<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1995
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
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. [_]
________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================
Proposed maximum Proposed maximum
Title of securities Amount to be offering price aggregate Amount of
to be registered registered per unit (1) offering price (1) registration fee
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
% Senior Notes due 2001 $100,000,000 100% $100,000,000 $34,483
========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) and based upon a bona fide estimate of the maximum
offering price.
________________
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.
================================================================================
<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
- ---- -------------------------------------- ---------------------------------------------------
<C> <S> <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; Outside
Back Cover Page of Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................... Inside Front Cover Page of Prospectus; Prospectus
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;
Underwriting
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 Operations
and Financial Condition; Business; 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>
SUBJECT TO COMPLETION, DATED MAY 2, 1995
PROSPECTUS $100,000,000
, 1995
[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" 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 CONTRARY IS A CRIMINAL OFFENSE.
<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 $ $ $
-----------------------------------------------------------------------------
</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 or deemed
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 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.
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 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.
3
<PAGE>
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 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.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
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 November
, 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
required to make an 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. Due
to the highly leveraged structure of the Company,
the Company may not have sufficient funds or
financing to repurchase the Senior Notes and
satisfy other obligations (including secured
obligations 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
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 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 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, 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. 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.
Certain Covenants.......... The Indenture pursuant to which the Senior Notes
will be issued (the "Indenture") will restrict,
among other things, (i) the incurrence of
additional indebtedness by the Company and its
subsidiaries, (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 disposal 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
Repayments. See "Use of Proceeds."
</TABLE>
5
<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)(9)
----------------------------------------------------------------- ---------------------
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)(10) $ 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)(10) (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(8) 5.11(8)
</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(8)
</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.
6
<PAGE>
(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 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.
(9) 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."
(10) 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.
7
<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.
8
<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
(Unaudited)
----------------------
Actual As Adjusted
(In thousands)
<S> <C> <C>
Fiscal Year Ended
- ---------------------
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(2)
2000.......... 200 200
2001.......... 50,300 150,300(3)
2002.......... 171,300 171,300(4)
</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) Includes $99.3 million maturing under the Amended Credit Agreement.
(3) Includes the $100.0 million of Senior Notes and $50.0 million due under
the Subordinated Debentures.
(4) Includes $170.0 million of the Subordinated Debentures.
9
<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 of the Amended Credit Agreement, it
may need to refinance amounts borrowed thereunder prior to 1999. See "--
Financial and Operating Restrictions; Financial Performance Requirements." 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 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 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."
10
<PAGE>
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."
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
particularly 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
11
<PAGE>
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.
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 payment default under the Amended
Credit Agreement or the Subordinated Debenture Indenture or certain other
defaults 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
12
<PAGE>
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. 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 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."
13
<PAGE>
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 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.
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.
14
<PAGE>
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 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.
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%.
15
<PAGE>
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.
16
<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)(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
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)(9) ---
--------- --------- --------- --------- --------- --------- ---------
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
========= ========= ========= ========= ========= ========= =========
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(7) 5.11(7)
</TABLE>
17
<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(7)
</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 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 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) 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.
18
<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.
19
<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 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
20
<PAGE>
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>
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.
21
<PAGE>
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.
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.
22
<PAGE>
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 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.
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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. See Note 16 of Notes to
Consolidated Financial Statements.
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
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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 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
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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 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. 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.
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.
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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 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.
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.
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.
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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 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
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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 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.
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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 market places 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.
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
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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.
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
32
<PAGE>
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 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.
33
<PAGE>
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 will expire 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. Neither the Company
nor any of its subsidiaries is a party to any legal proceedings which are
material within the meaning of regulations of the Commission presently in
effect. See Notes 15 and 16 of Notes to Consolidated Financial Statements for
information regarding certain legal proceedings.
34
<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, Manufacture storage rack, slotted angle, Building owned 353,000
U.K. shelving and partitioning on leased land
Laubach, Germany Manufacture storage rack, slotted angle, Owned 335,000
shelving, partitioning and conveyors
Gainsborough, U.K. Manufacture conveyors Building owned 103,000
on leased land
Nivelles, Belgium Manufacture storage rack and slotted angle Owned 101,000
Halle, Germany Manufacture steelwork and conveyors Owned 90,000
Kilnhurst, U.K. Manufacture storage rack Owned 89,000*
Handling Asia Pacific
Blacktown, Australia Manufacture storage rack, slotted angle, Owned 135,000*
shelving and conveyors
Wacol, Australia Manufacture shelving and wire products Owned 30,000*
PACKAGING
Scarborough, Canada Manufacture steel strap, edgeboard, Owned 135,000*
collated nails and strapping equipment
Kilnhurst, U.K. Manufacture steel strap, seals, tools and Owned 97,000
machines
Racine, WI Manufacture stitching machines Leased 70,000
Fountain Inn, SC Manufacture non-metallic strap Owned 61,000*
Hodgkins, IL Machine preparation, warehouse Leased 32,000
Maidenhead, U.K. Machine preparation, warehouse Owned 22,000
Strood, U.K. 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.
35
<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, 52
President and Chief Executive Officer
Craig A. Grant........................... Vice President--Human Resources 47
Stephen Gregory.......................... Vice President--Finance, Treasurer and 46
Chief Financial Officer
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 46
Robert A. Pedersen....................... President, Interlake Packaging Corporation 49
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 69
</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.
36
<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. In March 1995, he retired as
Chief Executive Officer of Navistar International Corporation. 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 trustee of the
Adler Planetarium. He is a director of Asarco Incorporated and USG Corporation.
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.
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.
37
<PAGE>
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 provided 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 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, 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.
38
<PAGE>
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 the
Senior Credit Facilities (as defined in (b)(i) under "--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
the Senior Credit Facilities 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 the Senior
Credit Facilities 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 in the definition 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 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, (collectively, the "Senior Credit Facilities") in an
aggregate principal amount outstanding at any one time not to exceed $200.0
million of Indebtedness, including any Indebtedness Incurred by the Company
or any Subsidiary in connection with or pursuant to any amendment,
extension, restructuring, refunding or refinancing of amounts due,
commitments or maturities under the Senior
39
<PAGE>
Credit Facilities (so long as the aggregate principal amount of the
Indebtedness Incurred under the Senior Credit Facilities does not exceed
$200.0 million in the aggregate);
(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 or liquidation preference so exchanged or refinanced (plus
accrued interest and accrued dividends, as the case may be, fees and
expenses related thereto and any premium payable pursuant to optional
redemption provisions of such Outstanding Indebtedness or Preferred Stock
to be 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 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 contained in the covenant 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 requirements 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 this clause (v) nor may the
Company issue, pursuant to 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 of this clause (v) with
respect to principal amount, 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 covenant
described below under "Limitation on Certain Asset Dispositions;"
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(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 covenant 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 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 clause (a) above to the contrary,
transactions expressly contemplated by certain agreements with Hoeganaes or
Dexion (North Asia) Ltd. 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
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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, pursuant to
certain agreements currently in effect, so long as the Company owns,
directly or indirectly, the percentage of Capital Stock, Voting Stock or
other ownership interest of Hoeganaes 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 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)
(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
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 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 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.
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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.
In addition, notwithstanding clauses (2) or (3) above but subject to clause
(1) above, 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 clause (vi) above under "Limitation on Consolidated
Indebtedness" and (y) Sale and Leaseback Transactions permitted by the covenant
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 clause (vi)
above under "Limitation on Consolidated Indebtedness" and Sale and Leaseback
Transactions permitted by the covenant 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 purchases of Outstanding Senior Notes and
other Indebtedness ranking Pari Passu with the Senior Notes (determined by
reference to principal amount) 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
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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 as
provided in clause (b) above 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.
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 the Senior Credit Facilities; (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 covenant 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 covenant 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 the Senior Credit Facilities, (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 the Senior Credit Facilities 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
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other Indebtedness required to be equally and ratably secured as a result of the
Incurrence of such Indebtedness; provided that the provisions of the Indenture
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 in paragraph (b)(i) under "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 of
the covenant 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 summarized 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 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 for payment in trust), and (b) need not comply with certain
restrictive covenants of the Indenture, including, among others, those described
under "--Change of
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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 such 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
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 the Senior Credit Facilities of written notice, provided such Event of
Default is then continuing, or (ii) an acceleration under any Senior Credit
Facilities. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization relating to the Company occurs, the principal
amount
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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.
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.
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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 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 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.
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"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 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 during such period to minority
shareholders with respect to a Controlled Subsidiary in an amount, if any, equal
to 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.
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"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 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 clause (viii) of the covenant described under "--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
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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 stockholder's 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.
"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.
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"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.
"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
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 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
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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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"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
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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 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 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 the Senior Credit Facilities,
(c) all other Indebtedness of the Company not prohibited under the provisions of
the Indenture summarized 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 the
Senior Credit Facilities and any refinancings thereof) 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 of the Indenture
described in paragraph (b) under "--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
the Senior Credit Facilities 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.
"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 under "--Certain Covenants--Limitation on Consolidated
Indebtedness."
54
<PAGE>
"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 under "--Certain Covenants--Limitation
on Consolidated Indebtedness."
55
<PAGE>
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 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 a final maturity of 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 bear interest, at
the option of the Company, at the prime rate plus 1.75%, or at various London
Interbank Offering Rates (LIBOR) plus 2.75%, with such rates adjusted
periodically. 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.
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; (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 of 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 30, 1999 and 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
regarding minimum EBITDA levels and minimum consolidated net worth 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 Credit Agreement, and 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 currently bear
interest at the Adjusted Sterling LIBOR Rate plus a margin of 2.75%.
56
<PAGE>
As of April 2, 1995, the interest rate 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,
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 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 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) capital expenditures,
(i) payments, prepayments, repurchases and modification of certain indebtedness,
(j) the modification of the Company's Certificate, by-laws or certain
agreements, (k) the creation of encumbrances or restrictions on the ability of
the Company's subsidiaries to make payments, transfers or distributions to the
Company, (l) the issuance by the Company's subsidiaries of capital stock, (m)
the engaging by the Company or its subsidiaries in new businesses and (n) 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. Accordingly, such information may
not be readily derivable from financial statements included elsewhere in this
Prospectus.
57
<PAGE>
Minimum Consolidated EBITDA. Minimum Consolidated EBITDA (defined in the
Amended Credit Agreement as 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 on a
consolidated basis, computed on a basis of a rolling four fiscal 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)
<S> <C>
Fiscal 1995 $
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1996
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1997
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1998
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1999
1st Quarter......................
2nd Quarter......................
</TABLE>
At December 25, 1994 and April 2, 1995, the Minimum Consolidated EBITDA
of the Company (as defined) would have been $ million and $
million, respectively.
58
<PAGE>
Minimum Consolidated Net Worth (Shareholders' Deficit). Shareholders'
deficit (as defined in the Amended Credit Agreement) of the Company and its
subsidiaries on a consolidated basis will be required to be no greater than the
amount set forth below at the end of each of the following fiscal quarters.
<TABLE>
<CAPTION>
Amount
(In millions)
<S> <C>
Fiscal 1995 $
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1996
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1997
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1998
1st Quarter......................
2nd Quarter......................
3rd Quarter......................
4th Quarter......................
Fiscal 1999
1st Quarter......................
2nd Quarter......................
</TABLE>
At December 25, 1994 and April 2, 1995, the Consolidated Shareholders'
Deficit of the Company (as defined) would have been $ million and $
million, respectively.
Capital Expenditures. The Company may not make or incur, or permit any
of its subsidiaries to make or incur, Capital Expenditures in any fiscal year
less than $ million or in excess of $ million.
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. 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.
59
<PAGE>
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%.
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
60
<PAGE>
of cross-acceleration provisions in the Indenture, a payment default under the
Subordinated Debenture Indenture or certain other defaults under the
Subordinated Debenture 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.
61
<PAGE>
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 Corporation.......................... $
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.
62
<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 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
(See notes to consolidated financial statements)
</TABLE>
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 Retained Unearned Foreign
and Paid-In Capital Held in Treasury Earnings Compen- Currency
Shares Amount Shares Amount (Deficit) sation Translation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1991 11,741 $11,741 (1,257) $(28,709) $(198,408) $(14,112) $ (9,977) $(239,465)
Net income (loss) (27,698) (27,698)
Sale of stock (See Note 11) 11,488 41,759 41,759
Stock incentive plans (See Note 12) 55 649 (1,146) 273 (224)
ESOP transactions (See Note 11) 905 905
Translation loss (7,995) (7,995)
Balance December 27, 1992 23,229 53,500 (1,202) (28,060) (227,252) (12,934) (17,972) (232,718)
Net income (loss) (25,962) (25,962)
Stock incentive plans (See Note 12) (23) 13 (1) 46 35
ESOP transactions (See Note 11) 1,609 1,609
Translation loss (2,731) (2,731)
Balance December 26, 1993 23,229 53,477 (1,202) (28,047) (253,215) (11,279) (20,703) (259,767)
Net income (loss) (40,751) (40,751)
Stock incentive plans (See Note 12) 15 15
ESOP transactions (See Note 11) 1,206 1,206
Translation gain 2,862 2,862
Balance December 25, 1994 23,229 $53,477 (1,202) $(28,047) $(293,966) $(10,058) $(17,841) $(296,435)
</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.
F-7
<PAGE>
Property, Plant and Equipment and Depreciation - For financial reporting
purposes, plant and equipment are depreciated principally on a straight-line
method over the estimated useful lives of the assets. Depreciation claimed for
income tax purposes is computed by use of accelerated methods.
Upon sale or disposal of property, plant and equipment, the asset cost and
related accumulated depreciation are removed from the accounts, and any gain or
loss on the disposal is generally credited or charged to nonoperating income.
(In 1992, gains and losses on disposals related to the 1989 restructuring
program were included in operating income as restructuring charges.) (See Note
3).
Expenditures for renewals and betterments which extend the originally estimated
useful life of an asset or materially increase its productivity are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. Property, plant and equipment by category at December 25, 1994 and
December 26, 1993 were:
<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 ex-
change contracts to hedge specific inventory purchases and other transactions
denominated in foreign currencies. Premiums received and fees paid on foreign
exchange contracts are deferred and amortized over the period of the contracts.
At December 25, 1994, the Company had outstanding currency contracts to
exchange $1,918 for foreign currency (including Canadian dollars, Australian
dollars, deutsche marks, pounds sterling, Japanese yen and Belgian francs).
The Company's exposure to loss in the event of nonperformance by the other
parties to these contracts is limited to the effect of the currency
fluctuations related to the amounts to be exchanged; however, the Company does
not anticipate nonperformance by the counterparties.
F-8
<PAGE>
Interest Rate Hedges - The Company utilizes swap agreements to hedge a portion
of its interest rate exposure on floating rate obligations (see Note 14).
Interest expense increases or decreases are accrued as they occur and are
settled on a quarterly basis. At current interest rates the Company has no
exposure to credit loss.
Research and Development Expenses - Research and development expenditures for
Company sponsored projects are generally expensed as incurred. Research and
development expenses included in selling and administrative expenses were
$2,107, $2,153, and $2,209 for the Engineered Materials segment in 1994, 1993,
and 1992, respectively, and $1,303, $1,092, and $607 for the Handling/Packaging
Systems segment in 1994, 1993, and 1992, respectively.
Deferred Taxes - Certain prior year deferred tax amounts were reclassified
to conform to current year presentation.
NOTE 2 Goodwill Write-down
Prior to the fourth quarter of 1994, impairment with respect to the Company's
long-lived assets was determined by comparing the sum of the undiscounted
projected future cash flows attributable to each business unit to the carrying
value of the assets of that business 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 analy-
zing the potential impairment of long-lived assets would be to reflect the cost
of capital in computing the present value of the expected cash flows of its
businesses. Applying this new policy to all of its long-lived assets the
Company determined, with respect to its Aerospace Components and newspaper-
related Packaging businesses, that in the light of the significant deteriora-
tion in business climates in the aerospace and newspaper industries over recent
years, the values of the discounted cash flows were insufficient to recover the
carrying value of the long-lived assets. Therefore, the goodwill included among
those assets was deemed to be impaired. As a result, a charge of $34,174 was
recorded for the write-down of goodwill established in connection with the
acquisitions of the Aerospace Components and newspaper-related Packaging
businesses. As of December 25, 1994, the remaining net investment in these
businesses was approximately equal to the value of the discounted projected
cash flows attributable to them, and consisted primarily of tangible assets.
The Company intends to continue to annually assess the carrying values of its
long-lived assets using the analysis described above.
NOTE 3 Restructuring Charges
In 1993, the Company provided $5,611 for restructuring costs related to: the
exit from certain lines of business that were part of Handling North America;
reorganization and downsizing of portions of the European Handling operation;
and, in the Aerospace Components business, the abandonment of certain product
lines which resulted in idled equipment and severance costs related to a
downsizing of the Aviation Repair workforce. The $5,611 consisted of $1,676 in
severance costs, $1,515 of idled equipment written-down to fair market value,
$1,367 of inventory related to the exited businesses and $1,053 of other costs.
Quantification of the 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 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.
F-9
<PAGE>
In 1992, the Company recorded $2,523 of additional costs related to unfavorable
adjustments on assets held for sale as part of an asset sale program. The
Company developed this program in 1989 as part of an overall restructuring
program which modified its strategic operating plan. The modified strategic
operating plan identified certain businesses and Corporate assets to be dis-
posed of and implemented major Corporate cost reductions. Most of the desig-
nated businesses were sold or shut-down in 1990. The 1992 adjustment reflected
the decline in real-estate value of two properties held for sale, both of which
were former Handling operations.
NOTE 4 Cumulative Effect of Changes in Accounting Principles
In the fourth quarter of 1992, the Company changed its method of accounting for
postretirement benefits and income taxes by adopting pronouncements of the
Financial Accounting Standards Board which are mandatory for fiscal years
beginning after December 15, 1992. The one-time cumulative effect of these new
accounting standards on income was a net charge of $6,141 which was reported
retroactively to the beginning of fiscal 1992. Such accounting changes did not
affect cash flows in 1992 and will not affect future cash flows.
The Company provides certain medical and life insurance benefits to qualifying
domestic retirees. In 1992, the Company changed its method of accounting for
these postretirement benefits by adopting the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (FAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This change
recognized the difference between the estimated accumulated postretirement
benefit obligation under FAS No. 106 ($34,477) and the obligation accrued under
the Company's previous accrual method ($20,439) by making a charge against
income of $14,038 ($9,265 after taxes, equivalent to $.56 per share)
retroactively to the beginning of the fiscal year.
In the fourth quarter of 1994, the Company elected to adopt FAS No. 106 for its
foreign plans. Adoption is mandatory for foreign plans for fiscal years
beginning after December 15, 1994. The one-time cumulative effect of this
adoption on income was a net charge of $194 ($.01 per share) which was reported
retroactively to the beginning of fiscal 1994.
In 1992, the Company changed its method of accounting for income taxes by adop-
ting the Financial Accounting Standards Board's FAS No. 109, "Accounting for
Income Taxes". In making this change, the Company recognized the cumulative
effect of the difference in accounting methods as a $3,124 credit to earnings
(equivalent to $.19 per share) retroactive to the beginning of the fiscal year.
NOTE 5 Extraordinary Loss
In 1992, the Company refinanced certain long-term debt and entered into a
comprehensive amendment and restatement of its bank credit agreement. This
necessitated the write-off of issuance costs related to this previously
outstanding indebtedness which were originally deferred so that they could be
expensed over the original lives of such indebtedness. This resulted in an
extraordinary loss of $7,567 without any currently usable tax benefit in 1992
(equivalent to $.46 per share).
The cash flow impact of the early extinguishment of debt was immaterial.
However, new debt issuance costs had a negative cash flow consequence of
$11,952 in 1992 which was deducted in determining net cash provided (used) by
operating activities in the Consolidated Statement of Cash Flows.
NOTE 6 Business Segment Information
The Company operates in two segments, each of which is composed of products
which have a similar strategic emphasis. The two business segments are:
Engineered Materials - includes Special Materials, which produces
ferrous metal powder used to manufacture precision parts, and
Aerospace Components, which manufactures precision jet engine
components and repairs jet engine fan blades.
Handling/Packaging Systems - is comprised of the Company's Handling
operations, which design, manufacture and sell storage rack,
shelving and related equipment primarily for use in warehouses,
distribution centers and for other storage applications; and the
Company's Packaging operations, which design and sell machinery
for applying strapping and stitching wire, and also supply
strapping and stitching wire for use in such machines.
F-10
<PAGE>
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
(in millions)
<TABLE>
<CAPTION>
Net Sales Operating Profit (Loss) Identifiable Assets
1994 1993 1992 1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered Materials
Special Materials $153.9 $131.5 $122.5
Aerospace Components 62.5 61.0 67.5
216.4 192.5 190.0 $ 32.3 $ 26.3 $29.6
Goodwill Write-down (13.2)
Restructuring Charge (1.8)
216.4 192.5 190.0 19.1 24.5 29.6 $166.6 $178.3 $173.5
Handling/Packaging Systems
Handling 406.0 366.7 395.3
Packaging 130.2 122.1 122.9
536.2 488.8 518.2 28.1 19.1 24.0
Goodwill Write-down (21.0)
Restructuring Charge (3.8) (2.5)
536.2 488.8 518.2 7.1 15.3 21.5 252.1 265.6 279.4
Corporate Items (2.0) (1.6) (0.7) 26.3 20.3 58.4
Operating Profit 24.2 38.2 50.4
Net Interest Expense (50.2) (49.1) (51.4)
Nonoperating Income (Expense) 0.5 (5.3) (0.5)
Consolidated Totals $752.6 $681.3 $708.2 $(25.5) $(16.2) $(1.5) $445.0 $464.2 $511.3
Depreciation and Amortization
Engineered Materials $ 11.7 $ 12.2 $ 11.8
Handling/Packaging Systems 11.2 12.6 15.5
Corporate Items 0.2 0.2 0.2
Consolidated Total $ 23.1 $ 25.0 $ 27.5
Capital Expenditures
Engineered Materials $ 8.3 $ 9.0 $ 15.5
Handling/Packaging Systems 7.2 5.5 9.1
Consolidated Total $ 15.5 $ 14.5 $ 24.6
Liquidation of LIFO Inventory Quantities
Engineered Materials $ $ $ .4
Handling/Packaging Systems 1.0 1.2 1.5
</TABLE>
F-11
<PAGE>
Information About The Company's Operations by Geographic Region
The following table presents information about the Company's operations by
geographic area. Transfers between geographic areas, which are all in the
Handling/Packaging Systems segment, are made at prices which approximate the
prices of similar items sold to distributors. Operating profit by geographic
area is the difference between net sales attributable to the area and all costs
and expenses related to that area. Export sales to unaffiliated customers
included in the United States' sales are not material. Sales to domestic and
foreign government agencies are not material.
<TABLE>
<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>
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>
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 ben-
efit in the U.S. and, as a result, the Company had tax expense in 1994, 1993,
and 1992, notwithstanding consolidated pretax losses in each of those years.
In 1994, a small amount of domestic taxable income was generated as the write-
down of goodwill did not increase the deduction allowable for tax purposes.
This taxable income was offset with the carryforward of prior year losses. The
Company also provided for additional amounts related to open federal tax
returns for the years 1982 through 1990. In addition, in 1994 the Company had
a small amount of income subject to Alternative Minimum Tax (AMT) in the U.S.
because of certain restrictions on the amount of net operating loss that can be
carried forward for purposes of calculating that tax.
The federal tax net operating loss carryforward, which was $19,878 at the end
of 1994, will not begin to expire until 2006. (The tax effect of this benefit
was fully reserved for in the valuation allowance.)
Actual cash disbursements for income taxes and other tax assessments were
$4,844, $8,586, and $16,151 in 1994, 1993, and 1992, respectively. Because of
the Company's tax situation in 1994, 1993, and 1992, effective tax rate
analysis would not be meaningful.
F-13
<PAGE>
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 compen-
sation during the latter years of employment. Company contributions are
determined according to the funding requirements set forth by ERISA and in the
case of foreign plans local statutory requirements.
Certain of the Company's defined benefit plans relate to foreign locations and
are denominated in currencies other than U.S. dollars. All plans use similar
economic assumptions. The following table sets forth the funded status of the
ongoing, domestic and foreign defined benefit plans and the amounts included in
the year-end balance sheet. The Company's plans were generally overfunded and
the underfunded plans which existed were not significant.
F-14
<PAGE>
<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 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.
F-15
<PAGE>
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>
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.
F-16
<PAGE>
NOTE 10 Convertible Exchangeable Preferred Stock
As part of its 1992 financing plan, the Company issued 40,000 shares of Series
A Preferred Stock. The preferred stock is convertible into common stock at an
initial conversion price of $6.50 per share and bears a 9% per annum dividend
payable semi-annually beginning December 31, 1992. To the extent dividends are
not paid in cash on a semi-annual dividend payment date, an adjustment is made
which reduces the per share conversion price. Upon such an adjustment, all
accrued and unpaid dividends on the shares of preferred stock through the date
of adjustment cease to be accrued and unpaid. Due to restrictions in the bank
credit agreement and the indenture under which the Senior Subordinated
Debentures were issued, it is not expected that cash dividends will be paid on
the preferred stock for the foreseeable future. Accordingly, it is expected
that the conversion price of the preferred stock will continue to decline
approximately 4.5% on each semi-annual dividend payment date, resulting in an
increase in the aggregate number of shares of common stock issuable upon
conversion of the preferred stock. As a result of the operation of these
dividend adjustment provisions of the preferred stock, the conversion price of
the preferred stock was reduced to $5.20 per share as of December 31, 1994. In
addition, to the extent dividends are not paid on the preferred stock in cash,
the liquidation preference on the preferred stock increases at a rate of 9% per
year, compounded semi-annually, and as of December 31, 1994 was $50,000. Upon
certain events defined as "changes in control" or fundamental changes, the
holders of the convertible preferred stock have the right to require the
Company to purchase the shares, subject to certain limitations.
NOTE 11 Shareholders' Equity (Deficit)
As part of its 1992 financing plan, the Company sold 11,488,000 shares of
common stock, par value $1 per share, in an underwritten public offering at an
initial public offering price of $4.00 per share. The net proceeds of this
sale of $41,759 were added to common stock and additional paid-in capital in
the amounts of $11,488 and $30,271, respectively. Each share of common stock
has the right to one vote per share on all matters submitted to a vote of the
shareholders of the Company.
A new class of non-voting common stock with a par value of $1 per share was
created, of which 15,000,000 shares were authorized. None has been issued.
Shares of non-voting common stock have no voting rights except as otherwise
provided or as required by law.
No dividend payments were made in 1994, 1993, and 1992 and, due to restrictions
in the bank credit agreement and the indenture for the Senior Subordinated
Debentures, it is not expected that cash dividends will be paid in the
foreseeable future.
The Company established an ESOP in 1989 with an initial contribution of 10,000
shares, followed by the sale of 1,100,000 shares to the ESOP. Under a related
stock purchase program, Interlake undertook to purchase the lesser of 1,100,000
shares or the number of shares purchasable for $16,088 in the open market or in
privately negotiated transactions. As of December 25, 1994, a total of 893,739
shares had been acquired at a cost of $11,083, unchanged from the prior year
end.
Unearned compensation represents estimated future charges to income by reason
of the ESOP and stock awards previously granted. Principal and interest
payments on the ESOP borrowings are charged against earnings as employee
compensation and interest expenses, respectively.
In 1989, the Board of Directors declared a stock right dividend distribution.
The purpose of these rights is to protect the Company against certain unfair
and abusive takeover tactics. In certain circumstances, shareholders, other
than certain holders of 15% or more of Interlake's stock, have the right to
purchase Interlake stock from Interlake for less than its market price. In
certain circumstances, Interlake shareholders can purchase, for less than
market value, shares of a company which acquires The Interlake Corporation.
F-17
<PAGE>
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>
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>
F-18
<PAGE>
During 1992, the Company implemented a financing plan which included the sale
of $220,000 of 12 1/8% Senior Subordinated Debentures due in 2002, redemption
of $200,000 of subordinated increasing rate notes, repayment of $51,074 of
long-term bank debt, and entering into an agreement with its bank group which
amended and restated the Company's bank credit agreement to modify payment and
other terms. Certain covenants in the agreement were further modified in 1993
and again early in 1995.
At the end of 1994, the bank credit agreement provided facilities for term
loans of $118,792, revolving loans of up to $102,114 (subject to limitations
described below), and ESOP loans of $10,055. Principal repayments for term and
revolving loans are due in varying annual amounts from 1995 through 1998.
Principal amounts for ESOP loans are due in varying amounts through 1999.
Under the terms of the bank credit agreement, the Company pays a commitment fee
of 1/2 percent on unused credit facilities and, in 1994, had the option to
borrow funds under the revolving and term facilities at the prime rate plus
1 3/4 percent, or various London Interbank Offered Rates (LIBOR) plus 2 3/4
percent, with such rates adjusted periodically. The bank credit agreement bor-
rowing rates at December 25, 1994 ranged from 8.00% to 8.625%. The bank credit
agreement also required the Company to enter into long-term interest rate swap
agreements to reduce the impact of changes in interest rates on its floating
rate long-term debt. At the end of 1994, the Company had interest rate hedging
arrangements with members of the bank group limiting interest rates on $113,000
of debt under the bank credit agreement to 8.57% plus the applicable spread.
These agreements mature on a quarterly basis through 1997. Without the swap
agreements, the weighted average cost of borrowing would have been 1.2
percentage points lower in 1994, 1.6 lower in 1993 and 1.4 lower in 1992. The
expiration dates of the swap agreements correlate to the original schedule of
principal term loan repayment dates and extend, on a declining basis, through
the final maturity of the term loans.
The long-term lease obligations relate principally to capitalized pollution
control facilities. The interest rates on these obligations vary from 6.125% to
7.875%. Principal repayments are due in varying amounts through 2002.
The Company has borrowed funds under several loan agreements with state and
county pollution control and industrial development authorities to finance
certain environmental and facility expansion and improvement projects. Interest
rates on these obligations vary from 6.25% to 7.125%. Principal repayments are
to be made in various amounts from 1998 to 2009. At the time of the spin-off of
Acme Steel Company from the Company in 1986, Acme assumed an obligation to pay
the Company for pollution control bonds related to its facilities, which are
currently outstanding for $6,000.
The schedule of debt repayment requirements for the five years following 1994
are as follows:
1995 $24,553
1996 88,824
1997 80,262
1998 11,544
1999 4,095
Although there can be no assurances, based on current levels of performance the
Company believes it will be able to comply with all bank credit agreement
covenants in 1995. In 1996, the Company has long-term debt amortization
requirements of $88,824 and, potentially, significant payments related to tax
matters (see "Provision for Income Taxes") which it does not expect to be able
to meet from operating cash flow. The Company continues to evaluate alternative
actions to refinance some or all of its long-term bank obligations including
among others the raising of new equity capital and the issuance of replacement
debt.
F-19
<PAGE>
Under the bank credit agreement the Company is limited in its ability to pay
cash dividends and repurchase its common stock. There are no plans to pay
dividends in the immediate future and stock repurchases will be limited to
those related to the ESOP. In addition to scheduled repayments of debt, the
bank credit agreement requires certain mandatory prepayments in connection with
asset dispositions, issuances of stock, incurrence of indebtedness and
generation of annual excess cash flows. The bank credit agreement contains
covenants relating to earnings before interest, taxes and depreciation and
amortization, capital expenditures and net worth, and limits the amount of
revolving loan balance outstanding. Substantially all of the Company's assets
are pledged under the bank credit agreement.
Actual cash disbursements for interest were $49,413, $48,326, and $41,179 in
1994, 1993, and 1992, respectively.
At December 25, 1994 the Company had unamortized deferred debt issuance costs
of $9,021 included in other assets which are being amortized as part of
interest expense over the lives of the related debt issues. Amortization
included in interest expense was $2,199, $1,786, and $1,594, in 1994, 1993,
and 1992, respectively.
Under the bank credit agreement, the Company will be able to borrow under its
revolving facility up to an additional $44,000 over the year-end revolving
indebtedness. However, outstanding revolver borrowings at the end of each of
the Company's fiscal 1995 quarters will be limited to between $17,000 and
$29,000 above the year-end 1994 revolver borrowings. In addition, the Company
will have up to $6,000 of deferred term loan availability during the year for
amounts incurred on certain environmental matters.
NOTE 14 Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents - The carrying amount approximates fair value
because of the short maturities of such instruments.
Other assets - The fair values for financial instruments included in other
assets were estimated based on quoted market prices for the same or similar
issues.
Long-term debt (See Note 13) - The interest rate on the Company's bank debt
is reset every quarter to reflect current market rates. Consequently, the
carrying value of the bank debt approximates fair value. The fair values of
the long-term debt other than bank debt were estimated based on quoted market
prices for the same or similar issues.
Convertible exchangeable preferred stock (See Note 10) - The fair value of
the preferred stock, which was issued in a private placement, is estimated at
its carrying value as such stock is not traded in the open market and a
market price is not readily available.
Foreign exchange contracts (See Note 1) - The fair value associated with the
foreign currency contracts has been estimated by valuing the net position of
the contracts using applicable spot rates and thirty day forward rates as of
the end of the fiscal year.
Interest rate swap agreements (See Note 13) - The fair value of interest rate
swaps (used for hedging purposes) is the estimated amount that the Company
would pay to terminate the swap agreements at the reporting date, taking into
account current interest rates and the present creditworthiness of the swap
counterparties. Under the restrictions of the bank credit agreement, the
Company does not expect to cancel these agreements, and expects them to
expire as originally contracted.
F-20
<PAGE>
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 25, December 26,
1994 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<F1> 433,521 418,440 432,905 435,754
Convertible exchangeable preferred stock 39,155 39,155 39,155 39,155
Foreign currency contract assets (43) (75)
Interest rate swap liabilities 932 1,838 1,824 12,226
<FN>
<F1> Includes current maturities and excludes capitalized long-term leases
</TABLE>
NOTE 15 Environmental Matters
In connection with the reorganization of the old Interlake, Inc. (now Acme
Steel Company ("Acme")) in 1986, the Company, then newly-formed, indemnified
Acme against certain environmental liabilities relating to properties which had
been shut down or disposed of by Acme's iron and steel division prior to the
1986 reorganization. The Company recorded a charge of $6 million in 1991 and
charges of $4.8 million in 1993 for anticipated liabilities for environmental
matters relating to nonoperating sites. As of December 25, 1994, the Company's
reserves for environmental liabilities totalled $6.2 million.
Based on its current estimate of its potential environmental liabilities,
including all contingent liabilities, individually and in the aggregate,
asserted and unasserted, the Company believes that the costs of environmental
matters have been fully provided for or are unlikely to have a material adverse
effect on the Company's business, future results of operations, liquidity or
consolidated financial condition. In arriving at its current estimate of its
potential environmental liabilities, the Company has relied upon the estimates
and analysis of its environmental consultants and legal advisors, as well as
its own evaluation, and has considered: the probable scope and cost of
investigations and remediations for which the Company expects to have
liability; the likelihood of the Company being found liable for the claims
asserted or threatened against it; and the risk of other responsible parties
not being able to meet their obligations with respect to clean-ups. In
estimating its potential environmental liabilities, the Company has not taken
into consideration any potential recoveries from insurance companies, although
in May 1994 the Company instituted an action seeking a declaratory judgment
against and recoveries from insurers under policies covering nearly 30 years.
The Company's estimate has not been discounted to reflect the time-value of
money, although a significant delay in implementation of certain of the
remedies thought to be probable could result in cost estimates increasing due
to inflation.
The Company's current estimates of its potential environmental liabilities are
subject to considerable uncertainty due to the continuing uncertainty
surrounding one of the sites for which the Company is responsible pursuant to
its indemnity of Acme -- namely, the Superfund site on the St. Louis River in
Duluth, Minnesota (the "Duluth Site"). These uncertainties relate to both the
clean-up of certain contaminated soils at the site, as well as the remediation
of certain underwater sediments. In the light of these uncertainties, the
Company's estimates could be subject to change in the future.
F-21
<PAGE>
With respect to the contaminated soils, the Company has conducted certain
investigations at the request of the Minnesota Pollution Control Agency
("MPCA"), including a study outlining a broad range of remedial alternatives
and associated costs. The alternatives studied have included both those that
assume that the Duluth Site will be used for industrial purposes, consistent
with its current and historical uses, and those that would meet standards for
unrestricted use. The Company and the MPCA are engaged in discussions regarding
the development of a work plan for clean-up to industrial use standards. The
costs of the alternatives for clean-up to industrial use standards believed to
be most appropriate by the Company range from $3 million to $4 million.
However, the Company has reviewed other remedial plans for the contaminated
soils which also contemplate the continued industrial use of the property but
which could cost as much as $20 million, due to their being based upon certain
risk assessments and other assumptions which the Company believes to be overly
conservative. The Company expects to arrive at an agreed-upon work plan with
the MPCA, based on appropriate assumptions, sometime during 1995, but there can
be no assurance it will do so.
With respect to the underwater sediments, the MPCA has requested the Company to
undertake an investigation and to evaluate remedial alternatives. The Company
is presently negotiating with the MPCA the scope of the sediments
investigation. The Company believes that any estimate of the potential costs of
remediating the underwater sediments will not be meaningful until the
investigation is completed and possible remedial alternatives are reviewed by
the Company and the MPCA. To date, there have been few sites in the United
States involving the clean-up of underwater sediments, and none in which the
MPCA has acted as lead agency. On a preliminary basis, the Company believes
that the range of reasonable remedial alternatives for the underwater sediments
includes that of taking no action, thereby avoiding the disruption of the
natural remediation of the underwater sediments which has been under way for
over 30 years. Thus, the Company believes the minimum of the range of costs of
remedial alternatives to be zero, and to date has made provision for only the
investigation, and not for the clean-up, of underwater sediments.
In March 1994, the citizen board of the MPCA, contrary to the recommendation of
the MPCA professional staff, named only the Company as a responsible party with
respect to the underwater sediments at the Duluth Site. The MPCA staff had
recommended that the successors to certain coal tar processors at the site (the
"tar companies") also be named as responsible parties. The Company believes
that the tar companies are the cause of a major portion of the underwater
contamination of the site, and is reviewing its options for either obtaining
the inclusion of the tar companies as responsible parties or recovering a
portion of the Company's costs from the tar companies.
The Company's current expectation is that cash outlays related to its
outstanding reserves for environmental matters will be made over the period of
1995 to 1997, or later. If the Company ultimately determines that additional
charges beyond its present reserves are necessary in connection with the Duluth
Site, the Company believes it is likely that cash outlays would occur near the
end of the decade, or later.
F-22
<PAGE>
NOTE 16 Commitments and Contingencies
The Company is engaged in certain routine litigation arising in the ordinary
course of business. Based upon its evaluation of available information,
management does not believe that any such matters are likely, individually or
in the aggregate, to have a material adverse effect upon the Company's business
future, results of operations, liquidity or consolidated financial condition.
On July 9, 1990, the City of Toledo, Ohio, brought an action in Federal
district court in Toledo, Ohio, against the Company, Acme Steel Company
("Acme" or the "old Interlake"), Beazer Materials and Services, Inc. ("Beazer")
and Toledo Coke Corporation ("Toledo Coke") in connection with the alleged
contamination of a 1.7 acre parcel of land the City had purchased from Toledo
Coke for purposes of building a road. The City has alleged various claims,
both with respect to the 1.7 acres of right-of-way it purchased and owns and
the entire coke facility owned by Toledo Coke which adjoins the right-of-way.
These claims seek a judgment finding the Company and the other defendants
liable for the environmental remediation costs and other relief. The Company's
alleged liability arises from its indemnification obligations with respect to
Acme, which as the old Interlake operated coke ovens and by-product recovery
facilities on the site from 1930 through 1978. In 1978 the old Interlake sold
the coke plant to Koppers Company, Inc., which was later acquired by Beazer,
and which indemnified Interlake against environmental liabilities. Koppers, in
turn, sold the facility to Toledo Coke. Interlake has cross-claimed against
Beazer under its indemnity.
Prior to the filing of the preliminary injunction described below, the City of
Toledo and the defendants had been discussing possible remedial plans which the
defendants believe would enable the City to build the road in question. Under
these plans, the amounts required to be contributed by the Company would not
have been material to the business or financial condition of the Company. On or
about January 31, 1994, the City filed a motion seeking a preliminary injunc-
tion under the Resource Conservation Recovery Act ordering the defendants to
take certain remedial actions with respect to the right-of-way. A hearing on
the City's motion was completed in October 1994. The City is seeking an order
compelling the defendants to perform a remedy which the City asserts would cost
approximately $4 million. The Company believes that the right-of-way could be
remedied to a degree sufficient to enable the building of the road at a cost
far less than $4 million. Although the Company believes that it is entitled to
be indemnified by Beazer, to the extent the Company incurs any liabilities or
costs by virtue of the ongoing injunction hearing, the Company could be
compelled to incur costs prior to having its indemnification cross-claim
against Beazer decided by the court.
In January 1995, Beazer filed a motion for summary judgment seeking to have the
Company's indemnification cross-claim denied. The Company intends to resist
such motion, and to file its own motion for summary judgment seeking the
enforcement of the indemnification from Beazer.
F-23
<PAGE>
NOTE 17 Quarterly Results (Unaudited)
Quarterly results of operations for 1994 and 1993 were as follows:
(in millions except per share data)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1994
Net sales
Engineered Materials $ 48.2 $ 54.4 $ 54.2 $ 59.6
Handling/Packaging Systems 121.1 127.7 139.5 147.9
169.3 182.1 193.7 207.5
Gross Profit 39.5 43.4 42.9 49.9
Operating profit
Engineered Materials 7.8 8.1 6.8 9.6
Handling/Packaging Systems 5.5 5.8 7.9 8.9
Corporate Items (1.3) (.3) (.3) (.1)
Operating profit before goodwill write-down 12.0 13.6 14.4 18.4
Goodwill write-down (34.2)
Operating profit 12.0 13.6 14.4 (15.8)
Income (loss) before accounting change (2.4) (2.4) (1.9) (33.9)
Net income (loss) (2.6) (2.4) (1.9) (33.9)
Income (loss) before accounting change
per common share (.11) (.11) (.08) (1.54)
Net income (loss) per common share (.12) (.11) (.08) (1.54)
1993
Net sales
Engineered Materials $ 51.5 $ 48.7 $ 46.9 $ 45.4
Handling/Packaging Systems 117.0 124.4 122.1 125.3
168.5 173.1 169.0 170.7
Gross profit 41.7 41.4 37.8 39.9
Operating profit
Engineered Materials 7.7 7.3 6.2 5.1
Handling/Packaging Systems 4.3 5.6 3.7 5.5
Corporate Items (.3) (.1) (.2) (1.0)
Operating profit before restructuring charge 11.7 12.8 9.7 9.6
Restructuring charge (5.6)
Operating profit 11.7 12.8 9.7 4.0
Net income (loss) (3.6) (3.1) (4.7) (14.6)
Net income (loss) per common share (.16) (.14) (.22) (.66)
</TABLE>
F-24
<PAGE>
In the fourth quarter 1994, the Company revised its accounting policy for
valuing its long-lived assets to include the cost of capital in estimating the
total projected future cash flows from its business units. Previously, the cash
flows were computed without discounting or allocation of interest cost. In the
fourth quarter 1994, the Company determined that in the case of certain
businesses, the projected cash flows on a discounted basis were insufficient to
recover the carrying value of the assets. As a result, certain goodwill assets
totalling $34,174 were written off in full (see Note 2).
In the fourth quarter of 1993, the Company took a restructuring charge of
$5,611 (see Note 3).
Nonoperating expenses consist of items which are not related to activities that
constitute the Company's ongoing operations. Nonoperating income was recorded
in the first quarter of 1994 in the amount of $1,100 related to a one-time gain
from settlement of a real-estate matter with a local transportation authority.
In 1993, nonoperating expenses included a special charge of $3,850 in the
fourth quarter and $900 in the second quarter for environmental matters
involving nonoperating locations (see Note 15).
In 1994 and 1993, benefits to pretax income due to reductions in LIFO
inventories were $626 and $1,000, respectively, in the first quarter and $325
and $200, respectively, in the fourth quarter.
Effective as of the beginning of fiscal 1994, the Company changed its method of
accounting for postretirement benefits for its foreign plans by adopting the
Financial Accounting Standards Board's FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This change in accounting
principle required restatement of previously reported first quarter 1994
results by a charge of $194 or $.01 per share.
NOTE 18 Subsequent Event
In March of 1995, the Company amended its bank credit agreement to modify
certain covenants as they relate to 1995.
F-25
<PAGE>
Unaudited Consolidated Statement of Operations
For the Three Months Ended
March 27, 1994 and April 2, 1995
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 27, 1994 April 2, 1995
(13 weeks) (14 weeks)
(In thousands, except per share data)
<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 N/A $ .01
========
Weighted average shares outstanding
Primary 22,027 22,341
======== ========
Fully diluted N/A 29,921
========
</TABLE>
F-26
<PAGE>
Unaudited Consolidated Balance Sheet
December 25, 1994 and April 2, 1995
<TABLE>
<CAPTION>
December 25, 1994 April 2, 1995
(In thousands, except share data)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 39,708 $ 22,473
Receivables, less allowances of $3,171 at
April 2, 1995 and $2,977 at December 25, 1994 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 (412,500 shares at
April 2, 1995 and 1,202,000 shares at December 25, 1994) (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>
Unaudited Consolidated Statement of Cash Flows
For the Three Months Ended
March 27, 1994 and April 2, 1995
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 27, 1994 April 2, 1995
(13 weeks) (14 weeks)
(In thousands)
<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>
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------
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.
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
F-29
<PAGE>
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.
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-30
<PAGE>
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............................... 10
Use of Proceeds............................ 15
Capitalization............................. 16
Selected Consolidated Financial Data....... 17
Management's Discussion and Analysis of
Results of Operations and Financial
Condition................................ 19
Business................................... 28
Management................................. 36
Description of Senior Notes................ 38
Description of Certain Other Indebtedness.. 56
Underwriting............................... 62
Legal Matters.............................. 62
Experts.................................... 62
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
$100,000,000
[LOGO OF INTERLAKE]
% Senior Notes
due 2001
-------------------
P R O S P E C T U S
-------------------
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>
<CAPTION>
<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 defense or settlement of such action or suit if
he acted in good
II-1
<PAGE>
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 a 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
Incorporation as amended, incorporated by reference to Exhibit
3.1 of the Registrant's Annual Report on Form 10-K for the
year ended December 27, 1992 (the "1992 10-K").
3.2 Bylaws of Registrant as amended and restated dated August 23,
1990, incorporated by reference to Exhibit 3(b) of the
Registrant's Annual Report on Form 10-K for the year ended
December 30, 1990 (the "1990 10-K").
4.1 Form of Indenture (including table of contents and form of Senior
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
Registrant and the First National Bank of Chicago, as Rights
Agent, (the "Rights Agreement") incorporated by reference to
Exhibit 2 of the Registrant's Registration Statement on Form
8-A dated as of January 27, 1989.
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 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,
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 Debenture,
incorporated by reference to Exhibit 4.11 of the Common Stock
S-2.
4.11 Form of Series 2 Junior Convertible Subordinated Debenture,
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, incorporated by reference to
Exhibit 4.9 of the IRN Post-Effective Amendment No. 4.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.13 Form of Series 3 Junior Convertible Subordinated Debenture
(Exchange Debentures relating to the Series A-3 Preferred Stock),
incorporated by reference to Exhibit 4.10 of the IRN Post-
Effective Amendment No. 4.
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, incorporated by
reference to Exhibit 10.15 of the IRN Post-Effective 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, incorporated by
reference to Exhibit 4.20 of the 1992 10-K.
4.25 The Registrant Revolving Notes dated June 18, 1992, incorporated
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, incorporated 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.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
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, 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").
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 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,
incorporated by reference to Exhibit 10.4 of the 1994 10-K.
10.5 Form of Agreement dated August 27, 1992 for the Cancellation
and Re-Granting of Non-Qualified Stock Options between the
Registrant and U.S. executive officers and employees,
incorporated by reference to Exhibit 10.7 of the 1992 10-K.
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 Registrant's 1990
annual meeting of shareholders.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
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").
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 (included on pages II-8 and II-9).
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
25.1 Statement of eligibility and qualification of trustee.
</TABLE>
________________
* To be filed by amendment.
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 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lisle, Illinois, on May 1, 1995.
THE INTERLAKE CORPORATION
By: /s/ W. Robert Reum
----------------------------------------
W. Robert Reum
Chairman, President and Chief Executive
Officer
Each person whose signature appears below constitutes and appoints W.
Robert Reum, Stephen Gregory and Stephen R. Smith, and each of them, as his
true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with
exhibits and schedules thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact, full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, thereby ratifying and
confirming all that said attorney-in-fact, or his substitute, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
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>
/s/ W. Robert Reum Chairman, President, Chief May 1, 1995
- ------------------------ Executive Officer and Director
W. Robert Reum (Principal Executive Officer)
/s/ Stephen Gregory Vice President-Finance, Treasurer May 1, 1995
- ------------------------ and Chief Financial Officer
Stephen Gregory (Principal Financial Officer)
/s/ John P. Miller Controller May 1, 1995
- ------------------------ (Principal Accounting Officer)
John P. Miller
/s/ John A. Canning, Jr. Director May 1, 1995
- -------------------------
John A. Canning, Jr.
/s/ James C. Cotting Director May 1, 1995
- ---------------------
James C. Cotting
/s/ John E. Jones Director May 1, 1995
- ---------------------
John E. Jones
/s/ Frederick C. Langenberg Director May 1, 1995
- ---------------------------
Frederick C. Langenberg
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ ----------------------------------- -----------
<S> <C> <C>
/s/ Quentin C. McKenna Director May 1, 1995
- ----------------------
Quentin C. McKenna
/s/ William G. Mitchell Director May 1, 1995
- -----------------------
William G. Mitchell
/s/ Erwin E. Schulze Director May 1, 1995
- ---------------------
Erwin E. Schulze
</TABLE>
II-9
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
1.1* Form of Underwriting Agreement.
3.1 Composite of the Registrant's Restated Certificate of
Incorporation as amended, incorporated by reference to
Exhibit 3.1 of the Registrant's Annual Report on Form 10-K
for the year ended December 27, 1992 (the "1992 10-K").
3.2 Bylaws of Registrant as amended and restated dated August
23, 1990, incorporated by reference to Exhibit 3(b) of the
Registrant's Annual Report on Form 10-K for the year ended
December 30, 1990 (the "1990 10-K").
4.1 Form of Indenture (including table of contents and form
of Senior 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
Registrant and the First National Bank of Chicago, as Rights
Agent, (the "Rights Agreement") incorporated by reference to
Exhibit 2 of the Registrant's Registration Statement on
Form 8-A dated as of January 27, 1989.
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 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,
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
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
Debenture, incorporated by reference to Exhibit 4.11 of the
Common Stock S-2.
4.11 Form of Series 2 Junior Convertible Subordinated
Debenture, 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, 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 (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.
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,
incorporated by reference to Exhibit 10.15 of the IRN Post-
Effective 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").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
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,
incorporated by reference to Exhibit 4.20 of the 1992 10-K.
4.25 The Registrant Revolving Notes dated June 18, 1992,
incorporated 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,
incorporated 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 subsidiaries,
incorporated by reference to Exhibit 10(t) of the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1989 (the "1989 10-K").
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
4.33* Form of Amended 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,
incorporated by reference to Exhibit 10.4 of the 1994 10-K.
10.5 Form of Agreement dated August 27, 1992 for the
Cancellation and Re-Granting of Non-Qualified Stock Options
between the Registrant and U.S. executive officers and
employees, incorporated by reference to Exhibit 10.7 of the
1992 10-K.
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
Registrant's 1990 annual meeting of shareholders.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
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").
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Document Number
- ------- ----------------------- ------
<S> <C> <C>
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 (included on pages II-8 and II-9).
25.1 Statement of eligibility and qualification of trustee.
- -----------------
*To be filed by amendment.
</TABLE>
<PAGE>
EXHIBIT 4.1
THE INTERLAKE CORPORATION
TO
BANK ONE, COLUMBUS, N.A.
Trustee
_________________
Indenture
Dated as of May __, 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.
ARTICLE 1
Definitions and Other Provisions
of General Application
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1.1. Definitions....................................... 1
Acquisition Debt.................................. 2
Act............................................... 2
Affiliate......................................... 2
Agent Bank........................................ 2
Amended Credit Agreement.......................... 2
Asset Acquisition................................. 3
Asset Disposition................................. 3
Asset Sale........................................ 4
Attributable Value................................ 4
Authenticating Agent.............................. 4
Authorized Denomination........................... 4
Board of Directors................................ 4
Board Resolution.................................. 4
Business Day...................................... 5
Capital Lease Obligation.......................... 5
Capital Stock..................................... 5
Change of Control................................. 5
Commission........................................ 6
Common Stock...................................... 6
Company........................................... 6
"Company Request" or "Company Order".............. 6
Consolidated Capital Expenditures................. 7
Consolidated Cash Flow Available for
Fixed Charges................................... 7
Consolidated Cash Flow Ratio...................... 7
Consolidated Income Tax Expense................... 8
Consolidated Interest Expense..................... 8
Consolidated Net Income........................... 9
Consolidated Net Worth............................ 9
Consolidated Subsidiary........................... 9
Consolidated Tangible Net Worth................... 9
Controlled Subsidiary.............................10
Convertible Preferred Stock.......................10
Corporate Trust Office............................10
Corporation.......................................10
Currency Agreement................................10
Defaulted Interest................................10
Employee Stock Ownership Plan.....................10
Equity Sale.......................................10
Event of Default..................................11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Exchange Act..................................... 11
Exchange Debentures.............................. 11
Hoeganaes........................................ 11
Hoeganaes Agreements............................. 11
Holder........................................... 11
Incur............................................ 11
Indebtedness..................................... 11
Indenture........................................ 12
Independent Financial Advisor.................... 12
Interest Payment Date............................ 12
Interest Rate Agreement.......................... 12
Lien............................................. 12
Material Subsidiary.............................. 13
Maturity......................................... 13
Net Available Proceeds........................... 13
Notice........................................... 13
Obligations...................................... 14
Offer............................................ 14
Offer to Purchase................................ 14
Officers' Certificate............................ 16
Opinion of Counsel............................... 16
Outstanding...................................... 16
Pari Passu....................................... 17
Paying Agent..................................... 18
Person........................................... 18
Predecessor Security............................. 18
Preferred Stock.................................. 18
Purchase Date.................................... 18
Record Date...................................... 18
Redeemable Stock................................. 18
Redemption Date.................................. 19
Redemption Price................................. 19
Regular Record Date.............................. 19
Related Person................................... 19
Required Filing Date............................. 19
Responsible Officer.............................. 19
Restricted Payments.............................. 19
Sale and Leaseback Transaction................... 19
Securities....................................... 20
Securities Act................................... 20
"Security Register" and "Security
Registrar"..................................... 20
Senior Indebtedness.............................. 20
Senior Subordinated Debentures................... 21
Senior Subordinated Indenture.................... 21
Special Record Date.............................. 21
Stated Maturity.................................. 21
Subsidiary....................................... 21
Trust Indenture Act.............................. 21
Trustee.......................................... 21
Vice President................................... 21
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Voting Stock..................................... 21
Wholly Owned Subsidiary.......................... 22
SECTION 1.2. Compliance Certificates and Opinions............. 22
SECTION 1.3. Form of Documents Delivered to Trustee........... 23
SECTION 1.4. Acts of Holders.................................. 23
SECTION 1.5. Notices, etc., to Trustee and Company............ 24
SECTION 1.6. Notice to Holders; Waiver........................ 25
SECTION 1.7. Conflict with Trust Indenture Act................ 25
SECTION 1.8. Effect of Headings and Table of
Contents....................................... 25
SECTION 1.9. Successors and Assigns........................... 25
SECTION 1.10. Separability Clause.............................. 26
SECTION 1.11. Benefits of Indenture............................ 26
SECTION 1.12. Governing Law.................................... 26
SECTION 1.13. Legal Holidays................................... 26
ARTICLE 2
Security Forms
SECTION 2.1. Forms Generally.................................. 26
SECTION 2.2. Form of Face of Security......................... 27
SECTION 2.3. Form of Reverse of Security...................... 29
ARTICLE 3
The Securities
SECTION 3.1. Title and Terms.................................. 33
SECTION 3.2. Denominations.................................... 34
SECTION 3.3. Execution, Authentication, Delivery and
Dating......................................... 34
SECTION 3.4. Temporary Securities............................. 34
SECTION 3.5. Registration, Registration of Transfer
and Exchange................................... 35
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen
Securities..................................... 36
SECTION 3.7. Payment of Interest; Interest Rights
Preserved...................................... 37
SECTION 3.8. Persons Deemed Owners............................ 39
SECTION 3.9. Cancellation..................................... 39
SECTION 3.10. Computation of Interest.......................... 39
SECTION 3.11. CUSIP Number..................................... 39
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 4
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.......... 40
SECTION 4.2. Application of Trust Money....................... 41
ARTICLE 5
Remedies
SECTION 5.1. Events of Default................................ 41
SECTION 5.2. Acceleration of Maturity; Rescission
and Annulment.................................. 44
SECTION 5.3. Collection of Indebtedness and Suits
for Enforcement by Trustee..................... 45
SECTION 5.4. Trustee May File Proofs of Claim................. 46
SECTION 5.5. Trustee May Enforce Claims Without
Possession of Securities....................... 47
SECTION 5.6. Application of Money Collected................... 47
SECTION 5.7. Limitation of Suits.............................. 48
SECTION 5.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest....................................... 49
SECTION 5.9. Restoration of Rights and Remedies............... 49
SECTION 5.10. Rights and Remedies Cumulative................... 50
SECTION 5.11. Delay or Omission Not Waiver..................... 50
SECTION 5.12. Control by Holders............................... 50
SECTION 5.13. Waiver of Past Defaults.......................... 51
SECTION 5.14. Undertaking for Costs............................ 51
SECTION 5.15. Waiver of Stay or Extension Laws................. 52
ARTICLE 6
The Trustee
SECTION 6.1. Certain Duties and Responsibilities.............. 52
SECTION 6.2. Certain Rights of Trustee........................ 53
SECTION 6.3. Not Responsible for Recitals or
Issuance of Securities......................... 55
SECTION 6.4. May Hold Securities.............................. 55
SECTION 6.5. Money Held in Trust.............................. 55
SECTION 6.6. Compensation and Reimbursement................... 55
SECTION 6.7. Corporate Trustee Required;
Eligibility.................................... 56
SECTION 6.8. Resignation and Removal; Appointment of
Successor...................................... 57
SECTION 6.9. Acceptance of Appointment by Successor........... 58
</TABLE>
iv
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 6.10. Merger, Conversion, Consolidation or
Succession to Business........................... 59
SECTION 6.11. Appointment of Authenticating Agent.............. 59
ARTICLE 7
Holders Lists and Reports by
Trustee and Company
SECTION 7.1. Certificate to Trustee; Securityholders
Lists.......................................... 61
SECTION 7.2. Report by Trustee................................ 62
SECTION 7.3. Reports by Company............................... 62
ARTICLE 8
SECTION 8.1. Mergers, Consolidations and Certain Sales of
Assets......................................... 62
SECTION 8.2. Successor Substituted............................ 63
ARTICLE 9
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent
of Holders..................................... 64
SECTION 9.2. Supplemental Indentures With Consent of
Holders........................................ 65
SECTION 9.3. Execution of Supplemental Indentures............. 66
SECTION 9.4. Effect of Supplemental Indentures................ 66
SECTION 9.5. Conformity with Trust Indenture Act.............. 66
SECTION 9.6. Reference in Securities to Supplemental
Indentures..................................... 66
ARTICLE 10
Covenants
SECTION 10.1. Payment of Principal, Premium and
Interest....................................... 67
SECTION 10.2. Maintenance of Office or Agency.................. 67
SECTION 10.3. Money for Security Payments to Be Held
in Trust....................................... 67
SECTION 10.4. Existence........................................ 69
SECTION 10.5. Maintenance of Properties........................ 69
SECTION 10.6. Payment of Taxes and Other Claims................ 70
</TABLE>
v
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10.7. Limitation on Consolidated
Indebtedness................................... 70
SECTION 10.8. Limitation on Transactions with
Stockholders and Affiliates.................... 73
SECTION 10.9. Limitation on Restricted Payments................ 74
SECTION 10.10. Limitation on Certain Asset
Dispositions................................... 77
SECTION 10.11. Limitation on Certain Restrictions
Affecting any Subsidiary....................... 80
SECTION 10.12. Limitation on Issuance of Shares of
Subsidiaries................................... 81
SECTION 10.13. Limitation on Sale and Leaseback
Transactions................................... 81
SECTION 10.14. Limitation on Liens.............................. 81
SECTION 10.15. Change of Control................................ 82
SECTION 10.16. Provision of Financial Information............... 84
SECTION 10.17. Waiver of Certain Covenants...................... 84
SECTION 10.18. Notice to Trustee of Certain Defaults............ 84
ARTICLE 11
Redemption of Securities
SECTION 11.1. Right of Optional Redemption..................... 85
SECTION 11.2. Election to Redeem; Notice to Trustee............ 85
SECTION 11.3. Selection by Trustee of Securities to
Be Redeemed.................................... 85
SECTION 11.4. Notice of Redemption............................. 86
SECTION 11.5. Deposit of Redemption Price...................... 87
SECTION 11.6. Securities Payable on Redemption Date............ 87
SECTION 11.7. Securities Redeemed in Part...................... 87
ARTICLE 12
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option to Effect Defeasance
or Covenant Defeasance......................... 88
SECTION 12.2. Defeasance and Discharge......................... 88
SECTION 12.3. Covenant Defeasance.............................. 89
SECTION 12.4. Conditions to Defeasance or Covenant
Defeasance..................................... 89
SECTION 12.5. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions................. 91
SECTION 12.6. Reinstatement.................................... 92
</TABLE>
vi
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<TABLE>
<CAPTION>
Page
<S> <C>
TESTIMONIUM................................................................ 93
SIGNATURES AND SEALS....................................................... 93
ACKNOWLEDGMENTS............................................................ 94
</TABLE>
vii
<PAGE>
INDENTURE, dated as of May __, 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 reference therein, have the meanings
assigned to them therein;
<PAGE>
(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 14.
"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 [__________] as Administrative Agent under the
Amended Credit Agreement, and, pursuant to 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 _____ __, 19__ and amended and restated as of May __,
1995 (including, without
2
<PAGE>
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 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.
3
<PAGE>
"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.
"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
4
<PAGE>
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 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
5
<PAGE>
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 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.
6
<PAGE>
"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 during such period to minority
shareholders with respect to a Controlled Subsidiary in an amount, if any, equal
to 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)
minority interest as set forth on such Person's consolidated balance sheet on
the date hereof, or (B) 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 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
7
<PAGE>
included in clause (ii)(A) or (C) with respect to any Indebtedness or Subsidiary
Preferred Stock 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(b)(viii);
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
8
<PAGE>
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.
"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 stockholder's 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
9
<PAGE>
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.
"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.
10
<PAGE>
"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 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
11
<PAGE>
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.
"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
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(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 Security, means the date on
which the principal 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.
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"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.
"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
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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);
(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
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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 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:
------
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(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 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 36 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.
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"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.
"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
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<PAGE>
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.
"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.
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"Securities" means securities designated in the first paragraph of the
Recitals Of The Company.
"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 11.11(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(b)) 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
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the United States Code (or any successor thereto) or was a 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."
"Voting Stock" means stock which ordinarily has voting power for the
election of directors, whether at all
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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
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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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.
---------------
(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, 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
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<PAGE>
(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 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
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<PAGE>
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.
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.
25
<PAGE>
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 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
26
<PAGE>
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 May __, 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 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
27
<PAGE>
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.
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
28
<PAGE>
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 May __, 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 of the principal amount )
together with accrued interest to the Redemption Date:
If redeemed during the twelve-month period beginning November __:
Redemption
Year Price
---- ----------
1998 [ ]%
1999 [ ]%
2000 100%
; 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
29
<PAGE>
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
(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
30
<PAGE>
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 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.
31
<PAGE>
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 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.
32
<PAGE>
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 May __,
1995, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may 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.
33
<PAGE>
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.
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,
34
<PAGE>
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 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 102 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.
35
<PAGE>
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 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
36
<PAGE>
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 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,
37
<PAGE>
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 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.
38
<PAGE>
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 37) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and 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 May
__, 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.
39
<PAGE>
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 36 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 103) 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 due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
40
<PAGE>
(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.
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):
41
<PAGE>
(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
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
42
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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
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.
43
<PAGE>
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 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
44
<PAGE>
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 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
45
<PAGE>
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 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
46
<PAGE>
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 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;
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<PAGE>
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 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;
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<PAGE>
(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, 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
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<PAGE>
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.
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
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<PAGE>
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
(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).
51
<PAGE>
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, 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
52
<PAGE>
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;
(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 61:
(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
53
<PAGE>
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 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 12 hereof and which shall contain such other statements as the Trustee
reasonably deems necessary to perform its duties herewith; and
54
<PAGE>
(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.
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
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counsel), except any such expense, disbursement or 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 surplus of at least $50 million and
which is eligible in
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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 for the purpose of rehabilitation,
conservation or liquidation,
57
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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
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
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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 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
59
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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 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
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<PAGE>
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 May __ in each year beginning with May __, 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 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.
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SECTION 7.2. Report by Trustee.
-----------------
Any Trustee's reports required under Section 313(a) of the Trust
Indenture Act shall be transmitted on May __, 1996 and on each May __
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 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
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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 81, 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
107; 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 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 81, the Successor Company
formed by such consolidation or into which
63
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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
(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.
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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
(3) modify any of the provisions of this Section, Section 513 or
Section 1017, 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
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<PAGE>
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 61) 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.
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.
66
<PAGE>
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 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
67
<PAGE>
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.
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
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<PAGE>
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 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.
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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 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 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 Incurred by
the Company or any Subsidiary in connection with or pursuant to any
amendment, extension, restructuring, refunding or refinancing of amounts
due, commitments or maturities under the
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Amended Credit Agreement and such similar senior credit facility or
agreement (so long as the principal amount of the Indebtedness Incurred
does not exceed $200 million in the aggregate);
(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 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 or liquidation preference so exchanged or refinanced (plus
accrued interest and accrued dividends, as the case may be, and fees and
expenses related thereto and any premium payable pursuant to optional
redemption provisions of such Outstanding Indebtedness or Preferred Stock
to be 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
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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 Preferred Stock which
constitutes Redeemable Stock (other than Redeemable Stock that (A) 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, (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 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(a)
as if such proceeds were received as a result of an Asset Disposition;
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(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) 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
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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(a) 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 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
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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, pursuant to the Hoeganaes Agreements so long as the Company
owns, directly or indirectly, the percentage of Capital Stock or other
ownership interest of Hoeganaes 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
(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 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
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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:
(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
-------- -------
(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
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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 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
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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:
------
(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 107 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 or principal amount) purchases of
Outstanding
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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 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(a) 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(a) (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(a).
(d) Notwithstanding any provision of this Section 10.10 to the
contrary, the Company shall have no obligation
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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 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(a) as if such proceeds were
received as a result of an Asset Disposition.
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
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Company or any of its Subsidiaries other than Senior Indebtedness (i) 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(b)(i) 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 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.
At least five Business Days prior to the Company's mailing of a Notice
under this Section 1015, 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
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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 1015
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 Trustee shall promptly authenticate and mail to
such Holders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered.
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<PAGE>
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.
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
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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.
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
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<PAGE>
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 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
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<PAGE>
(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
-------- -------
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
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<PAGE>
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 122 or Section 123 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 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.
88
<PAGE>
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 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
89
<PAGE>
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).
(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
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<PAGE>
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 (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
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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 be an original, but all such counterparts
shall together constitute but one and the same instrument.
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<PAGE>
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:
93
<PAGE>
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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EXHIBIT 5.1
JONES, DAY, REAVIS & POGUE
77 WEST WACKER
CHICAGO, ILLINOIS 60601-1692
TELEPHONE: 312-782-3939
FACSIMILE: 312-782-8585
May 2, 1995
The Interlake Corporation
550 Warrenville Road
Lisle, Illinois 60532
Re: $100,000,000 % Senior Notes due 2001
--------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-2, dated May 2,
1995 (the "Registration Statement") of The Interlake Corporation (the
"Company"), to which this opinion is an exhibit, for the registration under the
Securities Act of 1933, as amended, of $100,000,000 in principal amount of the
Company's Senior Notes due 2001 (the "Notes") to be issued pursuant to the
Indenture (the "Indenture"), to be executed from the Company to Bank One Trust
Company, NA (the "Trustee"). The Notes are to be sold pursuant to that certain
Underwriting Agreement (the "Underwriting Agreement") to be executed between or
among the Company and the Underwriter or Underwriters named therein (the
"Underwriter").
We have also examined such documents, records and matters of law as we
have deemed necessary for purposes of this opinion. Based on the foregoing, and
subject to the qualifications set forth herein, we are of the opinion that:
1. The Indenture, when duly executed and delivered by the Company
and the Trustee, will constitute a valid and binding instrument of the Company.
2. The Notes have been duly authorized and, when duly executed,
authenticated and delivered to the Underwriters, in accordance with the terms of
the Indenture, and paid for by the Underwriters, in accordance with the terms of
the Underwriting
<PAGE>
Agreement, will be valid and binding obligations of the Company and will be
entitled to the benefits of the Indenture, except as enforcement of the
provisions of the Indenture is subject to the effect of (i) general principles
of equity, including the possible unavailability of specific performance or
injunctive relief, regardless of whether such enforceability is considered in a
proceeding in equity or at law, (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and (iii)
laws relating to fraudulent transfers, fraudulent obligations or preferential
transfer, or any laws governing the distribution of assets of the Company.
The foregoing opinions are subject to the satisfaction of the
following conditions:
(a) the due adoption by the Board of Directors of the Company, or an
appropriate committee of such Board, of appropriate resolutions
authorizing the execution and delivery of the Indenture and the
Underwriting Agreement and the execution, authentication, issuance and
sale of the Notes;
(b) the due execution and delivery of the Indenture by the parties
thereto, in substantially the form of the Indenture filed as Exhibit
4.1 to the Registration Statement and the form of the Indenture
approved by the authorizing resolutions of the Board of Directors or
the appropriate committee of such Board;
(c) the due execution and delivery of the Notes by the Company, and the
authentication thereof by the Trustee in accordance with the terms of
the Indenture; and the issuance and sale of the Notes by the Company
against receipt by it of the agreed consideration therefor, in
accordance with the terms of the Underwriting Agreement and in
accordance with the authorizing resolutions of the Board of Directors
or the appropriate committee of such Board; and
(d) the conformity of the Indenture and the Notes to the authorizing
resolutions of the Board of Directors or the appropriate committee of
such Board.
The Registration Statement must become effective under the Securities
Act of 1933, as amended, prior to the sale of the Notes.
2
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement.
Very truly yours,
JONES, DAY, REAVIS & POGUE
3
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Ended
------------------------------------------------------------ -----------------------------
Pro Forma
Pro Forma March 27, April 2, April 2,
1990 1991 1992 1993 1994 1994 1994 1995 1995
(In thousands, except ratio)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before income taxes and
minority interest................. $ (108) $ 427 $(1,526) $(16,224) $(25,534) $(29,233) $ 488 $ 5,299 $ 4,874
Minority interest before income
taxes............................. 6,768 5,383 5,669 5,421 6,791 6,791 1,536 2,386 2,386
------- ------- ------- -------- -------- -------- ------- ------- -------
(6,876) (4,956) (7,195) (21,645) (32,325) (36,024) (1,048) 2,913 2,488
------- ------- ------- -------- -------- -------- ------- ------- -------
Fixed charges:
Interest expense.................... 65,671 58,654 54,284 50,906 51,609 55,308 12,818 13,950 14,375
------- ------- ------- -------- -------- -------- ------- ------- -------
Earnings before income tax,
discontinued operations and
fixed charges..................... $58,795 $53,698 $47,089 $29,261 $19,284 $19,284 $11,770 $16,863 $16,863
======= ======= ======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed
charges (1)....................... _ _ _ _ _ _ _ 1.21 1.17
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- -----------------
(1) 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.
<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
May 1, 1995
<PAGE>
EXHIBIT 25.1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE
ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, COLUMBUS, N.A.
------------------------
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code)
executive offices)
Victoria Pavlick
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6180
(Name, address and telephone number of agent for service)
----------------
The Interlake Corporation
(Exact name of obligor as specified in its charter)
Delaware 36-3428543
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) (Identification No.)
550 Warrenville Road 60532-4387
Lisle, Illinois (Zip Code)
(Address of principal executive
offices)
The Interlake Corporation ____ % Senior Notes Due 2001
(Title of the Indenture securities)
GENERAL
1. General Information.
Furnish the following information as to the trustee:
1
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(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
16. List of Exhibits
List below all exhibits filed as a part of this statement of eligibility
and qualification. (Exhibits identified in parentheses, on file with the
Commission, are incorporated herein by reference as exhibits hereto.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
December 31, 1994, published pursuant to the requirements of the Comptroller of
the Company, see Exhibit 7 to Form T-1, filed in connection with Form S-3
relating to Prime Hospitality Corp. 7% Convertible Subordinated Note Due 2002,
Securities and Exchange Commission File No. 33-58047, Amendment #3, Exhibit 25.1
filed on April 19, 1995.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
2
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the Trustee, Bank One, Columbus, N.A., a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on April 27, 1995.
Bank One, Columbus, N.A.
/s/ Stephen W. Boughton
By:_________________________
Stephen W. Boughton
Authorized Signer
3
<PAGE>
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
-----------------------
For the purpose of organizing an association to carry on the business
of banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
-----
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus,
------
County of Franklin, State of Ohio. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of
-----
not less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
------
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year specified
therefor in the By-Laws, but if no election is held on that day, it may be held
on any subsequent business day according to the provisions of law; and all
elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association
-----
shall be 2,073,750 shares of common stock of the par value of Ten Dollars ($10)
each; but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
4
<PAGE>
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time fix.
This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The Board of Directors shall appoint one of its members
-----
President of the Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board of Directors
shall have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of this Association.
The Board of Directors shall have the power to define the duties of
the officers and employees of this Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all By-Laws that it may be lawful for them to make;
and generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
-------
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue
------
until terminated in accordance with the laws of the United States.
5
<PAGE>
NINTH. The Board of Directors of this Association, or any three or
-----
more shareholders owning, in the aggregate, not less than 10 percent of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least ten days prior to the date of such meeting to each shareholder of record
at his address as shown upon the books of this Association.
TENTH. Every person who is or was a Director, officer or employee of
-----
the Association or of any other corporation which he served as a Director,
officer or employee at the request of the Association as part of his regularly
assigned duties may be indemnified by the Association in accordance with the
provisions of this paragraph against all liability (including, without
limitation, judgments, fines, penalties and settlements) and all reasonable
expenses (including, without limitation, attorneys' fees and investigative
expenses) that may be incurred or paid by him in connection with any claim,
action, suit or proceeding, whether civil, criminal or administrative (all
referred to hereafter in this paragraphs as "Claims") or in connection with any
appeal relating thereto in which he may become involved as a party or otherwise
or with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director, officer or employee, whether or not he continues to be such at the
time such liability or expenses are incurred, provided that nothing contained in
this paragraph shall be construed to permit indemnification of any such person
who is adjudged guilty of, or liable for, willful misconduct, gross neglect of
duty or criminal acts, unless, at the time such indemnification is sought, such
indemnification in such instance is permissible under applicable law and
regulations, including published rulings of the Comptroller of the Currency or
other appropriate supervisory or regulatory authority, and provided further that
there shall be no indemnification of directors, officers, or employees against
expenses, penalties, or other payments incurred in an administrative proceeding
or action instituted by an appropriate regulatory agency which proceeding or
action results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
6
<PAGE>
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or non-
existence of a contract of insurance or indemnity under which the Association
would be wholly or partially reimbursed for such indemnification, but the
existence or non-existence of such insurance is not the sole circumstance to be
considered nor shall it be wholly determinative of whether such indemnification
shall be made. In addition to such finding or opinion, no indemnification
under this paragraph shall be made unless the Board of Directors or the
Executive Committee acting by a quorum consisting of Directors who are not
parties to such Claim shall find or if independent legal counsel (who may be
the regular counsel of the Association) selected by the Board of Directors or
Executive Committee whether or not a disinterested quorum exists shall render
their opinion that the Director, officer or employee acted in good faith in
what he reasonably believed to be the best interests of the Association or such
other corporation and further in the case of any criminal action or proceeding,
that the Director, officer or employee reasonably believed his conduct to be
lawful. Determination of any Claim by judgment adverse to a Director, officer
or employee by settlement with or without Court approval or conviction upon a
plea of guilty or of nolocontendere or its equivalent shall not create a
--------------
presumption that a Director, officer or employee failed to meet the standards
of conduct set forth in this paragraph. Expenses incurred with respect to any
Claim may be advanced by the Association prior to the final disposition thereof
upon receipt of an undertaking satisfactory to the Association by or on behalf
of the recipient to repay such amount unless it is ultimately determined that
he is entitled to indemnification under this paragraph. The rights of
indemnification provided in this paragraph shall be in addition to any rights
to which any Director, officer or employee may otherwise be entitled by
contract or as a matter of law. Every person who shall act as a Director,
officer or employee of this Association shall be conclusively presumed to be
doing so in reliance upon the right of indemnification provided for in this
paragraph.
7
<PAGE>
ELEVENTH. These Articles of Association may be amended at any regular
- --------
or special meeting of the shareholders by the affirmative vote of the holders
of a majority of the stock of this Association, unless the vote of the holders
of a greater amount of stock is required by law, and in that case by the vote
of the holders of such greater amount.
8
<PAGE>
Exhibit 4
BY-LAWS
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OF
--
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
----------------------------------------
ARTICLE I
---------
MEETING OF SHAREHOLDERS
-----------------------
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
- -----------------------------
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as
shown upon the books of the Bank mailed not less than ten days prior to the
date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
- -------------------------------
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders
called by the Board of Directors, stating the time, place and purpose of the
meeting, shall be given by or under the direction of the Secretary, or such
other officer as is designated by the Chief Executive Officer, by first-class
mail, postage prepaid, to all shareholders of record of the Bank at their
respective addresses as shown upon the books of the Bank, mailed not less than
ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its proceedings
recorded in the manner prescribed in these By-Laws for annual meetings of
shareholders.
9
<PAGE>
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
- -------------------------------------------------
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns made by
the judges and election and other proceedings to be recorded in the minute book
of the Bank. The presiding officer shall notify the directors-elect of their
election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and the
Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
- ---------------------------------
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall notify, in writing over their
signatures, the secretary of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
- ----------------------
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the
10
<PAGE>
annual meeting shall be secured for that meeting only, or any adjournment
thereof, and shall be dated, and if not dated by the shareholder, shall be
dated as of the date of receipt thereof. No officer or employee of this Bank
may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
- ---------------------
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
11
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
- -------------------------------------
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as
an executive officer of the Bank. A director shall not be eligible for
nomination and re-election as a director of the Bank if such person's executive
or leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The
age of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after
such termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the
right to participate in board meetings but shall be without the power to vote
and shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
- -----------------------------
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the
- ----------------------------------------
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to his prior death,
resignation, or removal from office. Whenever any vacancy shall occur among the
directors, the remaining directors shall constitute the directors of
12
<PAGE>
the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
- -----------------------------------
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time
to time until a quorum is obtained. A majority of the number of Directors
elected by the shareholders shall constitute a quorum for the transaction of
business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors
- -------------------------------
shall be held on the third Monday of each calendar month excluding March and
July, which meeting will be held at 4:00 p.m. When any regular meeting of the
Board falls on a holiday, the meeting shall be held on such other day as the
Board may previously designate or should the Board fail to so designate, on
such day as the Chairman of the Board of President may fix. Whenever a quorum
is not present, the directors in attendance shall adjourn the meeting to a time
not later than the date fixed by the Bylaws for the next succeeding regular
meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
- -------------------------------
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such
place in Franklin County, Ohio, and at such time as may be fixed in the call.
Written or oral notice shall be given to each Director not later than the day
next preceding the day on which special meeting is to be held, which notice may
be waived in writing. The presence of a Director at any meeting of the Board
shall be deemed a waiver of notice thereof by him. Whenever a quorum is not
present the Directors in attendance shall adjourn the special meeting from day
to day until a quorum is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at
- ---------------------
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote
13
<PAGE>
of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
- ---------------------------
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which the Director
receives payment; and provided further, that payment hereunder shall not be
made in the case of any Director in the regular employment of the Bank or of
one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
- ----------------------------------
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee shall
be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive Committee
until their successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote thereof at
any regular or special meeting of the Board. The Chairman or President shall
fill any vacancy in the Committee by the appointment of another Director,
subject to the approval of the Board of Directors. The regular meetings of the
Executive Committee shall be held on a regular basis as scheduled by the Board
of Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with
14
<PAGE>
regard to any matters on which the Executive Committee shall vote, a majority
of the Committee members present at the meeting at which a vote is to be taken
shall not be officers of the Bank and, provided further, that if, at any
meeting at which the Chairman of the Board and President are both present,
Committee members who are not officers are not in the majority, then the
Chairman of the Board or President, which ever of such officers is not also the
Chief Executive Officer, shall not be eligible to vote at such meeting and
shall not be recognized for purposes of determining if a quorum is present at
such meeting. When neither the Chairman of the Board nor President are present,
the Committee shall appoint a presiding officer. The Executive Committee shall
keep a record of its proceedings and report its proceedings and the action
taken by it to the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There
- ------------------------------------------------------------------------
shall be a standing committee of the Board of Directors known as the Community
Reinvestment Act and Compliance Policy Committee the duties of which shall be,
at least once in each calendar year, to review, develop and recommend policies
and programs related to the Bank's Community Reinvestment Act Compliance and
regulatory compliance with all existing statutes, rules and regulations
affecting the Bank under state and federal law. Such Committee shall provide
and promptly make a full report of such review of current Bank policies with
regard to Community Reinvestment Act and regulatory compliance in writing to
the Board, with recommendations, if any, which may be necessary to correct any
unsatisfactory conditions. Such Committee may, in its discretion, in
fulfilling its duties, utilize the Community Reinvestment Act officers of the
Bank, Banc One Ohio Corporation and Banc One Corporation and may engage outside
Community Reinvestment Act experts, as approved by the Board, to review,
develop and recommend policies and programs as herein required. The Community
Reinvestment Act and regulatory compliance policies and procedures established
and the recommendations made shall be consistent with, and shall supplement,
the Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The
Community Reinvestment Act and Compliance Policy Committee shall consist of not
fewer than four board members, one of whom shall be the Chief Executive Officer
and a majority of whom are not officers of the Bank. Not fewer than three
members of the Committee, a majority of whom are not officers of the Bank, must
be present to constitute a quorum. The Chairman of the Board or President of
the Bank, whichever is not the Chief Executive Officer, shall be an ex officio
member of the Community Reinvestment Act and Compliance Policy
15
<PAGE>
Committee. The Community Reinvestment Act and Compliance Policy Committee,
whose chairman shall be appointed by the Board, shall keep a record of its
proceedings and report its proceedings and the action taken by it to the Board
of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
- -------------------------------
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
- -------------------------------
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
16
<PAGE>
ARTICLE III
-----------
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
----------------------------------------
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
- --------------------------------------------
(a) The officers of the Bank shall include a President, Secretary and Security
Officer and may include a Chairman of the Board, one or more Vice Chairmen,
one or more Vice Presidents (which may include one or more Executive Vice
Presidents and/or Senior Vice Presidents) and one or more Assistant
Secretaries, all of whom shall be elected by the Board. All other officers
may be elected by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall be fixed
by the Board. The Board from time-to-time shall designate the President or
Chairman of the Board to serve as the Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be elected by
the Board from their own number. The President and Chairman of the Board
shall be re-elected by the Board annually at the organizational meeting of
the Board of Directors following the Annual Meeting of Shareholders. Such
officers as the Board shall elect from their own number shall hold office
from the date of their election as officers until the organization meeting
of the Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be relieved of
their duties at any time by action of the Board in which event all the
powers incident to their office shall immediately terminate.
(c) Except as provided in the case of the elected officers who are members of
the Board, all officers, whether elected or appointed, shall hold office at
the pleasure of the Board. Except as otherwise limited by law or these By-
laws, the Board assigns to Chief Executive Officer and/or his designees the
authority to appoint and dismiss any elected or appointed officer or other
member of the Bank's management staff and other employees of the Bank, as
the person in charge of and responsible for any branch office, department,
section, operation, function, assignment or duty in the Bank.
17
<PAGE>
(d) The management staff of the Bank shall include officers elected by the
Board, officers appointed by the Chief Executive Officer, and such other
persons in the employment of the Bank who, pursuant to written appointment
and authorization by a duly authorized officer of the Bank, perform
management functions and have management responsibilities. Any two or more
offices may be held by the same person except that no person shall hold the
office of Chairman of the Board and/or President and at the same time also
hold the office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of the Bank,
to the extent that such officer is authorized in writing by the Chief
Executive Officer, may appoint persons other than officers who are in the
employment of the Bank to serve in management positions and in connection
therewith, the appointing officer may assign such title, salary,
responsibilities and functions as are deemed appropriate by him, provided,
however, that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as provided in
this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
- --------------------------------------
shall have general and active management of the business of the Bank and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. Except as otherwise prescribed or limited by these By-Laws, the Chief
Executive Officer shall have full right, authority and power to control all
personnel, including elected and appointed officers, of the Bank, to employ or
direct the employment of such personnel and officers as he may deem necessary,
including the fixing of salaries and the dismissal of them at pleasure, and to
define and prescribe the duties and responsibility of all Officers of the Bank,
subject to such further limitations and directions as he may from time-to-time
deem proper. The Chief Executive Officer shall perform all duties incident to
his office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such
18
<PAGE>
officer as is designated by the Chief Executive Officer shall be vested with all
the powers and perform all the duties of the Chief Executive Officer as defined
by these By-Laws. When designating an officer to serve in his absence, the
Chief Executive Officer shall select an officer who is a member of the Board of
Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
- ------------------------------------------------------
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attor-
neys; to sign and give any notice required to be given; to demand payment
and/or to declare due for any default any debt or obligation due or payable to
the Bank upon demand or authorized to be declared due; to foreclose any
mortgages, to exercise any option, privilege or election to forfeit, terminate,
extend or renew any lease; to authorize and direct any proceedings for the
collection of any money or for the enforcement of any right or obligation; to
adjust, settle and compromise all claims of every kind and description in favor
of or against the Bank, and to give receipts, releases and discharges therefor;
to borrow money and in connection therewith to make, execute and deliver notes,
bonds or other evidences of indebtedness; to pledge or hypothecate any
securities or any stocks, bonds, notes or any property real or personal held or
owned by the Bank, or to rediscount any notes or other obligations held or
owned by the Bank, to employ or direct the employment of all personnel,
including elected and appointed officers, and the dismissal of them at
pleasure, and in furtherance of and in addition to the powers hereinabove set
forth to do all such acts and to take all such proceedings as in his judgment
are necessary and incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
- ------------------------
designated by the
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Chief Executive Officer shall have supervision and control of the records of
the Bank and, subject to the direction of the Chief Executive Officer, shall
undertake other duties and functions usually performed by a corporate
secretary. Other officers may be designated by the Chief Executive Officer or
the Board of Directors as Assistant Secretary to perform the duties of the
Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer being a member of the Bank's management staff
who is also a person in charge of and responsible for any department within the
Bank and any other officer to the extent such officer is so designated and
authorized by the Chief Executive Officer, the Chairman of the Board, the
President, or any other officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank, are
hereby authorized on behalf of the Bank to sell, assign, lease, mortgage,
transfer, deliver and convey any real or personal property now or hereafter
owned by or standing in the name of the Bank or its nominee, or held by this
Bank as collateral security, and to execute and deliver such deeds, contracts,
leases, assignments, bills of sale, transfers or other papers or documents as
may be appropriate in the circumstances; to execute any loan agreement,
security agreement, commitment letters and financing statements and other
documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or
on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as may be appropriate in the
circumstances; to execute any indemnity and fidelity bonds, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the conduct of its banking business; to execute and deliver
settlement agreements or other papers or documents as may be appropriate in
connection with a dismissal authorized by Section 3.01(c) of these By-laws; to
execute agreements, instruments, documents, contracts or other papers of like
or difference character necessary, desirable or incidental to the conduct of
its banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance
20
<PAGE>
policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any officer
being a member of the Bank's management staff who is also a person in charge of
and responsible for any department within the Bank, and any other officer of the
Bank so designated and authorized by the Chief Executive Officer, Chairman of
the Board, President or any officer who is a member of the Bank's management
staff who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired by
or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
- -------------------------------
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
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ARTICLE IV
----------
TRUST DEPARTMENT
----------------
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
- -------------------------------
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
- -----------------------------------------
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall
consist of the Chairman of the Board who shall be Chairman of the Committee,
the President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the Board of
Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing
- ------------------------------------------
Committee known as the Trust Examination Committee, consisting of three
directors appointed by the Board of Directors and who shall continue as members
of the committee until their successors are appointed. Such members shall not
be active officers of the Bank. Two members of the Committee shall constitute
a quorum. Any member of the Committee may be removed by the Board by a
majority vote at any regular or special meeting of the Board. The Committee
shall
22
<PAGE>
meet at such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law,
Regulations of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing to
the Board of Directors of the Bank, together with a recommendation as to what
action, if any, may be necessary to correct any unsatisfactory condition. A
report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
- -------------------------
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
- ----------------------------------
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
- --------------------------------
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
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<PAGE>
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or personal
property and to execute and deliver such agreements, contracts, or other papers
and documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute
and deliver partial releases from any discharges or assignments or mortgages
and assignments or surrender of insurance policies, to execute and deliver
deeds, contracts, leases, assignments, bills of sale, transfers or such other
papers or documents as may be appropriate in the circumstances for property now
or hereafter held by this Bank in any fiduciary capacity or owned by any
principal for whom this Bank may now or hereafter be acting under a power of
attorney or as agent; to execute and deliver settlement agreements or other
papers or documents as may be appropriate in connection with a dismissal
authorized by Section 3.01(c) of these By-laws; provided that the signature of
any such person shall be attested in each case by any officer of the Trust
Department or by any other person who is specifically authorized by the Chief
Executive Officer, the President or the officer in charge of the Trust
Department.
The Chief Executive Officer, Chairman of the Board, President, any officer of
the Trust Department and such other officers of the trust affiliate of the Bank
as are specifically designated and authorized by the Chief Executive Officer,
the President, or the officer in charge of the Trust Department, or any other
person or corporation as is specifically authorized by the Chief Executive
Officer, the President or the officer in charge of the Trust Department, are
hereby authorized on behalf of this Bank, to sign any and all pleadings and
papers in probate and other court proceedings, to execute any indemnity and
fidelity bonds, trust agreements, proxies or other
24
<PAGE>
papers or documents of like or different character necessary, desirable or
incidental to the appointment of the Bank in any fiduciary capacity and the
conduct of its business in any fiduciary capacity; also to foreclose any
mortgage, to execute and deliver receipts for payments of principal, interest,
dividends, rents, fees and payments of every kind and description paid to the
Bank; to sign receipts for property acquired or entrusted to the Bank; also to
sign stock or bond certificates on behalf of this Bank in any fiduciary capacity
and on behalf of this Bank as transfer agent or registrar; to guarantee the
genuineness of signatures on assignments of stocks, bonds or other securities,
and to authenticate bonds, debentures, land or lease trust certificates or other
forms of security issued pursuant to any indenture under which this Bank now or
hereafter is acting as Trustee. Any such person, as well as such other persons
as are specifically authorized by the Chief Executive Officer or the officer in
charge of the Trust Department, may sign checks, drafts and orders for the
payment of money executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
- ------------------------------
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law applicable
to such fiduciary account. In the case of shares of stock which are held by a
nominee of the Bank, such shares may be voted by such person(s) authorized by
such nominee.
25
<PAGE>
ARTICLE V
---------
STOCKS AND STOCK CERTIFICATES
-----------------------------
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
- ---------------------------------
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has been
placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
- ---------------------------------------
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and under such
conditions as the Board of Directors may at any time determine for any meeting
of shareholders, the payment of dividends or any other lawful purpose. In lieu
of closing the transfer books, the Board may, in its discretion, fix a record
date and hour constituting a reasonable period prior to the day designated for
the holding of any meeting of the shareholders or the day appointed for the
26
<PAGE>
payment of any dividend or for any other purpose at the time as of which
shareholders entitled to notice of and to vote at any such meeting or to
receive such dividend or to be treated as shareholders for such other purpose
shall be determined, and only shareholders of record at such time shall be
entitled to notice of or to vote at such meeting or to receive such dividends
or to be treated as shareholders for such other purpose.
27
<PAGE>
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 6.01. SEAL. The impression made below is an impression of the seal
- -------------------
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
- ----------------------------
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
- --------------------------
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of the
Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
- -----------------------------------
majority of the Directors.
28
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
-------
The undersigned, designated to act as Trustee under the Indenture for The
Interlake Corporation described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, Columbus, N.A.
Dated: 27th April, 1995 /s/ Stephen W. Boughton
By:___________________________
Stephen W. Boughton
Authorized Signer
29
