<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1995
REGISTRATION NO. 033-59003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
THE INTERLAKE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN 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
(708) 852-8800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEPHEN R. SMITH, ESQ.
THE INTERLAKE CORPORATION
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
550 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-4387
(708) 852-8800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
ROBERT A. YOLLES, ESQ. WINTHROP B. CONRAD, JR., ESQ.
JONES, DAY, REAVIS & POGUE DAVIS POLK & WARDWELL
77 WEST WACKER DRIVE 450 LEXINGTON AVENUE
CHICAGO, ILLINOIS 60601-1692 NEW YORK, NEW YORK 10017
(312) 782-3939 (212) 450-4000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement has become effective.
----------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
THE INTERLAKE CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NO. FORM S-2 ITEM NUMBER AND HEADING CAPTION OR LOCATION IN PROSPECTUS
- ---- -------------------------------- ---------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page
of Prospectus........................... Inside Front Cover Page of Prospectus; Out-
side Back Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Inside Front Cover Page of Prospectus; Pro-
spectus Summary; Risk Factors; Selected
Consolidated Financial Data
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Not Applicable
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page of Prospectus; Un-
derwriting
9. Description of Securities to be
Registered.............................. Outside Front Cover Page of Prospectus;
Prospectus Summary; Description of Senior
Notes
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the
Registrant.............................. Prospectus Summary; Risk Factors; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Results of Op-
erations and Financial Condition; Busi-
ness; Index to Consolidated Financial
Statements
12. Incorporation of Certain Information by
Reference............................... Incorporation of Certain Information by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 15, 1995
PROSPECTUS
, 1995
$100,000,000
[LOGO OF INTERLAKE]
% SENIOR NOTES DUE 2001
The % Senior Notes due 2001 (the "Senior Notes") are being offered (the
"Offering") by The Interlake Corporation (the "Company"). The Senior Notes will
mature on November , 2001. Interest on the Senior Notes will be payable
semiannually on May and November of each year, commencing November ,
1995.
Except as set forth below, the Senior Notes are not redeemable prior to
November , 1998. Thereafter, the Senior Notes are redeemable at the option of
the Company, in whole or in part, at the redemption prices set forth herein,
plus accrued and unpaid interest to the date of redemption. At any time, and
from time to time, prior to November , 1998, the Company may redeem up to 35%
of the original principal amount of the Senior Notes with the proceeds of
Equity Sales (as defined herein) at a redemption price of % of the principal
amount, plus accrued and unpaid interest to the date of redemption. Upon a
Change of Control (as defined herein), the Company will be obligated, subject
to certain conditions, to offer to repurchase all outstanding Senior Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of repurchase. See "Risk Factors--Change of Control" and
"Description of Senior Notes."
Concurrently with the consummation of the Offering, the Company is repaying a
portion of the indebtedness outstanding under its existing senior secured bank
credit facilities (the "Credit Agreement") and entering into an amendment to
the Credit Agreement (as amended, the "Amended Credit Agreement"). See
"Description of Certain Other Indebtedness--Amended Credit Agreement." The
consummation of the Offering and the effectiveness of the Amended Credit
Agreement are contingent upon each other.
The Senior Notes will be general unsecured obligations of the Company, senior
in right of payment to all existing and future subordinated indebtedness and
pari passu in right of payment with all other Senior Indebtedness (as defined
herein) of the Company. However, substantially all existing Senior Indebtedness
is (and obligations under the Amended Credit Agreement will be) secured by a
pledge of substantially all of the assets of the Company and its subsidiaries.
After giving effect to the Offering and the application of the net proceeds
thereof, as of April 2, 1995, Senior Indebtedness (excluding the Senior Notes)
would have aggregated approximately $131.6 million, substantially all of which
is secured indebtedness. As a result of the Company's holding company
structure, the Senior Notes will be effectively subordinated to all liabilities
of the Company's subsidiaries, including liabilities to general creditors.
After giving effect to the Offering and the application of the net proceeds
thereof, as of April 2, 1995, the aggregate of all liabilities of the Company's
subsidiaries (excluding amounts included above in Senior Indebtedness) would
have aggregated approximately $221.7 million.
SEE "RISK FACTORS," BEGINNING ON PAGE 11 HEREOF, FOR A DISCUSSION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH
AN INVESTMENT IN THE SENIOR NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note................. % % %
Total........................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at $ .
The Senior Notes are offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of the Senior Notes will be made in New
York, New York, on or about , 1995.
DONALDSON, LUFKIN & JENRETTE CS FIRST BOSTON
SECURITIES CORPORATION
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-2 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement and the exhibits and schedules thereto,
to which reference is made hereby. Statements contained herein concerning any
document filed as an exhibit are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 500 West Madison Street, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on the New York Stock Exchange (Symbol: IK)
and the Chicago Stock Exchange. Reports, proxy statements and other information
filed by the Company with the Commission may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005, and the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Prospectus incorporates by reference the Annual Report on Form 10-K for
the fiscal year ended December 25, 1994 and the Quarterly Report on Form 10-Q
for the fiscal quarter ended April 2, 1995, filed by the Company with the
Commission. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus and the Registration Statement of which it is a part to the extent
that a statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the Registration
Statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents that have been
incorporated in this Prospectus by reference, other than exhibits to such
documents that have not been specifically incorporated by reference herein or
therein. Requests should be directed to Corporate Secretary, The Interlake
Corporation, 550 Warrenville Road, Lisle, Illinois 60532-4387, telephone number
(708) 852-8800.
----------------
The principal executive offices of the Company are located at 550 Warrenville
Road, Lisle, Illinois 60532-4387. The telephone number of the Company at such
address is (708) 852-8800.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. All
references in this Prospectus to the "Company" include its consolidated
subsidiaries unless the context otherwise indicates.
THE COMPANY
General. The Company is a multinational corporation engaged in the design,
manufacture and sale or distribution of value-added metal and related products
for the automotive, materials handling, packaging and aerospace industries. The
Company's operations are divided into two segments: Engineered Materials and
Handling/Packaging Systems. The Company's operations include:
Engineered Materials
. Hoeganaes Corporation ("Hoeganaes" or "Special Materials"), which
produces ferrous metal powder used to manufacture precision parts; and
. Chem-tronics, Inc. ("Chem-tronics" or "Aerospace Components"), which
manufactures precision jet engine components and repairs jet engine fan
blades.
Handling/Packaging Systems
. Handling, which designs, manufactures and sells storage rack, shelving
and related equipment; and
. Packaging, which designs and sells machinery for applying strapping and
stitching wire, and supplies strapping and stitching wire for use in
these machines.
The Company believes it has leading market shares in all of its businesses
and believes they enjoy a reputation for high quality products and superior
customer service. The Company has implemented programs to reduce costs, improve
productivity, improve customer service and support, and seek growth
opportunities through geographic expansions and new product development. The
Company expects that its leading market positions, together with its business
initiatives, will enable it to continue to take advantage of U.S. economic
trends and the economic improvements in other markets throughout the world.
There can be no assurance, however, that the Company's expectations will be
fulfilled.
Although the Company's businesses are cyclical in nature, the Company's
operating results have historically lagged behind improvements in the general
economy, and its earnings downturns have also come later than those of the
general economy. This is largely due to many of Handling's customers waiting to
implement long-term capital projects until a recovery is well-established. The
Company expects this lagging relationship to continue.
The Company expects its operating results to benefit from the recovery of the
European economies, which accounted for approximately 28% of the Company's
revenues in 1994. In addition, the Company anticipates that future results will
be enhanced by certain positive trends in its businesses, including the
increased use of powder metallurgy in the manufacture of automobile parts and
Handling's continuing penetration of growing Pacific Rim markets.
Hoeganaes is the North American market and technology leader in the
production of ferrous (iron-based) 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 powdered metal technology have
certain cost and design
3
<PAGE>
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. The
automotive industry is the largest market for ferrous metal powder, accounting
for approximately 65% of Hoeganaes' sales in 1994. Average usage of ferrous
metal powder per vehicle has increased from 18 pounds in 1986 to 30 pounds in
1994. In 1994, Hoeganaes had revenues of $153.9 million.
Chem-tronics is a leading producer of lightweight, fabricated products for
commercial and military aerospace applications, and also provides jet engine
fan blade repair services. Chem-tronics offers its customers a vertically
integrated facility, thereby eliminating the need for numerous subcontractors
for a single component. Chem-tronics' principal products are sold to engine
manufacturers under arrangements which generally establish Chem-tronics as the
sole source of supply. Approximately 67% of Chem-tronics' revenues in 1994 were
comprised of sales to commercial and space program customers. In 1994, Chem-
tronics had revenues of $62.5 million.
Handling designs, manufactures and sells storage rack, shelving, angle,
conveyors and related equipment for use in warehouse distribution centers,
factories and other storage and material handling applications. Handling also
supplies equipment for retail display and office interiors. The Company
believes Handling is the world's largest manufacturer of storage rack.
Handling's rack systems are used in warehouse and distribution applications
ranging from simple pallet storage to sophisticated warehouse systems and
warehouse-type retail store environments. In 1994, Handling had revenues of
$406.0 million.
The Company's Packaging business is one of the leading North American and
European suppliers of steel and plastic strap and the machinery and tools to
apply this strap. Packaging also manufactures and distributes wire and
stitching equipment. In 1994, Packaging had revenues of $130.2 million.
Financial Results. The Company's net sales increased 10.5% to $752.6 million
in 1994 from $681.3 million in 1993 and increased 22.2% to $206.9 million in
the first quarter of 1995 from $169.3 million in the first quarter of 1994.
Operating profit before goodwill write-down, restructuring charges,
depreciation and amortization ("EBITDA") increased 18.5% to $81.5 million in
1994 from $68.8 million in 1993 and increased 33.3% to $24.0 million in the
first quarter of 1995 from $18.0 million in the first quarter of 1994. EBITDA
excludes a $34.2 million goodwill write-down in 1994 and restructuring charges
of $5.6 million in 1993. The Company reported a net loss of $40.8 million for
1994 and a net loss of $26.0 million in 1993. Net income in the first quarter
of 1995 was $0.4 million compared to a net loss of $2.6 million in the first
quarter of 1994.
The Offering. The Company is undertaking the Offering and entering into the
Amended Credit Agreement to extend the maturities of a substantial portion of
its long-term debt and to enhance the Company's financial flexibility by
increasing its liquidity and modifying certain covenants applicable under the
Credit Agreement. The Company will use the net proceeds of the Offering to
repay approximately $72.7 million of term loans and approximately $23.3 million
of revolving loans (the "Loan Repayments") under the Credit Agreement. As a
result of the Offering and the revised amortization schedule under the Amended
Credit Agreement, $195.3 million of indebtedness which would have matured in
1995 through 1998 under the Credit Agreement, including $171.4 million which
would have matured in 1996 and 1997, will be extended to 1999 through 2001. The
Amended Credit Agreement is subject to the negotiation, execution and delivery
of definitive documentation. Accordingly, certain of the actual terms,
conditions and covenants may differ from those described herein. See
"Description of Certain Other Indebtedness--Amended Credit Agreement." The
consummation of the Offering and the effectiveness of the Amended Credit
Agreement are contingent upon each other.
Prior Transactions. The Company's high debt level and interest costs are a
result of a restructuring program implemented in 1989 pursuant to which the
Company incurred obligations of $551.1 million, and paid a special cash
dividend aggregating $458.8 million on the Company's common stock (the "1989
Restructuring Program"). In 1992, the Company completed a financing plan
pursuant to which the Company
4
<PAGE>
raised additional equity capital and refinanced or revised the terms of certain
of its outstanding indebtedness (the "1992 Financing"). In connection with the
1992 Financing, the Company issued common stock and preferred stock providing
aggregate net proceeds of $80.9 million and issued $220 million of its Senior
Subordinated Debentures due 2002 (the "Subordinated Debentures"). The net
proceeds of the 1992 Financing were used to redeem the Company's $200 million
increasing rate notes, to repay a portion of indebtedness under the Credit
Agreement and for general corporate purposes.
THE OFFERING
Securities Offered.......... $100,000,000 principal amount of % Senior Notes
due 2001.
Maturity Date............... November , 2001.
Interest Payment Dates...... May and November of each year, commencing
November , 1995.
Mandatory Redemption........ None.
Optional Redemption......... Except as set forth below, the Senior Notes will
not be redeemable by the Company prior to Novem-
ber , 1998. Thereafter, the Senior Notes will
be redeemable at the option of the Company, in
whole or in part, at the redemption prices set
forth herein, plus accrued and unpaid interest to
the date of redemption. At any time, and from
time to time, prior to November , 1998, the
Company may redeem up to 35% of the original
principal amount of the Senior Notes with the
proceeds of Equity Sales at a redemption price of
% of the principal amount, plus accrued and
unpaid interest to the date of redemption.
Change of Control........... Upon a Change of Control, the Company will be re-
quired to make an offer to repurchase all out-
standing Senior Notes at a purchase price of 101%
of the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. Due to
the highly leveraged structure of the Company,
the Company may not have sufficient funds or fi-
nancing to repurchase the Senior Notes and sat-
isfy other obligations (including secured obliga-
tions under the Amended Credit Agreement) which
may come due upon the occurrence of a Change of
Control. See "Risk Factors--Change of Control"
and "Description of Senior Notes."
Ranking..................... The Senior Notes will be general unsecured obli-
gations of the Company and will rank senior in
right of payment to all existing and future sub-
ordinated indebtedness of the Company (including
the Subordinated Debentures) and pari passu in
right of payment with all other Senior Indebted-
ness, including indebtedness under the Amended
Credit Agreement. However, substantially all ex-
isting Senior Indebtedness is (and obligations
under the Amended Credit Agreement will be) se-
cured by a pledge of substantially all of the as-
sets of the Company and its subsidiaries. In ad-
dition, as a result of the Company's holding com-
pany structure, the Senior Notes will be effec-
tively subordinated to all liabilities of the
Company's subsidiaries, including liabilities to
general creditors.
5
<PAGE>
After giving effect to the Offering and the ap-
plication of the net proceeds thereof, as of
April 2, 1995, Senior Indebtedness (excluding the
Senior Notes) would have aggregated approximately
$131.6 million (including $108.6 million under
the Amended Credit Agreement), substantially all
of which is secured indebtedness, and the aggre-
gate of all liabilities of the Company's subsidi-
aries (excluding amounts included above in Senior
Indebtedness) would have aggregated approximately
$221.7 million. The maximum aggregate principal
amount of borrowings which may be outstanding un-
der the Amended Credit Agreement is $175.4 mil-
lion. In addition, the Company may incur addi-
tional Senior Indebtedness, including, under cer-
tain circumstances, Senior Indebtedness that is
secured.
Certain Covenants........... The Indenture pursuant to which the Senior Notes
will be issued (the "Indenture") will restrict,
among other things, (i) the incurrence of addi-
tional indebtedness by the Company and its sub-
sidiaries, (ii) the payment of dividends or other
distributions, (iii) the redemption of capital
stock or subordinated indebtedness, (iv) certain
transactions with affiliates, (v) the incurrence
of liens, (vi) the use of proceeds from the dis-
posal of assets and (vii) mergers, consolidations
or the sale of all or substantially all of the
assets of the Company.
Use of Proceeds............. The net proceeds of the Offering, estimated to be
$96.0 million, will be used to make the Loan Re-
payments. See "Use of Proceeds."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of the
Company for each of the fiscal years ended December 30, 1990, December 29,
1991, December 27, 1992, December 26, 1993 and December 25, 1994 and for the
three months ended March 27, 1994 and April 2, 1995 and summary consolidated
pro forma data for the year ended December 25, 1994 and the three months ended
April 2, 1995 (giving effect to the Offering and the making of the Loan
Repayments as if such transactions had occurred at the beginning of the year
ended December 25, 1994 and, except as otherwise indicated, the three months
ended April 2, 1995, respectively). The following financial data should be read
in conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Company's Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED (UNAUDITED)(8)
----------------------------------------------------------------- ----------------------
MARCH 27, APRIL 2,
1990 1991 1992 1993 1994 1994 1995
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT
DATA:
Net sales from
continuing operations.. $ 786,279 $ 714,742 $ 708,199 $ 681,330 $ 752,592 $ 169,336 $206,898
Restructuring charges
and goodwill write-down
(1).................... 13,482 3,344 2,523 5,611 34,174 -- --
Operating profit........ 58,651 61,539 50,383 38,186 24,225 12,033 18,707
Net interest expense.... 62,037 56,146 51,425 49,051 50,240 12,541 13,479
Provision for income
taxes.................. 8,536 10,530 9,040 6,542 10,888 1,988 3,489
Income (loss) from
continuing operations
before minority
interest, extraordinary
loss and accounting
changes................ (8,644) (10,103)(6) (10,566) (22,766)(6) (36,422) (1,500) 1,810
Net income (loss) (1)... $ (21,751)(5) $ (13,744) $ (27,698)(7) $ (25,962) $ (40,751) $ (2,589)(9) $ 394
========= ========= ========= ========= ========= ========= ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 18,473 $ 10,541 $ 38,640 $ 31,934 $ 39,708 $ 17,606 $ 22,473
Working capital......... 70,020 61,347 92,789 73,869 67,619 73,275 71,826
Total assets............ 518,997 478,067 511,292 464,160 444,953 454,037 435,604
Total debt.............. 494,615 471,441 450,801 443,135 442,451 442,150 447,594
Convertible Exchangeable
Preferred Stock--
Redeemable............. -- -- 39,155 39,155 39,155 39,155 39,155
Total shareholders'
equity (deficit)....... (226,808) (239,465) (232,718) (259,767) (296,435) (261,624)(9) (292,378)
OTHER DATA:
Capital expenditures.... $ 14,249 $ 13,472 $ 24,588 $ 14,540 $ 15,485 $ 3,675 $ 3,051
========= ========= ========= ========= ========= ========= ========
EBIT--Operating profit
before restructuring
charges and goodwill
write-down (2)......... $ 72,133 $ 64,883 $ 52,906 $ 43,797 $ 58,399 $ 12,033 $ 18,707
Depreciation and
amortization........... 27,146 25,324 27,535 25,040 23,102 5,987 5,322
--------- --------- --------- --------- --------- --------- --------
EBITDA (2).............. $ 99,279 $ 90,207 $ 80,441 $ 68,837 $ 81,501 $ 18,020 $ 24,029
========= ========= ========= ========= ========= ========= ========
Ratio of earnings from
continuing operations
to fixed charges (3)... -- -- -- -- -- -- 1.21
Ratio of EBITDA to net
interest expense....... 1.60 1.61 1.56 1.40 1.62 1.44 1.78
Ratio of total debt to
EBITDA................. 4.98 5.23 5.60 6.44 5.43 6.42(10) 5.11(10)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 25, 1994 APRIL 2, 1995
----------------- ------------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
UNAUDITED PRO FORMA DATA (4):
Net interest expense...................... $53,939 $13,904
Net loss.................................. (44,450) (31)
Ratio of earnings from continuing
operations to fixed charges (3).......... -- 1.17
Ratio of EBITDA to net interest expense... 1.51 1.73
Ratio of total debt to EBITDA............. 5.48 5.16 (10)
</TABLE>
- --------
(1) Reflects restructuring charges in 1990, 1991, 1992 and 1993 and a charge
for goodwill write-down in 1994.
(2) The Company has included information concerning EBIT and EBITDA because it
believes that EBIT and EBITDA are used by certain investors as one measure
of an issuer's historical ability to fund operations and meet its financial
obligations and because EBIT and EBITDA are relevant to compliance with the
covenants in the Credit Agreement and the Amended Credit Agreement. See
"Description of Certain Other Indebtedness--Amended Credit Agreement." EBIT
and EBITDA should not be considered by an investor as alternatives to, or
more meaningful than, net income (loss) as indicators of the Company's
results of operations or cash flows or as a measure of liquidity.
(3) For purposes of determining the ratio of earnings from continuing
operations to fixed charges, "earnings" includes pretax income from
continuing operations adjusted for the minority interest in the pretax
income of majority-owned subsidiaries and fixed charges. "Fixed charges"
consists of interest on all indebtedness (which includes the interest
component of capitalized leases) and amortization of deferred financing
costs. Earnings were inadequate to cover fixed charges by deficiencies of
$6.9 million, $5.0 million, $7.2 million, $21.6 million and $32.3 million
in the fiscal years ended December 30, 1990, December 29, 1991, December
27, 1992, December 26, 1993 and December 25, 1994, respectively, and by a
deficiency of $1.0 million for the three months ended March 27, 1994. On a
pro forma basis, earnings were inadequate to cover fixed charges by a
deficiency of $36.0 million in the fiscal year ended December 25, 1994.
(4) Pro forma data includes the effects of (a) amortization of fees and
expenses related to the Senior Notes and the Amended Credit Agreement, (b)
elimination of the amortization of fees and expenses attributable to the
loans under the Credit Agreement to be written off upon consummation of
the Offering and (c) an increase in interest expense attributable to the
Senior Notes.
(5) Includes results of discontinued operations consisting of losses of $8.9
million.
(6) Includes the effect of special non-operating charges of $6.0 million and
$4.8 million in 1991 and 1993, respectively, relating to certain
environmental matters.
(7) Includes an extraordinary loss of $7.6 million on early extinguishment of
debt, net of applicable income taxes, and charges related to changes in
methods for accounting for income taxes and postretirement benefits
totalling $6.1 million.
(8) The first quarter of 1995 was a 14-week period, whereas the first quarter
of 1994 was a 13-week period. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Results of Operations for
the First Quarter of 1994 and 1995."
(9) Reflects a charge recorded in the fourth quarter of 1994, retroactive to
the beginning of fiscal 1994, related to a change in method of accounting
for postretirement benefits of $0.2 million.
(10) The ratio of total debt to EBITDA for these periods has been calculated
using total debt at the end of the period divided by EBITDA for the four
fiscal quarters ended at the end of such period. EBITDA for the four
fiscal quarters ended March 27, 1994 and April 2, 1995 was $68.9 million
and $87.5 million, respectively.
8
<PAGE>
SUMMARY CAPITALIZATION
The following table sets forth the summary consolidated capitalization of the
Company at April 2, 1995 and as adjusted to give effect to the Offering and the
Loan Repayments at such date. See "Capitalization."
<TABLE>
<CAPTION>
APRIL 2, 1995
(UNAUDITED)
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including
current maturities):
Credit Agreement loans (1).. $ 204,580 $ 108,580
Senior Notes................ -- 100,000
Subordinated Debentures..... 220,000 220,000
Other....................... 23,014 23,014
--------- ---------
Total long-term debt (2).. 447,594 451,594
Convertible Exchangeable
Preferred Stock--Redeemable.. 39,155 39,155
Shareholders' equity
(deficit).................... (292,378) (296,414)(3)
--------- ---------
Total capitalization.... $ 194,371 $ 194,335
========= =========
</TABLE>
- --------
(1) Reflect amounts outstanding under the Credit Agreement (actual) and the
Amended Credit Agreement (as adjusted).
(2) Includes current maturities of $30.5 million (actual) and $3.3 million (as
adjusted).
(3) Reflects charges of $4.0 million relating to unamortized bank fees
pertaining to the Loan Repayments. These amounts will be charged against
results of operations during the fiscal quarter in which the Loan
Repayments are made.
LIQUIDITY
The following table sets forth at April 2, 1995 the Company's consolidated
cash position and amounts available to the Company under the Credit Agreement
and as adjusted to give effect to the Offering, the Amended Credit Agreement
and the Loan Repayments.
<TABLE>
<CAPTION>
APRIL 2, 1995
(UNAUDITED)
--------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................. $ 22,473 $ 22,473
======== ========
Total available commitment (1)............................. $239,164 $175,400
Total utilization (2)...................................... 224,685 128,685
-------- --------
Amounts available (1)...................................... $ 14,479 $ 46,715
======== ========
</TABLE>
- --------
(1) Amounts shown reflect the amounts effectively available at April 2, 1995
under the terms of the Credit Agreement (actual) and the Amended Credit
Agreement (as adjusted) and include $5.8 million (actual and as adjusted)
available only to pay certain potential environmental liabilities.
(2) Amounts include outstanding letters of credit of $20.1 million.
9
<PAGE>
SCHEDULED AMORTIZATION
In connection with the Offering and the Loan Repayments, the Company will
repay a portion of the amounts outstanding under the Credit Agreement and enter
into the Amended Credit Agreement. The Loan Repayments and the Amended Credit
Agreement will extend the maturities of a substantial portion of the Company's
long-term debt and enhance the Company's financial flexibility by increasing
its liquidity and modifying certain covenants applicable under the Credit
Agreement. See "Description of Certain Other Indebtedness--Amended Credit
Agreement." After giving effect to the Offering, the application of the net
proceeds thereof to make the Loan Repayments, and the revised amortization
schedule under the Amended Credit Agreement, scheduled maturities of
outstanding indebtedness (including obligations under the Amended Credit
Agreement) are expected to be as follows:
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION(2)
(UNAUDITED)
----------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
FISCAL YEAR ENDED
<S> <C> <C>
1995(1).................................... $ 24,633 $ 8,539
1996....................................... 89,188 4,277
1997....................................... 90,773 3,948
1998....................................... 11,544 4,044
1999....................................... 4,096 103,426(3)
2000....................................... 200 200
2001....................................... 50,300 150,300(4)
2002....................................... 171,300 171,300(5)
</TABLE>
- --------
(1) Includes $5.8 million paid during the first quarter of 1995 under the terms
of the Credit Agreement (actual and as adjusted) and excludes the Loan
Repayments (as adjusted).
(2) Calculated based on borrowings and currency exchange rates at April 2,
1995.
(3) Includes $99.3 million maturing under the Amended Credit Agreement.
(4) Includes the $100.0 million of Senior Notes and $50.0 million due under the
Subordinated Debentures.
(5) Includes $170.0 million of the Subordinated Debentures.
10
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the specific risk factors set
forth below, as well as the other information set forth or incorporated by
reference in this Prospectus, prior to purchasing the Senior Notes offered
hereby.
HIGH LEVERAGE
The Company is highly leveraged. At April 2, 1995, the Company had
approximately $447.6 million of indebtedness and shareholders' deficit of
$292.4 million. Following consummation of the Offering and giving effect to the
Loan Repayments, the Company will remain highly leveraged. Accordingly, (i) the
Company will have significant interest expense and principal repayment
obligations; (ii) the ability of the Company to satisfy its obligations
(including its debt service requirements relating to the Senior Notes and the
other indebtedness which will remain outstanding following consummation of the
Offering) through 1998 and its ability to refinance its indebtedness maturing
in 1999 through 2002 will depend on achieving satisfactory operating results,
which will be subject to prevailing economic conditions and financial, business
and other factors, many of which are beyond the control of the Company; (iii)
the outstanding indebtedness and the deficit in shareholders' equity will limit
the Company's ability to effect future financings, to make capital expenditures
or acquisitions and to take advantage of other significant business
opportunities that may arise, and may otherwise restrict corporate activities;
(iv) a portion of the Company's indebtedness will be subject to fluctuations in
interest rates; and (v) the credit ratings, if any, on the Company's
outstanding long-term debt are expected to remain below investment grade.
High debt levels and interest costs incurred by the Company have had, and
will continue to have, a substantial adverse effect on the Company's cash flows
and results of operations. The Company reported a net loss of $40.8 million for
the year ended December 25, 1994 (including a $34.2 million charge for goodwill
write-down) and net income of $0.4 million for the three months ended April 2,
1995. The ratio of earnings to fixed charges for the three months ended April
2, 1995 was 1.21. Earnings for the years ended December 25, 1994 and December
26, 1993 were inadequate to cover fixed charges by deficiencies of $32.3
million and $21.6 million, respectively. Giving effect to the Offering and the
Loan Repayments, on a pro forma basis, for the three months ended April 2,
1995, the ratio of earnings to fixed charges would have been 1.17 and, for the
year ended December 25, 1994, earnings would have been inadequate to cover
fixed charges by $36.0 million.
INABILITY TO REFINANCE OR REPAY INDEBTEDNESS AT MATURITY
Following the Offering, the Company will have substantial indebtedness
maturing in 1999 through 2002, including $99.3 million under the Amended Credit
Agreement which will mature in 1999, $100.0 million under the Senior Notes
which will mature in 2001, $50.0 million of Subordinated Debentures which will
be payable in 2001 and $170.0 million of Subordinated Debentures which will
mature in 2002. See "Prospectus Summary--Scheduled Amortization." After
consummation of the Offering and the effectiveness of the Amended Credit
Agreement, the Company believes that it will be able to meet its debt service
requirements from operating cash flow through 1998. However, there can be no
assurance that the Company will be able to do so. In addition, if the Company
is unable to comply with the financial and operating covenants under the
Amended Credit Agreement or otherwise defaults under the Amended Credit
Agreement, it may need to refinance amounts borrowed thereunder prior to 1999.
See "--Financial and Operating Restrictions; Financial Performance
Requirements," "--Environmental Matters" and "Description of Certain Other
Indebtedness--Amended Credit Agreement." The Company does not expect to be able
to repay the indebtedness maturing in 1999 through 2002 from operating cash
flows. Accordingly, the Company will need to refinance the indebtedness
represented by the Amended Credit Agreement, the Senior Notes and the
Subordinated Debentures. The Company may determine that it is necessary to
include an equity offering as a component of any proposed refinancing. The
Company's ability to refinance this indebtedness, including its ability to
issue equity, will be dependent on its future operating results and cash flow
from operations, which
11
<PAGE>
are in turn dependent upon a number of factors, including prevailing economic
conditions and financial, business and other factors, many of which are beyond
the control of the Company. There can be no assurance that the Company will be
able to refinance its indebtedness under the Amended Credit Agreement, the
Senior Notes or the Subordinated Debentures at maturity. In addition, the
Company's ability to meet its debt service requirements through 1998 and its
ability to refinance this indebtedness could be adversely affected by the
outcome of certain determinations relating to potential environmental and
federal income tax liabilities. See "--Environmental Matters" and "--Federal
Income Taxes." For a discussion of the possible consequences of an event of
default under the Amended Credit Agreement, see "--Effective Subordination as a
Result of Unsecured Status of Senior Notes."
IMPACT OF ECONOMIC CONDITIONS ON COMPANY'S PERFORMANCE
The Company's operating results are, and will continue to be, highly
dependent on the economic environments in which it operates. In recent periods,
the U.S. economy has improved from earlier recessionary conditions; however,
the economic climate in Europe deteriorated significantly during 1993 and
recovered only partially in 1994. The Company's net sales in Europe represented
28% and 31% of consolidated net sales in 1994 and 1993, respectively. The
Company's net sales outside of the U.S. represented approximately 42% of
consolidated net sales in 1994. See Note 6 of Notes to Consolidated Financial
Statements. There can be no assurance that the improvements in the economies in
which the Company operates will continue or that any improvement will be of a
magnitude sufficient to enable the Company to generate operating results and
cash flow in sufficient amounts to meet its debt service requirements or to
comply with the restrictive covenants under the Amended Credit Agreement.
FINANCIAL AND OPERATING RESTRICTIONS; FINANCIAL PERFORMANCE REQUIREMENTS
The Amended Credit Agreement will contain numerous financial and operating
covenants restricting the manner in which the business of the Company may be
operated. The Company will be required under the Amended Credit Agreement to
comply with specified financial performance and operating requirements or
restrictions, including those relating to operating cash flow, net worth and
capital expenditures. A description of the requirements or restrictions is set
forth under the heading "Description of Certain Other Indebtedness--Amended
Credit Agreement--Certain Covenants." The Company's results and cash flow from
operations must improve over 1994 levels to meet these performance
requirements. In addition, the Amended Credit Agreement, among other things,
will require that all net cash proceeds from dispositions of assets of the
Company out of the ordinary course of business and other cash infusions
(including certain financing transactions) and the Company's excess cash flow
annually on a consolidated basis (as defined in the Amended Credit Agreement)
be applied to prepay debt outstanding under the Amended Credit Agreement.
If the Company were unable to comply with any of the covenants under the
Amended Credit Agreement, the Company could seek to renegotiate the Amended
Credit Agreement or to refinance the loans outstanding under the Amended Credit
Agreement. If the Company were unable to renegotiate the Amended Credit
Agreement in a satisfactory manner or to refinance the loans, the Company could
be in default under the Amended Credit Agreement. See "--Effective
Subordination as a Result of Unsecured Status of Senior Notes" and "Description
of Certain Other Indebtedness--Amended Credit Agreement."
In addition, the Indenture will contain certain restrictive covenants
limiting, among other things, the issuance of additional indebtedness and
preferred stock by the Company and its subsidiaries, the payment by the Company
of dividends or other distributions, the redemption of capital stock of the
Company, transactions with affiliates, the use of proceeds from the disposal of
assets, the incurrence of liens, and the merger, consolidation or sale of all
or substantially all of the assets of the Company. See "Description of Senior
Notes." The Indenture governing the Subordinated Debentures (the "Subordinated
Debenture Indenture") also contains restrictive covenants which are
substantially similar to those contained in the Indenture. See "Description of
Certain Other Indebtedness--Subordinated Debentures."
12
<PAGE>
The ability of the Company to comply with such provisions in the Indenture,
the Amended Credit Agreement and the Subordinated Debenture Indenture will
depend on its future performance, which will be subject to prevailing economic
conditions and financial, business and other factors, many of which are beyond
the Company's control. Although the Company expects that it will be able to
comply with such provisions, there can be no assurance that it will be able to
do so.
POTENTIAL ADVERSE EFFECTS OF FLUCTUATIONS IN FOREIGN CURRENCY
The Company's net sales outside the U.S. represented approximately 42% of
consolidated net sales in 1994. Substantially all of the Company's consolidated
indebtedness and related interest expense has been incurred in U.S. dollars.
The Company relies on transfers of funds from its foreign subsidiaries to
provide a portion of the funds necessary to meet the Company's debt service
obligations arising principally in the U.S. As a result, the Company is
sensitive to foreign currency fluctuations. Fluctuations in currency exchange
rates between the U.S. dollar and other currencies could have a material
adverse effect on the Company's financial position, results of operations and
cash flows. For example, if the dollar strengthens in relation to currencies in
which the Company's sales are made, the Company's revenues would decline and
cause a reduction in cash flows. Any significant strengthening of the dollar
could affect the Company's ability to meet its debt service obligations through
operating cash flows or to refinance its outstanding indebtedness. The Company
is not hedged against these currency fluctuation risks.
EFFECTIVE SUBORDINATION AS A RESULT OF HOLDING COMPANY STRUCTURE
The Company is a holding company which conducts all of its operations through
its subsidiaries. The Company is the sole obligor on the Senior Notes. The
Senior Notes are not guaranteed by any subsidiary of the Company.
All of the Company's operating income is generated by its subsidiaries. The
Company relies on dividends and other advances and transfers of funds from its
subsidiaries to provide the funds necessary to meet the Company's debt service
obligations, including payment of principal and interest on the indebtedness
under the Amended Credit Agreement, the Senior Notes and the Subordinated
Debentures. The ability of the Company's subsidiaries to pay such dividends and
make such advances and transfers is subject to applicable state and non-U.S.
laws. Claims of creditors of the Company's subsidiaries, including general
creditors, will generally have priority as to the assets of such subsidiaries
over the claims of the Company and the holders of indebtedness of the Company,
including holders of the Senior Notes. At April 2, 1995, the liabilities of the
Company's subsidiaries aggregated approximately $307.7 million, including $86.0
million of indebtedness for borrowed money, substantially all of which is, to
some extent, secured indebtedness. After giving effect to the Offering and the
Loan Repayments, at April 2, 1995, the liabilities of the Company's
subsidiaries would have aggregated approximately $293.0 million, including
$71.3 million of indebtedness for borrowed money. The Indenture, the Amended
Credit Agreement and the Subordinated Debenture Indenture permit the Company's
subsidiaries to incur additional indebtedness in certain circumstances.
Certain subsidiaries of the Company are borrowers under the Amended Credit
Agreement and, as such, have pledged substantially all of their assets as
security for their obligations under the Amended Credit Agreement. See "--
Effective Subordination as a Result of Unsecured Status of Senior Notes."
EFFECTIVE SUBORDINATION AS A RESULT OF UNSECURED STATUS OF SENIOR NOTES
The Senior Notes will be general, unsecured obligations of the Company and
will rank pari passu in right of payment to all other Senior Indebtedness,
including the principal of and interest on and all other amounts due on or
payable by the Company in connection with the Amended Credit Agreement (whether
as primary obligor or as a guarantor of the obligations of the Subsidiary
Borrowers and the ESOP Borrower (as defined) under the Amended Credit
Agreement) and any indebtedness designated by the Company as Senior
Indebtedness at the time of its incurrence. The Amended Credit Agreement and
the Indenture limit, but do not prohibit, the incurrence of additional
indebtedness which constitutes Senior Indebtedness.
13
<PAGE>
A default under the Amended Credit Agreement could cause indebtedness
thereunder to be declared due and payable prior to maturity. Because of cross-
acceleration provisions in the Indenture, a default under the Amended Credit
Agreement or the Subordinated Debenture Indenture followed, in each case, by an
acceleration of the indebtedness outstanding under such document, would
constitute a default under the Indenture which in turn could lead to an
acceleration of the Senior Notes. If the Company is unable to repay any such
indebtedness when due, the holders of such indebtedness could proceed against
the collateral, if any, securing such indebtedness. In the case of the Amended
Credit Agreement, the collateral consists of substantially all of the assets of
the Company and certain of its subsidiaries. If the indebtedness under the
Amended Credit Agreement were to be accelerated, the proceeds of any sale of
the collateral securing such indebtedness would be applied to payment of
indebtedness owed under the Amended Credit Agreement prior to being applied to
payment of the Company's general unsecured indebtedness (including the Senior
Notes). In such an event, it is possible any amounts available to repay the
other general unsecured indebtedness of the Company (including the Senior
Notes) would be insignificant.
In addition, by reason of the unsecured status of the Senior Notes, in the
event of the insolvency, bankruptcy, liquidation, reorganization, dissolution
or other winding-up of the Company, the lenders under the Amended Credit
Agreement (the "Banks") will be entitled to be paid out of the proceeds of a
sale of the Company's assets and the assets of certain of the Company's
subsidiaries before payments to the holders of the Senior Notes and other
general unsecured creditors. As a result, the remaining assets of the Company
may be insufficient to pay the amounts due on the Senior Notes in the event of
the Company's insolvency, bankruptcy or similar event. As of April 2, 1995,
Senior Indebtedness aggregated approximately $227.6 million, including $204.6
million of secured obligations under the Credit Agreement. After giving effect
to the Offering and the Loan Repayments, as of April 2, 1995, secured debt
would have aggregated approximately $131.6 million (including $108.6 million
under the Amended Credit Agreement). The maximum aggregate principal amount of
borrowings which may be outstanding under the Amended Credit Agreement is
$175.4 million. In addition, the Company may incur additional Senior
Indebtedness, including under certain circumstances, Senior Indebtedness that
is secured. See "Description of Senior Notes--Certain Covenants--Limitation on
Liens" and "Description of Certain Other Indebtedness--Amended Credit
Agreement."
FRAUDULENT CONVEYANCE AND OTHER CONCERNS
Proceeds from the Offering will be used to refinance a portion of the
indebtedness under the Credit Agreement. The indebtedness under the Credit
Agreement was initially incurred in connection with the 1989 Restructuring
Program. If in a lawsuit on behalf of an unpaid creditor of the Company or a
representative of the creditors, a court were to find under applicable
provisions of federal bankruptcy law and state fraudulent conveyance statutes
that, pursuant to the incurrence of the indebtedness under the Credit Agreement
in connection with the 1989 Restructuring Program, the Company (i) intended to
hinder, delay or defraud any present or future creditor or (ii) received less
than reasonably equivalent value in exchange for the debt incurred or the
distribution made and (a) was insolvent, (b) was rendered insolvent by reason
of the transaction, (c) was engaged or about to engage in a business or
transaction for which its remaining assets constituted unreasonably small
capital or (d) intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they matured, such court could void certain of
the indebtedness incurred under the Credit Agreement as a fraudulent transfer,
conveyance or obligation. In addition, in such circumstances, the court also
might, under fraudulent conveyance laws or other legal principles, permit the
Senior Notes and prior payments thereon to be voided and permit such prior
payments to be recovered from the holders of the Senior Notes, based on the use
of the proceeds of the Offering to repay indebtedness under the Credit
Agreement. Alternatively, in such event, claims of the holders of the Senior
Notes could be subordinated to claims of other creditors of the Company.
CHANGE OF CONTROL
In the event of a Change of Control (as defined in the Indenture, see
"Description of Senior Notes--Certain Definitions"), the Company is required
promptly to make an offer to purchase all Senior Notes then outstanding at a
purchase price equal to 101% of the principal amount, plus accrued and unpaid
interest, if
14
<PAGE>
any, as provided in the Indenture. Prior to the mailing of a notice to each
holder of the Senior Notes of such an offer, the Company will be required in
good faith (i) to seek to obtain any required consent under the Amended Credit
Agreement so as to permit such purchase of the Senior Notes, or (ii) to attempt
to repay all or a portion of the indebtedness under the Amended Credit
Agreement to the extent necessary (including, if necessary, payment in full of
such indebtedness and payment of any prepayment premiums, fees, expenses or
penalties) to permit purchase of the Senior Notes without such consent. If such
indebtedness is not then prepayable to such extent, the Company will be
required to make an offer to those Banks under the Amended Credit Agreement
from which consent is required and cannot be obtained to repay such
indebtedness in full for an amount equal to the outstanding principal balance
thereof and accrued interest to the date of repayment (and fees, expenses,
penalties and premiums, if any) and to repay any Banks that accept such offer.
Due to the highly leveraged structure of the Company, the Company may be
unable to repurchase the Senior Notes upon the occurrence of a Change of
Control. In addition, any such Change of Control would constitute an event of
default under the Amended Credit Agreement with the result that the Banks could
declare the loans under the Amended Credit Agreement to be immediately due and
payable. Further, a Change of Control could trigger obligations by the Company
to prepay or redeem the Subordinated Debentures and its Convertible Preferred
Stock. In such events, the holders of all such obligations could seek to pursue
various contractual and legal remedies against the Company. If the Company were
unable to pay all amounts that would become due in respect of all such
obligations in such circumstance, it could result in the bankruptcy,
liquidation, reorganization, dissolution or other winding-up of the Company.
The assets of the Company may be insufficient to pay the amounts due under the
Amended Credit Agreement and the Senior Notes in such event. See "--Effective
Subordination as a Result of Unsecured Status of the Senior Notes,"
"Description of Senior Notes--Change of Control," and "--Certain Definitions--
Change of Control." For a discussion of the Company's ability to incur
additional indebtedness under the Indenture and the Amended Credit Agreement,
see "Description of Senior Notes--Certain Covenants--Limitation on Consolidated
Indebtedness."
ENVIRONMENTAL MATTERS
The Company has incurred and will continue to incur expenses for
environmental matters, including those arising from sites related to former
operations of predecessors of the Company. Included among these sites is a
Superfund site in Duluth, Minnesota, for which the Company has been identified
as a potentially responsible party. In 1991, based on a review of its
environmental matters involving nonoperating locations, the Company took a
special charge of $6.0 million, of which $4.5 million was attributable to its
estimate of potential costs related to the Duluth site. In 1993, the Company
took additional special charges totalling $4.8 million to cover estimated
liabilities for environmental matters at nonoperating sites, including a $3.9
million charge with respect to the Duluth site. The Duluth charge in 1993
reflected an increase in the Company's existing reserve to account for the
Company's estimate of its share of the likely costs to complete remediation of
certain contaminated soils at the site to standards consistent with the site's
present industrial use, based on certain risk assessments and other
assumptions, and to further investigate certain underwater sediments at the
site for which the Company has been identified as the potentially responsible
party. However, the Duluth charge did not attempt to account for potential
costs of remediation of the contaminated soils based on alternative risk
assessments or other assumptions, or to standards consistent with unrestricted
use. Based on its most recent discussions with the Minnesota Pollution Control
Agency (the "MPCA") staff, the Company believes that the required remediation
of contaminated soils at the Duluth site will be consistent with its long-time
industrial use. 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 prepared
on behalf of the Company for the contaminated soils which also contemplate the
continued industrial use of the property but which could cost as much as $20
million. This higher amount is based upon certain risk assessments and other
assumptions which the Company believes to be overly conservative. If
remediation to an unrestricted use standard were required, the cost likely
would be much higher than the amount accrued by the Company through April 2,
1995. The cost of the remedial alternative designed to meet unrestricted use
standards most recently prepared for the Company was
15
<PAGE>
calculated to be approximately $38 million. The Company is currently in
negotiations with the MPCA to arrive at an agreed-upon work plan for the
remediation of the contaminated soils, but there can be no assurance that an
agreement will be reached. Furthermore, absent further investigation and
indication by government agencies, it is not known whether any remediation of
the underwater sediments will be required or, if so, to what level. Therefore,
the Duluth charges to date have not accounted for the costs of remediation of
the underwater sediments. There can be no assurance that the Company will have
available resources sufficient to pay any costs of remediation beyond those
accrued for, including any costs relating to remediation of the underwater
sediments.
It will be an event of default under the Amended Credit Agreement if the
Company makes payments pursuant to certain federal environmental statutes with
respect to the Duluth site, on a cumulative basis, beginning in fiscal year
1995, in amounts aggregating more than $5.0 million in fiscal year 1995, $10.0
million through fiscal year 1996, $15.0 million through fiscal year 1997 and
$20.0 million thereafter. See "--Effective Subordination as a Result of
Unsecured Status of Senior Notes."
The Company is a defendant in two actions in federal district court seeking
recoveries of amounts expended or anticipated by third parties in connection
with the clean-up of alleged environmental contamination. The Company does not
believe that either of these actions is likely to have a material adverse
effect on its business, future results of operations, liquidity or consolidated
financial condition. However, there can be no assurance that these matters will
be resolved in accordance with the Company's expectations. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Nonoperating Items" and Note 16 of Notes to Consolidated Financial Statements.
As of April 2, 1995, the Company had accruals aggregating $5.9 million for
environmental liabilities. While the Company believes that the Amended Credit
Agreement will provide adequate liquidity to fund the amounts accrued, there
can be no assurance that adequate liquidity would be available to the Company
to fund any additional charges for environmental matters. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Nonoperating Items" and Note 15 of Notes to Consolidated Financial Statements.
FEDERAL INCOME TAXES
The Company's federal income tax returns for the years 1988 through 1990 are
in the process of examination. Resolution of tax years 1982 through 1984 is
pending at the U.S. Tax Court following receipt in 1994 by the Company of a
statutory notice of deficiency for these years of $17.0 million plus interest
and penalties (which interest and penalties could substantially exceed the
amount of the alleged deficiency). Resolution of tax years 1985 through 1987,
which involve some of the issues raised regarding tax years 1982 through 1984
and other issues, is pending at the Appeals Division of the Internal Revenue
Service. The Company believes that its positions with respect to contested
matters for all outstanding periods are strong and that adequate provision in
the financial statements has been made for the possible assessments of
additional taxes and interest. The Company believes that the Amended Credit
Agreement will provide adequate liquidity to fund the expected assessments
arising from the examinations of tax years 1982 through 1990. However, there
can be no assurance that federal income tax issues for the years 1982 through
1990 will be resolved in accordance with the Company's expectations.
LACK OF PUBLIC MARKET
The Senior Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Senior
Notes on any securities exchange. The Underwriters have advised the Company
that they currently intend to make a market in the Senior Notes, but they are
not obligated to do so and may discontinue such market making at any time.
Accordingly, no assurance can be given that an active public market will
develop for the Senior Notes or as to the liquidity of any trading market which
develops for the Senior Notes. If a trading market does not develop or is not
maintained, holders of Senior Notes may experience difficulty in reselling the
Senior Notes or may be unable to sell them at all. If a market for the Senior
Notes develops, the Senior Notes may trade at a discount from their original
issue price.
16
<PAGE>
The liquidity of and the market price for the Senior Notes can be expected to
vary with changes in market and economic conditions, the financial condition
and prospects of the Company, and other factors that generally influence the
market prices of securities, including in particular, fluctuations in the
market for high yield securities. Such fluctuations in the high yield market
may significantly affect liquidity and market prices for the Senior Notes,
independent of the financial performance of and prospects for the Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Senior Notes in the
Offering are expected to be approximately $96.0 million, after deducting
estimated expenses and underwriting discounts. The Company intends to use the
net proceeds of the Offering to repay approximately $96.0 million of
indebtedness under the Credit Agreement, including $72.7 million of term loans
maturing on various dates from 1995 through 1998 and $23.3 million of revolving
loans maturing in 1997, each bearing interest, at April 2, 1995, at rates
ranging from 9.00% to 9.4375%.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company, as of April 2, 1995, and as adjusted to give effect to the Offering
and the Loan Repayments on such date. See "Use of Proceeds" and the Company's
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
APRIL 2, 1995
(UNAUDITED)
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Long-term debt (including current maturities):
Credit Agreement loans (1)......................... $ 204,580 $ 108,580
Senior Notes....................................... -- 100,000
Subordinated Debentures............................ 220,000 220,000
All other.......................................... 23,014 23,014
--------- ---------
Total long-term debt (2)......................... 447,594 451,594
Preferred Stock, 2,000,000 shares authorized:
Convertible Exchangeable Preferred Stock--
Redeemable, par value $1 per share, 40,000 shares
issued and outstanding............................ 39,155 39,155
Shareholders' equity (deficit):
Common Stock, par value $1 per share, 100,000,000
shares authorized; 23,228,695 shares issued and
outstanding....................................... 23,229 23,229
Non-Voting Common Stock, par value $1 per share,
15,000,000 shares authorized; none issued and
outstanding....................................... -- --
Additional paid-in capital......................... 13,504 13,504
Cost of Common Stock held in treasury (412,500
shares)........................................... (9,625) (9,625)
Retained earnings (accumulated deficit)............ (293,571) (297,607)(3)
Unearned compensation.............................. (10,752) (10,752)
Accumulated foreign currency translation
adjustments....................................... (15,163) (15,163)
--------- ---------
Total shareholders' equity (deficit)........... (292,378) (296,414)
--------- ---------
Total capitalization........................... $ 194,371 $ 194,335
========= =========
</TABLE>
- --------
(1) Reflects amounts outstanding under the Credit Agreement (actual) and the
Amended Credit Agreement (as adjusted).
(2) Includes current maturities of $30.5 million (actual) and $3.3 million (as
adjusted).
(3) Reflects charges of $4.0 million relating to unamortized bank fees
pertaining to the Loan Repayments. These amounts will be charged against
results of operations during the fiscal quarter in which the Loan
Repayments are made.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of the Company for each of the fiscal years ended December 30, 1990,
December 29, 1991, December 27, 1992, December 26, 1993 and December 25, 1994
and for the three months ended March 27, 1994 and April 2, 1995 and selected
pro forma data for the year ended December 25, 1994 and the three months ended
April 2, 1995 (giving effect to the Offering and the making of the Loan
Repayments as if such transactions had occurred at the beginning of the year
ended December 25, 1994 and, except as otherwise indicated, the three months
ended April 2, 1995, respectively). The selected historical consolidated
financial data for each of the five fiscal years are derived from the Company's
Consolidated Financial Statements which have been audited by Price Waterhouse
LLP. The information for the three months ended March 27, 1994 and April 2,
1995 has not been audited, but, in the opinion of management, includes all
adjustments necessary for a fair presentation of the information shown. Results
of operations for the three months ended April 2, 1995 are not necessarily
indicative of results of operations for the entire 1995 fiscal year. The
following financial data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Company's Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED (UNAUDITED)(7)
------------------------------------------------------------- ----------------------
MARCH 27, APRIL 2,
1990 1991 1992 1993 1994 1994 1995
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net sales from continuing
operations.............. $ 786,279 $ 714,742 $ 708,199 $ 681,330 $752,592 $169,336 $206,898
Cost of products sold.... 578,173 521,803 527,857 520,508 576,929 129,863 155,979
Selling and
administrative expense.. 135,973 128,056 127,436 117,025 117,264 27,440 32,212
Restructuring charges and
goodwill write-down (1). 13,482 3,344 2,523 5,611 34,174 -- --
--------- --------- --------- --------- -------- -------- --------
Operating profit......... 58,651 61,539 50,383 38,186 24,225 12,033 18,707
Interest expense......... 65,671 58,654 54,284 50,906 51,609 12,818 13,950
Interest and dividend
income.................. (4,534)(5) (2,728)(5) (2,859) (1,855) (1,369) (277) (471)
Nonoperating (income)
expense................. (2,378) 5,186 (6) 484 5,359 (6) (481) (996) (71)
--------- --------- --------- --------- -------- -------- --------
Income (loss) from
continuing operations
before taxes on income,
minority interest,
extraordinary loss and
accounting changes...... (108) 427 (1,526) (16,224) (25,534) 488 5,299
Provision for income
taxes................... 8,536 10,530 9,040 6,542 10,888 1,988 3,489
--------- --------- --------- --------- -------- -------- --------
Income (loss) from
continuing operations
before minority
interest, extraordinary
loss and accounting
changes................. (8,644) (10,103) (10,566) (22,766) (36,422) (1,500) 1,810
Minority interest in net
income of subsidiaries.. 4,199 3,641 3,424 3,196 4,135 895 1,416
--------- --------- --------- --------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
loss and accounting
changes................. (12,843) (13,744) (13,990) (25,962) (40,557) (2,395) 394
Extraordinary loss on
early extinguishment of
debt (net of applicable
income taxes)........... -- -- (7,567) -- -- -- --
Cumulative effect of
changes in accounting
principles.............. -- -- (6,141) -- (194) (194)(8) --
--------- --------- --------- --------- -------- -------- --------
Income (loss) from
continuing operations... (12,843) (13,744) (27,698) (25,962) (40,751) (2,589) 394
Income (loss) from
discontinued
operations............... (8,908) -- -- -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Net income (loss)....... $ (21,751) $ (13,744) $ (27,698) $ (25,962) $(40,751) $ (2,589) $ 394
========= ========= ========= ========= ======== ======== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED (UNAUDITED)(7)
----------------------------------------------------- -----------------------
MARCH 27, APRIL 2,
1990 1991 1992 1993 1994 1994 1995
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 18,473 $ 10,541 $ 38,640 $ 31,934 $ 39,708 $ 17,606 $ 22,473
Working capital......... 70,020 61,347 92,789 73,869 67,619 73,275 71,826
Total assets............ 518,997 478,067 511,292 464,160 444,953 454,037 435,604
Total debt.............. 494,615 471,441 450,801 443,135 442,451 442,150 447,594
Convertible Exchangeable
Preferred Stock--
Redeemable............. -- -- 39,155 39,155 39,155 39,155 39,155
Total shareholders'
equity (deficit)....... (226,808) (239,465) (232,718) (259,767) (296,435) (261,624)(8) (292,378)
OTHER DATA:
Capital expenditures.... $ 14,249 $ 13,472 $ 24,588 $ 14,540 $ 15,485 $ 3,675 $ 3,051
========= ========= ========= ========= ========= ========= =========
EBIT--Operating profit
before restructuring
charges and goodwill
write-down (2)......... $ 72,133 $ 64,883 $ 52,906 $ 43,797 $ 58,399 $ 12,033 $ 18,707
Depreciation and
amortization........... 27,146 25,324 27,535 25,040 23,102 5,987 5,322
--------- --------- --------- --------- --------- --------- ---------
EBITDA (2).............. $ 99,279 $ 90,207 $ 80,441 $ 68,837 $ 81,501 $ 18,020 $ 24,029
========= ========= ========= ========= ========= ========= =========
Ratio of earnings from
continuing operations
to fixed charges (3)... -- -- -- -- -- -- 1.21
Ratio of EBITDA to net
interest expense....... 1.60 1.61 1.56 1.40 1.62 1.44 1.78
Ratio of total debt to
EBITDA................. 4.98 5.23 5.60 6.44 5.43 6.42 (9) 5.11 (9)
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 25, 1994 APRIL 2, 1995
----------------- ------------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
UNAUDITED PRO FORMA DATA (4):
Net interest expense...................... $53,939 $13,904
Net loss.................................. (44,450) (31)
Ratio of earnings from continuing
operations to fixed charges (3).......... -- 1.17
Ratio of EBITDA to net interest expense... 1.51 1.73
Ratio of total debt to EBITDA............. 5.48 5.16(9)
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) Reflects restructuring charges in 1990, 1991, 1992 and 1993 and a charge
for goodwill write-down in 1994.
(2) The Company has included information concerning EBIT and EBITDA because it
believes that EBIT and EBITDA are used by certain investors as one measure
of an issuer's historical ability to fund operations and meet its financial
obligations and because EBIT and EBITDA are relevant to compliance with the
covenants in the Credit Agreement and the Amended Credit Agreement. See
"Description of Certain Other Indebtedness--Amended Credit Agreement." EBIT
and EBITDA should not be considered by an investor as alternatives to, or
more meaningful than, net income (loss) as indicators of the Company's
results of operations or cash flows or as a measure of liquidity.
(3) For purposes of determining the ratio of earnings from continuing
operations to fixed charges, "earnings" includes pretax income from
continuing operations adjusted for the minority interest in the pretax
income of majority-owned subsidiaries and fixed charges. "Fixed charges"
consists of interest on all indebtedness (which includes the interest
component of capitalized leases) and amortization of deferred financing
costs. Earnings were inadequate to cover fixed charges by deficiencies of
$6.9 million, $5.0 million, $7.2 million, $21.6 million and $32.3 million
in the fiscal years ended December 30, 1990, December 29, 1991, December
27, 1992, December 26, 1993 and December 25, 1994, respectively, and
19
<PAGE>
by a deficiency of $1.0 million for the three months ended March 27, 1994.
On a pro forma basis, earnings were inadequate to cover fixed charges by a
deficiency of $36.0 million in the fiscal year ended December 25, 1994.
(4) Pro forma data includes the effects of (a) amortization of fees and
expenses related to the Senior Notes and the Amended Credit Agreement, (b)
elimination of the amortization of fees and expenses attributable to the
loans under the Credit Agreement to be written off upon consummation of the
Offering and (c) an increase in interest expense attributable to the Senior
Notes.
(5) Includes $0.9 million and $0.2 million of dividend income for the fiscal
years ended December 30, 1990 and December 29, 1991, respectively.
(6) Includes the effect of special non-operating charges of $6.0 million and
$4.8 million in 1991 and 1993, respectively, relating to certain
environmental matters.
(7) The first quarter of 1995 was a 14-week period, whereas the first quarter
of 1994 was a 13-week period. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Results of Operations for
the First Quarter of 1994 and 1995."
(8) Reflects a charge recorded in the fourth quarter of 1994, retroactive to
the beginning of fiscal 1994, related to a change in method of accounting
for postretirement benefits.
(9) The ratio of total debt to EBITDA for these periods has been calculated
using total debt at the end of the period divided by EBITDA for the four
fiscal quarters ended at the end of such period. EBITDA for the four fiscal
quarters ended March 27, 1994 and April 2, 1995 was $68.9 million and $87.5
million, respectively.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE FIRST QUARTER OF 1994 AND 1995
Net sales increased 22% to $206.9 million in the first quarter of 1995 from
$169.3 million in the first quarter of 1994, with improvements in both the
Engineered Materials and Handling/Packaging Systems segments. The weakening of
the U.S. dollar against most foreign currencies added $4.8 million to net sales
compared with 1994. Higher sales volumes boosted operating profit by 55% to
$18.7 million, compared with $12.0 million in the first quarter of 1994. Net
income for the quarter was $0.4 million compared with a net loss of $2.6
million for the 1994 quarter. The first quarter of 1995 was a 14-week period,
whereas the first quarter of 1994 was a 13-week period, which partially
accounts for the higher sales, operating profit and interest costs.
FIRST QUARTER NET SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT
---------------------------- ----------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
(UNAUDITED) (UNAUDITED)
---------------------------- ----------------------------
MARCH 27, 1994 APRIL 2, 1995 MARCH 27, 1994 APRIL 2, 1995
(IN MILLIONS)
<S> <C> <C> <C> <C>
Engineered Materials
Hoeganaes............. $ 35.7 $ 48.1
Chem-tronics.......... 12.5 16.7
------ ------
48.2 64.8 $ 7.8 $10.8
Handling/Packaging
Systems
Handling.............. 91.6 105.9
Packaging............. 29.5 36.2
------ ------
121.1 142.1 5.5 8.2
------ ------
Corporate Items......... (1.3) (0.3)
----- -----
Total Net Sales......... $169.3 $206.9
====== ======
Total Operating Profit.. $12.0 $18.7
===== =====
</TABLE>
Net sales of $64.8 million in the first quarter of 1995 in the Engineered
Materials segment, which includes Hoeganaes (metal powders for manufacturing
precision parts) and Chem-tronics (precision machined structures, complex
fabrications and jet engine component repairs), were up 34% from $48.2 million
in the first quarter of 1994. The increase was primarily due to increased
tonnage of metal powders, along with higher selling prices at Hoeganaes and
higher fabrication sales at Chem-tronics. For the first quarter of 1995,
Hoeganaes' metal powder sales increased 34% compared with the first quarter of
1994, setting a quarterly record in terms of both tonnage and revenues, due to
continued strong demand from the automotive industry. This increase reflects,
in part, the continued increase in automotive usage of powder metal components.
Chem-tronics' first quarter net sales increased 34% compared with the 1994
period due to higher commercial fabrication shipments.
Operating profit for the Engineered Materials segment increased 38% in the
first quarter of 1995. Operating profit at Hoeganaes increased 49% for the
quarter, reflecting increased tonnage, higher selling prices and improved
manufacturing performance. Operating profit for the quarter at Chem-tronics was
down 37%. Excluding a one-time gain in the first quarter of 1994 from the
settlement of a real estate matter, Chem-tronics' operating profit increased
54% in the 1995 period due to the higher volume of fabrication shipments and
improved margins in the aviation repair business resulting from cost controls,
increased productivity and a more favorable sales mix.
21
<PAGE>
Order backlog in the Engineered Materials segment was $172.6 million at the
end of the first quarter of 1995, up from $80.6 million at the end of the first
quarter of 1994. Hoeganaes' backlog, which is generally short-term, reached a
record level, up 141% from the end of the first quarter of 1994, reflecting the
continued strong demand from the automotive industry. Chem-tronics' backlog
increased 101%, mainly due to new multi-year fabrication orders received during
the latter part of 1994 and early 1995 for commercial, military and space
applications. All orders for Engineered Materials at April 2, 1995 were
believed to be firm, but approximately 32% of these orders are subject to
renegotiation. Approximately 55% of these orders are expected to be delivered
during 1995.
Net sales in the Handling/Packaging Systems segment increased 17% to $142.1
million in the first quarter of 1995 from $121.1 million in the first quarter
of 1994, with improvements at both Handling and Packaging. In the first quarter
of 1995, Handling's net sales increased 10% (at the same exchange rates) from
sales in the comparable 1994 period, due to higher sales in all locations.
North American net sales increased 6%, European net sales rose 12% and net
sales in the Asia Pacific region were up 20% from the year earlier period.
Packaging's first quarter 1995 net sales increased 22% (at the same exchange
rates) compared with the first quarter of 1994, with all operations reporting
improved net sales.
Operating profit for the Handling/Packaging Systems segment increased 50% in
the first quarter of 1995 from the comparable 1994 period. Handling's operating
profit in the first quarter of 1995 increased 26% (at the same exchange rates)
compared with the first quarter of 1994. Operating profit in North America in
the first quarter of 1995 increased 34% over the first quarter of 1994, as
higher volume and improved rack selling prices were partially offset by higher
steel costs. Handling's European operating profit declined 2% in the first
quarter of 1995, despite higher sales in the U.K. and continental Europe due to
lower margins and higher pension expense. Asia Pacific results improved over
1994 due to volume increases. Operating profit at Packaging increased 40% in
the first quarter of 1995, due primarily to higher volume and increased selling
prices for steel strap and machines in Canada and the U.K. LIFO inventory
liquidation benefits of $0.8 million in the first quarter of 1995 compared with
benefits of $0.5 million in the 1994 period.
Order backlog in the Handling/Packaging Systems segment was $93.8 million at
the end of the first quarter of 1995, up from $76.7 million (at the same
exchange rates) at the end of the first quarter of 1994, due mainly to
significantly higher backlog at the North American Handling operation. All
orders at April 2, 1995 were believed to be firm and are expected to be
delivered during 1995.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED 1992, 1993 AND 1994
Net sales were $752.6 million, $681.3 million and $708.2 million,
respectively, in 1994, 1993 and 1992. Net sales in the Engineered Materials
segment were up $23.9 million 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 million,
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 million increase
in sales of metal powders by Hoeganaes which was offset by a $6.5 million
decline in Chem-tronics' 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 million, $38.2 million and $50.4 million,
respectively, in 1994, 1993 and 1992. In 1994, operating income declined $14.0
million from 1993, reflecting a $34.2 million charge to write down goodwill
attributable to Chem-tronics' and Packaging's businesses. Excluding the
goodwill charge in 1994 and the restructuring charges in 1993 and 1992,
operating income was $58.4 million, $43.8 million and $52.9 million in 1994,
1993 and 1992, respectively. 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 of Notes to
Consolidated Financial Statements, the Company determined that
22
<PAGE>
the goodwill related to Chem-tronics and Packaging was impaired. Record metal
powder volume at Hoeganaes, 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 million and $2.5 million reduced operating income in 1993 and 1992,
respectively, as discussed in "--Restructuring Charges" and Note 3 of Notes to
Consolidated Financial Statements. In 1993, operating income was $12.2 million
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 million, lower shipments and weak conditions in the commercial
aerospace industry and higher scrap steel costs in Hoeganaes. These declines
were partially offset by higher domestic Handling profits.
From 1992 to 1994, Hoeganaes' 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 Chem-tronics, reduced U.S. defense
spending resulted in a decline in military sales of $3.8 million between 1992
and 1994. This decline in military fabrication sales was more than offset by a
$6.0 million increase in sales for commercial fabrication. In 1994, repair
sales were down $7.3 million 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 of Notes to
Consolidated Financial Statements for further information on business segments.
NET SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT
-------------------- --------------------
1992 1993 1994 1992 1993 1994
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Engineered Materials
Hoeganaes......................... $122.5 $131.5 $153.9
Chem-tronics...................... 67.5 61.0 62.5
------ ------ ------
190.0 192.5 216.4 $29.6 $26.3 $ 32.3
Goodwill Write-Down............... -- -- (13.2)
Restructuring Charges............. -- (1.8) --
------ ------ ------ ----- ----- ------
190.0 192.5 216.4 29.6 24.5 19.1
Handling/Packaging Systems
Handling.......................... 395.3 366.7 406.0
Packaging......................... 122.9 122.1 130.2
------ ------ ------
518.2 488.8 536.2 24.0 19.1 28.1
Goodwill Write-Down............... -- -- (21.0)
Restructuring Charges............. (2.5) (3.8) --
------ ------ ------ ----- ----- ------
518.2 488.8 536.2 21.5 15.3 7.1
------ ------ ------
Corporate Items..................... (0.7) (1.6) (2.0)
----- ----- ------
Total Net Sales..................... $708.2 $681.3 $752.6
====== ====== ======
Total Operating Profit.............. $50.4 $38.2 $ 24.2
===== ===== ======
</TABLE>
23
<PAGE>
Engineered Materials. Sales increased 12% in 1994 in the Engineered Materials
segment reflecting record shipments of metal powders, which were up 17% from
1993, as a result of continued growth in North American auto and light truck
production, increased penetration by powder metallurgy in automotive
applications and higher selling prices. Chem-tronics' sales were up slightly as
higher commercial fabrication shipments were substantially offset by lower
repair and defense business.
Chem-tronics' 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, Chem-tronics has developed and executed a strategy of increasing
its fabrication business' penetration of the commercial and space sectors.
Although Chem-tronics has experienced a 71% increase in sales to the commercial
sector from 1990 to 1994, margins in this area are generally lower than margins
on military business, particularly in 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 of Notes
to Consolidated Financial Statements. Excluding the effect of the goodwill
charge and the $1.8 million restructuring charge in 1993, operating profit
increased 23% over 1993. Hoeganaes' operating profit was up 20% primarily
reflecting the record volume. Scrap steel costs increased 18% from 1993, about
half of which was recovered with higher selling prices. Operating profit was up
27% at Chem-tronics 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.
Chem-tronics' 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 million
of restructuring charges, segment operating profit fell 11% in 1993. Hoeganaes'
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. Chem-tronics' 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
million, double the year-end 1993 balance of $73.6 million. Hoeganaes' backlog,
which is generally short-term in nature, was up 51% to a near record level.
Chem-tronics' 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, increased 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.
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Segment operating profit fell 54% to $7.1 million due to the $21.0 million
write-down of the goodwill related to the Packaging unit as discussed in "--
Long-Lived Assets" and in Note 2 of Notes to Consolidated Financial Statements.
Excluding the effects of the goodwill write-down and the $3.8 million
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 million,
up from $74.0 million 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 million 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 Chem-tronics' 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 million
consisted of $1.7 million in severance costs, $1.5 million of idled equipment
written down to fair market value, $1.4 million of inventory related to the
exited businesses and $1.0 million 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 million of additional costs related to
unfavorable adjustments on assets held for sale as part of an asset sale
program adopted as part of the 1989 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 parcels of real estate held for sale, both of which were former Handling
operations sites.
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
the light of its highly leveraged capital structure, a preferable accounting
policy for analyzing the valuation
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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 Packaging's newspaper-related businesses and
Chem-tronics, in light of the significant deterioration in business climates in
the newspaper and aerospace 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 million was taken for the write-
down of goodwill established in connection with the acquisitions of Packaging's
newspaper-related businesses and Chem-tronics. 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 value of its long-lived assets using the analysis
described above. See Note 2 of Notes to Consolidated Financial Statements.
INTEREST EXPENSE
The Company has a highly leveraged capital structure with substantial net
interest expense of $50.2 million, $49.1 million and $51.4 million in 1994,
1993 and 1992, respectively. In 1994, the increase in net interest expense was
caused primarily by higher rates on amounts outstanding under the Credit
Agreement. The decline in 1993 was largely the result of lower average
outstanding borrowings. The Company has long-term interest rate agreements as
required under the Credit Agreement, which effectively provided fixed rates of
interest on 57% of the obligations thereunder 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 million one-time gain
for settlement of a real estate matter with a local transportation authority at
Chem-tronics. In 1993, a charge of $4.8 million was recorded for anticipated
costs for environmental matters as discussed below and in Note 15 of Notes to
Consolidated Financial Statements. 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, results
of operations 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. See "Risk Factors--Environmental Matters" and Note 15 of
Notes to Consolidated Financial Statements.
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 of Toledo 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 $4.0 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. To the
extent the Company incurs any liabilities or costs by virtue of the proceedings
brought by the City of Toledo, the Company could be compelled to incur costs
prior to having its indemnification cross-claim against Beazer decided by the
court. See Note 16 of Notes to Consolidated Financial Statements.
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Hoeganaes is a defendant in a recently-filed action in federal district court
in Trenton, New Jersey, brought by a subsidiary of Waste Management
International Plc. The plaintiff is seeking to recover from Hoeganaes and
numerous other defendants amounts expended or to be expended in the remediation
of a broadly-defined Superfund site which encompasses a landfill formerly
operated by the plaintiff and may also include the groundwater under Hoeganaes'
Riverton, New Jersey facility. Based on its preliminary investigation, the
Company does not believe that this matter will have a material adverse effect
on its liquidity, results of operations or consolidated financial condition.
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 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 through 1984 is pending at the U.S. Tax Court following receipt in
1994 by the Company of a statutory notice of deficiency for these years of
$17.0 million plus interest and penalties. Resolution of tax years 1985 through
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 through 1990 will
be resolved in accordance with the Company's expectations or, alternatively,
that these issues could be settled for either more or less than what has been
provided by the Company.
In 1992, the Company adopted a new method of accounting for income taxes. See
"--Cumulative Effect of Accounting Changes" and Note 4 of Notes to Consolidated
Financial Statements.
EXTRAORDINARY LOSS
In 1992, as part of the 1992 Financing, the Company redeemed its increasing
rate notes and negotiated the Credit Agreement. These actions necessitated the
write-off of related deferred debt issuance costs amounting to $7.6 million
without any net tax benefit in 1992.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
In 1992, the Company adopted the Financial Accounting Standards Board's
Statements 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 million (net of
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taxes) in 1992 and $0.2 million in 1994, while the adoption of FAS No. 109
resulted in a credit of $3.1 million. See Note 4 of Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow. Cash used by operating activities was $19.1 million in the first
quarter of 1995 compared to $10.1 million in the first quarter of 1994, as
working capital required the use of $24.8 million in 1995 compared to $12.0
million in 1994. Working capital needs were significantly higher in the first
quarter of 1995 due to the timing of interest payments and a lower level of
payables.
Cash provided by operating activities was $21.9 million and $8.0 million in
the fiscal years 1994 and 1993, respectively, while operating activities used
cash of $7.2 million in fiscal year 1992. Cash provided by operating activities
was up in 1994 from 1993 primarily as a result of higher operating earnings
before the $34.2 million goodwill charge which did not affect cash. Working
capital needs were $6.5 million in 1994 compared to an inflow of $5.8 million
in 1993 which resulted from the decline in net 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, cash inflows provided by operating activities were $4.8 million in
1992.
Cash used by investing activities was $3.0 million in the first quarter of
1995 compared to $3.5 million in the first quarter of 1994, primarily due to
lower capital expenditures, which were $3.1 million during the first quarter of
1995 compared to $3.7 million during the prior year period. The Company
anticipates that 1995 capital spending will be approximately $20.0 million.
Capital expenditures were $15.5 million, $14.5 million and $24.6 million in
fiscal years 1994, 1993 and 1992, respectively, including capital expenditures
for expansion projects totalling $4.1 million, $6.1 million and $8.8 million,
respectively, in 1994, 1993 and 1992. Expansion spending in 1994 and 1993
included the addition of two annealing furnaces to expand capacity at the
Hoeganaes 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 Hoeganaes'
atomized metal powders and the establishment of Chem-tronics' 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.
Cash provided by financing activities was $5.6 million in the first quarter
of 1995, mainly due to borrowings under the Credit Agreement. Cash provided by
financing activities was $0.7 million in fiscal year 1994 and $67.5 million in
1992. The 1992 cash provided by financing activities resulted from
implementation of the 1992 Financing. The cash used by financing activities of
$1.3 million in 1993 resulted primarily from scheduled amortization of long-
term debt.
Capital Resources. The Company's total debt at the end of the first quarter
of 1995 was $447.6 million, up $5.1 million from December 25, 1994. The year-
end 1994 total debt was down $0.7 million from year-end 1993. Cash and cash
equivalents totaled $22.5 million at the end of the first quarter of 1995,
compared with $39.7 million at the end of 1994, reflecting increased working
capital requirements. The total cash and cash equivalents at the end of 1994
was up $7.8 million from year-end 1993. Without giving effect to the Offering
and the Amended Credit Agreement, during 1995 the Company will have long-term
debt amortization requirements of $24.6 million, including $5.8 million of
amortization payments under the Credit Agreement made in the first quarter of
1995. Based on current levels of performance, and the availability of
additional revolver borrowings under the Credit Agreement, the Company believes
that it will have adequate liquidity to meet its debt amortization and
operating requirements in 1995. Under the Credit Agreement, the Company will be
able to borrow under its revolving facility up to an additional $34.0 million
over the amount of revolving indebtedness outstanding at April 2, 1995.
However, outstanding revolver borrowings at the end of each of the Company's
three remaining 1995 fiscal quarters will be limited to between $7.0 million
and $19.0 million above the amount of revolving indebtedness at April 2, 1995.
In addition, the Company will have up to $5.8 million of deferred term loan
availability during the year for amounts that may be incurred in connection
with certain environmental matters.
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In the first quarter of 1995, the Company completed an amendment of certain
covenants under the 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 Credit Agreement covenants in 1995. In 1996, the Company has
long-term debt amortization requirements of $88.8 million under the Credit
Agreement 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.
Giving effect to the Offering, the Loan Repayments and the Amended Credit
Agreement, as of April 2, 1995, the Company would have had available credit
facilities under the Amended Credit Agreement of $175.4 million, of which $46.7
million would have been unutilized, including $5.8 million available only to
pay certain potential environmental liabilities. In addition, the Company would
have had approximately $22.5 million of cash available for general corporate
purposes. As a result of the Offering and the revised amortization schedule
under the Amended Credit Agreement, $195.3 million of indebtedness which would
have matured in 1995 through 1998 under the Credit Agreement, including $171.4
million which would have matured in 1996 and 1997, will be extended to 1999
through 2001. Assuming the consummation of the Offering and the effectiveness
of the Amended Credit Agreement, the Company believes it will have sufficient
liquidity through 1996 and expects that it will be able to meet all financial
covenants under the Amended Credit Agreement. The consummation of the Offering
and the effectiveness of the Amended Credit Agreement are contingent upon each
other.
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 the first quarter
of 1995 and in fiscal 1994, the dollar was somewhat weaker against most
currencies, which had a favorable impact on sales of $4.8 million and $5.2
million, respectively, but an insignificant impact on operating income in both
periods. In 1993, the dollar was generally stronger against most European
currencies than in 1992, resulting in a negative impact on sales of $35.7
million and on operating income of $2.4 million. Fluctuations in foreign
currency exchange rates in 1992 had very little effect on sales and operating
profit. See "Risk Factors--Potential Adverse Effects of Fluctuations in Foreign
Currency." For additional information about the Company's operations by
geographic area, see Note 6 of Notes to Consolidated Financial Statements.
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.
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BUSINESS
GENERAL
The Company is a multinational corporation engaged in the design, manufacture
and sale or distribution of value-added metal and related 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. The Company's operations include:
Engineered Materials
. Hoeganaes, which produces ferrous metal powder used to manufacture
precision parts; and
. Chem-tronics, which manufactures precision jet engine components and
repairs jet engine fan blades.
Handling/Packaging Systems
. Handling, which designs, manufactures and sells storage rack, shelving
and related equipment; and
. Packaging, which designs and sells machinery for applying strapping and
stitching wire, and supplies strapping and stitching wire for use in
these machines.
The Company believes it has leading market shares in all of its businesses
and believes they enjoy a reputation for high quality products and superior
customer service. The Company has implemented programs to reduce costs, improve
productivity, improve customer service and support, and seek growth
opportunities through geographic expansions and new product development. The
Company expects that its leading market positions, together with its business
initiatives, will enable it to continue to take advantage of U.S. economic
trends and the economic improvements in other markets throughout the world.
There can be no assurance, however, that the Company's expectations will be
fulfilled.
Although the Company's businesses are cyclical in nature, the Company's
operating results have historically lagged behind improvements in the general
economy, and its earnings downturns have also come later than those of the
general economy. This is largely due to many of Handling's customers waiting to
implement long-term capital projects until a recovery is well established. The
Company expects this lagging relationship to continue.
The Company expects its operating results to benefit from the recovery of the
European economies, which accounted for approximately 28% of the Company's
revenues in 1994. In addition, the Company anticipates that future results will
be enhanced by certain positive trends in its businesses, including the
increased use of powder metallurgy in the manufacture of automobile parts and
Handling's continuing penetration of growing Pacific Rim markets.
HOEGANAES
General. Hoeganaes is the North American market and technology leader in the
production of ferrous (iron-based) 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 powdered metal 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.
The automotive industry is the largest market for Hoeganaes' products.
Average usage of ferrous metal powder per vehicle has increased from 18 pounds
in 1986 to 30 pounds in 1994 due to new applications (for example, anti-lock
brakes, connecting rods and bearing end caps) as well as increased demand for
vehicles in the light truck category (including sport utility vehicles), which
use greater amounts of ferrous metal powder per vehicle.
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Hoeganaes shipped record tonnage in 1994, as sales increased 17% to $153.9
million from $131.5 million in 1993, due mainly to continued strong demand from
the automotive industry.
Strategy. Hoeganaes' status as the North American market leader is based on
its broad product range and new product development coupled with cost-efficient
manufacturing processes producing a high quality metal powder. Hoeganaes'
strategy is to commercially develop new powder metal products, manufacturing
processes and applications, thereby promoting the increased use of powder
metallurgy generally and establishing Hoeganaes as the sole source for its
proprietary products. This strategy is based on the Company's ongoing research
and development efforts, in which Hoeganaes representatives work closely with
customers to advance the performance characteristics achievable through powder
metallurgy.
Markets. The North American market for ferrous metal powders can be divided
into two segments: structural parts (metal powder to be compressed into solid
parts) and non-structured applications (powders principally used in welding,
chemicals and photocopying).
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.
Customers. Although approximately 65% of Hoeganaes' product shipments are
ultimately used in automobiles and other light vehicles, Hoeganaes' customers
generally are not the auto manufacturers, but rather intermediary parts
fabricators. In recent years, there has been increasing consolidation among the
powder metal parts manufacturers; however, no single customer accounted for
more than 2% of the Company's net sales in 1994. Sales are made by Hoeganaes'
direct sales force.
Products. The Company believes that Hoeganaes currently has the broadest
product line of all ferrous metal powder producers. It is also a leader in the
research and development of advanced proprietary powders and processes.
Hoeganaes' patented ANCORBOND(R) and ANCORDENSE(TM) blend technologies, for
example, allow the formulation of press-ready mixes that result in more
consistent metallurgical properties in finished parts with increased part
strength and density while also increasing press productivity for parts
fabricators.
To achieve specific performance objectives, powder metal parts producers
require steel powder mixed with various alloying constituents such as copper,
nickel or graphite plus other additives. In addition to producing conventional
mixes, Hoeganaes offers customers the unique advantages of ANCORBOND premixes
produced with a proprietary mixing process. With ANCORBOND premixes, additives
are bonded directly to the steel particles, resulting in more consistent
metallurgical properties and improved manufacturing productivity.
Based on its ANCORBOND premix technology, in 1994 Hoeganaes introduced the
new, patented ANCORDENSE process that maintains its technological leadership
and will lead to new parts applications. The ANCORDENSE process uses heat
throughout the part-forming operation. The combination of special, bonded
premixed powders and warm compaction enables fabricators to produce parts with
properties that previously could be obtained only through more expensive
processes. Several pilot parts programs using the ANCORDENSE process are
currently under way.
Production. Hoeganaes has two basic production processes. The first process
is atomizing, which converts selected 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
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reduction which converts high purity iron ore into a unique, 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 its
customers. In 1994, Hoeganaes added annealing capacity at both of its atomizing
plants.
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.
CHEM-TRONICS
General. Chem-tronics is a leading producer of lightweight, fabricated
products for commercial and military aerospace applications, and also provides
jet engine fan blade repair services. Chem-tronics offers its customers a
vertically integrated facility, thereby eliminating the need for numerous
subcontractors for a single component. Chem-tronics' principal products are
sold directly to engine manufacturers under arrangements which generally
establish Chem-tronics as the sole source of supply.
Chem-tronics' sales increased 2.5% in 1994 to $62.5 million from $61.0
million in 1993, primarily on the strength of increased fabrication sales for
commercial and space programs.
Strategy. Responding to the decline of the defense industry, Chem-tronics'
strategy during the 1990's has been to diversify and realign its fabrication
business by reducing the dependence on a declining military business through
expansion of the commercial and space segments. Commercial and space programs
have substantially offset declining military business and represented 67% of
Chem-tronics' sales in 1994, up from 22% in 1986. At the end of the first
quarter of 1995, Chem-tronics had a backlog of over $100 million of fabrication
orders, including significant multi-year agreements with General Electric,
Pratt & Whitney, Rolls-Royce and Allison.
Products and Customers. Chem-tronics' fabricated products include rings,
cases and modules for large commercial aircraft jet engines, ducts for military
jet engines, exhaust nozzles and structures for jet engines and space launch
vehicles, and other complex fabrications for a variety of aerospace
applications. The primary fabrication customers are the original equipment
manufacturers ("OEMs") of jet aircraft and engines. The Company believes that
its sales have benefitted, and will continue to benefit, from the trend toward
outsourcing by OEMs.
Production Processes. The primary processes used in the fabrication
businesses are chemical milling, welding, forming, machining, non-destructive
testing and inspection. Chem-tronics uses a patented Unistructure(R)
technology, a chemical milling process which produces integral rib and skin
structures that are both stiff and lightweight. Unistructure components have
significant cost and performance advantages over other fabrication methods.
Repair. In addition to its fabrication business, Chem-tronics provides
comprehensive repair services for jet engine fan and compressor blades, discs
and combustion liners. Repair services are sold directly and through sales
agents. Repair customers include all major jet engine manufacturers, major
domestic and international airlines and engine overhaul centers.
HANDLING
General. Handling designs, manufactures and sells storage rack, shelving,
conveyors and related equipment for use in warehouses, distribution centers,
retail stores and for other storage applications. Handling also supplies
equipment for retail display and office interiors.
The Company believes 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. Its customers are
primarily engaged in the retailing and wholesaling of food and consumer
durables and
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<PAGE>
non-durables and industrial products. Handling's rack systems are used in
warehouse and distribution applications ranging from simple pallet storage to
sophisticated warehouse systems and warehouse-type retail store environments.
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 for many of the largest
retailers in the United States. In addition, its large size allows it to
realize significant economies of scale in product development, design and
manufacturing.
Driven by stronger demand in North America, the U.K. and Australia, and
expansion into the Asia Pacific market, Handling's 1994 sales increased 11% to
$406.0 million from $366.7 million in 1993.
Strategy. Handling's strategy is to enhance its position of market leadership
by continuously improving product quality, manufacturing efficiency and
customer service and support, while exploiting opportunities for geographic and
new product growth. In 1994, the acquisition of a Hong Kong company expanded
sales coverage in the rapidly growing Northeast Asia marketplace, and a sales
office was established in the Czech Republic to continue development of the
emerging eastern European market. Planned product introductions in 1995 include
a direct-drive lineshaft conveyor, new pick-to-light interface and software
products for order fulfillment applications, and a redesigned industrial
shelving range. The new pick-to-light product is intended to further Handling's
position in the growing area of paperless warehousing and distribution
applications.
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 and office
storage equipment and, in Europe, partitioning for offices.
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 also used to generate detailed bills of material which
automatically specify the size, type and quantity of all components to be used
in the project, streamlining 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% to 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, while 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 establishing a sales office in the Czech
Republic. In Europe and Asia Pacific, Handling operates under the Dexion name,
which is well recognized in those markets and provides Handling with certain
marketing advantages.
33
<PAGE>
PACKAGING
General. The Company's Packaging business is one of the leading North
American and European suppliers of steel and plastic strap and the machinery
and tools to apply this strap. Packaging also manufactures and distributes wire
and stitching equipment. Packaging's sales increased 7% to $130.2 million in
1994 compared with $122.1 million in 1993.
Strategy. Packaging serves industries which are highly cyclical, and thus
over recent years has concentrated on continually lowering fixed costs and
improving production efficiencies to enable it to maintain profitability even
during economic downturns. Its growth strategy is based on successfully
anticipating and meeting the changing needs of its customers through product
development.
In the near-term, a key growth area for plastic strapping is the conversion
of the fiber and lumber industries from steel to plastic strap. Packaging's
research and development efforts have been focused on developing the high-
strength polyester strap these applications require. In 1994, a large acrylic
fibers plant in Alabama was successfully converted to polyester strap, and
other customers are targeted for conversion. Also in 1994, the American
Association of Railroads certified plastic strap for use by North American
lumber mills for rail shipments.
New products for 1995 include lower-cost plastic strapping machines and new
inserter and overwrapper machines for the newspaper industry, new general
purpose strapping machines, and a booklet maker for the graphic arts industry.
Packaging also expects growth in 1995 from expanded export sales of both steel
and plastic strap in continental Europe from sales offices established in
France and Germany.
Products and Customers. Packaging develops and markets solutions for
companies of all sizes utilizing a "total systems sales" approach--providing
the customer with engineering support, equipment and tools, strap, parts and
service. The Company believes this approach gives it a competitive advantage.
Plastic strap customers can choose from an equally broad line of machines,
tools and polypropylene and polyester strap of various widths and strengths.
Packaging specializes in newspaper strapping systems, with a complete line of
strapping machines, overwrapping and underwrapping systems, turners and
conveyors. Other large plastic strap customers include the textile, corrugated,
graphics, can, bottle and distribution industries.
Steel strap customers use zinc-coated and painted strap in the most demanding
strapping applications, where tensile strength and resistance to breakage is
essential, and apply it with Packaging's extensive line of manual, electric and
pneumatic hand tools and automated strapping machinery. Packaging's largest
steel strap customers are the lumber, steel, brick and concrete block
industries.
The largest customers of wire stitching products come from the graphic arts
industry, where Packaging supplies patented stitching products for binding
printed materials. Fruit and produce growers, corrugated box manufacturers and
numerous other businesses use Packaging's stitching machines to assemble
shipping containers.
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
in order to prevent rusting. Rust resistant strap is 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 is 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 and either slit or embossed, cooled to minimize shrinkage and wound
into coils.
Market Share. The Company believes that the Canadian steel strapping unit
generally 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 the U.K. non-metallic strapping and non-metallic machines units have
leading market shares in certain areas. In the U.S., Packaging sells only
plastic strapping and stitching products and is a leading supplier of these
products.
34
<PAGE>
Sales, Distribution and Servicing. Packaging's direct sales force services
clients in the U.S., the U.K. and Canada. 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. Engineered Materials' products are sold to a number of
customers, none of which individually purchased a significant portion of the
segment's output in 1994. At April 2, 1995 and March 27, 1994, the backlog of
orders for Engineered Materials was $172.6 million and $80.6 million,
respectively. Hoeganaes' backlog, which is generally short-term in nature, was
up 141% to a record level. Chem-tronics' backlog increased 101% mainly due to
new multi-year fabrication orders received for commercial, military and space
applications during the latter part of 1994 and early 1995. All orders for
Engineered Materials at April 2, 1995 were believed to be firm, but
approximately 32% of these orders are subject to renegotiation. Approximately
55% 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 April 2, 1995 was $93.8 million compared with $76.7
million at March 27, 1994 (in each case applying foreign exchange rates at
April 2, 1995), due mainly to significantly higher backlog at the North
American Handling operation. All orders at April 2, 1995 were believed to be
firm and are expected to be delivered 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:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
--------------
1992 1993 1994
(IN MILLIONS)
<S> <C> <C> <C>
Engineered Materials...................................... $2.2 $2.1 $2.1
Handling/Packaging Systems................................ 0.6 1.1 1.3
---- ---- ----
Total................................................... $2.8 $3.2 $3.4
==== ==== ====
</TABLE>
The Company believes that these amounts are adequate to maintain its
competitive position 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 equally 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
35
<PAGE>
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 operating results or its ability to compete with other companies.
In 1994, capital expenditures for environmental compliance were $0.6 million
and the Company estimates that environmental capital spending in 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 relating to its ongoing operations. See "Risk Factors--
Environmental Matters," "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Nonoperating Items" and Note 15 of Notes to
Consolidated Financial Statements.
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.
EMPLOYEES
At April 2, 1995, the Company employed a total of 4,450 persons, consisting
of 1,968 salaried and 2,482 hourly employees. Of the hourly employees, 56% are
represented by unions, with no single union representing a significant number
of the hourly employees. A labor contract covering approximately 3% of hourly
employees expired on May 31, 1995, and a labor contract covering approximately
7% of hourly employees will expire on November 1, 1995. The Company is
currently negotiating with respect to each of these contracts. While the
Company believes that it will not experience difficulties in negotiating the
renewal of these contracts, there can be no assurance that difficulties will
not arise or that work stoppages will not occur.
LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly involved in
legal proceedings incidental to its business. None of these proceedings is
material within the meaning of regulations of the Commission presently in
effect.
In a Request for Response Action issued by the Minnesota Pollution Control
Agency (the "MPCA") on March 29, 1994, the Company was named a responsible
party for and requested to investigate and remediate certain contaminated
soils, and to investigate certain underwater sediments, at a Superfund site in
Duluth, Minnesota. With respect to the contaminated soils, the Company and the
MPCA are engaged in discussions regarding the development of a work plan for
remediation 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 Company is presently
negotiating with the MPCA the scope of the requested 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. See
"Risk Factors--Environmental Matters," "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Nonoperating Items," Notes 15
and 16 of Notes to Consolidated Financial Statements and Note 4 of Notes to
Consolidated Interim Financial Statements.
36
<PAGE>
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, warehouse Owned 102,000
CHEM-TRONICS
El Cajon, CA Manufacture aerospace components and repair Owned 230,000*
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, Ger-
many 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, Bel-
gium 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, Aus-
tralia Manufacture storage rack, slotted angle, Owned 135,000*
shelving and conveyors
Wacol, Austra-
lia 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. Manufacturer over/under-wrappers Leased 6,000
and conveyors
</TABLE>
The properties marked with an asterisk (*) are subject to mortgages pursuant
to the Credit Agreement and will be subject to mortgages pursuant to the
Amended 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 productive capacity is adequate to
meet the requirements of the Company.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and certain executive officers of the Company. For purposes of this
section, the term "Company" includes Interlake, Inc. and other predecessors of
The Interlake Corporation.
<TABLE>
<CAPTION>
NAME POSITION AND OFFICE WITH THE COMPANY AGE
<S> <C> <C>
W. Robert Reum.......... Director, Chairman of the Board,
President and Chief Executive Officer 52
Craig A. Grant.......... Vice President--Human Resources 48
Stephen Gregory......... Vice President--Finance, Treasurer and Chief Financial Officer 46
John P. Miller.......... Controller 37
Stephen R. Smith........ Vice President, Secretary and General Counsel 38
Robert J. Fulton........ President, Hoeganaes 52
John J. Greisch......... President, Material Handling Group 39
James Legler............ President, Chem-tronics 47
Robert A. Pedersen...... President, Interlake Packaging Corporation 50
John A. Canning, Jr..... Director 50
James C. Cotting........ Director 61
John E. Jones........... Director 60
Frederick C. Langenberg. Director 67
Quentin C. McKenna...... Director 68
William G. Mitchell..... Director 64
Erwin E. Schulze........ Director 70
</TABLE>
W. Robert Reum has served as Chairman of the Board of the Company since April
1991 and as President and Chief Executive Officer since January 1991. He also
served as President and Chief Operating Officer from August 1989 to December
1990. He has been a Director of the Company since 1987 and is a member of the
Executive Committee. He is also a director of Amsted Industries Incorporated
and Duplex Products, Inc.
Craig A. Grant has served as Vice President--Human Resources of the Company
since May 1991. He served as a human resources executive of The Ceco
Corporation, a manufacturer of building products and provider of concrete
forming services for the construction industry, for more than five years prior
to joining the Company, of which two were as Vice President--Human Resources.
Stephen Gregory has served as Vice President--Finance, Treasurer and Chief
Financial Officer of the Company since December 1994. From August 1994 to
December 1994, he served as Vice President of the Company. For more than five
years prior thereto, he served as President of the Material Handling Division
of The Interlake Companies, Inc., a subsidiary of the Company.
John P. Miller has served as Controller of the Company since April 1993. He
served as Vice President--Finance of the Material Handling Division of The
Interlake Companies, Inc. from October 1989 to April 1993.
Stephen R. Smith has served as Vice President and General Counsel of the
Company since January 1992, and as Secretary of the Company since January 1993.
Prior thereto, he was Vice President--Law of the Company from September 1991 to
December 1991 and was a partner in the law firm of Hopkins & Sutter, Chicago,
Illinois, from prior to 1990 to September 1991.
Robert J. Fulton has served as President of Hoeganaes since July 1994. He
served as Chief Executive Officer of Micafil, Inc., a manufacturer of
components for fractional electric motors, and as consultant to Sterling
Stainless Tube-IIT Automotive, a manufacturer of stainless tubing, from 1992 to
1994. From 1990 to 1992, he served as Executive Vice President and Chief
Operating Officer of Doehler Jarvis, a manufacturer of aluminum castings.
38
<PAGE>
John J. Greisch has served as President, Material Handling Group since
December 1994. From February 1993 to December 1994, he served as Vice
President--Finance, Treasurer and Chief Financial Officer of the Company, and
from January to February 1993 he served as a Vice President of the Company. He
served as Managing Director of Dexion Group plc, a subsidiary of the Company,
from May 1991 to December 1992. He served as Managing Director of Dexion
Limited from February 1990 to November 1992.
James Legler has served as President of Chem-tronics since prior to 1990.
Robert A. Pedersen has served as President of Interlake Packaging
Corporation, one of the Company's Packaging subsidiaries, since prior to 1990.
John A. Canning, Jr. has been a Director of the Company since 1993 and is a
member of the Compensation and Finance Committees. Since 1993 he has served as
the President of Madison Dearborn Partners, Inc., which is the manager of
Madison Dearborn Capital Partners, L.P., a private equity investment fund. From
prior to 1990 to January 1993, he was President of First Chicago Venture
Capital and Executive Vice President of The First National Bank of Chicago. He
also is a director of Bayou Steel Corporation, The Milnot Company, Tyco Toys,
Inc., Chicago Capital Fund, Northwestern Memorial Corporation and Northwestern
Memorial Management Corporation, and is a member of the board of trustees of
Northwestern University and a member of the board of visitors of Duke
University School of Law.
James C. Cotting has been a Director of the Company since 1989 and is a
member of the Compensation, Executive and Finance Committees. He has been
Chairman and a director of Navistar International Corporation, a manufacturer
of medium and heavy duty trucks, since prior to 1990. From 1987 until he
retired in March 1995, he was Chief Executive Officer of Navistar International
Corporation. He is a director of USG Corporation, Asarco Incorporated and MIM
Holdings Limited and a member of the Board of Governors of the Chicago Stock
Exchange. He is also a member of the Conference Board, a director of the
National Association of Manufacturers, a director of Junior Achievement of
Chicago and a trustee of the Adler Planetarium.
John E. Jones has been a Director of the Company since 1988 and is a member
of the Audit Review, Executive, Finance and Nominating Committees. He is
Chairman of the Board, President, Chief Executive Officer and a director of CBI
Industries, Inc., a manufacturer of industrial gases, provider of construction
services and investor in oil transport and storage businesses. He has been an
executive officer and a director of CBI since prior to 1990. He also is a
director of Allied Products Corporation, Amsted Industries Incorporated, NICOR
Inc. and Valmont Industries, Inc.
Frederick C. Langenberg has been a Director of the Company since 1979 and is
a member of the Audit Review, Executive, Finance and Nominating Committees. He
was Chairman of the Board of the Company from 1983 until his retirement in 1991
and Chief Executive Officer of the Company from 1982 to 1991. He is also a
director of Carpenter Technology Corporation, Peoples Energy Corporation and
Dietrich Industries and a trustee of Piedmont College.
Quentin C. McKenna has been a Director of the Company since 1986 and is a
member of the Audit Review and Nominating Committees. He has been Chairman of
the Board and a director of Kennametal, Inc., a manufacturer of metal cutting
tools, machining systems and materials for applications requiring wear
resistance, since prior to 1990. In 1991, he retired as Chief Executive Officer
of Kennametal, Inc. He is also a past director of PNC Financial Corp. and its
affiliate, Pittsburgh National Bank, and a past director of the Federal Reserve
Bank of Cleveland.
William G. Mitchell has been a Director of the Company since 1984 and is a
member of the Audit Review, Compensation and Executive Committees. He retired
as Vice Chairman and director of Centel Corporation, a communications and
electric services company, in 1987. He was an executive officer and director of
Centel for more than five years prior thereto. He is also a director of The
Northern Trust Company, The Sherwin-Williams Company and Peoples Energy
Corporation.
39
<PAGE>
Erwin E. Schulze has been a Director of the Company since 1981 and is a
member of the Compensation, Executive and Finance Committees. He is Chairman of
the Board of Governors of the Chicago Stock Exchange. He retired as Chairman of
the Board, President and Chief Executive Officer and a director of The Ceco
Corporation, a manufacturer of building products and provider of concrete
forming services for the construction industry, in 1990. He had been an
executive officer and director of Ceco for more than five years prior thereto.
He is also a director of AAR Corporation.
DESCRIPTION OF SENIOR NOTES
The Senior Notes will be issued pursuant to an indenture (the "Indenture"),
dated as of , 1995, between the Company and Bank One, Columbus, N.A.,
as Trustee (the "Trustee"). The following summaries of certain provisions of
the Senior Notes and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Senior Notes and the Indenture, including the definitions
therein of certain terms (certain of which are summarized under "--Certain
Definitions"). Wherever particular provisions or defined terms of the Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference as part of the statements made herein. A form of the Indenture,
including a form of the Senior Notes, is filed as an exhibit to the
Registration Statement, of which this Prospectus is a part.
GENERAL
The Senior Notes will be limited to $100,000,000 in principal amount which
will mature on
November , 2001. Interest on the Senior Notes will accrue from the date of
original issuance at the annual rate shown on the front cover of this
Prospectus and will be payable semiannually on May and November of each
year, commencing November , 1995, to holders of record on the immediately
preceding April and October . Interest on the Senior Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
The Senior Notes will be general unsecured obligations of the Company and
will rank senior in right of payment to all existing and future subordinated
indebtedness of the Company (including the Subordinated Debentures) and Pari
Passu in right of payment with all other Senior Indebtedness, including
indebtedness under the Amended Credit Agreement. However, substantially all
existing Senior Indebtedness is (and obligations under the Amended Credit
Agreement will be) secured by a pledge of substantially all of the assets of
the Company and/or its subsidiaries. In addition, as a result of the Company's
holding company structure, the Senior Notes will be effectively subordinated to
all liabilities of the Company's subsidiaries, including liabilities to general
creditors. After giving effect to the Offering and the Loan Repayments, as of
April 2, 1995, Senior Indebtedness (excluding the Senior Notes) would have
aggregated approximately $131.6 million, substantially all of which is secured
indebtedness, and the aggregate of all liabilities of the Company's
subsidiaries (excluding amounts included above in Senior Indebtedness) would
have aggregated approximately $221.7 million.
OPTIONAL REDEMPTION
Except as described in the following paragraph, the Senior Notes will not be
redeemable prior to November , 1998. On and after November , 1998 the
Senior Notes are redeemable in whole at any time and in part from time to time
at the option of the Company upon not less than five or more than 30 days'
notice in case of redemption in whole or upon not less than 30 or more than 60
days' notice in the case of redemption in part mailed to each Holder of Senior
Notes to be redeemed at his address appearing in the Security Register, at the
following Redemption Prices (expressed as percentages of principal amount) plus
accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant Regular
40
<PAGE>
Record Date to receive interest due on an Interest Payment Date that is on or
prior to the Redemption Date) if redeemed during the 12-month period beginning
November of the years indicated.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
1998............................................. %
1999.............................................
2000............................................. 100
</TABLE>
At any time, and from time to time, prior to November , 1998 up to 35% of
the original aggregate principal amount of the Senior Notes may be redeemed at
the option of the Company at a redemption price of % of the principal amount
thereof, plus accrued and unpaid interest to the date of redemption, out of the
proceeds of one or more Equity Sales by the Company upon not less than 30 or
more than 60 days' notice by mail.
CHANGE OF CONTROL
In the event of a Change of Control, the Company shall promptly make an Offer
to Purchase on the Purchase Date (as defined in the Indenture) all Senior Notes
then Outstanding at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Purchase Date, as
provided in the Indenture. The Company is required to mail a Notice of Change
of Control to the Trustee and to mail a Notice of an Offer to Purchase to each
Holder of record not less than 15 days prior to the Purchase Date. In the event
of an Offer to Purchase, the Company will comply with any applicable rules
under the Exchange Act, including Section 14(e) thereof and Rule 14e-1
thereunder, to the extent applicable. Prior to the mailing of a Notice, the
Company will in good faith (i) seek to obtain any required consent under any
Senior Credit Facility (as defined below under clause (b)(i) of "--Certain
Covenants--Limitation on Consolidated Indebtedness") so as to permit such
purchase of the Senior Notes or (ii) attempt to repay all or a portion of the
Indebtedness under any Senior Credit Facility to the extent necessary
(including, if necessary, payment in full of such Indebtedness and payment of
any prepayment premiums, fees, expenses or penalties) to permit such purchase
of the Senior Notes without such consent. If such Indebtedness is not then
prepayable to such extent, the Company will be required to make an offer to
those lenders under any Senior Credit Facility from which consent is required
and cannot be obtained to repay such Indebtedness in full for an amount equal
to the outstanding principal balance thereof and accrued interest to the date
of repayment (and any fees, expenses, penalties and premiums) and will repay
any Banks that accept such offer.
As described below under "--Certain Definitions--Change of Control," one of
the events which would constitute a Change of Control is "any sale, lease,
exchange or other transfer . . . of all, or substantially all, of the assets of
the Company." There is no established quantitative definition of "substantially
all" of the assets of a corporation under applicable law. Accordingly, if the
Company engaged in a transaction in which it disposed of less than all of its
assets, a question of interpretation could arise as to whether such disposition
was of "substantially all" of the assets and whether the Company was required
to make an Offer to Purchase.
Due to the highly leveraged structure of the Company, it is unlikely that the
Company would be able to repurchase the Senior Notes upon the occurrence of a
Change of Control. In addition, any such Change of Control would constitute an
event of default under the Amended Credit Agreement with the result that the
Banks could declare the loans under the Amended Credit Agreement (all of which
are Pari Passu in right of payment to the Senior Notes and which are secured by
a pledge of substantially all of the assets of the Company and/or its
subsidiaries) to be immediately due and payable. Further, a Change of Control
could trigger obligations by the Company to prepay or redeem the Subordinated
Debentures or the Convertible Preferred Stock. In such events, the holders of
all such obligations could seek to pursue various contractual and legal
remedies against the Company. If the Company were unable to pay all amounts
that would become
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due in respect of all such obligations in such circumstance, it could result in
the bankruptcy, liquidation, reorganization, dissolution or other winding-up of
the Company. The assets of the Company may be insufficient to pay the amounts
due on the Senior Notes in such event.
CERTAIN COVENANTS
Limitation on Consolidated Indebtedness. (a) So long as any of the Senior
Notes are Outstanding, (1) the Company may not Incur and may not permit any
Subsidiary to Incur any Indebtedness, including Acquisition Debt, and (2) may
not permit any Subsidiary to issue any Preferred Stock, unless the Company's
Consolidated Cash Flow Ratio for the four full consecutive fiscal quarters
ending with the most recently completed fiscal quarter of the Company preceding
the Incurrence of such Indebtedness or Acquisition Debt or the issuance of such
Preferred Stock, calculated on a pro forma basis as if such Indebtedness or
Acquisition Debt had been Incurred or such Preferred Stock had been issued at
the beginning of such four full fiscal quarters, would be greater than 2.0 to
1.
(b) Notwithstanding the foregoing paragraph, the Company or a Subsidiary may
Incur the following Indebtedness, and a Subsidiary may issue the following
Preferred Stock:
(i) Indebtedness of the Company or any Subsidiary under or with respect
to the Amended Credit Agreement or any similar senior credit facility or
agreement, or both (each, a "Senior Credit Facility") in an aggregate
principal amount outstanding at any one time not to exceed $200.0 million
of Indebtedness, including any Indebtedness outstanding under any
amendment, extension, restructuring, refunding or refinancing of amounts
due, commitments or maturities under any Senior Credit Facility;
(ii) Indebtedness evidenced by the Senior Notes;
(iii) Indebtedness owed to the Company or a Controlled Subsidiary of the
Company and Preferred Stock issued to and held by the Company or a
Controlled Subsidiary of the Company, in each case only so long as owed to
or held by the Company or a Controlled Subsidiary of the Company and, in
the case of a Controlled Subsidiary, so long as the Company owns, directly
or indirectly, a percentage of the Capital Stock, Voting Stock and other
ownership interest of the Controlled Subsidiary which is equal to or
greater than the percentage of such Capital Stock, Voting Stock or other
ownership interest, respectively, owned by the Company, directly or
indirectly, on the date of the Indenture;
(iv) Indebtedness or Preferred Stock of any Subsidiary outstanding on the
date of execution and delivery of the Indenture, less any amounts actually
repaid in accordance with the scheduled amortization provisions under any
such Indebtedness;
(v) Indebtedness or Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance or redeem, any Outstanding
Indebtedness or Preferred Stock of the Company or any of its Subsidiaries,
including any extension, renewal or refinancing of any such Indebtedness or
Preferred Stock, in an aggregate principal amount (or, if such new
Indebtedness is issued at a price less than the principal amount thereof,
with an original issue price) or liquidation preference not to exceed the
principal amount of Indebtedness or liquidation preference of Preferred
Stock so exchanged or refinanced (plus accrued interest and accrued
dividends, as the case may be, fees and expenses related to such exchange
or refinancing and any premium payable pursuant to optional redemption
provisions of such Outstanding Indebtedness or Preferred Stock to be
exchanged or refinanced); provided that any Indebtedness exchanged for, or
the proceeds of which are used to refinance, the Senior Notes or other
Indebtedness of the Company which is Pari Passu or subordinated to the
Senior Notes is only permitted (1) if, in case the Senior Notes are
refinanced or exchanged in part, such Indebtedness expressly remains Pari
Passu with or subordinate in right of payment to, as the case may be, the
Senior Notes, (2) if, in case the Indebtedness to be exchanged or
refinanced is subordinated to the Senior Notes, such Indebtedness is
subordinate to the Senior Notes at least to the extent and in the manner
that the
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Indebtedness to be exchanged or refinanced is subordinate to the Senior
Notes and (3) if, in case the Senior Notes are exchanged or refinanced in
part or the Indebtedness to be exchanged or refinanced is subordinated to
the Senior Notes, no payments by way of sinking fund, mandatory redemption
or otherwise (including defeasance) may be made by the Company (including,
without limitation, at the option of the holder thereof other than an
option given to a holder pursuant to a "change of control" covenant which
is no more favorable to the holders of such Indebtedness than the
provisions described above under "--Change of Control" and such
Indebtedness provides that the Company will not repurchase such
Indebtedness pursuant to such provisions prior to the Company's repurchase
of the Senior Notes required to be repurchased by the Company pursuant to
the provisions described above under "--Change of Control") at any time
prior to the Stated Maturity of the Senior Notes; and, provided further
that in no event may Indebtedness of the Company (other than Senior
Indebtedness) be refinanced by means of Indebtedness of any Subsidiary of
the Company pursuant to the provisions described in this clause (v) nor may
the Company issue, pursuant to the provisions described in this clause (v),
Preferred Stock which constitutes Redeemable Stock other than Redeemable
Stock that is exchanged for, or the proceeds of which are used to refinance
or redeem, any Outstanding Indebtedness of the Company or any of its
Subsidiaries and that has no maturity (whether by way of sinking fund,
mandatory redemption or otherwise) prior to the Stated Maturity of the
Senior Notes or, if such Indebtedness to be so exchanged, refinanced or
redeemed has a maturity prior to the Stated Maturity of the Senior Notes,
the maturity or maturities are no earlier than the maturity or respective
maturities of such Indebtedness to be so exchanged, refinanced or redeemed
and the Redeemable Stock complies with the other provisions described in
this clause (v) with respect to liquidation preference and subordination;
(vi) Indebtedness secured by a Lien on real property or improvements
thereon; provided that any Net Available Proceeds received by the Company
or any Subsidiary as a result of the Incurrence of such Indebtedness are
applied in the amount and otherwise in accordance with the provisions
described below under "Limitation on Certain Asset Dispositions;"
(vii) Indebtedness secured by a Lien on real property, which Indebtedness
(a) constitutes all or a part of the purchase price of such property or (b)
is Incurred prior to, at the time of or within 270 days after the
acquisition of such property for the purpose of financing all or any part
of the purchase price thereof and which otherwise is in accordance with the
provisions described below under "Limitations on Liens;"
(viii) Indebtedness in an aggregate principal amount not to exceed $70.0
million at any one time outstanding (exclusive of other permitted
Indebtedness);
(ix) Indebtedness under Currency Agreements entered into in the ordinary
course of business and Indebtedness under Currency Agreements and Interest
Rate Agreements relating to existing and future Indebtedness otherwise
permitted under the Indenture; and
(x) Indebtedness of the Company the proceeds of which are used to
purchase shares of stock of (a) Hoeganaes pursuant to the right of first
refusal set forth in the stockholders' agreement among the Company,
Hoeganaes and Hoganas AB, the minority shareholder of Hoeganaes or (b)
Dexion (North Asia) Ltd. pursuant to the right of first refusal set forth
in the stockholders' agreement among the Company, Dexion (North Asia) Ltd.
and the minority shareholder of Dexion (North Asia) Ltd.
Limitation on Transactions with Stockholders and Affiliates. (a) So long as
any of the Senior Notes are Outstanding, the Company may not, and may not
permit any Subsidiary to, directly or indirectly, enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or
exchange of property or the rendering of any service but excluding transactions
between the Company and Controlled Subsidiaries of the Company or between
Controlled Subsidiaries of the Company not otherwise prohibited by the
Indenture) involving aggregate consideration in excess of $1.0 million not
otherwise prohibited by the Indenture, with a Related Person or with any
Affiliate of the Company; provided that this provision shall not be deemed to
prohibit transactions made in good faith the terms of which are fair and
reasonable to the Company or such Subsidiary, as the case may be, and are at
least as favorable as the terms which could be
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obtained by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
Related Person or Affiliate; provided, that any such transaction shall be
conclusively deemed to be on terms which are fair and reasonable to the Company
or any of its Subsidiaries and on terms which are at least as favorable as the
terms which could be obtained on an arm's length basis with Persons who are not
such a Related Person or Affiliate if such transaction is approved by a
majority of the Company's Board of Directors (including a majority of the
Company's independent directors, if any).
(b) Notwithstanding the provisions described in clause (a) above to the
contrary, transactions expressly contemplated by certain agreements with
Hoeganaes or Dexion (North Asia) Ltd., respectively, are permitted, so long as
the Company owns, directly or indirectly, the percentage of Capital Stock,
Voting Stock and other ownership interest of Hoeganaes or Dexion (North Asia)
Ltd., as the case may be, which is equal to or greater than the percentage of
such Capital Stock, Voting Stock or other ownership interest, respectively,
owned by the Company, directly or indirectly, as of the date of the Indenture.
Limitation on Restricted Payments. The Company:
(i) may not, directly or indirectly, declare or pay any dividend, or make
any distribution, in respect of any class of its Capital Stock or to the
holders of any class of its Capital Stock (including pursuant to a merger
or consolidation of the Company, but excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Redeemable Stock)),
(ii) may not, and may not permit any Subsidiary of the Company, directly
or indirectly, to purchase, redeem or otherwise acquire or retire for value
(a) any Capital Stock of the Company or (b) any options, warrants or rights
to acquire shares of Capital Stock of the Company or any Related Person of
the Company,
(iii) may not, and may not permit any Subsidiary of the Company to, make
any loan, advance or capital contribution to or investment in, transfer any
assets to or for the benefit of, assume any liability with respect to any
obligations of, or make any payment on a guarantee of any obligation of any
Affiliate or Related Person of the Company (other than (A) the Company or a
Wholly Owned Subsidiary of the Company which was a Wholly Owned Subsidiary
prior to, or becomes a Wholly Owned Subsidiary contemporaneously with, such
loan, advance, contribution, investment or payment; provided that such
loan, advance, contribution, investment or payment was not made or assumed
in anticipation of such Person becoming a Wholly Owned Subsidiary of the
Company and (B) Hoeganaes or Dexion (North Asia) Ltd., pursuant to certain
existing agreements related to Hoeganaes or Dexion (North Asia) Ltd.,
respectively, so long as the Company owns, directly or indirectly, the
percentage of Capital Stock, Voting Stock or other ownership interest of
Hoeganaes or Dexion (North Asia) Ltd., as the case may be, which is equal
to or greater than the percentage of such Capital Stock, Voting Stock or
other ownership interest, respectively, owned by the Company, directly or
indirectly, as of the date of the Indenture), and
(iv) may not, and may not permit any Subsidiary of the Company to,
redeem, defease, repurchase, retire or otherwise acquire or retire for
value, prior to any scheduled maturity, repayment or sinking fund payment,
Indebtedness of the Company which is subordinate in right of payment to the
Senior Notes (other than (A) redemptions, defeasances, repurchases,
retirements or acquisitions to the extent effected from the proceeds of
Capital Stock of the Company or any Subsidiary of the Company issued
subsequent to the date of this Indenture, including Redeemable Stock
permitted to be issued pursuant to the provisions described above under
clause (b)(v) of "Limitation on Consolidated Indebtedness," and (B) any
extensions, refundings or refinancing of such Indebtedness so long as such
extended, refunded or refinanced Indebtedness remains subordinate in right
of payment to the Senior Notes pursuant to terms of subordination at least
as favorable to the Holders of the Senior Notes as were contained in the
Indebtedness which was so extended, refunded or refinanced and so long as
such extended, refunded or refinanced Indebtedness has a maturity date on
or after the maturity date of such Indebtedness prior to such extension,
refunding or refinancing)
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(the transactions described in clauses (i) through (iv) being referred to
herein as "Restricted Payments"), if at the time thereof, or after giving
effect thereto:
(1) an Event of Default, or an event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, has
occurred and is continuing; or
(2) the Consolidated Cash Flow Ratio of the Company for the four full
fiscal quarters immediately preceding the date on which such Restricted
Payment is made (after giving effect thereto, including the aggregate
amount of all Restricted Payments made pursuant to the last paragraph of
this section) will not be at least 2.5 to 1; provided that compliance with
the provisions described in this clause (2) shall not be required with
respect to the mandatory redemption of the Subordinated Debentures pursuant
to the terms thereof; or
(3) the aggregate amount of all Restricted Payments made (including any
amounts made pursuant to the last paragraph of this section) from the date
of the Indenture exceeds the sum (without duplication) of:
(a) the aggregate of 50% of cumulative Consolidated Net Income of the
Company (or, in the case Consolidated Net Income of the Company shall
be negative for any fiscal year, less 100% of such deficit) accrued for
the period (taken as one accounting period) commencing with the first
full fiscal quarter after the date of the Indenture to and including
the fiscal quarter ended immediately prior to the date of such
calculation; and
(b) 100% of (i) the aggregate net proceeds, including the fair value
of property other than cash (determined in good faith by the Board of
Directors as evidenced by a Board Resolution), received by the Company
from any Person other than a Subsidiary of the Company from all
issuances (including issuances of Capital Stock of the Company pursuant
to the exercise of any warrants or other rights to acquire Capital
Stock of the Company) after the date of the Indenture of Capital Stock
of the Company (and, in the event the Company merges or consolidates
with another corporation in a transaction in which the outstanding
Common Stock of the Company prior to the transaction is canceled, the
Consolidated Tangible Net Worth of such other corporation) and options,
warrants or other rights to acquire Capital Stock of the Company
(excluding for purposes of the provisions described in this clause (i)
any issuance of Redeemable Stock by the Company) and (ii) the aggregate
net proceeds, including the fair value of property other than cash
(determined in good faith by the Board of Directors as evidenced by a
Board Resolution), received by the Company from any Person other than a
Subsidiary of the Company of Indebtedness of the Company or any of its
Subsidiaries issued subsequent to the date of the Indenture which is
converted into Capital Stock of the Company (other than Redeemable
Stock) (excluding for purposes of the provisions described in this
clause (ii) any issuance of Capital Stock upon the conversion of the
Exchange Debentures).
The foregoing provision will not be violated by reason of the payment of any
dividend within 60 days after declaration thereof, if at the declaration date
such payment would have complied with the foregoing provision.
Notwithstanding the foregoing, the following shall not be prohibited:
(a) payments required to be made in connection with stock appreciation
rights with respect to the Capital Stock of the Company outstanding on the
date of the Indenture;
(b) the settlement of stock options with respect to the Capital Stock of
the Company outstanding on the date of the Indenture in an aggregate amount
not to exceed $2.5 million;
(c) payments in connection with the redemption of shareholder rights in
an aggregate amount not to exceed $1.0 million; or
(d) purchases of the Subordinated Debentures pursuant to Section 1016 of
the Subordinated Debenture Indenture governing purchases upon a change in
control.
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In addition, notwithstanding the provisions described above under clauses (2)
or (3) but subject to the provisions described above under clause (1), the
Company may make Restricted Payments not to exceed $10.0 million.
Limitation on Certain Asset Dispositions. (a) So long as any of the Senior
Notes are Outstanding, the Company may not, and may not permit any Subsidiary
of the Company to, make Asset Dispositions in one or more transactions in any
fiscal year that result, together with (x) the proceeds received from any
Indebtedness permitted by the provisions described above under clause (b)(vi)
of "Limitation on Consolidated Indebtedness" and (y) Sale and Leaseback
Transactions permitted by the provisions described below under "Limitation on
Sale and Leaseback Transactions," in Net Available Proceeds in excess of $5.0
million in the aggregate in such fiscal year unless:
(i) the Company or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Dispositions at least equal to the
fair market value for the shares or assets disposed of (which shall be as
determined in good faith by the Board of Directors),
(ii) at least 75% of the consideration for such Asset Dispositions
consists of cash; provided, however, that the amount of (x) any liabilities
(as shown on the Company's or such Subsidiary's most recent balance sheet
or in the notes therein) of the Company or any Subsidiary that are assumed
by the transferee of any such assets and (y) any notes, other obligations
or other marketable securities received by the Company or any such
Subsidiary from the transferee that are immediately converted by the
Company or such Subsidiary into cash will be deemed to be cash for purposes
of this provision; and provided, further, that the 75% limitation referred
to above does not apply to any Asset Disposition in which the cash portion
of the consideration received therefor is equal to or greater than what the
net after-tax proceeds would have been had such Asset Disposition complied
with such 75% limitation, and
(iii) any applicable provisions of the Indenture described below under
"--Mergers, Consolidations and Certain Sales of Assets" shall have been
complied with.
(b) The Company is required to apply 100% of the Net Available Proceeds
(including the proceeds received from any Indebtedness permitted by the
provisions described above under clause (b)(vi) of "Limitation on Consolidated
Indebtedness" and Sale and Leaseback Transactions permitted by the provisions
described below under "Limitation on Sale and Leaseback Transactions"), in
excess of $5.0 million in the aggregate in any fiscal year from such Asset
Dispositions (including from the sale of any marketable cash equivalents
received therein): (A) first, within 90 days of receipt of such Net Available
Proceeds, to repayment (in whole or in part) of the principal and/or interest
on Senior Indebtedness then outstanding that is secured; (B) second, to the
extent such Net Available Proceeds are not applied to the principal and/or
interest on Senior Indebtedness that is secured as specified in clause (A), to
pro rata (determined by reference to principal amount or accreted value, as the
case may be) purchases of Outstanding Senior Notes and other Indebtedness
ranking Pari Passu with the Senior Notes for which the Company is obligated to
make an offer to purchase substantially similar to the Offer to Purchase
required pursuant to this provision, pursuant to an Offer to Purchase at a
purchase price equal to 100% of their principal amount, plus accrued interest
to the Purchase Date (subject to the rights of Holders of record on the
relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Purchase Date); and (C) third, to the extent of
any remaining Net Available Proceeds following completion of the Offers to
Purchase referred to in clause (B) above, to the repayment, within five
Business Days of completion of such Offer to Purchase, of other Indebtedness
which is Pari Passu with the Senior Notes but is not required to be purchased
pursuant to an offer to purchase substantially similar to the Offer to Purchase
required pursuant to this provision or, in lieu thereof, other Indebtedness of
the Company or any Subsidiary, to the extent that the same may be repaid prior
to maturity.
(c) The Company has no obligation to apply the Net Available Proceeds
pursuant to the provisions described above under clause (b) if the Company has
a bona fide intent to reinvest the Net Available Proceeds from an Asset
Disposition in another asset or business in the same or similar line of
business as the Company or any of its Material Subsidiaries and the Net
Available Proceeds are so reinvested within 180 days of receipt thereof.
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Limitation on Certain Restrictions Affecting Any Subsidiary. So long as any
of the Senior Notes are Outstanding, the Company may not, and may not permit
any of its Subsidiaries to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any of its Subsidiaries to (i) pay dividends or make any other distributions on
such Subsidiary's Capital Stock to the Company or any of its Subsidiaries, (ii)
pay any Indebtedness owed to the Company or any of its Subsidiaries, (iii) make
loans or advances to the Company or any of its Subsidiaries, or (iv) transfer
any of its property or assets to the Company or any of its Subsidiaries, other
than restrictions on transfer contained in lease instruments Incurred in the
ordinary course of business or assumed in connection with an acquisition of
another Person; provided, however, that this covenant does not prohibit (a) any
restrictions or encumbrances contained in any Senior Credit Facility; (b) any
restrictions or encumbrances existing in the Indenture or under agreements in
effect at the date of execution and delivery of the Indenture; (c) consensual
encumbrances or restrictions binding upon any Person at the time such Person
becomes a Subsidiary of the Company; provided that such encumbrances or
restrictions were not Incurred in anticipation of such Person becoming a
Subsidiary of the Company; (d) encumbrances or restrictions imposed by
applicable law; or (e) subject to the terms of the provisions described above
under "Limitation on Certain Asset Dispositions," restrictions with respect to
a Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
Limitation on Issuance of Shares of Subsidiaries. So long as any of the
Senior Notes are Outstanding, the Company may not permit any Subsidiary of the
Company to issue shares of Capital Stock or any other ownership interest to any
Person other than to the Company or a Wholly Owned Subsidiary of the Company
except to the extent, and subject to the conditions under which, the Company
could have sold, transferred or otherwise disposed of such shares or other
ownership interests in an Asset Disposition pursuant to the provisions
described above under "Limitation on Certain Asset Dispositions" if they had
first been issued to the Company or such Subsidiary; provided, however, that
the foregoing limitation does not apply to (a) the issuance of shares of
Capital Stock of a Subsidiary of the Company which is required in order to
provide collateral security in certain jurisdictions outside the U.S. with
respect to funds borrowed by certain non-U.S. Subsidiaries of the Company
pursuant to the terms of any Senior Credit Facility, (b) the issuance of shares
of Capital Stock or other ownership interests so long as immediately after such
issuance the Company owns, directly or indirectly, a percentage of the Capital
Stock, Voting Stock and other ownership interest of such Subsidiary which is
equal to or greater than the percentage of such Capital Stock, Voting Stock or
other ownership interest, respectively, owned by the Company, directly or
indirectly, immediately prior to such issuance or (c) the issuance of
directors' qualifying shares.
Limitation on Sale and Leaseback Transactions. The Company may not, and may
not permit any Subsidiary of the Company to, enter into any Sale and Leaseback
Transaction (except for a period not exceeding 30 months) unless the Company or
such Subsidiary applies or commits to apply within 180 days after the sale or
transfer an amount equal to the Net Available Proceeds of the sale pursuant to
the Sale and Leaseback Transaction in accordance with the provisions described
above under "Limitation on Certain Asset Dispositions" as if such proceeds were
received as a result of an Asset Disposition.
Limitation on Liens. The Company may not Incur any Indebtedness which is
secured, directly or indirectly, with a Lien on the property, assets or any
income or profits therefrom of the Company or any of its Subsidiaries other
than (i) Senior Indebtedness Incurred pursuant to any Senior Credit Facility or
(ii) Senior Indebtedness with respect to which such Lien is perfected at the
time of the Incurrence of such Senior Indebtedness or substantially
contemporaneously therewith, unless contemporaneously therewith or prior
thereto the Senior Notes are equally and ratably secured, except for (a) any
such Indebtedness secured by Liens on the assets of any entity existing at the
time such assets are acquired by the Company of any of its Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise; provided
that such Liens (x) are not Incurred in contemplation of such assets being
acquired by the Company or any of its Subsidiaries and (y) do not extend to any
other property or assets of the Company or any of its Subsidiaries or (b) any
other Indebtedness required to be equally and ratably secured as a result of
the Incurrence of such
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Indebtedness; provided that the provisions described in this paragraph shall
not in any way affect the Incurrence by the Company of Indebtedness permitted
pursuant to the provisions of the Indenture described above under clause (b)(i)
of "Limitation on Consolidated Indebtedness" and the securing of such
Indebtedness, directly or indirectly, with a Lien on the property, assets or
any income or profits therefrom of the Company or any of its Subsidiaries.
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company (a) may not consolidate with or merge into any other Person; (b)
may not permit any other Person to consolidate with or merge into the Company
or any Subsidiary of the Company (in a transaction in which such Subsidiary
remains a Subsidiary of the Company), except for transactions involving the
consolidation or merger of a Wholly Owned Subsidiary of the Company with or
into the Company or another Wholly Owned Subsidiary of the Company; and (c) may
not, directly or indirectly, transfer, convey, sell, lease or otherwise dispose
of all or substantially all of its properties and assets as an entirety, unless
in any such transaction:
(1) immediately before and after giving effect to such transaction and
treating any Indebtedness Incurred by the Company or a Subsidiary of the
Company as a result of such transaction as having been Incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, has occurred and is continuing;
(2) in case the Company consolidates with or merges into another Person
or directly or indirectly transfers, conveys, sells, leases or otherwise
disposes of all or substantially all of its properties and assets as an
entirety, the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by transfer, conveyance, sale, lease
or other disposition all or substantially all the properties and assets of
the Company as an entirety (a "Successor Company") is a corporation
organized and validly existing under the laws of the U.S., any State
thereof or the District of Columbia, and expressly assumes, by a
supplemental indenture, the due and punctual payment of the principal of
(and premium, if any) and interest on all the Senior Notes and the
performance of every covenant of the Indenture on the part of the Company
to be performed or observed;
(3) immediately after giving effect to such transaction, on a pro forma
basis, the Consolidated Net Worth of the Company or, if applicable, the
Successor Company, shall be equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction;
(4) immediately after giving effect to such transaction, on a pro forma
basis, the Company or, if applicable, the Successor Company, is able to
incur at least $1.00 of additional Indebtedness under the provisions
described above under clause (a) of "Limitation on Consolidated
Indebtedness;" and
(5) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel as required by the Indenture, in each case to the
effect that the provisions described under this caption and all conditions
precedent relating to such transaction have been complied with and, with
respect to such Officers' Certificate, if applicable, setting forth the
manner of determination of the Consolidated Net Worth and Consolidated Cash
Flow Ratio of the Company or, if applicable, of the Successor Company.
As described above under "--Change of Control," there is no established
quantitative definition of the term "substantially all" of the Company's assets
as used in the foregoing described covenant. Accordingly, if the Company
engaged in a transaction in which it disposed of less than all of its assets, a
question of interpretation could arise as to whether such disposition was of
"substantially all" of the assets and whether the requirements of the foregoing
described covenant would apply to the transaction.
DEFEASANCE
The Indenture will provide that the Company, at the Company's option, (a)
will be discharged from its Obligations in respect of the Senior Notes (except
for certain Obligations to register the transfer or exchange of Senior Notes,
replace stolen, lost or mutilated Senior Notes, maintain paying agencies and
hold moneys
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for payment in trust), and (b) need not comply with certain provisions of the
Indenture, including, among others, those provisions described above under "--
Change of Control," "--Certain Covenants" and "--Mergers, Consolidations and
Certain Sales of Assets," in each case if the Company deposits, with the
Trustee, money, or U.S. Government Obligations which through the payment of
interest thereon and principal thereof in accordance with their terms, together
with any uninvested money so deposited, will provide money, in an amount
sufficient to pay all the principal of, premium, if any, and interest on, the
Senior Notes on the dates such payments are due (which may include one or more
redemption dates desired by the Company) in accordance with the terms of such
Senior Notes. Such a trust may only be established if, among other things, (i)
no Event of Default or event which with the giving of notice or lapse of time,
or both, would become an Event of Default under the Indenture has occurred and
is continuing on the date of such deposit, (ii) such defeasance or covenant
defeasance does not result in a breach or violation of, or constitute a default
under, the Indenture or any other agreement or instrument to which the Company
is a party or by which it is bound, (iii) such defeasance or covenant
defeasance does not cause the Trustee to have any conflicting interest (for
purposes of the Trust Indenture Act) with respect to other securities of the
Company, (iv) the Company has delivered an Opinion of Counsel to the effect
that the Holders of the Outstanding Senior Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same time as if such defeasance or
covenant defeasance had not occurred, and (v) the Company delivers an Officers'
Certificate and an Opinion of Counsel, in each case to the effect that all
conditions precedent relating to such defeasance have been complied with.
In the event the Company does not comply with its remaining Obligations under
the Indenture after a defeasance of the Indenture with respect to the Senior
Notes as described above and the Senior Notes are declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the Trustee may be insufficient to pay
amounts due on the Senior Notes at the time of the acceleration resulting from
such Event of Default. However, the Company will remain liable in respect of
such payments.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) default in
the payment of the principal of or premium, if any, on any Senior Note at its
Maturity; (b) default in the payment of any interest on any Senior Note when
due and payable, and continuance of such default for 30 days; (c) default in
the performance or breach of any other covenant of the Company in the
Indenture, and continuance of such default for 60 days after written notice to
the Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in principal amount of the Outstanding Senior Notes; (d) a default
under any Indebtedness by the Company and/or one or more Material Subsidiaries,
or under any instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness of the Company and/or one or more
Material Subsidiaries with a principal amount then outstanding in excess of
$8.0 million individually or in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be created,
which default shall constitute a failure to pay the principal of such
Indebtedness at final maturity or shall have resulted in such Indebtedness
becoming due and payable prior to its Stated Maturity if such Indebtedness is
not discharged, or its acceleration is not rescinded or annulled, within 60
days after written notice to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Senior Notes; (e) a final unappealable judgment or judgments remain
undischarged or unbonded for 60 consecutive days and create uninsured
liabilities against the Company and/or one or more Material Subsidiaries of
$5.0 million or more in the aggregate; and (f) certain events of bankruptcy,
insolvency or reorganization relating to the Company and/or one or more
Material Subsidiaries. Subject to the provisions of the Indenture relating to
the duties of the Trustee, in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity. Subject to such provisions for the
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indemnification of the Trustee, the Holders of a majority in aggregate
principal amount of the Outstanding Senior Notes will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
If an Event of Default shall occur and be continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
relating to the Company) either the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Senior Notes may accelerate the
maturity of all Senior Notes and the principal amount thereof shall become due
and payable upon the earlier of (i) five Business Days after the receipt by the
Company and the administrative agent(s) or similar Person under any Senior
Credit Facility of written notice, provided such Event of Default is then
continuing, or (ii) an acceleration under any Senior Credit Facility. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization relating to the Company occurs, the principal amount of all the
Senior Notes shall become due and payable without any declaration or other act
on the part of the Trustee or any Holder. After a declaration of acceleration,
but before a judgment or decree based on acceleration, the Holders of a
majority in aggregate principal amount of Outstanding Senior Notes may, in
certain circumstances, waive all defaults and rescind and annul such
declaration if (i) the Company has paid or deposited with the Trustee a sum
sufficient to pay overdue interest, principal amount and premium (if any) due
otherwise than by acceleration and certain other expenses and (ii) all Events
of Default, other than the non-payment of principal amount due by reason of
such declaration of acceleration, have been cured or waived as provided in the
Indenture. For information as to waiver of defaults, see "--Modification and
Waiver" below.
No Holder of any Senior Notes will have any right to institute any proceeding
with respect to the Indenture or for any other remedy thereunder, unless such
Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and the Holders of at least 25% in aggregate
principal amount of the Outstanding Senior Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in aggregate principal amount of the Outstanding Senior Notes a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted by a Holder of a Senior Note for enforcement of payment of the
principal of and premium, if any, and interest on such Senior Note on or after
the respective due dates expressed in such Senior Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Senior Notes; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Senior Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Senior Note, (b) reduce
the principal of, or the premium or interest on, any Senior Note or reduce any
amount payable on redemption thereof, (c) change the place or currency of
payment of principal of, or premium or interest on, any Senior Note, (d) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Senior Note, (e) modify the provisions concerning purchase at
the Holder's option in a manner adverse to the Holders, (f) reduce the above-
stated percentage of Outstanding Senior Notes necessary to modify or amend the
Indenture or (g) reduce the percentage of aggregate principal amount of
Outstanding Senior Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. In certain
limited circumstances, the Indenture permits the amendment thereof without the
consent of the Holders.
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The Holders of a majority in aggregate principal amount of the Outstanding
Senior Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. The Holders of a majority in aggregate principal
amount of the Outstanding Senior Notes may waive any past default under the
Indenture, except a default in the payment of principal, premium or interest on
any Senior Note or a covenant provision that cannot be modified or amended
without the consent of each Holder of Outstanding Senior Notes affected.
GOVERNING LAW
The Indenture and the Senior Notes will be governed by the laws of the State
of New York.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Company or the Trustee may require a Holder, among other things,
to furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Senior Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Senior Note for a period of 15 days before a selection of Senior
Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
"Acquisition Debt" means Indebtedness or Preferred Stock of any Person
existing at the time such Person became a Subsidiary of the Company (or such
Person is merged into the Company or one of its Subsidiaries) or assumed or
issued in connection with the acquisition of assets from any such Person (other
than assets acquired in the ordinary course of business), including
Indebtedness Incurred or Preferred Stock issued in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company (but
excluding Indebtedness or Preferred Stock of such Person which is extinguished,
retired, repaid, redeemed or repurchased in connection with such Person
becoming a Subsidiary of the Company).
"Amended Credit Agreement", for purposes of the Indenture, includes any
agreement extending the maturity of, refinancing or otherwise restructuring all
or any portion of the Obligations under the Amended Credit Agreement and any
successor agreement.
"Asset Acquisition" means (i) an investment by the Company or any of its
Subsidiaries in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with
the Company or any of its Subsidiaries or (ii) the acquisition by the Company
or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Disposition" by any Person means any sale, lease, conveyance, transfer
or other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) of (i) shares of Capital Stock
of a Subsidiary of such Person, (ii) property of such Person or any of its
Subsidiaries or (iii) other assets of such Person or any of its Subsidiaries
(each referred to for the purposes of this definition as a "disposition") by
such Person or any of its Subsidiaries (other than a disposition (x) by a
Subsidiary of such Person to such Person, (y) by such Person or a Subsidiary of
such Person to a Wholly Owned Subsidiary of such Person or such Subsidiary or
(z) by such Person or a Subsidiary of such Person to a Controlled Subsidiary of
such Person or such Subsidiary so long as immediately after such disposition
such Person or such Subsidiary owns, directly or indirectly, a percentage of
the Capital Stock, Voting Stock and other ownership interest of such Subsidiary
which is equal to or greater than the percentage of such Capital Stock, Voting
Stock or other ownership interest, respectively, owned by such Person or such
Subsidiary, directly or
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indirectly, immediately prior to such disposition) other than dispositions of
property or assets in the ordinary course of business. For purposes of this
definition, any disposition in connection with directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall not
constitute an Asset Disposition. Notwithstanding the foregoing, a pledge,
change in share registry or similar transaction shall not be deemed an Asset
Disposition if effected to secure Indebtedness permitted in accordance with the
provisions described above under "--Certain Covenants--Limitation on
Consolidated Indebtedness."
"Asset Sale" means the sale, lease, conveyance, transfer or other disposition
by the Company or any of its Subsidiaries (other than to one of its Wholly
Owned Subsidiaries or to one of its Controlled Subsidiaries so long as
immediately after such disposition the Company or Subsidiary owns, directly or
indirectly, a percentage of the Capital Stock, Voting Stock or other ownership
interest in such Subsidiary which is equal to or greater than the percentage of
Capital Stock, Voting Stock or other ownership interest, respectively, owned by
such Person or such Subsidiary, directly or indirectly, immediately prior to
such disposition) of (i) all or substantially all of the Capital Stock of any
Subsidiary or (ii) substantially all of the assets which constitute
substantially all of an operating unit or business of the Company or any of its
Subsidiaries.
"Attributable Value" means, as to any particular lease under which any Person
is at the time liable and at any date as of which the amount thereof is to be
determined, the total net amount of rent required to be paid by such Person
under such lease during the initial term thereof as determined in accordance
with generally accepted accounting principles, discounted from such initial
term date to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation of such
Person with like term in accordance with generally accepted accounting
principles. The net amount of rent required to be paid under any such lease for
any such period shall be the aggregate amount of rent payable by the lessee
with respect to such period after excluding amounts required to be paid on
account of insurance, taxes, assessments, utility, operating and labor costs
and similar charges. In the case of any lease which is terminable by the lessee
upon the payment of a penalty, such net amount shall also include the amount of
such penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Capital Lease Obligation" of any Person means any obligation to pay rent or
other amounts under a lease of (or other Indebtedness arrangements conveying
the right to use) real, personal or mixed property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with generally
accepted accounting principles, and the amount of such obligation shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations, warrants, rights or other equivalents (however designated) of
corporate stock whether now outstanding or issued after the date of the
Indenture.
"Change of Control" means the occurrence of one or more of the following
events, whether or not approved by the Company's Board of Directors:
(1) any Person or any Persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof, other than the ESOP or the trusts for
any other employee stock ownership, benefit or pension plans of the Company
or any Subsidiary and other than the original holders of Convertible
Preferred Stock, shall beneficially own (as defined in Rule 13d-3 of the
Commission) at least 50% of the total voting power of all classes of
Capital Stock of the Company entitled to vote generally in the election of
directors of the Company;
(2) any one Person or Group (other than the Board of Directors of the
Company as it may be constituted from time to time), or any Affiliates
thereof, shall succeed in having sufficient of its or their
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nominees elected to the Board of Directors of the Company such that such
nominees, when added to any existing director remaining on the Board of
Directors of the Company after such election who is an Affiliate of such
Group, shall constitute a majority of the Board of Directors of the
Company;
(3) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, the assets of
the Company to any Person or entity or Group of Persons or entities (other
than any Wholly Owned Subsidiary of the Company);
(4) the shareholders of the Company shall approve any plan for the
liquidation or dissolution of the Company; or
(5) the merger or consolidation of the Company with or into another
corporation or the merger of another corporation into the Company with the
effect that immediately after such transaction any Person or Group holds
more than 50% of the total voting power entitled to vote generally in the
election of directors, managers or trustees of the surviving corporation of
such merger or consolidation.
"Consolidated Capital Expenditures" means, for any period, the aggregate of
all expenditures Incurred (whether paid in cash or accrued as liabilities and
including Capital Lease Obligations) by the Company and its Subsidiaries during
such period that, in conformity with generally accepted accounting principles,
are included in the property, plant or equipment or similar fixed asset account
reflected in the consolidated balance sheet of the Company and its Consolidated
Subsidiaries.
"Consolidated Cash Flow Available for Fixed Charges" of any Person means, for
any period, the Consolidated Net Income of such Person for such period plus (i)
Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person and its Consolidated Subsidiaries for such period,
less (iv) the aggregate amount actually paid by such Person and its
Consolidated Subsidiaries during such period on account of Consolidated Capital
Expenditures and less (v) dividends declared or paid (without duplication)
during such period to minority shareholders with respect to a Controlled
Subsidiary to the extent, if any, the amount thereof exceeds the difference
between the "minority interest" set forth on such Person's consolidated balance
sheet on the last day of such period and the lesser of (A) the minority
interest as set forth on such Person's consolidated balance sheet on the date
of the Indenture or (B) the minority interest as set forth on such Person's
consolidated balance sheet on the day immediately preceding the first day of
such period.
"Consolidated Cash Flow Ratio" of any Person means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for
such period to (ii) the sum of (A) Consolidated Interest Expense of such Person
for such period plus (B) the annual Consolidated Interest Expense with respect
to any Indebtedness or Subsidiary Preferred Stock proposed to be Incurred by
such Person or any of its Consolidated Subsidiaries which requires the
calculation of the Consolidated Cash Flow Ratio, as if such Indebtedness or
Subsidiary Preferred Stock had been Incurred on the first day of such period
plus (C) the annual Consolidated Interest Expense with respect to any other
Indebtedness or Subsidiary Preferred Stock Incurred by such Person or its
Consolidated Subsidiaries since the end of such period to the extent not
included in clause (ii)(A) as if such Indebtedness or Subsidiary Preferred
Stock had been Incurred on the first day of such period and after giving effect
to the application of the proceeds therefrom less (D) Consolidated Interest
Expense of such Person to the extent included in clause (ii)(A) or (C) with
respect to any Indebtedness or Subsidiary Preferred Stock that is or will be no
longer outstanding as a result of the redemption, defeasance, repurchase,
retirement or acquisition thereof from the proceeds of Capital Stock of the
Company or any Subsidiary of the Company (other than Redeemable Stock) or that
will no longer be outstanding as a result of the Incurrence of the Indebtedness
or Subsidiary Preferred Stock proposed to be Incurred by such Person or any of
its Consolidated Subsidiaries, except for Consolidated Interest Expense
actually Incurred with respect to Indebtedness borrowed (as adjusted pursuant
to the first proviso set forth below) (x) under a revolving credit or similar
arrangement to the extent the commitment thereunder remains in effect on the
date of computation or (y) pursuant to the provisions described above under
clause (b)(viii) of
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"--Certain Covenants--Limitations on Consolidated Indebtedness;" provided,
however, that in making such computation, the Consolidated Interest Expense of
such Person attributable to interest or dividends on any Indebtedness or
Subsidiary Preferred Stock bearing a floating interest rate shall be computed
on a pro forma basis as if the rate in effect on the date of computation had
been the applicable rate for the entire period, unless, in the case of any
Indebtedness, such Person or any of its Consolidated Subsidiaries is a party to
an Interest Rate Agreement (which shall remain in effect for the shorter of the
twelve month period after the date of computation or the term of such
Indebtedness) which has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used;
provided further that in the event such Person or its Subsidiaries has made
Asset Sales or Asset Acquisitions during or after such period and prior to the
date of Incurrence of such Indebtedness which requires calculation of the
Consolidated Cash Flow Ratio, such computation of Consolidated Cash Flow
Available for Fixed Charges and Consolidated Interest Expense shall be made on
a pro forma basis as if the Asset Sales or Asset Acquisitions had taken place
on the first day of such period.
"Consolidated Income Tax Expense" for any Person means for any period the
consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), in respect of such Person
or any of its Consolidated Subsidiaries, (i) the interest component of such
Person's aggregate Capital Lease Obligations; (ii) the amortization of
Indebtedness discounts; (iii) any payments of fees with respect to letters of
credit, bankers' acceptances or similar facilities; (iv) fees with respect to
Interest Rate Agreements or Currency Agreements; and (v) Preferred Stock
dividends declared and payable in cash.
"Consolidated Net Income" of any Person means for any period the consolidated
net income (or loss) of such Person and its Consolidated Subsidiaries for such
period determined in accordance with generally accepted accounting principles;
provided, however, that there shall be excluded therefrom (a) the net income
(or loss) of any Person acquired by such Person or a Subsidiary of such Person
in a pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (but not the net loss) of any Consolidated
Subsidiary of such Person which is subject to restrictions which prevent the
payment of dividends or the making of distributions to such Person the extent
of such restrictions, (c) the net income (or loss) of any Person that is not a
Consolidated Subsidiary of such Person except to the extent of the amount of
any dividends or other distributions actually paid to such Person by such other
Person during such period, (d) gains or losses on Asset Dispositions by such
Person or its Consolidated Subsidiaries, (e) all extraordinary gains and
extraordinary losses and (f) the cumulative effect of a change in accounting
principle.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person and its Consolidated Subsidiaries, as determined on a
consolidated basis in accordance with generally accepted accounting principles,
less (to the extent reflected therein) (a) amounts attributable to the effects
of foreign currency exchange adjustments under Financial Accounting Standards
Board Opinion No. 52, (b) amounts attributable to Redeemable Stock of such
Person and (c) with respect to the Company and its Consolidated Subsidiaries,
adjustments following the date of the Indenture to the accounting books and
records of the Company and its Consolidated Subsidiaries resulting from the
acquisition of control of such Person by another Person in accordance with
Accounting Principles Board Opinions Nos. 16 and 17.
"Consolidated Tangible Net Worth" means with respect to any Person (i) the
consolidated stockholders' equity of such Person and its Consolidated
Subsidiaries as set forth on the most recent consolidated balance sheet of such
Person and its Consolidated Subsidiaries prepared in accordance with generally
accepted accounting principles less (ii) the value of all of the consolidated
intangible assets of such Person and its Consolidated Subsidiaries determined
in accordance with generally accepted accounting principles.
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"Controlled Subsidiary" of any Person means a Subsidiary, at least 80% of the
Voting Stock of which (other than directors' qualifying shares) shall at the
time be owned, directly or indirectly, by such Person (including ownership
through one or more Subsidiaries).
"Convertible Preferred Stock" means (a) the Company's Series A1 Convertible
Exchangeable Preferred Stock, par value $1.00 per share, (b) the Company's
Series A2 Convertible Exchangeable Preferred Stock, par value $1.00 per share,
(c) the Company's Series B1 Convertible Preferred Stock, par value $1.00 per
share, (d) the Company's Series B2 Convertible Preferred Stock, par value $1.00
per share, (e) the Company's Series A3 Convertible Exchangeable Preferred
Stock, par value $1.00 per share and (f) the Company's Series B3 Convertible
Preferred Stock, par value $1.00 per share.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect any
Person against fluctuations in currency values.
"Equity Sale" means a sale of Capital Stock (other than Redeemable Stock) of
the Company other than sales of such Capital Stock to Affiliates, employees,
officers or directors of the Company, including issuances pursuant to any
employee stock or option arrangements.
"Exchange Debentures" means the Company's Series 1 Junior Convertible
Subordinated Debentures, the Company's Series 2 Junior Convertible Subordinated
Debentures and the Company's Series 3 Junior Convertible Subordinated
Debentures, in each case for which certain of the Convertible Preferred Stock
may be exchanged.
"Incur" means, with respect to any Indebtedness, Lien or other obligation of
any Person, to create, issue, assume, guarantee, incur or otherwise become
liable in respect of such Indebtedness (including in the case of Indebtedness,
the extension of the maturity of or becoming responsible for the payment of,
any Indebtedness), Lien or other obligation (and "Incurrence," "Incurred" and
"Incurring" shall have the meanings correlative to the foregoing), provided
that a change in generally accepted accounting principles that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, (i)
every obligation of such Person for money borrowed, (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person, (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property (including pursuant to Capital Lease
Obligations), every conditional sale obligation and every obligation under any
title retention agreement, in each case if on terms permitting any portion of
the purchase price to be paid beyond one year from the date of purchase (but
excluding trade accounts payable arising in the ordinary course of business
which are not overdue by more than 90 days or which are being contested in good
faith), (v) every obligation of such Person issued or contracted for as payment
in consideration of the purchase by such Person or an Affiliate of such Person
of the stock or substantially all of the assets of another Person or a merger
or consolidation to which such Person or an Affiliate of such Person was a
party, (vi) every obligation of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of which,
in either case, such Person is responsible or liable, directly or indirectly,
as obligor, guarantor or otherwise, (vii) every obligation of the type referred
to in clauses (i) through (vi) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amount of the obligation so secured
and (viii) all Redeemable Stock valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge agreement.
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"Lien" means, with respect to any property or assets, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Material Subsidiary" means, as of any date, any Subsidiary of any Person (a)
the value of whose assets, as such assets would appear on a consolidated
balance sheet of such Subsidiary and its Consolidated Subsidiaries prepared as
of the end of the fiscal quarter next preceding such determination in
accordance with generally accepted accounting principles, is at least 5% of the
value of the assets of such Person and its Consolidated Subsidiaries,
determined as aforesaid, or (b) which has revenues, as such revenues would
appear on a consolidated income statement of such Subsidiary and its
Consolidated Subsidiaries prepared as of the end of the fiscal quarter next
preceding such determination in accordance with generally accepted accounting
principles, constituting at least 5% of the revenues of such Person and its
Consolidated Subsidiaries, determined as aforesaid.
"Maturity," when used with respect to any Senior Note, means the date on
which the principal amount of such Senior Note becomes due and payable as
provided in the Senior Note or the Indenture, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition by a Person means cash or
readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person, net of
all legal, title and recording tax expenses, commissions and other fees and
expenses Incurred by such Person and all federal, state, provincial, foreign
and local taxes and reserves required to be accrued by such Person as a
liability as a consequence of such Asset Disposition, and net of all payments
made by such Person or its Subsidiaries on any Indebtedness which is secured by
such assets in accordance with the terms of any Liens upon or with respect to
such assets or which must by the terms of such Liens, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law be repaid out
of the proceeds from such Asset Disposition, and net of all distributions and
other payments made by such Person to minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition.
"Obligations" means all obligations for the reimbursement of amounts drawn
under any letter of credit or for the payment of principal, premium, interest
(including, without limitation, interest whether or not allowed after the
filing of a petition in bankruptcy or insolvency), penalties, fees, expenses,
indemnities or other amounts, now or hereafter existing, with respect to any
Indebtedness.
"Offer to Purchase" means a written notice (the "Notice") delivered to the
Trustee and given (a) with respect to an Offer to Purchase made as a result of
an Asset Disposition, by first class mail, postage prepaid, or (b) with respect
to an Offer to Purchase made as a result of a Change of Control, by overnight
carrier, in either event to each Holder at the address appearing in the
Security Register, offering to purchase up to the principal amount of Senior
Notes specified in such Notice, at the purchase price specified in such Notice
(as determined pursuant to the Indenture). Any Notice shall specify a purchase
date (the "Purchase Date") for such Offer to Purchase which (x) with respect to
an Offer to Purchase made as a result of an Asset Disposition, shall be not
less than 30 days or more than 60 days after the date of such Notice and (y)
with respect to an Offer to Purchase made as a result of a Change of Control,
shall not be less than 15 days after the date of such Notice (or, in either
event, such other time period as is necessary for the Offer to Purchase to
remain open for a sufficient period of time to comply with applicable
securities laws). Any Notice shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and shall
contain (i) the most recent financial statements required to be filed with the
Trustee, (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such
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<PAGE>
financial statements (including the events requiring the Company to make such
Offer to Purchase), (iii) if material, appropriate pro forma financial
information concerning such Offer to Purchase and the events requiring the
Company to make such Offer to Purchase and (iv) any other information required
by applicable law to be included therein. Any Notice shall contain all
instructions and materials necessary to enable such Holder to tender Senior
Notes for purchase pursuant to such Offer to Purchase and shall remain open
from the time of mailing of the Notice until the Purchase Date. Any Notice
shall state:
(1) the section of the Indenture pursuant to which such Offer to Purchase
is being made;
(2) the aggregate outstanding principal amount (the "Purchase Amount") of
the Senior Notes required to be offered to be purchased by the Company
pursuant to such Offer to Purchase;
(3) the Purchase Date;
(4) the purchase price to be paid by the Company for each $1,000
principal amount of Senior Notes accepted for payment;
(5) that the Holder of any Senior Notes may tender for purchase by the
Company all or any portion of such Senior Notes equal to $1,000 principal
amount or any integral multiple thereof;
(6) the place or places where Senior Notes are to be surrendered for
tender pursuant to such Offer to Purchase;
(7) that interest on any Senior Notes not tendered or tendered but not
purchased by the Company pursuant to such Offer to Purchase will continue
to accrue;
(8) that on the Purchase Date the purchase price will become due and
payable upon each Senior Note (or portion thereof) selected for purchase
pursuant to such Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;
(9) that each Holder electing to tender a Senior Note pursuant to such
Offer to Purchase will be required to surrender such Senior Note at the
place or places specified in the Notice prior to the close of business on
the fifth Business Day prior to the Purchase Date;
(10) that any Holder will be entitled to withdraw the tender of such
Holder's Senior Note upon written notice to the Trustee, not later than the
close of business on the fifth Business Day prior to the Purchase Date;
(11) that (a) if Senior Notes (or portions thereof) in an aggregate
principal amount less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to such Offer to Purchase, the Company
shall purchase all such Senior Notes and (b) if Senior Notes in an
aggregate principal amount in excess of the Purchase Amount are duly
tendered and not withdrawn pursuant to such Offer to Purchase, (i) the
Company shall purchase Senior Notes having an aggregate principal amount
equal to the Purchase Amount and (ii) the particular Senior Notes (or
portions thereof) to be purchased shall be selected by such method as the
Trustee shall deem fair and appropriate; and
(12) that, in the case of any Holder whose Senior Note is purchased only
in part, the Company shall execute a new Senior Note or Senior Notes, of
any Authorized Denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Senior Notes so tendered.
"Pari Passu" as applied to the ranking of any Indebtedness of a Person in
relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not expressly subordinated in right of payment to
any Indebtedness or (ii) is expressly subordinated in right of payment to the
same Indebtedness as is the other, and is so subordinated to the same extent,
and is not expressly subordinated in right of payment to the other or to any
Indebtedness as to which the other is not so expressly subordinated.
"Preferred Stock" as applied to the capital stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
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<PAGE>
"Redeemable Stock" of any Person means any class or series of Capital Stock
of such Person that by its terms or otherwise is (i) required to be redeemed
prior to the Maturity of the Senior Notes or (ii) redeemable at the option of
the holder thereof at any time prior to the Maturity of the Senior Notes or
(iii) convertible into or exchangeable for Capital Stock referred to in clause
(i) or (ii) or Indebtedness having a scheduled maturity prior to the Maturity
of the Senior Notes; provided that any Capital Stock which would not constitute
Redeemable Stock but for provisions thereof giving holders thereof the right to
require the Company to repurchase or redeem such Capital Stock upon the
occurrence of a change in control occurring prior to the Maturity of the Senior
Notes shall not constitute Redeemable Stock if the change in control provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions described above under "--Change of Control"
and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such stock pursuant to such provisions prior to the
Company's repurchase of such Senior Notes as are required to be repurchased
pursuant to the provisions described above under "--Change of Control."
"Sale and Leaseback Transaction" of any Person means an arrangement with any
bank, insurance company or other lender or investor or to which such lender or
investor is a party, providing for the leasing by such Person or any Subsidiary
of such Person of any property or asset of such Person or such Subsidiary which
has been or is being sold or transferred by such Person or such Subsidiary to
such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest on, and all other amounts payable in respect of, (a) all Obligations
of the Company under the Indenture and the Senior Notes, (b) all Obligations of
the Company and its Subsidiaries created pursuant to any Senior Credit
Facility, (c) all other Indebtedness of the Company not prohibited by the
provisions described above under "--Certain Covenants--Limitation on
Consolidated Indebtedness," whether outstanding on the date of the Indenture or
thereafter Incurred, (d) obligations of the Company under Interest Rate
Agreements, (e) Obligations of the Company under Currency Agreements entered
into in respect of any such Indebtedness or obligation or in the ordinary
course of business and (f) amendments, renewals, extensions, modifications and
refundings of any such Indebtedness or obligation; provided that the term
Senior Indebtedness shall not include (to the extent any of the following
constitutes Indebtedness) (i) any Indebtedness or Obligation owed to a
Subsidiary, (ii) any Indebtedness or Obligation which is expressly subordinated
or junior to the Senior Notes or to any other Indebtedness or Obligation of the
Company (other than any Indebtedness secured by a subordinated Lien and
Incurred by the Company pursuant to any Senior Credit Facility) including the
Exchange Debentures, (iii) any Indebtedness of the Company which when Incurred
and without respect to any election under Section 1111(b) of the U.S.
Bankruptcy Code, as amended, was without recourse to the Company, (iv) any
Indebtedness (other than Indebtedness Incurred pursuant to the provisions
described above under clause (b) of "--Certain Covenants--Limitation on
Consolidated Indebtedness") of the Company not otherwise permitted by certain
sections of the Indenture, (v) any Indebtedness to any employee of the Company,
(vi) any liability for taxes and (vii) accounts payable or any other
Indebtedness or monetary obligations to trade creditors created or assumed by
the Company or any of its Subsidiaries in the ordinary course of business in
connection with the obtaining of materials or services. Any Obligation under
any Senior Credit Facility constituting Senior Indebtedness shall continue to
constitute Senior Indebtedness despite a determination that the Incurrence of
such Obligation by the Company was a preference under Section 547(b) of Title
11 of the U.S. Code (or any successor thereto) or was a fraudulent conveyance
or transfer under Federal or State law.
"Stated Maturity" when used with respect to any Senior Note or any
installment of interest thereon, means the date specified in such Senior Note
as the fixed date on which the principal amount of such Senior Note or such
installment of interest is due and payable.
"Subordinated Debentures" means the 12 1/8% Senior Subordinated Debentures of
the Company due 2002.
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<PAGE>
"Subsidiary" of any Person means a corporation of which more than 50% of the
outstanding Voting Stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are owned, directly or indirectly, by such Person or by one
or more other Subsidiaries, or by such Person and one or more other
Subsidiaries. Voting Stock or other ownership interests shall be deemed owned
by a Person notwithstanding the pledge, transfer of registered ownership or
similar transaction relating to such Voting Stock or other ownership interests
to the extent such transaction secures Indebtedness permitted in accordance
with the provisions described above under "--Certain Covenants--Limitation on
Consolidated Indebtedness."
"Voting Stock" means stock which ordinarily has voting power for the election
of directors, whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary all of the
outstanding Capital Stock of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Subsidiaries or by such Person and one or more Wholly Owned Subsidiaries.
Capital Stock shall be deemed owned by a person notwithstanding the pledge,
transfer of registered ownership or similar transaction relating to such
Capital Stock to the extent such transaction secures Indebtedness permitted in
accordance with the provisions described above under "--Certain Covenants--
Limitation on Consolidated Indebtedness."
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The Company will make the Loan Repayments with a portion of the net proceeds
of the Offering and the Amended Credit Agreement will become effective
simultaneously with the consummation of the Offering. The consummation of the
Offering, the effectiveness of the Amended Credit Agreement and the making of
the Loan Repayments are contingent on each other. Set forth below is a brief
description of certain terms of the Credit Agreement, the Amended Credit
Agreement and the Subordinated Debentures.
CREDIT AGREEMENT
The Credit Agreement provides for a total of $271.4 million in principal
amount of loan commitments, of which $239.2 million was available at April 2,
1995, consisting of the following components: (i) revolving loans aggregating
no more than $147.8 million, of which $115.6 million was available and $106.9
million was utilized; (ii) $89.9 million of term loans; (iii) $11.1 million of
delayed draw term loans; (iv) $7.5 million of deferred term loans; (v) a $5.8
million term loan facility available only to pay certain potential
environmental liabilities; and (vi) an ESOP Loan of $9.3 million, repayment of
which is guaranteed by the Company. The revolving loans mature in 1997. The
term loans have final maturities in 1996 and 1998 and require periodic
principal payments prior thereto. The ESOP loan matures in 1999 and requires
periodic principal payments prior thereto. Amounts borrowed under the Credit
Agreement (other than Sterling Loans) bear interest, at the option of the
Company (or, in the case of the ESOP Loan, at the option of the ESOP Borrower),
at the Alternate Base Rate plus a margin of 1.75% or the Adjusted LIBOR Rate
plus a margin of 2.75%. Sterling Loans bear interest at the Adjusted Sterling
LIBOR Rate plus a margin of 2.75%. Interest rates applicable to amounts
borrowed under the Credit Agreement ranged from 9.00% to 9.4375% at April 2,
1995. A portion of the amounts outstanding under the Credit Agreement will be
repaid and the Credit Agreement will be amended by execution of the Amended
Credit Agreement.
Under the Credit Agreement an event of default will occur if the amount of
costs and matured liabilities arising against the Company and its subsidiaries
pursuant to certain federal environmental statutes with respect to the Duluth
site exceeds $7.5 million in the aggregate.
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<PAGE>
AMENDED CREDIT AGREEMENT
GENERAL
The following constitutes only a summary of the principal terms and
conditions which are expected to be contained in the Amended Credit Agreement,
when executed, and is qualified in its entirety by the actual terms of the
Amended Credit Agreement. Whenever particular provisions or defined terms of
the Amended Credit Agreement are referred to, such provisions or defined terms
are incorporated herein by reference as part of the statements made herein. The
Amended Credit Agreement is subject to the negotiation, execution and delivery
of definitive documentation. Accordingly, certain of the actual terms,
conditions and covenants may differ from those described below. For purposes of
this description of the Amended Credit Agreement, the term "Company" refers
only to The Interlake Corporation and does not include The Interlake
Corporation's consolidated subsidiaries.
The Company, the Subsidiary Borrowers, the ESOP Borrower and the Required
Banks propose to enter into the Amended Credit Agreement, pursuant to an
amendment of the Credit Agreement. The Amended Credit Agreement will become
effective upon the consummation of the Offering and the making of the Loan
Repayments. The Amended Credit Agreement will provide for a total of $175.4
million in principal amount of loan commitments consisting of the following
components: (i) revolving loans aggregating no more than $76.3 million and
subject to borrowing base limitations; (ii) $84.0 million of term loans; (iii)
an ESOP Loan of $9.3 million, repayment of which is guaranteed by the Company;
and (iv) a $5.8 million term loan facility available only to pay certain
potential environmental liabilities. Of the term loans, $18.0 million will be
sterling-denominated loans ("Sterling Loans"). The ESOP Loan will mature on
September 27, 1999 and will require periodic principal payments prior thereto.
All other loans under the Amended Credit Agreement will mature on June 30,
1999. The Amended Credit Agreement will modify certain covenants under the
Credit Agreement, including covenants regarding minimum consolidated EBITDA
levels, minimum consolidated net worth levels and minimum and maximum capital
expenditure levels. The Banks will continue to receive a commitment fee of 0.5%
of the Revolving A Loan Commitments not yet utilized but available to the
Company and its subsidiaries under the Amended Credit Agreement.
INTEREST RATES
Loans (other than Sterling Loans) under the Amended Credit Agreement will
continue to bear interest, at the option of the Company (or, in the case of the
ESOP Loan, at the option of the ESOP Borrower), at a rate equal to either the
Alternate Base Rate plus a margin of 1.75% or the Adjusted LIBOR Rate plus a
margin of 2.75%. Sterling Loans will continue to bear interest at the Adjusted
Sterling LIBOR Rate plus a margin of 2.75%. At April 2, 1995, the interest
rates on the outstanding Loans ranged from 9.00% to 9.4375%. After June 30,
1998, the interest rate margin for all Loans will increase by 0.75%.
COLLATERAL
The obligations of the Company and the Subsidiary Borrowers under the Amended
Credit Agreement will continue to be secured by pledges of and mortgages and
security interests in substantially all of the assets of the Company and
certain of its subsidiaries. The collateral securing the Company's obligations
under the Amended Credit Agreement will continue to include (i) all of the
capital stock of substantially all of the Company's domestic subsidiaries and a
substantial portion of the capital stock of most of the Company's material
foreign subsidiaries, (ii) existing and after-acquired accounts receivable and
inventory (together with all proceeds thereof) of the Company, and (iii)
certain real property and other assets of the Company and its foreign and
domestic subsidiaries. Certain of the domestic subsidiaries of the Company have
jointly and severally guaranteed the obligations of the Company, the Subsidiary
Borrowers and the ESOP Borrower under the Amended Credit Agreement. These
guarantees, as well as each Subsidiary Borrower's obligations under the Amended
Credit Agreement, will continue to be secured by (i) all the capital stock of
its material subsidiaries and (ii) security interests granted by such
Subsidiary Borrower in substantially all of its assets. In addition, the
obligations of the ESOP Borrower with respect to the ESOP Loan will continue to
be
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<PAGE>
guaranteed by the Company and secured by a pledge of all shares of Common Stock
of the Company held by the ESOP Borrower which have been purchased with the
proceeds of the ESOP Loan and which have not been allocated to ESOP participant
accounts.
CERTAIN COVENANTS
The Amended Credit Agreement will also require that the Company satisfy
certain financial tests, including meeting specified tests for minimum
Consolidated EBITDA, minimum Consolidated Net Worth and minimum and maximum
capital expenditures. In addition, the Amended Credit Agreement will contain
covenants that restrict, among other things, (a) the incurrence of liens, (b)
mergers, consolidations and certain sales of assets, (c) dividends or other
distributions, (d) lease payments, (e) the incurrence of indebtedness, (f)
certain advances, investments and loans, (g) certain transactions with
affiliates, (h) payments, prepayments, repurchases and modification of certain
indebtedness, (i) the modification of the Company's Certificate, by-laws or
certain agreements, (j) the creation of encumbrances or restrictions on the
ability of the Company's subsidiaries to make payments, transfers or
distributions to the Company, (k) the issuance by the Company's subsidiaries of
capital stock, (l) the engaging by the Company or its subsidiaries in new
businesses and (m) the cancellation, termination or modification of the ESOP,
the ESOP Trust or any of the ESOP Documents.
Method of Calculations. A summary of certain covenants which are expected to
be contained in the Amended Credit Agreement appears below. The calculations
set forth below with respect to historical and pro forma compliance with the
various covenants have been prepared in a manner consistent with the
anticipated requirements of the Amended Credit Agreement. Information necessary
to calculate compliance with such covenants may not be readily derivable from
financial statements included elsewhere in this Prospectus.
Minimum Consolidated EBITDA. Consolidated EBITDA (defined in the Amended
Credit Agreement as consolidated earnings before extraordinary items, minority
interests, provisions for income taxes and net interest expense plus
depreciation and amortization expenses) of the Company and its subsidiaries,
computed for the four quarter period ending with the quarter of computation
(except for the calculations for the second and third quarters of fiscal 1995,
which will be computed for the two and three quarter periods, respectively,
ending with such quarters), will be required to be at least the amount set
forth below at the end of each of the following fiscal quarters.
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
<C> <S> <C>
Fiscal 1995
2nd Quarter.............................. $41.0
3rd Quarter.............................. 62.0
4th Quarter.............................. 85.0
Fiscal 1996
1st Quarter.............................. 85.0
2nd Quarter.............................. 85.0
3rd Quarter.............................. 85.0
4th Quarter.............................. 87.5
Fiscal 1997
1st Quarter.............................. 87.5
2nd Quarter.............................. 87.5
3rd Quarter.............................. 87.5
4th Quarter.............................. 90.0
Fiscal 1998
1st Quarter.............................. 90.0
2nd Quarter.............................. 90.0
3rd Quarter.............................. 90.0
4th Quarter.............................. 92.5
Fiscal 1999
1st Quarter.............................. 92.5
2nd Quarter.............................. 92.5
</TABLE>
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<PAGE>
In addition, in the event the Company exceeds the required minimum
Consolidated EBITDA levels at the end of the fourth quarter of fiscal year 1995
or 1996, up to 50% of the excess (or a maximum of $5.0 million in the
aggregate) can be carried forward and allocated, in whole or in part, to
increase Consolidated EBITDA in any one or more subsequent fiscal quarters for
purposes of each four quarter test of which such quarter(s) is a component;
provided that any portion of such excess carried forward and allocated to a
particular fiscal quarter may not be carried forward and allocated to any other
fiscal quarter.
For the four quarters ended December 25, 1994 and April 2, 1995 and for the
quarter ended April 2, 1995, the Consolidated EBITDA of the Company (as
defined) would have been $82.0 million, $87.1 million and $24.1 million,
respectively.
Minimum Consolidated Net Worth. Consolidated Net Worth (defined in the
Amended Credit Agreement as consolidated shareholders' equity including
preferred stock) at any time will be required to be at least equal to the
Company's Consolidated Net Worth at December 25, 1994 plus the aggregate of any
net income earned in any fiscal quarter for which such net income was a
positive number subsequent to December 25, 1994, calculated in accordance with
generally accepted accounting principles in effect on December 25, 1994, minus
$30.0 million.
Minimum and Maximum Capital Expenditures. The Company and its subsidiaries
(on a consolidated basis) may not make or incur Capital Expenditures in any
fiscal year (i) less than $15.0 million or (ii) in excess of $25.0 million
provided that up to $5.0 million of unutilized capital expenditure allowances
for any one fiscal year (beginning with the fiscal year ending December 31,
1995) may be carried over to increase the following fiscal year's capital
expenditure allowance.
EVENTS OF DEFAULT
The Amended Credit Agreement will specify a number of "events of default"
including, among others, the failure to make timely principal and interest
payments or to perform the covenants or to meet the financial tests or maintain
the financial requirements contained therein. It will be an event of default
under the Amended Credit Agreement if the Company makes payments pursuant to
certain federal environmental statutes with respect to the Duluth site, on a
cumulative basis, beginning in fiscal year 1995, in amounts aggregating more
than $5.0 million in fiscal year 1995, $10.0 million through fiscal year 1996,
$15.0 million through fiscal year 1997 and $20.0 million thereafter. See "Risk
Factors--Environmental Matters." Upon the occurrence of an event of default
under the Amended Credit Agreement, the Banks will have the right to cease
making loans and to terminate the Amended Credit Agreement and to declare all
amounts outstanding thereunder immediately due and payable. Because of cross-
acceleration provisions in the Indenture, a payment default under the Amended
Credit Agreement, or certain other defaults under the Amended Credit Agreement
followed, in each case, by an acceleration of the indebtedness outstanding
under the Amended Credit Agreement, would constitute a default under the
Indenture which in turn could lead to an acceleration of the Senior Notes.
SUBORDINATED DEBENTURES
The following summaries of certain provisions of the Subordinated Debentures
and the Subordinated Debenture Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Subordinated Debentures and the Subordinated Debenture
Indenture, including the definitions therein of certain terms. Wherever
particular provisions or defined terms of the Subordinated Debenture Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference as part of the statements made herein.
GENERAL
The Subordinated Debentures are general, unsecured senior subordinated
obligations of the Company in an aggregate principal amount of $220.0 million
and will mature on March 1, 2002. The Subordinated Debentures bear interest at
the annual rate of 12 1/8%.
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<PAGE>
SINKING FUND
The Subordinated Debentures are redeemable through the operation of a sinking
fund on March 1, 2001, at a redemption price equal to 100% of the principal
amount thereof plus accrued interest. Prior to March 1, 2001, the Company is
required to pay to the trustee for the Subordinated Debentures, for the sinking
fund, funds sufficient to redeem Subordinated Debentures in the aggregate
principal amount of $50.0 million.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Subordinated Debentures is, to the extent set forth in the Subordinated
Debenture Indenture, subordinated in right of payment to the prior payment in
full in cash of all Senior Indebtedness, including the Senior Notes. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, or (b) any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due or to become due thereon before the
holders of the Subordinated Debentures will be entitled to receive any payments
in respect of the Subordinated Debentures. No payments on account of principal
(including without limitation, sinking fund payments), premium, if any, or
interest or repurchases, redemptions or retirements of the Subordinated
Debentures may be made if any Senior Indebtedness is not paid when due and such
default is not waived or cured, or any other event of default with respect to
any Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated and such acceleration is not rescinded, or if judicial proceedings
shall be pending in respect such a default in payment or event of default.
CERTAIN COVENANTS
The Subordinated Debenture Indenture contains certain restrictive covenants
limiting, among other things, the issuance of additional indebtedness and
preferred stock by the Company and its subsidiaries, the payment by the Company
of dividends or other distributions, the redemption of capital stock of the
Company, transactions with affiliates, the use of proceeds from the disposal of
assets, the incurrence of liens and the merger, consolidation or sale of
substantially all of the assets of the Company. The restrictive covenants in
the Subordinated Debenture Indenture are substantially similar to the
restrictive covenants contained in the Indenture. See "Description of Senior
Notes--Certain Covenants."
CHANGE OF CONTROL
The Subordinated Debenture Indenture requires the Company, upon a Change of
Control, to make an offer to purchase all of the Subordinated Debentures at
101% of the principal amount thereof, plus accrued interest to the date of
purchase. The Indenture contains a similar provision requiring the Company to
make an offer to purchase all of the Senior Notes at 101% of the principal
amount thereof in the event of a Change of Control. See "Description of Senior
Notes--Change of Control." The Indenture expressly allows the Company to offer
to purchase, and to purchase, the Subordinated Debentures pursuant to a Change
of Control, even if no holder of Senior Notes tenders Senior Notes for payment.
EVENTS OF DEFAULT
The Subordinated Debenture Indenture specifies a number of "events of
default" including, among others, the failure to make timely principal and
interest payments or to perform the covenants or to meet the financial tests or
maintain the financial ratios contained therein. Upon the occurrence of an
event of default under the Subordinated Debenture Indenture, all amounts
outstanding thereunder may be declared to be immediately due and payable.
Because of cross-acceleration provisions in the Indenture, a payment default
under the Subordinated Debenture Indenture or certain other defaults under the
Subordinated Debenture
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<PAGE>
Indenture followed, in each case, by an acceleration of the indebtedness
outstanding under the Subordinated Debentures, would constitute a default under
the Indenture which in turn could lead to an acceleration of the Senior Notes.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") among the Company and the Underwriters named below,
the Underwriters have severally agreed to purchase from the Company, and the
Company has agreed to sell to them, severally, all of the Senior Notes offered
hereby, in the respective principal amount set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER SENIOR NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corpora-
tion.............................................. $
CS First Boston Corporation........................
------------
Total............................................ $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to certain conditions precedent. The Underwriting
Agreement also provides that the Company will indemnify the Underwriters and
their respective controlling persons against certain liabilities and expenses,
including liabilities under the Securities Act. The nature of the Underwriters'
obligations is such that the Underwriters are required to purchase all of the
Senior Notes if any of the Senior Notes are purchased.
The Underwriters propose to offer the Senior Notes directly to the public at
the public offering price set forth on the cover page of this Prospectus. After
the Senior Notes are released for sale to the public, the offering price may
from time to time be varied by the Underwriters.
The Company has no present plan to list any of the Senior Notes on a
securities exchange. The Underwriters have advised the Company that they
currently intend to make a market in the Senior Notes, but they are not
obligated to do so and may discontinue such market making at any time without
notice. Accordingly, there can be no assurance that an active trading market
will develop for, or as to the liquidity of, the Senior Notes.
LEGAL MATTERS
The validity of the issuance of the Senior Notes will be passed upon for the
Company by Jones, Day, Reavis & Pogue and for the Underwriters by Davis Polk &
Wardwell. In rendering their opinions on the validity of the Senior Notes,
neither counsel for the Company nor for the Underwriters will express any
opinions as to the applicability of federal and state statutes dealing with
fraudulent conveyances and obligations.
EXPERTS
The financial statements as of December 25, 1994 and December 26, 1993 and
for each of the three years in the period ended December 25, 1994 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
64
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Public Accountants................................ F-2
Consolidated Statement of Operations for the years ended December 25,
1994, December 26, 1993 and December 27, 1992.......................... F-3
Consolidated Balance Sheet at December 25, 1994 and December 26, 1993... F-4
Consolidated Statement of Cash Flows for the years ended December 25,
1994, December 26, 1993 and December 27, 1992.......................... F-5
Consolidated Statement of Shareholders' Equity (Deficit) for the years
ended December 25, 1994, December 26, 1993 and December 27, 1992....... F-6
Notes to Consolidated Financial Statements.............................. F-7
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
Consolidated Statement of Operations for the three months ended March
27, 1994 and April 2, 1995............................................. F-26
Consolidated Balance Sheet at December 25, 1994 and April 2, 1995....... F-27
Consolidated Statement of Cash Flows for the three months ended March
27, 1994 and April 2, 1995............................................. F-28
Notes to Consolidated Interim Financial Statements...................... F-29
</TABLE>
F-1
<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
F-2
<PAGE>
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)
<TABLE>
<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
</TABLE>
(See notes to consolidated financial statements)
F-3
<PAGE>
THE INTERLAKE CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 25, 1994 AND DECEMBER 26, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<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
========= =========
</TABLE>
(See notes to consolidated financial statements)
F-4
<PAGE>
THE INTERLAKE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 25, 1994, DECEMBER 26, 1993 AND DECEMBER 27, 1992
(IN THOUSANDS)
<TABLE>
<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
======== ======== =========
</TABLE>
(See notes to consolidated financial statements)
F-5
<PAGE>
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)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
AND PAID-IN HELD IN
CAPITAL TREASURY RETAINED FOREIGN
-------------- ---------------- EARNINGS UNEARNED CURRENCY
SHARES AMOUNT SHARES AMOUNT (DEFICIT) COMPENSATION 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)
====== ======= ====== ======== ========= ======== ======== =========
</TABLE>
(See notes to consolidated financial statements)
F-6
<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, pre-tax 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:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Raw materials............................................ $14,703 $13,443
Semi-finished and finished products...................... 50,978 54,795
Supplies................................................. 8,172 8,787
------- -------
$73,853 $77,025
======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C>
$5,875 $5,357 $4,866 $3,939 $3,577
</TABLE>
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.
F-7
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
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
========= =========
</TABLE>
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
exchange 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.
F-8
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 unit. Projected future cash flows for each
business unit were estimated for a period approximating the remaining lives of
that business unit's 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
analyzing 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
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
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 anticipated 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
F-9
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 disposed of and implemented major Corporate cost reductions. Most of the
designated businesses were sold or shut-down in 1990. The 1992 adjustment
reflected the 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
adopting 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.
F-10
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
INFORMATION ABOUT THE COMPANY'S BUSINESS SEGMENTS
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT (LOSS) IDENTIFIABLE ASSETS
---------------------- --------------------------- --------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
(IN MILLIONS)
<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... $ -- $ -- $ 0.4
Handling/Packaging
Systems............... 1.0 1.2 1.5
</TABLE>
F-11
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
<CAPTION>
OPERATING PROFIT
NET SALES (LOSS) IDENTIFIABLE ASSETS
---------------------- ---------------------- --------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<S> <C> <C> <C>
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>
F-12
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES
Pretax income (loss) consisted of:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
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:
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
======== ======== ========
</TABLE>
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
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 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.
F-13
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
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
======== ========
</TABLE>
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 compensation
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.
F-14
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
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
======== ========
</TABLE>
Net pension cost (income) included in operating profit for these plans
consists of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
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%
</TABLE>
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
F-15
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
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
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
F-16
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
F-17
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
AVERAGE AVERAGE
SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C>
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
========= =========
</TABLE>
F-18
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
borrowing 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.
F-19
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<S> <C>
1995............................. $24,553
1996............................. 88,824
1997............................. 80,262
1998............................. 11,544
1999............................. 4,095
</TABLE>
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.
F-20
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
<CAPTION>
DECEMBER 25, 1994 DECEMBER 26, 1993
----------------- -----------------
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(1)..................... 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
</TABLE>
- --------
(1)Includes current maturities and excludes capitalized long-term leases
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
F-21
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
F-22
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
injunction 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.
F-23
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17--QUARTERLY RESULTS (UNAUDITED)
Quarterly results of operations for 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
(IN MILLIONS EXCEPT PER SHARE
DATA)
<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>
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).
F-24
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
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.
F-25
<PAGE>
THE INTERLAKE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 27, 1994 AND APRIL 2, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
MARCH 27, 1994 APRIL 2, 1995
(13 WEEKS) (14 WEEKS)
-------------- -------------
(UNAUDITED)
<S> <C> <C>
Net sales......................................... $169,336 $206,898
Cost of products sold............................. 129,863 155,979
Selling and administrative expense................ 27,440 32,212
-------- --------
Operating profit.................................. 12,033 18,707
Interest expense.................................. 12,818 13,950
Interest income................................... (277) (471)
Nonoperating (income) expense..................... (996) (71)
-------- --------
Income (loss) before taxes on income, minority
interest and accounting changes.................. 488 5,299
Provision for income taxes........................ 1,988 3,489
-------- --------
Income (loss) before minority interest and
accounting change................................ (1,500) 1,810
Minority interest in net income of subsidiaries... 895 1,416
-------- --------
Income (loss) before accounting change............ (2,395) 394
Accounting change................................. (194) --
-------- --------
Net income (loss)................................. $ (2,589) $ 394
======== ========
Primary net income (loss) per share:
Before accounting change........................ $ (.11) $ .02
Accounting change............................... (.01) --
-------- --------
Primary net income (loss) per share............. $ (.12) $ .02
======== ========
Fully diluted net income per share................ N/A $ .01
========
Weighted average shares outstanding
Primary......................................... 22,027 22,341
Fully diluted................................... N/A 29,921
</TABLE>
F-26
<PAGE>
THE INTERLAKE CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 25, 1994 AND APRIL 2, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 25, 1994 APRIL 2, 1995
----------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................... $ 39,708 $ 22,473
Receivables less allowances of $2,977 at
December 25, 1994 and $3,171 at April 2,
1995........................................ 129,089 126,056
Inventories--Raw materials and supplies...... 22,875 23,283
--Semi-finished and finished products.... 50,978 59,225
Other current assets......................... 6,340 8,309
--------- ---------
Total Current Assets....................... 248,990 239,346
--------- ---------
Goodwill and Other Assets:
Goodwill, less amortization.................. 4,667 4,426
Other assets................................. 45,562 45,909
--------- ---------
50,229 50,335
--------- ---------
Property, Plant and Equipment, at cost......... 382,840 392,327
Less--Depreciation and amortization............ (237,106) (246,404)
--------- ---------
145,734 145,923
--------- ---------
Total Assets............................... $ 444,953 $ 435,604
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable............................. $ 71,957 $ 68,860
Accrued liabilities.......................... 42,563 40,847
Interest payable............................. 13,910 3,249
Accrued salaries and wages................... 18,060 12,807
Income taxes payable......................... 10,328 11,230
Debt due within one year..................... 24,553 30,527
--------- ---------
Total Current Liabilities.................. 181,371 167,520
--------- ---------
Long-Term Debt................................. 417,898 417,067
--------- ---------
Other Long-Term Liabilities and Deferred
Credits....................................... 102,964 104,240
--------- ---------
Preferred Stock--2,000,000 shares authorized
Convertible Exchangeable Preferred Stock--
Redeemable, par value $1 per share, issued
40,000 shares................................. 39,155 39,155
Shareholders' Equity (Deficit):
Common stock, par value $1 per share,
authorized 100,000,000 shares, issued
23,228,695 shares........................... 23,229 23,229
Additional paid-in capital................... 30,248 13,504
Cost of common stock held in treasury
(1,202,000 shares at December 25, 1994 and
412,500 shares at April 2, 1995)........... (28,047) (9,625)
Accumulated deficit.......................... (293,966) (293,571)
Unearned compensation........................ (10,058) (10,752)
Accumulated foreign currency translation
adjustments................................. (17,841) (15,163)
--------- ---------
Total Shareholders' Equity (Deficit)....... (296,435) (292,378)
--------- ---------
Total Liabilities and Shareholders' Equity
(Deficit)................................. $ 444,953 $ 435,604
========= =========
</TABLE>
F-27
<PAGE>
THE INTERLAKE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 27, 1994 AND APRIL 2, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
MARCH 27, 1994 APRIL 2, 1995
(13 WEEKS) (14 WEEKS)
-------------- -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from (for) operating activities:
Net income (loss)............................... $ (2,589) $ 394
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................. 5,987 5,322
Debt issuance costs........................... (1,137) (1,236)
Other operating adjustments................... (288) 1,155
(Increase) decrease in working capital:
Accounts receivable......................... (3,952) 6,188
Inventories................................. (1,914) (6,590)
Other current assets........................ (540) (1,759)
Accounts payable............................ 4,318 (4,219)
Other accrued liabilities................... (10,537) (19,352)
Income taxes payable........................ 577 953
-------- --------
Total Working Capital Change.............. (12,048) (24,779)
-------- --------
Net cash provided (used) by operating activities.. (10,075) (19,144)
-------- --------
Cash flows from (for) investing activities:
Capital expenditures............................ (3,675) (3,051)
Proceeds from disposal of PP&E.................. 38 23
Other investment flows.......................... 93 42
-------- --------
Net cash provided (used) by investing activities.. (3,544) (2,986)
-------- --------
Cash flows from (for) financing activities:
Proceeds from issuance of long-term debt........ -- 10,000
Retirements of long-term debt................... (925) (5,210)
Other financing flows........................... 302 804
-------- --------
Net cash provided (used) by financing activities.. (623) 5,594
-------- --------
Effect of exchange rate changes................... (86) (699)
-------- --------
Increase (decrease) in cash and cash equivalents.. (14,328) (17,235)
Cash and cash equivalents, beginning of period.... 31,934 39,708
-------- --------
Cash and cash equivalents, end of period.......... $ 17,606 $ 22,473
======== ========
</TABLE>
F-28
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 27, 1994 AND APRIL 2, 1995
NOTE 1--UNAUDITED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements of the Company for
the three month periods ended March 27, 1994 and April 2, 1995 and as of April
2, 1995 have been prepared in accordance with generally accepted accounting
principles for interim financial information, in accordance with the
instructions to Form 10-Q and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, such statements do not include all of the information and
footnotes that are included in the annual consolidated financial statements. In
the opinion of management, all adjustments (except as noted consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three month period ended April 2, 1995
are not necessarily indicative of the results that may be expected for the
entire 1995 fiscal year.
The Registrant and its subsidiaries are referred to herein on a consolidated
basis as the Company.
NOTE 2--COMPUTATION OF COMMON SHARE DATA
The weighted average number of common shares outstanding used to compute
income (loss) per common share for the first quarter was 22,341,000 in 1995 and
22,027,000 in 1994 for primary shares, and for fully diluted shares was
29,921,000 in 1995. (The weighted average shares outstanding excludes common
stock equivalents of 7,055,000 shares in 1994 related to the convertible
preferred stock because the conversion of the preferred stock into such shares
would have an anti-dilutive effect.)
NOTE 3--NON-OPERATING (INCOME) EXPENSE
Non-operating (income) expense consists of items which are not related to
activities that constitute the Company's ongoing major operations. In 1994,
non-operating (income) expense reflected a $1.1 million nonrecurring gain at
Aerospace Components from the settlement of a real estate matter with a local
transportation authority.
NOTE 4--LIFO INVENTORIES
The liquidation of LIFO inventories benefited income before taxes by $0.8
million in the first quarter of 1995 and by $0.6 million in the first quarter
of 1994.
NOTE 5--INCOME TAXES
In the first quarter of 1995, the Company had an effective tax rate of 65.8%.
Because most of the interest expense is borne in the United States at the
parent company level, the Company had substantial taxable income in foreign and
state jurisdictions. Taxes due to foreign authorities were not offset by U.S.
federal income tax benefits.
The high level of net interest expense caused domestic losses in 1994 which
were not eligible for federal tax benefits in the periods in which they were
incurred (although such losses may be carried forward and tax benefits realized
in future years to the extent that domestic income is earned). As a result, the
taxes due to foreign and state authorities were not offset by U.S. federal
income tax benefits in 1994 and, as a result, the Company recorded tax expense
in excess of pretax income in 1994.
NOTE 6--ENVIRONMENTAL MATTERS
In connection with the reorganization of the old Interlake, Inc. (now Acme
Steel Company ("Acme")) in 1986, the Registrant, 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. As of April 2, 1995, the Company's reserves for
environmental liabilities totalled $5.9 million.
F-29
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
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.
With respect to the contaminated soils, the Company has conducted certain
investigations at the request of the Minnesota Pollution Control Agency
("MPCA"), and has studied various 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.
Based on these investigations and studies, the Company's estimate of its share
of the likely costs to complete remediation of certain contaminated soils at
the site to standards consistent with the site's present industrial use, based
on risk assessments and other assumptions it believes to be most appropriate,
range from $3 million to $4 million. The Company has reviewed other remedial
plans prepared on behalf of the Company for the contaminated soils which also
contemplate the continued industrial use of the property but which could cost
as much as $20 million. This higher amount is based upon certain risk
assessments and other assumptions which the Company believes to be overly
conservative. If remediation to an unrestricted use standard were required, the
cost likely would be higher yet. The cost of the remedial alternative designed
to meet unrestricted use standards most recently prepared for the Company was
calculated to be approximately $38 million.
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 underway 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.
F-30
<PAGE>
THE INTERLAKE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
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 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 7--ACCOUNTING CHANGE
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 $0.2 million.
F-31
<PAGE>
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- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY IN ANY
JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER
OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 17
Capitalization............................................................ 17
Selected Consolidated Financial Data...................................... 18
Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 21
Business.................................................................. 30
Management................................................................ 38
Description of Senior Notes............................................... 40
Description of Certain Other Indebtedness................................. 59
Underwriting.............................................................. 64
Legal Matters............................................................. 64
Experts................................................................... 64
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
[LOGO OF INTERLAKE]
% SENIOR NOTES
DUE 2001
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CS FIRST BOSTON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by The
Interlake Corporation (the "Company") in connection with the issuance and
distribution of the Senior Notes being registered hereby, other than
underwriting discounts and commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 34,483*
National Association of Securities Dealers, Inc. filing fee... 10,500*
Trustee fees.................................................. 8,000
Printing costs................................................ 200,000
Accounting fees and expenses.................................. 100,000
Legal fees and expenses (not including Blue Sky).............. 500,000
Blue Sky qualifications and related legal fees and expenses... 20,000
Miscellaneous expenses........................................ 127,017
----------
Total......................................................... $1,000,000
==========
</TABLE>
- --------
*Actual expense.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware sets
forth provisions which define the extent to which a corporation organized under
the laws of Delaware may indemnify directors, officers, employees and agents.
Article Thirteenth of the Company's Certificate of Incorporation and Article
III, Section 8, of the Company's By-Laws provide for the indemnification by the
Company of each person who is or was or had agreed to become a director,
officer, employee or agent of the Company, or, at the request of the Company, a
director, officer, employee or agent of another enterprise, against all
expenses and other amounts for which indemnification may be made under law.
Section 145 provides in pertinent part as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the
II-1
<PAGE>
defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this section.
* * *
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Company also maintains directors' and officers' reimbursement and and
liability insurance and has entered into agreements with its directors and
certain officers providing for indemnification in certain events.
Reference is made to Section 7 of the Underwriting Agreement (Exhibit 1.1 to
this Registration Statement), which provides for indemnification of the
Company's officers, directors and controlling persons by the Underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
II-2
<PAGE>
ITEM 16. EXHIBITS.
The following Exhibits are filed herewith and made part hereof:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1** Composite of the Registrant's Restated Certificate of Incorpora-
tion as amended.
3.2 Bylaws of Registrant as amended and restated dated August 23,
1990, incorporated by reference to Exhibit 3(b) of the Regis-
trant's Annual Report on Form 10-K for the year ended December
30, 1990 (the "1990 10-K").
4.1 Form of Indenture (including table of contents and form of Se-
nior Note).
4.2 Form of Indenture (including form of 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").
4.3 Rights Agreement dated as of January 26, 1989 between the Regis-
trant 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.
4.4 Amendment to Rights Agreement dated as of August 15, 1989, in-
corporated by reference to Exhibit (a) of the Company's Form 8
dated May 22, 1990.
4.5 Amendment to Rights Agreement dated as of May 7, 1990, incorpo-
rated by reference to Exhibit (b) of the Company's Form 8 dated
May 22, 1990.
4.6 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").
4.7 Amendment to Rights Agreement dated as of April 13, 1994, incor-
porated by reference to Exhibit 7 of the Company's Form 8-A/A
dated April 19, 1994.
4.8 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 Ex-
hibit 4.6 of the Common Stock S-2.
4.9 Revised Form of Registration Rights Agreement among the Regis-
trant and the parties listed on the signature pages thereof, in-
corporated 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").
4.10 Form of Series 1 Junior Convertible Subordinated Debenture, in-
corporated by reference to Exhibit 4.11 of the Common Stock S-2.
4.11 Form of Series 2 Junior Convertible Subordinated Debenture, in-
corporated by reference to Exhibit 4.12 of the Common Stock S-2.
4.12 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.
4.13 Form of Series 3 Junior Convertible Subordinated Debenture (Ex-
change Debentures relating to the Series A-3 Preferred Stock),
incorporated by reference to Exhibit 4.10 of the IRN Post-Effec-
tive Amendment No. 4.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
4.14 Stock Purchase Agreement dated November 2, 1989 between
the Registrant and LaSalle National Bank, trustee for The
Interlake Corporation Employee Stock Ownership Plan, in-
corporated by reference to Exhibit 10(v) of the Regis-
trant's Annual Report on Form 10-K for the year ended De-
cember 29, 1991 (the "1991 10-K").
4.15 Form of Amended and Restated Credit Agreement, incorpo-
rated by reference to Exhibit 10.15 of the IRN Post-Effec-
tive Amendment No. 4.
4.16 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.
4.17 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.
4.18 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 ended September 26, 1993.
4.19 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 (the "1993 10-
K").
4.20 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.
4.21 Sixth Amendment, dated August 16, 1994, to the Amended and
Restated Credit Agreement, incorporated by reference to
Exhibit 4.20 of the Registrant's Annual Report on Form 10-
K for the year ended December 25, 1994 (the "1994 10-K").
4.22 Seventh Amendment, dated as of January 24, 1995, to the
Amended and Restated Credit Agreement, incorporated by
reference to Exhibit 4.21 of the 1994 10-K.
4.23 Eighth Amendment, dated as of February 1, 1995, to the
Amended and Restated Credit Agreement, incorporated by
reference to Exhibit 4.22 of the 1994 10-K.
4.24 The Registrant Term Notes dated June 18, 1992, incorpo-
rated by reference to Exhibit 4.20 of the 1992 10-K.
4.25 The Registrant Revolving Notes dated June 18, 1992, incor-
porated by reference to Exhibit 4.21 of the 1992 10-K.
4.26 Subsidiary Term Notes dated June 18, 1992, incorporated by
reference to Exhibit 4.22 of the 1992 10-K.
4.27 Subsidiary Revolving Notes dated June 18, 1992, incorpo-
rated by reference to Exhibit 4.23 of the 1992 10-K.
4.28 The Registrant Delayed Draw Notes dated June 18, 1992, in-
corporated by reference to Exhibit 4.24 of the 1992 10-K.
4.29 The Registrant Deferred Term Notes dated June 18, 1992,
incorporated by reference to Exhibit 4.25 of the 1992 10-
K.
4.30 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, in-
corporated by reference to Exhibit 10(t) of the Regis-
trant's Annual Report on Form 10-K for the year ended De-
cember 31, 1989 (the "1989 10-K").
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
4.31 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.
4.32 Amended and Restated Security Agreement among Certain Sub-
sidiaries 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.
4.33 Form of Ninth Amendment to Amended and Restated Credit
Agreement.
5.1** Opinion of Jones, Day, Reavis & Pogue as to the validity
of the Senior Notes being offered.
10.1 1995 Executive Incentive Compensation Plan, incorporated
by reference to Exhibit 10.1 to the 1994 10-K.
10.2 1994 Executive Incentive Compensation Plan, incorporated
by reference to Exhibit 10.1 of the 1993 Form 10-K.
10.3 Key Executive Retention Program adopted February 23, 1995,
incorporated by reference to Exhibit 10.3 of the 1994 10-
K.
10.4 Form of Grant of Stock Award as of February 23, 1995, in-
corporated by reference to Exhibit 10.4 of the 1994 10-K.
10.5 Form of Agreement dated August 27, 1992 for the Cancella-
tion and Re-Granting of Non-Qualified Stock Options be-
tween the Registrant and U.S. executive officers and em-
ployees, incorporated by reference to Exhibit 10.7 of the
1992 10-K.
10.6 Form of Non-Qualified Stock Option Agreement dated January
26, 1995 between the Registrant and one executive officer,
incorporated by reference to Exhibit 10.6 of the 1994 10-
K.
10.7 Form of Non-Qualified Stock Option Agreement dated January
26, 1995 between the Registrant and one foreign executive,
incorporated by reference to Exhibit 10.7 of the 1994 10-
K.
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.
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.
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.
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.
10.12 1989 Stock Incentive Program, incorporated by reference to
the proxy statement filed in connection with the Regis-
trant's 1990 annual meeting of shareholders.
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.
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").
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
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.
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").
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.
10.18 Form of Severance Pay Agreement between the Registrant and 12
executive officers, incorporated by reference to Exhibit 10.18
of the 1994 10-K.
10.19 Form of Severance Pay Agreement between the Registrant and two
executive officers, incorporated by reference to Exhibit 10.19
of the 1994 10-K.
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").
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.
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.
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.
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.
12.1** Statement regarding calculation of ratios.
23.1** Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
24.1** Powers of Attorney.
25.1** Statement of eligibility and qualification of trustee.
</TABLE>
- --------
**Previously filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such
II-6
<PAGE>
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 3 TO
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN LISLE, ILLINOIS, ON JUNE 15, 1995.
The Interlake Corporation
/s/ Stephen R. Smith
By: _________________________________
Stephen R. Smith
Vice President, Secretary and
General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, President, Chief June 15, 1995
____________________________________ Executive Officer and
W. Robert Reum Director (Principal
Executive Officer)
* Vice President--Finance, June 15, 1995
____________________________________ Treasurer and Chief
Stephen Gregory Financial Officer
(Principal Financial
Officer)
/s/ John P. Miller Controller (Principal June 15, 1995
____________________________________ Accounting Officer)
John P. Miller
* Director June 15, 1995
____________________________________
John A. Canning, Jr.
* Director June 15, 1995
____________________________________
James C. Cotting
* Director June 15, 1995
____________________________________
John E. Jones
* Director June 15, 1995
____________________________________
Frederick C. Langenberg
* Director June 15, 1995
____________________________________
Quentin C. McKenna
* Director June 15, 1995
____________________________________
William G. Mitchell
* Director June 15, 1995
____________________________________
Erwin E. Schulze
</TABLE>
*The undersigned by signing his name hereunto has hereby signed this Amendment
No. 3 to Registration Statement on behalf of the above-named officers and
directors, on June 15, 1995, pursuant to a power of attorney executed on behalf
of each such director and officer and filed with the Securities and Exchange
Commission.
/s/ Stephen R. Smith
By: ___________________________
Stephen R. Smith
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
------- ----------------------- ----------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1 Composite of the Registrant's Restated Certificate of
Incorporation as amended.
3.2 Bylaws of Registrant as amended and restated dated Au-
gust 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").
4.1** Form of Indenture (including table of contents and form
of Senior Note).
4.2 Form of Indenture (including form of Subordinated De-
benture), 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").
4.3 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 Registra-
tion Statement on Form 8-A dated as of January 27,
1989.
4.4 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.
4.5 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.
4.6 Form of Amendment to Rights Agreement, incorporated by
reference to Exhibit 4.5 of the Registrant's Registra-
tion Statement on Form S-2, File No. 33-46248, as
amended (the "Common Stock S-2").
4.7 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.
4.8 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.
4.9 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").
4.10 Form of Series 1 Junior Convertible Subordinated Deben-
ture, incorporated by reference to Exhibit 4.11 of the
Common Stock S-2.
4.11 Form of Series 2 Junior Convertible Subordinated Deben-
ture, incorporated by reference to Exhibit 4.12 of the
Common Stock S-2.
4.12 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, incorpo-
rated by reference to Exhibit 4.9 of the IRN Post-Ef-
fective Amendment No. 4.
4.13 Form of Series 3 Junior Convertible Subordinated Deben-
ture (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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
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<C> <S> <C>
4.14 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").
4.15 Form of Amended and Restated Credit Agreement, incorpo-
rated by reference to Exhibit 10.15 of the IRN Post-Ef-
fective Amendment No. 4.
4.16 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.
4.17 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.
4.18 Third Amendment, dated August 20, 1993, to the Amended
and Restated Credit Agreement, incorporated by refer-
ence to the Registrant's quarterly report on Form 10-Q
for the quarter ended September 26, 1993.
4.19 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 (the "1993 10-K").
4.20 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.
4.21 Sixth Amendment, dated August 16, 1994, to the Amended
and Restated Credit Agreement, incorporated by refer-
ence to Exhibit 4.20 of the Registrant's Annual Report
on Form 10-K for the year ended December 25, 1994 (the
"1994 10-K").
4.22 Seventh Amendment, dated as of January 24, 1995, to the
Amended and Restated Credit Agreement, incorporated by
reference to Exhibit 4.21 of the 1994 10-K.
4.23 Eighth Amendment, dated as of February 1, 1995, to the
Amended and Restated Credit Agreement, incorporated by
reference to Exhibit 4.22 of the 1994 10-K.
4.24 The Registrant Term Notes dated June 18, 1992, incorpo-
rated by reference to Exhibit 4.20 of the 1992 10-K.
4.25 The Registrant Revolving Notes dated June 18, 1992, in-
corporated by reference to Exhibit 4.21 of the 1992 10-
K.
4.26 Subsidiary Term Notes dated June 18, 1992, incorporated
by reference to Exhibit 4.22 of the 1992 10-K.
4.27 Subsidiary Revolving Notes dated June 18, 1992, incor-
porated by reference to Exhibit 4.23 of the 1992 10-K.
4.28 The Registrant Delayed Draw Notes dated June 18, 1992,
incorporated by reference to Exhibit 4.24 of the 1992
10-K.
4.29 The Registrant Deferred Term Notes dated June 18, 1992,
incorporated by reference to Exhibit 4.25 of the 1992
10-K.
4.30 The Registrant Pledge Agreement dated September 27,
1989, made by the Registrant and accepted by Chemical
Bank, along with stock certificates of the two subsidi-
aries, 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").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
------- ----------------------- ----------
<C> <S> <C>
4.31 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.
4.32 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.
4.33* Form of Amended Credit Agreement.
5.1** Opinion of Jones, Day, Reavis & Pogue as to the valid-
ity of the Senior Notes being offered.
10.1 1995 Executive Incentive Compensation Plan, incorpo-
rated by reference to Exhibit 10.1 to the 1994 10-K.
10.2 1994 Executive Incentive Compensation Plan, incorpo-
rated by reference to Exhibit 10.1 of the 1993 Form 10-
K.
10.3 Key Executive Retention Program adopted February 23,
1995, incorporated by reference to Exhibit 10.3 of the
1994 10-K.
10.4 Form of Grant of Stock Award as of February 23, 1995,
incorporated by reference to Exhibit 10.4 of the 1994
10-K.
10.5 Form of Agreement dated August 27, 1992 for the Cancel-
lation 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.
10.6 Form of Non-Qualified Stock Option Agreement dated Jan-
uary 26, 1995 between the Registrant and one executive
officer, incorporated by reference to Exhibit 10.6 of
the 1994 10-K.
10.7 Form of Non-Qualified Stock Option Agreement dated Jan-
uary 26, 1995 between the Registrant and one foreign
executive, incorporated by reference to Exhibit 10.7 of
the 1994 10-K.
10.8 Form of Grant of Stock Award as of May 23, 1991--Out-
side Director, incorporated by reference to Exhibit
10(a) of the 1991 10-K.
10.9 Form of Grant of Stock Award as of April 26, 1990--Out-
side Directors, incorporated by reference to Exhibit
10(a) of the 1990 10-K.
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, incorpo-
rated by reference to Exhibit 10(i) of the 1990 10-K.
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, incorpo-
rated by reference to Exhibit 10(j) of the 1990 10-K.
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.
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
------- ----------------------- ----------
<C> <S> <C>
10.14 Trust Agreement between the Registrant and Continental
Illinois National Bank and Trust Company of Chicago
with respect to The Interlake Corporation Restated Di-
rectors' 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").
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.
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").
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.
10.18 Form of Severance Pay Agreement between the Registrant
and 12 executive officers, incorporated by reference to
Exhibit 10.18 of the 1994 10-K.
10.19 Form of Severance Pay Agreement between the Registrant
and two executive officers, incorporated by reference
to Exhibit 10.19 of the 1994 10-K.
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").
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.
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.
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.
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.
12.1** Statement regarding calculation of ratios.
23.1** Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
24.1** Powers of Attorney.
25.1** Statement of eligibility and qualification of trustee.
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
<PAGE>
EXHIBIT 1.1
THE INTERLAKE CORPORATION
[ ]% Senior Notes due 2001
UNDERWRITING AGREEMENT
----------------------
__________ __, 1995
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CS FIRST BOSTON CORPORATION
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Dear Sirs:
The Interlake Corporation, a Delaware corporation (the "Company")
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and CS First Boston Corporation (collectively, "you" or the
"Underwriters") an aggregate of $100 million principal amount of its [ ]% Senior
Notes due 2001 (the "Securities"). The Securities are to be issued pursuant to
the provisions of an Indenture to be dated as of __________ __, 1995 (the
"Indenture") between the Company and Bank One, Columbus, N.A., a national
banking association, as trustee (the "Trustee").
1. Registration Statement and Prospectus. The Company has prepared
-------------------------------------
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-2 (File No. 33-59003) including a
prospectus relating to the Securities, which may be amended. The registration
<PAGE>
statement, as amended at the time it becomes effective, including information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as
the Registration Statement; and the prospectus in the form first used to confirm
sales of Securities is hereinafter referred to as the Prospectus (including, in
the case of all references to the Registration Statement and the Prospectus,
documents incorporated therein by reference).
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to the
terms and conditions contained herein, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the
Company, $100 million aggregate principal amount of Securities set forth
opposite their names in Schedule I hereto. The purchase price for the Securities
shall be [ ]% of their principal amount (the "Purchase Price") plus accrued
interest, if any.
3. Terms of Public Offering. The Company is advised by you that you
------------------------
propose (i) to make a public offering of the Securities as soon after the
effective date of the Registration Statement as in your judgment is advisable
and (ii) initially to offer the Securities upon the terms set forth in the
Prospectus.
4. Delivery and Payment. Delivery to you of and payment for the
--------------------
Securities shall be made at 10:00 A.M., New York City time, on June __, 1995
(the "Closing Date") following the date of the initial public offering, at such
place as you shall designate. The Closing Date and the location of delivery of
and the form of payment for the Securities may be varied by agreement between
you and the Company.
The Securities shall be registered in such names and issued in such
denominations as you shall request in writing not later than two full business
days prior to the Closing Date. Such Securities shall be made available to you
for inspection at your office not later than 9:30 A.M., New York City time, on
the business day next preceding the Closing Date. Payment of the Purchase Price
shall be made by certified or official bank checks payable in New York Clearing
House funds to the order of the Company against delivery to you of the
Securities.
5. Agreements of the Company. The Company agrees with each
-------------------------
Underwriter:
2
<PAGE>
(a) To file, if necessary, an amendment to the Registration Statement
(including, if necessary pursuant to Rule 430A under the Act, a post-
effective amendment to the Registration Statement), as soon as practicable
after the execution and delivery of this Agreement, and will use its best
efforts to cause the Registration Statement (or such post-effective
amendment) to become effective at the earliest possible time. The Company
will comply fully and in a timely manner with the applicable provisions of
Rule 424 and Rule 430A under the Act.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to it becomes effective, (ii) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purposes, and (iv) of the
happening of any event during the period referred to in paragraph (e) below
which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires the making of any
additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. The Company shall use
its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of the Securities under any state
securities or Blue Sky laws, and, if at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement,
or any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification
of the Securities under state securities or Blue Sky laws, the Company will
make every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(c) To furnish to you, without charge, a total of two signed copies
of the Registration Statement (excluding documents incorporated by
reference) as first filed with (or transmitted for filing to) the
Commission and of each amendment to it, including all
3
<PAGE>
exhibits, and to furnish to each of you such number of conformed copies of
the Registration Statement (including documents incorporated by reference)
as so filed (or transmitted for filing) and of each amendment to it,
without exhibits, as each of you may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus, of which you shall
not previously have been advised or to which any of you shall reasonably
object in writing; and to prepare and file with the Commission, promptly
upon your reasonable request, any amendment to the Registration Statement
or amendments or supplements to the Prospectus which may be necessary or
advisable in connection with the distribution of the Securities by you, and
to use its best efforts to cause the same to become effective at the
earliest possible time.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of your
counsel a prospectus is required by law to be delivered in connection with
sales by you or a dealer, to furnish to you and each dealer as many copies
of the Prospectus, any document incorporated therein and any amendment or
supplement to the Prospectus, as you or such dealer may reasonably request.
The Company consents to the use of the Prospectus and any amendment or
supplement thereto by you and by all dealers to whom the Securities may be
sold, both in connection with the offering or sale of the Securities and
for such period of time thereafter as the Prospectus is required by law to
be delivered in connection therewith.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the judgment of the Company or in the
opinion of your counsel, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus to
comply with any law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not, in
the light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply
4
<PAGE>
with law, and to furnish to you and to such dealers as you shall specify,
such number of copies thereof as you or dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and your counsel in connection with the registration or qualification
of the Securities for offer and sale by you and by dealers under the state
securities or Blue Sky laws of such jurisdictions as you may reasonably
request, to continue such qualification in effect so long as may be
reasonably required for distribution of the Securities and to file such
consents to service of process or other documents as may be necessary in
order to effect such registration or qualification; provided that the
--------
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so subject to service or qualified.
(h) To mail and make generally available to its security holders as
soon as reasonably practicable an earnings statement (which need not be
audited) covering a period of at least twelve months after the effective
date of the Registration Statement (but in no event commencing later than
90 days after such date) which shall satisfy the provisions of Section
11(a) of the Act and to advise you in writing when such statement has been
so made available.
(i) So long as any of the Securities are outstanding, to file reports
required to be filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, including the rules and regulations
thereunder (collectively, the "Exchange Act") and to deliver to you,
promptly upon these becoming available, copies of all current, regular and
periodic reports filed by the Company with any securities exchange or with
the Commission.
(j) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), each
preliminary prospectus and all amendments and supplements to any of them
prior to or during the period specified in paragraph (e), (ii) the
preparation, printing and delivery of the Prospectus and all amendments or
supplements to it during the period specified in paragraph (e), (iii) the
5
<PAGE>
registration with the Commission, and the issuance and delivery by the
Company of, the Securities, (iv) the preparation, printing (including word
processing and duplication costs) and delivery of this Agreement, the
Indenture, the Preliminary and Supplemental Blue Sky Memorandum and all
other agreements, memoranda, correspondence and other documents printed and
delivered in connection with the offering of Securities and the
registration or qualification of the Securities for offer and sale under
the securities or Blue Sky laws of the several states (including in each
case the reasonable fees and disbursements of your counsel relating to such
preparation, printing, delivery, registration or qualification), (v)
filings and clearance with the National Association of Securities Dealers,
Inc. ("NASD") in connection with the offering, (vi) furnishing such copies
of the Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the
offering or sale of the Securities by you or by dealers to whom Securities
may be sold, (vii) obtaining any rating for the Securities from one or more
statistical rating organizations and (viii) the performance by the Company
of its other obligations under this Agreement.
(k) Prior to the Closing Date, to furnish to you, as soon as they
have been prepared by the Company, a copy of any consolidated financial
statements of the Company for any period subsequent to the period covered
by the financial statements appearing in the Registration Statement and the
Prospectus.
(l) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date, and to satisfy all conditions precedent to the
delivery of the Securities.
(m) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of the Securities.
(n) To use the proceeds of the issuance of the Securities as stated
under the caption "Use of Proceeds" in the Prospectus.
6. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to each Underwriter that:
6
<PAGE>
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act, and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder; (ii)
the Registration Statement and any amendments thereto will comply in all
material respects with the provisions of the Act and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; and (iii) the Prospectus and any supplements thereto will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this paragraph
(a) shall not apply to statements or omissions in the Registration
Statement or the Prospectus (or any supplement or amendment to them) based
upon information furnished to the Company in writing by or on behalf of
such Underwriter expressly for use therein.
(b) Each preliminary prospectus filed as part of the registration
statement, and each preliminary prospectus subsequently filed as part of
any amendment thereto, or filed pursuant to Rule 424 under the Act,
complied when so filed in all material respects with the Act.
(c) (i) Each of the Company and the Significant United States
Subsidiaries (as defined in Exhibit A hereto) has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, (ii) each of the Significant non-United
States Subsidiaries (as defined in Exhibit A hereto) has been duly formed
or incorporated and is validly existing under the laws of its jurisdiction
of formation or incorporation and (iii) each of the Company and the
Significant United States Subsidiaries and the Significant non-United
States Subsidiaries (collectively, the "Significant Subsidiaries") has the
corporate power and authority to carry on its business as it is currently
being conducted and to own, lease and operate its properties, and each is
duly qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business or
its ownership, leasing or operation of property requires
7
<PAGE>
such qualification, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(d) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Significant Subsidiaries that are owned
by the Company as described in Exhibit A hereto have been duly and validly
authorized and issued and are fully paid and non-assessable, and to the
extent owned by the Company, are owned free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature other
than those created pursuant to the security documents in favor of the Banks
under the Credit Agreement and the Amended Credit Agreement (as those terms
are defined in the Prospectus).
(e) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights; the Securities have
been duly authorized and when executed and authenticated in accordance with
the provisions of the Indenture and issued and delivered to you against
payment therefor as provided in this Agreement will be entitled to the
benefits of the Indenture and will be legally valid and binding obligations
of the Company.
(f) This Agreement has been duly authorized, executed and delivered
and is a valid and binding agreement of the Company.
(g) Each of the Amended Credit Agreement and the Indenture has been
duly authorized and, on or prior to the Closing Date, will be duly executed
and delivered and, on or prior to the Closing Date, will be a valid and
binding agreement of the Company. The Indenture has been duly qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(h) The authorized capital stock of the Company is as set forth under
the caption "Capitalization" in the Registration Statement and the
Prospectus.
(i) The Securities conform to the description thereof under the
caption "Description of Senior Notes" in the Prospectus.
(j) None of the Company or any Significant Subsidiary is in violation
of its respective charter or
8
<PAGE>
by-laws or in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument, in each
case material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to which the Company or any of the
Significant Subsidiaries is a party or by which the Company or any of the
Significant Subsidiaries or their respective property is bound.
(k) The execution, delivery and performance by the Company of this
Agreement, the Amended Credit Agreement and the Indenture, compliance by
the Company with all the provisions hereof and thereof and the consummation
by the Company of the transactions contemplated hereby and thereby,
including the issuance of the Securities, will not require any consent,
approval, authorization or other order of or filing or registration with,
any court, regulatory body, administrative agency or other governmental
body (except (i) for the order of the Commission making the Registration
Statement effective, (ii) as may be required under the Trust Indenture Act
with respect to the Indenture, (iii) as may be required under the
securities or Blue Sky laws of the various states, (iv) as may be required
in connection with the employee stock ownership plan established in 1989 by
the Company (the "ESOP") and (v) as may be required in connection with
security documents in favor of the Banks under the Amended Credit
Agreement) and will not conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any Significant Subsidiary or any agreement, indenture or other
instrument material to the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole,
to which the Company or any Significant Subsidiary is a party or by which
the Company or any Significant Subsidiary or their respective property is
bound, or violate or conflict with any laws, administrative regulations or
rulings or court decrees applicable to the Company, any Significant
Subsidiary or their respective properties, the breach or violation of which
is material to the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(l) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its
9
<PAGE>
Significant Subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such material legal or governmental proceedings are threatened. No contract
or document of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement is not so described or filed as required.
(m) Except as otherwise set forth in the Prospectus, none of the
Company or any Significant Subsidiary has violated any environmental,
safety or similar law applicable to its business, nor any law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable wages and hours laws, nor any provisions of the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder or any similar law, which in each case in the Company's judgment
is likely to result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and
its subsidiaries, taken as a whole.
(n) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, (A) each
of the Company and the Significant Subsidiaries has good and sufficient
title, free and clear of all liens, claims, encumbrances and restrictions
except liens for taxes not yet due and payable, to all property and assets
described in the Registration Statement as being owned by them and (B) all
leases described in the Registration Statement to which the Company or any
Significant Subsidiary is a party are valid and binding and no material
default has occurred or is continuing thereunder. The Company and each of
the Significant Subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with such
exceptions as do not materially interfere with the use made by the Company
or such Significant Subsidiary.
(o) Price Waterhouse LLP are independent public accountants with
respect to the Company as required by the Act.
(p) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and
any
10
<PAGE>
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply subject to year-end adjustments in the case of quarterly
numbers; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein and
the other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) is, in all material respects, accurately presented and prepared on
a basis consistent with such financial statements and the books and records
of the Company.
(q) Except as set forth in the Prospectus, (A) the Company and each
Significant Subsidiary have such permits, licenses, franchises and
authorizations of, or other rights issued by, governmental or regulatory
authorities ("permits") as are necessary to own, lease and operate their
respective material properties and to conduct their respective businesses
substantially in the manner described in the Prospectus; (B) the Company
and each Significant Subsidiary have substantially fulfilled and performed
all of their respective material obligations with respect to such permits
and (C) none of the Company or any Significant Subsidiary has received any
notice of proceedings relating to the revocation or modification of such
permit which, in the judgment of the Company, is likely to result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole.
(r) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(s) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company
except pursuant to the Preferred Stock Purchase Agreement dated March 6,
1992 between the Company, First Capital Corporation of Chicago and Madison
Dearborn Partners VIII, the Series A3 Preferred Stock Purchase Agreement
dated May 7, 1992 between the Company, Heine Securities
11
<PAGE>
Corporation and Mutual Series Fund Inc., the Stock Purchase Agreement dated
November 2, 1989 between the Company and LaSalle Bank, as trustee for The
Interlake Corporation Employee Stock Ownership Plan, or the Rights
Agreement dated January 26, 1989, as amended, between the Company and The
First National Bank of Chicago (the "Rights Agreement").
(t) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency which
prevents the issuance of the Securities; no injunction, restraining order
or order of any nature by a federal or state court of competent
jurisdiction has been issued which would prevent the issuance of the
Securities; and no action, suit or proceeding is pending against or
affecting or, to the knowledge of the Company, threatened against, the
Company before any court or arbitrator or any governmental body, agency or
official which, if adversely determined, would (a) interfere with or
adversely affect the issuance of the Securities or (b) in any manner draw
into question the validity of this Agreement, the Amended Credit Agreement,
the Indenture, the issuance of the Securities or any of the transactions
contemplated hereby or thereby.
(u) None of the Company or any Significant Subsidiary is involved in
any material labor dispute nor, to the knowledge of the Company, is any
material labor dispute threatened that, in the judgment of the Company, is
likely to result in a material adverse effect on the business, prospects,
financial condition or results of operation of the Company and its
subsidiaries, taken as a whole.
(v) Except pursuant to the Rights Agreement, the terms of the
Company's Convertible Preferred Stock, as that term is defined in the
Registration Statement under the heading "Description of Senior Notes" (and
the other securities for which or into which such Convertible Preferred
Stock is exchangeable or convertible), or awards previously granted by the
Company pursuant to its compensation or incentive plans or pursuant to the
Hoeganaes Agreements (as defined in the Indenture), there are no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company or any Significant Subsidiary.
12
<PAGE>
(w) To the best of the Company's knowledge, after due inquiry, none
of the Company or any subsidiary of the Company does business with the
government of Cuba or with any person or affiliate located in Cuba and the
Company and each subsidiary of the Company have complied to the extent
necessary with all provisions of Florida H.B. 1771.
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and up to the
Closing Date, except as set forth in the Prospectus, neither the Company
nor any subsidiary has incurred any liabilities or obligations, direct or
contingent, which are material to the Company and the subsidiaries taken as
a whole, nor entered into any transaction not in the ordinary course of
business and there has not been, singly or in the aggregate, any material
adverse change, in the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of the Company and
the subsidiaries taken as a whole.
(y) All tax returns required to be filed by the Company or any of the
Significant Subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities have been paid,
other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty or
interest.
(z) The Company and each Significant Subsidiary maintains insurance
covering their properties, operations, personnel and businesses insuring
against such losses and risks as is adequate, in the opinion of the
Company, to protect the Company and its Significant Subsidiaries and their
businesses. Neither the Company nor any Significant Subsidiary has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof and will be outstanding and duly in force on the
Closing Date.
7. Indemnification.
---------------
13
<PAGE>
(a) The Company agrees to indemnify and hold harmless (i) each
Underwriter, (ii) each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and
(iii) the respective officers, directors, partners, employees,
representatives and agents of any Underwriter (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Person") to the fullest extent lawful from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation
and as incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing or defending any claim or action or any investigation
or proceeding by any governmental agency or body commenced or threatened,
including the reasonable fees of and expenses of counsel to the Indemnified
Person) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (if
used within the period set forth in Section 5(e) hereof, as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except (i) insofar as such losses, claims, damages, liabilities
or judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished in writing to
the Company by or on behalf of such Underwriter expressly for use therein
and (ii) the Company shall not be liable to any Underwriter under this
Section 7(a) with respect to any preliminary prospectus to the extent that
such loss, claim, damage, liability or judgment results from the fact that
any of the Underwriters sold any Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a
copy of the Prospectus as then amended or supplemented, if (A) such copy of
the Prospectus corrected such untrue or alleged untrue statement or such
omission or alleged omission and (B) the Company has previously furnished
copies thereof to such Underwriter.
(b) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought against any
Indemnified Person, based upon any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto and with
respect to
14
<PAGE>
which indemnity may be sought against the Company pursuant to Section
7(a) hereof, such Indemnified Person shall promptly notify the Company in
writing (provided that failure to give such notice shall not relieve the
Company of its obligations pursuant to this Section 7, other than
liabilities incurred as a result of failure to give such prompt notice)
and the Company shall assume the defense thereof, including the
employment of counsel selected by the Company and reasonably satisfactory
to such Indemnified Person and payment of all fees and expenses. Any such
Indemnified Person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the employment of such counsel has been specifically
authorized in writing by the Company, (ii) the Company has failed to
assume the defense and employ counsel or (iii) the named parties to any
such action (including any impleaded parties) include both such
Indemnified Person and the Company and such Indemnified Person shall have
been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Company and which make joint representation impractical or
imprudent in the reasonable opinion of such counsel (in which case the
Company shall not have the right to assume the defense of such action on
behalf of such Indemnified Person, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Persons, which
firm shall be designated in writing by DLJ and that all such fees and
expenses shall be reimbursed as they are incurred). The Company shall not
be liable for any settlement of any such action effected without its
written consent but if settled with the written consent of the Company or
if there is a final judgment for the plaintiff, the Company agrees to
indemnify and hold any Indemnified Person harmless from and against any
loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have
been a party and indemnity could have been sought
15
<PAGE>
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on
claims that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter
but only with reference to information furnished in writing by or on behalf
of such Underwriter expressly for use in the Registration Statement, the
Prospectus or any preliminary prospectus. In case any action shall be
brought against the Company, any of its directors, any such officer or any
person controlling the Company based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter pursuant to this paragraph (c), the
Underwriter shall have the rights and duties given to the Company by
Section 7(b) hereof (except that if the Company shall have assumed the
defense thereof, such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof and
the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officers and any
person controlling the Company shall have the rights and duties given to
the Underwriter by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other hand from
the offering of the Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company and the Underwriters
in connection with the statements or omissions which resulted in such
losses, claims,
16
<PAGE>
damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company on one hand
and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the
public of the Securities, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public was
offered to the public exceeds the amount of any damages which such
Underwriter had otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective principal amount of Securities purchased by each of the
Underwriters hereunder and not joint.
17
<PAGE>
(e) The statements with respect to the offering of the Securities on
the cover page of the Prospectus, the first paragraph on page 2 of the
Prospectus and under the caption "Underwriting" in the Prospectus
constitute the only information heretofore furnished to the Company in
writing, expressly for use in the Registration Statement, the Prospectus,
or any amendment or supplement thereto, or any preliminary prospectus.
8. Conditions of Underwriters' Obligations. The several obligations
---------------------------------------
of the Underwriters to purchase the Securities under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) (i) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City time, on the date of this Agreement or
at such later date and time as you may approve in writing, (ii) at the
Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending before or, to the best knowledge of
the Company, threatened by the Commission and (iii) no stop order
suspending the sale of the Securities in any jurisdiction shall have been
issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement, except as disclosed therein, there shall not have
been any material adverse change, or any development involving a
prospective material adverse change, in the financial condition, business,
properties, net worth, results of operations, earnings or business
prospects, whether or not arising in the ordinary course of business, of
the Company and its subsidiaries, taken as a whole, (ii) since the date of
the latest balance sheet included in the Registration Statement, except as
disclosed therein, there shall not have been any material adverse change,
or any development involving a prospective material adverse change, in the
capital stock or in the long-term debt of the Company from that set forth
in or contemplated by the Registration Statement, except as
disclosed therein, (iii) the Company and the
18
<PAGE>
Significant Subsidiaries shall have no liability or obligation, direct or
contingent, which is material to the Company and its subsidiaries, taken as
a whole, other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by W. Robert Reum and Stephen
Gregory, in their respective capacities as the President and Chief
Financial Officer of the Company, confirming the matters set forth in
paragraphs (a), (b), (c), (j) and (k) of this Section 8.
(d) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Stephen R. Smith, counsel for the Company, substantially
in the form attached hereto as Exhibit B.
(e) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Jones, Day, Reavis & Pogue, counsel for the Company,
substantially in the form attached hereto as Exhibit C.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Davis Polk & Wardwell, your counsel, as to the matters
referred to in clauses 1, 3 and 4 of Exhibit C hereto and to the further
effect that the statements contained under the captions "Description of
Senior Notes" and "Underwriting" in the Prospectus, insofar as they purport
to summarize certain provisions of the documents or statutes referred to
therein, taken together, present fair summaries of such provisions. Such
counsel shall also state that the Registration Statement and the Prospectus
(except for the financial statements, financial schedules and other
financial data included or incorporated by reference therein as to which
such counsel need not express an opinion) comply as to form in all material
respects with the Act and the rules and regulations thereunder and that no
facts have come to such counsel's attention that cause them to believe that
the Registration Statement and the Prospectus included therein (except for
financial statements, financial schedules and other financial data included
or incorporated by reference therein as to which such counsel need not
express an opinion), at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or that the Prospectus (with
the foregoing exceptions), as of the Closing Date,
19
<PAGE>
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were
made, not misleading. In giving such opinion with respect to the matters
covered by the foregoing sentence, such counsel may state that their
opinion and belief are based upon their participation in the preparation of
the Registration Statement and Prospectus and any amendments or supplements
thereto (other than the documents incorporated by reference) and review and
discussion of the contents thereof (including the documents incorporated by
reference), but are without independent check or verification except as
specified.
(g) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Price Waterhouse LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Registration Statement and the Prospectus and substantially in the
form and substance of the letter delivered to you by Price Waterhouse LLP
on the date of this Agreement.
(h) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements contained herein and
required to be performed or complied with by the Company at or prior to the
Closing Date.
(i) On or before the Closing Date, you shall have received a
certificate, dated the Closing Date and signed by an officer of the
Company, confirming that the Amended Credit Agreement shall have become
effective on or before the Closing Date and a copy of each of such
documents shall be attached thereto.
(j) The Company shall have paid or made provision for payment of the
Loan Repayments (as defined in the Prospectus) in an aggregate amount of at
least $95 million.
(k) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of the
Securities; and no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction shall have
20
<PAGE>
issued as of the Closing Date which would prevent the issuance of the
Securities.
(l) Prior to the Closing Date, the Company shall have furnished to
you such further information, certificates and documents as you may
reasonably request.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to you. The Company will furnish you with conformed copies of such opinions,
certificates, letters and other documents as you may reasonably request.
9. Effective Date of Agreement and Termination. This Agreement shall
-------------------------------------------
become effective upon the later of (i) execution of this Agreement, (ii) when
notification of the effectiveness of the Registration Statement has been
released by the Commission and (iii) if a post-effective amendment is required
to be filed pursuant to 430A under the Act, the effectiveness of such post-
effective amendment.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in or affecting the financial condition
of the Company and its subsidiaries, taken as a whole, or the earnings or
business prospects of the Company and its subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, which would, in your
reasonable judgment, make it impracticable to market the Securities on the terms
and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions in the financial markets of the United States
or elsewhere that, in your reasonable judgment, is material and adverse and
that, in your reasonable judgment would make it impracticable to market the
Securities on the terms and in the manner contemplated in the Prospectus, (iii)
the suspension or material limitation of trading in securities on the New York
Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market or
limitation on prices for securities on any such exchange or The Nasdaq Stock
Market (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental
21
<PAGE>
authority which in your reasonable opinion materially and adversely affects, or
will materially and adversely affect, the business or operations of the Company
and its Significant Subsidiaries, (v) the declaration of a banking moratorium by
either federal, New York State or Illinois authorities, (vi) the taking of any
action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the financial markets in the United States or (vii) any
securities of the Company shall have been downgraded or placed on any "watch
list" for possible downgrading by any nationally recognized statistical rating
organization after the date hereof, provided, that in the case of such "watch
--------
list" placement, termination shall be permitted only if such placement would, in
the judgment of any Underwriter, make it impracticable or inadvisable to market
the Securities or to enforce contracts for the sale of the Securities or
materially impair the investment quality of the Securities.
10. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Company, to 550
Warrenville Road, Lisle, Illinois 60532, Attention: Vice President and General
Counsel, and (b) if to any Underwriter, to or c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of you set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Securities, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter or by or on behalf of the
Company, the officers or directors of the Company or any controlling person of
the Company, (ii) acceptance of the Securities and payment for them hereunder
and (iii) termination of this Agreement.
If this Agreement shall be terminated by you because of any failure or
refusal on the part of the Company to comply with the terms or to fulfill any of
the conditions of this Agreement, the Company agrees to reimburse you for all
out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by them in connection herewith.
22
<PAGE>
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, you, any
controlling persons referred to herein and each such person's respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Securities from you merely because of such purchase.
11. Defaults. If, on the Closing Date, any of the Underwriters shall
--------
fail or refuse to purchase Securities in an aggregate principal amount that
exceeds 10% of the total principal amount of the Securities and arrangements
satisfactory to the other Underwriters and the Company for the purchase of such
Securities are not made within 48 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting Underwriters or
the Company, except as otherwise provided in Section 9. In any such case that
does not result in termination of this Agreement, the Underwriters or the
Company may postpone the Closing Date for not longer than seven (7) days, in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve a defaulting Underwriter from
liability in respect of any default by any such Underwriter in this Agreement.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York as applied to contracts made and
performed entirely within the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
23
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between you and the Company.
Very truly yours,
THE INTERLAKE CORPORATION
By____________________________
Title:
Accepted and Agreed to:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By__________________________
Title:
CS FIRST BOSTON CORPORATION
By__________________________
Title:
24
<PAGE>
Schedule I
----------
<TABLE>
<CAPTION>
Principal Amount
of Securities
to be
Underwriter Purchased
- ----------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
Total $100,000,000
</TABLE>
25
<PAGE>
EXHIBIT A
---------
LIST OF SUBSIDIARIES
THE INTERLAKE CORPORATION
"Significant United States Subsidiaries"
are those with one asterisk before their names;
"Significant non-United States Subsidiaries"
are those with two asterisks before their names
<TABLE>
<CAPTION>
State or Country
Corporate Name Parent Company of Incorporation
- -------------- -------------- ----------------
<S> <C> <C>
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 Dexion International Limited England
Limited
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. The Interlake Companies, Inc./1/ Hong Kong
</TABLE>
__________________________________
/1/20% owned by Peter Kedge
26
<PAGE>
<TABLE>
<CAPTION>
State or Country
Corporate Name Parent Company of Incorporation
- -------------- -------------- ----------------
<S> <C> <C>
Dexion Produktions GmbH Dexion Holding GmbH Germany
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, The Interlake Companies, Inc. Ohio
Inc.
*Interlake DRC Limited The Interlake Companies, Inc. Delaware
Interlake Foreign Sales Corporation The Interlake Companies, Inc. (70%) Barbados, West
Hoeganaes Corporation (30%) Indies
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
S.A. Dexion-Redirack N.V. Dexion Group plc Belgium
Seal-less Strapping Industries Limited Acme Strapping Inc. Canada
</TABLE>
_____________________________
/2/20% of captial stock, all of which is voting common stock, is
owned by Hoganas Aktiebolag
27
<PAGE>
<TABLE>
<CAPTION>
State or Country
Corporate Name Parent Company of Incorporation
- -------------- -------------- ----------------
<S> <C> <C>
Southern Countless Storage Equipment Dexion International Limited England
Limited
*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 Limited Dexion International Limited England
</TABLE>
28
<PAGE>
EXHIBIT B
[Letterhead of Stephen R. Smith]
June __, 1995
Donaldson, Lufkin & Jenrette
Securities Corporation
New York, New York
CS First Boston Corporation
Chicago, Illinois
Re: _____% Senior Notes due 2001 of
The Interlake Corporation
-------------------------------
Ladies and Gentlemen:
I am Vice President, Secretary and General Counsel of The Interlake
Corporation, a Delaware corporation (the "Company"), and have advised the
Company in connection with the purchase by you from the Company of $100,000,000
aggregate principal amount of _____% Senior Notes Due 2001 (the "Securities"),
issued pursuant to an indenture dated as of June __, 1995 (the "Indenture") from
the Company to Bank One, Columbus, N.A., as trustee (the "Trustee"). This
opinion is furnished to you pursuant to Section 8(d) of the Underwriting
Agreement dated June __, 1995 (the "Underwriting Agreement") between you and the
Company. Certain capitalized terms used herein and not otherwise defined herein
are defined in the Underwriting Agreement and are used herein as so defined.
In my capacity as counsel, I or a member of my staff have examined the
originals, or certified, conformed or reproduction copies, of all records,
agreements, instruments and documents as I have deemed necessary as the basis
for the opinions expressed below. In stating my opinion, I have assumed the
genuineness of all signatures on original or certified copies, the authenticity
of all documents submitted to me as originals and the conformity to original or
certified copies of all copies submitted to me as certified or reproduction
copies. I have obtained and relied upon such certificates and assurance from
public officials as I have deemed appropriate. I have investigated
29
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 2
such questions of law for the purpose of rendering this opinion as I have deemed
necessary. I do not herein express any opinion with respect to the subject
transactions as to any matters governed by any laws other than the General
Corporation Law of the State of Delaware and United States federal law.
A. Based on the foregoing, and subject to the assumptions,
qualifications and limitations set forth below I am of the opinion that:
1. Each Significant United States Subsidiary (i) has been duly
incorporated and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and authority to
own its property and assets and to conduct its business as it is currently being
conducted and (iii) is duly qualified as a foreign corporation and is in good
standing in each jurisdiction where its ownership, leasing or operation of
property or the conduct of its business requires such qualification except where
the failure to so qualify would not have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole.
2. The Company is duly qualified as a foreign corporation and is in
good standing in each jurisdiction where its ownership, leasing or operation of
property or the conduct of its business requires such qualification except where
the failure to so qualify would not have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole.
3. All of the outstanding shares of capital stock of each
Significant United States Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. All such shares, other than 20% of
the outstanding shares of Hoeganaes Corporation, are owned by the Company, free
and clear of any security interest, claim, lien, encumbrance or adverse interest
of any nature, other than those created pursuant to the security documents in
favor of the lenders under the Amended Credit Agreement.
30
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 3
4. The Securities have been duly authorized by all necessary
corporate action of the Company.
5. The Underwriting Agreement has been duly authorized by all
necessary corporate action of the Company and has been duly executed and
delivered by the Company.
6. The Amended Credit Agreement has been duly authorized by all
necessary corporate action of the Company and has been dully executed and
delivered by the Company.
7. The Indenture has been duly authorized by all necessary corporate
action of the Company and has been duly executed and delivered by the Company.
8. The execution, delivery and performance by the Company of the
Underwriting Agreement, the Amended Credit Agreement and the Indenture, the
compliance by the Company with all the provisions thereof and the consummation
by the Company of the transactions contemplated thereby, including issuance of
the Securities, will not (a) result in the violation by the Company of any
Delaware corporate or federal statute, rule or regulation (except that with
respect to the Act and the Exchange Act, my opinion is limited to the matters
expressed in paragraphs B and C below and it being understood that you have not
requested and I am not expressing any opinion as to any state securities or
"Blue Sky" laws), (b) conflict with or constitute or result in a breach or
violation by the Company or any Significant United States Subsidiary of any of
the terms or provisions of, or constitute a default by the Company or any
Significant United States Subsidiary under, any indenture, loan agreement or
other agreement to which the Company or any Significant United States Subsidiary
is a party or by which any of such entities is bound and which is material to
the Company and its subsidiaries, taken as a whole, (c) conflict with or result
in a default under the certificate of incorporation or bylaws of the Company or
any Significant United States Subsidiary, in each case as amended through the
date hereof, or (d) violate or conflict with any judgment, order or decree of
any court or governmental authority or body binding upon the Company or any
Significant United States Subsidiary or any of their respective properties.
31
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 4
9. None of the Company or the Significant United States Subsidiaries
is in violation of its respective charter or by-laws and none of the Company or
any Significant United States Subsidiary is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture or
instrument to which the Company or any Significant United Subsidiary is a party
or by which the Company or any Significant United States Subsidiary or their
respective property is bound and which is material to the conduct of the
business of the Company and its subsidiaries, taken as a whole.
10. There are no legal or governmental proceedings pending or
threatened which are known to me after due inquiry, or contracts or other
documents of a character required to be described in the Registration statement
or to be filed as exhibits to the Registration Statement which are not described
or filed as required.
11. To the best of my knowledge (a) no action has been taken and no
statute, rule or regulation or order has been enacted, adopted or issued by any
governmental agency which prevents the issuance by the Company of the
Securities; (b) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued which would
prevent the issuance by the Company of the Securities; (c) no action, suit or
proceeding is pending against or affecting or threatened against, the Company
before any court or arbitrator or any governmental body, agency or official
which, if adversely determined, would (i) interfere with or adversely affect the
issuance of the Securities; or (ii) in any manner draw into question the
validity of the Underwriting Agreement, the Amended Credit Agreement, the
Indenture, the issuance of the Securities or any of the transactions
contemplated thereby.
B. I have participated in the preparation of the Registration
Statement, the Prospectus and the documents filed pursuant to the Exchange Act
and incorporated by reference in the Registration Statement and the Prospectus
32
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 5
(collectively, the "Incorporated Documents"). From time to time, in connection
therewith, I have had discussions with the officers, directors and employees of
the Company, Price Waterhouse LLP, who examined certain of the financial
statements of the Company and its consolidated subsidiaries included in the
Registration Statement and Prospectus, Jones, Day, Reavis & Pogue, the Company's
outside counsel retained in connection with the Registration Statement, your
representatives and your counsel concerning the information contained in the
Registration Statement and the Prospectus and the proposed responses to various
items in Form S-2. I have not independently verified and am not passing upon,
and do not assume any responsibility for, the accuracy, completeness or fairness
of the information contained in the Registration Statement and the Prospectus.
Based upon the participation and discussions described above, however, no facts
have come to our attention that cause us to believe that (i) the Registration
Statement and the Prospectus (except for the financial statements, financial
schedules and other financial and statistical data included or incorporated by
reference therein and the Statement of Eligibility on Form T-1 of the Trustee as
to which we express no opinion), at the time the Registration Statement became
effective, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (ii) the Prospectus (with the foregoing
exceptions), as of the date hereof, contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
C. The Registration Statement has become effective under the Act, no
stop order suspending the effectiveness of the Registration Statement has been
issued, and to the best of my knowledge no proceedings for that purpose are
pending or threatened by the Commission.
This opinion is furnished by me, as counsel for the Company, solely
for your benefit and solely with respect to the purchase of the Securities from
the Company by you, upon the understanding that I am not hereby assuming any
33
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 6
professional responsibility to any other person whatsoever. Unless otherwise
expressly indicated, each of the matters set forth herein is as of the date
hereof, and I hereby undertake no, and disclaim any, obligation to advise you of
any change in matters set forth herein or upon which this opinion is based.
Very truly yours,
34
<PAGE>
EXHIBIT C
[JDRP Letterhead]
June __, 1995
Donaldson, Lufkin & Jenrette
Securities Corporation
New York, New York
CS First Boston Corporation
Chicago, Illinois
Re: __% Senior Notes due 2001 of
The Interlake Corporation
----------------------------
Ladies and Gentlemen:
We have acted as counsel for The Interlake Corporation (the "Company")
in connection with the purchase by you from the Company of $100,000,000
aggregate principal amount of ___% Senior Notes Due 2001 (the "Securities"),
issued pursuant to an indenture dated as of June __, 1995 (the "Indenture") from
the Company to Bank One, Columbus, N.A., as trustee (the "Trustee"). This
opinion is furnished to you pursuant to Section 8(e) of the Underwriting
Agreement dated June __, 1995 (the "Underwriting Agreement") between you and the
Company. Certain capitalized terms used herein and not otherwise defined herein
are defined in the Underwriting Agreement and are used herein as so defined.
In our capacity as counsel, we have examined the originals, or
certified, conformed or reproduction copies, of all records, agreements,
instruments and documents as we have deemed necessary as the basis for the
opinions expressed below. In stating our opinion, we have assumed the
genuineness of all signatures on original or certified copies, the authenticity
of all documents submitted to us as originals and the conformity to original or
certified copies of all copies submitted to us as certified or reproduction
copies. We have obtained and relied upon such certificates and assurance from
public officials as we have deemed appropriate. We have investigated such
questions of law for the purpose of rendering this opinion as we have deemed
necessary. We do not herein express any opinion with respect to the subject
transactions as to any matters governed by any laws other than the laws of the
State of New York, the General Corporation Law of the State of Delaware and
United States federal law.
35
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 2
A. Based on the foregoing, and subject to the assumptions,
qualifications and limitations set forth below we are of the opinion that:
1. The Company is duly organized, validly existing and in good
standing as a corporation under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and to conduct its
business as described in the Prospectus.
2. The Company is duly qualified to do business as a foreign
corporation and is in good standing in Illinois.
3. The Securities have been duly authorized by all necessary
corporate action of the Company and when duly executed, authenticated and
delivered to you pursuant to the Underwriting Agreement against payment of the
consideration therefor as provided therein, will be valid and binding
obligations of the Company.
4. The Underwriting Agreement has been duly authorized by all
necessary corporate action of the Company, has been duly executed and delivered
by the Company and constitutes the valid and binding agreement of the Company,
except as rights to indemnity and contribution thereunder may be limited by
applicable laws, including securities laws, public policy considerations
underlying such laws, and equitable principles.
5. The Amended Credit Agreement has been duly authorized by all
necessary corporate action of the Company, has been duly executed and delivered
by the Company, and constitutes a valid and binding agreement of the Company.
6. The Indenture has been duly authorized by all necessary corporate
action of the Company, has been duly executed and delivered by the Company and
has been duly qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") and constitutes a valid and legally binding instrument of
the Company.
36
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 3
7. The execution, delivery and performance by the Company of the
Underwriting Agreement, the Amended Credit Agreement and the Indenture, the
compliance by the Company with all the provisions thereof and the consummation
by the Company of the transactions contemplated thereby, including issuance of
the Securities, will not (a) result in the violation by the Company of any New
York, Delaware corporate or federal statute, rule or regulation, in each case
known to us (except that with respect to the Act and the Exchange Act, our
opinion is limited to the matters expressed in paragraphs A 8, B, D and E below
and it being understood that you have not requested and we are not expressing
any opinion as to any state securities or "Blue Sky" laws), (b) conflict with or
constitute or result in a breach or violation by the Company of any of the terms
or provisions of, or constitute a default by the Company under, any indenture,
loan agreement or other material agreement, in each case known to us, to which
the Company is a party or by which it is bound, (c) conflict with or result in a
default under the Company's Restated Certificate of Incorporation or Bylaws, in
each case as amended to the date hereof, or (d) violate any judgment, order or
decree known to us of any court or governmental agency or body binding upon the
Company or its properties.
8. No consent, approval, authorization or order of any governmental
agency or body is required for the execution, delivery and performance by the
Company of the Underwriting Agreement, the Amended Credit Agreement and the
Indenture, compliance by the Company with all the provisions thereof and the
consummation by the Company of the transactions contemplated thereby, except (a)
such as have been obtained under the Act and the Trust Indenture Act, (b) such
as may be required under state securities or "Blue Sky" laws and (c) such as may
be required in connection with security arrangements under the Amended Credit
Agreement.
9. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
B. We have participated in the preparation of the Registration
Statement and the Prospectus other than the
37
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 4
documents filed pursuant to the Exchange Act and incorporated by reference in
the Registration Statement and the Prospectus (collectively, the "Incorporated
Documents"), although we have reviewed and discussed with the Company the
contents of the Incorporated Documents. From time to time, in connection
therewith, we have had discussions with the officers, directors and employees of
the Company, Price Waterhouse LLP, its independent accountants who examined
certain of the financial statements of the Company and its consolidated
subsidiaries included in the Registration Statement and Prospectus, your
representatives and your counsel concerning the information contained in the
Registration Statement and the Prospectus and the proposed responses to various
items in Form S-2. Based thereupon, we are of the opinion that (1) each of the
Incorporated Documents (except for financial statements, financial schedules and
other financial and statistical data included or incorporated by reference
therein as to which we express no opinion) complied, when filed with the
Commission under the Exchange Act, as to form in all material respects with the
Exchange Act, and (2) the Registration Statement and the Prospectus (except for
the financial statements, financial schedules, and other financial and
statistical data included or incorporated by reference therein and the Statement
of Eligibility on Form T-1 of the Trustee, as to which we express no opinion),
at the time the Registration Statement became effective under the Act, complied
as to form in all material respects with the Act.
C. We are further of the opinion that the statements contained under
the captions "Description of Certain Other Indebtedness", "Description of Senior
Notes" and the first two paragraphs under the caption "Underwriting" in the
Prospectus and in Item 15 of Part II of the Registration Statement insofar as
such statements purport to summarize certain provisions of the documents or
statutes referred to therein, taken collectively, present fair summaries of such
provisions.
D. The Registration Statement has become effective under the Act,
any required filing of the Prospectus pursuant to Rule 424(b) under the Act has
been made in the manner and within the time period required by
38
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 5
Rule 424(b) under the Act, to the best of our knowledge no stop order suspending
the effectiveness of the Registration Statement has been issued, and to the best
of our knowledge no proceedings for that purpose are pending or threatened by
the Commission.
E. We have not independently verified and are not passing upon, and
do not assume any responsibility for, the accuracy, completeness or fairness
(except as set forth in paragraph (C) above) of the information contained in the
Registration Statement and the Prospectus. Based upon the participation and
discussions described above, however, no facts have come to our attention that
cause us to believe that the Registration Statement and the Prospectus (except
for the financial statements, financial schedules and other financial and
statistical data included or incorporated by reference therein and the Statement
of Eligibility on Form T-1 of the Trustee as to which we express no opinion), at
the time the Registration Statement became effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or that the Prospectus (with the foregoing exceptions), as of the
date hereof, contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The opinions set forth above are subject to the following assumptions,
qualifications and limitations:
(a) Our opinions in paragraphs 3, 4, 5 and 6 of A above are subject,
as to enforceability, to (i) the effects of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, (ii) the effects of general principles of equity,
including without limitation concepts of materiality, reasonableness, good
faith and fair dealing (regardless whether considered in a proceeding in
equity or at law) and the possible unavailability of the remedy of specific
performance or injunctive relief, and (ii) the
39
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 6
qualification that there are possible limitations upon the exercise of
remedial or procedural provisions contained in the Underwriting Agreement,
the Amended Credit Agreement and the Indenture, including without
limitation any provision providing for the waiver by the Company or any of
its subsidiaries of the right to a jury trial.
(b) We have assumed, to the extent the obligations of the Company may
be dependent on such matters, that: (i) each party to each of the
Underwriting Agreement, the Amended Credit Agreement and the Indenture
(other than the Company) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and (ii) such
parties are qualified to do business in every state necessary in order for
them to realize the practical benefits of enforcing their rights under the
Underwriting Agreement, the Amended Credit Agreement and the Indenture. We
also have assumed (i) the due authorization, execution, and delivery of the
Underwriting Agreement, the Amended Credit Agreement and the Indenture by
all parties thereto (other than the Company), (ii) that each such party has
the requisite organizational power and authority to perform its obligations
under the Underwriting Agreement, the Amended Credit Agreement and the
Indenture and (iii) the validity and the binding effect of the Underwriting
Agreement, the Amended Credit Agreement and the Indenture with regard to
such parties.
(c) We express no opinion as to the applicability to the obligations
of the Company under the Underwriting Agreement, the Amended Credit
Agreement and the Indenture of laws relating to fraudulent transfer,
fraudulent obligations or preferential transfer, or any laws governing the
distribution of assets of the Company, including without limitation section
548 of chapter 11 of the United States Code.
(d) For purpose of the opinions expressed in paragraph A 7, the
phrase "known to us" means and refers solely to those agreements, orders or
decrees
40
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 7
identified to us in certificates of officers of the Company,
agreements listed as exhibits to the Registration Statement and to those
matters that the Company has referred to us for legal representation. We
have identified those matters by making inquiry of lawyers presently in our
firm who, according to our records, have been engaged in legal services on
behalf of the Company and by examining certain current records that we
maintain for our internal operations. In that process we have not
undertaken any independent review of documents or records concerning the
Company that are in our possession.
(e) We express no opinion as to (i) any provision of any document
purporting to provide for the payment of interest on interest or (ii) the
effect of the laws of any jurisdiction, other than the State of New York,
that limit rates of interest that may be charged or collected under the
Amended Credit Agreement, the Indenture or the Securities. In addition, we
wish to point out that the enforceability of indemnities in any document to
which the Company or any of its subsidiaries is a party may be subject to
limitations based upon public policy considerations.
(f) As to certain factual matters, we have relied upon certificates
of officers of the Company without any independent investigation or
verification whatsoever. In addition, in rendering the opinions in
paragraph A 1 with respect to the good standing of the Company and the
opinion in paragraph A 2, we have relied solely upon certificates issued by
governmental entities and representations made by Corporation Service
Company without any independent investigation or verification whatsoever.
(g) You have not requested and we are not expressing any opinion as
to any state securities or "Blue Sky" laws.
This opinion is furnished by us, as counsel for the Company, solely
for your benefit and solely with respect to the purchase of the Securities from
the Company by you,
41
<PAGE>
Donaldson, Lufkin & Jenrette
Securities Corporation
CS First Boston Corporation
June __, 1995
Page 8
upon the understanding that we are not hereby assuming any professional
responsibility to any other person whatsoever. Unless otherwise expressly
indicated, each of the matters set forth herein is as of the date hereof, and we
hereby undertake no, and disclaim any, obligation to advise you of any change in
matters set forth herein or upon which this opinion is based.
Very truly yours,
42
<PAGE>
THE INTERLAKE CORPORATION
TO
BANK ONE, COLUMBUS, N.A.
Trustee
_________________
Indenture
Dated as of June __, 1995
__________________
$100,000,000
[ ]% Senior Notes Due 2001
<PAGE>
TABLE OF CONTENTS
This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
Definitions and Other Provisions
of General Application
<S> <C>
SECTION 1.1. Definitions............................................... 1
Acquisition Debt.......................................... 2
Act....................................................... 2
Affiliate................................................. 2
Agent Bank................................................ 2
Amended Credit Agreement.................................. 3
Asset Acquisition......................................... 3
Asset Disposition......................................... 3
Asset Sale................................................ 4
Attributable Value........................................ 4
Authenticating Agent...................................... 5
Authorized Denomination................................... 5
Board of Directors........................................ 5
Board Resolution.......................................... 5
Business Day.............................................. 5
Capital Lease Obligation.................................. 5
Capital Stock............................................. 5
Change of Control......................................... 5
Commission................................................ 6
Common Stock.............................................. 6
Company................................................... 7
Company Request" or "Company Order"....................... 7
Consolidated Capital Expenditures......................... 7
Consolidated Cash Flow Available for
Fixed Charges........................................... 7
Consolidated Cash Flow Ratio.............................. 8
Consolidated Income Tax Expense........................... 9
Consolidated Interest Expense............................. 9
Consolidated Net Income................................... 9
Consolidated Net Worth.................................... 10
Consolidated Subsidiary................................... 10
Consolidated Tangible Net Worth........................... 10
Controlled Subsidiary..................................... 10
Convertible Preferred Stock............................... 10
Corporate Trust Office.................................... 11
Corporation............................................... 11
Currency Agreement........................................ 11
Defaulted Interest........................................ 11
Employee Stock Ownership Plan............................. 11
Equity Sale............................................... 11
Event of Default.......................................... 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exchange Act.............................................. 11
Exchange Debentures....................................... 11
Hoeganaes................................................. 11
Hoeganaes Agreements...................................... 11
Holder.................................................... 12
Incur..................................................... 12
Indebtedness.............................................. 12
Indenture................................................. 13
Independent Financial Advisor............................. 13
Interest Payment Date..................................... 13
Interest Rate Agreement................................... 13
Lien...................................................... 13
Material Subsidiary....................................... 13
Maturity.................................................. 14
Net Available Proceeds.................................... 14
Notice.................................................... 14
Obligations............................................... 14
Offer..................................................... 14
Offer to Purchase......................................... 15
Officers' Certificate..................................... 17
Opinion of Counsel........................................ 17
Outstanding............................................... 17
Pari Passu................................................ 18
Paying Agent.............................................. 18
Person.................................................... 19
Predecessor Security...................................... 19
Preferred Stock........................................... 19
Purchase Date............................................. 19
Record Date............................................... 19
Redeemable Stock.......................................... 19
Redemption Date........................................... 20
Redemption Price.......................................... 20
Regular Record Date....................................... 20
Related Person............................................ 20
Required Filing Date...................................... 20
Responsible Officer....................................... 20
Restricted Payments....................................... 20
Sale and Leaseback Transaction............................ 20
Securities................................................ 20
Securities Act............................................ 21
Security Register" and "Security
Registrar".............................................. 21
Senior Indebtedness....................................... 21
Senior Subordinated Debentures............................ 22
Senior Subordinated Indenture............................. 22
Special Record Date....................................... 22
Stated Maturity........................................... 22
Subsidiary................................................ 22
Trust Indenture Act....................................... 22
</TABLE>
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Trustee................................................... 22
Vice President............................................ 22
Voting Stock.............................................. 23
Wholly Owned Subsidiary................................... 23
SECTION 1.2. Compliance Certificates and Opinions...................... 23
SECTION 1.3. Form of Documents Delivered to Trustee.................... 24
SECTION 1.4. Acts of Holders........................................... 24
SECTION 1.5. Notices, etc., to Trustee and Company..................... 25
SECTION 1.6. Notice to Holders; Waiver................................. 26
SECTION 1.7. Conflict with Trust Indenture Act......................... 26
SECTION 1.8. Effect of Headings and Table of
Contents................................................ 27
SECTION 1.9. Successors and Assigns.................................... 27
SECTION 1.10. Separability Clause....................................... 27
SECTION 1.11. Benefits of Indenture..................................... 27
SECTION 1.12. Governing Law............................................. 27
SECTION 1.13. Legal Holidays............................................ 27
ARTICLE 2
Security Forms
SECTION 2.1. Forms Generally........................................... 28
SECTION 2.2. Form of Face of Security.................................. 28
SECTION 2.3. Form of Reverse of Security............................... 30
ARTICLE 3
The Securities
SECTION 3.1. Title and Terms........................................... 34
SECTION 3.2. Denominations............................................. 35
SECTION 3.3. Execution, Authentication, Delivery and
Dating.................................................. 35
SECTION 3.4. Temporary Securities...................................... 36
SECTION 3.5. Registration, Registration of Transfer
and Exchange............................................ 37
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen
Securities.............................................. 38
SECTION 3.7. Payment of Interest; Interest Rights
Preserved............................................... 39
SECTION 3.8. Persons Deemed Owners..................................... 40
SECTION 3.9. Cancellation.............................................. 41
SECTION 3.10. Computation of Interest................................... 41
SECTION 3.11. CUSIP Number.............................................. 41
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ARTICLE 4
Satisfaction and Discharge
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SECTION 4.1. Satisfaction and Discharge of Indenture................... 42
SECTION 4.2. Application of Trust Money................................ 43
ARTICLE 5
Remedies
SECTION 5.1. Events of Default......................................... 44
SECTION 5.2. Acceleration of Maturity; Rescission
and Annulment........................................... 46
SECTION 5.3. Collection of Indebtedness and Suits
for Enforcement by Trustee.............................. 47
SECTION 5.4. Trustee May File Proofs of Claim.......................... 48
SECTION 5.5. Trustee May Enforce Claims Without
Possession of Securities................................ 49
SECTION 5.6. Application of Money Collected............................ 50
SECTION 5.7. Limitation of Suits....................................... 51
SECTION 5.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest................................................ 52
SECTION 5.9. Restoration of Rights and Remedies........................ 52
SECTION 5.10. Rights and Remedies Cumulative............................ 52
SECTION 5.11. Delay or Omission Not Waiver.............................. 53
SECTION 5.12. Control by Holders........................................ 53
SECTION 5.13. Waiver of Past Defaults................................... 53
SECTION 5.14. Undertaking for Costs..................................... 54
SECTION 5.15. Waiver of Stay or Extension Laws.......................... 54
ARTICLE 6
The Trustee
SECTION 6.1. Certain Duties and Responsibilities....................... 55
SECTION 6.2. Certain Rights of Trustee................................. 56
SECTION 6.3. Not Responsible for Recitals or
Issuance of Securities.................................. 58
SECTION 6.4. May Hold Securities....................................... 58
SECTION 6.5. Money Held in Trust....................................... 58
SECTION 6.6. Compensation and Reimbursement............................ 58
SECTION 6.7. Corporate Trustee Required;
Eligibility............................................. 59
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SECTION 6.8. Resignation and Removal; Appointment of
Successor............................................... 60
SECTION 6.9. Acceptance of Appointment by Successor.................... 61
SECTION 6.10. Merger, Conversion, Consolidation or
Succession to Business.................................. 62
SECTION 6.11. Appointment of Authenticating Agent....................... 62
ARTICLE 7
Holders Lists and Reports by
Trustee and Company
SECTION 7.1. Certificate to Trustee; Securityholders
Lists................................................... 64
SECTION 7.2. Report by Trustee......................................... 65
SECTION 7.3. Reports by Company........................................ 65
ARTICLE 8
SECTION 8.1. Mergers, Consolidations and Certain
Sales of Assets......................................... 65
SECTION 8.2. Successor Substituted..................................... 67
ARTICLE 9
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent
of Holders.............................................. 67
SECTION 9.2. Supplemental Indentures With Consent of
Holders................................................. 68
SECTION 9.3. Execution of Supplemental Indentures...................... 69
SECTION 9.4. Effect of Supplemental Indentures......................... 69
SECTION 9.5. Conformity with Trust Indenture Act....................... 69
SECTION 9.6. Reference in Securities to Supplemental
Indentures.............................................. 70
ARTICLE 10
Covenants
SECTION 10.1. Payment of Principal, Premium and
Interest................................................ 70
SECTION 10.2. Maintenance of Office or Agency........................... 70
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SECTION 10.3. Money for Security Payments to Be Held
in Trust................................................ 71
SECTION 10.4. Existence................................................. 72
SECTION 10.5. Maintenance of Properties................................. 73
SECTION 10.6. Payment of Taxes and Other Claims......................... 73
SECTION 10.7. Limitation on Consolidated
Indebtedness............................................ 73
SECTION 10.8. Limitation on Transactions with
Stockholders and Affiliates............................. 77
SECTION 10.9. Limitation on Restricted Payments......................... 78
SECTION 10.10. Limitation on Certain Asset
Dispositions............................................ 81
SECTION 10.11. Limitation on Certain Restrictions
Affecting any Subsidiary................................ 84
SECTION 10.12. Limitation on Issuance of Shares of
Subsidiaries............................................ 85
SECTION 10.13. Limitation on Sale and Leaseback
Transactions............................................ 85
SECTION 10.14. Limitation on Liens....................................... 86
SECTION 10.15. Change of Control......................................... 86
SECTION 10.16. Provision of Financial Information........................ 88
SECTION 10.17. Waiver of Certain Covenants............................... 88
SECTION 10.18. Notice to Trustee of Certain Defaults..................... 89
ARTICLE 11
Redemption of Securities
SECTION 11.1. Right of Optional Redemption.............................. 89
SECTION 11.2. Election to Redeem; Notice to Trustee..................... 89
SECTION 11.3. Selection by Trustee of Securities to
Be Redeemed............................................. 90
SECTION 11.4. Notice of Redemption...................................... 90
SECTION 11.5. Deposit of Redemption Price............................... 91
SECTION 11.6. Securities Payable on Redemption Date..................... 91
SECTION 11.7. Securities Redeemed in Part............................... 92
ARTICLE 12
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option to Effect Defeasance
or Covenant Defeasance.................................. 92
SECTION 12.2. Defeasance and Discharge.................................. 92
SECTION 12.3. Covenant Defeasance....................................... 93
SECTION 12.4. Conditions to Defeasance or Covenant
Defeasance.............................................. 93
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SECTION 12.5. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.......................... 95
SECTION 12.6. Reinstatement............................................. 96
TESTIMONIUM.................................................................... 97
SIGNATURES AND SEALS........................................................... 97
ACKNOWLEDGMENTS................................................................ 98
</TABLE>
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<PAGE>
INDENTURE, dated as of June __, 1995 between The Interlake Corporation, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 550 Warrenville
Road, Lisle, Illinois 60532-4387, and Bank One, Columbus, N.A., a national
banking association, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its [ ]%
Senior Notes Due 2001 (herein called the "Securities") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
Definitions and Other Provisions
of General Application
SECTION 1.1. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by
<PAGE>
reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of this Indenture; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article 6, are defined in that
Article.
"Acquisition Debt" means Indebtedness or Preferred Stock of any Person
existing at the time such Person became a Subsidiary of the Company (or such
Person is merged into the Company or one of its Subsidiaries) or assumed or
issued in connection with the acquisition of assets from any such Person (other
than assets acquired in the ordinary course of business), including Indebtedness
Incurred or Preferred Stock issued in connection with, or in contemplation of,
such Person becoming a Subsidiary of the Company (but excluding Indebtedness or
Preferred Stock of such Person which is extinguished, retired, repaid, redeemed
or repurchased in connection with such Person becoming a Subsidiary of the
Company).
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Bank" means Chemical Bank as Administrative Agent under the
Amended Credit Agreement, and, pursuant to
2
<PAGE>
Section 11.09 of the Amended Credit Agreement, any successor thereto under the
Amended Credit Agreement.
"Amended Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of September 27, 1989 and amended and restated as of May 28,
1992, and as heretofore amended and as amended as of June __, 1995 (including,
without limitation, any "Credit Documents" (as defined in the Amended Credit
Agreement)), among the Company, the Employee Stock Ownership Plan and certain
Subsidiaries of the Company, the Agent Bank and the Lenders listed therein, as
such Agreement has been amended, amended and restated, supplemented or otherwise
modified to the date hereof, and includes any agreement extending the maturity
of, refinancing or otherwise restructuring (including, but not limited to, the
inclusion of additional borrowers thereunder that are Subsidiaries of the
Company and additional lenders) all or any portion of the Obligations under such
Agreement (as defined therein) or any successor agreement.
"Asset Acquisition" means (i) an investment by the Company or any of
its Subsidiaries in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or any of its Subsidiaries or shall be merged with
the Company or any of its Subsidiaries or (ii) the acquisition by the Company or
any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Disposition" by any Person means any sale, lease, conveyance,
transfer or other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) of (i) shares of Capital Stock
of a Subsidiary of such Person, (ii) property of such Person or any of its
Subsidiaries or (iii) other assets of such Person or any of its Subsidiaries
(each referred to for the purposes of this definition as a "disposition") by
such Person or any of its Subsidiaries (other than a disposition (x) by a
Subsidiary of such Person to such Person, (y) by such Person or a Subsidiary of
such Person to a Wholly Owned Subsidiary of such Person or such Subsidiary or
(z) by such Person or a Subsidiary of such Person to a Controlled Subsidiary of
such Person or such Subsidiary so long as immediately after such disposition
such Person or such Subsidiary owns, directly or indirectly, a percentage of the
Capital Stock, Voting Stock and other ownership interest of such Subsidiary
which is equal to or greater than the percentage of such Capital Stock, Voting
Stock or other ownership interest, respectively, owned by such Person or such
Subsidiary, directly or indirectly, immediately prior
3
<PAGE>
to such disposition) other than dispositions of property or assets in the
ordinary course of business. For purposes of this definition, any disposition
in connection with directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall not constitute an Asset Disposition.
Notwithstanding the foregoing, a pledge, change in share registry or similar
transaction shall not be deemed an Asset Disposition if effected to secure
Indebtedness permitted under Section 10.7.
"Asset Sale" means the sale, lease, conveyance, transfer or other
disposition by the Company or any of its Subsidiaries (other than to one of its
Wholly Owned Subsidiaries or to one of its Controlled Subsidiaries so long as
immediately after such disposition the Company or Subsidiary owns, directly or
indirectly, a percentage of the Capital Stock, Voting Stock or other ownership
interest in such Subsidiary which is equal to or greater than the percentage of
Capital Stock, Voting Stock or other ownership interest, respectively, owned by
such Person or such Subsidiary, directly or indirectly, immediately prior to
such disposition) of (i) all or substantially all of the Capital Stock of any
Subsidiary or (ii) substantially all of the assets which constitute
substantially all of an operating unit or business of the Company or any of its
Subsidiaries.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the total net amount of rent required to be paid by such
Person under such lease during the initial term thereof as determined in
accordance with generally accepted accounting principles, discounted from such
initial term date to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation of such
Person with like term in accordance with generally accepted accounting
principles. The net amount of rent required to be paid under any such lease for
any such period shall be the aggregate amount of rent payable by the lessee with
respect to such period after excluding amounts required to be paid on account of
insurance, taxes, assessments, utility, operating and labor costs and similar
charges. In the case of any lease which is terminable by the lessee upon the
payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
4
<PAGE>
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
"Authorized Denomination" has the meaning set forth in Section 3.2.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York, or Columbus, Ohio are authorized or obligated
by law or executive order to close.
"Capital Lease Obligation" of any Person means any obligation to pay
rent or other amounts under a lease of (or other Indebtedness arrangements
conveying the right to use) real, personal or mixed property of such Person
which is required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles, and the amount of such obligation
shall be the capitalized amount thereof in accordance with generally accepted
accounting principles and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations, warrants, rights or other equivalents (however designated) of
corporate stock whether now outstanding or issued after the date of this
Indenture.
"Change of Control" means the occurrence of one or more of the
following events, whether or not approved by the Board of Directors of the
Company:
(1) any Person or any Persons acting together which would constitute
a "group" for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof, other than the Employee
5
<PAGE>
Stock Ownership Plan or the trusts for any other employee stock ownership,
benefit or pension plans of the Company or any Subsidiary and other than
the original holders of Convertible Preferred Stock, shall beneficially own
(as defined in Rule 13d-3 promulgated under the Exchange Act) at least 50%
of the total voting power of all classes of Capital Stock of the Company
entitled to vote generally in the election of directors of the Company;
(2) any one Person or Group (other than the Board of Directors of the
Company as it may be constituted from time to time), or any Affiliates
thereof, shall succeed in having sufficient of its or their nominees
elected to the Board of Directors of the Company such that such nominees,
when added to any existing director remaining on the Board of Directors of
the Company after such election who is an Affiliate of such Group, shall
constitute a majority of the Board of Directors of the Company;
(3) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company to any Person or entity or Group of Persons or
entities (other than any Wholly Owned Subsidiary of the Company);
(4) the shareholders of the Company shall approve any plan for the
liquidation or dissolution of the Company; or
(5) the merger or consolidation of the Company with or into another
corporation or the merger of another corporation into the Company with the
effect that immediately after such transaction any Person or Group holds
more than 50% of the total voting power entitled to vote generally in the
election of directors, managers or trustees of the surviving corporation of
such merger or consolidation.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
"Commission" shall mean the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment
6
<PAGE>
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up, to shares of Capital Stock
of any other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures Incurred (whether paid in cash or accrued as
liabilities and including Capital Lease Obligations) by the Company and its
Subsidiaries during such period that, in conformity with generally accepted
accounting principles, are included in the property, plant or equipment or
similar fixed asset account reflected in the consolidated balance sheet of the
Company and its Consolidated Subsidiaries.
"Consolidated Cash Flow Available for Fixed Charges" of any Person
means for any period the Consolidated Net Income of such Person for such period
plus (i) Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person and its Consolidated Subsidiaries for such period, less
(iv) the aggregate amount actually paid by such Person and its Consolidated
Subsidiaries during such period on account of Consolidated Capital Expenditures
and less (v) dividends declared or paid (without duplication) during such period
to minority shareholders with respect to a Controlled Subsidiary to the extent,
if any, the amount thereof exceeds the difference between the "minority
interest" set forth on such Person's consolidated balance sheet on the last day
of such period and the lesser of (A) the minority interest as set forth on such
Person's consolidated balance sheet on the date hereof, or (B) the minority
interest as set forth on such Person's consolidated balance sheet on the day
immediately preceding the first day of such period.
7
<PAGE>
"Consolidated Cash Flow Ratio" of any Person means for any period the
ratio of (i) Consolidated Cash Flow Available for Fixed Charges of such Person
for such period to (ii) the sum of (A) Consolidated Interest Expense of such
Person for such period plus (B) the annual Consolidated Interest Expense with
respect to the Indebtedness or Subsidiary Preferred Stock proposed to be
Incurred by such Person or any of its Consolidated Subsidiaries which requires
the calculation of the Consolidated Cash Flow Ratio, as if such Indebtedness or
Subsidiary Preferred Stock had been Incurred on the first day of such period
plus (C) the annual Consolidated Interest Expense (including the amortization of
original issue discount and non-cash interest payments or accruals) with respect
to any other Indebtedness or Subsidiary Preferred Stock Incurred by such Person
or its Consolidated Subsidiaries since the end of such period to the extent not
included in clause (ii)(A) as if such Indebtedness or Subsidiary Preferred Stock
had been Incurred on the first day of such period and after giving effect to the
application of the proceeds therefrom less (D) Consolidated Interest Expense of
such Person to the extent included in clause (ii)(A) or (C) with respect to any
Indebtedness or Subsidiary Preferred Stock that is or will be no longer
outstanding as a result of the redemption, defeasance, repurchase, retirement or
acquisition thereof from the proceeds of Capital Stock of the Company or any
Subsidiary of the Company (other than Redeemable Stock) or that will no longer
be outstanding as a result of the Incurrence of the Indebtedness or Subsidiary
Preferred Stock proposed to be Incurred by such Person or any of its
Consolidated Subsidiaries, except for Consolidated Interest Expense actually
Incurred with respect to Indebtedness borrowed (as adjusted pursuant to the
first proviso set forth below) (x) under a revolving credit or similar
arrangement to the extent the commitment thereunder remains in effect on the
date of computation or (y) pursuant to Section 10.7; provided, however, that in
-------- -------
making such computation, the Consolidated Interest Expense of such Person
attributable to interest or dividends on any Indebtedness or Subsidiary
Preferred Stock bearing a floating interest rate shall be computed on a pro
forma basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period, unless, in the case of any Indebtedness,
such Person or any of its Consolidated Subsidiaries is a party to an Interest
Rate Agreement (which shall remain in effect for the shorter of the twelve month
period after the date of computation or the term of such Indebtedness) which has
the effect of fixing the interest rate on the date of computation, in which case
such rate (whether higher or lower) shall be used; provided further that in the
-------- -------
event such Person or its Subsidiaries
8
<PAGE>
has made Asset Sales or Asset Acquisitions during or after such period and prior
to the date of Incurrence of such Indebtedness which requires calculation of the
Consolidated Cash Flow Ratio, such computation of Consolidated Cash Flow
Available for Fixed Charges and Consolidated Interest Expense shall be made on a
pro forma basis as if the Asset Sales or Asset Acquisitions had taken place on
the first day of such period.
"Consolidated Income Tax Expense" for any Person means for any period
the consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period.
"Consolidated Interest Expense" for any Person means for any period
the consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), in respect of such Person
or any of its Consolidated Subsidiaries, (i) the interest component of such
Person's aggregate Capital Lease Obligations; (ii) the amortization of
Indebtedness discounts; (iii) any payments of fees with respect to letters of
credit, bankers' acceptances or similar facilities; (iv) fees with respect to
Interest Rate Agreements or Currency Agreements and (v) Preferred Stock
dividends declared and payable in cash.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided, however, that there shall be excluded therefrom
-------- -------
(a) the net income (or loss) of any Person acquired by such Person or a
Subsidiary of such Person in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (but not net loss) of
any Consolidated Subsidiary of such Person which is subject to restrictions
which prevent the payment of dividends or the making of distributions to such
Person to the extent of such restrictions, (c) the net income (or loss) of any
Person that is not a Consolidated Subsidiary of such Person except to the extent
of the amount of any dividends or other distributions actually paid to such
Person by such other Person during such period, (d) gains or losses on Asset
Dispositions by such Person or its Consolidated Subsidiaries, (e) all
extraordinary gains and extraordinary losses and (f) the cumulative effect of a
change in accounting principle.
9
<PAGE>
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with generally accepted
accounting principles, less (to the extent reflected therein) (a) amounts
attributable to the effects of foreign currency exchange adjustments under
Financial Accounting Standards Board Opinion No. 52, (b) amounts attributable to
Redeemable Stock of such Person and (c) with respect to the Company and its
Consolidated Subsidiaries, adjustments following the date of this Indenture to
the accounting books and records of the Company and its Consolidated
Subsidiaries resulting from the acquisition of control of such Person by another
Person in accordance with Accounting Principles Board Opinions Nos. 16 and 17.
"Consolidated Subsidiary" of any Person means any Subsidiary in which
such Person has an interest that would be accounted for on a consolidated basis
in such Person's financial statements in accordance with generally accepted
accounting principles.
"Consolidated Tangible Net Worth" means with respect to any Person (i)
the consolidated stockholders' equity of such Person and its Consolidated
Subsidiaries as set forth on the most recent consolidated balance sheet of such
Person and its Consolidated Subsidiaries prepared in accordance with generally
accepted accounting principles less (ii) the value of all of the consolidated
intangible assets of such Person and its Consolidated Subsidiaries determined in
accordance with generally accepted accounting principles.
"Controlled Subsidiary" of any Person means a Subsidiary, at least 80%
of the Voting Stock of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by such Person (including ownership
through one or more Subsidiaries).
"Convertible Preferred Stock" means (a) the Company's Series A1
Convertible Exchangeable Preferred Stock, par value $1.00 per share, (b) the
Company's Series A2 Convertible Exchangeable Preferred Stock, par value $1.00
per share, (c) the Company's Series B1 Convertible Preferred Stock, par value
$1.00 per share, (d) the Company's Series B2 Convertible Preferred Stock, par
value $1.00 per share, (e) the Company's Series A3 Convertible Exchangeable
Preferred Stock, par value $1.00 per share and (f) the Company's Series B3
Convertible Preferred Stock, par value $1.00 per share.
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"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, the City of New York or in the City of Columbus, Ohio,
at which at any particular time its corporate trust business shall be
administered, which on the date of this Indenture is c/o First Chicago Trust
Company, 14 Wall Street, Suite 4607, 8th Floor, New York, NY 10002 or Bank One,
Columbus, N.A., 100 East Broad Street, 8th Floor, Columbus, Ohio 43215.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect any
Person against fluctuations in currency values.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Employee Stock Ownership Plan" means the Company Employee Stock
Ownership Plan effective as of September 1, 1989.
"Equity Sale" means a sale of Capital Stock (other than Redeemable
Stock) of the Company other than sales of such Capital Stock to Affiliates,
employees, officers or directors of the Company, including issuances pursuant to
any employee stock or option arrangements.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debentures" means the Company's Series 1 Junior Convertible
Subordinated Debentures, the Company's Series 2 Junior Convertible Subordinated
Debentures and the Company's Series 3 Junior Convertible Subordinated
Debentures, in each case for which certain of the Convertible Preferred Stock
may be exchanged.
"Hoeganaes" means Hoeganaes Corporation, a Delaware corporation,
together with its Subsidiaries.
"Hoeganaes Agreements" means the Stockholders Agreement dated as of
February 8, 1994 among the Company, Hoeganaes and Hoganas Aktiebolag, a Swedish
corporation, and the Research and Development Agreement dated as of February
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8, 1994 between Hoganas Aktiebolag, a Swedish corporation, and Hoeganaes.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Indebtedness, Lien or other
obligation of any Person, to create, issue, assume, guarantee, incur or
otherwise become liable in respect of such Indebtedness (including in the case
of Indebtedness, the extension of the maturity of or becoming responsible for
the payment of, any Indebtedness), Lien or other obligation (and "Incurrence,"
"Incurred" and "Incurring" shall have meanings correlative to the foregoing),
provided that a change in generally accepted accounting principles that results
- --------
in an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) every obligation of such Person issued or assumed
as the deferred purchase price of property (including pursuant to Capital Lease
Obligations), every conditional sale obligation and every obligation under any
title retention agreement, in each case if on terms permitting any portion of
the purchase price to be paid beyond one year from the date of purchase (but
excluding trade accounts payable arising in the ordinary course of business
which are not overdue by more than 90 days or which are being contested in good
faith), (v) every obligation of such Person issued or contracted for as payment
in consideration of the purchase by such Person or an Affiliate of such Person
of the stock or substantially all of the assets of another Person or a merger or
consolidation to which such Person or an Affiliate of such Person was a party,
(vi) every obligation of the type referred to in clauses (i) through (v) of
other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, (vii) every obligation of the type referred to
in clauses (i) through (vi) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such property or
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<PAGE>
assets or the amount of the obligation so secured, and (viii) all Redeemable
Stock valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means a nationally recognized
investment banking firm (i) which does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company or any of its Subsidiaries and (ii) which, in the sole
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which such firm is being engaged.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge arrangement.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Material Subsidiary" means, as of any date, any Subsidiary of any
Person (a) the value of whose assets, as such assets would appear on a
consolidated balance sheet of such Subsidiary and its Consolidated Subsidiaries
prepared as of the end of the fiscal quarter next preceding such determination
in accordance with generally accepted accounting principles, is at least 5% of
the value of the assets of such Person and its Consolidated Subsidiaries,
determined as aforesaid, or (b) which has revenues, as such revenues would
appear on a consolidated income statement of such Subsidiary and its
Consolidated Subsidiaries prepared as of the end of the fiscal quarter next
preceding such
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determination in accordance with generally accepted accounting principles,
constituting at least 5% of the revenues of such Person and its Consolidated
Subsidiaries, determined as aforesaid.
"Maturity," when used with respect to any Security, means the date on
which the principal amount of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition by a Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person, net of
all legal, title and recording tax expenses, commissions and other fees and
expenses Incurred by such Person and all federal, state, provincial, foreign and
local taxes and reserves required to be accrued by such Person as a liability as
a consequence of such Asset Disposition, and net of all payments made by such
Person or its Subsidiaries on any Indebtedness which is secured by such assets
in accordance with the terms of any Liens upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such Asset Disposition or by applicable law be repaid out of the proceeds
from such Asset Disposition, and net of all distributions and other payments
made by such Person to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition.
"Notice" has the meaning specified in the definition of Offer to
Purchase in this Section 1.1.
"Obligations" means all obligations for the reimbursement of amounts
drawn under any letter of credit or for the payment of principal, premium,
interest (including, without limitation, interest whether or not allowed after
the filing of a petition initiating any proceeding referred to in Section 5.1(6)
or (7) at the rate specified in the instrument governing the relevant
Indebtedness), penalties, fees, expenses, indemnities or other amounts, now or
hereafter existing, with respect to any Indebtedness.
"Offer" means an offer to purchase the Securities pursuant to an Offer
to Purchase.
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"Offer to Purchase" means a written notice (the "Notice") delivered to
the Trustee and given (a) with respect to an Offer to Purchase made pursuant to
Section 10.10, by first class mail, postage prepaid, and (b) with respect to an
Offer to Purchase made pursuant to Section 10.15, by overnight carrier, in
either event to each Holder at the address appearing in the Security Register,
offering to purchase up to the principal amount of Securities specified in such
Notice, at the purchase price specified in such Notice (as determined pursuant
to this Indenture). Any Notice shall specify a purchase date (the "Purchase
Date") for such Offer to Purchase which (X) with respect to an Offer to Purchase
made pursuant to Section 10.10, shall be not less than 30 days or more than 60
days after the date of such Notice and, (Y) with respect to an Offer to Purchase
made pursuant to Section 10.15, shall be not less than 15 days after the date of
such Notice (or, in either event, such other time period as is necessary for the
Offer to Purchase to remain open for a sufficient period of time to comply with
applicable securities laws). Any Notice shall be given by the Company or, at
the Company's request, by the Trustee in the name and at the expense of the
Company and shall contain (i) the most recent financial statements required to
be filed with the Trustee pursuant to Sections 7.3 and 10.16, (ii) a description
of material developments in the Company's business subsequent to the date of the
latest of such financial statements referred to in clause (i) (including the
events requiring the Company to make such Offer to Purchase), (iii) if material,
appropriate pro forma financial information concerning such Offer to Purchase
and the events requiring the Company to make such Offer to Purchase and (iv) any
other information required by applicable law to be included therein. Any Notice
shall contain all instructions and materials necessary to enable such Holder to
tender Securities for purchase pursuant to such Offer to Purchase. Any Offer to
Purchase shall remain open from the time of mailing of the Notice until the
Purchase Date, and shall be governed by and effected in accordance with, and the
Company and the Trustee shall perform their respective obligations specified in,
the Notice for such Offer to Purchase. Any Notice shall state:
(1) the Section of this Indenture pursuant to which such Offer to
Purchase is being made;
(2) the aggregate outstanding principal amount (the "Purchase
Amount") of the Securities required to be offered to be purchased by the
Company pursuant to such Offer to Purchase (including, if less than all the
Securities, the calculation thereof pursuant to the Section hereof
requiring such Offer to Purchase);
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<PAGE>
(3) the Purchase Date;
(4) the purchase price to be paid by the Company for each $1,000
principal amount of Securities accepted for payment (as specified pursuant
to this Indenture);
(5) that the Holder of any Security may tender for purchase by the
Company all or any portion of such Security equal to $1,000 principal
amount or any integral multiple thereof;
(6) the place or places where Securities are to be surrendered for
tender pursuant to such Offer to Purchase;
(7) any Security not tendered or tendered but not purchased by the
Company pursuant to such Offer to Purchase will continue to accrue interest
as set forth in such Security and this Indenture;
(8) that on the Purchase Date the purchase price will become due and
payable upon each Security (or portion thereof) selected for purchase
pursuant to such Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;
(9) that each Holder electing to tender a Security pursuant to such
Offer to Purchase will be required to surrender such Security at the place
or places specified in the Notice prior to the close of business on the
fifth Business Day prior to the Purchase Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or its attorney duly
authorized in writing);
(10) that any Holder will be entitled to withdraw the tender of such
Holder's Security if the Trustee receives, not later than the close of
business on the fifth Business Day prior to the Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of the Security such Holder tendered, the
certificate number of the Security such Holder tendered and a statement
that such Holder is withdrawing the tender of such Holder's Security;
(11) that (a) if Securities (or portions thereof) in an aggregate
principal amount less than or equal to
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the Purchase Amount are duly tendered and not withdrawn pursuant to such
Offer to Purchase, the Company shall purchase all such Securities and (b)
if Securities in an aggregate principal amount in excess of the Purchase
Amount are duly tendered and not withdrawn pursuant to such Offer to
Purchase, (i) the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount and (ii) the particular
Securities (or portions thereof) to be purchased shall be selected by such
method as the Trustee shall deem fair and appropriate and which may provide
for the selection for purchase of portions (equal to $1,000 or any integral
multiple of $1,000) of the principal amount of Securities of a
denomination larger than $1,000; and
(12) that, in the case of any Holder whose Security is purchased only
in part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any Authorized Denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee. Each such certificate shall comply with Section 314
of the Trust Indenture Act.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee. Each such
opinion shall comply with Section 314 of the Trust Indenture Act.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities therefore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as
17
<PAGE>
its own Paying Agent) for the Holders of such Securities; provided that, if
--------
such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Pari Passu," as applied to the ranking of any Indebtedness of a
Person in relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not expressly subordinated in right of payment to any
Indebtedness or (ii) is expressly subordinated in right of payment to the same
Indebtedness as is the other, and is so subordinated to the same extent, and is
not expressly subordinated in right of payment to the other or to any
Indebtedness as to which the other is not so expressly subordinated.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. Initially the Company authorizes the Trustee to act as Paying
Agent.
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"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization, government, or any agency or
political subdivision thereof or any similar entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock," as applied to the capital stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Purchase Date" has the meaning specified in the definition of Offer
to Purchase in this Section.
"Record Date" means any Regular Record Date or Special Record Date.
"Redeemable Stock" of any Person means any class or series of Capital
Stock of such Person that by its terms or otherwise is (i) required to be
redeemed prior to the Maturity of the Securities or (ii) redeemable at the
option of the holder thereof at any time prior to the Maturity of the Securities
or (iii) convertible into or exchangeable for Capital Stock referred to in
clause (i) or (ii) or Indebtedness having a scheduled maturity prior to the
Maturity of the Securities; provided that any Capital Stock which would not
--------
constitute Redeemable Stock but for provisions thereof giving holders thereof
the right to require the Company to repurchase or redeem such Capital Stock upon
the occurrence of a change in control occurring prior to the Maturity of the
Securities shall not constitute Redeemable Stock if the change in control
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Section 10.15 and such
Capital Stock specifically provides that the Company will not repurchase or
redeem any such stock pursuant to such provisions prior to the Company's
repurchase of such Securities as are required to be repurchased pursuant to the
provisions of Section 10.15.
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"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the _____ day of April or October (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Related Person" of any Person means any Person beneficially owning
(a) 5% or more of the outstanding Common Stock of such Person or (b) 5% or more
of the outstanding Voting Stock of such Person.
"Required Filing Date" has the meaning specified in Section 10.16.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Department (or any successor group) of the
Trustee, including without limitation any Vice President, Assistant Vice
President, Assistant Secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers, who shall, in any case, be responsible for the administration of this
Indenture or have familiarity with it, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section 10.9.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any bank, insurance company or other lender or investor or to which such
lender or investor is a party, providing for the leasing by such Person or any
Subsidiary of such Person of any property or asset of such Person or such
Subsidiary which has been or is being sold or transferred by such Person or such
Subsidiary to such lender or investor or to any Person to whom funds have been
or are to be advanced by such lender or investor on the security of such
property or asset.
"Securities" means securities designated in the first paragraph of the
Recitals Of The Company.
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"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest on, and all other amounts payable in respect of, (a) all Obligations of
the Company under this Indenture and the Securities, (b) all Obligations of the
Company and its Subsidiaries created pursuant to the Amended Credit Agreement or
any similar senior credit facility or agreement to the extent permitted by
Section 10.7(b)(i) hereof (each of the Amended Credit Agreement and such other
facility or agreement as permitted by Section 10.7(b)(i), a "Senior Credit
Facility"), (c) all other Indebtedness of the Company not prohibited by Section
10.7, whether outstanding on the date of this Indenture or thereafter Incurred,
other than the Securities, (d) Obligations of the Company under Interest Rate
Agreements, (e) Obligations of the Company under Currency Agreements entered
into in respect of any such Indebtedness or obligation or in the ordinary course
of business and (f) amendments, renewals, extensions, modifications and
refundings of any such Indebtedness or obligation; provided that the term Senior
--------
Indebtedness shall not include (to the extent any of the following constitutes
Indebtedness) (i) any Indebtedness or Obligation owed to a Subsidiary, (ii) any
Indebtedness or Obligation which is expressly subordinated or junior to the
Securities or to any other Indebtedness or Obligation of the Company (other than
any Indebtedness secured by a subordinated Lien and Incurred by the Company
pursuant to any Senior Credit Facility), including the Exchange Debentures,
(iii) any Indebtedness of the Company which when Incurred and without respect to
any election under Section 1111(b) of the United States Bankruptcy Code, as
amended, was without recourse to the Company, (iv) any Indebtedness (other than
Indebtedness Incurred pursuant to Section 10.7) of the Company not otherwise
permitted by Section 10.7, (v) any Indebtedness to any employee of the Company,
(vi) any liability for taxes and (vii) accounts payable or any other
Indebtedness or monetary obligations to trade creditors created or assumed by
the Company or any of its Subsidiaries in the ordinary course of business in
connection with the obtaining of materials or services. Any Obligation under
any Senior Credit Facility constituting Senior Indebtedness shall continue to
constitute Senior Indebtedness despite a determination that the Incurrence of
such Obligation by the Company was a preference under Section 547(b) of Title 11
of the United States Code (or any successor thereto) or was a
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fraudulent conveyance or transfer under Federal or State law.
"Senior Subordinated Debentures" means the 12 1/8% Senior Subordinated
Debentures of the Company due 2002.
"Senior Subordinated Indenture" means the Indenture dated as of June
18, 1992 between the Company and Harris Trust and Savings Bank as Trustee,
pursuant to which the Senior Subordinated Debentures were issued.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" of any Person means a corporation of which more than 50%
of the outstanding Voting Stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are owned, directly or indirectly, by such Person
or by one or more other Subsidiaries, or by such Person and one or more other
Subsidiaries. Voting Stock or other ownership interests shall be deemed owned
by a Person notwithstanding the pledge, transfer of registered ownership or
similar transaction relating to such Voting Stock or other ownership interests
to the extent such transaction secures Indebtedness permitted under Section
10.7.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this Indenture was executed, except as provided in
Section 9.5.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
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"Voting Stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary all of the
outstanding Capital Stock of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Subsidiaries or by such Person and one or more Wholly Owned Subsidiaries.
Capital Stock shall be deemed owned by a person notwithstanding the pledge,
transfer of registered ownership or similar transaction relating to such Capital
Stock to the extent such transaction secures Indebtedness permitted under
Section 10.7.
SECTION 1.2. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
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(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representation with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders.
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(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required,
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<PAGE>
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 1.5. Notices, etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given furnished or filed in writing
or, in the case of the Company, by facsimile transmission to the Trustee at
(614) 248-5195 or any other number provided by the Trustee so long as such
transmission is confirmed by written notice sent by guaranteed overnight
courier, to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture or
25
<PAGE>
at any other address previously furnished in writing to the Trustee by the
Company, or
(3) to the Agent Bank by the Company, by the Trustee or by the Holders
if in writing and mailed, first class postage prepaid, to the Agent Bank at
[__________], Attention: [__________], with a copy to: [__________],
Attention: [__________], or at any other address previously furnished in
writing to the Company and the Trustee.
SECTION 1.6. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by operation
of Sections 310 to 317, inclusive, of the Trust Indenture Act (an "incorporated
provision"), such incorporated provision shall control.
26
<PAGE>
SECTION 1.8. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not. All agreements of
the Trustee in this Indenture shall bind its successor, if any.
SECTION 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture. This Indenture may not be used to
interpret another indenture, loan or debt agreement of the Company or any of its
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 1.12. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 1.13. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity,
provided that no interest shall accrue for the period from
27
<PAGE>
and after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE 2
Security Forms
SECTION 2.1. Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. The Company shall approve
the form of the Securities and any notation, legend or endorsement on them.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.2. Form of Face of Security.
------------------------
The Interlake Corporation
[ ]% Senior Note Due 2001
No. __________ $_________
The Interlake Corporation, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________, or registered assigns, the
principal sum of_______________ Dollars on the __ day of November, 2001 and to
pay interest thereon from June __, 1995 or from the most recent Interest Payment
Date (as hereinafter defined) to which interest has been paid or duly provided
for, on May __ and November__ in each year commencing on November __, 1995 at a
rate per annum equal to [ ]% until the principal hereof is paid or
28
<PAGE>
made available for payment. The interest payable and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the __ day of April or October (whether or not
a Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice of
which shall be given to Holders of Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture. Payment of the
principal of (and premium, if any) and interest on this Security will be made at
the offices or agencies of the Company maintained for that purpose in the
Borough of Manhattan, the City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
-------- -------
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
The Company shall pay interest on overdue principal at the rate of 1% per annum
in excess of the applicable interest rate and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
29
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
The Interlake Corporation
By_____________________________
Attest:
______________________
This is one of the Securities referred to in
the within-mentioned Indenture.
______________________________
as Trustee
By_____________________________
Authorized Signer
SECTION 2.3. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its [ ]% Senior Notes Due 2001 (herein called the
"Securities"), limited in aggregate principal amount to $100,000,000, issued
and to be issued under an Indenture, dated as of June __, 1995 (herein called
the "Indenture"), between the Company and Bank One, Columbus, N.A. as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
Except as provided in the next succeeding paragraph, the Securities
will not be subject to redemption prior to November __, 1998. On and after
November __, 1998, the Securities are subject to redemption in whole at any time
and in part from time to time at the option of the Company, if in whole, upon
not less than five or more than 30 days' notice by mail, and from time to time,
if in part, upon not less than 30 or more than 60 days' notice by mail, at the
following Redemption Prices (expressed in percentages
30
<PAGE>
of the principal amount ) together with accrued interest to the Redemption Date:
If redeemed during the twelve-month period
beginning November __:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
1998 [ ]%
1999 [ ]%
2000 100%
</TABLE>
; provided that interest installments whose Stated Maturity is on or prior to
--------
such Redemption Date will be payable to the Holders of such Securities, or one
or more Predecessor Securities, of record at the close of business on the
relevant Record Date referred to on the face hereof, all as provided in the
Indenture.
At any time, and from time to time, prior to November __, 1998, up to
35% of the original aggregate principal amount of the Securities are subject to
redemption at the option of the Company out of the proceeds of one or more
Equity Sales after the date hereof upon not less than 30 or more than 60 days'
notice by mail, at a Redemption Price of [___]% of the principal thereof to the
Redemption Date, together with accrued interest to the Redemption Date.
In the event of a Change of Control, the Company shall make an Offer
to Purchase all Securities then outstanding at a purchase price equal to 101% of
the principal thereof plus accrued and unpaid interest, if any, as and to the
extent provided in the Indenture. "Change of Control" is defined in the
Indenture as the occurrence of one or more of the following events:
(1) any Person or any Persons acting together which would constitute
a "group" for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof, other than the Employee Stock
Ownership Plan or the trusts for any other employee stock ownership,
benefit or pension plans of the Company or any Subsidiary and other than
the original holders of Convertible Preferred Stock, shall beneficially own
(as defined in Rule 13d-3 promulgated under the Exchange Act) at least 50%
of the total voting power of all classes of Capital Stock of the Company
entitled to vote generally in the election of directors of the Company; or
31
<PAGE>
(2) any one Person or Group (other than the Board of Directors of the
Company as it may be constituted from time to time), or any Affiliates
thereof, shall succeed in having sufficient of its or their nominees
elected to the Board of Directors of the Company such that such nominees,
when added to any existing director remaining on the Board of Directors of
the Company after such election who is an Affiliate of such Group, shall
constitute a majority of the Board of Directors of the Company;
(3) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company to any Person or entity or Group of Persons or
entities (other than any Wholly Owned Subsidiary of the Company);
(4) the shareholders of the Company shall approve any plan for the
liquidation or dissolution of the Company; or
(5) the merger or consolidation of the Company with or into another
corporation or the merger of another corporation into the Company with the
effect that immediately after such transaction any Person or Group other
than the Company holds more than 50% of the total voting power entitled to
vote generally in the election of directors, managers or trustees of the
surviving corporation of such merger or consolidation.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, Pari Passu in right of payment with all other Senior
Indebtedness, and this Security is issued subject to the provisions of the
Indenture with respect thereto.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security or (ii) certain restrictive covenants
and events of default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be
32
<PAGE>
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentage in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security. In certain limited circumstances, the Indenture permits the amendment
thereof without the consent of the Holders.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the time, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, the City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of Authorized Denominations and for the same aggregate
principal amount , will be issued to the designated transferee or transferees.
Initially the Trustee will act as Paying Agent and Security Registrar. The
Company may change any Paying Agent or Security Registrar without notice to the
Holder.
The Securities are issuable only in registered form without coupons in
Authorized Denominations. As
33
<PAGE>
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different Authorized Denomination, as requested by the Holder surrendering
the same. The Security Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents. The Security Registrar
need not recognize the transfer or exchange of any Securities selected for any
redemption. The Security Registrar need not exchange or register the transfer
of any Security for a period of 15 Business Days prior to the selection of
Securities to be redeemed.
Except where otherwise specifically provided in the Indenture, no
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE 3
The Securities
SECTION 3.1. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $100 million
(except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.4,
3.5, 3.6, 9.6 or 11.7).
The Securities shall be known and designated as the "[ ]% Senior
Notes Due 2001" of the Company. Their Stated Maturity shall be the __ day in
November, 2001 and they shall bear interest at a rate of [ ]% from June __,
1995, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may
34
<PAGE>
be, payable semi-annually in arrears on each May __ and November __ of each year
commencing November __, 1995 until the principal thereof is paid or made
available for payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the offices or agencies of the Company in the Borough of
Manhattan, the City of New York and in the City of Columbus, Ohio maintained for
such purpose, at the designated office of the Paying Agent at c/o First Chicago
Trust Company, 14 Wall Street, Suite 4607, 8th Floor, New York, NY 10002 or
Bank One, Columbus, N.A., 100 East Broad Street, 8th Floor, Columbus, Ohio 43215
and at any other office or agency maintained by the Company for such purpose;
provided, however that at the option of the Company payment of interest may be
- -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Upon a Change of Control the Company shall make an Offer to Purchase
all Securities then outstanding as and to the extent provided in Section 10.15.
The Securities shall be redeemable at the Company's option as provided
in Article 11.
The Securities shall be Pari Passu in right of payment with other
Senior Indebtedness.
The Securities are subject to defeasance, and certain covenants of the
Company are subject to defeasance, at the option of the Company as provided in
Article 12.
SECTION 3.2. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount and any integral
multiple of $1,000 (an "Authorized Denomination").
SECTION 3.3. Execution, Authentication, Delivery
------------------------------------
and Dating.
----------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries or by its Treasurer. The signature of any of these
officers on the Securities may be manual or facsimile.
35
<PAGE>
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 3.4. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any Authorized Denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall
36
<PAGE>
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of Authorized Denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.2 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount , upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
37
<PAGE>
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than exchange
pursuant to Section 3.4, 9.6, 10.10 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.4 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge
38
<PAGE>
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the
39
<PAGE>
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall not be more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent for the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and
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neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 3.9. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
cancelled Securities be returned to it.
SECTION 3.10. Computation of Interest.
-----------------------
Cash interest on the Securities, which shall accrue from and after
June __, 1995, shall be computed on the basis of a 360-day year divided into
twelve 30-day months.
SECTION 3.11. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number (if
then generally in use), and if so, the Trustee shall use the CUSIP number in
notices of redemption or exchange as a convenience to Holders; provided that any
--------
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company will promptly notify the Trustee in writing of any
change in the CUSIP number.
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ARTICLE 4
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to (i)
any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for, (ii) substitution of apparently mutilated,
defaced, destroyed, lost or stolen Securities, and (iii) rights of Holders to
receive payments of principal thereof and interest thereon), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 10.3) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation.
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust an amount
sufficient to pay and discharge the entire Indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case of
Securities which have become
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due and payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) such satisfaction or discharge shall not result in a breach or
violation of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it is bound;
and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Upon request, the Trustee shall acknowledge in writing the discharge
of the obligations of the Company under this Indenture (except for those
surviving obligations specified in this Section 4.1). Notwithstanding the
satisfaction and discharge of this Indenture, the obligations of the Company to
the Trustee under Section 6.6, the obligations of the Trustee to any
Authenticating Agent under Section 6.11 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 4.2 and the last paragraph of Section
10.3 shall survive.
SECTION 4.2. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE 5
Remedies
SECTION 5.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity as and when the same shall become due and
payable; or
(3) default in the performance or breach of any covenant of the
Company in this Indenture (other than a covenant or a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(4) a default under any Indebtedness by the Company and/or one or
more Material Subsidiaries or under any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company and/or one or more Material
Subsidiaries with a principal amount then outstanding in excess of $8 million
individually or in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, which
default shall constitute a failure to pay the principal of such Indebtedness at
final maturity or shall have resulted in such Indebtedness coming or being
declared due and payable prior to its Stated Maturity, without such Indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 60 days after there shall have been given, by registered or
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certified mail, to the Company by the Trustee, or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding
Securities, a written notice specifying such default and requiring the Company
to cause such Indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
hereunder; or
(5) a final judgment or final judgments for the payment of money are
entered into by a court or courts of competent jurisdiction against the Company
and/or any of its Material Subsidiaries which remain undischarged or unbonded
for a period (during which execution shall not be effectively stayed) of 60
consecutive days; provided, that the aggregate of all such judgments creates
--------
uninsured liabilities against the Company and/or any of its Material
Subsidiaries exceeding $5 million and the right to appeal all such judgments has
expired; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company and/or a Material
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company and/or one or more Material Subsidiaries a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company and/or a Material Subsidiary under any applicable Federal or State law,
or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company and/or a Material Subsidiary or of any
substantial part of such Person's property, or ordering the winding up or
liquidation of such Person's affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(7) the commencement by the Company and/or a Material Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by such
Person to the entry of a decree or order for relief in respect of the Company
and/or a Material Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against such Person, or the filing by it of a petition or answer or
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consent seeking reorganization or relief under any applicable Federal or State
law, or the consent by such Person to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company and/or a
Material Subsidiary of any substantial part of such Person's property, or the
making by such Person of a general assignment for the benefit of creditors, or
the admission by such Person in writing of such Person's inability to pay its
debts generally as they become due, or the taking of corporate action by the
Company and/or a Material Subsidiary in furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default occurs and is continuing, then and in every
such case (other than an Event of Default specified in Section 5.1(6) or 5.1(7)
hereof relating to the Company), unless the principal of all of the Securities
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Securities may declare
the principal of all the Securities to be due and payable, by a notice in
writing to the Company and the Agent Bank and/or the administrative agent for
any other Senior Credit Facility, as the case may be (and to the Trustee if
given by Holders), and upon any such declaration such principal shall become due
and payable upon the earlier of (i) five Business Days after the receipt by the
Company and the Agent Bank and/or such administrative agent of such written
notice, provided such Event of Default is then continuing, or (ii) an
acceleration under any Senior Credit Facility. If an Event of Default specified
in Section 5.1(6) or 5.1(7) hereof relating to the Company occurs, the principal
of all the Securities shall become and be immediately due and payable on all
Outstanding Securities without any declaration or other act on the part of the
Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Securities then Outstanding, by written
notice to the Company and the Trustee, may waive all defaults and rescind and
annul such declaration and its consequences (provided that no such waiver or
--------
rescission and annulment shall extend
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to or shall affect any subsequent default or impair any right consequent
thereon) if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration and interest, if any, thereon at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest, if any, upon overdue interest at the rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the
principal of Securities which has become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or any
premium on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and
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on any overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, except as a
result of its negligence or bad faith.
Until such demand is made by the Trustee, the Company may pay the
principal of and interest on the Securities to the Holders, whether or not the
Securities be overdue.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated. If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company of the payment of overdue principal (or premium, if any) or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or
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documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(ii) unless prohibited by applicable law, to vote on behalf of the
Holders of the Securities in any election of a trustee or a standby trustee
in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar functions in comparable
proceedings, and
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder hereof or to authorize the Trustee to vote in
respect of the claim
of any Holder in any such proceeding.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the
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Holders of the securities in respect of which such judgment has been recovered.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Securities, and it shall not be necessary to make any Holders of the
Securities parties to any such proceedings.
SECTION 5.6. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.6;
SECOND: In case the principal of the Securities shall not have become
and be then due and payable, to the payment of interest in default in the
order of the maturity of the installments of such interest, with interest
(to the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the same rate as the rate of
interest specified in the Securities, such payments to be made ratably to
the persons entitled thereto, without discrimination or preference;
THIRD: In case the principal of the Securities shall have become and
shall be then due and payable, to the payment of the whole amount then
owing and unpaid upon all the Securities for principal and interest, with
interest upon the overdue principal, and (to the extent that such interest
has been collected by the Trustee) upon overdue installments of interest at
the same rate as the rate of interest specified in the Securities; and in
case such moneys shall be insufficient to pay in full the whole amount so
due and unpaid upon the Securities, then to the payment of such principal
and interest, without preference or priority of principal over interest, or
of interest over principal, or of any installment of interest over any
other installment of interest, or of any Security over
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any other Security, ratably to the aggregate of such principal and accrued
and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Company or
any other Person lawfully entitled thereto.
SECTION 5.7. Limitation of Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture,
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except in the manner herein provided and for the equal and ratable benefit of
all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
--------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or in the case of an Offer to Purchase made by the Company, on the Purchase
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
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SECTION 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that such direction shall
--------
not be in conflict with any rule of law or with this Indenture, and provided
--------
further that (subject to the provisions of Section 6.1) the Trustee shall have
- -------
the right to decline to follow any such direction if the Trustee, being advised
by counsel, shall determine that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or responsible officers
of the Trustee shall determine that the action or proceedings so directed would
involve the Trustee in personal liability or if the Trustee in good faith shall
so determine that the actions or forebearances specified in or pursuant to such
direction shall be unduly prejudicial to the interests of Holders of the
Securities not joining in the giving of said direction, it being understood that
(subject to Section 6.1) the Trustee shall have no duty to ascertain whether or
not such actions or forebearances are unduly prejudicial to such holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by Holders.
SECTION 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
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(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under
Article 9 cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Security on or after the respective Stated Maturities expressed
in such Security (or, in the case of redemption, on or after the Redemption
Date).
SECTION 5.15. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension of law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee,
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but will suffer and permit the execution of every such power as though no such
law had been enacted.
ARTICLE 6
The Trustee
SECTION 6.1. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
55
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(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power, conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise Incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) This Section 6.1 is in furtherance of and subject to Sections 315
and 316 of the Trust Indenture Act.
SECTION 6.2. Certain Rights of Trustee.
-------------------------
In furtherance of and subject to the Trust Indenture Act, and subject
to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the
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absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be Incurred by it in compliance with such
request or direction;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and/or an Opinion of Counsel, which shall conform to
Section 1.2 hereof and which shall contain such other statements as the Trustee
reasonably deems necessary to perform its duties herewith; and
(i) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
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SECTION 6.3. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.4. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to the
terms of the Trust Indenture Act, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 6.5. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 6.6. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances Incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or
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advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense Incurred without gross
negligence, willful misconduct or bad faith on its part, arising out
of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder. The Trustee shall notify the
Company promptly of any claim for which the Trustee may seek indemnity
from the Company. The Trustee may have separate counsel and the
Company shall pay the reasonable compensation, expenses And
disbursements of such counsel. The Company will not pay for any
settlement made without its consent, which consent shall not be
unreasonably withheld.
As security for the performance of the obligations of the Company
under this Section and notwithstanding any other provision herein to the
contrary, the Trustee shall have a lien with right of payment prior to payment
on account of principal of (or premium, if any) or interest on the Securities
upon all property and funds held or collected by the Trustee under any provision
hereof for all amounts it is entitled to receive under this Section 6.6. The
obligation of the Company under this Section 6.6 to compensate the Trustee and
to pay and reimburse the Trustee for such expenses, disbursements and advances
shall constitute additional Indebtedness.
When the Trustee Incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or (7), the expenses and
the compensation for the services are intended to constitute expenses of
administration under bankruptcy law.
The Company's obligations under this Section 6.6 and any lien arising
hereunder shall survive the resignation or removal of any Trustee, the discharge
of the Company's obligations pursuant to Article 12 of this Indenture and/or
the termination of this Indenture.
SECTION 6.7. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
corporation, having a combined capital and
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surplus of at least $50 million and which is eligible in accordance with the
provisions of Section 310(a) of the Trust Indenture Act. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of a Federal, State or District of Columbia supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
SECTION 6.8. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.9.
(b) the Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Section
310(b) of the Trust Indenture Act after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security for
at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.7 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any pubic officer shall take charge or control of the
Trustee or of its property or affairs
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for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 315(e) of the Trust Indenture Act, any
holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to all Holders as
their names and addresses appear in the Security Register. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 6.9. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
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successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.10. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
--------
corporation shall be eligible under the provisions of Section 6.7, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 6.11. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities upon
exchange, registration of transfer or partial redemption or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication
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executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50 million and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
--------
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent
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shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustees certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities described in the within mentioned
Indenture.
______________________
As Trustee
By__________________________
As Authenticating Agent
By__________________________
Authorized Officer
ARTICLE 7
Holders Lists and Reports by
Trustee and Company
SECTION 7.1. Certificate to Trustee; Securityholders Lists.
---------------------------------------------
(a) The Company will furnish or cause to be furnished to the Trustee
on or before June __ in each year beginning with June __, 1996, a brief
certificate from the principal executive, financial or accounting officer of the
Company as to his or her knowledge of the Company's compliance with all
conditions and covenants under the Indenture (such compliance to be determined
without regard to any period of grace or requirement of notice provided under
the Indenture).
(b) If and so long as the Trustee shall not be the Security
Registrar, the Company will furnish or cause to be furnished to the Trustee a
list in such form as the Trustee may reasonably require of the names and
addresses of the Holders pursuant to Section 312 of the Trust Indenture
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Act (i) semi-annually not more than 15 days after each Regular Record Date, as
of such Regular Record Date and (ii) at such other times as the Trustee may
request in writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished.
SECTION 7.2. Report by Trustee.
-----------------
Any Trustee's reports required under Section 313(a) of the Trust
Indenture Act shall be transmitted on June __, 1996 and on each June __
thereafter, and shall be dated as of a date convenient to the Trustee no more
than 60 days nor less than 45 days prior thereto.
SECTION 7.3. Reports by Company.
------------------
The Company shall file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports which the Company
may be required to file with the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act.
ARTICLE 8
Consolidation, Merger, Conveyance,
Transfer or Lease
SECTION 8.1. Mergers, Consolidations and Certain Sales of Assets.
---------------------------------------------------
The Company (a) will not consolidate with or merge into any other
Person; (b) will not permit any other Person to consolidate with or merge into
the Company or any Subsidiary of the Company (in a transaction in which such
Subsidiary remains a Subsidiary of the Company), except for transactions
involving the consolidation or merger of a Wholly Owned Subsidiary of the
Company with or into the Company or another Wholly Owned Subsidiary of the
Company; and (c) will not, directly or indirectly, transfer, convey, sell, lease
or otherwise dispose of all or substantially all of its properties and assets as
an entirety, unless, in any such transaction:
(1) immediately before and after giving effect to such transaction
and treating any Indebtedness Incurred by the Company or a Subsidiary of
the Company as a result of such transaction as having been Incurred by the
Company or such Subsidiary at the time of such
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transaction, no Event of Default, and no event which, after notice or lapse
of time, or both, would become an Event of Default, shall have occurred and
be continuing;
(2) in the case the Company shall consolidate with or merge into
another Person or shall directly or indirectly transfer, convey, sell,
lease or otherwise dispose of all or substantially all of its properties
and assets as an entirety, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by transfer,
conveyance, sale, lease or other disposition all or substantially all the
properties and assets of the Company as an entirety (for purposes of this
Section 8.1, a "Successor Company") shall be a corporation, and shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of (and premium, if any) and interest on all the
Securities and the performance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(3) immediately after giving effect to such transaction on a pro
forma basis, the Company or, if applicable, the Successor Company, shall
have a Consolidated Net Worth which is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction;
(4) immediately after giving effect to such transaction on a pro
forma basis, the Company or, if applicable, the Successor Company, would be
able to Incur at least $1.00 of additional Indebtedness pursuant to Section
10.7; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer, lease or acquisition and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, complies with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with,
and, with respect to such Officers' Certificate, if applicable, setting
forth the manner of determination and the calculation of the Consolidated
Net Worth and the Consolidated Cash Flow Ratio of the
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Company or, if applicable, of the Successor Company as required pursuant to
clause (3) or clause (4).
SECTION 8.2. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any transfer, conveyance, sale, lease or other
disposition of all or substantially all of the properties and assets of the
Company as an entirety in accordance with Section 8.1, the Successor Company
formed by such consolidation or into which the Company is merged or to which
such conveyance, transfer, sale, lease or other disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such Successor
Company had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE 9
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Securities; or
(4) to comply with any requirement of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act; or
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(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, provided such action pursuant to this clause (5) shall not
--------
adversely affect the interests of the Holders in any material respect.
SECTION 9.2. Supplemental Indentures With Consent of Holders.
-----------------------------------------------
With the consent of the Holders of a majority in principal amount of
the Outstanding Securities, by Act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
-------- -------
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal thereof
or the rate of interest thereon, or any premium payable upon redemption
thereof, or reduce any amount payable on redemption thereof, or change the
place of payment where, or the coin or currency in which, any Security or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
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(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.17, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) modify the provisions of this Indenture with respect to the
obligation of the Company to purchase the Securities pursuant to Section
10.15 in a manner adverse to the Holders.
It shall not be necessary for any Act of Holders under this section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture and that it is not inconsistent
herewith and that the supplemental indenture will be valid and binding upon the
Company in accordance with its terms. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
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SECTION 9.6. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company, and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
ARTICLE 10
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, the City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, the City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or
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rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 10.3. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, or mailed to each
Holder, or both, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company.
SECTION 10.4. Existence.
---------
Subject to Article 8, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
-------- -------
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and the failure to
preserve such right or franchise is not disadvantageous in any material respect
to the Holders or to the condition, financial or otherwise, or would not have a
material adverse effect on, the earnings, business affairs or business
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prospects of the Company and its Subsidiaries considered as a whole.
SECTION 10.5. Maintenance of Properties.
-------------------------
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Material Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
- -------- -------
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 10.6. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the income, profits or property of
the Company or any Material Subsidiary, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
property of the Company or any Material Subsidiary; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (i) if the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and if a reserve or other appropriate provision shall
have been made therefor in accordance with and to the extent required by
generally accepted accounting principles or (ii) if the failure to pay such tax,
assessment, charge or claim would not be disadvantageous in any material respect
to the Holders or to the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its Subsidiaries
considered as a whole.
SECTION 10.7. Limitation on Consolidated Indebtedness.
---------------------------------------
(a) So long as any of the Securities are Outstanding, (1) the Company
will not Incur and will not permit any Subsidiary to Incur any Indebtedness,
including Acquisition Debt, and (2) will not permit any Subsidiary to
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issue any Preferred Stock, unless the Company's Consolidated Cash Flow Ratio for
the four full consecutive fiscal quarters ending with the most recently
completed fiscal quarter of the Company preceding the Incurrence of such
Indebtedness or Acquisition Debt or the issuance of such Preferred Stock,
calculated on a pro forma basis as if such Indebtedness or Acquisition Debt had
been Incurred or such Preferred Stock had been issued at the beginning of such
four full fiscal quarters would be greater than 2 to 1.
(b) Notwithstanding the foregoing paragraph, the Company or a
Subsidiary may Incur the following Indebtedness, and a Subsidiary may issue the
following Preferred Stock:
(i) Indebtedness of the Company or any Subsidiary under or with
respect to the Amended Credit Agreement or any other Senior Credit
Facility, or both, in an aggregate principal amount outstanding at any one
time not to exceed $200 million of Indebtedness, including any Indebtedness
outstanding under any amendment, extension, restructuring, refunding or
refinancing of amounts due, commitments or maturities under the Amended
Credit Agreement and such other Senior Credit Facility;
(ii) Indebtedness evidenced by the Securities;
(iii) Indebtedness owed to the Company or a Controlled Subsidiary of
the Company and Preferred Stock issued to and held by the Company or a
Controlled Subsidiary of the Company, in each case only so long as owed to
or held by the Company or a Controlled Subsidiary of the Company and, in
the case of a Controlled Subsidiary, so long as the Company owns, directly
or indirectly, a percentage of the Capital Stock, Voting Stock and other
ownership interest of such Controlled Subsidiary which is equal to or
greater than the percentage of such Capital Stock, Voting Stock or other
ownership interest, respectively, owned by the Company, directly or
indirectly, on the date hereof;
(iv) Indebtedness or Preferred Stock of any Subsidiary outstanding on
the date of execution and delivery of this Indenture, less any amounts
actually repaid in accordance with the scheduled amortization provisions
under any such Indebtedness;
(v) Indebtedness or Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance or redeem, any Outstanding
Indebtedness or
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Preferred Stock of the Company or any of its Subsidiaries, including any
extension, renewal or refinancing of any such Indebtedness or Preferred
Stock, in an aggregate principal amount (or, if such new Indebtedness is
issued at a price less than the principal amount thereof, with an original
issue price) or liquidation preference not to exceed the principal amount
of Indebtedness or liquidation preference of Preferred Stock so exchanged
or refinanced (plus accrued interest and accrued dividends, as the case may
be, and fees and expenses related to such exchange or refinancing and any
premium payable pursuant to optional redemption provisions of such
Outstanding Indebtedness or Preferred Stock to be exchanged or refinanced);
provided that any Indebtedness exchanged for, or the proceeds of which are
--------
used to refinance, the Securities or other Indebtedness of the Company
which is Pari Passu or subordinated to the Securities shall only be
permitted (1) if, in case the Securities are refinanced or exchanged in
part, such Indebtedness expressly remains Pari Passu with or subordinate in
right of payment to, as the case may be, the Securities, (2) if, in case
the Indebtedness to be exchanged or refinanced is subordinated to the
Securities, such Indebtedness is subordinate to the Securities at least to
the extent and in the manner that the Indebtedness to be exchanged or
refinanced is subordinate to the Securities and (3) if, in case the
Securities are exchanged or refinanced in part or the Indebtedness to be
exchanged or refinanced is subordinated to the Securities, no payments by
way of sinking fund, mandatory redemption or otherwise (including
defeasance) may be made by the Company (including, without limitation, at
the option of the holder thereof other than an option given to a holder
pursuant to a "change of control" covenant which is no more favorable to
the holders of such Indebtedness than the provisions contained in Section
10.15 and such Indebtedness provides that the Company will not repurchase
such Indebtedness pursuant to such provisions prior to the Company's
repurchase of the Securities required to be repurchased by the Company
pursuant to Section 10.15) at any time prior to the Stated Maturity of the
Securities; and, provided, further, that in no event may Indebtedness of
-------- -------
the Company (other than Senior Indebtedness) be refinanced by means of
Indebtedness of any Subsidiary of the Company pursuant to this clause (v)
nor may the Company issue pursuant to this clause (v) Preferred Stock which
constitutes Redeemable Stock (other than Redeemable Stock that (A) is
exchanged for, or the proceeds of
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which are used to refinance or redeem, any Outstanding Indebtedness of the
Company or any of its Subsidiaries, (B) does not mature, in whole or in
part (by way of sinking fund, mandatory redemption or otherwise (including
defeasance)) prior to the Stated Maturity of the Securities or, if such
Indebtedness to be so exchanged, refinanced or redeemed has a maturity
prior to the Stated Maturity of the Senior Notes, does not mature, in whole
or in part, earlier than the maturity or respective maturities of the
Indebtedness to be so exchanged, refinanced or redeemed, (C) has a
liquidation preference which does not exceed the principal amount of the
Indebtedness so exchanged or refinanced (plus accrued interest, fees and
expenses related thereto and any premium payable pursuant to optional
redemption provisions of such Outstanding Indebtedness to be refinanced),
and (D) complies with the first proviso of this clause (v) regarding
subordination);
(vi) Indebtedness secured by a Lien on real property or improvements
thereon; provided that any Net Available Proceeds received by the Company
--------
or any Subsidiary as a result of the Incurrence of such Indebtedness are
applied in the amount and otherwise in accordance with Section 10.10 as if
such proceeds were received as a result of an Asset Disposition;
(vii) Indebtedness secured by a Lien on real property, which
Indebtedness (a) constitutes all or a part of the purchase price of such
property or (b) is Incurred prior to, at the time of or within 270 days
after the acquisition of such property for the purpose of financing all or
any part of the purchase price thereof and which otherwise is in accordance
with Section 10.14;
(viii) Indebtedness in an aggregate principal amount not to exceed $70
million at any one time outstanding (exclusive of Indebtedness permitted by
any other clause of this Section 10.7);
(ix) Indebtedness arising under Currency Agreements entered into in
the ordinary course of business and Indebtedness arising under Currency
Agreements and Interest Rate Agreements relating to existing and future
Indebtedness otherwise permitted under this Indenture; and
(x) Indebtedness of the Company the proceeds of which are used to
purchase shares of stock of (a)
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Hoeganaes pursuant to the right of first refusal set forth in subparagraph
6(c) of the Stockholders Agreement dated as of February 8, 1994 among the
Company, Hoeganaes and Hoganas Aktiebolag or of (b) Dexion (North Asia)
Ltd. ("Dexion North Asia") pursuant to the right of first refusal set forth
in the stockholders' agreement among the Company, Dexion North Asia and the
minority shareholder of Dexion North Asia (the "Dexion Agreement").
SECTION 10.8. Limitation on Transactions with Stockholders and Affiliates.
-----------------------------------------------------------
(a) So long as any of the Securities are Outstanding the Company will
not, and will not permit any Subsidiary to, directly or indirectly, enter into
or permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of property or the rendering of any service but
excluding transactions between the Company and Controlled Subsidiaries of the
Company or between Controlled Subsidiaries of the Company not otherwise
prohibited by this Indenture) involving aggregate consideration in excess of
$1,000,000 not otherwise prohibited by this Indenture, with a Related Person or
with any Affiliate of the Company; provided that this Section 10.8 shall not be
--------
deemed to prohibit transactions (including, subject to Section 10.9, any loans
or advances by or to, or guarantees on behalf of, any Affiliate of the Company)
made in good faith the terms of which are fair and reasonable to the Company or
such Subsidiary, as the case may be, and are at least as favorable as the terms
which could be obtained by the Company or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's length basis with Persons who are
not such a Related Person or Affiliate; provided, that any such transaction
--------
shall be conclusively deemed to be on terms which are fair and reasonable to the
Company or any of its Subsidiaries and on terms which are at least as favorable
as the terms which could be obtained on an arm's length basis with Persons who
are not such a Related Person or Affiliate if such transaction is approved by a
majority of the Company's Board of Directors (including a majority of the
Company's independent directors, if any).
(b) Notwithstanding anything contained in Section 10.8 to the
contrary, transactions expressly contemplated by the Hoeganaes Agreements or the
Dexion Agreement are permitted, so long as the Company owns, directly or
indirectly, the percentage of Capital Stock, Voting Stock and other ownership
interest of Hoeganaes or of Dexion North
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Asia, as the case may be, which is equal to or greater than the percentage of
such Capital Stock, Voting Stock or other ownership interest, respectively,
owned by the Company, directly or indirectly, as of the date hereof.
SECTION 10.9. Limitation on Restricted Payments.
---------------------------------
Subject to the other provisions of this Section 10.9, the Company:
(i) will not, directly or indirectly, declare or pay any dividend, or
make any distribution, in respect of any class of its Capital Stock or to
the holders of any class of its Capital Stock (including pursuant to a
merger or consolidation of the Company, but excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Redeemable Stock)),
(ii) will not, and will not permit any Subsidiary of the Company,
directly or indirectly, to purchase, redeem or otherwise acquire or retire
for value (a) any Capital Stock of the Company or (b) any options, warrants
or rights to acquire shares of Capital Stock of the Company or any Related
Person of the Company,
(iii) will not and will not permit any Subsidiary of the Company to,
make any loan, advance or capital contribution to or investment in,
transfer any assets to or for the benefit of, assume any liability with
respect to any obligations of, or make any payment on a guarantee of any
obligation of any Affiliate or Related Person of the Company (other than
(A) the Company or a Wholly Owned Subsidiary of the Company which was a
Wholly Owned Subsidiary prior to, or becomes a Wholly Owned Subsidiary
contemporaneously with, such loan, advance, contribution, investment or
payment; provided that such loan, advance, contribution, investment or
--------
payment was not made or assumed in anticipation of such Person becoming a
Wholly Owned Subsidiary of the Company, and (B) Hoeganaes or Dexion North
Asia, pursuant to the Hoeganaes Agreements and the Dexion Agreement,
respectively, so long as the Company owns, directly or indirectly, the
percentage of Capital Stock or other ownership interest of Hoeganaes or
Dexion North Asia, as the case may be, which is equal to or greater than
the percentage of such Capital Stock or other ownership interest,
respectively, owned by the Company, directly or indirectly, as of the date
hereof), and
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(iv) will not, and will not permit any Subsidiary to, redeem,
defease, repurchase, retire or otherwise acquire or retire for value prior
to any scheduled maturity, repayment or sinking fund payment, Indebtedness
of the Company which is subordinate in right of payment to the Securities
(other than (A) redemptions, defeasances, repurchases, retirements or
acquisitions to the extent effected from the proceeds of Capital Stock of
the Company or any Subsidiary of the Company issued subsequent to the date
hereof, including Redeemable Stock permitted to be issued pursuant to
Section 10.7(b)(v) and (B) any extensions, refundings or refinancing of
such Indebtedness so long as such extended, refunded or refinanced
Indebtedness remains subordinate in right of payment to the Securities
pursuant to terms of subordination at least as favorable to the Holders of
the Securities as were contained in the Indebtedness which was so extended,
refunded or refinanced and so long as such extended, refunded or refinanced
Indebtedness has a maturity date on or after the maturity date of such
Indebtedness prior to such extension, refunding or refinancing)
(the transactions described in clauses (i) through (iv) being referred to herein
as "Restricted Payments"), if at the time thereof, or after giving effect
thereto:
(1) an Event of Default, or an event that with the lapse of time
or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and is continuing; or
(2) the Consolidated Cash Flow Ratio of the Company for the four
full fiscal quarters immediately preceding the date on which such
Restricted Payment is made (after giving effect thereto, including the
aggregate amount of all Restricted Payments made pursuant to the last
paragraph of this section), will not be at least 2.5 to 1; provided
that compliance with this clause (2) shall not be required with
respect to the mandatory redemption of the Senior Subordinated
Debentures pursuant to the terms thereof; or
(3) the aggregate amount of all Restricted Payments made
(including any amounts made pursuant to the last paragraph of this
section) from the date hereof exceeds the sum (without duplication)
of:
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(a) the aggregate of 50% of cumulative Consolidated Net Income
of the Company (or, in the case Consolidated Net Income of
the Company shall be negative for any fiscal year, less 100%
of such deficit) accrued for the period (taken as one
accounting period) commencing with the first full fiscal
quarter after the date hereof to and including the fiscal
quarter ended immediately prior to the date of such
calculation; and
(b) 100% of (i) the aggregate net proceeds, including the fair
value of property other than cash (determined in good faith
by the Board of Directors as evidenced by a Board
Resolution), received by the Company from any Person other
than a Subsidiary of the Company from all issuances
(including issuances of Capital Stock of the Company
pursuant to the exercise of any warrants or other rights to
acquire Capital Stock of the Company) after the date hereof
of Capital Stock of the Company (and, in the event the
Company merges or consolidates with another corporation in a
transaction in which the outstanding Common Stock of the
Company prior to the transaction is canceled, the
Consolidated Tangible Net Worth of such other corporation)
and options, warrants or other rights to acquire Capital
Stock of the Company; provided, however, that this clause
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(i) shall not include any issuance of Redeemable Stock by
the Company; and (ii) the aggregate net proceeds, including
the fair value of property other than cash (determined in
good faith by the Board of Directors as evidenced by a Board
Resolution), received by the Company from any Person other
than a Subsidiary of the Company of Indebtedness of the
Company or any of its Subsidiaries issued subsequent to the
date of this Indenture which is converted into Capital Stock
of the Company (other than Redeemable Stock); provided that
--------
this clause (ii) shall not include any issuance of Capital
Stock
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upon the conversion of the Exchange Debentures.
The foregoing provision will not be violated by reason of the payment
of any dividend within 60 days after declaration thereof, if at the declaration
date such payment would have complied with the foregoing provision.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 10.9 shall not prohibit:
(a) payments required to be made in connection with stock
appreciation rights with respect to the Capital Stock of the Company
outstanding on the date hereof;
(b) the settlement of stock options with respect to the Capital
Stock of the Company outstanding on the date hereof in an aggregate
amount not to exceed $2.5 million;
(c) payments in connection with the redemption of Common Stock
Purchase Rights existing pursuant to the Rights Agreement, dated as of
January 26, 1989, as amended, between the Company and the First
National Bank of Chicago, as rights agent (or any amendment or
supplement thereto or any successor, substitute or similar plan), in
an aggregate amount not to exceed $1 million; or
(d) purchases of the Senior Subordinated Debentures pursuant to
Section 1016 of the Senior Subordinated Indenture.
In addition, notwithstanding clauses (2) or (3) above but subject to
clause (1) above, the Company may make Restricted Payments not to exceed $10
million.
SECTION 10.10. Limitation on Certain Asset Dispositions.
----------------------------------------
(a) So long as any of the Securities are Outstanding, the Company
will not, and will not permit any Subsidiary of the Company to, make Asset
Dispositions in one or more transactions in any fiscal year that result,
together with the proceeds received from any Indebtedness permitted by Section
10.7 and Sale and Leaseback transactions permitted by Section 10.13, in Net
Available Proceeds in excess of $5 million in the aggregate in such fiscal year
unless:
- ------
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(i) the Company or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Dispositions at least equal to the
fair market value for the shares or assets disposed of (which shall be as
determined in good faith by the Board of Directors),
(ii) at least 75% of the consideration for such Asset Dispositions
consists of cash; provided however that the amount of (x) any liabilities
-------- -------
(as shown on the Company's or such Subsidiary's most recent balance sheet
or in the notes therein) of the Company or any Subsidiary that are assumed
by the transferee of any such assets and (y) any notes, other obligations
or other marketable securities received by the Company or any such
Subsidiary from the transferee that are immediately converted by the
Company or such Subsidiary into cash shall be deemed to be cash for
purposes of this provision; and provided further that the 75% limitation
-------- -------
referred to above shall not apply to any Asset Disposition in which the
cash portion of the consideration received therefor is equal to or greater
than what the net after-tax proceeds would have been had such Asset
Disposition complied with such 75% limitation,
(iii) any applicable provisions of Article 8 shall have been complied
with, and
(iv) 100% of the Net Available Proceeds (including the proceeds
received from any Indebtedness permitted by Section 10.7 and Sale and
Leaseback Transactions permitted by Section 10.13), in excess of $5 million
in the aggregate in any fiscal year from such Asset Dispositions (including
from the sale of any marketable cash equivalents received therein) are
applied by the Company or such Subsidiary, as the case may be: (A) first,
within 90 days of receipt of such Net Available Proceeds, to repayment (in
whole or in part) of the principal and/or interest on Senior Indebtedness
then outstanding that is secured; (B) second, to the extent such Net
Available Proceeds are not applied to the principal and/or interest on
Senior Indebtedness that is secured as specified in clause (A), to pro rata
(determined by reference to principal amount or accreted value, as the case
may be) purchases of Outstanding Securities and other Indebtedness ranking
Pari Passu with the Securities for which the Company is obligated to make
an offer to purchase substantially similar to the Offer to Purchase
required pursuant to this Section 10.10, pursuant to an Offer to
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Purchase at a purchase price equal to, in the case of the Securities, 100%
of principal, and in the case of other Indebtedness, the applicable
percentage of their principal amount, in each case plus accrued interest to
the Purchase Date; provided however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Purchase Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 3.7; and (C) third,
to the extent of any remaining Net Available Proceeds following completion
of the Offers to Purchase referred to in clause (B) above, to the
repayment, within five Business Days of completion of such Offer to
Purchase, of other Indebtedness which is Pari Passu with the Securities but
is not required to be purchased pursuant to an offer to purchase
substantially similar to the Offer to Purchase required pursuant to this
Section 10.10 or, in lieu thereof, other Indebtedness of the Company or any
Subsidiary, to the extent that the same may be repaid prior to maturity.
(b) The Company will give the Notice for an Offer to Purchase
required pursuant to subclause (iv)(B) of Section 10.10 to Holders of record as
of the date of the relevant Asset Disposition not more than 180 days after such
Asset Disposition. The purchase price of the Securities to be offered to be
purchased pursuant to the Offer to Purchase shall equal the amount of the
remaining Net Available Proceeds pursuant to Clause (iv) of Section 10.10 (such
result rounded down to the next lowest integral multiple of $1,000). The Company
shall not be entitled to any credit against its obligation under this Section
for the principal of any Securities otherwise acquired by the Company.
(c) Not later than the date upon which the Notice of an Offer to
Purchase is delivered to the Trustee pursuant to this Section 10.10, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the Purchase
Amount (as defined in the definition of Offer to Purchase), (ii) the allocation
of the Net Available Proceeds from the Asset Disposition pursuant to which such
Offer to Purchase is being made, and (iii) the compliance of such allocation
with the provisions of Section 10.10.
(d) Notwithstanding any provision of this Section 10.10 to the
contrary, the Company shall have no obligation to apply the Net Available
Proceeds as provided in clause (a)(iv) above if the Company has a bona fide
intent to reinvest the Net Available Proceeds from an Asset
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Disposition in another asset or business in the same or similar line of business
as the Company or any of its Material Subsidiaries and the Net Available
Proceeds are so reinvested within 180 days of receipt thereof.
(e) On the Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Offer to Purchase, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered, and (iii) deliver to the Trustee
Securities so accepted together with an Officer's Certificate stating the
Securities or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to the Holder of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered.
SECTION 10.11. Limitation on Certain Restrictions Affecting any Subsidiary.
-----------------------------------------------------------
So long as any of the Securities are Outstanding, the Company will
not, and will not permit any of its Subsidiaries to, create or otherwise cause
or permit to exist or become effective any consensual encumbrance or restriction
on the ability of any of its Subsidiaries to (i) pay dividends or make any other
distributions on such Subsidiary's Capital Stock to the Company or any of its
Subsidiaries, (ii) pay any Indebtedness owed to the Company or any of its
Subsidiaries, (iii) make loans or advances to the Company or any of its
Subsidiaries, or (iv) transfer any of its property or assets to the Company or
any of its Subsidiaries, other than restrictions on transfer contained in lease
instruments Incurred in the ordinary course of business or assumed in connection
with an acquisition of another Person; provided, however, that this Section
-------- -------
shall not prohibit (a) any restrictions or encumbrances contained in any Senior
Credit Facility; (b) any restrictions or encumbrances existing in this Indenture
or under agreements in effect at the date of execution and delivery of this
Agreement; (c) consensual encumbrances or restrictions binding upon any Person
at the time such Person becomes a Subsidiary of the Company; provided that such
--------
encumbrances or restrictions were not Incurred in anticipation of such Person
becoming a Subsidiary of the Company; (d) encumbrances or restrictions imposed
by applicable law; or (e) subject to the terms of Section 10.10, restrictions
with respect to a Subsidiary of the Company imposed pursuant to an agreement
which has been entered into for the sale or
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disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary.
SECTION 10.12. Limitation on Issuance of Shares of Subsidiaries.
------------------------------------------------
So long as any of the Securities are Outstanding, the Company will not
permit any Subsidiary of the Company to issue shares of Capital Stock or any
other ownership interest to any Person other than to the Company or a Wholly
Owned Subsidiary of the Company except to the extent, and subject to the
conditions under which, the Company could have sold, transferred or otherwise
disposed of such shares or other ownership interests in an Asset Disposition
pursuant to Section 10.10 (including the provisions thereof relating to the
application of the Net Available Proceeds therefrom) if they had first been
issued to the Company or such Subsidiary; provided, however, that the foregoing
-------- -------
limitation shall not apply to (a) the issuance of shares of Capital Stock of a
Subsidiary of the Company which is required in order to provide collateral
security in certain jurisdictions outside the United States with respect to
funds borrowed by certain non-United States Subsidiaries of the Company pursuant
to the terms of any Senior Credit Facility, (b) the issuance of shares of
Capital Stock or other ownership interests so long as immediately after such
issuance the Company owns, directly or indirectly, a percentage of the Capital
Stock, Voting Stock and other ownership interest of such Subsidiary which is
equal to or greater than the percentage of such Capital Stock, Voting Stock or
other ownership interest, respectively, owned by the Company, directly or
indirectly, immediately prior to such issuance or (c) the issuance of directors'
qualifying shares.
SECTION 10.13. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any Subsidiary of the
Company to, enter into any Sale and Leaseback Transaction (except for a period
not exceeding 30 months) unless the Company or such Subsidiary applies or
------
commits to apply within 180 days after the sale or transfer, an amount equal to
the Net Available Proceeds of the sale pursuant to the Sale and Leaseback
Transaction in accordance with Section 10.10 as if such proceeds were received
as a result of an Asset Disposition.
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SECTION 10.14. Limitation on Liens.
-------------------
The Company shall not Incur any Indebtedness which is secured,
directly or indirectly, with a Lien on the property, assets or any income or
profits therefrom of the Company or any of its Subsidiaries other than (i)
Senior Indebtedness Incurred pursuant to any Senior Credit Facility or (ii)
Senior Indebtedness with respect to which such Lien is perfected at the time of
the Incurrence of such Senior Indebtedness or substantially contemporaneously
therewith, unless contemporaneously therewith or prior thereto the Securities
are equally and ratably secured except for (a) any such Indebtedness secured by
Liens on the assets of any entity existing at the time such assets are acquired
by the Company or any of its Subsidiaries, whether by merger, consolidation,
purchase of assets or otherwise; provided that such Liens (x) are not Incurred
-------- ----
in contemplation of such assets being acquired by the Company or any of its
Subsidiaries and (y) do not extend to any other property or assets of the
Company or any of its Subsidiaries or (b) any other Indebtedness required to be
equally and ratably secured as a result of the Incurrence of such Indebtedness;
provided that this Section 10.14 shall not in any way affect the Company's
- -------- ----
Incurrence of Indebtedness pursuant to Section 10.7 and the securing of such
Indebtedness, directly or indirectly, with a Lien on the property, assets or any
income or profits therefrom of the Company or any of its Subsidiaries.
SECTION 10.15. Change of Control.
-----------------
(a) In the event that there is a Change of Control (the date of such
Change of Control being the "Trigger Date"), the Company shall, as described
below, notify the Trustee in writing of such occurrence and, subject to the
notice requirements set forth below, shall promptly make an Offer to Purchase on
the Purchase Date (as defined below) all Securities then outstanding at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to and including the Change of Control Payment Date.
The "Purchase Date" shall be the last day of the fiscal quarter of the Company
next following the Trigger Date or (i) if such day is not a Business Day, the
next succeeding Business Day, or (ii) if such day would result in the Change of
Control Offer not remaining open for a sufficient period of time to comply with
applicable securities laws or the conditions set forth below have not yet been
satisfied, the next succeeding Business Day after such conditions have been
satisfied and on which consummation of such purchase may take place without
violating such securities laws.
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At least five Business Days prior to the Company's mailing of a Notice
under this Section 10.15, the Company shall notify the Trustee of the Change of
Control which triggers the Company's obligation to make an Offer to Purchase.
Prior to the mailing of a Notice, the Company will in good faith (i) seek to
obtain any required consent under any Senior Credit Facility so as to permit the
purchase of Securities pursuant to this Section 10.15 or (ii) attempt to repay
all or a portion of the Indebtedness under such Senior Credit Facility to the
extent necessary (including, if necessary, payment in full of such Indebtedness
and payment of any prepayment premiums, fees, expenses or penalties) to permit
the mailing of such Notice and the purchase of Securities pursuant to this
Section 10.15 without such consent. If such Indebtedness is not then prepayable
to such extent, the Company agrees to make an offer to the lenders under any
Senior Credit Facility from which consent is required and cannot be obtained to
repay such Indebtedness in full for an amount equal to the outstanding principal
balance thereof and accrued interest to the date of repayment, plus any fees,
expenses and penalties required pursuant to the instruments governing such
Indebtedness, plus, in the event such Indebtedness is subsequently prepayable at
a premium, the premium payable when such Indebtedness is first payable, and
repay any lender who accepts such offer. The Company shall first comply with
the covenants in the previous two sentences before it shall be required to
repurchase Securities pursuant to this Section 10.15.
Not later than the date upon which the Notice of Offer to Purchase is
delivered to the Trustee pursuant to this Section 10.15, the Company shall
deliver to the Trustee an Officers' Certificate as to the circumstances and
relevant facts regarding such Change of Control (including but not limited to
information with respect to pro forma historical and projected financial
information after giving effect to such Change of Control, information regarding
the persons acquiring control and such person's business plans going forward).
(b) On the Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Offer to Purchase, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered, and (iii) deliver to the Trustee
Securities so accepted together with an Officer's Certificate stating the
Securities or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to the Holder of Securities so accepted payment in an amount equal
to the purchase price, and the
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Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered.
SECTION 10.16. Provision of Financial Information.
----------------------------------
So long as any Securities are Outstanding, in addition to and without
limitation of the Company's obligations pursuant to Section 7.3, whether or not
the Company is required to be subject to Section 13 or 15(d) of the Exchange
Act, or any successor provision thereto,
(a) the Company shall file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 or 15(d) or any
successor provision thereto if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject; and
(b) the Company shall also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act or any successor
provision thereto if the Company were required to be subject to such Sections
and (y) if filing such documents by the Company with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective Holder.
SECTION 10.17. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 8.1, 10.6 to 10.16, inclusive, if
before the time for such compliance the Holders of a majority in principal
amount of the Outstanding Securities shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
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SECTION 10.18. Notice to Trustee of Certain Defaults.
-------------------------------------
The Company will deliver to the Trustee within five days after the
occurrence thereof written notice of any acceleration which with the giving of
notice and the lapse of time would become an Event of Default under clause 4 of
Section 5.1.
ARTICLE 11
Redemption of Securities
SECTION 11.1. Right of Optional Redemption.
----------------------------
Except as provided in the next succeeding paragraph, the Securities
will not be subject to redemption prior to November __, 1998. On and after
November __, 1998, the Securities are subject to redemption at the option of the
Company at the times and at the Redemption Prices specified in the form of
Security hereinbefore set forth, together with accrued interest to the
Redemption Date.
At any time, and from time to time, prior to November __, 1998, up to
35% of the original aggregate principal amount of the Securities are subject to
redemption at the option of the Company out of the proceeds of one or more
Equity Sales at [___]% of the principal thereof as specified in the form of
Security hereinbefore set forth.
SECTION 11.2. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice period shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal of Securities to
be redeemed. In case of a redemption of all the Securities, the Company shall,
at least six days prior to the Redemption Date fixed by the Company, notify the
Trustee of such Redemption Date. At the request and expense of the Company the
Trustee shall give notice of redemption required by Section 11.4 to the Holders.
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SECTION 11.3. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee within 10 days after
receiving notice from the Company of any redemption pursuant to Section 11.2.
Securities will be selected from the Outstanding Securities not previously
called for redemption by lot. Selection by lot may provide for the selection for
redemption of portions (equal to $1,000 or any integral multiple thereof) of the
principal amount of Securities of a denomination larger than $1,000. The
Trustee shall promptly notify the Company and each Security Registrar in writing
of the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal of such Securities which has been or is to be redeemed.
SECTION 11.4. Notice of Redemption.
--------------------
In case of a redemption of all the Securities, notice of redemption
shall be given by first-class mail, postage prepaid, mailed not less than five
nor more than 30 days prior to the Redemption Date, to each Holder of Securities
to be redeemed, at his address appearing in the Security Register. In case of a
redemption of less than all the Securities, notice of redemption shall be given
by first class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date, to each Holder of the Securities to be
redeemed, at its address appearing in the Security Register. In either case,
such notice shall be given to Holders of record as of the close of business on
the 15th day preceding the date on which such notice is first mailed to Holders.
Any notice of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price (including the method of calculation
thereof),
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the
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case of partial redemption, the principal amounts thereof) of the
particular Securities to be redeemed and that, on and after the Redemption
Date, upon surrender of such Security, a new Security in principal amount
equal to the unredeemed portion thereof will be issued,
(4) that on the Redemption Date the Redemption Price will be due and
payable upon each such Security to be redeemed, unless the Company defaults
in making the redemption payment, and that interest thereon will cease to
accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and that the Securities called for
redemption must be surrendered at such places to collect the Redemption
Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.5. Deposit of Redemption Price.
---------------------------
At least one day prior to any Redemption Date (or on such other date
as may be agreed on by the Trustee and the Company), the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 10.3) an amount
of money in immediately available funds sufficient to pay the Redemption Price
of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 11.6. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price specified in the notice, and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
-------- -------
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Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.7. If any Security called for redemption
shall not be so paid upon surrender thereof for redemption, the principal shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 11.7. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any Authorized Denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal amount of the Security so surrendered.
ARTICLE 12
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option to Effect Defeasance or Covenant Defeasance.
------------------------------------------------------------
The Company may at its option by Board Resolution, at any time, elect
to have either Section 12.2 or Section 12.3 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
12.
SECTION 12.2. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the option provided in Section 12.1
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations
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under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 12.4 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article 12. Subject to compliance with this Article 12, the Company may
exercise its Option under this Section 12.2 notwithstanding the prior exercise
of its option under Section 12.3.
SECTION 12.3. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in Section 12.1
applicable to this Section, the Company shall be released from its obligations
under Sections 5.1(3), 5.1(4), 7.3, 8.1, 10.5 through 10.16, 10.18, the
Securities and the Holders of Securities, on and after the date the conditions
set forth below are satisfied (hereinafter, "covenant defeasance"). For this
purpose, such covenant defeasance means that the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such Section or Article, whether directly or indirectly by reason
of any reference elsewhere herein to any such Section or Article or by reason of
any reference in such Section or Article to any other provision herein or in any
other document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
12.2 or Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.7 who shall agree to comply with the provisions of this
Article 12 applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated
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solely to, the benefit of the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, the principal of,
premium, if any, and each installment of interest on the Securities on the
Stated Maturity of such principal or installment of interest on the day on
which such payments are due and payable in accordance with the terms of
this Indenture and of such Securities. For this purpose, "U.S. Government
Obligations" means securities that are direct obligations of the United
States of America for the timely payment of which its full faith and credit
is pledged or obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any
such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for
the account of the holder of such depository receipt, provided that (except
as required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as subsections 5.1(5)
and (6) are concerned, at any time during the period ending on the 121st
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
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(3) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the Trust Indenture
Act with respect to any securities of the Company.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 12.2
or the covenant defeasance under Section 12.3 (as the case may be) have
been complied with.
(6) In the case of an election under Section 12.2, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred.
(7) In the case of an election under Section 12.3, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held in
-------------------------------------------------------------
Trust; Other Miscellaneous Provisions.
-------------------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee
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(or other qualifying trustee, collectively, for purposes of this Section 12.5,
the "Trustee") pursuant to Section 12.4 in respect of the Securities shall be
held in trust and applied by the Trustee, in accordance with the provisions of
such Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal (and premium, if any) and interest,
but such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities of such series.
Anything in this Article 12 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 12.6. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 12.2 or 12.3 by authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 12 until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
12.2 or 12.3; provided, however, that if the Company makes any payment of
-------- -------
interest or principal of any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to
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be an original, but all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
THE INTERLAKE CORPORATION
By___________________________________
Name:
Title:
Attest:
_______________________________
Name:
Title:
BANK ONE, COLUMBUS, N.A.
as Trustee
By_________________________________
Name:
Title:
Attest:
_______________________________
Name:
Title:
Dated:
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STATE OF )
COUNTY OF ) ss.:
On the __th day of _____, 1995, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that [he -- she] is ____________________ of The Interlake Corporation, one
of the corporations described in and which executed the foregoing instrument;
that [he -- she] knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that [he -- she] signed [his --
her] name thereto by like authority.
_____________________
STATE OF )
COUNTY OF ) ss.:
On the __th day of _____, 1995, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that [he -- she] is ____________________ of Bank One, Columbus, N.A. one of
the corporations/associations described in and which executed the foregoing
instrument; that [he -- she] knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation/association, and that
[he -- she] signed [his --her] name thereto by like authority.
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FORM OF
NINTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
NINTH AMENDMENT (the "Amendment"), dated as of June 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 indivi dual 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, the Seventh Amendment dated as of
January 24, 1995, and the Eighth Amendment dated as of February 1, 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
<PAGE>
WHEREAS, the Company, the Subsidiary Borrowers and the Banks wish to
amend the Credit Agreement as herein pro vided;
NOW THEREFORE, it is agreed:
1. On the Ninth Amendment Effective Date, Section 1.01(c) of the
Credit Agreement is hereby amended and restated in its entirety as follows:
(c) Each Revolving A Bank severally agrees: (x) on the Restatement
Effective Date, to continue outstanding (i) for the account of the Company and
on the terms and con ditions of this Agreement, each of its Original Company
Revolving A Loans (as so continued, the "Continued Company Revolving A Loans")
and (ii) for the accounts of the respec tive Existing Subsidiary Revolving A
Borrowers and on the terms and conditions of this Agreement, each of its
Original Subsidiary Revolving A Loans (as so continued, the "Continued
Subsidiary Revolving A Loans"); and (y) to make, subject to and upon the terms
and conditions of this Agreement at any time and from time to time on and after
the Restatement Effective Date and prior to the Revolving Loan Maturity Date (i)
a revolving loan or loans to the Company (together with the Continued Company
Revolving A Loans, each a "Company Re volving A Loan" and collectively, the
"Company Revolving A Loans") and (ii) a revolving loan or loans to one or more
Subsidiary Revolving A Borrowers (together with the Continued Subsidiary
Revolving A Loans, each a "Subsidiary Revolving A Loan" and collectively, the
"Subsidiary Revolving A Loans"). Revolving A Loans first incurred on or after
the Restatement Effective Date shall, at the option of the respective Bor rower,
be incurred as either Base Rate Loans or Eurodollar Loans, provided that all
--------
Revolving A Loans incurred as part of the same Borrowing shall, unless otherwise
specifically provided herein, be of the same Type. Revolving A Loans (i) may be
repaid and reborrowed in accordance with the provi sions of this Agreement, (ii)
shall not exceed for any Revolving A Bank at any time outstanding that aggregate
prin cipal amount which, when added to the product of (x) such Revolving A
Bank's Revolving Percentage and (y) all Letter of Credit Outstandings at such
time plus the aggregate principal amount of all Permitted Other Indebtedness
then outstanding, equals such Revolving A Bank's Revolving A Commitment at such
time and (iii) shall not exceed in aggregate principal amount for all Revolving
A Banks at any time outstanding, when added to the Letter of Credit Outstandings
then outstanding plus the aggregate principal amount of all Permitted Other
Indebt-
-2-
<PAGE>
edness then outstanding, the Borrowing Base. Revolving A Loans made to any
Subsidiary Revolving A Borrower by all the Revolving A Banks shall not exceed in
aggregate principal amount at any time outstanding the Revolving Sub-Limit of
such Subsidiary Revolving A Borrower.
2. On the Ninth Amendment Effective Date, Section 1.05(j) is hereby
amended by deleting the date "September 27, 1996" appearing in clause (iii)
thereof, and inserting in lieu thereof the date "June 30, 1999".
3. On the Ninth Amendment Effective Date, Section 1.09 is hereby
amended by deleting the date "September 27, 1996" appearing in clause (ix)
thereof, and inserting in lieu thereof the date "June 30, 1999".
4. On the Ninth Amendment Effective Date, Section 2.01(b) of the
Credit Agreement is hereby amended by inserting the word "or" immediately after
the comma at the end of the tenth line thereof, and deleting the language "or
(3) the limitations set forth in the last sentence of Section 1.01(c)" appearing
in clause (ii) thereof.
5. On the Ninth Amendment Effective Date, Section 3.02 of the Credit
Agreement shall be deleted in its entirety and the following shall be inserted
in lieu thereof:
"3.02 Intentionally Omitted."
---------------------
6. On the Ninth Amendment Effective Date, Section 3.03(a) of the
Credit Agreement shall be deleted in its entirety and the following shall be
inserted in lieu thereof:
"(a) [Intentionally Omitted]."
7. On the Ninth Amendment Effective Date, Section 3.03(e) of the
Credit Agreement is amended and restated in its entirety as follows:
(e) On each date upon which a mandatory prepayment of Revolving A
Loans or Delayed Draw Loans would be required to be made in accordance with
Section 4.02(h), or on the date any voluntary prepayment of Revolving A Loans or
Delayed Draw Loans is made pursuant to Section 4.01(a), the Total Revolving A
Commitment and Total Delayed Draw Commitment shall be permanently reduced by the
amount of such prepayment (determined as if Revolving A Loans and Delayed Draw
Loans were outstanding in the full amount of the Total Revolving A Commitment
and Total Delayed Draw Commitment).
-3-
<PAGE>
8. On the Ninth Amendment Effective Date, Section 4.01 of the Credit
Agreement is hereby amended by (i) inserting the letter "(a)" prior to the text
thereof, (ii) inserting the parenthetical "(other than Revolving A Loans repaid
pursuant to Section 4.02(b))" after the first reference to the word "Loans" in
such Section 4.01(a), (iii) deleting clauses (iv) and (v) of such Section
4.01(a) and re-designating clause "(vi)" as clause "(iv)", (iv) deleting the
last sentence of such Section 4.01(a), (v) inserting the following new sentence
at the end of such Section 4.01(a):
"In addition to the foregoing, all repayments of Loans under this
Section 4.01(a) shall be made on the same basis as mandatory prepayments
(and reductions to the Total Revolving A Commitment and Total Delayed Draw
Commitment) are made pursuant to Section 4.02(h)."
and (vi) adding the following new Section 4.01(b):
"(b) Each Borrower of Revolving A Loans shall have the right to
prepay the Revolving A Loans (without causing an automatic reduction in the
Total Revolving A Commitment), without premium or penalty, in whole or in part
from time to time on the following terms and conditions: (i) the respective
Borrower shall give the Administrative Agent prior to 11:00 A.M. (New York time)
at its Notice Office at least (x) two Business Days' prior notice of its intent
to prepay Fixed Rate Loans and (y) one Business Day's prior notice of its intent
to prepay Base Rate Loans, which notice shall identify (a) the amount of such
prepayment, (b) the Type of Revolving A Loans to be prepaid and (c) in the case
of Fixed Rate Loans, the specific Borrowing or Borrowings pursuant to which
made, which notice the Administrative Agent shall promptly transmit to the
respective Banks; (ii) each partial prepayment of Revolving A Loans of a single
Borrower shall be in an aggregate principal amount of at least $1,000,000, pro
vided that no partial prepayment of Fixed Rate Loans made pursuant to any
Borrowing shall reduce the outstanding Fixed Rate Loans made pursuant to such
Borrowing to an amount less than $5,000,000; and (iii) prepayments of Fixed Rate
Loans may be made pursuant to this Section 4.01(b) only on the last day of an
Interest Period applicable thereto. Each prepayment pursuant to this Section
4.01(b) in respect of any Revolving A Loans, and to any Borrowing in respect
thereof, shall be applied pro rata among all Revolving A Loans of such
--- ----
Borrowing."
9. On the Ninth Amendment Effective Date, Section 4.02(h) of the
Credit Agreement is hereby amended by (i)
-4-
<PAGE>
deleting the first sentence thereof and (ii) inserting the following sentences
in lieu thereof:
"All amounts required to be applied in accordance with this Section
4.02(h) shall be applied: (i) first, and with respect to repayments made
on the Ninth Amendment Effective Date only, 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) and reductions to the Total
Revolving A Commitment and Total Delayed Draw Commitment pursuant to
Section 3.03(e), pro rata among the Banks, based on each Bank's pro rata
--- ---- --- ----
share of the Total Exposure on or after the Ninth Amendment Effective Date
(after giving effect thereto), and (iii) third, to the extent permitted by
applicable law, to repayments of the outstanding ESOP Loans. Each Bank
shall apply such amounts under clause (ii) above based on its pro rata
--- ----
share of the Total Exposure (x) first, to repay all of its outstanding
Loans of Borrowers which are incorporated in the United States or any State
thereof in the following order: (A) first to all of its Deferred Term
Loans, (B) then to all of its Delayed Draw Term Loans, (C) then to all of
its Revolving B Loans, (D) then to all of its Term Loans; and (y) second,
to repay all of its outstanding Loans of Borrowers which are incorporated
outside of the United States in the following order: (A) first to all of
its Term Loans denominated in U.S. Dollars, (B) then to all of its Sterling
Revolving B Loans, (C) then to all of its Sterling Term Loans, (D) then to
all of its Revolving B Loans and (E) then to all of its Revolving A Loans
(to the extent necessary to adjust the outstanding Revolving A Loans of any
Bank such that its outstanding Revolving A Loans are proportionate to all
outstanding Revolving A Loans on the basis of its Revolving Percentage)."
10. On the Ninth Amendment Effective Date, Section 7.01(c) of the
Credit Agreement is hereby amended by deleting the number "75" in the first line
thereof and inserting in lieu thereof the number "90".
11. On the Ninth Amendment Effective Date, Section 7.09 of the Credit
Agreement is hereby amended by inserting the following sentence at the end
thereof:
-5-
<PAGE>
"Notwithstanding the foregoing, there shall be no further obligation
to obtain or maintain Hedging Agreements after the Ninth Amendment
Effective Date."
12. On the Ninth Amendment Effective Date, (i) Section 8.05(d) of the
Credit Agreement is hereby amended by deleting the language "pursuant to Section
7.09" in the second line thereof, and inserting in lieu thereof "prior to the
Ninth Amendment Effective Date", (ii) Section 8.05(k) of the Credit Agreement is
hereby amended by deleting "and" at the end of the fourth line thereof, (iii)
Section 8.05(l) of the Credit Agreement is hereby amended by deleting the period
at the end thereof and inserting in lieu thereof "; and", and (iv) Section 8.05
of the Credit Agreement is hereby amended by inserting the following new
paragraph (m) at the end thereof:
"(m) Indebtedness evidenced by the Senior Notes."
13. On the Ninth Amendment Effective Date, Section 8.06 of the Credit
Agreement is hereby amended by (i) deleting the word "and" after the semicolon
in subsection (xvi) of such Section, (ii) deleting the period at the end of
subsection (xvii) of such Section and inserting in lieu thereof "; and", and
(iii) inserting the following new subsection (xviii) at the end of such Section
8.06:
"(xviii) (x) the Company and its Subsidiaries may make advances or loans
to, or investments in, Subsidiaries of the Company in an amount not to
exceed $1,000,000 annually and (y) the Company and its Subsidiaries may
make investments described in the proviso to the definition of Capital
Expenditures."
14. On the Ninth Amendment Effective Date, Section 8.08 of the Credit
Agreement is hereby amended by (i) deleting the dollar amount of "23,000,000" in
the Amount column opposite the Period "Fiscal Year Ending December, 1995 and
each fiscal year thereafter" and inserting in lieu thereof the dollar amount
"25,000,000", and (ii) inserting the following new language at the end of such
Section 8.08:
"Notwithstanding anything to the contrary contained in this Section 8.08,
up to $5,000,000 (the "Carry-Over Amount") of unutilized capital
expenditure allowances created in any one fiscal year (beginning with the
fiscal year ending on December 31, 1995) may be carried over to increase
the following fiscal year's capital expenditure allowance."
-6-
<PAGE>
15. On the Ninth Amendment Effective Date, Section 8.11 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
"8.11 Minimum Consolidated Net Worth. The Company's Minimum
------------------------------
Consolidated Net Worth at any time may not be less than an amount
equal to (i) the Company's Consolidated Net Worth at December 25, 1994
(i.e., $257,280,386), minus (ii) $30,000,000, plus (iii) Cumulative
----
Consolidated Net Income at such time."
16. On the Ninth 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. Consolidated EBITDA for (i) the
---------------------------
period beginning on December 26, 1994 and ending on the last day of (x) the
second quarter of 1995, taken as one accounting period, shall be greater
than $41,000,000 and (y) the third quarter of 1995, taken as an accounting
period, shall be greater than $62,000,000 and (ii) any four fiscal quarter
period ending on the last day of any fiscal quarter set forth below, taken
as one accounting period, shall be greater than the amount set forth
opposite such fiscal quarter:"
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- ------
<S> <C>
For the fourth quarter of 1995 $85,000,000
For the first quarter of 1996 85,000,000
For the second quarter of 1996 85,000,000
For the third quarter of 1996 85,000,000
For the fourth quarter of 1996 87,500,000
For the first quarter of 1997 87,500,000
For the second quarter of 1997 87,500,000
For the third quarter of 1997 87,500,000
For the fourth quarter of 1997 90,000,000
For the first quarter of 1998 90,000,000
For the second quarter of 1998 90,000,000
For the third quarter of 1998 90,000,000
For the fourth quarter of 1998 92,500,000
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C>
For the first quarter of 1999 92,500,000
For the second quarter of 1999 92,500,000
</TABLE>
Additionally, if the Company exceeds the required minimum Consolidated
EBITDA levels set forth above for the fiscal years ending December 31, 1995 or
December 31, 1996, then 50% of the excess in each of those two years, up to a
maximum of $5,000,000 in the aggregate, will be available to the Company as a
credit to add to the actual Consolidated EBITDA of the Company in any fiscal
quarter thereafter, to be included in the calculation for any period in which
such quarter is included. The credit created by such excess may be used in
whole or in part."
17. On the Ninth Amendment Effective Date, Section 9.13 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
"9.13 Environmental Liabilities. The Company makes payments in
-------------------------
excess of $5,000,000 pursuant to CERCLA in any single fiscal year with
respect to remediation at the St. Louis River Site, provided, that the
--------
Company may carry over 100% of any year's unused remediation
expenditures, up to a maximum aggregate amount of $20,000,000;"
18. On the Ninth Amendment Effective Date, Section 10.01 of the
Credit Agreement is hereby amended as follows:
(a) The definition of Applicable Margin is amended by adding the
following sentence to the end thereof:
"Effective June 30, 1998, the percentages per annum set forth above
shall increase (x) in the case of Base Rate Loans and all other
interest rates determined by reference to the Alternate Base Rate, to
2.5%, and (y) in the case of Fixed Rate Loans, to 3.5%."
(b) The definition of Capital Expenditures shall be amended by adding
the following proviso to the end of the first sentence thereof:
"; provided that there shall be included in the definition of Capital
-------------
Expenditures up to $5,000,000 in any fiscal year in expenditures of
the Company for (i) securities acquired by the Company and/or its
Subsidiaries of another Person representing at least 50% of the voting
and
-8-
<PAGE>
economic interests in such Person and (ii) assets the acquisition of
which would not otherwise constitute a Capital Expenditure and would
not otherwise be permitted under Section 8.02."
(c) The definition of Consolidated Current Assets is amended and
restated in its entirety as follows:
"Consolidated Current Assets" shall mean, at any date, all the current
assets (other than cash and Cash Equivalents) of the Company and its
Subsidiaries determined on a consolidated basis in conformity with
generally accepted accounting principals.
(d) The definition of Deferred Term Loan Maturity Date is amended by
deleting the date "September 27, 1998" and inserting in lieu thereof the
date "June 30, 1999";
(e) The definition of Delayed Draw Maturity Date is amended by
deleting the date "March 27, 1997" and inserting in lieu thereof the date
"June 30, 1999";
(f) The definition of Excess Cash Flow is amended by inserting at the
end of clause (i)(x) the following:
"provided that such calculation shall only include the amount of any
--------
decrease which is in excess of $5,000,000,";
(g) The definition of Consolidated Net Worth is hereby amended and
restated as follows:
"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."
(h) The definition of Payment Office is amended by deleting the
address appearing in the third and fourth lines thereof and inserting in
lieu thereof the address "270 Park Avenue, New York, New York 10017"; and
(i) The definition of Scheduled Repayment Date shall be amended and
restated in its entirety as follows:
-9-
<PAGE>
"Scheduled Repayment Date" shall mean (i) with respect to ESOP Loans,
the dates set forth under the heading "ESOP Loans" on Schedule III and
(ii) with respect to all other Installment Loans, June 30, 1999.
(j) The definition of Revolving Loan Maturity Date is amended by
deleting the date "September 27, 1997" and inserting in lieu thereof the
date "June 30, 1999";
(k) The definition of Term Loan Maturity Date is amended by deleting
the date "September 27, 1996" and inserting in lieu thereof the date "June
30, 1999";
(l) The following new definitions are inserted in alphabetical order:
"Cumulative Consolidated Net Income" shall mean, on any date,
Consolidated Net Income on a cumulative basis for all fiscal quarters
of the Company ending after December 25, 1994 (for which Consolidated
Net Income was a positive number), all determined on the basis of
generally accepted accounting principles as in effect on December 25,
1994.
"Ninth Amendment Effective Date" shall mean June 1, 1995.
"Senior Notes" shall mean the Senior Notes due 2001 of the Company
issued on the Ninth Amendment Effective Date pursuant to the
Indenture, dated as of such date, between the Company and Bank One,
Columbus, N.A. as Trustee.
"Total Exposure" shall mean, at any time, (i) the aggregate principal
amount of Loans (excluding ESOP Loans) outstanding at such time, plus
(ii) the Letter of Credit Outstandings at such time, plus (iii) the
Total Unutilized Revolving A Commitment then in effect, plus (iv) the
Delayed Draw Commitment then in effect.
19. On the Ninth Amendment Effective Date, Section 13.04(b) of the
Credit Agreement is hereby amended by (i) deleting clause "(iii)" thereof in its
entirety, (ii) redesignating clauses "(iv)" and "(v)" as clauses "(iii)" and
"(iv)", respectively, and (iii) inserting the following
-10-
<PAGE>
language at the end of clause (ii) in the seventeenth line of such Section
13.04(b):
"or such lesser amount representing the entire remaining Commitment of
such Assigning Bank, and"
20. On the Ninth Amendment Effective Date, Section 13.11(i) is hereby
amended by inserting at the end thereof the following:
"or create any scheduled amortization for any Tranche of Loans
(including by changing the definition of Scheduled Repayment Date),"
21. On the Ninth Amendment Effective Date, Section 13.20 is hereby
deleted in its entirety.
22. 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
Ninth 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.
23. 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.
24. This Amendment may be executed in any number of counterparts and
by the different parties hereto on sepa rate 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.
25. 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-
<PAGE>
26. This Amendment shall become effective on the date (the "Ninth
Amendment Effective Date") when each of the following conditions shall have been
satisfied:
(a) On or prior to the Ninth Amendment Effective Date, the Company,
the Subsidiary Borrowers, the ESOP Trustee, the Administrative Agent, the
Co-Agents and the 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;
(b) The Company shall have received, on or prior to August 31, 1995,
at least $95 million of net cash proceeds from the issuance of the Senior
Notes pursuant to documents satisfactory to the Administrative Agent or the
Banks, and shall have applied such proceeds as required pursuant to Section
4.02(h) (as amended hereby);
(c) The Company shall have paid all fees and expenses (including
legal fees and expenses) then due and owing to the Administrative Agent;
and
(d) The Administrative Agent shall have received an opinion of
counsel to the Company and its Subsidiaries covering the matters herein and
such other matters as the Administrative Agent shall have reasonably
requested.
27. From and after the Ninth Amendment Effective Date, all references
in the Credit Agreement and each of the Credit Documents or any other agreement
to the Credit Agree ment shall be deemed to be references to such Credit Agree
ment 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:
-12-
<PAGE>
SUBSIDIARY BORROWERS
--------------------
ACME STRAPPING INC.
By________________________
Title:
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By________________________
Title:
-13-
<PAGE>
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:
-14-
<PAGE>
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 in
dividual or corporate capacity (except for
the representa tions 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:
-15-
<PAGE>
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:
BANK OF AMERICA, ILLINOIS
By________________________
Title:
THE FUJI BANK LIMITED
By_______________________
Title:
-16-
<PAGE>
MELLON BANK N.A.
By_______________________
Title:
THE NIPPON CREDIT BANK, LTD.
By_______________________
Title:
THE BANK OF NOVA SCOTIA
By_______________________
Title:
UNION BANK OF FINLAND/
CAYMAN ISLAND BRANCH
By_______________________
Title:
By_______________________
Title:
BANK OF YOKOHAMA
By_______________________
Title:
-17-
<PAGE>
GIROCREDIT BANK AG
DER 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:
-18-
<PAGE>
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:
-19-
<PAGE>
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By________________________
Title:
DEXION GROUP PLC
By________________________
Title:
-20-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-2 of our report dated January 25, 1995, except
as to Note 18, which is as of March 8, 1995, relating to the financial
statements of The Interlake Corporation, which appears in such Prospectus. We
also consent to the application of such report to the Financial Statement
Schedules for the three years ended December 25, 1994 listed under Item 14(a) of
The Interlake Corporation's Annual Report on Form 10-K for the year ended
December 25, 1994 when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included these Financial Statement Schedules. We also consent to the references
to us under the headings "Experts" and "Selected Consolidated Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial Data."
Price Waterhouse LLP
June 15, 1995
