.3 Thresholds An Award for ACWC/S performance shall not be earned
by an Organizational Unit Participant if the EBIT Minimum (See Section 2.1[i])
for his Organizational Unit is not achieved.
An Award for ACWC/S performance shall not be earned by a Corporate
Participant if the Corporate EBIT Minimum is not achieved. Corporate EBIT
minimum is 89.059% of the Corporate EBIT Plan. The 1995 Corporate EBIT Plan is
the sum of the Plan EBITs for the organizational units (other than Corporate),
less Corporate expense. An Award shall not be earned by any elected officers
of The Interlake Corporation, other than assistant officers, if The Interlake
Corporation shall, during the Year, default in the payment of principal or
interest when due under any note, debenture or other instrument evidencing
borrowed money, which default is not cured within the applicable cure period.
4.4 Performance Measurement Objectives Provided that the
Organizational Unit to which a participant is assigned meets or exceeds the
applicable threshold described in the preceding subparagraph as it applies to
ACWC/S performance, a Participant's Award for the Year, before adjustment for
personal performance, will have two components: one based upon EBIT performance
for his Organizational Unit and the other based upon the Average Controllable
Working Capital to Sales Ratio ("ACWC/S") performance for his Organizational
Unit, expressed as a percentage. For each performance measurement, the Award
percentage earned for a given level of performance shall be adjusted for the
weight of the performance measurement.
4.5 Performance Measurement Weighting The EBIT weighting percentage
under the Plan shall be seventy (70) and the ACWC/S weighting percentage shall
be thirty (30).
4.6 Award Calculation An Award shall be calculated as follows:
The bonus factor (percentage of maximum Award earned) for each performance
measurement's actual achievement shall be multiplied by that performance
measurement's weighting factor. The sum of the individual products shall be the
total bonus factor. The total bonus factor shall be multiplied by a
participant's maximum Award opportunity. That product shall be multiplied by
the participant's Base Salary to determine the amount of the Award.
<PAGE>
EXAMPLE
EBIT ACWC/S
($ in 000's)
1995 Plan Objective $ 69,107 13.21%
Actual Performance $ 66,587 13.73%
Percentage of Maximum
Award Earned 70.0% 50.0%
Performance Measurement
Weight .7 .3
Adjusted Percentage of
Maximum Award Earned 49.0 15.0
Total Award Earned As A
Percentage Of Maximum
Award 49.0 15.0 = 64.0%
Participant's Award = % of Maximum Award Earned X Participant's
Maximum Award Percentage X Participant's Base Salary.
Note: This example assumes the EBIT Minimum was achieved.
4.7 Maximum Awards No Award, prior to adjustment for personal
performance, may exceed the Participant's maximum Award opportunity. However,
any Award may be adjusted based on personal performance (See Section 4.9).
4.8 1995 Performance Objectives The Plan objectives for each
Organizational Unit, defined in Section 3.2, are contained in Attachment I to
this Plan.
<PAGE>
4.9 Individual Performance Ratings Adjustments to the Participant's
incentive Award may be made based upon the Participant's individual performance
during the Plan Year as follows:
(a) CEO Incentive Classification The Award of the CEO is subject to
adjustment based on the discretion of the Board of Directors.
(b) Incentive Group A, B, C, D, E and F Participants' performance
is evaluated each year by management on a scale of l to 3.
- l Rating results in a Participant's Award being reduced by
l5%. This means that the Participant is either very new in
his position or did not meet expectations or objectives
satisfactorily.
- 2 Rating results in a Participant receiving l00% of
his/her Award. This means that a Participant has met
expectations and objectives satisfactorily.
- 3 Rating results in a Participant's Award being increased
by 25%. This means that a Participant has exceeded the
expectations and objectives for his position, or has
completed a particular assignment or objective in an
unusual or exemplary manner.
All ratings of "1" or "3" will be substantiated in writing with an explanation
by the executive recommending the determination.
Ratings will then be subject to the review and approval of the Chief Executive
Officer and approval of the Board.
4.10 Award Determinations Following the end of the Plan Year, Awards
shall be computed (See Section 4.l) for each Participant based upon performance
of his Organizational Unit (including Corporate) and adjusted for personal
performance. The Board may adjust Awards payable to Participants in any
Organizational Unit if it determines that changes in business conditions or
other circumstances have materially and unduly influenced such Organizational
Unit's ability to meet the performance goals. All Awards, when approved by the
Board, shall be conclusive for all purposes.
<PAGE>
Section 5. Payment of Awards
5.l Form and Timing of Payment Payment of Awards shall be made in
cash or cash and Stock, net of applicable withholding taxes, as soon as
practicable following the end of the Year as the Board may determine. The
maximum amount of an Award payable in Stock shall be fifty percent (50%) of the
Award.
5.2 Payment in the Event of Death In the event of death, a
Participant's designated Award shall be paid to the Participant's estate.
Section 6. Termination of Employment
6.l Termination of Employment Due to Death, Disability, or Retirement
In the event a Participant's employment is terminated by reason of death, total
and permanent disability (as determined by the Board), or retirement, the Award
shall be determined by multiplying the Participant's Base Salary, prior to
termination, by the appropriate final Award percentage, adjusted for personal
performance.
6.2 Voluntary Termination or Termination for Cause In the event a
Participant voluntarily terminates employment, or is terminated for cause (of
which the Board shall be the sole judge), all rights to an Award for the Plan
Year shall be forfeited.
6.3 Other Termination In the event a Participant's employment is
terminated for reasons other than those described in Sections 6.1 and 6.2, an
Award shall be paid. Such Award shall be based on the Participant's Base
Salary, prior to termination, multiplied by the appropriate final Award
percentage, adjusted for personal performance.
Section 7. Rights of Participants
7.l Employment Nothing in this Plan shall interfere with or limit
in any way the right of the Company to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in the
employ of the Company.
<PAGE>
7.2 Nontransferability No right or interest of any Participant in
this Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge, and bankruptcy.
7.3 Board Member Participants No member of the Board who also is a
Participant shall vote as to any action taken by the Board with respect to
Awards to be made to him under the Plan or with respect to his designation as a
Participant.
Section 8. Administration
8.l Administration This Plan shall be administered by the Vice
President-Human Resources of The Interlake Corporation in accordance with its
terms and such rules, if any, as may be established from time to time by the
Board for the administration of this Plan.
8.2 Disputes The determination of the Board as to any disputed
question arising under this Plan, including questions of construction and
interpretation, shall be final, binding, and conclusive upon all persons.
Section 9. Amendments
9.l Amendments The Board, in its absolute discretion, without
notice, at any time and from time to time, may modify or amend, in whole or in
part, any or all of the provisions of this Plan, or suspend or terminate it
entirely; provided, that no such modification, amendment, suspension, or
termination, may without the consent of a Participant reduce the right of a
Participant (or his Beneficiary as the case may be) to a payment or
distribution hereunder to which he has otherwise become entitled with respect
to the Plan Year.
Section l0. General
l0.l Governing Law The Plan shall be construed in accordance with
and governed by the laws of the State of Illinois.
l0.2 Withholding Taxes The Company shall have the right to deduct
from all payments under this Plan any Federal, state or local taxes required by
the law to be withheld with respect to such payments.
<PAGE>
10.3 Supersession of Prior Plan This Plan is intended to be
operative for the 1995 Plan Year. Accordingly, this Plan shall supersede in
its entirety the 1994 Executive Incentive Compensation Plan of The Interlake
Corporation, as heretofore restated, except as to Executive Incentive
Compensation Awards and related matters in respect of periods prior to the 1995
Plan Year.
EXHIBIT 10.3
THE INTERLAKE CORPORATION
KEY EXECUTIVE RETENTION PROGRAM
1. Purpose. The purpose of the Key Executive Retention Program (the
Program) is to retain key executives and managers of The Interlake Corporation
and its subsidiaries ( Interlake or the Corporation ), while at the same time
promoting improvement in performance from 1994 through 1996.
2. Administration. The Program will be administered by the Board of
Directors of The Interlake Corporation, upon the recommendations of the
Compensation Committee; provided, that grants of stock awards pursuant to
paragraph 9 below will be made and administered by the Compensation Committee
exclusively, without any action on the part of the Board of Directors as a
whole. The Compensation Committee will at all times during the term of this
program consist of not less than three non-employee directors designated by the
Board of Directors from time to time, all of whom will be disinterested
persons within the meaning of Rule 16b-3 of the Securities and Exchange
Commission.
3. Participants. Participants in the Program consist of such
officers or key employees of the Corporation as the Board in its sole discre-
tion may designate from time to time to receive cash awards hereunder or the
Compensation Committee may designate to receive stock awards hereunder.
4. Cash Awards. Except as set forth in paragraph 9 below, awards
under the Program represent the right to cash compensation, such right to vest
upon achievement of performance goals as set forth in paragraphs 5 and 6 below
and upon termination following a change in control as set forth in paragraph 10
below, to be paid at the times determined in accordance with paragraph 7(a)
below, to be subject to forfeiture as set forth in paragraph 8 below, and to be
subject to acceleration and/or increase as set forth in paragraph 10 below.
5. Performance Goals. Performance goals are determined based upon
earnings before interest expense and tax expense ( EBIT ) for Interlake on a
consolidated basis. A 1995 threshold goal, a 1995 target goal, a 1996 threshold
goal and a 1996 target goal shall be set for all cash awards by the Board of
Directors and for all stock awards by the Compensation Committee. Performance
goals may be adjusted from time to time for unusual items and in any other
manner deemed appropriate by the Board of Directors with respect to cash awards
and the Compensation Committee with respect to stock awards.
<PAGE>
6. Performance Vesting.
(a) Forty percent (40%) of each participant's award represents
the 1995 portion, and sixty percent (60%) of each participant's award
represents the 1996 portion.
(b) As of the end of the 1995 fiscal year:
(i) if Interlake has met the 1995 threshold goal, seventy-
five percent (75%) of the 1995 portion (i.e., 75% of
40%, or 30%) will then be performance vested;
(ii) if Interlake has met the 1995 target goal, the entire
1995 portion (i.e., 40%) will then be performance
vested; and
(iii) if Interlake achieves an EBIT level between the 1995
threshold goal and the 1995 target goal, a percentage
of the 1995 portion determined by interpolation
between seventy-five percent (75%) and one hundred
percent (100%) will then be performance vested.
(c) As of the end of the 1996 fiscal year:
(i) if Interlake meets the 1996 threshold goal, seventy-five
percent (75%) of the sum of (x) the 1996 portion plus,
(y) if the 1995 threshold goal was met but the 1995 tar-
get goal was not met, the unvested portion of the 1995
portion (the unvested 1995 portion ) will then be
performance vested (e.g., if 1995 performance was at the
1995 threshold exactly, and 1996 performance was also at
the threshold exactly, then the percentage of the award
vested as of the end of fiscal 1995 would have been 30%,
and the percentage vested as of the end of fiscal 1996
would be 75% of 70% (i.e., the 60% 1996 portion, plus
the unvested 10% of the 1995 portion), or an additional
52.5%);
(ii) if Interlake meets the 1996 target goal, the sum of (x)
the entire 1996 portion plus (y) if the 1995 threshold
goal was met but the 1995 target goal was not, the
entire unvested 1995 portion, will then be performance
vested; and
(iii) if Interlake achieves an EBIT level between the 1996
threshold goal and the 1996 target goal, a percentage
<PAGE>
determined by interpolation between 75% and 100% of
the sum of (x) the 1996 portion plus (y) if the 1995
threshold goal was met but the 1995 target goal was
not, the unvested 1995 portion, will then be
performance vested.
7. Payment of Performance Vested Cash Awards; Non-Forfeitability of
Performance Vested Stock Awards.
(a) Each performance vested cash award is payable on a date set by
the Board of Directors, such date to be more than 300 calendar days and less
than 400 calendar days after the last day of the fiscal year with respect to
which such award vests. Performance vested cash awards may be paid on any other
date in the sole discretion of the Board of Directors. The Board will set the
same payment date for each performance vested cash award with respect to all
participants.
(b) Each performance vested stock award will be deemed non-
forfeitable and deliverable on a date set by the Compensation Committee, such
date to be more than 300 calendar days and less than 400 calendar days after
the last day of the fiscal year with respect to which such award vests.
Performance vested stock awards may be deemed non-forfeitable and deliverable
on any other date in the sole discretion of the Compensation Committee. The
Compensation Committee will set the same date of non-forfeitability for each
performance vested stock award with respect to all participants receiving such
award.
8. Eligibility for Payment of Vested Cash Awards and Non-
Forfeitability and Delivery of Vested Stock Awards. Except as set forth in
paragraph 12 below, to be eligible to receive any payment of a performance
vested cash award, a participant must be an employee of Interlake on the date
set for payment by the Board in accordance with paragraph 7(a), and to be
eligible to receive delivery of a performance vested stock award, a participant
must be an employee of Interlake on the date set for non-forfeitability and
delivery by the Compensation Committee in accordance with paragraph 7(b); any
award with respect to which the recipient is not an employee on such date will
be automatically forfeited.
9. Stock Awards. In its discretion, the Compensation Committee may
grant to those participants it designates (whether or not those participants
have also been designated by the Board as participants under this Program)
awards of restricted stock pursuant to the 1986 Stock Incentive Program or the
1989 Stock Incentive Program, pursuant to stock award agreements substantially
in the form set forth in Appendix A hereto. Shares granted pursuant to such
awards will be subject to performance vesting as set forth in paragraphs 5 and
6 above and vesting upon termination following a change in control as set forth
in paragraph 10 below; will be earned out and deliverable at the times
<PAGE>
determined in accordance with paragraph 7(b) above; subject to forfeiture as
set forth in paragraph 8 above; and subject to acceleration of earnout as set
forth in paragraph 10 below.
10. Change in Control. Notwithstanding any other provision of this
Program, any participant who is terminated following a change in control under
circumstances which would entitle such participant to enhanced severance
benefits under paragraph 4(a) of one of the Severance Pay Agreements dated as
of March 1, 1994, authorized by the Board of Directors, or any subsequent
similar agreement so authorized, will be deemed vested as to his or her full
award immediately upon such termination and, in the case of any cash award,
entitled to payment in full of such award in cash within five business days of
such participant's demand therefor and, in the case of any stock award,
delivery of a certificate or certificates representing all shares granted under
such award within five business days of such participant s request therefor or,
at the election of the participant, a certificate representing freely-
transferable shares within 90 days of such participant's demand therefor.
11. Acceleration and Increase of Awards. The Board of Directors with
respect to cash awards, and the Compensation Committee with respect to stock
awards, may in its sole discretion increase any award made hereunder by up to
50%, and may accelerate the timing of the performance vesting and/or payment or
non-forfeitability and delivery of any award hereunder, if it deems such
increase or acceleration to be appropriate in the light of outstanding
performance or achievement, or under any other circumstances, including without
limitation in connection with the successful refinancing of some or all of the
Corporation s debt.
12. Death, Permanent Disability and Termination.
(a) Notwithstanding any other provisions of this Program, in the
event of the death or permanent disability (as determined in accordance with
the meaning of the long-term disability plan applicable to the participant at
the time or, if no such plan is then applicable to the participant, within the
meaning of the plan of The Interlake Corporation),
(i) with respect to the portion of such participant s award based on
performance during the fiscal year during which such participant dies
or is deemed permanently disabled, such participant shall, as of the
end of such fiscal year, be deemed performance vested as to a pro rata
portion (based on the ratio of the number of days in such year prior
to the participant s death or being deemed permanently disabled to the
total number of days in such fiscal year) of the award to which he or
<PAGE>
she would have been performance vested had he or she been employed for
the full year, such portion to be paid or delivered in accordance with
paragraph 7 above; and
(ii) with respect to any award with respect to which such participant
is performance vested as of the date of such death or being deemed
permanently disabled but which has not yet been paid or delivered
as of such date, such award shall be paid or delivered as promptly
after such date as is practicable.
(b) Notwithstanding any other provision of this Program, in the event of the
termination by the Corporation other than for cause ( cause having the same
meaning as that set forth in those Severance Pay Agreements approved by the
Board of Directors, and dated as of March 1, 1994, with respect to terminations
following changes in control) then, in such case, the participant will be
entitled to payment or delivery of any award on the payment date or delivery
date with respect thereto set by the Board of Directors or the Compensation
Committee, as the case may be, in accordance with paragraph 7 above.
13. Limitation on Transferability. No awards granted pursuant to
this Program, or rights represented thereby, are transferable otherwise than by
will or the laws of descent and distribution, and any such awards or rights
hereunder are payable during the lifetime of the participant to whom they have
been granted only to such participant or his or her guardian or legal
representative, and after such participant s death shall be payable only to his
or her legal representative.
14. Other Provisions. The grant of any award under the Program may
be subject to any other provisions (whether or not applicable to awards to
other participants) as the Board of Directors or, in the case of stock awards,
the Compensation Committee, determines appropriate, including, without
limitation, such provisions as may be appropriate to comply with federal and
state securities laws and stock exchange requirements, and understandings or
conditions as to the participant s employment, in addition to those
specifically provided for under the Program.
15. Taxes. The Corporation is entitled if necessary or desirable to
withhold, or secure payment from a participant in lieu of withholding, the
amount of any federal, state or local withholding or other tax due from the
Corporation attributable to awards under the Program.
16. No Employment Rights. Neither the Program nor any action taken
under the Program shall be construed as giving any employee any rights to be
retained in the employ of the Corporation.
17. Not Compensation Under Retirement Plans. No amount paid or
shares delivered in accordance with this Program shall be deemed to be
"compensation" for purposes of any retirement or other savings plan applicable
to any participant.
THE INTERLAKE CORPORATION EXHIBIT 10.4
AWARD OF RESTRICTED STOCK
Dated as of __________ ___, 199___
To:
Pursuant to, and in accordance with all the terms and conditions of, The
Interlake Corporation [1986 Stock Incentive Program][1989 Stock Incentive
Program] (the "Program"), and in accordance with the Key Executive Retention
Program adopted in February 1995 (the "KERP"), you were granted by the
Compensation Committee of the Board of Directors (the "Committee") of The
Interlake Corporation (hereinafter sometimes referred to as the "Corporation")
an award of restricted stock, effective the above date, of _____ shares of the
$1.00 par value common stock of The Interlake Corporation, such stock award to
be subject also to the following terms and conditions:
1. Grant of Stock Award
(a) As soon as practicable after you have executed this stock award and
the documents described in Paragraph 1(b) below, the Corporation will cause to
be issued in your name a certificate or certificates representing the total
number of shares covered by this stock award, and will physically deliver such
certificates to you as promptly as possible as they become earned out and
deliverable under Paragraph 3 of this stock award. Such certificates will bear
the following legend:
"The shares of common stock represented by this
certificate have not been registered under the
Securities Act of 1933, and may not be sold or
otherwise transferred absent an exemption from
such registration."
(b) When you sign and return a copy of this stock award you will also sign
and return the irrevocable stock powers enclosed herewith and will deliver the
same to the Secretary of the Corporation to facilitate the transfer of any or
all of the stock covered by this stock award to the Corporation (or its
assignee or nominee), if appropriate or required under the terms of this stock
award, the KERP, the Program under which such shares are issued, or applicable
laws or regulations.
2. Issue of Stock Award - Limits on Transfer
Physical custody of the stock certificates representing the shares covered
by this stock award will be in the Corporation's possession subject to the
removal or release of restrictions on transfer thereof, as provided in
Paragraph 3 hereof. You expressly agree that you will not sell, assign,
<PAGE>
transfer, pledge, or otherwise make any disposition of the shares subject to
this stock award, or make any attempt to do so, except as to such shares, if
any, which are covered by this stock award and which are represented by one or
more stock certificates duly delivered to you, and with respect to which the
transfer thereof is permitted under the federal securities laws.
3. Non-Forfeitability of Stock Award
Restrictions on the disposition of shares covered by this stock award
(except those that may be imposed by law) shall lapse and such shares shall
become deliverable to you on the dates for non-forfeitability set by the
Committee under Paragraph 7(b) of the KERP following performance vesting under
Section 6 thereof, or such earlier delivery date arising under Section 10 of
the KERP (change-in-control), Section 11 of the KERP (acceleration of awards)
or Section 12 of the KERP (death, disability or termination). On such delivery
dates, restrictions on the disposition of the non-forfeitable portion of the
shares covered by this stock award (except those that may be imposed by law)
will lapse and a certificate for such shares will become deliverable to you
(still bearing the legend set forth in Section 1(a) above). As promptly as
reasonably possible thereafter, the Corporation will physically deliver to you
a stock certificate or certificates representing the number of shares then
earned out; provided, however, that none of the stock subject to this award
shall be deliverable to you unless and until (i) all necessary requirements of
state and federal securities laws and regulations have been met, (ii) you have
executed and delivered any requested additional stock powers relating to shares
covered hereby which have yet to be earned out, and (iii) the Corporation or a
subsidiary has been reimbursed for applicable withholding taxes which are
payable to federal, state and local governments.
4. Payment of Taxes
(a) You or any other person receiving stock under this stock award shall
be required to pay to the Corporation or a subsidiary the amount of any feder-
al, state or local taxes which the Corporation or a subsidiary is required to
withhold with respect to shares covered by this stock award at the time the
restrictions on such shares lapse or at such time as the Corporation or a
subsidiary in its judgment becomes liable to withhold any such tax.
(b) You may elect, subject to Compensation Committee approval, to have the
fair market value of a number of shares of each installment of this award
delivered to you applied to the payment of federal, state and local taxes
arising out of your right to receive such installment. "Fair market value"
means as to each share the average of the high and low price on the applicable
date of the Corporation's common stock on The New York Stock Exchange Composite
Transactions as reported in The Wall Street Journal, corrected for reporting
errors. Such fair market value shall be determined, in the case of each
<PAGE>
installment, on the applicable earnout date for such installment under the
KERP. If there are no sales of the Corporation's common stock on the applicable
date, fair market value will be determined as of the last preceding date on
which there was a sale. The fair market value of such shares will be applied
first to state and local taxes at the statutory withholding rates in effect
when the applicable installment is valued, second to federal income and payroll
taxes at the statutory withholding rates in effect when the applicable install-
ment is valued, and any balance will be treated as federal income taxes with-
held in excess of the statutory minimum. The Corporation shall pay to the
applicable taxing authorities such amounts for your account. If you make such
an election you will be deemed to have sold and re-transferred to the
Corporation the number of whole shares covered by your election.
5. Rights As a Shareholder
Subject to the limitations, conditions, and restrictions on transfer
imposed by this stock award and by the Program, it is recognized that you will
be treated as the owner of the stock covered by this grant of stock award as
follows:
(a) You shall be entitled to receive all dividends, whether in cash,
stock or in any other form, payable with respect to such unearned
shares; if payable in stock, any such dividend shall be subject to
all restrictions applicable to the stock with respect to which such
dividend is paid.
(b) You shall be entitled to vote all such unearned shares in respect to
any question with respect to which a vote of stockholders is required
or solicited.
Such rights shall immediately lapse in the event any shares are forfeited
or lapsed as provided in Paragraphs 4, 6, 7 or 8 hereof.
6. Amendment, Cancellation and Termination of Grant
Reference is specifically made to the provisions regarding amendment,
cancellation and termination of this stock award contained in [Paragraph
9(e)][Paragraph 16] of the Program, and the related provisions of the KERP, and
such provisions are herein expressly incorporated by reference.
7. Additional Restrictions On This Grant
As to any shares of stock granted hereunder with respect to which it is
finally determined that they will not be earned out under the KERP or otherwise
will not be deliverable hereunder or under the Program, any and all of your
rights shall cease and terminate, and the Corporation shall be fully entitled,
legally and beneficially, to any of such shares not then delivered or
deliverable. In such event, the stock certificates representing any unearned or
undelivered shares so forfeited shall be transferred to the Corporation or its
nominee, by it or its agents, pursuant to your authorization granted the
Corporation under Paragraph 1(b) hereof.
<PAGE>
8. Miscellaneous Provisions
(a) Your rights and interests under this stock award may not be assigned
or transferred except, in the case of your death, to your beneficiary or, in
the absence of such designation, by will or the laws of descent and
distribution.
(b) No employee or other person shall have any claim or right to be
granted a stock award under the Program or the KERP. Neither the Program nor
the KERP, nor any action taken under either, including the grant of this stock
award, shall be construed as giving any employee any rights to be retained in
the employ of the Corporation or a subsidiary.
(c) Express reference is made to all of the terms and conditions of the
Program and the KERP, and you, by your acceptance of this grant of stock award
acknowledge that you have received a copy of such Program and the KERP, that
you have read the same and are sufficiently familiar therewith to understand
both your rights and your obligations thereunder, and you agree to accept and
to be bound by all of the terms and conditions of this stock award and such
Program and the KERP, including without limitation the right of the Committee
to amend, cancel, suspend or terminate this grant of stock award in whole or
in part, on behalf of yourself and your heirs and assigns.
Stock Award Granted by
THE INTERLAKE CORPORATION
By:___________________________
W. R. Reum
Chairman of the Board,
President
and Chief Executive Officer
AGREED AND ACCEPTED, including all terms and conditions of The Interlake
Corporation [1986][1989] Stock Incentive Program and the Key Executive
Retention Program adopted by the Board in February 1995. I acknowledge that
the shares awarded hereunder have not been registered under the Securities Act
of 1933 and may not be sold or otherwise transferred absent an exemption from
such registration.
Date:______________________________
Signed:____________________________
NON-QUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.6
Option Granted January 26, 1995
Under the 1986 Stock Incentive Program
of
The Interlake Corporation
WHEREAS, Robert J. Fulton (hereinafter called the "Optionee"), is an
employee of The Interlake Corporation (hereinafter called the "Corporation") or
a subsidiary thereof;
WHEREAS, the 1986 Stock Incentive Program of the Corporation
("Program") authorizing the granting to officers and to other key employees of
the Corporation and its subsidiaries of options to buy from the Corporation
shares of common stock, par value $1 a share, has been duly adopted by the
Corporation; and
WHEREAS, the execution of a stock option agreement in the form hereof
has been authorized by a resolution of the Compensation Committee of the Board
of Directors of the Corporation duly adopted on January 26, 1995;
NOW, THEREFORE, the Corporation hereby grants to the Optionee an
option to purchase 40,000 shares of common stock, par value $1 a share, of the
Corporation (or any security into which such shares may be changed by reason of
any transaction or event described in Paragraph 16(a) of the Program) at the
price of Four Dollars ($4.00) per share, upon the terms and conditions herein-
after set forth.
1. Until terminated, as hereinafter provided, this option may be
exercised in whole or in part from time-to-time as follows:
(a) In full, upon a "change in control," as hereinafter
defined, while the Optionee is employed by the Corporation and/or
any subsidiary;
(b) Unless exercisable in full by reason of a change in
control, to the extent of 30 percent of the shares specified in
Paragraph 2 immediately, and to the following additional percent-
ages of the shares specified in Paragraph 2 after each of the
periods ending on the dates set forth below during which the
Optionee shall have been in the continuous employ of the
Corporation or one or more of its subsidiaries:
August 26, 1995 30 percent
August 26, 1996 40 percent
(c) If an Optionee's employment terminates by reason of
retirement on or after the Optionee's 60th birthday or
"disability," as hereinafter defined, or by reason of death, and
if an installment would have become exercisable within one year
subsequent to such event had the Optionee remained in the
continuous employ of the Corporation and/or any subsidiary, this
option may be exercised to the extent of the sum of the number of
shares purchasable pursuant to the preceding sub-paragraph and
such additional installment.
Upon the exercise of this option when fewer than all installments set
forth in sub-paragraph (b) and (c) are exercisable, any fractional share shall
be rounded down to the nearest whole share.
<PAGE>
2. The option price may, at the election of the Optionee, be
paid (i) in cash or by check acceptable to the Corporation or (ii) by transfer
to the Corporation of shares of common stock of the Corporation having a value
(such shares to be valued, for purposes of this paragraph, at the average of
the high and low prices quoted on the New York Stock Exchange Composite
Transactions for the date upon which the Optionee's exercise of stock option is
received) equal to the total option price, or (iii) any combination of whole
shares and funds equal to the total option price. In addition, the Optionee
shall pay the Corporation an amount in cash or by check equal to applicable
federal and other withholding taxes. Upon receipt of the payments referred to
in the two preceding sentences, the Corporation agrees to cause certificates
for any shares purchased hereunder to be delivered to the Optionee.
3. This option shall terminate on the earliest of the following
dates:
(a) On the date upon which the Optionee ceases to be an
employee of the Corporation or a subsidiary by reason of
termination of employment for cause;
(b) Three months after the Optionee ceases to be an employee
of the Corporation or a subsidiary, unless he ceases to be an
employee by reason of death, retirement on or after the
Optionee's 60th birthday, disability, or as described in (a)
above;
(c) Two years after the death of the Optionee if the Optionee
dies while an employee of the Corporation or a subsidiary;
(d) Two years after the termination of the Optionee's
employment by reason of retirement on or after the Optionee's
60th birthday or "disability" as hereinafter defined; or
(e) January 26, 2005.
In the event the Optionee shall intentionally commit an act materially
inimical to the interests of the Corporation or a subsidiary, this option shall
terminate upon a finding by the Compensation Committee of the Board of
Directors of the Corporation to that effect, notwithstanding any other
provision of this agreement. Nothing contained in this option shall limit
whatever right the Corporation or a subsidiary might otherwise have to
terminate the employment of the Optionee.
4. This option is not transferrable by the Optionee otherwise
than by will or the laws of descent and distribution, and is exercisable,
during the lifetime of the Optionee, only by him or by his legal guardian or
legal representative.
5. This option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities laws. The
Corporation hereby agrees to make reasonable efforts to comply with any
applicable securities laws.
6. The Compensation Committee of the Board of Directors of the
Corporation shall make or provide for such adjustments in the number of shares
of common stock covered by outstanding stock options granted hereunder, in the
option price applicable to such stock options, and in the kind of securities
covered thereby, as the Committee in its sole discretion, exercised in good
faith, determines is equitably required to prevent dilution or enlargement of
the rights of Optionees that otherwise would result from (a) any stock
<PAGE>
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, reorganization, partial or complete liquidation, repurchase or
exchange of shares, issuance of rights or warrants to purchase securities, or
(c) any other corporate transaction or event having an effect similar to any of
the foregoing. The Committee shall also make or provide for such adjustments in
the number of shares reserved for issuance as specified in Paragraph 16 of the
Program as the Committee in its sole discretion, exercised in good faith,
determines is appropriate to reflect any transaction or event described in the
preceding sentence. No adjustment provided in this Paragraph 6 shall require
the Corporation to sell any fractional shares.
7. The term "subsidiary," as used in this agreement, means any
corporation of which the securities having a majority of the ordinary voting
power needed to elect its board of directors are, at the time as of which any
determination is being made, owned by the Corporation either directly or
through one or more subsidiaries. For purposes of this agreement, the
continuous employ of the Optionee with the Corporation or a subsidiary shall
not be deemed interrupted, and the Optionee shall not be deemed to have ceased
to be an employee of the Corporation or any subsidiary, by reason of the
transfer of his employment among the Corporation and its subsidiaries.
8. The term "disability," as used in this agreement, means the
termination of an Optionee's employment under such circumstances as entitle him
to Long Term Disability Benefits under the Corporation's Salaried Employees
Group Insurance Plan, or a long term disability plan of the subsidiary by which
he is employed, and in which he participates at the time the disability occurs.
If an Optionee does not participate in a long term disability plan,
"disability" means the termination of an Optionee's employment under such
circumstances as would entitle him to long term disability benefits if he were
a participant in the Corporation's Salaried Employees Group Insurance Plan.
9. The term "change in control," as used in this agreement, means
the occurrence of any of the following events while the Optionee is employed by
the Corporation or a subsidiary:
(a) The Corporation is merged or consolidated or reorganized
into or with another corporation or other legal person and as a
result of such merger, consolidation or reorganization less than
75% of the outstanding voting securities or other capital
interests of the surviving, resulting or acquiring corporation or
other legal person are owned in the aggregate by the stockholders
of the Corporation immediately prior to such merger,
consolidation or reorganization;
(b) The Corporation sells all or substantially all of its
business and/or assets to any other corporation or other legal
person, less than 75% of the outstanding voting securities or
other capital interests of which are owned in the aggregate by
the stockholders of the Corporation, directly or indirectly,
immediately prior to or after such sale;
(c) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) each as
promulgated pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act") disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange
<PAGE>
Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 25% or more of
the issued and outstanding shares of voting securities of the
Corporation; or
(d) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors
of the Corporation cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for
election by the Corporation's stockholders, of each new director
of the Corporation was approved by a vote of at least two-thirds
of such directors of the Corporation then still in office who
were directors of the Corporation at the beginning of any such
period.
10. This option is intended to be a non-qualified stock option
and shall not be treated as an incentive stock option within the meaning of the
Internal Revenue Code of 1986, as the same has been heretofore or may hereafter
be amended.
Executed at Lisle, Illinois, as of January 26, 1995.
THE INTERLAKE CORPORATION
By
W. R. Reum
Chairman of the Board,
President and Chief
Executive Officer
Receipt Acknowledged and Non-Qualified Stock Option Agreement Accepted this
day of ________________, 1995.
Signed:__________________________
Robert J. Fulton
NON-QUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.7
Option Granted January 26, 1995
Under the 1986 Stock Incentive Program
of
The Interlake Corporation
WHEREAS, Wayne M. Osman (hereinafter called the "Optionee"), is an
employee of The Interlake Corporation (hereinafter called the "Corporation") or
a subsidiary thereof;
WHEREAS, the 1986 Stock Incentive Program of the Corporation
("Program") authorizing the granting to officers and to other key employees of
the Corporation and its subsidiaries of options to buy from the Corporation
shares of common stock, par value $1 a share, has been duly adopted by the
Corporation; and
WHEREAS, the execution of a stock option agreement in the form hereof
has been authorized by a resolution of the Compensation Committee of the Board
of Directors of the Corporation duly adopted on January 26, 1995;
NOW, THEREFORE, the Corporation hereby grants to the Optionee an
option to purchase 10,000 shares of common stock, par value $1 a share, of the
Corporation (or any security into which such shares may be changed by reason of
any transaction or event described in Paragraph 16(a) of the Program) at the
price of Four Dollars ($4.00) per share, upon the terms and conditions
hereinafter set forth.
1. Until terminated, as hereinafter provided, this option may be
exercised in whole or in part from time-to-time as follows:
(a) In full, upon a "change in control," as hereinafter
defined, while the Optionee is employed by the Corporation and/or
any subsidiary;
(b) Unless exercisable in full by reason of a change in
control, to the extent of 30 percent of the shares specified in
Paragraph 2 immediately, and to the following additional
percentages of the shares specified in Paragraph 2 after each of
the periods ending on the dates set forth below during which the
Optionee shall have been in the continuous employ of the
Corporation or one or more of its subsidiaries:
August 26, 1995 30 percent
August 26, 1996 40 percent
(c) If an Optionee's employment terminates by reason of
retirement on or after the Optionee's 60th birthday or
"disability," as hereinafter defined, or by reason of death, and
if an installment would have become exercisable within one year
subsequent to such event had the Optionee remained in the
continuous employ of the Corporation and/or any subsidiary, this
option may be exercised to the extent of the sum of the number of
shares purchasable pursuant to the preceding sub-paragraph and
such additional installment.
Upon the exercise of this option when fewer than all installments set
forth in sub-paragraph (b) and (c) are exercisable, any fractional share shall
be rounded down to the nearest whole share.
<PAGE>
2. The option price may, at the election of the Optionee, be paid
(i) in cash or by check acceptable to the Corporation or (ii) by transfer to
the Corporation of shares of common stock of the Corporation having a value
(such shares to be valued, for purposes of this paragraph, at the average of
the high and low prices quoted on the New York Stock Exchange Composite
Transactions for the date upon which the Optionee's exercise of stock option is
received) equal to the total option price, or (iii) any combination of whole
shares and funds equal to the total option price. Upon receipt of the payments
referred to in the preceding sentence, the Corporation agrees to cause certifi-
cates for any shares purchased hereunder to be delivered to the Optionee.
3. This option shall terminate on the earliest of the following
dates:
(a) On the date upon which the Optionee ceases to be an
employee of the Corporation or a subsidiary by reason of
termination of employment for cause;
(b) Three months after the Optionee ceases to be an employee
of the Corporation or a subsidiary, unless he ceases to be an
employee by reason of death, retirement on or after the
Optionee's 60th birthday, disability, or as described in (a)
above;
(c) Two years after the death of the Optionee if the Optionee
dies while an employee of the Corporation or a subsidiary;
(d) Two years after the termination of the Optionee's
employment by reason of retirement on or after the Optionee's
60th birthday or "disability" as hereinafter defined; or
(e) January 26, 2005.
In the event the Optionee shall intentionally commit an act materially
inimical to the interests of the Corporation or a subsidiary, this option shall
terminate upon a finding by the Compensation Committee of the Board of
Directors of the Corporation to that effect, notwithstanding any other
provision of this agreement. Nothing contained in this option shall limit
whatever right the Corporation or a subsidiary might otherwise have to
terminate the employment of the Optionee.
4. This option is not transferrable by the Optionee otherwise
than by will or the laws of descent and distribution, and is exercisable,
during the lifetime of the Optionee, only by him or by his legal guardian or
legal representative.
5. This option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities laws. The
Corporation hereby agrees to make reasonable efforts to comply with any
applicable securities laws.
6. The Compensation Committee of the Board of Directors of the
Corporation shall make or provide for such adjustments in the number of shares
of common stock covered by outstanding stock options granted hereunder, in the
option price applicable to such stock options, and in the kind of securities
covered thereby, as the Committee in its sole discretion, exercised in good
faith, determines is equitably required to prevent dilution or enlargement of
the rights of Optionees that otherwise would result from (a) any stock
<PAGE>
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, reorganization, partial or complete liquidation, repurchase or
exchange of shares, issuance of rights or warrants to purchase securities, or
(c) any other corporate transaction or event having an effect similar to any of
the foregoing. The Committee shall also make or provide for such adjustments in
the number of shares reserved for issuance as specified in Paragraph 16 of the
Program as the Committee in its sole discretion, exercised in good faith,
determines is appropriate to reflect any transaction or event described in the
preceding sentence. No adjustment provided in this Paragraph 6 shall require
the Corporation to sell any fractional shares.
7. The term "subsidiary," as used in this agreement, means any
corporation of which the securities having a majority of the ordinary voting
power needed to elect its board of directors are, at the time as of which any
determination is being made, owned by the Corporation either directly or
through one or more subsidiaries. For purposes of this agreement, the
continuous employ of the Optionee with the Corporation or a subsidiary shall
not be deemed interrupted, and the Optionee shall not be deemed to have ceased
to be an employee of the Corporation or any subsidiary, by reason of the
transfer of his employment among the Corporation and its subsidiaries.
8. The term "disability," as used in this agreement, means the
termination of an Optionee's employment under such circumstances as entitle him
to Long Term Disability Benefits under the Corporation's Salaried Employees
Group Insurance Plan, or a long term disability plan of the subsidiary by which
he is employed, and in which he participates at the time the disability occurs.
If an Optionee does not participate in a long term disability plan,
"disability" means the termination of an Optionee's employment under such
circumstances as would entitle him to long term disability benefits if he were
a participant in the Corporation's Salaried Employees Group Insurance Plan.
9. The term "change in control," as used in this agreement, means
the occurrence of any of the following events while the Optionee is employed by
the Corporation or a subsidiary:
(a) The Corporation is merged or consolidated or reorganized
into or with another corporation or other legal person and as a
result of such merger, consolidation or reorganization less than
75% of the outstanding voting securities or other capital
interests of the surviving, resulting or acquiring corporation or
other legal person are owned in the aggregate by the stockholders
of the Corporation immediately prior to such merger,
consolidation or reorganization;
(b) The Corporation sells all or substantially all of its
business and/or assets to any other corporation or other legal
person, less than 75% of the outstanding voting securities or
other capital interests of which are owned in the aggregate by
the stockholders of the Corporation, directly or indirectly,
immediately prior to or after such sale;
(c) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) each as
promulgated pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act") disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act) has become the beneficial owner (as the term "beneficial
<PAGE>
owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 25% or more of
the issued and outstanding shares of voting securities of the
Corporation; or
(d) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors
of the Corporation cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for
election by the Corporation's stockholders, of each new director
of the Corporation was approved by a vote of at least two-thirds
of such directors of the Corporation then still in office who
were directors of the Corporation at the beginning of any such
period.
10. This option is intended to be a non-qualified stock option
and shall not be treated as an incentive stock option within the meaning of the
Internal Revenue Code of 1986, as the same has been heretofore or may hereafter
be amended.
Executed at Lisle, Illinois, as of January 26, 1995.
THE INTERLAKE CORPORATION
By____________________________
W. R. Reum
Chairman of the Board,
President and Chief
Executive Officer
Receipt Acknowledged and Non-Qualified Stock Option Agreement Accepted this
day of ________________, 1995.
Signed:__________________________
Wayne M. Osman
SEVERANCE PAY AGREEMENT EXHIBIT 10.18
THIS SEVERANCE PAY AGREEMENT (this "Agreement"), dated as of March 1,
1994, by and between The Interlake Corporation, a Delaware corporation (the
"Company"), and (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or key employee of the
Company or a Subsidiary (as hereinafter defined) of the Company and has made
and is expected to continue to make major contributions to the short- and
long-term profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case of most
publicly-held companies, the possibility of a Change in Control exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive;
WHEREAS, the Company wishes to ensure that its senior executives and
other key employees are not practically disabled from discharging their duties
in respect of a proposed or actual transaction involving a Change in Control;
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company; and
WHEREAS, this Agreement is intended to supersede and replace all of
Executive's rights and benefits under the Company's Key Executive Severance Pay
Plan established on August 29, 1986 (the "Severance Pay Plan").
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
<PAGE>
(a) "Base Pay" means the Executive's annual base salary at a rate
not less than the Executive's annual fixed or base compensation as in
effect for Executive on the relevant determination date;
(b) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than 75% of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in
the aggregate by the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its business and/or assets to another corporation
or other legal person, and as a result of such sale or transfer less
than 75% of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer
is held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) (x) Prior to March 1, 1997, any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than First Capital Corporation of Chicago or Madison Dearborn Partners
VIII so long as their combined beneficial ownership of Voting Stock does
not exceed 35% of the Company's Voting Stock) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 25% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election
of directors of the Company ("Voting Stock"); or (y) from and after
March 1, 1997, any person is or becomes the beneficial owner of shares
<PAGE>
of Voting Stock in an amount equal to or greater than 25% of the
outstanding shares of Voting Stock;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors of the
Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (v) each Director
who is first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two-thirds of the Directors of the
Company (or a committee thereof) then still in office who were Directors
of the Company at the beginning of any such period will be deemed to
have been a Director of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv),
(A) unless otherwise determined in a specific case by majority vote of the
Board, a"Change in Control" shall not be deemed to have occurred for purposes
of Sections 1(b)(iii) or 1(b)(iv) solely because (1) the Company, (2) an
entity in which the Company directly or indirectly beneficially owns 50% or
more of the voting securities (a "Subsidiary"), or (3) any employee stock
ownership plan or any other employee benefit plan of the Company or any
Subsidiary, either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act disclosing beneficial ownership by it of shares of
Voting Stock, whether in excess of 25% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will occur in
the future by reason of such beneficial ownership, and (B) a "Change in
Control" shall not be deemed to have occurred for purposes of Section 1(b)
(iii) or 1(b)(iv) upon any person becoming the beneficial owner of shares of
Voting Stock in an amount up to 35% of the outstanding shares of Voting Stock
<PAGE>
(or because the Company reports that a change in control of the Company has
occurred or will occur in the future by reason of such purchase) if within
twenty (20) calendar days following such purchase the Board of Directors has
expressly determined that such acquisition of ownership is not a "Change in
Control" for purposes of this Agreement.
(c) "Change in Control Severance Period" means the period of time
commencing on the date of an occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of the
Change in Control, (ii) the Executive's death, or (iii) the Executive's
attainment of age 65; provided, however, that on each anniversary of the
Change in Control, the Severance Period will automatically be extended for
an additional year unless, not later than 120 calendar days prior to such
date, either the Company or the Executive shall have given written notice to
the other that the Severance Period is not to be so extended; and
(d) (i) "Cause" means that, for purposes of, and prior to, any
termination during the Change in Control Severance Period pursuant to Section
3 hereof, the Executive shall have committed:
(A) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with
the Company or any Subsidiary;
(B) intentional wrongful damage to property of the Company or
any Subsidiary;
(C) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(D) intentional wrongful engagement in any Competitive
Activity;
and any such act shall have been determined by the Board of Directors of the
Company (the "Board") to have been materially harmful to the Company. For
purposes of this Agreement, no act or failure to act on the part of the
<PAGE>
Executive shall be deemed "intentional" if it was due primarily to an error
in judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company.
(ii) "Cause" means that, for purposes of, and prior to, any
Other Termination pursuant to Section 1(h) hereof, the Executive shall
have committed:
(A) an act of fraud, embezzlement or theft in connection with
his duties or in the course of his employment with the Company or
any Subsidiary;
(B) wrongful damage to property of the Company or any
Subsidiary;
(C) wrongful disclosure of secret processes or confidential
information of the Company or any Subsidiary;
(D) wrongful engagement in any Competitive Activity; or
(E) an intentional and continued failure to substantially
perform his duties after a demand for substantial performance has
been delivered to him, or intentional misconduct which is
materially injurious to the Company.
(e) "Competitive Activity" means the Executive's participation, without
the written consent of an officer of the Company, in (i) the management of
any business enterprise if such enterprise engages in substantial and direct
competition with the Company and/or any Subsidiary and such enterprise's
sales of any product or service competitive with any product or service of
the Company and/or any Subsidiary amounted to 25% of such enterprise's net
sales for its most recently completed fiscal year and if the Company's
consolidated net sales of said product or service amounted to 10% of the
Company's consolidated net sales for its most recently completed fiscal year,
or (ii) the active recruitment of an employee of the Company or any
Subsidiary. "Competitive Activity" will not include (A) the mere ownership
<PAGE>
of securities in any such enterprise and the exercise of rights appurtenant
thereto and (B) participation in the management of any such enterprise other
than in connection with the competitive operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income
and welfare benefit policies, plans, programs or arrangements in which
Executive is entitled to participate, including without limitation any stock
option, stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company.
(g) "Incentive Pay" means a bonus, incentive or other compensation
payable either in cash, stock in lieu of cash, or a combination of such
methods of payment, in addition to Base Pay, made or to be made in regard to
services rendered pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan, program or
arrangement (whether or not funded) of the Company, or any successor thereto,
including without limitation, the Company's Executive Incentive Compensation
Plan for any year, but excluding any long-term incentive plan such as the
Company's 1994 Stock Performance Incentive Program.
(h) "Other Termination" means the termination by the Company or any
Subsidiary of Executive's employment with the Company or any Subsidiary dur-
ing the Term (other than during the Change in Control Severance Period),
other than upon the occurrence of (i) the Executive's death, (ii) the
Executive's permanent disability within the meaning of, and provided that
Executive begins to receive benefits pursuant to, the long-term disability
plan in effect for, or applicable to, Executive immediately prior to the
Termination Date (as hereinafter defined), or (iii) Cause, as defined in
Section 1(d)(ii).
<PAGE>
(i) "Target Bonus" means the bonus that Executive would have earned for
achieving 'target' performance for Executive's participation level under the
Interlake Executive Incentive Compensation Plan or any other similar
incentive compensation plan, program or arrangement of the Company or any
Subsidiary (other than any long-term incentive, stock award, restricted
stock, employee stock ownership or stock-related plan of the Company).
(j) "Term" means the period commencing as of the date hereof and
expiring on the close of business on February 28, 1997; provided, however,
that (A) commencing on March 1, 1997 and each March 1 thereafter, the term of
this Agreement will automatically be extended for an additional year unless,
not later than September 1 of the immediately preceding year, the Company or
the Executive shall have given notice that it or the Executive, as the case
may be, does not wish to have the Term extended and (B) if, prior to a Change
in Control, the Executive ceases to be an employee of the Company or any
Subsidiary for any reason other than an Other Termination, thereupon without
further action the Term shall be deemed to have expired. For purposes of
this Section 1(j), the Executive shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(k) "Termination Date" means the date on which the Executive's employ-
ment is terminated, the effective date of which shall be the date of termin-
ation, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3(b).
2. Operation of Agreement: This Agreement will be effective and
binding immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, provisions of this Agreement providing benefits for
termination of employment during the Change in Control Severance Period will
not be operative unless and until a Change in Control occurs, whereupon without
further action such provisions shall become immediately operative.
3. Termination Following a Change in Control: (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company or any Subsidiary during the Change in Control Severance Period
and the Executive shall not be entitled to the benefits provided by Section
<PAGE>
4(a) only upon the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant
to, the long-term disability plan in effect for, or applicable to,
Executive immediately prior to the Change in Control; or
(iii) Cause, as defined in Section 1(d)(i).
If, during the Change in Control Severance Period, the Executive's employment
is terminated by the Company other than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), the Executive will be entitled to the benefits provided by
Section 4(a) hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Change in Control Severance Period with the right to severance compensation
as provided in Section 4(a) upon the occurrence of one or more of the
following events (regardless of whether any other reason, other than Cause as
defined in Section 1(d)(i), for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent
office or position, of or with the Company and/or a Subsidiary, as the
case may be, which the Executive held immediately prior to a Change in
Control, or the failure to elect or reelect, or the removal of, the
Executive as a Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company immediately prior to
the Change in Control;
(ii) (I) A significant adverse change in the nature or scope of
the authorities, powers, functions, responsibilities or duties attached
to the position with the Company and any Subsidiary which the Executive
held immediately prior to the Change in Control; (II) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay at the rates in
effect immediately prior to a Change in Control; or (III) the termina-
<PAGE>
tion or denial of the Executive's rights to Employee Benefits providing
perquisites, benefits and service credit for benefits at least as great
in the aggregate as are payable thereunder immediately prior to a Change
in Control or a reduction in the scope or value thereof;
(iii) A determination by the Executive (which determination will
be conclusive and binding upon the parties hereto provided it has been
made in good faith and in all events will be presumed to have been made
in good faith unless otherwise shown by the Company by clear and
convincing evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation, a change
in the scope of the business or other activities for which the Executive
was responsible immediately prior to the Change in Control, which has
rendered the Executive unable to carry out any of the authorities,
powers, functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in Control, which
situation is not remedied within 30 calendar days after written notice
to the Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) shall
have assumed all duties and obligations of the Company under this
Agreement pursuant to Section 10(a); or
(v) The Company requires the Executive to have his principal
location of work changed, to any location which is in excess of 50 miles
from Executive's principal residence immediately prior to the Change of
Control, or requires the Executive to travel away from his office in the
course of discharging his responsibilities or duties hereunder more than
30 consecutive days or an aggregate of more than 60 days in any
consecutive 90-day period without, in either case, his prior written
consent.
<PAGE>
(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof.
4. Severance Compensation: (a) If, following the occurrence of a
Change in Control, the Company terminates the Executive's employment during the
Change in Control Severance Period other than pursuant to Section 3(a), or if
the Executive terminates his employment pursuant to Section 3(b):
(i) The Company will pay to the Executive, within five
business days after Executive's demand therefor, a lump sum payment in
an amount equal to the multiple set forth under Column I on Annex A
hereto times the sum of (A) Base Pay (at the highest rate in effect for
any period prior to the Termination Date), plus (B) the Target Bonus
established for the fiscal year in which the Change in Control or the
Termination Date occurs, whichever is higher; and
(ii) The Company will arrange to provide the Executive, at no
cost to the Executive, with (A) health benefits (including without
limitation medical and dental insurance or benefits with dependent
coverage providing for aggregate individual and family deductibles no
greater than $250 and $500 per annum, respectively, for medical
insurance and $50 per individual for dental coverage), substantially
similar to those which the Executive was receiving or entitled to
receive immediately prior to the Termination Date, (B) life insurance
and disability insurance or coverage at least equivalent to that the
Executive was receiving or entitled to receive immediately prior to the
<PAGE>
Termination Date, and (C) reasonable and customary executive outplace-
ment services (or, at the election of the Executive, within five
business days after Executive's demand therefor, a lump sum cash payment
in lieu thereof equal to 15% of the sum of (x) Executive's Base Pay (at
the rate in effect immediately prior to the Termination Date) plus (y)
the Target Bonus established for the fiscal year in which the
Termination Date occurs, (collectively, "Additional Benefits"), for not
less than the number of months set forth under Column II on Annex A
hereto following the Termination Date (the "Change in Control
Continuation Period"); and
(iii) The Company will offer to the Executive the opportunity to
purchase any Company leased automobile being used by the Executive
immediately prior to the Termination Date for the aggregate amount
necessary to effect the purchase by the Company pursuant to the terms of
the lease for such automobile, which purchase may at Executive's option
be effected as a credit against the lump sum payment due Executive under
Section 4(a)(i).
(b) In the event of an Other Termination of the Executive:
(i) The Company will pay to the Executive within five business
days after Executive's demand therefor, a lump sum payment in an amount
equal to (x) the multiple set forth under Column I on Annex B hereto
times (A) Base Pay (at the rate in effect immediately prior to the
Termination Date), plus (B) the Target Bonus established for the fiscal
year in which the Termination Date occurs, minus (y) the amount of any
severance payments actually paid to the Executive in connection with
Executive's Other Termination pursuant to any other agreement between
the Company or any Subsidiary and the Executive (other than payments
made pursuant to any Employee Benefits); and
(ii) The Company will arrange to provide the Executive, at no
cost to the Executive, with Additional Benefits for not less than the
number of months set forth under Column II on Annex B hereto (the "Other
Termination Continuation Period"); and
(iii) The Company will offer to the Executive the opportunity to
purchase any Company leased automobile being used by the Executive
immediately prior to the Termination Date for the aggregate amount
necessary to effect the purchase by the Company pursuant to the terms of
the lease for such automobile, which purchase may, at Executive's
<PAGE>
option, be effected as a credit against the lump sum payment due
Executive under Section 4(b)(i).
(c) If and to the extent that any benefit described in Sections 4(a)(ii)
or 4(b)(ii) is not or cannot be paid or provided under any policy, plan,
program or arrangement of the Company or any Subsidiary, as the case may be,
then the Company will itself pay or provide for the payment to the Executive,
his dependents and beneficiaries, of such benefits. Without otherwise
limiting the purposes or effect of Section 5, benefits otherwise receivable
by the Executive pursuant to Sections 4(a)(ii) or 4(b)(ii) will be reduced
to the extent comparable benefits (including coverage for any preexisting
conditions or illness) are actually received by the Executive from another
employer during any Change of Control Continuation Period or Other
Termination Continuation Period following the Executive's Termination Date.
There will be no right of set-off or counterclaim in respect of any claim,
debt or obligation against any payment to or benefit for the Executive
provided for in this Agreement, except as provided in subsection (y) of
Section 4(b)(i) and the second sentence of this Section 4(c).
(d) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest
on the amount or value thereof at an annualized rate of interest equal to
the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Midwest Edition of The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such prime
rate will be effective on and as of the date of such change.
(e) Notwithstanding any other provision hereof, the parties' respective
rights and obligations under this Agreement will survive any termination or
expiration of this Agreement following a Change in Control, the termination
of the Executive's employment following a Change in Control for any reason
whatsoever, the termination or expiration of this Agreement following an
Other Termination, or the termination of the Executive's employment following
an Other Termination.
(f) Upon written notice given by the Executive to the Company prior to
the occurrence of the Change in Control that caused the Executive to become
<PAGE>
entitled to the benefits under this Agreement, the Executive, at his sole
option, may elect to have all or any of the amounts so payable paid to him on
a quarterly basis during the remainder of the Change in Control Continuation
Period or any portion thereof designated by the Executive.
5. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult and may be impossible (a) for the Executive to find reason-
ably comparable employment following the Termination Date, and (b) to measure
the amount of damages which Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the severance compensation
by the Company to the Executive in accordance with the terms of this Agreement
is hereby acknowledged by the Company to be reasonable and will be liquidated
damages, and the Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or other-
wise, nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of the Executive hereunder or otherwise, except as expressly provided
in subsection (y) of Section 4(b)(i) and the second sentence of Section 4(c).
6. Certain Limitations: (a) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined (as hereafter provided)
that any payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive hereunder would be subject to the excise tax
(the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") (or any successor provision thereto) but for the application of
this Section 6, then the payments and benefits to be provided hereunder shall
be reduced to the minimum extent necessary so that no portion thereof shall be
subject to the Excise Tax but only if by reason of, and giving effect to such
reduction, Executive's net after- tax benefit shall exceed Executive's net
after-tax benefit if such reduction were not made. If the application of this
Section 6 should require a reduction in benefits under this Agreement, such
reduction shall be implemented first by reducing any non-cash benefits to the
extent necessary, and second by reducing any cash benefits to the extent
necessary. In each case, the reductions shall be made starting with the latest
payment or benefit.
<PAGE>
(b)(i) The calculation of whether any reduction in Executive's payments
and benefits shall be made under this Section 6 shall be made (A) within 30
days following the Termination Date, if applicable, and (B) at such other
time or times as may be reasonably requested by the Company or the Executive,
including, without limitation, at such times as may be necessary to effect
any recalculation under Section 6(b)(ii).
(ii) If (I) any payment or benefit taken into account in calculating the
amount of the Excise Tax payable by Executive exceeds the payment or benefit
actually received by Executive hereunder following the Termination Date, (II)
any payments and benefits which were to have been provided hereunder were
reduced as a result of the calculation made under Section 6(b)(i), and (III)
a recalculation based upon payments and benefits actually received by
Executive hereunder indicates that Executive's net after-tax benefit would be
maximized if such reduction had not been made, then the Company shall pay
Executive the amount of such reduction no later than 10-days following such
recalculation so as, and to the extent necessary, to maximize Executive's net
after-tax benefit based upon payments and benefits actually received by
Executive hereunder.
(c) The calculations required under this Section 6 shall initially be
made by the Company and Executive. If no agreement on such calculations is
reached, the Executive and the Company shall agree to the selection of an
accounting firm to make the calculations. If no agreement can be reached
regarding the selection of an accounting firm, the Company shall select a
nationally recognized independent public accounting firm which has no current
or recent business relationship with the Company. The determination of any
such firm shall be conclusive and binding on all parties. All calculations
provided for in this Section 6 shall be made at the Company's expense.
7. Legal Fees and Expenses; Security:
(a) It is the intent of the Company that the Executive not be required
to incur legal fees and the related expenses associated with the interpret-
ation, enforcement or defense of Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
<PAGE>
Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny,
or to recover from, the Executive the benefits provided or intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of Executive's choice, at the
expense of the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director,
officer, stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship
with such counsel, and in that connection the Company and the Executive agree
that a confidential relationship shall exist between the Executive and such
counsel. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees
and expenses incurred by the Executive in connection with any of the
foregoing.
(b) Without limiting the obligations of the Company pursuant to
Section 7(a) hereof, the performance of the Company's obligations under
Section 7 of this Agreement and of Severance Pay Agreements with other
executive officers of the Company shall be secured by an irrevocable clean
letter of credit, a conformed copy of which shall be attached hereto as Annex
C and is incorporated herein by reference following notice by the Company to
the Executive and such other executive officers (the "Letter of Credit"), for
the benefit of the Executive and such other executive officers and issued by
a commercial bank selected by the Company as promptly as practicable here-
after (the "Bank"), and providing that the fees and expenses of counsel
selected from time to time by the Executive and such other executive officers
pursuant to Section 7 of this Agreement and such other severance pay agree-
<PAGE>
ments shall be paid, or reimbursed to the Executive and such other executive
officers if paid by the Executive and such other executive officers, on a
regular, periodic basis upon presentation by the Executive and such other
executive officers to the Bank of a statement or statements prepared by such
counsel in accordance with its customary practices; provided, however, that
such Letter of Credit may not be used by the Executive for the enforcement of
rights with respect to amounts due under Section 4(b) of this Agreement. The
Company shall pay all amounts and take all action necessary to maintain the
Letter of Credit during the Term, during the Change in Control Severance
Period, and thereafter during any period in which amounts are payable by the
Company hereunder and if, notwithstanding the Company's complete discharge of
such obligations, such Letter of Credit shall be terminated or not renewed,
the Company shall obtain a replacement irrevocable clean letter of credit on
substantially the same terms and conditions as contained in the Letter of
Credit drawn upon a commercial bank having total assets of at least
$500,000,000 selected by the Company or any similar arrangement which, in any
case, assures that Executive of the benefits of this Section 7. Any failure
by the Company to satisfy any of its obligations under this Section 7(b)
shall not limit the rights of the Executive hereunder. Subject to the
foregoing, the Executive shall have the status of a general unsecured
creditor of the Company and shall have no right to, or security interest in,
any assets of the Company or any Subsidiary.
8. Employment Rights; Termination Prior to Change in Control:
(a) Nothing expressed or implied in this Agreement will create any right
or duty on the part of the Company or the Executive to have the Executive
remain in the employment of the Company or any Subsidiary, whether or not a
Change in Control shall occur.
(b) Any termination of employment of the Executive or the removal of the
Executive from the office or position in the Company following the
commencement of any discussions with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
<PAGE>
9. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation
or ruling.
10. Successors and Binding Agreement: (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 10(a) and 10(b) hereof. Without limiting the generality
or effect of the foregoing, the Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by
pledge, creation of a security interest, or otherwise, other than by a
transfer by Executive's will or by the laws of descent and distribution and,
in the event of any attempted assignment or transfer contrary to this Section
10(c), the Company shall have no liability to pay any amount so attempted to
be assigned, transferred or delegated.
11. Notices: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
<PAGE>
or permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to
the principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
14. Competitive Activity: If the Executive shall have received or shall
be receiving benefits under this Agreement, the Executive shall not, without
the written consent of an officer of the Company, engage in any Competitive
Activity during the Change in Control Continuation Period or Other Termination
Continuation Period, as the case may be.
15. Severance Pay Plan: This Agreement supersedes and replaces all of
the Executive's rights and benefits under the Severance Pay Plan. From and
after the date of this Agreement, Executive shall cease being a participant in
the Severance Pay Plan and Executive hereby waives and forever relinquishes all
rights and benefits thereunder.
<PAGE>
16. Arbitration:
(a) Any controversy or claim (contract, tort or statutory) under
federal, state or local law between the Company and Executive arising out of
any of the terms, provisions, or conditions of this Agreement, shall, on
written request of either party served upon the other, be submitted to final
and binding arbitration. Such arbitration shall be compelled and enforced
according to the Illinois Uniform Arbitration Act, and shall be conducted
according to the Model Employment Arbitration Procedures of the American
Arbitration Association, except as otherwise provided herein. The arbitration
shall be conducted before the American Arbitration Association or such other
arbitration service as the parties may, by mutual agreement, select. The
arbitrator shall be appointed by agreement of the parties hereto or, if no
agreement can be reached, by the American Arbitration Association pursuant
to its rules.
(b) Judgment on the award the arbitrator renders may be entered in any
court having jurisdiction over the parties. The arbitration shall be
conducted in Chicago, Illinois. This Section 16 shall survive the expiration
or termination of this Agreement. If any part of this Section 16 is found to
be void as a matter of law or public policy, the remainder of this Section 16
will continue to be in full force and effect.
17. Miscellaneous: No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or represent-
ations, oral or otherwise, expressed or implied with respect to the subject
matter hereof have been made by either party which are not set forth expressly
in this Agreement. References to Sections are to references to Sections of
this Agreement.
18. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
THE INTERLAKE CORPORATION
By
------------------------
------------------------
<PAGE>
Annex A
-------
(I) (II)
Multiple of Annual
Base Salary and Months of Additional
Bonus Severance Benefits Continuation
------------------ ---------------------
3 36
<PAGE>
Annex B
-------
(I) (II)
Multiple of Annual
Base Salary and Months of Additional
Bonus Severance Benefits Continuation
------------------ ---------------------
1 12
<PAGE>
Annex C
-------
[Form of letter of credit]
SEVERANCE PAY AGREEMENT EXHIBIT 10.19
THIS SEVERANCE PAY AGREEMENT (this "Agreement"), dated as of March 1,
1994, by and between The Interlake Corporation, a Delaware corporation (the
"Company"), and (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or key employee of the
Company or a Subsidiary (as hereinafter defined) of the Company and has made
and is expected to continue to make major contributions to the short- and
long-term profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case of most
publicly-held companies, the possibility of a Change in Control exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive;
WHEREAS, the Company wishes to ensure that its senior executives and
other key employees are not practically disabled from discharging their duties
in respect of a proposed or actual transaction involving a Change in Control;
and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate
not less than the Executive's annual fixed or base compensation as in
<PAGE>
effect for Executive on the relevant determination date;
(b) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than 75% of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its business and/or assets to another corporation
or other legal person, and as a result of such sale or transfer less
than 75% of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) (x) Prior to March 1, 1997, any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than First Capital Corporation of Chicago or Madison Dearborn Partners
VIII so long as their combined beneficial ownership of Voting Stock does
not exceed 35% of the Company's Voting Stock) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 25% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election
of directors of the Company ("Voting Stock"); or (y) from and after
March 1, 1997, any person is or becomes the beneficial owner of shares
of Voting Stock in an amount equal to or greater than 25% of the
outstanding shares of Voting Stock;
<PAGE>
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors of the
Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (v) each Director
who is first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two-thirds of the Directors of the
Company (or a committee thereof) then still in office who were Directors
of the Company at the beginning of any such period will be deemed to
have been a Director of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv),
(A) unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Sections 1(b)(iii) or 1(b)(iv) solely because (1) the Company,
(2) an entity in which the Company directly or indirectly beneficially owns
50% or more of the voting securities (a "Subsidiary"), or (3) any employee
stock ownership plan or any other employee benefit plan of the Company or any
Subsidiary, either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act disclosing beneficial ownership by it of shares of
Voting Stock, whether in excess of 25% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will occur in
the future by reason of such beneficial ownership, and (B) a "Change in
Control" shall not be deemed to have occurred for purposes of Section
1(b)(iii) or 1(b)(iv) upon any person becoming the beneficial owner of shares
of Voting Stock in an amount up to 35% of the outstanding shares of Voting
<PAGE>
Stock (or because the Company reports that a change in control of the Company
has occurred or will occur in the future by reason of such purchase) if
within twenty (20) calendar days following such purchase the Board of
Directors has expressly determined that such acquisition of ownership is not
a "Change in Control" for purposes of this Agreement.
(c) "Change in Control Severance Period" means the period of time
commencing on the date of an occurrence of a Change in Control and continuing
until the earliest of (i) the third anniversary of the occurrence of the
Change in Control, (ii) the Executive's death, or (iii) the Executive's
attainment of age 65; provided, however, that on each anniversary of the
Change in Control, the Severance Period will automatically be extended for an
additional year unless, not later than 120 calendar days prior to such date,
either the Company or the Executive shall have given written notice to the
other that the Severance Period is not to be so extended; and
(d) (i) "Cause" means that, for purposes of, and prior to, any
termination during the Change in Control Severance Period pursuant to
Section 3 hereof, the Executive shall have committed:
(A) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with
the Company or any Subsidiary;
(B) intentional wrongful damage to property of the Company or
any Subsidiary;
(C) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(D) intentional wrongful engagement in any Competitive
Activity;
and any such act shall have been determined by the Board of Directors of the
Company (the "Board") to have been materially harmful to the Company. For
purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an error
<PAGE>
in judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company.
(ii) "Cause" means that, for purposes of, and prior to, any
Other Termination pursuant to Section 1(h) hereof, the Executive shall
have committed:
(A) an act of fraud, embezzlement or theft in connection with
his duties or in the course of his employment with the Company or
any Subsidiary;
(B) wrongful damage to property of the Company or any
Subsidiary;
(C) wrongful disclosure of secret processes or confidential
information of the Company or any Subsidiary;
(D) wrongful engagement in any Competitive Activity; or
(E) an intentional and continued failure to substantially
perform his duties after a demand for substantial performance has
been delivered to him, or intentional misconduct which is
materially injurious to the Company.
(e) "Competitive Activity" means the Executive's participation, without
the written consent of an officer of the Company, in (i) the management of
any business enterprise if such enterprise engages in substantial and direct
competition with the Company and/or any Subsidiary and such enterprise's
sales of any product or service competitive with any product or service of
the Company and/or any Subsidiary amounted to 25% of such enterprise's net
sales for its most recently completed fiscal year and if the Company's
consolidated net sales of said product or service amounted to 10% of the
Company's consolidated net sales for its most recently completed fiscal year,
or (ii) the active recruitment of an employee of the Company or any
Subsidiary. "Competitive Activity" will not include (A) the mere ownership
<PAGE>
of securities in any such enterprise and the exercise of rights appurtenant
thereto and (B) participation in the management of any such enterprise other
than in connection with the competitive operations of such enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income
and welfare benefit policies, plans, programs or arrangements in which
Executive is entitled to participate, including without limitation any stock
option, stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company.
(g) "Incentive Pay" means a bonus, incentive or other compensation
payable either in cash, stock in lieu of cash, or a combination of such
methods of payment, in addition to Base Pay, made or to be made in regard to
services rendered pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan, program or
arrangement (whether or not funded) of the Company, or any successor thereto,
including without limitation, the Company's Executive Incentive Compensation
Plan for any year, but excluding any long-term incentive plan such as the
Company's 1994 Stock Performance Incentive Program.
(h) "Other Termination" means the termination by the Company or any
Subsidiary of Executive's employment with the Company or any Subsidiary
during the Term (other than during the Change in Control Severance Period),
other than upon the occurrence of (i) the Executive's death, (ii) the
Executive's permanent disability within the meaning of, and provided that
Executive begins to receive benefits pursuant to, the long-term disability
plan in effect for, or applicable to, Executive immediately prior to the
Termination Date (as hereinafter defined), or (iii) Cause, as defined in
Section 1(d)(ii).
<PAGE>
(i) "Target Bonus" means the bonus that Executive would have earned for
achieving 'target' performance for Executive's participation level under the
Interlake Executive Incentive Compensation Plan or any other similar
incentive compensation plan, program or arrangement of the Company or any
Subsidiary (other than any long-term incentive, stock award, restricted
stock, employee stock ownership or stock-related plan of the Company).
(j) "Term" means the period commencing as of the date hereof and
expiring on the close of business on February 28, 1997; provided, however,
that (A) commencing on March 1, 1997 and each March 1 thereafter, the term of
this Agreement will automatically be extended for an additional year unless,
not later than September 1 of the immediately preceding year, the Company or
the Executive shall have given notice that it or the Executive, as the case
may be, does not wish to have the Term extended and (B) if, prior to a Change
in Control, the Executive ceases to be an employee of the Company or any
Subsidiary for any reason other than an Other Termination, thereupon without
further action the Term shall be deemed to have expired. For purposes of
this Section 1(j), the Executive shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(k) "Termination Date" means the date on which the Executive's
employment is terminated, the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3(b).
2. Operation of Agreement: This Agreement will be effective and
binding immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, provisions of this Agreement providing benefits for
termination of employment during the Change in Control Severance Period will
not be operative unless and until a Change in Control occurs, whereupon without
further action such provisions shall become immediately operative.
<PAGE>
3. Termination Following a Change in Control: (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company or any Subsidiary during the Change in Control Severance Period
and the Executive shall not be entitled to the benefits provided by Section
4(a) only upon the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant
to, the long-term disability plan in effect for, or applicable to,
Executive immediately prior to the Change in Control; or
(iii) Cause, as defined in Section 1(d)(i).
If, during the Change in Control Severance Period, the Executive's employment
is terminated by the Company other than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), the Executive will be entitled to the benefits provided by
Section 4(a) hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary during
the Change in Control Severance Period with the right to severance
compensation as provided in Section 4(a) upon the occurrence of one or more
of the following events (regardless of whether any other reason, other than
Cause as defined in Section 1(d)(i), for such termination exists or has
occurred, including without limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially equivalent
office or position, of or with the Company and/or a Subsidiary, as the
case may be, which the Executive held immediately prior to a Change in
Control, or the failure to elect or reelect, or the removal of, the
Executive as a Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company immediately prior to
the Change in Control;
<PAGE>
(ii) (I) A significant adverse change in the nature or scope
of the authorities, powers, functions, responsibilities or duties
attached to the position with the Company and any Subsidiary which the
Executive held immediately prior to the Change in Control; (II) a
reduction in the aggregate of the Executive's Base Pay and Incentive Pay
at the rates in effect immediately prior to a Change in Control; or
(III) the termination or denial of the Executive's rights to Employee
Benefits providing perquisites, benefits and service credit for benefits
at least as great in the aggregate as are payable thereunder immediately
prior to a Change in Control or a reduction in the scope or value
thereof;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it has
been made in good faith and in all events will be presumed to have been
made in good faith unless otherwise shown by the Company by clear and
convincing evidence) that a change in circumstances has occurred
following a Change in Control, including, without limitation, a change
in the scope of the business or other activities for which the Executive
was responsible immediately prior to the Change in Control, which has
rendered the Executive unable to carry out any of the authorities,
powers, functions, responsibilities or duties attached to the position
held by the Executive immediately prior to the Change in Control, which
situation is not remedied within 30 calendar days after written notice
to the Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) shall
have assumed all duties and obligations of the Company under this
Agreement pursuant to Section 10(a); or
<PAGE>
(v) The Company requires the Executive to have his principal
location of work changed, to any location which is in excess of 50 miles
from Executive's principal residence immediately prior to the Change of
Control, or requires the Executive to travel away from his office in the
course of discharging his responsibilities or duties hereunder more than
30 consecutive days or an aggregate of more than 60 days in any
consecutive 90-day period without, in either case, his prior written
consent.
(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof.
4. Severance Compensation: (a) If, following the occurrence of a
Change in Control, the Company terminates the Executive's employment during the
Change in Control Severance Period other than pursuant to Section 3(a), or if
the Executive terminates his employment pursuant to Section 3(b):
(i) The Company will pay to the Executive, within five
business days after Executive's demand therefor, a lump sum payment in
an amount equal to the multiple set forth under Column I on Annex A
hereto times the sum of (A) Base Pay (at the highest rate in effect for
any period prior to the Termination Date), plus (B) the Target Bonus
established for the fiscal year in which the Change in Control or the
Termination Date occurs, whichever is higher; and
(ii) The Company will arrange to provide the Executive, at no
cost to the Executive, with (A) health benefits (including without
limitation medical and dental insurance or benefits with dependent
coverage providing for aggregate individual and family deductibles no
greater than $250 and $500 per annum, respectively, for medical
insurance and $50 per individual for dental coverage), substantially
similar to those which the Executive was receiving or entitled to
receive immediately prior to the Termination Date, (B) life insurance
and disability insurance or coverage at least equivalent to that the
<PAGE>
Executive was receiving or entitled to receive immediately prior to the
Termination Date, and (C) reasonable and customary executive
outplacement services (or, at the election of the Executive, within five
business days after Executive's demand therefor, a lump sum cash payment
in lieu thereof equal to 15% of the sum of (x) Executive's Base Pay (at
the rate in effect immediately prior to the Termination Date) plus (y)
the Target Bonus established for the fiscal year in which the
Termination Date occurs, (collectively, "Additional Benefits"), for not
less than the number of months set forth under Column II on Annex A
hereto following the Termination Date (the "Change in Control
Continuation Period"); and
(iii) The Company will offer to the Executive the opportunity
to purchase any Company leased automobile being used by the Executive
immediately prior to the Termination Date for the aggregate amount
necessary to effect the purchase by the Company pursuant to the terms of
the lease for such automobile, which purchase may at Executive's option
be effected as a credit against the lump sum payment due Executive under
Section 4(a)(i).
(b) In the event of an Other Termination of the Executive:
(i) The Company will pay to the Executive within five
business days after Executive's demand therefor, a lump sum payment in
an amount equal to (x) the multiple set forth under Column I on Annex B
hereto times (A) Base Pay (at the rate in effect immediately prior to
the Termination Date), plus (B) the Target Bonus established for the
fiscal year in which the Termination Date occurs, minus (y) the amount
of any severance payments actually paid to the Executive in connection
with Executive's Other Termination pursuant to any other agreement
between the Company or any Subsidiary and the Executive (other than
payments made pursuant to any Employee Benefits); and
(ii) The Company will arrange to provide the Executive, at no
cost to the Executive, with Additional Benefits for not less than the
<PAGE>
number of months set forth under Column II on Annex B hereto (the "Other
Termination Continuation Period"); and
(iii) The Company will offer to the Executive the opportunity
to purchase any Company leased automobile being used by the Executive
immediately prior to the Termination Date for the aggregate amount
necessary to effect the purchase by the Company pursuant to the terms of
the lease for such automobile, which purchase may, at Executive's
option, be effected as a credit against the lump sum payment due
Executive under Section 4(b)(i).
(c) If and to the extent that any benefit described in
Sections 4(a)(ii) or 4(b)(ii) is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any Subsidiary, as the
case may be, then the Company will itself pay or provide for the payment to
the Executive, his dependents and beneficiaries, of such benefits. Without
otherwise limiting the purposes or effect of Section 5, benefits otherwise
receivable by the Executive pursuant to Sections 4(a)(ii) or 4(b)(ii) will be
reduced to the extent comparable benefits (including coverage for any
preexisting conditions or illness) are actually received by the Executive
from another employer during any Change of Control Continuation Period or
Other Termination Continuation Period following the Executive's Termination
Date. There will be no right of set-off or counterclaim in respect of any
claim, debt or obligation against any payment to or benefit for the Executive
provided for in this Agreement, except as provided in subsection (y) of
Section 4(b)(i) and the second sentence of this Section 4(c).
(d) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to
be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite "prime rate" as quoted from time to time
during the relevant period in the Midwest Edition of The Wall Street Journal.
Such interest will be payable as it accrues on demand. Any change in such
prime rate will be effective on and as of the date of such change.
<PAGE>
(e) Notwithstanding any other provision hereof, the parties' respective
rights and obligations under this Agreement will survive any termination or
expiration of this Agreement following a Change in Control, the termination
of the Executive's employment following a Change in Control for any reason
whatsoever, the termination or expiration of this Agreement following an
Other Termination, or the termination of the Executive's employment following
an Other Termination.
(f) Upon written notice given by the Executive to the Company prior to
the occurrence of the Change in Control that caused the Executive to become
entitled to the benefits under this Agreement, the Executive, at his sole
option, may elect to have all or any of the amounts so payable paid to him on
a quarterly basis during the remainder of the Change in Control Continuation
Period or any portion thereof designated by the Executive.
5. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult and may be impossible (a) for the Executive to find
reasonably comparable employment following the Termination Date, and (b) to
measure the amount of damages which Executive may suffer as a result of
termination of employment hereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable and will
be liquidated damages, and the Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employ-
ment or otherwise, nor will any profits, income, earnings or other benefits
from any source whatsoever create any mitigation, offset, reduction or any
other obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in subsection (y) of Section 4(b)(i) and the second sentence
of Section 4(c).
6. Certain Limitations: (a) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined (as hereafter provided)
that any payment or distribution by the Company or any of its affiliates to or
for the benefit of the Executive hereunder would be subject to the excise tax
(the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") (or any successor provision thereto) but for the application of
this Section 6, then the payments and benefits to be provided hereunder shall
be reduced to the minimum extent necessary so that no portion thereof shall be
<PAGE>
subject to the Excise Tax but only if by reason of, and giving effect to such
reduction, Executive's net after-tax benefit shall exceed Executive's net
aftertax benefit if such reduction were not made. If the application of this
Section 6 should require a reduction in benefits under this Agreement, such
reduction shall be implemented first by reducing any non-cash benefits to the
extent necessary, and second by reducing any cash benefits to the extent
necessary. In each case, the reductions shall be made starting with the latest
payment or benefit.
(b)(i) The calculation of whether any reduction in Executive's payments
and benefits shall be made under this Section 6 shall be made (A) within 30
days following the Termination Date, if applicable, and (B) at such other
time or times as may be reasonably requested by the Company or the Executive,
including, without limitation, at such times as may be necessary to effect
any recalculation under Section 6(b)(ii).
(ii) If (I) any payment or benefit taken into account in calculating
the amount of the Excise Tax payable by Executive exceeds the payment or
benefit actually received by Executive hereunder following the Termination
Date, (II) any payments and benefits which were to have been provided
hereunder were reduced as a result of the calculation made under Section
6(b)(i), and (III) a recalculation based upon payments and benefits actually
received by Executive hereunder indicates that Executive's net after-tax
benefit would be maximized if such reduction had not been made, then the
Company shall pay Executive the amount of such reduction no later than 10-
days following such recalculation so as, and to the extent necessary, to
maximize Executive's net after-tax benefit based upon payments and benefits
actually received by Executive hereunder.
(c) The calculations required under this Section 6 shall initially be
made by the Company and Executive. If no agreement on such calculations is
reached, the Executive and the Company shall agree to the selection of an
accounting firm to make the calculations. If no agreement can be reached
regarding the selection of an accounting firm, the Company shall select a
nationally recognized independent public accounting firm which has no current
or recent business relationship with the Company. The determination of any
<PAGE>
such firm shall be conclusive and binding on all parties. All calculations
provided for in this Section 6 shall be made at the Company's expense.
7. Legal Fees and Expenses; Security:
(a) It is the intent of the Company that the Executive not be required
to incur legal fees and the related expenses associated with the
interpretation, enforcement or defense of Executive's rights under this
Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to the
Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny,
or to recover from, the Executive the benefits provided or intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of Executive's choice, at the
expense of the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director,
officer, stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship
with such counsel, and in that connection the Company and the Executive agree
that a confidential relationship shall exist between the Executive and such
counsel. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees
and expenses incurred by the Executive in connection with any of the
foregoing.
<PAGE>
(b) Without limiting the obligations of the Company pursuant to
Section 7(a) hereof, the performance of the Company's obligations under
Section 7 of this Agreement and of Severance Pay Agreements with other
executive officers of the Company shall be secured by an irrevocable clean
letter of credit, a conformed copy of which shall be attached hereto as
Annex C and is incorporated herein by reference following notice by the
Company to the Executive and such other executive officers (the "Letter of
Credit"), for the benefit of the Executive and such other executive officers
and issued by a commercial bank selected by the Company as promptly as
practicable hereafter (the "Bank"), and providing that the fees and expenses
of counsel selected from time to time by the Executive and such other
executive officers pursuant to Section 7 of this Agreement and such other
severance pay agreements shall be paid, or reimbursed to the Executive and
such other executive officers if paid by the Executive and such other
executive officers, on a regular, periodic basis upon presentation by the
Executive and such other executive officers to the Bank of a statement or
statements prepared by such counsel in accordance with its customary
practices; provided, however, that such Letter of Credit may not be used by
the Executive for the enforcement of rights with respect to amounts due under
Section 4(b) of this Agreement. The Company shall pay all amounts and take
all action necessary to maintain the Letter of Credit during the Term, during
the Change in Control Severance Period, and thereafter during any period in
which amounts are payable by the Company hereunder and if, notwithstanding
the Company's complete discharge of such obligations, such Letter of Credit
shall be terminated or not renewed, the Company shall obtain a replacement
irrevocable clean letter of credit on substantially the same terms and
conditions as contained in the Letter of Credit drawn upon a commercial bank
having total assets of at least $500,000,000 selected by the Company or any
similar arrangement which, in any case, assures that Executive of the
benefits of this Section 7. Any failure by the Company to satisfy any of its
obligations under this Section 7(b) shall not limit the rights of the
Executive hereunder. Subject to the foregoing, the Executive shall have the
status of a general unsecured creditor of the Company and shall have no right
to, or security interest in, any assets of the Company or any Subsidiary.
<PAGE>
8. Employment Rights; Termination Prior to Change in Control:
(a) Nothing expressed or implied in this Agreement will create any
right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary, whether
or not a Change in Control shall occur.
(b) Any termination of employment of the Executive or the removal of
the Executive from the office or position in the Company following the
commencement of any discussions with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
9. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
10. Successors and Binding Agreement: (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
<PAGE>
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 10(a) and 10(b) hereof. Without limiting the generality
or effect of the foregoing, the Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by
pledge, creation of a security interest, or otherwise, other than by a
transfer by Executive's will or by the laws of descent and distribution and,
in the event of any attempted assignment or transfer contrary to this
Section 10(c), the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
11. Notices: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office and to the Exec-
utive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to
the principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
<PAGE>
14. Competitive Activity: If the Executive shall have received or
shall be receiving benefits under this Agreement, the Executive shall not,
without the written consent of an officer of the Company, engage in any
Competitive Activity during the Change in Control Continuation Period or Other
Termination Continuation Period, as the case may be.
15. Arbitration:
(a) Any controversy or claim (contract, tort or statutory) under
federal, state or local law between the Company and Executive arising out of
any of the terms, provisions, or conditions of this Agreement, shall, on
written request of either party served upon the other, be submitted to final
and binding arbitration. Such arbitration shall be compelled and enforced
according to the Illinois Uniform Arbitration Act, and shall be conducted
according to the Model Employment Arbitration Procedures of the American
Arbitration Association, except as otherwise provided herein. The
arbitration shall be conducted before the American Arbitration Association or
such other arbitration service as the parties may, by mutual agreement,
select. The arbitrator shall be appointed by agreement of the parties hereto
or, if no agreement can be reached, by the American Arbitration Association
pursuant to its rules.
(b) Judgment on the award the arbitrator renders may be entered in any
court having jurisdiction over the parties. The arbitration shall be
conducted in Chicago, Illinois. This Section 15 shall survive the expiration
or termination of this Agreement. If any part of this Section 15 is found to
be void as a matter of law or public policy, the remainder of this Section 15
will continue to be in full force and effect.
16. Miscellaneous: No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
<PAGE>
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
17. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
THE INTERLAKE CORPORATION
By
-------------------------
-------------------------
<PAGE>
Annex A
-------
(I) (II)
Multiple of Annual
Base Salary and Months of Additional
Bonus Severance Benefits Continuation
------------------ ---------------------
2 24
<PAGE>
Annex B
-------
(I) (II)
Multiple of Annual
Base Salary and Months of Additional
Bonus Severance Benefits Continuation
------------------ ---------------------
1 12
<PAGE>
Annex C
-------
[Form of letter of credit]
EXHIBIT 13
<TABLE>
Selected Financial Data
(in thousands except per share data)
<CAPTION>
1994 1993 1992 1991 1990
For the Year
<S> <C> <C> <C> <C> <C>
Net sales of continuing operations $752,592 $681,330 $708,199 $714,742 $786,279
Income (loss) from continuing operations
before extraordinary loss and
accounting change $(40,557)(F1) $(25,962)(F2) $(13,990)(F2) $(13,744)(F2) $(12,843)(F2)
(F3) (F3)
Net income (loss) $(40,751)(F1) $(25,962)(F2) $(27,698)(F2) $(13,744)(F2) $(21,751)(F2)
(F3) (F4) (F3) (F5)
Income (loss) from continuing operations
before extraordinary loss and
accounting change per common share $(1.84)(F1) $(1.18)(F2)(F3) $(.84)(F2) $(1.31)(F2)(F3) $(1.22)(F2)
Net income (loss) per common share $(1.85)(F1) $(1.18)(F2)(F3) $(1.67)(F2)(F4)$(1.31)(F2)(F3) $(2.07)(F2)(F5)
Average number of shares outstanding 22,027 22,027 16,574 10,484 10,516
At Year End
Working capital
cash and cash equivalents $ 39,708 $ 31,934 $ 38,640 $ 10,541 $ 18,473
other working capital 27,911 41,935 54,149 50,806 51,547
total working capital 67,619 73,869 92,789 61,347 70,020
current ratio 1.4 to 1 1.5 to 1 1.6 to 1 1.4 to 1 1.4 to 1
Total assets $444,953 $464,160 $511,292 $478,067 $518,997
Long-term debt, including current maturities 442,451 443,135 450,801 471,441 494,615
Convertible Exchangeable Preferred Stock 39,155 39,155 39,155
Common shareholders' equity (deficit) (296,435) (259,767) (232,718) (239,465) (226,808)
<FN>
(F1) includes a charge for goodwill write-down of $34,174 (see Note 2)
(F2) includes restructuring charges of $5,611, $2,523, $3,344, and $13,482 in
1993, 1992, 1991, and 1990 (see Note 3 )
(F3) includes nonoperating charges for environmental matters of $4,750 in 1993
and $6,000 in 1991 (see Note 15)
(F4) includes extraordinary loss on early extinguishment of debt of $7,567 (see
Note 5) and cumulative effect of changes in accounting principles of
$6,141 (see Note 4)
(F5) includes loss from discontinued operations of $8,908
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
(dollars in millions except per share data)
Results of Operations
Net sales were $752.6, $681.3, and $708.2, respectively, in 1994, 1993, and
1992. Net sales in the Engineered Materials segment were up $23.9 in 1994 as
shipments of metal powders reached record levels on the continued strength of
North American auto and light truck production and the increased penetration by
powder metallurgy in automotive applications. Handling/Packaging Systems'
sales were up $47.4, primarily as a result of a robust market for material
handling equipment in the U.S. and Asia Pacific markets, coupled with higher
sales of strapping products in the U.S. and Canada. In 1993, in the Engineered
Materials segment, improved North American auto and light truck production led
to a $9.0 increase in sales of metal powders which was offset by a $6.5 decline
in Aerospace Components' sales. Handling/Packaging Systems' sales declined in
1993 as increased U.S. sales of material handling equipment were more than
offset by recessionary conditions in Continental Europe and the effects of a
stronger U.S. dollar.
Operating income was $24.2, $38.2, and $50.4, respectively, in 1994, 1993, and
1992. In 1994, operating income declined $14.0 from 1993, reflecting a $34.2
charge to write down goodwill attributable to the Aerospace Components and
Packaging businesses. Based on a revised accounting policy for assessing the
valuation of long-lived assets and updated long-term projections for these
businesses as discussed in "Long-Lived Assets" and in Note 2, management
determined that the goodwill related to the Aerospace Components and Packaging
businesses was impaired. Record metal powder volume at Special Materials,
record Handling volumes in the U.S. and Asia Pacific, and improved sales of
packaging products primarily in the U.S. and Canada had a favorable effect on
1994 operating results. Restructuring charges of $5.6 and $2.5 reduced
operating income in 1993 and 1992, respectively, as discussed in "Restructuring
Charges" and Note 3. In 1993, operating income was $12.2 lower than in 1992
reflecting the recessionary impact on volume and pricing in the
Handling/Packaging Systems segment in Continental Europe, a restructuring
charge of $5.6, lower shipments and weak conditions in the commercial aerospace
industry, and higher scrap steel costs in Special Materials. These declines
were partially offset by higher domestic Handling profits. Excluding the
goodwill charge in 1994 and the restructuring charges in 1993 and 1992,
operating income was $58.4, $43.8, and $52.9 in 1994, 1993, and 1992,
respectively.
From 1992 to 1994, Special Materials' shipments of metal powders increased 24%
due to growth in North American auto and light truck production and increased
usage of metal powders in automotive parts. At Aerospace Components, reduced
U.S. defense spending resulted in a decline in military sales of $3.8 between
1992 and 1994. This decline in military fabrication sales was more than offset
by a $6.0 increase in sales for commercial fabrication. 1994 repair sales were
down $7.3 from 1992 reflecting continued weak demand from the airline industry.
In Handling/Packaging Systems, despite a decline in sales in 1993 in most
markets, 1994 sales exceeded those of 1992 in all markets other than
Continental Europe as demand for capital goods in most major economies improved.
Cost of sales as a percentage of sales was 77%, 76%, and 75%, respectively, in
1994, 1993, and 1992. The increase primarily reflects rising raw material
costs which were not fully recovered through price increases and cost
reductions. Although sales increased 10%, selling and administrative expenses
in 1994 were held to 1993 levels. As a percentage of sales, selling and
administrative expenses were 16% in 1994, 17% in 1993, and 18% in 1992.
The following business segment commentary reflects the 1994 goodwill write-down
and the 1993 and 1992 restructuring charges for each segment. However, the
discussion of individual business unit results is presented before these
charges and allocation of general corporate expenses. See Note 6 for further
information on business segments.
<TABLE>
Net Sales and Operating Profit by Business Segment
(in millions)
<CAPTION>
Net Sales Operating Profit
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Engineered Materials
Special Materials $153.9 $131.5 $122.5
Aerospace Components 62.5 61.0 67.5
216.4 192.5 190.0 $ 32.3 $ 26.3 $ 29.6
Goodwill Write-Down (13.2)
Restructuring Charge (1.8)
216.4 192.5 190.0 19.1 24.5 29.6
Handling/Packaging Systems
Handling 406.0 366.7 395.3
Packaging 130.2 122.1 122.9
536.2 488.8 518.2 28.1 19.1 24.0
Goodwill Write-Down (21.0)
Restructuring Charge (3.8) (2.5)
536.2 488.8 518.2 7.1 15.3 21.5
Corporate Items (2.0) (1.6) (0.7)
Total Net Sales $752.6 $681.3 $708.2
Total Operating Profit $ 24.2 $ 38.2 $ 50.4
</TABLE>
Engineered Materials
Engineered Materials includes Special Materials (metal powders for
manufacturing precision parts) and Aerospace Components (precision machined
structures, complex fabrications, and jet engine component repairs).
Sales increased 12% in 1994 in the Engineered Materials segment reflecting
record shipments of metal powders which were up 17% from 1993, driven by
continued growth in North American auto and light truck production, increased
penetration by powder metallurgy in automotive applications and higher selling
prices. Aerospace Components' sales were up slightly as higher commercial
fabrication shipments were substantially offset by lower repair and defense
business.
Aerospace Components' defense-related business represented approximately 33%,
39%, and 36% of its sales in 1994, 1993, and 1992, respectively. Defense-
related sales as a percent of the Company's consolidated sales were
approximately 3% in each of the last three years. In anticipation of a long-
term slowdown in military procurement, Aerospace Components has developed and
executed a strategy of increasing its fabrication business' penetration of the
commercial and space sectors. Although Aerospace Components has experienced a
71% increase in sales to the commercial sector from 1990 to 1994, margins in
this area are generally lower than those on military business, particularly in
the light of weak conditions in commercial aviation which have led to
competitive pricing pressure. Weak demand in the airline industry also had a
negative impact on repair volumes with sales declining 24% in 1994 after an 11%
drop in 1993.
Operating profit for the segment fell 22% in 1994 as a result of the write-down
of goodwill as discussed in "Long-Lived Assets" and in Note 2. Excluding the
effect of the goodwill charge and the $1.8 restructuring charge in 1993,
operating profit increased 23% over 1993. Special Materials' operating profit
was up 20% primarily reflecting the record volume. Scrap steel costs increased
18% above 1993, about half of which was recovered with higher selling prices.
Operating profit was up 27% at Aerospace Components due to a one-time gain from
settlement of a real estate matter (see "Nonoperating Items") and slightly
improved margins in the aviation repair business.
In 1993, segment sales increased 1% over 1992. Metal powder shipments were up
8% in 1993 on higher North American automobile and light truck production.
Aerospace Components' sales declined 10% in 1993 due to the slowdown in
military procurement and the weak conditions in the airline industry.
Operating profit for the segment fell 17% in 1993. Excluding the $1.8 of
restructuring charges, segment operating profit fell 11% in 1993. Special
Materials' operating profit fell 3% despite the higher metal powder volume as
higher scrap steel costs and other manufacturing costs more than offset the
benefits of higher volume. Scrap steel costs increased 20% in 1993, only a
small portion of which was recovered with higher selling prices. Aerospace
Components' operating profit was 37% lower in 1993 than in 1992. In addition
to the volume shortfall noted above, depressed conditions in the commercial
aerospace and airline industries led to excess capacity resulting in increased
price competition. Results in 1993 were also unfavorably affected by high
initial costs related to the early production stages of new non-defense
business.
The Engineered Materials segment's order backlog at year-end 1994 was $148.4,
double the year-end 1993 balance of $73.6. Special Materials' backlog, which is
generally short-term in nature, was up 51% to a near record level. Aerospace
Components' backlog increased 127% from unusually low levels in 1993 due mainly
to new, multi-year fabrication orders received for commercial, military and
space applications.
Handling/Packaging Systems
Total segment sales in 1994 were up 10% above 1993. Handling sales increased
11% from the prior year. Demand for material handling products in the U.S.
continued to be strong, resulting in record volumes, higher pricing and a 14%
increase in sales. Strong Australian and Pacific Rim demand, together with
sales of the newly acquired Hong Kong distributor, led to a 52% increase in
Asia Pacific sales to record levels. European Handling sales were up slightly
as improvements in the U.K. were offset by the effects of a slow economy in
Continental Europe. Packaging sales were up 7% with higher sales in all
locations, especially in Canada where, on a local currency basis, sales were up
13% on strong domestic and export demand.
Segment operating profit fell 54% to $7.1 due to the $21.0 write-down of the
goodwill related to the Packaging unit as discussed in "Long-Lived Assets" and
in Note 2. Excluding the effects of the goodwill write-down and the $3.8
restructuring charge in 1993, operating profit was up 47%. U.S. Handling
profits were up 43% reflecting the record volumes and better pricing which were
partially offset by an 11% increase in steel costs. The improved volume at
Handling Asia Pacific returned that unit to profitability and was a significant
contributor to the increase in segment income. Operating profit for the
European Handling business was up 18% as higher volume in the U.K. and cost
savings throughout Europe were partially offset by lower volume and pricing in
Continental Europe and higher steel costs in the U.K. Despite a decline in
operating profit in the newspaper-related business, Packaging operating profit
was up 25%, due primarily to higher strapping volume and selling price and LIFO
inventory liquidation benefits in Canada and the U.K.
In 1993, Handling/Packaging Systems' sales were down 6% from 1992. Domestic
Handling sales were up 17% as the market for material handling equipment in the
U.S. showed substantial improvement during the year. However, this increase
was more than offset by a decline in Continental Europe and the unfavorable
effects of the stronger dollar. Recessionary conditions in Continental Europe,
especially Germany, resulted in lower volume and pricing levels, leading to a
sales decline of 21% for the European Handling unit overall. Packaging sales
fell by 1% during the year.
Segment operating profit in 1993 was 29% below 1992. Handling profit fell 20%,
as improved domestic volume and cost reduction efforts throughout the group
were not enough to offset the recessionary impact of lower volume and pricing
on the European operations and the effect of a stronger dollar. Packaging
operating profit was 10% lower than the prior year as improved strapping and
machine volume in North America was more than offset by lower stitching product
volume and the effect of a stronger dollar.
Handling/Packaging Systems ended 1994 with an order backlog of $93.1, up from
$74.0 at the end of 1993 (at the same exchange rates), due mainly to improved
order rates at all Handling operations. Order intake at U.S. Handling reached
a record level in 1994.
Restructuring Charges
In 1993, the Company provided $5.6 for restructuring costs related to: the
exit from certain lines of businesses that were part of Handling North America;
reorganization and downsizing of portions of the European Handling operation;
and, in the Aerospace Components business, the abandonment of certain product
lines which resulted in idled equipment and the provision for severance costs
related to a downsizing of the Aviation Repair workforce. The $5.6 consisted
of $1.7 in severance costs, $1.5 of idled equipment written down to fair market
value, $1.4 of inventory related to the exited businesses and $1.0 of other
costs. Quantification of the effects of the restructuring on future operating
results is not practical because some of the actions were taken to avoid future
costs while other actions were strategic in nature and implemented to limit
exposure to changing market dynamics. These restructuring activities are
substantially complete and the remaining reserves are immaterial.
In 1992, the Company recorded $2.5 of additional costs related to unfavorable
adjustments on assets held for sale as part of an asset sale program adopted in
1989 as part of an overall restructuring program which modified its strategic
operating plan. The modified strategic operating plan identified certain
businesses and corporate assets to be disposed of and implemented significant
corporate cost reductions. Most of the designated businesses were sold or
shut down in 1990. The 1992 adjustment reflected the decline in value of two
pieces of real estate held for sale, both of which were sites of former
Handling operations.
Long-Lived Assets
Prior to the fourth quarter of 1994, impairment with respect to the Company's
assets was determined by comparing the sum of the undiscounted projected future
cash flows attributable to each business to the carrying value of the assets of
that business. In the fourth quarter of 1994, the Company concluded that, in
light of its highly leveraged capital structure, a preferable accounting policy
for analyzing the valuation of long-lived assets would be to reflect its cost
of capital in computing the present value of the expected cash flows of its
businesses. In addition, the long-term cash flow projections were updated to
reflect current information. Applying this new policy to all of its long-lived
assets, the Company determined that with respect to its Aerospace Components
and newspaper-related Packaging businesses, in light of the significant
deterioration in business climates in the aerospace and newspaper industries
over recent years, the values of the discounted cash flows were insufficient to
recover the carrying value of the long-lived assets. Therefore, the goodwill
component of those assets was deemed to be impaired. As a result, a charge of
$34.2 was taken for the write-down of goodwill established in connection with
the acquisitions of the Aerospace Components and newspaper-related Packaging
businesses. As of December 25, 1994, the remaining net investment in these
businesses was approximately equal to the value of the discounted projected
cash flows attributable to them, and consisted primarily of tangible assets.
The Company intends to continue to annually assess the carrying values of its
long-lived assets using the analysis described above. (See Note 2.)
Interest Expense
The Company has a highly leveraged capital structure with substantial net
interest expense of $50.2, $49.1, and $51.4 in 1994, 1993, and 1992,
respectively. In 1994, the increase in net interest expense was caused
primarily by higher rates on bank debt. The decline in 1993 was largely the
result of lower average outstanding borrowings. The Company has long-term
interest rate agreements as required under its bank credit agreement, which
effectively provided fixed rates of interest on 57% of its bank obligations at
the end of 1994, all of which bore interest at floating rates.
Nonoperating Items
The Company has certain income and expenses which are not related to its
ongoing operations. In 1994, these items included a $1.1 one-time gain for
settlement of a real estate matter with a local transportation authority at
Aerospace Components. In 1993, a charge of $4.8 was recorded for anticipated
costs for environmental matters as discussed below and in Note 15. Ongoing
postretirement expenses attributable to disposed or discontinued operations are
also shown as nonoperating items.
The Company has been identified as a potentially responsible party in
connection with the investigation and remediation of a site in Duluth,
Minnesota. Based on the Company's current estimates of its potential
liabilities related to the site, the Company believes that this matter is
unlikely to have a material adverse effect on the Company's liquidity or
consolidated financial condition. However, the Company's current estimate of
its potential environmental liabilities at this site is subject to considerable
uncertainty related to both the clean-up of certain contaminated soils at the
site, as well as the possible remediation of certain underwater sediments.
The Company is a defendant in an action in federal district court in Toledo,
Ohio, in which the City of Toledo alleges various claims in connection with the
alleged contamination of a 1.7 acre parcel of land (the "right-of-way") owned
by the City and an adjacent piece of land which formerly was the site of a coke
plant and related by-products facilities. The City of Toledo is seeking an
order compelling the defendants to perform a remedy of the right-of-way which
it asserts would cost approximately $4 million. The Company believes the
right-of-way could be remedied for much less, although remediation of the
entire site, if it were required, could cost more. The Company also believes
it is entitled to indemnification by one of the other defendants in the matter,
Beazer Materials and Services Inc., under the terms of a 1978 sale agreement.
The Company has brought an indemnification cross-claim against Beazer which may
be decided on motions for summary judgment in 1995.
In May 1994, the Company instituted an action seeking a declaratory judgment
against and recoveries from insurers in connection with environmental claims
under policies covering nearly 30 years. The parties are in discovery and
trial is tentatively set for October 1996.
Provision for Income Taxes
In 1993 and 1992, high levels of interest expense resulted in losses for U.S.
federal tax purposes. Because most of the interest expense is borne in the
United States at the parent company level, the Company had taxable income in
foreign and state jurisdictions despite the high levels of consolidated
interest expense. Foreign taxes paid did not result in a benefit in the U.S.
and, as a result, the Company had tax expense in 1994, 1993, and 1992,
notwithstanding consolidated pretax losses in each of those years.
In 1994, a small amount of domestic taxable income was generated as the write-
down of goodwill in 1994 did not increase the deduction allowable for tax
purposes. This taxable income was offset with the carryforward of prior year
losses. The Company also provided for additional amounts related to open
federal tax returns for the years 1982 through 1990. In addition, in 1994 the
Company had a small amount of income subject to Alternative Minimum Tax (AMT)
in the U.S. because of certain restrictions on the amount of net operating loss
that can be carried forward for purposes of calculating that tax.
At the end of 1994, the Company's U.S. federal income tax returns for the years
1988 through 1990 were in the process of examination. Resolution of tax years
1982-1984 is pending at the U.S. Tax Court following receipt in 1994 by the
Company of a statutory notice of deficiency for $17.0 plus interest and
penalties. Resolution of tax years 1985-1987 is pending at the Appeals
Division of the Internal Revenue Service. The Company believes that its
positions with respect to the contested matters for these years are strong, and
that adequate provision has been made for the possible assessments of
additional taxes and interest. However, there can be no assurance that federal
income tax issues for the years 1982-1990 will be resolved in accordance with
the Company's expectations or, alternatively, they could be settled for either
more or less than what has been provided.
In 1992, the Company adopted a new method of accounting for income taxes (see
"Cumulative Effect of Accounting Changes" and Note 4).
Extraordinary Loss
In 1992, as part of its debt refinancing, the Company redeemed its Increasing
Rate Notes and negotiated an amended bank credit agreement. These actions
necessitated the write-off of related deferred debt issuance costs amounting to
$7.6 without any net tax benefit in 1992.
Cumulative Effect of Accounting Changes
In 1992, the Company adopted the Financial Accounting Standards Board's State-
ments of Financial Accounting Standards ("FAS") No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" and No. 109 "Accounting
for Income Taxes". The Company's foreign operations adopted FAS No. 106 in
1994. The cumulative effects of these adoptions were recognized in 1992 and
1994, respectively, as of the beginning of the year. The adoption of FAS No.
106 resulted in a charge of $9.3 (net of taxes) in 1992 and $.2 in 1994, while
the adoption of FAS No. 109 resulted in a credit of $3.1. (See Note 4.)
Liquidity and Capital Resources
Interlake's total debt at year-end 1994 was $442.5, down $.7 from year-end
1993. Cash totaled $39.7 at the end of the year, up $7.8 from year-end 1993.
During 1995, the Company will have long-term debt amortization requirements of
$24.6. Based on current levels of performance, and the availability of
additional revolver borrowings under the Company's bank credit agreement, the
Company believes that it will have adequate liquidity to meet its debt service
and operating requirements in 1995. Under the bank credit agreement, the
Company will be able to borrow under its revolving facility up to an additional
$44.0 over the year-end revolving indebtedness. However, outstanding revolver
borrowings at the end of each of the Company's fiscal 1995 quarters will be
limited to between $17.0 and $29.0 above the year-end 1994 revolver borrowings.
In addition, the Company will have up to $6.0 of deferred term loan
availability during the year for amounts that may be incurred on certain
environmental matters.
In the first quarter of 1995, the Company completed an amendment of certain
covenants under its bank credit agreement. Although there can be no
assurances, based on current levels of performance the Company believes it will
be able to comply with all bank credit agreement covenants in 1995. In 1996,
the Company has long-term debt amortization requirements of $88.8 and,
potentially, significant payments related to tax matters (see "Provision for
Income Taxes") which it does not expect to be able to meet from operating cash
flow. The Company continues to evaluate alternative actions to refinance some
or all of its long-term bank obligations including among others the raising of
new equity capital and the issuance of replacement debt.
Cash Flow (see Consolidated Statement of Cash Flows)
Cash inflows provided by operating activities were $21.9 and $8.0 in 1994 and
1993, respectively, while operating activities used cash of $7.2 in 1992. Cash
provided by operating activities was up in 1994 from 1993 primarily as a result
of higher operating earnings before the $34.2 goodwill charge which did not
affect cash. Working capital needs were $6.5 in 1994 versus an inflow of $5.8
in 1993 which resulted from the decline in sales in 1993. In 1994, other
operating adjustments reflect the movement of certain expected tax liabilities
from current to long-term. Excluding debt issuance costs related to the 1992
financing plan, cash inflows provided by operating activities were $4.8 in
1992.
Cash outflows used by investing activities were $14.6, $13.1, and $26.3,
respectively, in 1994, 1993, and 1992. Capital expenditures for expansion
projects totaled $4.1, $6.1, and $8.8, respectively, in 1994, 1993, and 1992.
Expansion spending in 1994 and 1993 included the addition of two annealing
furnaces to expand capacity at the Special Materials operation and, in 1993, a
new production line for polyester strapping at Packaging. Expansion spending
in 1992 included the implementation of advanced manufacturing techniques to
further enhance the quality of Special Materials' atomized metal powders and
the establishment of Aerospace Components' new Tulsa facility for repair of jet
engine fan blades. Management believes that capital expenditures have been
adequate to properly maintain the Company's businesses and provide for
anticipated growth opportunities. At the end of 1994, the unexpended balance on
approved capital expenditure projects was $6.4. The Company anticipates that
1995 capital spending will be approximately $20.0.
Cash inflows from financing activities were $.7 in 1994 and $67.5 in 1992. The
1992 inflow resulted from implementation of the 1992 debt refinancing. The
cash outflow from financing activities of $1.3 in 1993 resulted primarily from
scheduled amortization of long-term debt.
Foreign Operations
The Company does business in a number of foreign countries, mainly through its
Handling/Packaging Systems segment. The results of these operations are
initially measured in local currencies, principally in British pounds, German
marks, Canadian dollars and Australian dollars, and then translated into U.S.
dollars at applicable exchange rates. The reported results of these operations
are sensitive to changes in applicable foreign exchange rates which could have
a material effect on the Company's results of operations. In 1994, the dollar
was somewhat weaker against most currencies and had a $5.2 favorable impact on
sales but an insignificant impact on operating income. In 1993, the dollar was
generally stronger against most European currencies than in 1992, resulting in
a negative impact on sales of $35.7 and on operating income of $2.4.
Fluctuations in foreign currency exchange rates in 1992 had very little effect
on sales and operating profit. (For additional information about the Company's
operations by geographic area, see Note 6.)
Effects of Inflation
The impact of inflation on the Company in recent years has not been material,
and it is not expected to have a significant effect in the foreseeable future.
<PAGE>
Report of Independent Accountants
To the Board of Directors
and Shareholders of
The Interlake Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of shareholders'
equity (deficit) present fairly, in all material respects, the financial
position of The Interlake Corporation and its subsidiaries at December 25, 1994
and December 26, 1993, and the results of their operations and their cash flows
for each of the three years in the period ended December 25, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of The Interlake Corporation's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of evaluating the recoverability of goodwill and other long-
lived assets in 1994. As discussed in Note 4 to the consolidated financial
statements, the Company changed its method of accounting for postretirement
benefits other than pensions and its method of accounting for income taxes in
1992.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 25, 1995, except as to Note 18, which is as of March 8, 1995
<PAGE>
<TABLE>
The Interlake Corporation
Consolidated Statement of Operations
For the Years Ended December 25, 1994,
December 26, 1993 and December 27, 1992
(in thousands except per share data)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net Sales $752,592 $681,330 $708,199
Cost of Products Sold 576,929 520,508 527,857
Selling and Administrative Expense 117,264 117,025 127,436
Restructuring Charge (See Note 3) 5,611 2,523
Goodwill Write-down (See Note 2) 34,174
Operating Profit 24,225 38,186 50,383
Interest Expense 51,609 50,906 54,284
Interest Income (1,369) (1,855) (2,859)
Nonoperating (Income) Expense (see Note 15) (481) 5,359 484
Income (Loss) Before Taxes, Minority Interest,
Extraordinary Loss and Accounting Changes (25,534) (16,224) (1,526)
Provision for Income Taxes (See Note 7) 10,888 6,542 9,040
Income (Loss) Before Minority Interest, Extraordinary
Loss and Accounting Changes (36,422) (22,766) (10,566)
Minority Interest in Net Income of Subsidiaries 4,135 3,196 3,424
Income (Loss) Before Extraordinary Loss
and Accounting Changes (40,557) (25,962) (13,990)
Extraordinary Loss on Early Extinguishment of Debt,
Net of Applicable Income Taxes (See Note 5) (7,567)
Cumulative Effect of Changes in Accounting Principles (See Note 4) (194) (6,141)
Net Income (Loss) $(40,751) $(25,962) $(27,698)
Income (Loss) Per Share of Common Stock:
Income (Loss) Before Extraordinary Loss
and Accounting Changes $ (1.84) $ (1.18) $ (0.84)
Extraordinary Loss (0.46)
Accounting Changes (.01) (0.37)
Net Income (Loss) $ (1.85) $ (1.18) $ (1.67)
Average Shares Outstanding 22,027 22,027 16,754
(See notes to consolidated financial statements)
</TABLE>
<PAGE>
<TABLE>
The Interlake Corporation
Consolidated Balance Sheet
December 25, 1994 and December 26, 1993
(Dollars in thousands)
<CAPTION>
1994 1993
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 39,708 $ 31,934
Receivables less allowances of $2,977 in 1994
and $2,775 in 1993 129,089 107,861
Inventories 73,853 77,025
Other current assets 6,340 9,720
Total Current Assets 248,990 226,540
Goodwill and Other Assets:
Goodwill, less accumulated amortization of $6,622
in 1994 and $20,141 in 1993 (See Note 2) 4,667 38,916
Other assets 45,562 49,013
Total Goodwill and Other Assets 50,229 87,929
Property, Plant and Equipment, net 145,734 149,691
Total Assets $444,953 $464,160
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 71,957 $ 60,382
Accrued liabilities 42,563 43,272
Interest payable 13,910 13,913
Accrued salaries and wages 18,060 14,713
Income taxes payable 10,328 17,866
Debt due within one year (See Note 13) 24,553 2,525
Total Current Liabilities 181,371 152,671
Long-Term Debt (See Note 13) 417,898 440,610
Other Long-Term Liabilities 75,753 65,765
Deferred Tax Liabilities (See Note 7) 6,038 6,896
Commitments and Contingencies (See Note 16)
Minority Interest 21,173 18,830
Preferred Stock 2,000,000 shares authorized
Convertible Exchangeable Preferred Stock - Redeemable,
par value $1 per share, issued 40,000 shares (See Note 10) 39,155 39,155
Shareholders' Equity (Deficit): (See Note 11)
Common stock, par value $1 per share, authorized
100,000,000 shares, issued 23,228,695 in 1994 and 1993 23,229 23,229
Additional paid-in capital 30,248 30,248
Cost of common stock held in treasury (1,202,000 shares in
1994 and 1993) (28,047) (28,047)
Retained earnings (Accumulated deficit) (293,966) (253,215)
Unearned compensation (10,058) (11,279)
Accumulated foreign currency translation adjustments (17,841) (20,703)
Total Shareholders' Equity (Deficit) (296,435) (259,767)
Total Liabilities and Shareholders' Equity (Deficit) $444,953 $464,160
(See notes to consolidated financial statements)
</TABLE>
<PAGE>
<TABLE>
The Interlake Corporation
Consolidated Statement of Cash Flows
For the Years Ended December 25, 1994,
December 26, 1993 and December 27, 1992
(in thousands)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash Flows from (for) Operating Activities:
Net income (loss) $(40,751) $(25,962) $(27,698)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Restructuring charge 5,611
Goodwill write-down 34,174
Depreciation and amortization 23,102 25,040 27,535
Extraordinary item 7,488
Debt issuance costs (1,264) (11,952)
Accounting changes 6,141
Nonoperating environmental matters 4,750
Other operating adjustments 13,172 (7,231) (4,412)
(Increase) Decrease working capital:
Accounts receivable (18,754) 16,233 (6,469)
Inventories 5,880 (4,190) (3,616)
Other current assets 3,249 (1,642) 190
Accounts payable 9,897 519 2,724
Other accrued liabilities 758 (2,708) 10,779
Income taxes payable (7,560) (2,432) (7,866)
Total Working Capital Change (6,530) 5,780 (4,258)
Net Cash Provided (Used) by Operating Activities 21,903 7,988 (7,156)
Cash Flows from (for) Investing Activities:
Capital expenditures (15,485) (14,540) (24,588)
Proceeds from disposal of PP&E 477 284 636
Acquisitions (746) (2,319)
Other investment flows 1,137 1,122
Net Cash Provided (Used) by Investing Activities (14,617) (13,134) (26,271)
Cash Flows from (for) Financing Activities:
Proceeds from issuance of long-term debt 10,656 104 267,832
Retirements of long-term debt (11,970) (7,582) (282,430)
Proceeds from issuance of common stock 41,759
Proceeds from issuance of preferred stock 39,155
Other financing flows 1,982 6,158 1,217
Net Cash Provided (Used) by Financing Activities 668 (1,320) 67,533
Effect of Exchange Rate Changes on Cash (180) (240) (6,007)
Increase (Decrease) in Cash and Cash Equivalents 7,774 (6,706) 28,099
Cash and Cash Equivalents, Beginning of Year 31,934 38,640 10,541
Cash and Cash Equivalents, End of Year $ 39,708 $ 31,934 $ 38,640
(See notes to consolidated financial statements)
</TABLE>
<PAGE>
<TABLE>
The Interlake Corporation
Consolidated Statement of Shareholders' Equity (Deficit)
For the Years Ended December 25, 1994,
December 26, 1993 and December 27, 1992
(in thousands)
<CAPTION>
Common Stock Common Stock Retained Unearned Foreign
and Paid-In Capital Held in Treasury Earnings Compen- Currency
Shares Amount Shares Amount (Deficit) sation Translation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1991 11,741 $11,741 (1,257) $(28,709) $(198,408) $(14,112) $ (9,977) $(239,465)
Net income (loss) (27,698) (27,698)
Sale of stock (See Note 11) 11,488 41,759 41,759
Stock incentive plans (See Note 12) 55 649 (1,146) 273 (224)
ESOP transactions (See Note 11) 905 905
Translation loss (7,995) (7,995)
Balance December 27, 1992 23,229 53,500 (1,202) (28,060) (227,252) (12,934) (17,972) (232,718)
Net income (loss) (25,962) (25,962)
Stock incentive plans (See Note 12) (23) 13 (1) 46 35
ESOP transactions (See Note 11) 1,609 1,609
Translation loss (2,731) (2,731)
Balance December 26, 1993 23,229 53,477 (1,202) (28,047) (253,215) (11,279) (20,703) (259,767)
Net income (loss) (40,751) (40,751)
Stock incentive plans (See Note 12) 15 15
ESOP transactions (See Note 11) 1,206 1,206
Translation gain 2,862 2,862
Balance December 25, 1994 23,229 $53,477 (1,202) $(28,047) $(293,966) $(10,058) $(17,841) $(296,435)
(See notes to consolidated financial statements)
</TABLE>
<PAGE>
The Interlake Corporation
Notes to Consolidated Financial Statements
For the Years Ended December 25, 1994, December 26, 1993 and December 27, 1992
(All dollar amounts in thousands except where indicated)
NOTE 1 Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include the
accounts of all majority-owned domestic and foreign subsidiaries. All
significant intercompany transactions are eliminated.
Cash Equivalents - The Company considers all highly liquid financial
instruments with original maturities of three months or less to be cash
equivalents and reports the earnings from these instruments as interest income.
Revenue Recognition - Revenue from sales is generally recognized when product
is shipped, except on long-term contracts in the Handling/Packaging Systems
segment, where revenue is accounted for principally by the percentage-of-
completion method.
Deferred Charges - The Aerospace Components unit periodically enters into long-
term agreements with customers on major programs where tooling and other
development costs are capitalized as Other Assets. These assets are then
amortized during the production stage by the units-of-production method.
Inventories - Inventories are stated at the lower of cost or market value.
Gross inventories valued on the LIFO method represent approximately 41% and 44%
of gross inventories and 50% and 55% of domestic gross inventories at December
25, 1994 and December 26, 1993, respectively. The current cost of these
inventories exceeded their valuation determined on a LIFO basis by $15,513 at
December 25, 1994 and by $16,628 at December 26, 1993.
During 1994, 1993, and 1992, inventory quantities valued on the LIFO method
were reduced, resulting in the liquidation of LIFO inventory quantities carried
at lower costs that prevailed in prior years as compared with the costs of
production for 1994, 1993, and 1992. As a result, pretax income in 1994, 1993,
and 1992 was increased by $951, $1,201, and $1,948, respectively.
Inventories by category at December 25, 1994 and December 26, 1993 were:
1994 1993
Raw materials $ 14,703 $ 13,443
Semi-finished and finished products 50,978 54,795
Supplies 8,172 8,787
$ 73,853 $ 77,025
Leases - The Company frequently enters into operating leases in the normal
course of business. Amounts due under noncancelable operating leases in the
next five fiscal years are as follows:
1995 1996 1997 1998 1999
$5,875 $5,357 $4,866 $3,939 $3,577
Rent expense charged to operating income was $11,853, $11,271, and $13,473
in 1994, 1993, and 1992, respectively.
Property, Plant and Equipment and Depreciation - For financial reporting
purposes, plant and equipment are depreciated principally on a straight-line
method over the estimated useful lives of the assets. Depreciation claimed for
income tax purposes is computed by use of accelerated methods.
Upon sale or disposal of property, plant and equipment, the asset cost and
related accumulated depreciation are removed from the accounts, and any gain or
loss on the disposal is generally credited or charged to nonoperating income.
(In 1992, gains and losses on disposals related to the 1989 restructuring
program were included in operating income as restructuring charges.) (See Note
3).
Expenditures for renewals and betterments which extend the originally estimated
useful life of an asset or materially increase its productivity are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. Property, plant and equipment by category at December 25, 1994 and
December 26, 1993 were:
1994 1993
At Cost:
Land $ 6,946 $ 6,729
Buildings 75,788 74,175
Equipment 294,239 284,060
Construction in progress 5,867 4,222
382,840 369,186
Less-Depreciation (237,106) (219,495)
$145,734 $149,691
Goodwill - Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies and is amortized on a straight-
line method over periods not exceeding thirty years. The Company carries its
goodwill assets at their purchase prices, less amortized amounts, but subject
to annual review for impairment. During the fourth quarter of 1994, the
Company changed its accounting policy for valuation of its long-lived assets,
primarily goodwill, to reflect its cost of capital in calculating the present
value of the projected future cash flows expected to be generated over the
lives of those assets. Previously, the cash flows were used without
discounting or allocation of interest cost. Under the new policy, projections
of cash flows for individual business units are discounted at the approximate
incremental cost of borrowing for the Company. This discounted amount is then
compared to the carrying value of the long-lived assets to determine if their
value is impaired. (See Note 2).
Foreign Currency Translation - The financial position and results of operations
of the Company's foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at each year end. Results of
operations are translated at the average rates of exchange prevailing during
the year. Translation adjustments arising from differences in exchange rates
from period to period are included in the accumulated foreign currency
translation adjustments account in shareholders' equity.
Foreign Exchange Contracts - The Company periodically enters into foreign ex-
change contracts to hedge specific inventory purchases and other transactions
denominated in foreign currencies. Premiums received and fees paid on foreign
exchange contracts are deferred and amortized over the period of the contracts.
At December 25, 1994, the Company had outstanding currency contracts to
exchange $1,918 for foreign currency (including Canadian dollars, Australian
dollars, deutsche marks, pounds sterling, Japanese yen and Belgian francs).
The Company's exposure to loss in the event of nonperformance by the other
parties to these contracts is limited to the effect of the currency
fluctuations related to the amounts to be exchanged; however, the Company does
not anticipate nonperformance by the counterparties.
Interest Rate Hedges - The Company utilizes swap agreements to hedge a portion
of its interest rate exposure on floating rate obligations (see Note 14).
Interest expense increases or decreases are accrued as they occur and are
settled on a quarterly basis. At current interest rates the Company has no
exposure to credit loss.
Research and Development Expenses - Research and development expenditures for
Company sponsored projects are generally expensed as incurred. Research and
development expenses included in selling and administrative expenses were
$2,107, $2,153, and $2,209 for the Engineered Materials segment in 1994, 1993,
and 1992, respectively, and $1,303, $1,092, and $607 for the Handling/Packaging
Systems segment in 1994, 1993, and 1992, respectively.
Deferred Taxes - Certain prior year deferred tax amounts were reclassified
to conform to current year presentation.
NOTE 2 Goodwill Write-down
Prior to the fourth quarter of 1994, impairment with respect to the Company's
long-lived assets was determined by comparing the sum of the undiscounted
projected future cash flows attributable to each business unit to the carrying
value of the assets of that business. Projected future cash flows for each
business unit were estimated for a period approximating the remaining lives of
that business' long-lived assets, based on earnings history, market conditions
and assumptions reflected in internal operating plans and strategies. In 1993,
under this analysis, the Company determined that the cash flows from each
business unit would be sufficient to recover the carrying value of its long-
lived assets and, therefore, that the value of such assets was not impaired.
In the fourth quarter of 1994, the Company concluded that, in the light of its
highly leveraged capital structure, a preferable accounting policy for analy-
zing the potential impairment of long-lived assets would be to reflect the cost
of capital in computing the present value of the expected cash flows of its
businesses. Applying this new policy to all of its long-lived assets the
Company determined, with respect to its Aerospace Components and newspaper-
related Packaging businesses, that in the light of the significant deteriora-
tion in business climates in the aerospace and newspaper industries over recent
years, the values of the discounted cash flows were insufficient to recover the
carrying value of the long-lived assets. Therefore, the goodwill included among
those assets was deemed to be impaired. As a result, a charge of $34,174 was
recorded for the write-down of goodwill established in connection with the
acquisitions of the Aerospace Components and newspaper-related Packaging
businesses. As of December 25, 1994, the remaining net investment in these
businesses was approximately equal to the value of the discounted projected
cash flows attributable to them, and consisted primarily of tangible assets.
The Company intends to continue to annually assess the carrying values of its
long-lived assets using the analysis described above.
NOTE 3 Restructuring Charges
In 1993, the Company provided $5,611 for restructuring costs related to: the
exit from certain lines of business that were part of Handling North America;
reorganization and downsizing of portions of the European Handling operation;
and, in the Aerospace Components business, the abandonment of certain product
lines which resulted in idled equipment and severance costs related to a
downsizing of the Aviation Repair workforce. The $5,611 consisted of $1,676 in
severance costs, $1,515 of idled equipment written-down to fair market value,
$1,367 of inventory related to the exited businesses and $1,053 of other costs.
Quantification of the effects of the restructuring on future operating results
is not practical because some of the actions were taken to avoid future costs
while other actions were strategic in nature and implemented to limit exposure
to changing market dynamics. These restructuring activities are substantially
complete and the remaining reserves are immaterial to the Company as a whole.
In 1992, the Company recorded $2,523 of additional costs related to unfavorable
adjustments on assets held for sale as part of an asset sale program. The
Company developed this program in 1989 as part of an overall restructuring
program which modified its strategic operating plan. The modified strategic
operating plan identified certain businesses and Corporate assets to be dis-
posed of and implemented major Corporate cost reductions. Most of the desig-
nated businesses were sold or shut-down in 1990. The 1992 adjustment reflected
the rapid decline in real-estate value of two properties held for sale, both of
which were former Handling operations.
NOTE 4 Cumulative Effect of Changes in Accounting Principles
In the fourth quarter of 1992, the Company changed its method of accounting for
postretirement benefits and income taxes by adopting pronouncements of the
Financial Accounting Standards Board which are mandatory for fiscal years
beginning after December 15, 1992. The one-time cumulative effect of these new
accounting standards on income was a net charge of $6,141 which was reported
retroactively to the beginning of fiscal 1992. Such accounting changes did not
affect cash flows in 1992 and will not affect future cash flows.
The Company provides certain medical and life insurance benefits to qualifying
domestic retirees. In 1992, the Company changed its method of accounting for
these postretirement benefits by adopting the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (FAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This change
recognized the difference between the estimated accumulated postretirement
benefit obligation under FAS No. 106 ($34,477) and the obligation accrued under
the Company's previous accrual method ($20,439) by making a charge against
income of $14,038 ($9,265 after taxes, equivalent to $.56 per share)
retroactively to the beginning of the fiscal year.
In the fourth quarter of 1994, the Company elected to adopt FAS No. 106 for its
foreign plans. Adoption is mandatory for foreign plans for fiscal years
beginning after December 15, 1994. The one-time cumulative effect of this
adoption on income was a net charge of $194 ($.01 per share) which was reported
retroactively to the beginning of fiscal 1994.
In 1992, the Company changed its method of accounting for income taxes by adop-
ting the Financial Accounting Standards Board's FAS No. 109, "Accounting for
Income Taxes". In making this change, the Company recognized the cumulative
effect of the difference in accounting methods as a $3,124 credit to earnings
(equivalent to $.19 per share) retroactive to the beginning of the fiscal year.
NOTE 5 Extraordinary Loss
In 1992, the Company refinanced certain long-term debt and entered into a
comprehensive amendment and restatement of its bank credit agreement. This
necessitated the write-off of issuance costs related to this previously
outstanding indebtedness which were originally deferred so that they could be
expensed over the original lives of such indebtedness. This resulted in an
extraordinary loss of $7,567 without any currently usable tax benefit in 1992
(equivalent to $.46 per share).
The cash flow impact of the early extinguishment of debt was immaterial.
However, new debt issuance costs had a negative cash flow consequence of
$11,952 in 1992 which was deducted in determining net cash provided (used) by
operating activities in the Consolidated Statement of Cash Flows.
NOTE 6 Business Segment Information
The Company operates in two segments, each of which is composed of products
which have a similar strategic emphasis. The two business segments are:
Engineered Materials includes Special Materials, which produces
ferrous metal powder used to manufacture precision parts, and
Aerospace Components, which manufactures precision jet engine
components and repairs jet engine fan blades.
Handling/Packaging Systems is comprised of the Company's Handling
operations, which design, manufacture and sell storage rack,
shelving and related equipment primarily for use in warehouses,
distribution centers and for other storage applications; and the
Company's Packaging operations, which design and sell machinery
for applying strapping and stitching wire, and also supply
strapping and stitching wire for use in such machines.
The accompanying tables present financial information by business segment for
the years 1994, 1993, and 1992. Operating profit consists of net sales of the
segment less all costs and expenses related to the segment. "Corporate Items"
includes items which are not related to either of the two business segments.
Total assets by business segment consist of those assets used directly in the
operations of each segment. Corporate net assets consist principally of cash,
nonoperating investments, prepaid pension cost and liabilities related to
closed plants.
<TABLE>
Information About The Company's Business Segments
(in millions)
<CAPTION>
Net Sales Operating Profit (Loss) Identifiable Assets
1994 1993 1992 1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered Materials
Special Materials $153.9 $131.5 $122.5
Aerospace Components 62.5 61.0 67.5
216.4 192.5 190.0 $ 32.3 $ 26.3 $ 29.6
Goodwill Write-down (13.2)
Restructuring Charge (1.8)
216.4 192.5 190.0 19.1 24.5 29.6 $166.6 $178.3 $173.5
Handling/Packaging Systems
Handling 406.0 366.7 395.3
Packaging 130.2 122.1 122.9
536.2 488.8 518.2 28.1 19.1 24.0
Goodwill Write-down (21.0)
Restructuring Charge (3.8) (2.5)
536.2 488.8 518.2 7.1 15.3 21.5 252.1 265.6 279.4
Corporate Items (2.0) (1.6) (0.7) 26.3 20.3 58.4
Operating Profit 24.2 38.2 50.4
Net Interest Expense (50.2) (49.1) (51.4)
Nonoperating Income (Expense) 0.5 (5.3) (0.5)
Consolidated Totals $752.6 $681.3 $708.2 $(25.5) $(16.2) $ (1.5) $445.0 $464.2 $511.3
Depreciation and Amortization
Engineered Materials $ 11.7 $ 12.2 $ 11.8
Handling/Packaging Systems 11.2 12.6 15.5
Corporate Items 0.2 0.2 0.2
Consolidated Total $ 23.1 $ 25.0 $ 27.5
Capital Expenditures
Engineered Materials $ 8.3 $ 9.0 $ 15.5
Handling/Packaging Systems 7.2 5.5 9.1
Consolidated Total $ 15.5 $ 14.5 $ 24.6
Liquidation of LIFO Inventory Quantities
Engineered Materials $ $ $ .4
Handling/Packaging Systems 1.0 1.2 1.5
</TABLE>
<PAGE>
Information About The Company's Operations by Geographic Region
The following table presents information about the Company's operations by
geographic area. Transfers between geographic areas, which are all in the
Handling/Packaging Systems segment, are made at prices which approximate the
prices of similar items sold to distributors. Operating profit by geographic
area is the difference between net sales attributable to the area and all costs
and expenses related to that area. Export sales to unaffiliated customers
included in the United States' sales are not material. Sales to domestic and
foreign government agencies are not material.
<TABLE>
Net Sales Operating Profit (Loss) Identifiable Assets
<CAPTION>
1994 1993 1992 1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions)
United States
Customer Sales $439.1 $390.0 $363.5
Inter-geographic 3.3 2.6 3.6
Subtotal 442.4 392.6 367.1 $ 43.1 $ 32.1 $ 32.7
Goodwill Write-down (34.2)
Restructuring Charge (3.8)
442.4 392.6 367.1 8.9 28.3 32.7 $240.1 $275.1 $274.4
Europe
Customer Sales 210.1 206.5 256.5
Inter-geographic 2.8 1.4 1.2
Subtotal 212.9 207.9 257.7 11.4 9.6 17.3
Restructuring Charge (1.1) (1.6)
212.9 207.9 257.7 11.4 8.5 15.7 100.8 94.7 106.3
Canada and Asia Pacific
Customer Sales 103.4 84.8 88.2
Inter-geographic 2.9 1.2 2.2
Subtotal 106.3 86.0 90.4 5.9 3.7 3.6
Restructuring Charge (0.7) (0.9)
106.3 86.0 90.4 5.9 3.0 2.7 77.8 74.1 72.2
Corporate Items/Eliminations (9.0) (5.2) (7.0) (2.0) (1.6) (0.7) 26.3 20.3 58.4
Operating Profit 24.2 38.2 50.4
Net Interest Expense (50.2) (49.1) (51.4)
Nonoperating Income (Expense) 0.5 (5.3) (0.5)
Consolidated Totals $752.6 $681.3 $708.2 $(25.5) $(16.2) $ (1.5) $445.0 $464.2 $511.3
Liquidation of LIFO Inventory Quantities
United States $ 0.1 $ $ 1.1
Europe 0.6 1.1 0.7
Canada and Asia Pacific 0.3 0.1 0.1
</TABLE>
<PAGE>
NOTE 7 Income Taxes
Pretax income (loss) consisted of:
1994 1993 1992
Domestic $(39,187) $(25,482) $(16,854)
Foreign 13,654 9,258 15,328
$(25,533) $(16,224) $ (1,526)
The provisions for taxes
on income consisted of:
1994 1993 1992
Current:
U.S. Federal $ 2,688 $ 602 $ 1,080
State 2,892 2,343 689
Foreign 3,001 3,697 6,527
Total 8,581 6,642 8,296
Deferred:
U.S. Federal (3,493)
State
Foreign 1,676 (100) 744
Total (1,817) (100) 744
Benefit of Net Operating
Loss Carryforwards:
U. S. Federal 3,172
Foreign 952
Total 4,124
Tax Provision $ 10,888 $ 6,542 $ 9,040
In 1993 and 1992, high levels of interest expense resulted in losses for U.S.
federal tax purposes. Because most of the interest expense is borne in the
United States at the parent company level, throughout the period the Company
had taxable income in foreign and state jurisdictions despite the high levels
of consolidated interest expense. Foreign taxes paid did not result in a ben-
efit in the U.S. and, as a result, the Company had tax expense in 1994, 1993,
and 1992, notwithstanding consolidated pretax losses in each of those years.
In 1994, a small amount of domestic taxable income was generated as the write-
down of goodwill did not increase the deduction allowable for tax purposes.
This taxable income was offset with the carryforward of prior year losses. The
Company also provided for additional amounts related to open federal tax
returns for the years 1982 through 1990. In addition, in 1994 the Company had
a small amount of income subject to Alternative Minimum Tax (AMT) in the U.S.
because of certain restrictions on the amount of net operating loss that can be
carried forward for purposes of calculating that tax.
The federal tax net operating loss carryforward, which was $19,878 at the end
of 1994, will not begin to expire until 2006. (The tax effect of this benefit
was fully reserved for in the valuation allowance.)
Actual cash disbursements for income taxes and other tax assessments were
$4,844, $8,586, and $16,151 in 1994, 1993, and 1992, respectively. Because of
the Company's tax situation in 1994, 1993, and 1992, effective tax rate
analysis would not be meaningful.
Deferred tax liabilities and assets are comprised of the following:
1994 1993
Deferred tax liabilities
Depreciation $ 20,123 $ 19,771
Other 3,034 3,156
$ 23,157 $ 22,927
Deferred tax assets
Deferred employee benefits $ 16,905 $ 16,400
Net operating loss carryforward 8,557 12,681
AMT credit carryforwards 2,168 2,078
Inventory 3,407 4,188
Recapitalization costs 2,049 2,419
Environmental reserves 2,189 2,884
Other 3,795 5,681
39,070 46,331
Valuation allowances (18,165) (23,489)
$ 20,905 $ 22,842
As of December 25, 1994, U.S. federal income tax returns for the years 1988
through 1990 were in the process of examination. Resolution of tax years 1982-
1984 is pending with the U.S. Tax Court following receipt in 1994 by the
Company of a statutory notice for $17,000 plus penalties and interest.
Resolution of tax years 1985-1987 is pending with the Appeals Division of the
Internal Revenue Service. The Company believes that adequate provision has
been made for possible assessments of additional taxes.
No provision has been made for U.S. income taxes on approximately $25,967 of
undistributed earnings of foreign subsidiaries, some of which are subject to
statutory restrictions on distribution.
NOTE 8 Pensions
The Company has various defined benefit and defined contribution pension plans
which among them cover substantially all employees.
The provision for defined benefit pension costs includes current costs,
interest costs, actual return on plan assets, amortization of the unrecognized
net asset existing at the date of transition and net unrealized gains and
losses. Benefits are computed based mainly on years of service and compen-
sation during the latter years of employment. Company contributions are
determined according to the funding requirements set forth by ERISA and in the
case of foreign plans local statutory requirements.
Certain of the Company's defined benefit plans relate to foreign locations and
are denominated in currencies other than U.S. dollars. All plans use similar
economic assumptions. The following table sets forth the funded status of the
ongoing, domestic and foreign defined benefit plans and the amounts included in
the year-end balance sheet. The Company's plans were generally overfunded and
the underfunded plans which existed were not significant.
1994 1993
Plan assets at fair value $131,387 $142,009
Actuarial present value of
accumulated benefit obligation:
Vested benefits 108,143 110,693
Non-vested benefits 1,243 907
109,386 111,600
Effect of assumed future compensation increases 13,452 10,010
Projected benefit obligation for service to date 122,838 121,610
Plan assets in excess of projected benefit
obligation 8,549 20,399
Items not yet recognized in earnings:
Unrecognized net asset at December 28, 1986
(being recognized over 15 years) 13,881 15,704
Unrecognized net actuarial gain (loss) (6,231) 3,834
Unrecognized prior service cost (6,456) (5,033)
1,194 14,505
Prepaid (Accrued) pension liability $ 7,355 $ 5,894
Net pension cost (income) included in operating profit for these plans consists
of the following components:
1994 1993 1992
Service cost $ 3,679 $ 3,068 $ 3,232
Interest cost 9,747 9,298 9,596
Actual return on plan assets [(income) loss] (6,795) (12,107) (9,923)
Net amortization and deferred items (7,657) (434) (3,177)
Net pension cost (income) $(1,026) $ (175) $ (272)
Assumptions used in the computations:
Assumed discount rate 7.5-9% 7-9% 7-9%
Expected long-term rate of return on plan assets 8.5-9% 7-9% 7-9%
Rate of increase in future compensation levels 4-7% 4-6% 5-7%
Pension plan assets are primarily invested in common and preferred stock, short
and intermediate term cash investments, and corporate bonds.
The expense for the Company's defined contribution pension plans covering
certain domestic employees was $1,835, $2,267, and $2,307 in 1994, 1993, and
1992, respectively. Annual contributions to defined contribution plans are
equal to the amounts accrued during the year.
In 1989, the Company established a non-contributory, defined contribution
employee stock ownership plan (ESOP) covering all domestic employees not
covered by collective bargaining agreements. Company contributions are
allocated to participants based on the ratio each participant's compensation
bears to the total compensation of all eligible participants. The Company makes
contributions to the plan in the amount necessary to enable the plan to make
its regularly scheduled payments of principal and interest on its term loan
under the bank credit agreement (see Note 13). Amounts charged to employee
benefits and interest during the year totalled $1,307 and $741, respectively,
in 1994, $1,508 and $703, respectively, in 1993, and $1,307 and $846,
respectively, in 1992.
NOTE 9 Postretirement Benefits Other Than Pensions
The Company has unfunded postretirement health care and death benefit plans
covering certain domestic employees and retirees. Effective as of the beginning
of 1992, the Company adopted FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", for these domestic retiree
benefit plans. Under FAS No. 106, the Company is required to accrue the
estimated cost of retiree benefit payments, other than pensions, during the
employee's active service period. The cost of postretirement benefits
historically has been actuarially determined and accrued over the working lives
of employees expected to receive benefits with prior service costs being
accrued over periods not exceeding twenty-five years.
The Company elected to recognize this change in accounting on the immediate
recognition basis. The difference between the estimated accumulated
postretirement benefit obligation under FAS No. 106 ($34,477) and the unfunded
obligation accrued under the Company's previous accounting method ($20,439) was
charged against earnings as of the beginning of fiscal 1992 ($14,038). The
related balance sheet effect was an increase to long-term liabilities of
$14,038.
Effective as of the beginning of fiscal 1994, the Company adopted FAS No. 106
for its foreign plans. This change in accounting principle required restatement
of previously reported first quarter 1994 results by a charge of $194.
The following table sets forth the status of the plans, reconciled to the
accrued postretirement benefit cost recognized in the Company's year-end
balance sheet.
1994 1993
Accumulated postretirement benefit obligation:
Retirees $22,751 $26,171
Fully eligible active plan participants 2,203 2,436
Other active plan participants 1,975 2,245
Total accumulated postretirement benefit obligation 26,929 30,852
Unrecognized prior service cost 2,177 2,341
Unrecognized gain (loss) 5,595 1,511
Accrued postretirement benefit cost $34,701 $34,704
Net periodic postretirement benefit cost included the following components:
1994 1993 1992
Service cost on benefits earned $ 205 $ 242 $ 464
Interest cost on accumulated postretirement
benefit obligation 2,062 2,389 2,808
Unrecognized prior service cost (164) (123)
Unrecognized gain (loss) (118) (57)
Net periodic postretirement benefit cost charged
to results from operations $ 1,985 $ 2,451 $ 3,272
For measuring the expected postretirement benefit obligation, a 14% annual rate
of increase in the per capita claims cost was assumed for 1994. This rate was
assumed to decrease 1% per year to 6% in 2002 and remain at that level
thereafter. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 8.5% at December 31, 1994 and
7.5% at December 31, 1993. The rate of compensation increase used to measure
the accumulated postretirement benefit obligation for the death benefit plans
was 4% in both 1994 and 1993.
If the health care cost trend rate were increased 1%, the accumulated
postretirement benefit obligation as of December 31, 1994 would have increased
by 5%. The effect of this change on the aggregate of service and interest cost
for 1994 would be an increase of 5%.
The provision for postretirement benefits other than pensions included in
operating profit was $1,107, $167, and $1,958 in 1994, 1993, and 1992,
respectively. In 1993, costs were down from 1992 because of benefit changes
made by the Company in the second quarter which resulted in a curtailment gain
of $1,141. The provision for such costs included in nonoperating income was
$878, $1,143, and $1,314 in 1994, 1993, and 1992, respectively.
NOTE 10 Convertible Exchangeable Preferred Stock
As part of its 1992 financing plan, the Company issued 40,000 shares of Series
A Preferred Stock. The preferred stock is convertible into common stock at an
initial conversion price of $6.50 per share and bears a 9% per annum dividend
payable semi-annually beginning December 31, 1992. To the extent dividends are
not paid in cash on a semi-annual dividend payment date, an adjustment is made
which reduces the per share conversion price. Upon such an adjustment, all
accrued and unpaid dividends on the shares of preferred stock through the date
of adjustment cease to be accrued and unpaid. Due to restrictions in the bank
credit agreement and the indenture under which the Senior Subordinated
Debentures were issued, it is not expected that cash dividends will be paid on
the preferred stock for the foreseeable future. Accordingly, it is expected
that the conversion price of the preferred stock will continue to decline
approximately 4.5% on each semi-annual dividend payment date, resulting in an
increase in the aggregate number of shares of common stock issuable upon
conversion of the preferred stock. As a result of the operation of these
dividend adjustment provisions of the preferred stock, the conversion price of
the preferred stock was reduced to $5.20 per share as of December 31, 1994. In
addition, to the extent dividends are not paid on the preferred stock in cash,
the liquidation preference on the preferred stock increases at a rate of 9% per
year, compounded semi-annually, and as of December 31, 1994 was $50,000. Upon
certain events defined as "changes in control" or fundamental changes, the
holders of the convertible preferred stock have the right to require the
Company to purchase the shares, subject to certain limitations.
NOTE 11 Shareholders' Equity (Deficit)
As part of its 1992 financing plan, the Company sold 11,488,000 shares of
common stock, par value $1 per share, in an underwritten public offering at an
initial public offering price of $4.00 per share. The net proceeds of this
sale of $41,759 were added to common stock and additional paid-in capital in
the amounts of $11,488 and $30,271, respectively. Each share of common stock
has the right to one vote per share on all matters submitted to a vote of the
shareholders of the Company.
A new class of non-voting common stock with a par value of $1 per share was
created, of which 15,000,000 shares were authorized. None has been issued.
Shares of non-voting common stock have no voting rights except as otherwise
provided or as required by law.
No dividend payments were made in 1994, 1993, and 1992 and, due to restrictions
in the bank credit agreement and the indenture for the Senior Subordinated
Debentures, it is not expected that cash dividends will be paid in the
foreseeable future.
The Company established an ESOP in 1989 with an initial contribution of 10,000
shares, followed by the sale of 1,100,000 shares to the ESOP. Under a related
stock purchase program, Interlake undertook to purchase the lesser of 1,100,000
shares or the number of shares purchasable for $16,088 in the open market or in
privately negotiated transactions. As of December 25, 1994, a total of 893,739
shares had been acquired at a cost of $11,083, unchanged from the prior year
end.
Unearned compensation represents estimated future charges to income by reason
of the ESOP and stock awards previously granted. Principal and interest
payments on the ESOP borrowings are charged against earnings as employee
compensation and interest expenses, respectively.
In 1989, the Board of Directors declared a stock right dividend distribution.
The purpose of these rights is to protect the Company against certain unfair
and abusive takeover tactics. In certain circumstances, shareholders, other
than certain holders of 15% or more of Interlake's stock, have the right to
purchase Interlake stock from Interlake for less than its market price. In
certain circumstances, Interlake shareholders can purchase, for less than
market value, shares of a company which acquires The Interlake Corporation.
NOTE 12 Stock Incentive Plans
The Company has in place two stock incentive programs adopted by its Board of
Directors and approved by the shareholders - the 1986 Stock Incentive Program
(the "1986 Program") and the 1989 Stock Incentive Program (the "1989 Program"
and, together with the 1986 Program, the "Stock Incentive Programs"). The Stock
Incentive Programs provide for the grant of awards of and options for shares of
the Company's common stock to officers, key employees and outside directors of
the Company and its subsidiaries. The 1989 Program also provides for the grant
of shares of common stock in lieu of cash bonuses and the 1986 Program also
provides for the grant of stock appreciation rights.
A summary of stock option activity under the Stock Incentive Programs follows:
1994 1993
Average Average
Shares Price Shares Price
Stock Options:
Outstanding-beginning of year 1,188,162 $6.15 1,331,955 $6.81
Granted 106,000 4.09
Exercised
Canceled or expired (111,874) 6.13 (249,793) 8.77
Outstanding-end of year 1,076,288 6.15 1,188,162 6.15
Exercisable-end of year 535,663 8.31 427,937 9.95
Available shares 908,529 796,655
NOTE 13 Long-Term Debt and Credit Arrangements
Long-term debt of the Company consists of the following:
<TABLE>
<CAPTION> December 25, Interest December 26, Interest
1994 Rates 1993 Rates
<S> <C> <C> <C> <C>
Senior Subordinated Debentures $220,000 12.13% $220,000 12.13%
Term Loans 94,383 8.00-8.63 94,136 5.69-8.44
Delayed Draw Term Loan 11,125 8.00 11,125 5.69
Deferred Term Loans 7,500 8.00 7,500 5.69
Revolving Loans 76,314 8.00-8.63 76,031 5.69-8.44
ESOP Note 10,055 8.00 11,261 5.69
Obligations under long-term lease agreements 8,930 6.13-7.88 10,230 6.13-7.88
Pollution control and industrial development
loan agreements 12,150 6.25-7.13 12,150 6.25-7.13
Other 1,994 702
442,451 443,135
Less-current maturities 24,553 2,525
$417,898 $440,610
Weighted average interest rate 11.66% 11.39%
</TABLE>
During 1992, the Company implemented a financing plan which included the sale
of $220,000 of 12 1/8% Senior Subordinated Debentures due in 2002, redemption
of $200,000 of subordinated increasing rate notes, repayment of $51,074 of
long-term bank debt, and entering into an agreement with its bank group which
amended and restated the Company's bank credit agreement to modify payment and
other terms. Certain covenants in the agreement were further modified in 1993
and again early in 1995.
At the end of 1994, the bank credit agreement provided facilities for term
loans of $118,792, revolving loans of up to $102,114 (subject to limitations
described below), and ESOP loans of $10,055. Principal repayments for term and
revolving loans are due in varying annual amounts from 1995 through 1998.
Principal amounts for ESOP loans are due in varying amounts through 1999.
Under the terms of the bank credit agreement, the Company pays a commitment fee
of 1/2 percent on unused credit facilities and, in 1994, had the option to
borrow funds under the revolving and term facilities at the prime rate plus
1 3/4 percent, or various London Interbank Offered Rates (LIBOR) plus 2 3/4
percent, with such rates adjusted periodically. The bank credit agreement bor-
rowing rates at December 25, 1994 ranged from 8.00% to 8.625%. The bank credit
agreement also required the Company to enter into long-term interest rate swap
agreements to reduce the impact of changes in interest rates on its floating
rate long-term debt. At the end of 1994, the Company had interest rate hedging
arrangements with members of the bank group limiting interest rates on $113,000
of debt under the bank credit agreement to 8.57% plus the applicable spread.
These agreements mature on a quarterly basis through 1997. Without the swap
agreements, the weighted average cost of borrowing would have been 1.2
percentage points lower in 1994, 1.6 lower in 1993 and 1.4 lower in 1992. The
expiration dates of the swap agreements correlate to the original schedule of
principal term loan repayment dates and extend, on a declining basis, through
the final maturity of the term loans.
The long-term lease obligations relate principally to capitalized pollution
control facilities. The interest rates on these obligations vary from 6.125% to
7.875%. Principal repayments are due in varying amounts through 2002.
The Company has borrowed funds under several loan agreements with state and
county pollution control and industrial development authorities to finance
certain environmental and facility expansion and improvement projects. Interest
rates on these obligations vary from 6.25% to 7.125%. Principal repayments are
to be made in various amounts from 1998 to 2009. At the time of the spin-off of
Acme Steel Company from the Company in 1986, Acme assumed an obligation to pay
the Company for pollution control bonds related to its facilities, which are
currently outstanding for $6,000.
The schedule of debt repayment requirements for the five years following 1994
are as follows:
1995 $24,553
1996 88,824
1997 80,262
1998 11,544
1999 4,095
Although there can be no assurances, based on current levels of performance the
Company believes it will be able to comply with all bank credit agreement
covenants in 1995. In 1996, the Company has long-term debt amortization
requirements of $88,824 and, potentially, significant payments related to tax
matters (see "Provision for Income Taxes") which it does not expect to be able
to meet from operating cash flow. The Company continues to evaluate alternative
actions to refinance some or all of its long-term bank obligations including
among others the raising of new equity capital and the issuance of replacement
debt.
Under the bank credit agreement the Company is limited in its ability to pay
cash dividends and repurchase its common stock. There are no plans to pay
dividends in the immediate future and stock repurchases will be limited to
those related to the ESOP. In addition to scheduled repayments of debt, the
bank credit agreement requires certain mandatory prepayments in connection with
asset dispositions, issuances of stock, incurrence of indebtedness and
generation of annual excess cash flows. The bank credit agreement contains
covenants relating to earnings before interest, taxes and depreciation and
amortization, capital expenditures and net worth, and limits the amount of
revolving loan balance outstanding. Substantially all of the Company's assets
are pledged under the bank credit agreement.
Actual cash disbursements for interest were $49,413, $48,326, and $41,179 in
1994, 1993, and 1992, respectively.
At December 25, 1994 the Company had unamortized deferred debt issuance costs
of $9,021 included in other assets which are being amortized as part of
interest expense over the lives of the related debt issues. Amortization
included in interest expense was $2,199, $1,786, and $1,594, in 1994, 1993,
and 1992, respectively.
Under the bank credit agreement, the Company will be able to borrow under its
revolving facility up to an additional $44,000 over the year-end revolving
indebtedness. However, outstanding revolver borrowings at the end of each of
the Company's fiscal 1995 quarters will be limited to between $17,000 and
$29,000 above the year-end 1994 revolver borrowings. In addition, the Company
will have up to $6,000 of deferred term loan availability during the year for
amounts incurred on certain environmental matters.
NOTE 14 Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents - The carrying amount approximates fair value
because of the short maturities of such instruments.
Other assets - The fair values for financial instruments included in other
assets were estimated based on quoted market prices for the same or similar
issues.
Long-term debt (See Note 13) - The interest rate on the Company's bank debt
is reset every quarter to reflect current market rates. Consequently, the
carrying value of the bank debt approximates fair value. The fair values of
the long-term debt other than bank debt were estimated based on quoted market
prices for the same or similar issues.
Convertible exchangeable preferred stock (See Note 10) - The fair value of
the preferred stock, which was issued in a private placement, is estimated at
its carrying value as such stock is not traded in the open market and a
market price is not readily available.
Foreign exchange contracts (See Note 1) - The fair value associated with the
foreign currency contracts has been estimated by valuing the net position of
the contracts using applicable spot rates and thirty day forward rates as of
the end of the fiscal year.
Interest rate swap agreements (See Note 13) - The fair value of interest rate
swaps (used for hedging purposes) is the estimated amount that the Company
would pay to terminate the swap agreements at the reporting date, taking into
account current interest rates and the present creditworthiness of the swap
counterparties. Under the restrictions of the bank credit agreement, the
Company does not expect to cancel these agreements, and expects them to
expire as originally contracted.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
December 25, December 26,
1994 1993
<CAPTION>
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 39,708 $ 39,708 $ 31,934 $ 31,934
Other assets 6,000 5,220 6,942 6,996
Long-term debt<F1> 433,521 418,440 432,905 435,754
Convertible exchangeable preferred stock 39,155 39,155 39,155 39,155
Foreign currency contract assets (43) (75)
Interest rate swap liabilities 932 1,838 1,824 12,226
<FN>
<F1> Includes current maturities and excludes capitalized long-term leases
</TABLE>
NOTE 15 Environmental Matters
In connection with the reorganization of the old Interlake, Inc. (now Acme
Steel Company ("Acme")) in 1986, the Company, then newly-formed, indemnified
Acme against certain environmental liabilities relating to properties which had
been shut down or disposed of by Acme's iron and steel division prior to the
1986 reorganization. The Company recorded a charge of $6 million in 1991 and
charges of $4.8 million in 1993 for anticipated liabilities for environmental
matters relating to nonoperating sites. As of December 25, 1994, the Company's
reserves for environmental liabilities totalled $6.2 million.
Based on its current estimate of its potential environmental liabilities,
including all contingent liabilities, individually and in the aggregate,
asserted and unasserted, the Company believes that the costs of environmental
matters have been fully provided for or are unlikely to have a material adverse
effect on the Company's business, future results of operations, liquidity or
consolidated financial condition. In arriving at its current estimate of its
potential environmental liabilities, the Company has relied upon the estimates
and analysis of its environmental consultants and legal advisors, as well as
its own evaluation, and has considered: the probable scope and cost of
investigations and remediations for which the Company expects to have
liability; the likelihood of the Company being found liable for the claims
asserted or threatened against it; and the risk of other responsible parties
not being able to meet their obligations with respect to clean-ups. In
estimating its potential environmental liabilities, the Company has not taken
into consideration any potential recoveries from insurance companies, although
in May 1994 the Company instituted an action seeking a declaratory judgment
against and recoveries from insurers under policies covering nearly 30 years.
The Company's estimate has not been discounted to reflect the time-value of
money, although a significant delay in implementation of certain of the
remedies thought to be probable could result in cost estimates increasing due
to inflation.
The Company's current estimates of its potential environmental liabilities are
subject to considerable uncertainty due to the continuing uncertainty
surrounding one of the sites for which the Company is responsible pursuant to
its indemnity of Acme -- namely, the Superfund site on the St. Louis River in
Duluth, Minnesota (the "Duluth Site"). These uncertainties relate to both the
clean-up of certain contaminated soils at the site, as well as the remediation
of certain underwater sediments. In the light of these uncertainties, the
Company's estimates could be subject to change in the future.
With respect to the contaminated soils, the Company has conducted certain
investigations at the request of the Minnesota Pollution Control Agency
("MPCA"), including a study outlining a broad range of remedial alternatives
and associated costs. The alternatives studied have included both those that
assume that the Duluth Site will be used for industrial purposes, consistent
with its current and historical uses, and those that would meet standards for
unrestricted use. The Company and the MPCA are engaged in discussions regarding
the development of a work plan for clean-up to industrial use standards. The
costs of the alternatives for clean-up to industrial use standards believed to
be most appropriate by the Company range from $3 million to $4 million.
However, the Company has reviewed other remedial plans for the contaminated
soils which also contemplate the continued industrial use of the property but
which could cost as much as $20 million, due to their being based upon certain
risk assessments and other assumptions which the Company believes to be overly
conservative. The Company expects to arrive at an agreed-upon work plan with
the MPCA, based on appropriate assumptions, sometime during 1995, but there can
be no assurance it will do so.
With respect to the underwater sediments, the MPCA has requested the Company to
undertake an investigation and to evaluate remedial alternatives. The Company
is presently negotiating with the MPCA the scope of the sediments
investigation. The Company believes that any estimate of the potential costs of
remediating the underwater sediments will not be meaningful until the
investigation is completed and possible remedial alternatives are reviewed by
the Company and the MPCA. To date, there have been few sites in the United
States involving the clean-up of underwater sediments, and none in which the
MPCA has acted as lead agency. On a preliminary basis, the Company believes
that the range of reasonable remedial alternatives for the underwater sediments
includes that of taking no action, thereby avoiding the disruption of the
natural remediation of the underwater sediments which has been under way for
over 30 years. Thus, the Company believes the minimum of the range of costs of
remedial alternatives to be zero, and to date has made provision for only the
investigation, and not for the clean-up, of underwater sediments.
In March 1994, the citizen board of the MPCA, contrary to the recommendation of
the MPCA professional staff, named only the Company as a responsible party with
respect to the underwater sediments at the Duluth Site. The MPCA staff had
recommended that the successors to certain coal tar processors at the site (the
"tar companies") also be named as responsible parties. The Company believes
that the tar companies are the cause of a major portion of the underwater
contamination of the site, and is reviewing its options for either obtaining
the inclusion of the tar companies as responsible parties or recovering a
portion of the Company's costs from the tar companies.
The Company's current expectation is that cash outlays related to its
outstanding reserves for environmental matters will be made over the period of
1995 to 1997, or later. If the Company ultimately determines that additional
charges beyond its present reserves are necessary in connection with the Duluth
Site, the Company believes it is likely that cash outlays would occur near the
end of the decade, or later.
NOTE 16 Commitments and Contingencies
The Company is engaged in certain routine litigation arising in the ordinary
course of business. Based upon its evaluation of available information,
management does not believe that any such matters are likely, individually or
in the aggregate, to have a material adverse effect upon the Company's business
future, results of operations, liquidity or consolidated financial condition.
On July 9, 1990, the City of Toledo, Ohio, brought an action in Federal
district court in Toledo, Ohio, against the Company, Acme Steel Company
("Acme" or the "old Interlake"), Beazer Materials and Services, Inc. ("Beazer")
and Toledo Coke Corporation ("Toledo Coke") in connection with the alleged
contamination of a 1.7 acre parcel of land the City had purchased from Toledo
Coke for purposes of building a road. The City has alleged various claims,
both with respect to the 1.7 acres of right-of-way it purchased and owns and
the entire coke facility owned by Toledo Coke which adjoins the right-of-way.
These claims seek a judgment finding the Company and the other defendants
liable for the environmental remediation costs and other relief. The Company's
alleged liability arises from its indemnification obligations with respect to
Acme, which as the old Interlake operated coke ovens and by-product recovery
facilities on the site from 1930 through 1978. In 1978 the old Interlake sold
the coke plant to Koppers Company, Inc., which was later acquired by Beazer,
and which indemnified Interlake against environmental liabilities. Koppers, in
turn, sold the facility to Toledo Coke. Interlake has cross-claimed against
Beazer under its indemnity.
Prior to the filing of the preliminary injunction described below, the City of
Toledo and the defendants had been discussing possible remedial plans which the
defendants believe would enable the City to build the road in question. Under
these plans, the amounts required to be contributed by the Company would not
have been material to the business or financial condition of the Company. On or
about January 31, 1994, the City filed a motion seeking a preliminary injunc-
tion under the Resource Conservation Recovery Act ordering the defendants to
take certain remedial actions with respect to the right-of-way. A hearing on
the City's motion was completed in October 1994. The City is seeking an order
compelling the defendants to perform a remedy which the City asserts would cost
approximately $4 million. The Company believes that the right-of-way could be
remedied to a degree sufficient to enable the building of the road at a cost
far less than $4 million. Although the Company believes that it is entitled to
be indemnified by Beazer, to the extent the Company incurs any liabilities or
costs by virtue of the ongoing injunction hearing, the Company could be
compelled to incur costs prior to having its indemnification cross-claim
against Beazer decided by the court.
In January 1995, Beazer filed a motion for summary judgment seeking to have the
Company's indemnification cross-claim denied. The Company intends to resist
such motion, and to file its own motion for summary judgment seeking the
enforcement of the indemnification from Beazer.
<PAGE>
NOTE 17 Quarterly Results (Unaudited)
Quarterly results of operations for 1994 and 1993 were as follows:
(in millions except per share data)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1994
Net sales
Engineered Materials $ 48.2 $ 54.4 $ 54.2 $ 59.6
Handling/Packaging Systems 121.1 127.7 139.5 147.9
169.3 182.1 193.7 207.5
Gross Profit 39.5 43.4 42.9 49.9
Operating profit
Engineered Materials 7.8 8.1 6.8 9.6
Handling/Packaging Systems 5.5 5.8 7.9 8.9
Corporate Items (1.3) (.3) (.3) (.1)
Operating profit before goodwill write-down 12.0 13.6 14.4 18.4
Goodwill write-down (34.2)
Operating profit 12.0 13.6 14.4 (15.8)
Income (loss) before accounting change (2.4) (2.4) (1.9) (33.9)
Net income (loss) (2.6) (2.4) (1.9) (33.9)
Income (loss) before accounting change
per common share (.11) (.11) (.08) (1.54)
Net income (loss) per common share (.12) (.11) (.08) (1.54)
1993
Net sales
Engineered Materials $ 51.5 $ 48.7 $ 46.9 $ 45.4
Handling/Packaging Systems 117.0 124.4 122.1 125.3
168.5 173.1 169.0 170.7
Gross profit 41.7 41.4 37.8 39.9
Operating profit
Engineered Materials 7.7 7.3 6.2 5.1
Handling/Packaging Systems 4.3 5.6 3.7 5.5
Corporate Items (.3) (.1) (.2) (1.0)
Operating profit before restructuring charge 11.7 12.8 9.7 9.6
Restructuring charge (5.6)
Operating profit 11.7 12.8 9.7 4.0
Net income (loss) (3.6) (3.1) (4.7) (14.6)
Net income (loss) per common share (.16) (.14) (.22) (.66)
</TABLE>
<PAGE>
In the fourth quarter 1994, the Company revised its accounting policy for
valuing its long-lived assets to include the cost of capital in estimating the
total projected future cash flows from its business units. Previously, the cash
flows were computed without discounting or allocation of interest cost. In the
fourth quarter 1994, the Company determined that in the case of certain
businesses, the projected cash flows on a discounted basis were insufficient to
recover the carrying value of the assets. As a result, certain goodwill assets
totalling $34,174 were written off in full (see Note 2).
In the fourth quarter of 1993, the Company took a restructuring charge of
$5,611 (see Note 3).
Nonoperating expenses consist of items which are not related to activities that
constitute the Company's ongoing operations. Nonoperating income was recorded
in the first quarter of 1994 in the amount of $1,100 related to a one-time gain
from settlement of a real-estate matter with a local transportation authority.
In 1993, nonoperating expenses included a special charge of $3,850 in the
fourth quarter and $900 in the second quarter for environmental matters
involving nonoperating locations (see Note 15).
In 1994 and 1993, benefits to pretax income due to reductions in LIFO
inventories were $626 and $1,000, respectively, in the first quarter and $325
and $200, respectively, in the fourth quarter.
Effective as of the beginning of fiscal 1994, the Company changed its method of
accounting for postretirement benefits for its foreign plans by adopting the
Financial Accounting Standards Board's FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This change in accounting
principle required restatement of previously reported first quarter 1994
results by a charge of $194 or $.01 per share.
NOTE 18 Subsequent Event
In March of 1995, the Company amended its bank credit agreement to modify
certain covenants as they relate to 1995.
EXHIBIT 18
January 25, 1995
To the Board of Directors and
Shareholders of The Interlake Corporation
We have audited the consolidated financial statements included in the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1994 and issued our report thereon dated January 25, 1995, except as
to Note 18, which is as of March 8, 1995. Note 2 to the consolidated
financial statements describes a change in the Corporation's method
of evaluating the recoverability of goodwill and other long-lived assets
from an undiscounted projected cash flow approach, which compared recorded
assets to the sum of undiscounted projected cash flows attributable to the
businesses to which those assets relate, to a discounted projected cash flow
approach. The Corporation has accounted for this change as a change in
accounting principle inseparable from a change in estimate. It should be
understood that the preferability of one acceptable method of evaluating the
recoverability of goodwill and other long-lived assets over another has not
been addressed in authoritative accounting literature and, in arriving at our
opinion expressed below, we have relied on management's business planning and
judgment. Based on our discussions with management and the stated reasons for
the change, we believe that such a change represents, in the circumstances, the
adoption of a preferable alternative accounting principle for evaluating the
recoverability of goodwill and other long-lived assets in conformity with
Accounting Principles Board Opinion No. 20.
Price Waterhouse LLP
Chicago, Illinois
LIST OF SUBSIDIARIES EXHIBIT 22
THE INTERLAKE CORPORATION
State or Country
Corporate Name Parent Company of Incorporation
-------------- -------------- -----------------
Acme Gerrard Limited Precis (935) Limited England
Acme Strapping Inc. Interlake Packaging Corporation Canada
The Interlake Companies, Inc.
Apton GmbH Dexion GmbH Germany
Arwood International, Inc. Interlake ARD Corporation New Jersey
Chem-tronics, Inc. The Interlake Companies, Inc. California
Ciceri & Company Limited Dexion Group plc England
Conco-Tellus Inc. The Interlake Companies, Inc. Delaware
Construction & Industrial
Supplies Limited Dexion International Limited England
Dexion-Aura GmbH Dexion GmbH Germany
Dexion (Australia) Pty. Ltd. Interlake DRC Limited New South Wales,
Australia
Dexion Control Systems
Limited Dexion International Limited England
Dexion GmbH Dexion Holding GmbH Germany
Dexion Group plc Interlake DRC Limited England
Dexion Holding GmbH Dexion Group plc Germany
Dexion Holdings Limited Dexion Group plc England
Dexion Incorporated The Interlake Companies, Inc. Delaware
Dexion International Limited Dexion Group plc England
Dexion Limited Dexion International Limited England
Dexion (North Asia) Ltd.(1) The Interlake Companies, Inc. Hong Kong
Dexion Produktions GmbH Dexion Holding GmbH Germany
-------------------------
(1) 20% owned by Peter Kedge
<PAGE>
Dexion S.A. Dexion Holding GmbH France
Dexion sro Dexion Holding GmbH Czech
Gary Steel Supply Company The Interlake Companies, Inc. Illinois
Hoeganaes Corporation The Interlake Companies, Inc.(2) Delaware
Hoeganaes Development, Inc. Hoeganaes Corporation Delaware
Interlake ARD Corporation The Interlake Companies, Inc. Delaware
Interlake Australian Mining
Ventures, Inc. The Interlake Companies, Inc. Ohio
Interlake DRC Limited The Interlake Companies, Inc. Delaware
Interlake Foreign Sales The Interlake Companies, Inc.(70%) Barbados,W.I.
Corporation Hoeganaes Corporation (30%)
Interlake Newco Corporation The Interlake Corporation Delaware
Interlake Packaging
Corporation The Interlake Companies, Inc. Delaware
Interlake Steel Corporation The Interlake Companies, Inc. Arizona
Lodi Fab Industries, Inc. The Interlake Companies, Inc. Delaware
Pakseal Power Industries Ltd. England
Pakseal Industries Limited Power Industries Limited England
Pakseal S.A.R.L. Power Industries Limited France
Pakseal S.R.L. Power Industries Limited Italy
Power Industries Limited Twicebonus Limited England
Power Strap Limited Pakseal Industries Limited (50%) England
Power Industries Limited (50%)
Precis (935) Limited Interlake DRC Limited England
Redirack GmbH Dexion GmbH Germany
Redirack Limited Dexion International Limited England
-------------------
(2) 20% of capital stock, all of which is voting common stock, is owned by
Hoganas Aktiebolag
<PAGE>
S.A. Dexion-Redirack N.V. Dexion Group plc Belgium
Seal-less Strapping Industries
Limited Acme Strapping Inc. Canada
Southern Counties Storage
Equipment Limited Dexion International Limited England
The Interlake Companies, Inc. The Interlake Corporation Delaware
TIC Assurance Ltd. The Interlake Companies, Inc. Cayman Islands
Twicebonus Limited Interlake DRC Limited England
Westore Limited Dexion Group plc England
Witty & Wyatt Equipment Dexion International Limited England
Limited
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-END> DEC-25-1994
<CASH> 12939
<SECURITIES> 26769
<RECEIVABLES> 132066
<ALLOWANCES> 2977
<INVENTORY> 73853
<CURRENT-ASSETS> 248990
<PP&E> 382840
<DEPRECIATION> 237106
<TOTAL-ASSETS> 444953
<CURRENT-LIABILITIES> 181371
<BONDS> 0
<COMMON> 23229
39155
0
<OTHER-SE> (319664)
<TOTAL-LIABILITY-AND-EQUITY> 444953
<SALES> 752592
<TOTAL-REVENUES> 752592
<CGS> 576929
<TOTAL-COSTS> 694193
<OTHER-EXPENSES> 34174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51609
<INCOME-PRETAX> (25534)
<INCOME-TAX> 10888
<INCOME-CONTINUING> (40557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 194
<NET-INCOME> (40751)
<EPS-PRIMARY> (1.85)
<EPS-DILUTED> (1.85)
</TABLE>
