SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 28, 1997 Commission file number 1-9149
THE INTERLAKE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3428543
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Warrenville Road, Lisle, Illinois 60532-4387
(Address of principal executive offices) (Zip Code)
(630) 852-8800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of common stock, $1.00 par value, held by non-affiliates
as of February 13, 1998: $103,083,713
As of February 13, 1998, 23,122,142 shares of the Registrant's common
stock were outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement for the 1998 Annual
Meeting of Stockholders (to be filed) are incorporated by reference
into Part III.
THE INTERLAKE CORPORATION
Form 10-K Annual Report-1997
Table of Contents
PART I Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . .8
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .8
Item 4. Submission of Matters to a Vote of Security Holders. . . . .8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . .9
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data. . . . . . . . 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . 43
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . 44
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . 45
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . 45
Item 13. Certain Relationships and Related Transactions . . . . . . 45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . 46
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
FORWARD LOOKING STATEMENTS
This Form 10-K contains "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including
(without limitation) statements as to expectations, beliefs and future
financial performance and assumptions underlying the foregoing relating
to the adequacy of the Company's future liquidity, expected capital
expenditures for environmental compliance and the cost of implementing
environmental remedial activities, the availability of substitute
supplies of raw materials and the impact of pending legal proceedings.
Actual results or outcomes could differ materially from those discussed
in the particular forward looking statement based on a number of
factors, including (i) the Company's future operating results and its
ability to put in place new or replacement credit facilities, (ii)
government actions or initiatives with respect to environmental matters
either generally or with respect to specific instances involving the
Company, (iii) the inability of the Company to obtain adequate
quantities of raw materials from its existing suppliers or to obtain
such materials from alternative sources and (iv) the Company's ability
to resolve legal proceedings on favorable terms.
PART I
As used herein, the term "Company" means The Interlake Corporation and
its subsidiaries. The terms "Interlake" and "Registrant" mean The
Interlake Corporation, the parent company.
ITEM 1-BUSINESS
GENERAL
The Company is engaged in the design, manufacture and sale or
distribution of products primarily in the automotive, materials handling,
and aerospace industries. In 1997, the Company sold its foreign Handling
businesses as discussed in Note 2 of Notes to Consolidated Financial
Statements. In 1996, the Company sold its Packaging businesses as
discussed in Note 3 of Notes to Consolidated Financial Statements. The
Company's operations are divided into two segments: Engineered Materials
and Handling. For certain information regarding these segments,
including information regarding geographic regions, see Note 8 of Notes
to Consolidated Financial Statements.
ENGINEERED MATERIALS
The Engineered Materials segment includes Special Materials, which
produces ferrous metal powders used to manufacture precision parts, and
Aerospace Components, which manufactures precision jet engine components
and repairs jet engine fan blades. The two units which comprise
Engineered Materials generally use proprietary and patented processes to
produce high quality metal powders or components.
SPECIAL MATERIALS
General-The Company conducts its Special Materials business through its
Hoeganaes Corporation subsidiary. 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.
Suppliers to the automotive industry constitute the largest market for
Hoeganaes' products. Average usage of ferrous metal powder per vehicle
in North America has increased from 19 pounds in 1987 to 33 pounds in
1997 due to new applications (for example, anti-lock brakes, connecting
rods and bearing end caps) as well as increased demand for four wheel
drive vehicles in the light truck category (including sport utility
vehicles and minivans), which use greater amounts of ferrous metal powder
per vehicle.
Strategy-Hoeganaes' position 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. In light of Hoeganaes' proprietary
powder metal products, this strategy has established Hoeganaes as the
sole source for these products. This strategy is based on the Company's
ongoing research and development efforts, whereby Hoeganaes' application
specialists 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 parts: structural (metal powder to be compressed into
solid parts) and non-structural (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. More than 50% of Hoeganaes' sales are
for automotive applications, which include components for transmissions,
engines and suspension systems.
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 more than 50% 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 3.2% of the Company's
net sales in 1997. Sales are made by Hoeganaes' direct sales force.
Products-The Company believes that Hoeganaes currently has the broadest
product line of North American 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(R) 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, molybdenum or graphite plus other additives. In addition
to producing conventional mixes, Hoeganaes offers customers the
advantages of ANCORBOND(R) premixes produced with a proprietary mixing
process. With ANCORBOND(R) premixes, additives are bonded directly to
the steel particles, resulting in more consistent metallurgical
properties and improved manufacturing productivity. The ANCORDENSE(R)
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.
Production-Hoeganaes has two basic production processes. The first
process is atomizing, which converts scrap steel into powders through
the use of an electric furnace steel making and water atomization system.
Hoeganaes has the two largest atomizing plants in North America. The
second process is direct reduction which converts high purity iron ore
into a 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.
Minority Interest-The Company owns 80% of the capital stock of Hoeganaes.
The remaining 20% is owned by Hoganas AB, a Swedish corporation.
Agreements between the owners of Hoeganaes define the structure of the
Hoeganaes board of directors, grant to each party a right of first
refusal with respect to a proposed sale of Hoeganaes stock and provide
for technology exchanges and tax sharing arrangements.
AEROSPACE COMPONENTS
General-The Company conducts its Aerospace Components business through
its Chem-tronics, Inc. subsidiary. Chem-tronics is a leading producer of
lightweight, fabricated products for commercial, military and 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.
Strategy-Responding to the decline of the defense industry, Chem-tronics'
strategy during the 1990s has been to diversify and realign its
fabrication business by reducing dependence on military business through
expansion of the commercial and space segments. Commercial and space
programs have substantially offset declining military business and
represented 69% of Chem-tronics' sales in 1997, up from 21% in 1987. At
the end of 1997, Chem-tronics had a backlog of nearly $144 million of
fabrication orders, including significant multi-year agreements with
Rolls-Royce, Pratt & Whitney, General Electric 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
business 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(R) components
have significant cost and performance advantages over parts produced using
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 major domestic and
international airlines, all major jet engine manufacturers and engine
overhaul centers.
HANDLING
General-The Handling segment is comprised of the Company's domestic
Handling unit which designs, manufactures and sells storage rack,
conveyors and related order fulfillment equipment for use in warehouses,
distribution centers, retail stores and for other storage applications.
The Company believes Handling has the largest share of the storage rack
market in the U.S. Its customers are primarily engaged in the retailing
and wholesaling of food and consumer durables and non-durables and
industrial products as well as records retention. 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 addition, its large size allows it to
realize significant economies of scale in product development, design and
manufacturing.
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.
Products-Handling's primary product is storage rack which is used for
storing unit loads in distribution centers, warehouse facilities, retail
stores and factories. 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.
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. Extensive technical training for its sales staff
and for third-party distributors enables Handling to be responsive to
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 process.
Handling's facilities generally purchase steel coils and then form,
assemble and paint the product for various storage applications. Steel
comprises approximately 60% to 70% of production cost. Handling believes
it is a low cost producer. 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 direct sales
force and extensive distributor network give it a significant competitive
advantage. Handling is represented by a network of over 150 distributors
and a direct sales force in North America. 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.
CUSTOMERS; ORDER BACKLOGS
Engineered Materials-Sales to three jet engine manufacturers accounted
for approximately 55% of Aerospace Components' sales, equivalent to 19%
of Engineered Materials' sales and 8% of total Company sales in 1997.
Sales to three parts fabricators accounted for approximately 30% of
Special Materials' sales, equivalent to 19% of Engineered Materials'
sales and 8% of total Company sales in 1997. The Company is a supplier
to these companies and has no other significant relationship with them.
Sales to these companies are made pursuant to purchase orders.
At December 28, 1997 and December 29, 1996, the backlog of orders for
Engineered Materials was $174.6 million and $166.1 million, respectively.
Special Materials' backlog, which is generally short-term in nature, was
down 15%. Aerospace Components' backlog increased 11%. All orders for
Engineered Materials at December 28, 1997 were believed to be firm, but
approximately 36% of these orders are subject to renegotiation.
Approximately 83% of the backlog is expected to be delivered during 1998.
Handling-Handling's products are sold to a substantial number of retail
and industrial customers. Sales in North America to two large retailers
and a records retention firm represented 9% of segment sales and 5% of
total Company sales in 1997. The backlog of orders for this segment at
December 28, 1997 was $36.2 million compared with $22.9 million at
December 29, 1996. All orders at December 28, 1997 were believed to be
firm and are expected to be filled during 1998.
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 toward developing primary products and
processes. Expenditures on research activities by business segment were
as follows:
1997 1996 1995
(in millions)
Engineered Materials. . . . . . . . . . . .$2.9 $2.2 $2.1
Handling. . . . . . . . . . . . . . . . . . 1.3 1.6 1.0
Total. . . . . . . . . . . . . . . . .$4.2 $3.8 $3.1
The Company believes that these amounts have been adequate to maintain
its competitive positions in the businesses in which it operates.
PATENTS
The Company holds domestic and foreign patents covering certain products
and processes in both business segments. While these patents are
considered important to the ability of the segments to compete,
unpatented manufacturing expertise is considered at least as important.
Future profitability of these segments is therefore not considered
dependent upon any one patent or group of related patents.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and changing federal,
state and local environmental laws and regulations, including those
relating to the use, handling, storage, discharge and disposal of
hazardous substances. As a result, the Company is from time to time
involved in administrative and judicial proceedings and inquiries
relating to environmental matters. In addition, the Company's future
capital and operating expenditures will continue to be influenced by
environmental laws and regulations; however, the Company does not believe
these expenditures are likely to have a material adverse effect on its
earnings or its ability to compete with other companies. In 1997,
capital expenditures for environmental compliance were $2.1 million and
the Company estimates that environmental capital spending for 1998 will
be $1.5 million. (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Nonoperating Items", and Notes 17 and
18 of Notes to Consolidated Financial Statements.)
EMPLOYEES
At December 28, 1997, the Company employed a total of 2,491 persons,
consisting of 773 salaried and 1,718 hourly employees. Of the hourly
employees, 46% are represented by unions, with no single union
representing a significant number of the hourly employees. Two labor
contracts covering approximately 19% of hourly employees will expire in
the fourth quarter of 1998.
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 limited foreign sources. 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; however,
there can be no assurance that the Company will not encounter raw
material shortages during the year. 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.
ITEM 2-PROPERTIES
The following are the principal properties of the Company, listed by
business unit:
Usable Space
Business Unit Function Owned/Leased (Square Feet)
ENGINEERED MATERIALS
Hoeganaes
Riverton, NJ Manufacture iron and steel
metal powder Owned 542,000
Gallatin, TN Manufacture steel metal powder Owned 200,000
Milton, PA Bonding and blending metal
powder, warehouse Owned 102,000
Ridgway, PA Screening, mixing and
packaging facility Leased 57,500
Chem-tronics
El Cajon, CA Manufacture aerospace Owned 273,000*
components and repair of jet
engine fan blades Building owned 39,000
on leased land
Tulsa, OK Repair of jet engine fan
blades Owned 42,000
HANDLING
Pontiac, IL Manufacture storage rack 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*
The properties marked with an asterisk (*) are subject to mortgages
pursuant to the Company's bank credit agreement. In addition to the
facilities described above, the Company owns and leases various
warehouses and sales and administrative facilities. The Company believes
that its manufacturing facilities are properly maintained and that
production capacity is adequate to meet the requirements of the Company.
ITEM 3-LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly
involved in legal proceedings incidental to its business. None of these
proceedings is material within the meaning of regulations of the
Securities and Exchange Commission. In addition, the Company is involved
in certain legal proceedings described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in Notes
17 and 18 of Notes to Consolidated Financial Statements.
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 28, 1997.
PART II
ITEM 5-MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for Interlake's common stock is the New York Stock
Exchange (ticker symbol IK). The common stock is also listed on the
Chicago Stock Exchange and is admitted to unlisted trading on the Pacific
Stock Exchange and the Boston Stock Exchange.
Interlake has not paid a dividend or made a distribution with respect to
its common stock since the third quarter of 1989. Restrictions under
Interlake's bank credit agreement and the indentures relating to its
Senior Subordinated Debentures and Senior Notes (see Note 12 of Notes to
Consolidated Financial Statements) will prevent it from paying any cash
dividends in 1998 or in the foreseeable future.
On December 28, 1997, there were approximately 6,086 holders of record of
Interlake's common stock.
High and low sales prices of Interlake's common stock as reported on the
NYSE composite ticker tape during each of the eight calendar quarters
during the period ending on December 31, 1997 were:
1997 1996
Price Price
High Low High Low
Calendar Quarter Ended
March 31. . . . . . . . . . . . . .$ 4-1/8 $ 2-7/8 $2-1/2 $1-3/4
June 30 . . . . . . . . . . . . . . 4-1/2 3-1/4 3-5/8 1-7/8
September 30. . . . . . . . . . . . 6-15/16 4-5/16 4-1/2 2-3/4
December 31 . . . . . . . . . . . . 7-1/2 3-7/8 4-1/4 3
ITEM 6-SELECTED FINANCIAL DATA
(in thousands except per share data)
(references to Notes are references to Notes to Consolidated
Financial Statements)
During the fourth quarter of 1997, the Company sold its foreign Handling
businesses, as discussed in Note 2. Operating results of the foreign
Handling businesses are included for eleven months of 1997 as compared to
twelve months in prior years.
During the fourth quarter of 1996, the Company sold its Packaging
businesses, as discussed in Note 3. The following selected statement of
operations data has been restated to reflect separately the operating
results and gain on the sale of the Packaging businesses as discontinued
operations. Net income (loss) includes discontinued operations. The
following selected balance sheet data was not restated.
<TABLE>
For the Year 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales from continuing operations $725,591 $709,585 $689,913 $622,400 $559,192
Income (loss) from continuing operations
before extraordinary loss and
accounting change $ 16,370(1) $ 7,525 $ 993 $(23,251)(2) $(27,390)(1)(3)
Net income (loss) $ 16,721(1)(4) $ 55,244(4) $ 765(4) $(40,751)(2) $(25,962)(1)(3)(5)
Income (loss) from continuing operations
before extraordinary loss and
accounting change per common share:
Basic $ .71(1) $ .33 $ .04 $(1.06)(2) $(1.24)(1)(3)
Diluted .50(1) .24 .03 (1.06)(2)(6) (1.24)(1)(3)(6)
Net income (loss) per common share:
Basic $ .72(1)(4) $2.39(4) $ .03(4) $(1.85)(2) $(1.18)(1)(3)(5)
Diluted .51(1)(4) 1.74(4) .03(4) (1.85)(2)(6) (1.18)(1)(3)(5)(6)
Average number of shares outstanding:
Basic 23,198 23,093 22,691 22,027 22,027
Diluted 32,848 31,670 30,520 22,027(6) 22,027(6)
<FN>
(1) includes nonoperating charges for environmental matters of $10,500 ( see Note 17) in 1997 and $4,750 in 1993
(2) includes a charge for goodwill write-down of $13,202 in continuing operations and $20,972 in discontinued operations
(3) includes a restructuring charge of $5,216 in 1993
(4) includes extraordinary losses on early extinguishment of debt of $1,482 in 1997, $267 in 1996 and $3,448 in 1995 (see Note
6) and cumulative effect of changes in accounting principles of $1,876 in 1996 (see Note 5)
(5) includes a restructuring charge of $5,611 in 1993
(6) excludes potential common shares because of the antidilutive effect upon per share amounts
1995 was a 53-week year while all other periods were 52-week years
</FN>
</TABLE>
ITEM 6-SELECTED FINANCIAL DATA (continued)
(in thousands except per share data)
<TABLE>
At Year End 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Working capital
-cash and cash equivalents $ 84,508 $ 70,228 $ 41,562 $ 39,708 $ 31,934
-debt due within one year (27,267) (3,759) (3,759) (24,553) (2,525)
-other working capital 1,895 46,492 61,968 52,464 44,460
-total working capital 59,136 112,961 99,771 67,619 73,869
Total assets $373,066 $457,723 $459,802 $444,953 $464,160
Long-term debt, including current maturities 323,632 398,819 443,615 442,451 443,135
Convertible Exchangeable Preferred Stock 39,155 39,155 39,155 39,155 39,155
Common stockholders' equity (deficit) (197,720) (228,134) (291,677) (296,435) (259,767)
</TABLE>
ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(dollars in millions except per share data)
(references to Notes are references to Notes to Consolidated
Financial Statements)
<TABLE>
Net Sales and Operating Profit by Business Segment
(in millions)
Net Sales Operating Profit
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Engineered Materials
Special Materials $197.5 $173.2 $175.7
Aerospace Components 107.2 84.3 72.7
304.7 257.5 248.4 $47.8 $40.5 $38.3
Handling 420.9 452.1 441.5 6.7 24.8 21.3
Corporate Items 34.6 (1.6) (2.0)
Total $725.6 $709.6 $689.9 $89.1 $63.7 $57.6
</TABLE>
During the fourth quarter of 1997, the Company sold its foreign
Handling businesses as discussed in Note 2. The results of their
operations and cash flow are included in the Company's consolidated
statement of operations and consolidated statement of cash flows for
eleven months through the end of November 1997, as compared to twelve
months in 1996 and 1995. The Company remains in the Handling business
in North America. The Company's continuing operations are divided
into two segments: Engineered Materials and Handling. For certain
information regarding these segments and geographic regions, see Note 8.
Results of Operations
Net sales from continuing operations were $725.6, $709.6 and $689.9,
respectively, in 1997, 1996 and 1995. Excluding the sales of the sold
foreign Handling businesses, sales were $483.5, $451.6 and $439.7,
respectively, in 1997, 1996 and 1995. Net sales in the Engineered
Materials segment were up $47.2 in 1997. Sales in the Aerospace
Components business were up $22.9 as shipments increased on several
key commercial and military engine programs, while increased shipments
of metal powders by the Special Materials business increased sales by
$24.3. Handling segment sales were down $31.2 due to the inclusion of
foreign Handling's sales for only eleven months in 1997, as well as a
$15.4 decline in 1997 in North American Handling's sales. Currency
fluctuations also reduced sales from continuing operations by $6.1
compared with 1996. Net sales in the Engineered Materials segment
were up $9.1 in 1996. Sales in the Aerospace Components business
increased $11.6 as shipment levels increased in 1996 on several key
engine programs, while sales of metal powders by the Special Materials
business posted a small decline. Handling sales were up $10.6 in
1996, as North American and Asia Pacific sales again reached record
levels. The years 1997 and 1996 were 52-week periods, while 1995 was
a 53-week period.
Operating profit was $89.1, $63.7 and $57.6, respectively, in 1997,
1996 and 1995. In 1997, operating profit included a gain of $35.6
($25.2 net of tax) from the sale of the foreign Handling businesses,
but was reduced by an additional $.9 of expense resulting from the
early paydown of the Company's Employee Stock Ownership Plan ("ESOP")
bank debt (see Note 4). In 1996, operating profit benefitted from the
adoption of a fair value approach with respect to accounting for the
ESOP, as discussed in Note 4, along with changes in the assumptions
used in calculating the Company's liability for postretirement medical
and life insurance benefits and the elimination of such benefits for
certain active domestic employees, as discussed in Note 11. The
combined effect of these changes in 1996 was a favorable adjustment to
operating profit of $5.3. In 1995, a one-time provision of $2.6 was
incurred to reduce fixed costs at the now sold European Handling
business. Excluding the operating results of the sold foreign
Handling businesses, the gain on the sale of the foreign Handling
businesses and accelerated ESOP expense in 1997, the favorable
adjustments to income in 1996 and the 1995 charge to reduce fixed
costs, operating profit was $44.4, $48.4 and $50.3 in 1997, 1996 and
1995, respectively.
Operating profit in 1997 benefitted from improved results at Special
Materials and Aerospace Components as well as from reduced Corporate
expenses, but they were more than offset by a decline at Handling
North America due to competitive sales pricing and higher
manufacturing costs. Operating profit in 1996 benefitted from
improved results in Aerospace Components and Handling North America,
offset in part by reduced earnings in Special Materials and in the
sold foreign Handling operations.
From 1995 to 1997, Special Materials' shipments of metal powders grew
by 12%, reflecting increased usage of metal powders in automotive and
nonautomotive applications as well as increased North American
automobile and truck production. At Aerospace Components, commercial,
military and space fabrication sales increased, growing by $30.1 since
1995. Repair sales increased $4.5 in 1997 as compared to 1995,
reflecting a 1996 resurgence in demand from the airline industry
which leveled in 1997. In Handling, 1997 sales were below 1996 and
1995 principally due to competitive sales pricing at the remaining
business unit, Handling North America. Sales of the sold foreign
Handling businesses were included for eleven months in 1997 and for
twelve months in 1996 and 1995. Foreign Handling sales in 1996 were
ahead of 1995 in the Asia Pacific markets, but were lower in
Continental Europe where the economy continued to be soft.
Cost of sales as a percentage of sales was 79% in 1997 and 77% in both
1996 and 1995. As a percentage of sales, selling and administrative
expenses were 13% in 1997, 14% in 1996 and 15% in 1995.
The following business segment commentary excludes the gain from the
sale of the foreign Handling businesses in 1997. The discussion of
individual business unit results is presented before allocation of
general corporate expenses and before the $2.6 favorable ESOP
adjustment in 1996 (see Note 4). See Note 8 for further information
on business segments.
Engineered Materials
Engineered Materials includes Special Materials (metal powders for
manufacturing precision parts) and Aerospace Components (precision
machined structures, complex fabrications and jet engine component
repairs).
Sales increased 18% in 1997 in the Engineered Materials segment.
Special Materials' sales increased 14% reflecting a 16% increase in
shipments over 1996 levels due to strong demand in both automotive and
nonautomotive sectors. Aerospace Components' sales increased 27%
reflecting continued increases in fabrication shipments on several
commercial and military programs. Space program fabrication shipments
declined 15% and repair activity was comparable to 1996 levels.
Aerospace Components' defense-related business represented
approximately 31%, 30% and 32% of its sales in 1997, 1996 and 1995,
respectively. Defense-related sales as a percentage of the Company's
consolidated sales were approximately 5% in 1997, 4% in 1996 and 3% in
1995. The fabrication business of Aerospace Components has continued
its strategy of increasing its penetration of the commercial and space
sectors, while continuing to secure new military business. The
business continued to develop expertise in fabrication of the very
large components used on new high-thrust commercial jet engines.
Sales to the commercial and space sectors have more than tripled from
1993 to 1997, while military sales increased 41% in the same period.
Operating profit for the Engineered Materials segment increased 18% in
1997 over 1996. Special Materials' operating profit increased 11%
reflecting a 16% increase in shipments and lower manufacturing costs
partially offset by lower selling prices and higher freight and
administrative costs. The favorable effects of the postretirement
medical and life adjustments described in Note 11 benefitted 1996
results. At Aerospace Components, operating profit increased 42% due
to increased shipments of fabricated components which were partially
offset by higher production costs.
Sales increased 4% in 1996 in the Engineered Materials segment. North
American automobile and light truck production remained essentially
level in 1996 compared with 1995. Special Materials' shipments
decreased 3% from 1995, due to competitive pressures in non-proprietary
powders and the disruptions of powder metal usage by several strikes in the
automotive industry. Aerospace Components' sales were up 16%, with increased
fabrication shipments on several newer commercial, military and space programs
and higher sales on certain repair programs. Repair sales increased 21% in
1996 over 1995 reflecting the higher utilization rates of certain aircraft
engines, along with several programs to perform blade modifications recommended
by engine manufacturers.
Operating profit for the Engineered Materials segment increased 6% in
1996 over 1995. Special Materials' operating profit declined 6%, as
lower production volume and higher expenses were only partially offset
by higher selling prices and the favorable effects of the
postretirement medical and life adjustments described in Note 11. At
Aerospace Components, operating profit was up 48% in 1996. Higher
volume and increased manufacturing efficiency on several newer
fabrication programs, along with operational improvements in the
repair business, all contributed to the earnings improvement.
The Engineered Materials segment's order backlog at year-end 1997 was
$174.6, up from $166.1 at the end of 1996. Special Materials'
backlog, which is generally short-term in nature, was down 15% from
1996. Increased orders on military and space programs resulted in an
11% increase in backlog at Aerospace Components at year-end 1997.
Handling
The foreign Handling businesses were sold in the fourth quarter of
1997 and their results are included in segment results for eleven
months in 1997 and for the full year in 1996 and 1995. Interlake
remains in the Handling business in North America. (See Note 2.)
Handling segment sales in 1997 decreased 7% from 1996 reflecting the
inclusion of the foreign Handling businesses for only eleven months in
1997 and an 8% decrease in North American sales. Sales in the
remaining business unit, Handling North America, reflected the impact
of competitive pricing pressures in all product lines and lower volume
in its conveyor line. Foreign Handling sales declined 4% for the
eleven months of 1997 as compared to the full year in 1996 at
comparable exchange rates.
Operating profit in the Handling segment decreased 73% in 1997 from
1996 levels. The remaining business unit, Handling North America, had
an 87% decrease in operating profit reflecting lower sales prices and
volume, higher material and manufacturing costs as well as increased
employee benefit costs. The sold foreign Handling businesses'
operating profit for eleven months in 1997 was level with 1996's full-year
results.
Total segment sales in 1996 were up 3% from 1995, at comparable
exchange rates. Demand for material handling products at the
remaining business unit, Handling North America, continued to be
strong after a substantial improvement in 1995, but pricing pressure
held sales growth to 2% in 1996. At the sold businesses, a 15%
increase in 1996 sales in Asia Pacific reflected opportunities
presented by the withdrawal of a conveyor competitor, expanded Pacific
Rim activity and favorable exchange rates in relation to the U.S.
dollar, which offset the impact of a slowdown in the Australian
economy. European Handling sales were essentially level, as increased
U.K. sales were offset by lower sales in Germany and unfavorable
exchange rate changes.
Segment operating profit increased 17% in 1996. The third quarter of
1995 included a one-time provision of $2.6 related to reducing fixed
costs at the businesses sold in the U.K. and Germany. Excluding this
provision, operating profit was up 4% from the prior year, as higher
volume, lower steel costs, lower expenses in Europe, and the effects
of the postretirement medical and life benefits and ESOP adjustments
were partially offset by lower prices. At the remaining business
unit, Handling North America, profit was up 19%, driven by lower steel
costs and additional volume. Excluding the impact of the 1995
provision to reduce fixed costs, operating profit for the European
Handling business declined 12% in 1996, as the competitive pricing
environment offset the benefits of lower steel costs and expense
savings. The benefit from additional sales at Handling Asia Pacific
was absorbed by a less favorable mix, the unfavorable impact of a
strong Australian currency in the Pacific Rim, higher manufacturing
costs and increased selling and administrative expenses. As a result,
earnings declined by 29% in 1996.
The Handling North America order backlog of $36.2 increased 58% over
year-end 1996, reflecting stronger order intake.
Interest Expense
The Company has a highly leveraged capital structure with substantial
net interest expense of $42.5, $45.9 and $45.7 in 1997, 1996 and 1995.
Net interest expense in 1996 and 1995 is after allocation of interest
to discontinued operations based on an assumed debt paydown of $75.6.
Nonoperating Items
The Company has certain income and expenses that are not related to
its ongoing operations. Ongoing postretirement expenses attributable
to disposed or previously discontinued operations are reported as
nonoperating items. In 1996, nonoperating items benefitted from a
change in the assumptions used in calculating the Company's liability
for postretirement medical and life insurance benefits for the former
employees of disposed or previously discontinued operations. The
effect of this change resulted in a favorable adjustment to
nonoperating income of $1.3.
In the fourth quarter of 1997, the Company recorded a charge of $10.5
for anticipated environmental costs. The costs largely relate to the
Company's indemnification of the old Interlake (now Acme Steel
Company) ("Acme") at the time of Acme's reorganization in 1986. Most
of the charge arises out of the anticipated costs of remediating
certain underwater sediments at a Superfund site in Duluth, Minnesota.
The Company has been identified as a potentially responsible party in
connection with the investigation and remediation of this Superfund
site; however, the course of remediation for the last operable unit at
the Duluth Site, the underwater sediments, has not been established.
The Company believes that, based on its current estimate of potential
environmental liabilities, including all contingent liabilities,
individually and in the aggregate, asserted and unasserted, 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 financial condition. There can be
no assurance, however, that the actual costs associated with potential
environmental liabilities will not exceed the Company's estimates.
(See Note 17.)
The Company's Hoeganaes Corporation subsidiary is a defendant in an
action in federal district court in Trenton, New Jersey, brought by SC
Holdings, Inc., a subsidiary of Waste Management International plc.
The plaintiff seeks to recover amounts expended or to be expended in
investigation and remediation of the Cinnaminson Groundwater
Contamination Site in Burlington County, New Jersey, which encompasses
a landfill formerly operated by the plaintiff and may also include the
groundwater under a Hoeganaes facility. SC Holdings alleges that
Hoeganaes has liability both as an owner/operator and as a generator.
The Company believes that Hoeganaes has meritorious defenses against
both alleged bases of liability. (See Note 18.)
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
Company has settled with certain defendants and is pursuing the
litigation with others.
Provision for Income Taxes
In 1997, U.S. federal taxable income (before application of a portion
of available net operating loss carry-forwards) was generated as a
result of the sale of the foreign Handling businesses. In 1996 and
1995, high levels of interest expense and differences in the timing of
income and expense recognition for financial reporting and income tax
purposes resulted in losses from continuing operations for U.S.
federal income tax purposes. Since most of the interest is borne in
the United States at the parent company level, throughout each period
the Company had taxable income in foreign and state jurisdictions
despite the high levels of consolidated interest expense. For each
period presented, the Company also provided for additional amounts
related to open federal tax return years 1982 through 1990. In 1997,
the sale of the foreign Handling businesses resulted in an estimated
current provision for income taxes of $10.4 (see Note 2). In 1996,
taxes of $17.5 were recognized in respect of the gain on the sale of
the Packaging businesses, and were reported as a component of income
from discontinued operations. (See Note 3.)
The Company's U.S. federal income tax returns for the years 1991
through 1994 are in the process of examination. Resolution of tax
years 1982-1984 is pending at the U.S. Tax Court following receipt of
a statutory notice of deficiency for $17.0 plus interest and
penalties. Resolution of tax years 1985-1990 is pending at the
Appeals Division of the Internal Revenue Service. The Company
believes that adequate provision has been made for possible
assessments of additional taxes.
Discontinued Operations
During the fourth quarter of 1996, the Company sold its Packaging
businesses to Samuel Manu-Tech Inc., of Etobicoke, Ontario, Canada,
for $104.4. The consolidated financial statements of the Company for
1996 and 1995 have been restated to report separately the operating
results and the gain on the sale of the Packaging businesses as
discontinued operations. During 1997, the Company recorded certain
adjustments and received additional proceeds which resulted in
adjustments to the gain on the sale of Packaging totaling $1.8 ($.06
per share), net of applicable income taxes, which is reported as
income from discontinued operations.
In 1996, income from discontinued operations of $46.4 ($1.46 per
share) consisted of a gain of $42.1 on the sale, net of income taxes,
$4.0 income from operations and $.3 cumulative effect of a change in
accounting principle. Income from operations for the Packaging
businesses in 1996 included a benefit of $.9 from changes in the
assumptions used in calculating the Company's liability for
postretirement medical and life insurance benefits and the elimination
of such benefits for certain active domestic employees. (See Notes 3
and 11.)
Extraordinary Loss
During the first quarter of 1997, the Company recorded an
extraordinary loss of $1.5, net of income taxes, for the premium
incurred and the write-off of deferred debt issuance costs related to
the repurchase and early retirement of $14.5 of the Company's Senior
Notes.
During the fourth quarter of 1996, the Company repurchased in the open
market $5.0 of its Senior Subordinated Debentures, at a premium of
$.2. In addition, debt issuance costs of $.1 associated with the
repurchased debentures were written off. The total of these amounts
was shown as an extraordinary item.
During the second quarter of 1995, the Company issued $100.0 of Senior
Notes due 2001 and completed a substantial amendment to the Company's
senior bank credit agreement. The proceeds were used to retire a
portion of the Company's bank debt. Debt issuance costs of $3.4
associated with the retired debt were written off, without any
currently usable tax benefit in 1995, and shown as an extraordinary
item. (See Notes 6 and 12.)
Cumulative Effect of Accounting Change
In 1996, the Company changed its method of amortizing unrecognized
actuarial gains and losses with respect to its postretirement benefits
to amortize them over a five-year period. This change has been
accounted for as a change in accounting principle, the cumulative
effect of which was recorded as of the beginning of the year. As a
result, net income for 1996 was increased by $1.6 in respect of
continuing operations and $.3 in respect of discontinued operations.
(See Note 5.)
Liquidity and Capital Resources
The Company's total debt at year-end 1997 was $323.6, down from $398.8
at year-end 1996. Total debt was reduced principally through the
application of the net proceeds of the sales of the foreign Handling
businesses and Packaging businesses and the assumption of indebtedness
by the buyer of the foreign Handling businesses. Cash totaled $84.5
at the end of the year, up from $70.2 at the end 1996. The Company
has debt amortization requirements of $27.3 in 1998. Subsequent to year
end, the Company repurchased approximately $24.0 of Senior Subordinated
Debentures out of the net proceeds from the sale of the foreign Handling
businesses.
In December 1997, the Company entered into an amended and restated
bank credit agreement which provides credit facilities totaling
$106.0, available for acquisitions and letters of credit. The
agreement expires on June 30, 1998.
The Company is in the process of evaluating its alternatives for
refinancing or replacing some or all of its existing credit
facilities. Were it unable to obtain such facilities, and proceeded
with the repurchase and redemption of Senior Subordinated Debentures
discussed above, based on current levels of performance, the Company
might not have adequate liquidity to fund its operations and carry out
its 1998 capital spending plan. However, the Company expects, based
on its current levels of performance, current market conditions and on
indications that it has received from credit providers to date, that
it will be able to arrange new credit facilities with terms and in
amounts sufficient to fund the Company's liquidity needs through 1999.
The Company has substantial debt repayment requirements in the years
2001 and 2002 (see Note 12).
Cash Flow (see Consolidated Statement of Cash Flows)
Cash inflows provided by operating activities were $20.4 in 1997 and
$23.9 in 1995, while cash outflow used by operating activities was
$2.6 in 1996. Reductions in inventory levels at Special Materials,
lower 1997 operating activity and lower accruals in North American
Handling, along with the income taxes payable resulting from the sale
of the foreign Handling businesses contributed to decreased working
capital. Working capital decreases at the sold foreign Handling
businesses also contributed to the overall reduction. The continued
ramp-up of engine fabrication programs at Aerospace Components in 1997
partially offset the overall working capital decrease. Strong 1996
fourth quarter operating activity in the Handling businesses and the
ramp-up of engine programs in Aerospace Components contributed to
increased working capital requirements of $23.1 in 1996 compared with
$3.6 in 1995. In 1996, other operating adjustments included payment
of certain tax liabilities that had been classified as long term.
Cash flow was not affected by the $10.5 charge to 1997 earnings for
environmental matters, or by the favorable adjustments to 1996
earnings in respect of postretirement medical and life insurance
benefits.
The cash inflows provided by investing activities in 1997 and 1996
were $70.1 and $77.5, respectively. In 1997, $99.7 of proceeds from
the sale of the foreign Handling businesses were provided, while in
1996 the sale of the Packaging businesses generated $102.4. Cash
outflow used by investing activities was $20.2 in 1995. In 1997,
Special Materials acquired ARC Metals Corporation for $4.9 plus $2.4
of notes payable. Capital expenditures for expansion projects totaled
$12.9, $8.5 and $2.9 in 1997, 1996 and 1995, respectively. Special
Materials added an additional annealing furnace in 1997 to expand
capacity. It also began an expansion at its Gallatin facility which
will continue into 1998 and will add a new annealing building and
powder processing line as well as upgrade the electric furnace.
Expansion spending at Aerospace Components in 1997 included equipment
and facilities to support the continued growth in engine program
requirements for fabricated units. Expansion spending in 1996
included the addition of an annealing furnace to expand capacity at
the Special Materials operation, and equipment and facilities to
accommodate fabrication of new engine programs at the Aerospace
Components operation. Expansion spending in 1995 included milling and
machining equipment for the Aerospace Components operation.
Management believes that capital expenditures have been adequate to
properly maintain the Company's businesses and provide for anticipated
growth opportunities. The Company expects that 1998 capital spending
will be approximately $55.0.
Cash outflows used by financing activities were $75.5, $46.9 and $1.2
in 1997, 1996 and 1995, respectively. In the first quarter of 1997,
the Company purchased in the open market $14.5 of its Senior Notes
from the proceeds of its 1996 sale of the Packaging businesses. As a
result of the sale of the foreign Handling businesses in the fourth
quarter of 1997, indebtedness was reduced by $52.7. In the fourth
quarter of 1996, following the sale of its Packaging businesses, the
Company repaid $46.0 in bank debt and purchased in the open market
$5.0 of its Senior Subordinated Debentures.
Year 2000 Issues
The Company has initiated a review of all systems serving the
financial and operational activities of its business units. The
potential effect of Year 2000 Issues relating to customers and
suppliers is also being considered. Based upon evaluations performed
to date, the Company believes Year 2000 Issues will not have a
material impact on its operations and required changes, if any, will
not materially affect future results.
Foreign Operations
Before the sale of the foreign Handling businesses in the fourth
quarter of 1997, the Company transacted business in a number of
foreign countries, mainly through its Handling segment. The results of
these operations were initially measured in local currencies,
principally in British pounds, Australian dollars and German marks,
and then translated into U.S. dollars at applicable exchange rates.
The reported results of these operations were sensitive to changes in
applicable foreign exchange rates that could have had a material
effect on the Company's results of operations. During 1997 and 1996,
the dollar was generally stronger against most currencies, which had
an unfavorable impact of $6.1 and $3.0, respectively, on sales from
continuing operations. The impact of changes in foreign exchange
rates on operating profit was insignificant. (For additional
information about the Company's operations by geographic area, see
Note 8.)
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.
ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL
STATEMENT SCHEDULES
Page
Number
Consolidated Financial Statements:
Report of Independent Accountants . . . . . . . . . . . . . . . .19
Consolidated Statement of Operations for the Years Ended
December 28, 1997, December 29, 1996 and December 31, 1995. . . .20
Consolidated Balance Sheet at December 28, 1997 and
December 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . .21
Consolidated Statement of Cash Flows for the Years Ended
December 28, 1997, December 29, 1996 and December 31, 1995. . . .22
Consolidated Statement of Stockholders' Equity (Deficit) for
the Years Ended December 28, 1997, December 29, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . .23
Notes to Consolidated Financial Statements. . . . . . . . . . . .24
Supplementary Data (unaudited):
Quarterly Results (Note 19 of Notes to Consolidated Financial
Statements) . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Financial Statement Schedules:
Schedule VIII Valuation and Qualifying Accounts . . . . . . . .51
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Interlake Corporation:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the
financial position of The Interlake Corporation and its subsidiaries
at December 28, 1997 and December 29, 1996, and the results of their
operations and their cash flows for each of the three years in the
period ended December 28, 1997, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 5 to the consolidated financial statements, the
Company changed its method of amortizing postretirement benefit gains
and losses in 1996.
/s/ Price Waterhouse LLP
Chicago, Illinois
January 21, 1998
<TABLE>
The Interlake Corporation
Consolidated Statement of Operations
For the Years Ended December 28, 1997,
December 29, 1996 and December 31, 1995
(in thousands except per share data)
1997 1996 1995
(52 weeks) (52 weeks) (53 weeks)
<S> <C> <C> <C>
Net Sales from Continuing Operations $725,591 $709,585 $689,913
Cost of Products Sold 574,338 546,151 530,465
Selling and Administrative Expense 97,755 99,739 101,844
Gain on sale of foreign Handling businesses (See Note 2) 35,613 - -
Operating Profit 89,111 63,695 57,604
Interest Expense 45,220 48,297 47,486
Interest Income (2,770) (2,413) (1,780)
Nonoperating (Income) Expense (See Note 17) 9,360 (2,088) (1,043)
Income from Continuing Operations Before Taxes,
Minority Interest, Extraordinary Loss and Accounting Change 37,301 19,899 12,941
Provision for Income Taxes (See Note 9) 16,400 8,481 7,415
Income from Continuing Operations Before Minority
Interest, Extraordinary Loss and Accounting Change 20,901 11,418 5,526
Minority Interest in Net Income of Subsidiaries 4,531 3,893 4,533
Income from Continuing Operations Before
Extraordinary Loss and Accounting Change 16,370 7,525 993
Income from Discontinued Operations, Net of Applicable
Income Taxes (See Note 3) 1,833 46,376 3,220
Extraordinary Loss on Early Extinguishments of Debt,
Net of Applicable Income Taxes (See Note 6) (1,482) (267) (3,448)
Cumulative Effect of Change in Accounting Principle (See Note 5) - 1,610 -
Net Income $ 16,721 $ 55,244 $ 765
Income Per Share of Common Stock (See Note 7):
Basic
Income from Continuing Operations Before
Extraordinary Loss and Accounting Change $ .71 $ .33 $ .04
Net Income .72 2.39 .03
Diluted
Income from Continuing Operations Before
Extraordinary Loss and Accounting Change .50 .24 .03
Net Income .51 1.74 .03
Average Shares Outstanding:
Basic 23,198 23,093 22,691
Diluted 32,848 31,670 30,520
(See notes to consolidated financial statements)
</TABLE>
<TABLE>
The Interlake Corporation
Consolidated Balance Sheet
December 28, 1997 and December 29, 1996
(Dollars in thousands)
1997 1996
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 84,508 $ 70,228
Receivables, less allowances of $542 in 1997
and $2,037 in 1996 78,124 128,990
Inventories 36,729 59,986
Other current assets 5,962 12,893
Total Current Assets 205,323 272,097
Other Assets 41,379 40,527
Property, Plant and Equipment, net 126,364 145,099
Total Assets $ 373,066 $ 457,723
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 39,097 $ 65,366
Accrued liabilities 20,551 33,921
Interest payable 10,439 10,824
Accrued salaries and wages 11,946 15,675
Income taxes payable 36,887 29,591
Debt due within one year (See Note 12) 27,267 3,759
Total Current Liabilities 146,187 159,136
Long-Term Debt (See Note 12) 296,365 395,060
Other Long-Term Liabilities 71,754 72,691
Deferred Tax Liabilities (See Note 9) 5,085 9,346
Commitments and Contingencies (See Note 18) - -
Minority Interest 12,240 10,469
Preferred Stock-2,000,000 shares authorized
Convertible Exchangeable Preferred Stock-Redeemable,
par value $1 per share, issued 40,000 shares (liquidation value
$65,114 at December 28,1997 and $59,626 at
December 29, 1996) (See Note 13) 39,155 39,155
Stockholders' Equity (Deficit): (See Note 14)
Common stock, par value $1 per share, authorized 100,000,000
shares, issued 23,393,695 in 1997 and 23,228,695 in 1996 23,394 23,229
Additional paid-in capital 2,604 3,741
Cost of common stock held in treasury (106,153 shares in 1997
and 115,696 shares in 1996) (2,477) (2,700)
Retained earnings (Accumulated deficit) (221,234) (237,955)
Unearned compensation - (5,102)
Accumulated foreign currency translation adjustments (7) (9,347)
Total Stockholders' Equity (Deficit) (197,720) (228,134)
Total Liabilities and Stockholders' Equity (Deficit) $ 373,066 $ 457,723
(See notes to consolidated financial statements)
</TABLE>
<TABLE>
The Interlake Corporation
Consolidated Statement of Cash Flows
For the Years Ended December 28, 1997,
December 29, 1996 and December 31, 1995
(in thousands)
1997 1996 1995
(52 weeks) (52 weeks) (53 weeks)
<S> <C> <C> <C>
Cash Flows from (for) Operating Activities:
Net income $ 16,721 $ 55,244 $ 765
Adjustments to reconcile net income to
net cash provided by operating activities:
(Gain) on sale of foreign Handling businesses (35,613) - -
Nonoperating provision for environmental matters 10,500 - -
(Gain) on discontinued operations (1,833) (42,105) -
Depreciation and amortization 19,117 19,955 20,298
Extraordinary item 1,482 267 3,448
Accounting change - (1,876) -
Other operating adjustments (4,050) (11,009) 2,982
(Increase) Decrease in working capital:
Accounts receivable 1,008 (18,497) (993)
Inventories 602 (2,119) (3,837)
Other current assets 2,808 (1,805) (1,762)
Accounts payable 5,556 5,758 2,040
Other accrued liabilities (5,115) (12,570) (3,717)
Income taxes payable 9,226 6,131 4,660
Total Working Capital Change 14,085 (23,102) (3,609)
Net Cash Provided (Used) by Operating Activities 20,409 (2,626) 23,884
Cash Flows from (for) Investing Activities:
Capital expenditures (27,318) (25,279) (21,299)
Proceeds from disposal of PP&E 565 257 329
Proceeds from disposal of foreign Handling businesses 99,748 - -
Acquisitions (4,853) (310) -
Divestitures 1,703 102,402 -
Other investment flows 212 455 762
Net Cash Provided (Used) by Investing Activities 70,057 77,525 (20,208)
Cash Flows from (for) Financing Activities:
Proceeds from issuance of long-term debt 6,476 9,000 110,127
Retirements of long-term debt (84,156) (55,217) (108,624)
Debt issuance costs - - (4,773)
Debt retirement costs (1,504) (175) -
Other financing flows 3,685 (514) 2,111
Net Cash Provided (Used) by Financing Activities (75,499) (46,906) (1,159)
Effect of Exchange Rate Changes on Cash (687) 673 (663)
Increase in Cash and Cash Equivalents 14,280 28,666 1,854
Cash and Cash Equivalents, Beginning of Year 70,228 41,562 39,708
Cash and Cash Equivalents, End of Year $ 84,508 $ 70,228 $ 41,562
(See notes to consolidated financial statements)
</TABLE>
<TABLE>
The Interlake Corporation
Consolidated Statement of Stockholders' Equity (Deficit)
For the Years Ended December 28, 1997,
December 29, 1996 and December 31, 1995
(in thousands)
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>
December 25, 1994 23,229 $53,477 (1,202) $(28,047) $(293,966) $(10,058) $(17,841) $(296,435)
Net income 765 765
Stock incentive plans (See Note 15) (16,744) 789 18,422 (1,004) 674
ESOP transactions (See Note 14) 2,112 2,112
Translation gain 1,207 1,207
December 31, 1995 23,229 36,733 (413) (9,625) (293,201) (8,950) (16,634) (291,677)
Net income 55,244 55,244
Stock incentive plans (See Note 15) (6,258) 297 6,925 2 337 1,006
ESOP transactions (See Notes 4 & 14) (3,505) 3,511 6
Sale of Packaging businesses 8,476 8,476
Translation loss (1,189) (1,189)
December 29, 1996 23,229 26,970 (116) (2,700) (237,955) (5,102) (9,347) (228,134)
Net income 16,721 16,721
Stock incentive plans (See Note 15) 165 506 10 223 669 1,398
ESOP transactions (See Notes 4 & 14) (1,478) 4,433 2,955
Sale of foreign Handling businesses 11,286 11,286
Translation loss (1,946) (1,946)
Balance December 28, 1997 23,394 $25,998 (106) $ (2,477) $(221,234) $ - $ (7) $(197,720)
(See notes to consolidated financial statements)
</TABLE>
The Interlake Corporation
Notes to Consolidated Financial Statements
For the Years Ended December 28, 1997, December 29, 1996 and December
31, 1995
(All dollar amounts in thousands except where indicated)
NOTE 1-Summary of Significant Accounting Policies
Principles of Consolidation-The consolidated financial statements for
the year ended December 28,1997 include the accounts of all majority-owned
domestic subsidiaries for the full year as well as the results
of operations and cash flows of the sold foreign Handling businesses
for eleven months (see Note 2). The consolidated statements for
prior years reflect the ending financial position and full year
results of operations and cash flows for all domestic and foreign
subsidiaries. All significant intercompany transactions are
eliminated. The consolidated statements of operations of the Company
for prior years have been restated to report separately the operating
results and the gain on the sale of the Packaging businesses as
discontinued operations. The consolidated balance sheet and cash
flow statements were not restated.
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
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. Inventories valued on the LIFO method represent approximately
47% and 38% of consolidated inventories and 48% and 55% of domestic
inventories at December 28, 1997 and December 29, 1996, respectively.
The current cost of these inventories exceeded their valuation
determined on a LIFO basis by $13,091 at December 28, 1997 and by
$12,946 at December 29, 1996.
Inventories by category at December 28, 1997 and December 29, 1996
were:
1997 1996
Raw materials $14,127 $15,212
Semi-finished and finished products 16,700 37,842
Supplies 5,902 6,932
$36,729 $59,986
Leases-The Company frequently enters into operating leases in the
normal course of business. Amounts due under noncancellable
operating leases in the next five fiscal years are as follows:
1998 1999 2000 2001 2002
$1,188 $1,125 $1,125 $1,085 $934
Rent expense charged to operating profit of continuing operations was
$9,183, $10,120 and $9,957 in 1997, 1996 and 1995, respectively.
Property, Plant and Equipment and Depreciation-Plant and equipment
are depreciated principally on a straight-line method over the
estimated useful lives of the assets. Depreciation for income tax
purposes is computed by use of accelerated methods.
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. 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.
Property, plant and equipment by category at December 28, 1997 and
December 29, 1996 were:
1997 1996
At Cost:
Land $ 3,413 $ 6,052
Buildings 49,827 71,147
Equipment 248,436 302,968
Construction in progress 13,830 7,379
315,506 387,546
Depreciation (189,142) (242,447)
$126,364 $145,099
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 periodic review for
impairment. The Company compares the sum of the expected future cash
flows (undiscounted and without interest charges) to the carrying
value of the long-lived assets to determine if their value is
impaired when facts and circumstances warrant.
Foreign Currency Translation-The financial position and results of
operations of the Company's foreign subsidiaries, principally the
sold foreign Handling businesses, 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
fiscal 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 stockholders' equity (deficit).
Foreign Exchange Contracts-The Company periodically enters into
foreign exchange contracts to hedge specific inventory purchases and
other transactions denominated in foreign currencies. At December
28, 1997, the Company had outstanding currency contracts to exchange
$13.2 million for 100.6 million Swedish Kroner. 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.
Research and Development Expenses-Research and development
expenditures for Company sponsored projects are expensed as incurred.
Research and development expenses included in selling and
administrative expenses of continuing operations were $2,879, $2,200
and $2,151 for the Engineered Materials segment in 1997, 1996 and
1995, respectively, and $1,329, $1,573 and $986 for the Handling
segment in 1997, 1996 and 1995, respectively.
Computation of Common Share Data-The weighted average number of
common shares outstanding used to compute basic income per common
share for the 1997, 1996 and 1995 periods was 23,198,000, 23,093,000
and 22,691,000, respectively. The weighted average number of common
shares outstanding used to compute diluted income per common share
for the 1997, 1996 and 1995 periods was 32,848,000, 31,670,000 and
30,520,000, respectively.
Use of Estimates-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and related notes
to financial statements. Changes in such estimates may affect
amounts reported in future periods.
Accounting for Stock-Based Compensation-In October of 1995, the
Financial Accounting Standards Board issued FAS No. 123, "Accounting
for Stock-Based Compensation." The statement, effective for fiscal
year 1996, establishes a fair value based method of accounting for
employee stock-based compensation plans and encourages adoption of
that method. FAS 123 permits an entity to continue to apply the
provision of Accounting Principles Board Opinion Number 25 (APB 25),
"Accounting for Stock Issued to Employees", provided certain pro
forma disclosures are made. The Company continues to use the
accounting prescribed under APB 25. See Note 15 for additional pro
forma disclosures.
NOTE 2-Sale of Foreign Handling Businesses
In the fourth quarter of 1997, the Company sold its foreign Handling
businesses in the United Kingdom, Continental Europe and Asia Pacific
to Extondew Limited and Extonbrook Limited. Extondew and Extonbrook
are English companies organized by Apax Partners & Co. Ventures
Limited, a U.K. based private equity company. The sale was
structured as a sale of all of the shares of Dexion Group Ltd., which
was the holding company for the European businesses, and all of the
shares of Dexion (Australia) Pty Ltd., Dexion, Inc., and Dexion
(North Asia) Ltd., the three entities holding the Asia Pacific
business. The aggregate purchase price for the shares of the four
purchased companies was $69,395. In addition, the disposed of
entities had outstanding indebtedness (net of cash) of $30,353 as of
the sale date, which was paid or assumed by the buyer and was
included in the proceeds from disposal of foreign Handling businesses
in the Consolidated Statement of Cash Flows. The transaction was
approved by the Company's board of directors. The sale resulted in a
pre-tax gain of $35,613 and an after-tax gain of $25,167, or $.77 per
share on a diluted basis. The foreign Handling businesses' operating
results were included in the Company's Consolidated Statement of
Operations and Consolidated Statement of Cash Flows for eleven months
in 1997 as compared to twelve months in 1996 and 1995. Net sales
from continuing operations included $242,114, $257,942 and $250,195
in 1997, 1996 and 1995, respectively, from the foreign Handling
businesses. Operating profit included $9,980, $9,967 and $9,911 in
1997, 1996 and 1995, respectively. Following the sale, indebtedness
was reduced by an additional $21,298 in 1997 and subsequent to year-end,
the Interlake Employee Stock Ownership Plan (ESOP) note of
$4,022 was repaid. ESOP expense of $875 was recognized in 1997 as a
result of the Company's commitment to repay the ESOP indebtedness and
to release the remaining shares. Interlake remains in the Handling
business in North America, through its subsidiary, Interlake Material
Handling, Inc.
NOTE 3-Discontinued Operations
In the fourth quarter of 1996, the Company sold its Packaging
businesses ("Packaging") to Samuel Manu-Tech Inc. ("SMT") of
Etobicoke, Ontario, Canada, or entities controlled by SMT, for an
aggregate net cash purchase price, before taxes and other expenses,
of $104,402, subject to potential adjustments. The purchase price
was based upon a multiple of operating earnings, and was agreed to
after arms length negotiations between the parties and approved by
their respective boards of directors. The transaction included the
sale in the United States of substantially all of the assets of
Interlake Packaging Corporation ("Interlake Packaging") to Samuel
Strapping Systems (Tennessee), Inc. ("Samuel Tennessee"), and the
assumption by Samuel Tennessee of substantially all of the
liabilities of Interlake Packaging; the sale in Canada by Interlake
Packaging and The Interlake Companies, Inc. ("Interlake Companies")
to SMT of all of the outstanding shares of Acme Strapping Inc.; and
the sale in England by Interlake Companies of all of the outstanding
shares of Precis (935) Limited to Samuel Strapping Systems (U.K.)
Limited.
During 1997, the Company received additional proceeds and recorded
certain adjustments to the gain on the sale of Packaging totalling
$1,833 net of applicable income taxes, which is reported as income
from discontinued operations.
The consolidated statement of operations of the Company has been
restated to report separately the operating results and the gain on
the sale of Packaging as discontinued operations. Summary results of
discontinued operations were as follows:
1997 1996 1995
Net Sales $ - $105,287 $141,374
Earnings Before Interest and Taxes(1) $ - $ 12,087 $ 13,995
Net Interest Expense(2) - (4,833) (6,834)
Provision for Income Taxes - (3,249) (3,941)
Gain on Disposal, Net of Income Taxes 1,833(3) 42,105(3)(4) -
Cumulative Effect of Accounting Change - 266 -
Income from Discontinued Operations $ 1,833 $ 46,376 $ 3,220
(1) The liquidation of LIFO inventories benefited pre-tax income from
discontinued operations in 1995 by $786.
(2) Interest expense was allocated to discontinued operations based on
an assumed $75,604 reduction in long-term debt.
(3) Net of income taxes of $833 in 1997 and $17,513 in 1996.
(4) Includes the write-off of $8,476 of deferred foreign exchange
losses in 1996 related to the Packaging businesses that were
previously a component of accumulated foreign currency
translation adjustments.
NOTE 4-Employee Stock Ownership Plan
In January 1998, following the sale of its foreign Handling
businesses, the Company repaid its Interlake Employee Stock Ownership
Plan (ESOP) indebtedness. Additional ESOP expense of $875 was
recognized in 1997 as a result of the Company's commitment to repay
the ESOP indebtedness before maturity and to release the shares
remaining in the ESOP. (See Notes 2 and 12.)
In 1996, the Company adopted a fair value approach with respect to
its accounting for the ESOP as described in American Institute of
Certified Public Accountants' Statement of Position 93-6, "Employers
Accounting for Employee Stock Ownership Plans." Previously, ESOP
expense was determined using the original purchase price of the ESOP
shares ($14.625 per share). Under the new method, ESOP expense is
based on the market value of Interlake common stock at the year end
multiplied by the number of shares allocated to participants during
the year. This change resulted in the Company recording a favorable
expense adjustment of $2,635 to income from continuing operations in
the fourth quarter of 1996.
NOTE 5-Cumulative Effect of Change in Accounting Principle
In 1996, the Company changed its method of amortizing unrecognized
actuarial gains and losses with respect to its postretirement
benefits to amortize them over a five-year period. The method
previously used was to amortize any unrecognized gain or loss in
excess of 10% of the APBO amount over 15 years. This change has been
accounted for as a change in accounting principle, the cumulative
effect of which was recorded as of the beginning of the year. As a
result, net income for 1996 was increased by $1,610 in respect of
continuing operations and $266 in respect of discontinued operations.
NOTE 6-Extraordinary Losses
In 1997, the Company repurchased $14,500 of Senior Notes at a premium
of $1,504. In addition, debt issuance costs of $348 related to the
repurchased notes, which were originally deferred to be amortized
over the original life of the notes, were written off. The total of
these amounts, net of income taxes, of $1,482 (equivalent to $.05 per
share on a diluted basis) was reported as an extraordinary loss in
1997.
In 1996, the Company repurchased $5,000 of Senior Subordinated
Debentures at a premium of $175. In addition, debt issuance costs of
$92 related to the repurchased debentures, which were originally
deferred to be amortized over the original life of the debentures,
were written off. The total of these amounts, $267 (equivalent to
$.01 per share on a diluted basis) was reported as an extraordinary
loss without any currently usable tax benefit in 1996.
In 1995, the Company completed the sale of $100,000 of Senior Notes
in a public offering and entered into a substantial amendment and
restatement of its senior bank credit agreement. Proceeds of the
Senior Notes were used to repay a portion of outstanding bank debt.
This necessitated the write-off of issuance costs related to the
previously outstanding indebtedness which were originally deferred to
be amortized over the original life of the indebtedness. This
resulted in an extraordinary loss of $3,448 (equivalent to $.11 per
share on a diluted basis) without any currently usable tax benefit in
1995.
The cash flow impact of the early extinguishment of debt in 1996 and
1995 was immaterial. However, debt issuance and related costs in
1995 had a negative cash flow consequence of $4,773 which was
deducted in determining cash flows from financing activities in the
Consolidated Statement of Cash Flows.
NOTE 7-Earnings Per Share
In February of 1997, the Financial Accounting Standards Board issued
FAS No. 128 "Earnings per Share". The Statement establishes
standards for computing and presenting earnings per share, which the
Company adopted in the fourth quarter of 1997. Where applicable,
earlier periods have been restated to conform to the standards set
forth in FAS No. 128.
The earnings and shares used to calculate basic and diluted earnings
per share amounts are reconciled below:
<TABLE>
1997 1996 1995
Per Per Per
Share Share Share
Income Shares(1) Amounts Income Shares(1) Amounts Income Shares(1) Amounts
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from Continuing
Operations Before
Extraordinary Loss and
Accounting Change $16,370 $7,525 $993
Basic EPS - Income available
to common stockholders 16,370 23,198 $.71 7,525 23,093 $.33 993 22,691 $.04
Effect of dilutive Convertible
Exchangeable Preferred
Stock (See Note 13) - 9,381 - 8,577 - 7,829
Stock Options - 269 - -(2) - -(2)
Diluted EPS - Income
available to common
stockholders and
assumed conversions $16,370 32,848 $.50 $7,525 31,670 $.24 $993 30,520 $.03
</TABLE>
1997 1996 1995
Income (Loss) Per Share of Common Stock - Basic:
Income from Continuing Operations Before
Extraordinary Loss and Accounting Change $.71 $ .33 $.04
Discontinued Operations .08 2.00 .14
Extraordinary Loss (.07) (.01) (.15)
Cumulative Effect of Accounting Change - .07 -
$.72 $2.39 $.03
Income (Loss) Per Share of Common Stock - Diluted:
Income from Continuing Operations Before
Extraordinary Loss and Accounting Change $.50 $ .24 $.03
Discontinued Operations .06 1.46 .11
Extraordinary Loss (.05) (.01) (.11)
Cumulative Effect of Accounting Change - .05 -
$.51 $1.74 $.03
Average Shares Outstanding - Basic(1) 23,198 23,093 22,691
Average Shares Outstanding - Diluted(1) 32,848 31,670 30,520
(1) Share amounts in thousands.
(2) Options to purchase 1,041,293 and 986,480 shares of common stock at
$4 to $13 per share were outstanding in 1996 and 1995 respectively,
but were not included in the computation of diluted EPS because the
exercise price of the options exceeded the average market price and
would have been antidilutive. See Note 15 for further information
about options outstanding.
NOTE 8-Business Segment Information
The Company operates in two segments:
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-comprises the Company's Handling operations, which
design, manufacture and sell storage rack and related
equipment primarily for use in warehouses, distribution
centers and for other storage applications.
The accompanying tables present financial information by business
segment for the years 1997, 1996 and 1995. 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 assets consist principally of cash, nonoperating
investments and prepaid pension cost, and assets related to
discontinued operations.
Results in 1997 reflect the sale of the Handling businesses in the
United Kingdom, Continental Europe and Asia Pacific in the fourth
quarter. Operating results of the foreign Handling businesses were
included for eleven months of 1997 as compared to twelve months in
prior years. A pretax gain on the sale of $35.6 million was included
in Corporate Items in 1997.
<TABLE>
Information About The Company's Business Segments
Net Sales Operating Profit (Loss) Identifiable Assets
1997 1996 1995 1997 1996 1995 1997 1996 1995
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered Materials
Special Materials $197.5 $173.2 $175.7
Aerospace Components 107.2 84.3 72.7
304.7 257.5 248.4 $47.8 $40.5 $38.3 $218.5 $189.4 $172.6
Handling 420.9 452.1 441.5 6.7 24.8 21.3 49.7 183.9 170.7
Corporate Items 34.6 (1.6) (2.0) 104.9 84.4 116.5
Operating Profit 89.1 63.7 57.6
Net Interest Expense (42.4) (45.9) (45.7)
Nonoperating Income (Expense) (9.4) 2.1 1.0
Consolidated Totals $725.6 $709.6 $689.9 $37.3 $19.9 $12.9 $373.1 $457.7 $459.8
Depreciation and Amortization Capital Expenditures
Engineered Materials $11.3 $10.7 $10.5 Engineered Materials $22.2 $17.6 $13.0
Handling 7.7 7.9 7.9 Handling 5.1 6.7 7.0
Corporate Items 0.1 0.1 0.1 Corporate Items - 0.1 -
Consolidated Totals $19.1 $18.7 $18.5 Consolidated Totals $27.3 $24.4 $20.0
</TABLE>
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 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 North American sales are less than
10% of consolidated sales. Sales to domestic and foreign government
agencies are not material.
<TABLE>
Net Sales Operating Profit (Loss) Identifiable Assets
1997 1996 1995 1997 1996 1995 1997 1996 1995
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North America
Customer Sales $483.0 $450.9 $439.3
Inter-geographic 0.4 0.7 0.4
483.4 451.6 439.7 $46.6 $57.6 $51.7 $268.2 $249.1 $224.3
United Kingdom
Customer Sales 105.9 110.8 104.0
Inter-geographic 5.7 6.7 4.4
111.6 117.5 108.4 6.7 5.9 4.6 - 50.7 42.1
Continental Europe
Customer Sales 65.3 81.5 89.1
Inter-geographic 0.2 0.6 0.5
65.5 82.1 89.6 0.4 1.0 1.5 - 40.2 44.8
Asia Pacific
Customer Sales 71.4 66.4 57.5
Inter-geographic - - -
71.4 66.4 57.5 0.8 0.8 1.8 - 33.3 32.1
Corporate Items/Eliminations (6.3) (8.0) (5.3) 34.6 (1.6) (2.0) 104.9 84.4 116.5
Operating Profit 89.1 63.7 57.6
Net Interest Expense (42.4) (45.9) (45.7)
Nonoperating Income
(Expense) (9.4) 2.1 1.0
Consolidated Totals $725.6 $709.6 $689.9 $37.3 $19.9 $12.9 $373.1 $457.7 $459.8
</TABLE>
NOTE 9-Income Taxes
Income before taxes, minority interest, extraordinary items,
discontinued operations and accounting changes consisted of:
1997 1996 1995
Domestic $30,360 $13,185 $ 6,789
Foreign 6,941 6,714 6,152
$37,301 $19,899 $12,941
The provisions for taxes on income consisted of:
1997 1996 1995
Current:
U.S. Federal $10,174 $ 3,390 $ 2,202
State 3,327 2,482 3,379
Foreign 2,771 3,276 983
Total 16,272 9,148 6,564
Deferred:
U.S. Federal (2,087) - 321
State - - -
Foreign (113) (1,321) 146
Total (2,200) (1,321) 467
Change in Net Operating Loss Carry-forwards:
U.S. Federal 2,087 - -
Foreign 241 654 384
Total 2,328 654 384
Tax Provision $16,400 $ 8,481 $ 7,415
In 1997, the consolidated tax expense consisted primarily of current
taxes. The 1997 federal tax expense was principally a result of the
sale of the foreign Handling businesses, while the current state and
foreign tax provisions were a result of income earned in state and
foreign jurisdictions. In 1996 and 1995, the Company reported
consolidated income tax expense consisting primarily of current and
deferred taxes on income earned in foreign and state jurisdictions.
In 1997, U.S. federal taxable income (before application of a portion
of available net operating loss carry-forwards) was generated as a
result of the sale of the foreign Handling businesses. In 1996 and
1995, high levels of interest expense and differences in the timing of
income and expense recognition for financial reporting and income tax
purposes resulted in losses for U.S. federal income tax purposes.
Since most of the Company's interest expense is borne in the United
States at the parent company level, throughout each period the Company
had taxable income in foreign and state jurisdictions despite the high
levels of consolidated interest expense. For each period presented, the
Company also provided for additional amounts related to open U.S. federal
tax return years 1982 through 1990.
The Company's effective tax rate was 44.0% in 1997 and 42.6% in 1996.
The table below summarizes the components of the Company' s effective
tax rates:
1997 1996
U.S. statutory rate 35.0% 35.0%
State income taxes (net of federal benefit) 5.8 8.6
Adjustment to prior year accruals 18.3 6.0
ESOP (See Note 4) -- (2.0)
Valuation allowance changes (18.2) (7.1)
Miscellaneous - other 3.1 2.1
44.0% 42.6%
The U.S. federal tax net operating loss carry-forward was $11,309 at
the end of 1997 and will expire in 2010. The alternative minimum tax
(AMT) credit carry-forwards of $4,321 can be carried forward
indefinitely. The tax effects of the remaining net operating loss
carry-forward, AMT credit carry-forwards as well as the other net
deferred domestic temporary differences, were fully reserved in the
valuation allowance principally because of uncertainties regarding the
availability of domestic taxable income in the future in view of the
Company's recent history of domestic tax losses. In addition, there
are uncertainties regarding the ultimate resolution of certain tax
issues as discussed below. The need for a valuation allowance is
reviewed periodically.
Actual cash disbursements for income taxes and other tax assessments,
including amounts from discontinued operations, were $4,957, $12,921
and $6,896 in 1997, 1996 and 1995, respectively.
Deferred tax liabilities and assets are comprised of the following:
1997 1996
Deferred tax liabilities
Depreciation $18,598 $19,596
Other 3,064 3,942
$21,662 $23,538
Deferred tax assets
Deferred employee benefits $10,532 $16,374
Net operating loss carry-forward 3,958 6,286
AMT credit carry-forward 4,321 3,284
Inventory 1,811 2,358
Environmental reserves 3,271 975
Other 2,060 5,425
25,953 34,702
Valuation allowance (7,291) (14,036)
$18,662 $20,666
The valuation allowance for net domestic deferred tax assets decreased
by $6,475. This reduction was the result of net changes in temporary
differences. The 1996 deferred tax liabilities and assets included
amounts relating to the sold foreign Handling businesses.
As of December 28, 1997, U.S. federal income tax returns for the years
1991 though 1994 were in the process of examination. Resolution of tax
years 1982-1984 is pending with the U.S. Tax Court following receipt of
a statutory notice for $17,000 plus interest and penalties. Resolution
of tax years 1985-1990 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.
NOTE 10-Pensions
The Company has various defined benefit and defined contribution
pension plans which between them cover substantially all employees.
The provision for defined benefit pension costs includes current costs,
interest costs, actual return on plan assets, amortization of the
unrecognized net asset existing at the date of transition and net
unrealized gains and losses. Benefits are computed based mainly on
years of service and compensation during the latter years of
employment. Company contributions are determined according to the
funding requirements set forth by ERISA and, in the case of foreign
plans, local statutory requirements.
Certain of the Company's defined benefit plans related to foreign
locations and in 1997, 1996 and 1995 were denominated in currencies
other than U.S. dollars. All plans use similar economic assumptions.
The following table sets forth the funded status of domestic and
foreign defined benefit plans and the amounts included in the year-end
balance sheet. The 1996 amounts include balances of the since-disposed
of foreign Handling businesses.
1997 1996
Plan assets at fair value $ 55,558 $129,528
Actuarial present value of accumulated
benefit obligation:
Vested benefits 52,331 124,691
Non-vested benefits 1,484 1,622
53,815 126,313
Effect of assumed future compensation increases 6,719 11,708
Projected benefit obligation for service to date 60,534 138,021
Projected benefit obligation in excess of
plan assets (4,976) (8,493)
Items not yet recognized in earnings:
Unrecognized net asset at December 28, 1986
(being recognized over 15 years) 2,953 6,666
Unrecognized net actuarial gain (12,990) (16,312)
Unrecognized prior service cost (3,375) (3,564)
(13,412) (13,210)
Prepaid pension assets $ 8,436 $ 4,717
In aggregate, the plans were underfunded by $4,976 at December 28, 1997
and $8,493 at December 29, 1996.
The following table shows net pension cost included in income from
continuing operations for these plans. The pension costs of the sold
foreign Handling businesses are included for eleven months in 1997 and
for the full year in 1996 and 1995:
1997 1996 1995
Service cost $ 4,026 $ 3,385 $ 2,659
Interest cost 9,342 9,490 8,531
Actual return on plan assets [(income) loss] (14,434) (11,679) (13,282)
Net amortization and deferred items 3,249 1,485 2,544
Net pension cost $ 2,183 $ 2,681 $ 452
Assumptions used in the computations:
Assumed discount rate 7-8% 7.5-8% 7.5-9%
Expected long-term rate of return on plan assets 9% 9% 8.5-9%
Rate of increase in future compensation levels 4-6% 4-6% 4-6%
Pension plan assets are primarily invested in common and preferred
stock, short and intermediate term cash investments, and corporate
bonds.
The expense to continuing operations for the Company's defined
contribution pension plans covering certain domestic employees was
$2,223, $2,570 and $1,959 in 1997, 1996 and 1995, 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 were allocated to participants based on the ratio of each
participant's compensation to the total compensation of all eligible
participants. The Company made 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. In January, 1998, following the sale of its foreign
Handling businesses, the Company repaid its ESOP indebtedness. ESOP
expense of $875 was recognized in 1997 as a result of the Company's
commitment to repay the indebtedness and to release the shares
remaining in the ESOP (see Notes 2 and 12). Including the additional
ESOP expense of $875 accelerated to 1997 and the effect of the 1996
favorable expense adjustment of $2,635 described in Note 4, amounts
charged to continuing operations for employee benefits and interest
during the year totaled $1,459 and $421, respectively, in 1997, $(685)
and $601, respectively, in 1996 and $1,539 and $824, respectively, in
1995.
NOTE 11-Postretirement Benefits Other Than Pensions
The following table sets forth the status of the Company's various
postretirement medical and life benefit plans, reconciled to the
accrued cost for postretirement medical and life benefits recognized in
the Company's year-end balance sheet:
1997 1996
Accumulated postretirement benefit obligation:
Retirees $13,757 $14,985
Fully eligible active plan participants 352 195
Other active plan participants 905 771
Total accumulated postretirement benefit obligation 15,014 15,951
Unrecognized prior service cost 617 687
Unrecognized gain 5,145 6,243
Accrued postretirement benefit cost $20,776 $22,881
Net periodic postretirement benefit cost (income) of continuing
operations included the following components:
1997 1996 1995
Service cost on benefits earned $ 41 $ 86 $ 148
Interest cost on accumulated postretirement
benefit obligation 1,062 1,243 1,756
Amortization of unrecognized prior
service cost (70) (169) (115)
Amortization of unrecognized gain (1,449) (1,558) (291)
Net periodic postretirement benefit
cost charged to results from continuing
operations (416) (398) 1,498
Favorable adjustment due to elimination of
medical and life insurance benefits for
certain employees - (1,593) -
Net effect charged to results from continuing
operations $ (416) $(1,991) $ 1,498
Based on a review of postretirement life and medical claims cost
experience in 1996, the Company changed the assumptions used to
calculate the accumulated postretirement benefit obligation. The
annual rate of increase of per capita claims cost was changed from 12%
in 1996, decreasing by 1% per year to 6% in 2002, to 7% in 1996,
decreasing by 1/2% per year to 5% in 2000 and remaining at that level
thereafter. In addition, the method for estimating expected future
medical claims was revised to reflect recent claims experience. The
previous estimate applied a weighting factor to recent experience.
These actuarial assumption changes resulted in a favorable expense
adjustment of $2,297 to operating profit. In 1996, the Company also
changed its method of amortizing unrecognized actuarial gains and
losses with respect to its postretirement benefits, as described in
Note 5. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.0% at December 28,
1997 and 7.5% at December 29, 1996. The rate of compensation increase
used to measure the accumulated postretirement benefit obligation for
the death benefit plans was 4% in both 1997 and 1996.
If the health care cost trend rate were increased 1%, the accumulated
postretirement benefit obligation as of December 28, 1997 would have
increased by 5%. The effect of this change on the aggregate of service
and interest cost for 1997 would be an increase of 4%.
In 1996, the Company eliminated postretirement medical and life
insurance benefits for which certain active domestic employees could
have become eligible. After a one-time cash payment of $1,012, the
Company recorded a favorable expense adjustment to income from
continuing operations of $1,593. The provision for postretirement
benefits other than pensions included in operating profit was $(30),
$117 and $760 in 1997, 1996 and 1995, respectively. The provision for
such costs included in nonoperating income was $(386), $(515) and $738
in 1997, 1996 and 1995, respectively.
NOTE 12-Long-Term Debt and Credit Arrangements
Long-term debt of the Company consists of the following:
<TABLE>
December 28, Interest December 29, Interest
1997 Rates 1996 Rates
<S> <C> <C> <C> <C>
Senior Subordinated Debentures $215,000 12.13% $215,000 12.13%
Senior Notes 85,500 12.00 100,000 12.00
Term Loans - - 36,957 8.38-9.25
Revolving Loans - - 21,356 8.38-9.25
ESOP Note 4,022 8.50 5,831 8.38
Obligations under long-term lease agreements 4,515 6.13-7.88 5,845 6.13-7.88
Pollution control and industrial development
loan agreements 12,150 6.25-7.13 12,150 6.25-7.13
Notes payable 2,400 9.00 - -
Other 45 - 1,680 -
323,632 398,819
Less-current maturities 27,267 3,759
$296,365 $395,060
Weighted average interest rate 11.19% 11.87%
</TABLE>
The Senior Subordinated Debentures were sold in 1992 and bear interest
at 12.125%. Principal repayment is due in 2002, with a sinking fund
payment of $45,000 due in 2001. In November, 1996 the Company
repurchased $5,000 of Senior Subordinated Debentures in the open market
with a portion of the proceeds from the sale of the Packaging
businesses. Subsequent to year end, the Company repurchased approximately
$24,000 of Senior Subordinated Debentures out of the net proceeds from
the sale of the foreign Handling businesses.
During 1995, the Company completed the sale of $100,000 of Senior Notes
due 2001 in a public offering. The proceeds from the offering were
used to repay a portion of the indebtedness outstanding under the
Company's senior bank credit facilities. In January, 1997 the Company
repurchased in the open market $14,500 of Senior Notes with a portion
of the net proceeds from the sale of the Packaging businesses.
The indentures governing the Senior Notes and the Senior Subordinated
Debentures impose limitations on the Company's payment of dividends,
other distributions, incurrence of indebtedness, sale and purchase of
assets and repayment of debt.
At the end of 1997, in conjunction with the sale of the foreign
Handling businesses, the bank credit agreement was amended after all
outstanding bank loans, with the exception of the ESOP Note, were
repaid with proceeds from the sale. The ESOP Note was repaid in
January, 1998. The amended agreement provides for a revolving loan
facility up to $106,000, available for acquisitions and to back letters
of credit, and expires June 30, 1998. Under the terms of the bank
credit agreement, the Company pays a commitment fee of 1/2 percent on
unused credit facilities and has the option to borrow funds under the
revolving loan facility at the prime rate plus 1 3/4 percent, or London
Interbank Offered Rates (LIBOR) plus 2 3/4 percent, with such rates
adjusted periodically. The bank credit agreement includes limitations
regarding the issuance of stock, the incurrence of additional
indebtedness, acquisitions, dispositions, and the payment of dividends
or other distributions. The bank credit agreement contains covenants
relating to earnings before interest, taxes and depreciation and
amortization, capital expenditures and net worth. Substantially all of
the Company's assets are pledged under the bank credit agreement.
During 1996, the Company had interest rate hedging arrangements with
members of the bank group fixing interest rates on an average of
$72,656 of debt under the bank credit agreement at 8.59% plus the
applicable spread. These agreements were settled in December 1996 for
$1,095 of which $570 was recorded as interest expense included in
income from continuing operations and $525 of expense was included in
the gain on the sale of the Packaging businesses. Without the interest
rate hedging agreements, the weighted average cost of borrowing would
have been .8 percentage points lower in 1996 and .5 percentage points
lower in 1995.
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.
Predecessors of the Company 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 varying amounts from 1998 to 2009. At the time of the spin-off
of Acme Steel Company from the Company in 1986, Acme entered into a
parallel loan agreement in favor of the Company with respect to
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 1997 is as follows:
1998 $ 27,267
1999 3,365
2000 200
2001 130,800
2002 151,300
The Company is in the process of evaluating its alternatives for
refinancing or replacing some or all of its existing credit
facilities. Were it unable to obtain such facilities, and proceeded
with the repurchase and redemption of Senior Subordinated Debentures
discussed above, based on current levels of performance, the Company
might not have adequate liquidity to fund its operations and carry out
its 1998 capital spending plan. However, the Company expects, based on
its current levels of performance, current market conditions and on
indications that it has received from credit providers to date, that it
will be able to arrange new credit facilities with terms and in amounts
sufficient to fund the Company's liquidity needs through 1999.
Actual cash disbursements for interest were $44,270, $52,087 and
$55,028 in 1997, 1996 and 1995, respectively, which includes the
amounts of net interest expense allocated to discontinued operations.
At December 28, 1997, the Company had unamortized deferred debt
issuance costs of $4,895 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 of continuing
operations was $1,335, $1,369 and $2,053 in 1997, 1996 and 1995,
respectively.
NOTE 13-Convertible Exchangeable Preferred Stock
In 1992, the Company issued 40,000 shares of Series A Preferred Stock.
The preferred stock is convertible into common stock and bears a 9% per
annum dividend payable semi-annually. The preferred stock initially
was convertible at $6.50 per share. However, to the extent dividends
are not paid in cash on the 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. Dividends have not been paid on the preferred shares since
their issuance, and due to restrictions in the bank credit agreement
and the indentures relating to the Company's Senior Subordinated
Debentures and the Senior Notes, 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 provisions, the
conversion price of the preferred stock was reduced to $3.99 per share
as of December 31, 1997 and was convertible into 10,025,063 shares of
common stock. 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, 1997 was $65,114. Upon certain events defined
as "changes in control" or fundamental changes, the holders of the
preferred stock have the right to require the Company to purchase the
shares at the liquidation preference value, subject to certain
limitations. The Company believes that the probability of these events
occurring is remote and, therefore, the preferred stock is not stated
at the liquidation preference value.
NOTE 14-Stockholders' Equity (Deficit)
No dividend payments were made in 1997, 1996 and 1995 and, due to
restrictions in the bank credit agreement and the indentures relating
to the Senior Subordinated Debentures and the Senior Notes, it is not
expected that cash dividends will be paid in the foreseeable future.
The Company established an Employee Stock Ownership Plan (ESOP) in 1989
with an initial contribution of 10,000 shares, followed by the sale of
1,100,000 shares to the ESOP. Unearned compensation in 1996 included
the shares held by the ESOP that had not been allocated to the
participants valued at their original purchase price of $14.625 per
share. Shares allocated during the year are charged to expense at the
fair market value at year end. The difference between fair market
value and their cost to the ESOP is charged or credited to additional
paid-in capital. Interest payments on the ESOP borrowings are a
component of interest expense. In January, 1998, following the sale of
its foreign Handling businesses, the Company repaid its ESOP
indebtedness. As a result of the Company's commitment to repay its
indebtedness and to release the shares remaining in the ESOP, all
future ESOP expense was recognized in 1997 and the balance in unearned
compensation was reduced to zero (see Notes 2 and 12).
In 1989, the Board of Directors declared a stock rights dividend
distribution. The purpose of these rights is to protect the Company
against certain unfair and abusive takeover tactics. In certain
circumstances, stockholders, 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 stockholders can purchase, for less than market value, shares
of a company which acquires The Interlake Corporation.
NOTE 15-Stock Incentive Plans
The Company has in place three stock incentive programs adopted by its
Board of Directors and approved by the stockholders-the 1986 Stock
Incentive Program (the "1986 Program"), the 1989 Stock Incentive
Program (the "1989 Program") and the 1997 Stock Incentive Program (the
"1997 Program") and, together, the "Stock Incentive Programs". The
Stock Incentive Programs provide for the grant of awards and options
for shares of the Company's common stock to officers and key employees
of the Company and its subsidiaries. The 1997 Program and 1989 Program
also provide for the grant of awards and options for shares of the
Company's common stock to outside directors of the Company and its
subsidiaries and the grant of shares of common stock in lieu of cash
bonuses. The 1986 Program also provides for the grant of stock
appreciation rights.
A summary of stock option activity under the Stock Incentive Programs
follows:
1997 1996
Average Average
Shares Price Shares Price
Stock Options:
Outstanding-beginning of year 1,041,293 $5.52 986,480 $5.91
Granted 1,355,000 3.59 165,500 4.00
Exercised (165,000) 4.00 - -
Cancelled or expired (223,633) 7.21 (110,687) 6.73
Outstanding-end of year 2,007,660 4.15 1,041,293 5.52
Exercisable-end of year 613,660 5.41 920,243 5.72
Available shares 41,665 102,658
The following table summarizes information about the options
outstanding at December 28, 1997:
<TABLE>
Options Outstanding Options Exercisable
Number Weighted-Average Number
Outstanding Remaining Weighted-Average Exercisable Weighted-Average
at 12/28/97 Contractual Life Exercise Price at 12/28/97 Exercise Price
<S> <C> <C> <C> <C> <C>
Range of Exercise Prices
$3.44 to $4.38 1,892,800 8.3 years $3.71 498,800 $4.01
$11.47 114,860 .6 years $11.47 114,860 $11.47
</TABLE>
In 1996, the Company adopted the disclosure provisions of FAS No. 123,
"Accounting for Stock-Based Compensation." As permitted under this
statement, the Company retained its current method of accounting for
stock compensation. Disclosures required under FAS 123 are as follows:
1997 1996
Weighted-average fair value per option of
options granted during the year $2.33 $1.38
Additional pro forma compensation expense $679 $216
Pro forma income from continuing operations before
extraordinary loss and change in accounting policy $15,691 $7,309
Pro forma earnings per share from continuing
operations before extraordinary loss and change
in accounting policy $.48 $.23
The fair value of each option granted is estimated at the date of grant
using the Black-Scholes option-pricing model, utilizing expected
volatility of 57% based on historical data starting from December 30,
1990, one year after the Company's 1989 restructuring. Risk-free rates
of 6.72% and 5.78%, for 1997 and 1996, respectively, are based on U.S.
government strip bonds on the date of grant with maturities equal to
the expected option term. Expected lives of the options are ten years,
the vesting period is two years and no dividends are assumed.
NOTE 16-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 12) -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. 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.
Convertible exchangeable preferred stock (See Note 13) -The fair
value of the preferred stock, which was issued in a private
placement, is included in the following table at 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 or forward
rates as of the end of the fiscal year.
The estimated fair values of the Company's financial instruments are as
follows:
December 28, 1997 December 29, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $ 84,508 $ 84,508 $ 70,228 $ 70,228
Other assets 6,000 6,000 6,000 5,715
Long-term debt* 319,117 334,765 392,974 403,879
Convertible exchangeable
preferred stock 39,155 39,155 39,155 39,155
Foreign currency contracts - (361) - (31)
*Includes current maturities and excludes capitalized long-term leases
NOTE 17-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. After taking a
nonoperating charge of $10,500 in the fourth quarter of 1997 as
discussed below, the Company's reserves for environmental liabilities
totaled $11,300 as of December 28, 1997, most of which relates to the
Acme indemnification. Of this amount, $4,712 is classified as a current
liability at December 28, 1997.
The nonoperating charge of $10,500 related to anticipated liabilities
for environmental matters. Of that amount, $8,200 related to
anticipated costs of remediation of certain underwater sediments at the
Superfund site on the St. Louis River in Duluth, Minnesota (the "Duluth
Site"). The Company's liability with respect to the Duluth Site arises
out of the Acme indemnification discussed above. In 1997, the Company
substantially completed an investigation of certain contaminated
underwater sediments at the Duluth Site. Based on that investigation,
the Company submitted a review of alternative remedial options to the
Minnesota Pollution Control Agency ("MPCA") in December, 1997. Those
alternatives range in estimated cost from zero to $50,000. The
nonoperating charge reflects the estimated cost of any of several
alternatives which the Company views as equally likely to be
implemented, based largely upon its own analysis and the advice of its
consultants, as well as upon discussions with the MPCA, community
groups and other interested parties to date. However, there is no
assurance that the remedy ultimately chosen will not cost more or less.
The remainder of the $10,500 special nonoperating charge is largely
attributable to costs incurred in substantially completing the
remediation of certain soils at the Duluth Site; incurred in the
settlement of the City of Toledo litigation discussed in Note 18 which
follows; and anticipated to be incurred in the resolution of the
Company's potential liability with respect to the Conservation Chemical
site located in Gary, Indiana, with respect to which an administrative
order on consent is being negotiated with the United States EPA.
With the nonoperating charge discussed above, the Company believes that
based on its current estimate of its potential environmental
liabilities, including all contingent liabilities, individually and in
the aggregate, asserted and unasserted, that subject to the remaining
uncertainty with respect to the Duluth Site discussed above, 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 financial condition. In arriving
at its current estimate of its potential environmental liabilities, the
Company has relied upon the estimates and analyses 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. 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 do not reflect any anticipated recoveries from third
parties. The Company believes that the successors to certain coal tar
processors at the Duluth Site (the "tar companies"), who have been
named as additional responsible parties for a portion of the underwater
sediments by the MPCA, are the cause of a significant portion of the
underwater contamination at the site. The tar companies have
maintained that their contributions were minimal. In addition, the
Company has pending an action seeking a declaratory judgment and
recoveries from insurers under policies covering various periods during
the 1960's, 1970's and 1980's.
The Company's current expectation is that cash outlays related to its
outstanding reserves for environmental matters will be made during the
period from 1998 through 2000 with the most significant expenditures
expected in 1999 and 2000.
NOTE 18 - 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 (the "City"), brought an
action (the "Primary Action") in federal district court (the "Court")
in Toledo against the Company, Acme (together with the Company, the
"Interlake defendants"), Beazer Materials and Services, Inc., succeeded
by Beazer East, 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
widening a road. Pursuant to a memorandum of understanding dated
September 30, 1996, among Beazer, the City, and the Toledo-Lucas County
Port Authority (the "Port Authority"), setting forth certain
obligations of Beazer, the City and the Port Authority for the
completion and funding of the road widening project and related
environmental work, the City, Beazer and the Interlake defendants
entered into a settlement agreement pursuant to which the City released
the Interlake defendants and Beazer from, and agreed to dismiss with
prejudice, all claims in the Primary Action. On October 10, 1996, the
Court entered a consent order dismissing with prejudice all claims in
the Primary Action, leaving only pending cross-claims between Beazer
and the Interlake defendants at issue in the litigation. In December
1997, the Court entered a consent order confirming the settlement of
all remaining issues in the litigation between Beazer and the Interlake
defendants, and dismissing with prejudice all claims in the case.
On March 10, 1995, SC Holdings, Inc., a subsidiary of Waste Management
International plc ("SC Holdings"), filed a complaint in federal
district court in Trenton, New Jersey, against Hoeganaes Corporation,
an Interlake subsidiary, and numerous other defendants, seeking to
recover amounts expended or to be expended in the remediation of the
Cinnaminson Groundwater Contamination Site in Burlington County, New
Jersey. SC Holdings claims to have spent approximately $10,000 in
investigation and remediation, and purportedly estimates the total
costs of investigation and remediation to be approximately $60,000.
The site is a broadly-defined Superfund site which encompasses a
landfill formerly operated by SC Holdings and may also include the
groundwater under Hoeganaes' Riverton, New Jersey facility. Hoeganaes
may have shipped certain materials to the landfill. SC Holdings
alleges that Hoeganaes has liability as both an owner/operator and a
generator. The Company believes that Hoeganaes has meritorious
defenses against both alleged bases of liability.
NOTE 19-Quarterly Results (Unaudited)
<TABLE>
Quarterly results of operations for 1997 and 1996 were as follows:
(in millions except per share data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1997
Net sales from Continuing Operations
Engineered Materials $ 72.8 $ 77.4 $ 74.1 $ 80.4
Handling 97.4 108.4 121.4 93.7
170.2 185.8 195.5 174.1
Gross Profit 38.3 41.1 38.9 33.0
Operating profit
Engineered Materials 12.2 13.6 10.8 11.2
Handling 2.1 2.5 3.6 (1.5)
Corporate Items (.4) (.1) (.3) 35.4
Operating profit 13.9 16.0 14.1 45.1
Income from Continuing Operations before
extraordinary loss .1 .7 .5 15.1
Income from Discontinued Operations 1.5 - .3 -
Net income .1 .7 .8 15.1
Income from Continuing Operations before
extraordinary loss per common share:
Basic - .03 .02 .65
Diluted - .02 .02 .45
Income from Discontinued Operations per
common share:
Basic .06 - .02 -
Diluted .05 - .01 -
Net income per common share:
Basic - .03 .04 .65
Diluted - .02 .03 .45
</TABLE>
Fourth quarter 1997 results reflect the sale of the foreign Handling
businesses (see Note 2). A pretax $35.6 gain on the sale of the
foreign Handling businesses is included in Corporate Items in the
fourth quarter of 1997.
Fourth quarter 1997 results include a $10.5 pretax nonoperating
provision for environmental matters.
NOTE 19-Quarterly Results (Unaudited) (continued)
<TABLE>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1996
Net sales from Continuing Operations
Engineered Materials $ 61.7 $ 67.5 $ 64.1 $ 64.2
Handling 103.5 107.2 109.9 131.5
165.2 174.7 174.0 195.7
Gross Profit 37.5 39.7 39.7 46.5
Operating profit
Engineered Materials 8.8 11.0 9.1 11.6
Handling 4.0 4.2 5.5 11.1
Corporate Items (.1) (1.0) (.1) (.4)
Operating profit 12.7 14.2 14.5 22.3
Income (loss) from Continuing Operations before
accounting change and extraordinary loss (.9) .6 .5 7.3
Income from Discontinued Operations 1.3 1.2 1.8 42.1
Net income 2.0 1.8 2.2 49.2
Income (loss) from Continuing Operations before
accounting change and extraordinary loss
per common share:
Basic (.04) .03 .02 .32
Diluted (.03) .02 .01 .23
Income from Discontinued Operations per
common share:
Basic .06 .05 .08 1.82
Diluted .04 .04 .06 1.32
Net income per common share:
Basic .09 .08 .10 2.13
Diluted .07 .06 .07 1.54
</TABLE>
First quarter 1996 results reflect the $1.6 cumulative adjustment for
the change in accounting for postretirement medical and life benefits
(see Note 5).
Quarterly results for the first three quarters of 1996 were restated in
1996 to reflect the Packaging businesses as discontinued operations.
ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information about directors and nominees required by this item is
incorporated by reference to the information under the caption
"Directors and Nominees" in the Registrant's definitive proxy
statement to be filed in connection with its 1998 Annual Meeting of
Stockholders. Information regarding compliance with Section 16(a)
reporting requirements, to the extent required to be disclosed, is
incorporated by reference to the information under the caption
"Section 16 (a) Beneficial Ownership Reporting Compliance" in the
Registrant's definitive proxy statement to be filed in connection
with its 1998 Annual Meeting of Stockholders.
(b) The executive officers listed below are elected annually by the
Board of Directors of the Registrant, to serve for a term of office
of one year and until their successors are elected.
Executive
Name Age Officer Since Positions During Last 5 Years
W. Robert Reum 55 1982 Chairman of the Board since April
1991 and President and Chief
Executive Officer since January
1991
Stephen Gregory 48 1989 Vice President-Finance and Chief
Financial Officer since August
1995; Vice President-Finance,
Treasurer and Chief Financial
Officer from December 1994 to
August 1995; Vice President from
August 1994 to December 1994;
President of the Material Handling
Division of The Interlake
Companies, Inc. from June 1989 to
August 1994
Stephen R. Smith 41 1991 Vice President, Secretary and
General Counsel since January 1993;
Vice President and General Counsel
from January through December 1992
Donn A. York 38 1995 Treasurer since August 1995;
Director of Treasury Operations
from April 1993 to August 1995;
Director-Operation Control from May
1991 to April 1993.
(c) The Registrant has designated the operating executives named
below as "executive officers" for purposes of certain provisions
of the Securities Exchange Act of 1934.
Executive
Name Age Officer Since Positions During Last 5 Years
Robert J. Fulton 55 1994 President, Hoeganaes Corporation,
since July 1994; Chief Executive
Officer of Micafil, Inc. and
consultant to Sterling Stainless
Tube - ITT Automotive from 1992 to
1994; Executive Vice President and
Chief Operating Officer of Doehler-
Jarvis from 1990 to 1992
James Legler 49 1988 President, Chem-tronics, Inc.,
since 1988
Daniel P. Wilson 53 1994 President Material Handling
Division, since January 1994;
Vice President-Sales, Material
Handling Division, from 1988 to
1993
ITEM 11-EXECUTIVE COMPENSATION
The information required by this item is incorporated into this report
by reference to the information under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be
filed in connection with its 1998 Annual Meeting of Stockholders.
Notwithstanding the foregoing sentence, the information set forth under
"Executive Compensation - Report of the Management Development and
Compensation Committee on Executive Compensation" and "Executive
Compensation - Performance Graph" in the Registrant's definitive proxy
statement to be filed in connection with its 1998 Annual Meeting of
Stockholders is not incorporated herein.
ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated into this report
by reference to the information under the caption "Voting Securities
and Security Ownership by Certain Persons and Management" in the
Registrant's definitive proxy statement to be filed in connection with
its 1998 Annual Meeting of Stockholders.
ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14-EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Financial statements filed as part of this report are listed in
the index on page 18.
2. Financial Statement Schedules
Financial statement schedules filed as part of this report are
listed in the index on page 18.
All other schedules are omitted because of the absence of
conditions under which they would have been required or because
the required information is disclosed in the financial
statements or notes thereto.
3. Reports on Form 8-K
Current reports on Form 8-K were filed on December 22, 1997 and
January 5, 1998, reporting under Items 5 and 2 of the Form,
respectively, that the Registrant had sold its European and
Asia-Pacific material handling businesses on December 19, 1997.
The report filed on January 5, 1998 includes unaudited pro forma
condensed consolidated statements of operations for the fiscal
year ended December 29, 1996 and the nine months ended September
28, 1997, and an unaudited pro forma condensed consolidated
balance sheet as of September 28, 1997, based on the historical
financial statements of the Company and giving pro forma effect
to the disposition as if it had occurred at the beginning of the
period or as of the date presented, as applicable.
4. Exhibits
Sequential
Numbering
System
Exhibit Page
Number Item Number
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Share Purchase Agreement dated as of December 19, 1997,
by and among the Registrant, The Interlake Companies,
Inc., Interlake DRC Limited, Extondew Limited, and
Extonbrook Limited, incorporated by reference to
Exhibit 2.1 of the Company's Current Report on
Form 8-K dated December 19, 1997, File No. 1-9149
3. Articles of Incorporation and Bylaws
3.1 Composite of the Registrant's Restated Certificate
of Incorporation as amended, incorporated by reference
to Exhibit 3.1 of the Registrant's Registration
Statement on Form S-2, File No. 33-59003, as amended
(the "1995 Debt S-2")
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, File No. 1-9149
(the "1990 10-K")
4. Instruments Defining the Rights of Security Holders,
including Indentures
4.1 Form of Indenture (including form of Senior Note),
incorporated by reference to Exhibit 4.1 of the 1995
Debt S-2
4.2 Form of Indenture (including form of Senior
Subordinated Debenture), incorporated by reference to
Exhibit 4.1 of the Registrant's Registration Statement
on Form S-2, File No. 33-46247, as amended
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, File No. 1-9149
4.4 Amendment to Rights Agreement dated as of August 15,
1989, incorporated by reference to Exhibit (a) of the
Company's Form 8-A/A dated May 23, 1990, File No. 1-9149
4.5 Amendment to Rights Agreement dated as of May 7, 1990,
incorporated by reference to Exhibit (b) of the
Company's Form 8-A/A dated May 23, 1990, File No. 1-9149
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, File
No. 1-9149
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
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, File No. 1-9149
(the "1991 10-K")
4.15+ Second Amended and Restated Credit Agreement dated as
of December 22, 1997, among the Registrant, The Chase
Manhattan Bank and The First National Bank of Chicago.
4.16+ Note dated December 22, 1997, payable from the
Registrant to The Chase Manhattan Bank.
4.17+ Note dated December 22, 1997, payable from the
Registrant to The First National Bank of Chicago
4.18 Pledge Agreement dated September 27, 1989, made by the
Registrant and accepted by The Chase Manhattan Bank,
incorporated by reference to Exhibit 10(t) of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989, File No. 1-9149
4.19 Amended and Restated Security Agreement dated
September 27, 1989 and amended and restated as of
August 17, 1992 between the Registrant and The Chase
Manhattan Bank, incorporated by reference to Exhibit
4.27 of the Registrant's Annual Report on Form 10-K
for the year ended December 27, 1992, File No. 1-9149
(the "1992 10-K")
4.20 Amended and Restated Security Agreement dated as of
September 27, 1989 and amended and restated as of
August 17, 1992, among certain Subsidiaries of the
Registrant and The Chase Manhattan Bank, incorporated
by reference to Exhibit 4.28 of the 1992 10-K
4.21+ Confirmation and Guaranty of Security Interest dated
December 22, 1997, made by certain Subsidiaries of the
Registrant and accepted by The Chase Manhattan Bank.
10. Material Contracts
10.1*+ 1998 Senior Executive Incentive Compensation Program
10.2* 1997 Senior Executive Incentive Compensation Program,
incorporated by reference to Exhibit 10.1 of the
Registrant's Annual Report on Form 10-K for the year
ended December 29, 1996, File No. 1-9149 (the "1996
10-K")
10.3* 1996 Senior Executive Incentive Compensation Program,
incorporated by reference to Exhibit 10.1 of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, File No. 1-9149 (the "1995
10-K")
10.4* 1995 Executive Incentive Compensation Plan,
incorporated by reference to Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the
year ended December 25, 1994, File No. 1-9149
(the "1994 10-K")
10.5* 1994 Executive Incentive Compensation Plan,
incorporated by reference to Exhibit 10.1 of the
Registrant's Annual Report on Form 10-K for the
year ended December 26, 1993, File No. 1-9149
10.6* Key Executive Retention Program adopted February 23,
1995, incorporated by reference to Exhibit 10.3 of
the 1994 10-K
10.7* Amendment to Key Executive Retention Program, adopted
December 1, 1995, incorporated by reference to Exhibit
10.5 of the 1995 10-K
10.8* Form of Grant of Stock Award dated as of January 30,
1996, incorporated by reference to Exhibit 10.6 of
the 1995 10-K
10.9* Form of Grant of Stock Award as of February 23, 1995,
incorporated by reference to Exhibit 10.4 of the 1994
10-K
10.10* 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
10.11*+ Form of Incentive Stock Option Agreement dated as of
December 5, 1997
10.12*+ Form of Non-Qualified Stock Option Agreement dated
as of January 22, 1998
10.13* Form of Non-Qualified Stock Option Agreement dated
as of January 28, 1997, incorporated by reference
to Exhibit 10.10 of the 1996 10-K
10.14* Form of Non-Qualified Stock Option Agreement dated
as of January 25, 1996, incorporated by reference
to Exhibit 10.9 of the 1995 10-K
10.15* 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
10.16* 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
10.17* 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
10.18*+ 1997 Stock Incentive Program
10.19* 1989 Stock Incentive Program as amended, incorporated
by reference to Exhibit 10.17 of the 1996 10-K
10.20* 1986 Stock Incentive Program as amended, incorporated
by reference to Exhibit 10.18 of the 1996 10-K
10.21 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,
File No. 1-9149 (the "1988 10-K")
10.22 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
10.23* 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 ended December 27,
1987, File No. 1-9149 (the "1987 10-K")
10.24* 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
10.25* Form of Severance Pay Agreement between the
Registrant and 6 executive officers (W. Robert Reum,
Stephen Gregory, Stephen R. Smith, Robert J. Fulton,
James H. Legler and Daniel P. Wilson), incorporated
by reference to Exhibit 10.18 of the 1994 10-K
10.26* Form of Severance Pay Agreement between the
Registrant and two executive officers, incorporated
by reference to Exhibit 10.19 of the 1994 10-K
10.27 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, File No. 1-9149 (the "1986
10-K")
10.28 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
10.29 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
10.30* 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
10.31 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
10.32 U.S. Asset Purchase Agreement, dated October 1, 1996,
between Interlake Packaging Corporation and Samuel
Strapping Systems (Tennessee), Inc., incorporated by
reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 29, 1996, File No. 1-9149 (the "1996 10-Q")
10.33 Canadian Stock Purchase Agreement, dated September 30,
1996, between Interlake Packaging Corporation, The
Interlake Companies, Inc. and Samuel Manu-Tech Inc.,
incorporated by reference to Exhibit 10.2 of the
Registrant's 1996 10-Q
10.34 U.K. Stock Purchase Agreement, dated October 1, 1996,
between The Interlake Companies, Inc., Samuel Strapping
Systems (U.K.) Limited, The Interlake Corporation
and Samuel Manu-Tech Inc., incorporated by reference
to Exhibit 10.3 of the Registrant's 1996 10-Q
21.+ Subsidiaries of the Registrant
23. Consents of Experts and Counsel
23.1+ Consent of Price Waterhouse LLP
27.+ Financial Data Schedule
* Denotes management contract or compensatory plan or arrangement
+ Denotes exhibits filed with this Annual Report on Form 10-K
<TABLE>
THE INTERLAKE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Year Expenses Accounts(a) Deductions Year
(in thousands)
Valuation accounts deducted from assets to which they apply:
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable-
Year ended-
December 28, 1997 . . .$ 2,037 $ 333 $ 12 $(1,840)(b) $ 542
December 29, 1996 . . .$ 3,425 $ 66 $ 64 $(1,518)(c) $ 2,037
December 31, 1995 . . .$ 2,977 $ 916 $ 91 $ (559)(d) $ 3,425
<FN>
(a) consists principally of recoveries of accounts charged off in prior years
(b) consists principally of uncollectible accounts charged off $(312),
allowances for doubtful accounts of sold operations $(1,343) and
foreign exchange rate fluctuations.
(c) consists principally of uncollectible accounts charged off $(938),
allowances for doubtful accounts of discontinued operations $(636) and
foreign exchange rate fluctuations
(d) consists principally of uncollectible accounts charged off and foreign
exchange rate fluctuations
</FN>
Valuation accounts from deferred tax assets-
Year ended-
December 28, 1997 . . .$14,036 $(6,475) $ - $ - $ 7,291
December 29, 1996. . . $21,232 $(7,196) $ - $ - $14,036
December 31, 1995. . . $18,165 $ 3,067 $ - $ - $21,232
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE INTERLAKE CORPORATION
By
/S/ W. ROBERT REUM
W. Robert Reum
Chairman, President and Chief
Executive Officer
February 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title
/S/ W. ROBERT REUM Director, Chairman, President
W. Robert Reum and Chief Executive Officer
/S/ STEPHEN GREGORY Vice President-Finance and
Stephen Gregory Chief Financial Officer
/S/ JOHN A. CANNING JR. Director
John A. Canning, Jr.
/S/ JAMES C. COTTING Director
James C. Cotting
/S/ JOHN E. JONES Director
John E. Jones
/S/ FREDERICK C. LANGENBERG Director February 27, 1998
Frederick C. Langenberg
/S/ QUENTIN C. McKENNA Director
Quentin C. McKenna
/S/ WILLIAM G. MITCHELL Director
William G. Mitchell
/S/ ERWIN E. SCHULZE Director
Erwin E. Schulze
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-58908 and 33-11428) of The Interlake
Corporation of our report dated January 21, 1998 appearing on page 19
of this Form 10-K.
/s/ Price Waterhouse LLP
Chicago, Illinois
February 27, 1998
Exhibit 4.15
$106,000,000
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
THE INTERLAKE CORPORATION,
VARIOUS BANKS,
THE CHASE MANHATTAN BANK,
as ADMINISTRATIVE AGENT
and
THE FIRST NATIONAL
BANK OF CHICAGO,
as DOCUMENTATION AGENT
__________________________________
Dated as of September 27, 1989
and
Amended and Restated as of
December 22, 1997
__________________________________
TABLE OF CONTENTS
Page
Section 1. Amount and Terms of Credit.1
1.01 The Commitments.1
1.02 Minimum Amount of Each Borrowing.1
1.03 Notice of Borrowing.1
1.04 Disbursement of Funds.2
1.05 Notes.2
1.06 Conversions.3
1.07 Pro Rata Borrowings.3
1.08 Interest.3
1.09 Interest Periods.4
1.10 Increased Costs, Illegality, etc..5
1.11 Compensation.7
Section 2. Letters of Credit.7
2.01 Letters of Credit.7
2.02 Minimum Stated Amount.8
2.03 Letter of Credit Requests.8
2.04 Letter of Credit Participations.8
2.05 Agreement to Repay Letter of Credit Drawings.11
2.06 Increased Costs.12
Section 3. Fees; Commitment; Reductions of Commitments.12
3.01 Fees.12
3.02 Voluntary Reduction of Commitments.13
3.03 Mandatory Reduction of Commitments.13
Section 4. Prepayments; Payments.13
4.01 Voluntary Prepayments.13
4.02 Mandatory Prepayments.14
4.03 Method and Place of Payment.15
4.04 Net Payments.15
Section 5. Conditions Precedent.17
5.01 Conditions Precedent to the Second
Restatement Effective Date.17
5.02 Conditions to All Credit Events.19
5.03 Special Condition to Certain Loans.19
Section 6. Representations, Warranties and Agreements.20
6.01 Organizational Status.20
6.02 Power and Authority.20
6.03 No Violation.20
6.04 Governmental Approvals.21
6.05 Pledge Agreements.21
6.06 Other Security Documents.21
6.07 Financial Statements; Financial Condition;
Undisclosed Liabilities, etc..21
6.08 Litigation.22
6.09 True and Complete Disclosure.23
6.10 Use of Proceeds; Margin Regulations.23
6.11 Tax Returns and Payments.23
6.12 Compliance with ERISA.23
6.13 Capitalization.24
6.14 Subsidiaries.25
6.15 Compliance with Statutes, etc..25
6.16 Investment Company Act.26
6.17 Public Utility Holding Company Act.26
6.18 Patents, Licenses, Franchises and Formulas.26
6.19 Restrictions on Subsidiaries.26
6.20 Properties.27
6.21 Existing and Continued Security Interests.27
Section 7. Affirmative Covenants.27
7.01 Information Covenants.27
7.02 Books, Records and Inspections.29
7.03 Maintenance of Property, Insurance.30
7.04 Corporate Franchises.30
7.05 Compliance with Statutes, etc..30
7.06 ERISA.30
7.07 End of Fiscal Years; Fiscal Quarters.31
7.08 Performance of Obligations.31
7.09 Permitted Acquisitions.31
7.10 Inactive Subsidiaries.32
7.11 Cash Management.32
Section 8. Negative Covenants.32
8.01 Liens.32
8.02 Consolidation, Merger, Sale of Assets, etc..33
8.03 Distributions.35
8.04 Leases.36
8.05 Indebtedness.36
8.06 Advances, Investments and Loans.37
8.07 Transactions with Affiliates.39
8.08 Capital Expenditures.39
8.09 Minimum Consolidated Net Worth.39
8.10 Minimum Consolidated EBITDA.39
8.11 Limitation on Voluntary Payments and
Modifications of Indebtedness;
Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements, etc..40
8.12 Limitation on Restrictions on Subsidiary
Dividends, Other Distributions and on
Granting of Liens.40
8.13 Limitation on Issuances of Capital Stock by
Subsidiaries.41
8.14 Business.41
Section 9. Events of Default.41
9.01 Payments.41
9.02 Representations, etc..41
9.03 Covenants.41
9.04 Default Under Other Agreements.41
9.05 Bankruptcy, etc..42
9.06 ERISA.42
9.07 Pledge Agreements.43
9.08 Other Security Documents.43
9.09 Guaranty.43
9.10 Judgments.43
9.11 Change in Control.43
9.12 Environmental Liabilities.44
Section 10. Definitions and Accounting Terms.44
10.01 Defined Terms.44
Section 11. The Administrative Agent.60
11.01 Appointment.60
11.02 Nature of Duties.60
11.03 Lack of Reliance on the Administrative Agent.60
11.04 Certain Rights of the Administrative Agent.61
11.05 Reliance.61
11.06 Indemnification.61
11.07 The Administrative Agent in its Individual Capacity.61
11.08 Holders.62
11.09 Resignation by the Administrative Agent.62
Section 12. Miscellaneous.62
12.01 Payment of Expenses, etc..62
12.02 Right of Setoff.63
12.03 Notices.64
12.04 Successors and Assigns.64
12.05 No Waiver; Remedies Cumulative.67
12.06 Payments Pro Rata.67
12.07 Calculations; Computations.68
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.68
12.09 Counterparts.69
12.10 Effectiveness.69
12.11 Headings Descriptive.69
12.12 Amendment or Waiver.69
12.13 Obligation to Make Payments in Dollars.70
12.14 Survival.70
12.15 Domicile of Loans.70
12.16 Confidentiality.70
12.17 Amendment and Restatement; ESOP Loans.71
12.18 Conversion of Original Loans of Continuing Banks;
Termination of Commitments of Non-Continuing Banks.71
SCHEDULE I Commitments
SCHEDULE II Existing Letters of Credit
SCHEDULE III Collateral Exceptions
SCHEDULE IV Undisclosed Liabilities
SCHEDULE V Subsidiaries
SCHEDULE VI Statutory, Regulatory and Environmental Matters
SCHEDULE VII Patents, Licenses, Franchises and Formulas
SCHEDULE VIII Permitted Liens
SCHEDULE IX Subsidiaries Permitted To Be Wound Up, Liquidated,
And/Or Dissolved
SCHEDULE X Existing Debt
SCHEDULE XI Designated Asset Sales
SCHEDULE XII Mortgaged Properties
SCHEDULE XIII Subsidiary Assignors/Subsidiary Guarantors/Subsidiary
Pledgors
EXHIBIT A Notice of Borrowing
EXHIBIT B Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Opinion Requested from Jones, Day, Reavis & Pogue
EXHIBIT E Opinion Requested from the General Counsel of the
Borrower
EXHIBIT F Confirmation of Guaranty and Security Interests
EXHIBIT G Assignment and Acceptance
EXHIBIT H Confidentiality Letter
ANNEX A Amended and Restated Company Security Agreement
ANNEX B Amended and Restated Subsidiary U.S. Security
Agreement
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as
of September 27, 1989, and amended and restated as of May 28, 1992 and as
of December 22, 1997, among THE INTERLAKE CORPORATION, a Delaware
corporation (the "Borrower"), THE CHASE MANHATTAN BANK (formerly Chemical
Bank) ("Chase"), THE FIRST NATIONAL BANK OF CHICAGO ("First National",
together with Chase and any future participating financial institutions
permitted under Section 12.04 as, the "Banks"), Chase, acting in the
capacity and to the extent described in Section 11 as administrative agent
(in such capacity, the "Administrative Agent") and First National, as
documentation agent (the "Documentation Agent"). All capitalized terms
used herein shall have the meanings provided in Section 10.
Section 1. Amount and Terms of Credit.
1.01 The Commitments. Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, (A) on the Second
Restatement Effective Date, to convert an amount equal to such Bank's
Percentage of all Original Loans outstanding on such date into Loans
(defined below) and (B) at any time and from time to time on and after the
Second Restatement Effective Date and prior to the Maturity Date, to make
a revolving loan or revolving loans (each a "Loan" and, collectively, the
"Loans") to the Borrower, which Loans:
(i) shall, at the option of the Borrower, be Base Rate Loans or
Eurodollar Loans, provided that all Loans comprising the same
Borrowing shall at all times be of the same Type;
(ii) may be repaid and reborrowed in accordance with the
provisions hereof;
(iii) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which equals the Commitment of such Bank at
such time;
(iv) shall not exceed for the Banks at any time outstanding that
aggregate principal amount which, when added to the aggregate
principal amount of Loans outstanding, equals the amount by which the
Acquisition Basket Amount is reduced pursuant to clause (ii) of the
definition thereof; and
(v) shall not exceed for the Banks at any time outstanding that
aggregate principal amount which, when added to the aggregate
principal amount of all Loans then outstanding plus all Letter of
Credit Outstandings, equals the Total Commitment less the Acquisition
Basket Amount at such time.
1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing of Loans shall be not less than $5,000,000,
provided that Borrowings of Loans constituting Base Rate Loans may be made
in amounts not less than $1,000,000 (or, if less, the amount of the Total
Unutilized Commitment) but at no time shall there be outstanding more than
ten Eurodollar Loans.
1.03 Notice of Borrowing. Whenever the Borrower desires to incur
Loans hereunder on and after the Second Restatement Effective Date, the
Borrower shall give the Administrative Agent at its Notice Office at least
one Business Day's prior notice of each incurrence of Base Rate Loans and
at least three Business Days' prior notice of each incurrence of Eurodollar
Loans, provided that any such notice shall be deemed to have been given on
a certain day only if given before 12:00 Noon (New York time) on such day.
Each such notice (each a "Notice of Borrowing") shall be in the form of Ex-
hibit A, appropriately completed to specify the aggregate principal amount
of the Loans to be incurred pursuant to each such Borrowing being
requested, the date of such incurrence (which shall be a Business Day),
whether the Loans being made pursuant to each requested Borrowing are to be
initially maintained as Base Rate Loans or Eurodollar Loans and, if
Eurodollar Loans, the initial Interest Period to be applicable thereto.
The Administrative Agent shall promptly give each Bank notice of such
proposed incurrence, of such Bank's proportionate share thereof, if any,
and of the other matters required by the immediately preceding sentence to
be specified in the Notice of Borrowing.
1.04 Disbursement of Funds. No later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing, each Bank will
make available its pro rata portion of each Borrowing requested to be made
on such date to the Administrative Agent, in Dollars and in immediately
available funds at the Payment Office, and the Administrative Agent will
make available to the Borrower at the Payment Office the aggregate of the
amounts so made available by the Banks. Unless the Administrative Agent
shall have been notified by any Bank prior to the date of any such
Borrowing that such Bank does not intend to make available to the
Administrative Agent such Bank's portion of any such Borrowing to be made
on such date, the Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent on such date of such
Borrowing and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative
Agent by such Bank, the Administrative Agent shall be entitled to recover
such corresponding amount on demand from such Bank. If such Bank does not
pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the
Borrower and the Borrower shall immediately pay such corresponding amount
to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Bank or the Borrower, as the case
may be, (i) interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the
Administrative Agent to the Borrower until the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal
to (x) if recovered from such Bank, the overnight Federal Funds Rate for
the first two days and the Alternate Base Rate thereafter and (y) if
recovered from the Borrower, the then applicable rate for Base Rate Loans
or Eurodollar Loans, as the case may be, as determined in accordance with
Section 1.08 plus (ii) in any case, an amount equal to any losses incurred
by the Administrative Agent or any Bank (other than the Bank which failed
to make its funds available) under any Hedging Agreement or otherwise as a
result of the failure of such Bank to provide such amount as required in
this Agreement. Nothing in this Section 1.04 shall be deemed to relieve
any Bank from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Borrower may have against any Bank as a
result of any default by any Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made by each Bank to the Borrower shall be
evidenced by a promissory note duly executed and delivered to such Bank by
the Borrower substantially in the form of Exhibit B hereto (each a "Note"
and collectively the "Notes").
(b) The Note issued to each Bank shall (i) be payable to the
order of such Bank and be dated the Second Restatement Effective Date, (ii)
be in a stated principal amount equal to the Commitment of such Bank and be
payable in the outstanding principal amount of the Loans evidenced thereby
from time to time, (iii) mature on the Maturity Date, (iv) bear interest as
provided in Section 1.08 in respect of the Base Rate Loans or Eurodollar
Loans, as the case may be, evidenced thereby and (v) be entitled to the
benefits of this Agreement and all other Credit Documents.
(c) Each Bank will note on its internal records the amount of
each Loan made by it and each payment and conversion in respect thereof and
will prior to any transfer of any of its Notes endorse on the reverse side
thereof the outstanding principal amount of Loans evidenced thereby.
Failure to make any such notation shall not affect the Borrower's
obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert
on any Business Day, all or a portion equal to not less than $5,000,000 of
the outstanding principal amount of Loans of one Type made to the Borrower
pursuant to one or more Borrowings into a Borrowing of the other Type,
provided that (i) except as otherwise provided in Section 1.10(b), Euro-
dollar Loans may be converted into Base Rate Loans only on the last day of
an Interest Period applicable thereto and no such partial conversion of
Eurodollar Loans shall reduce the outstanding principal amount of
Eurodollar Loans made pursuant to any single Borrowing to less than
$5,000,000, (ii) Base Rate Loans may only be converted into Eurodollar
Loans if no Default or Event of Default is in existence on the date of
conversion and (iii) no conversion pursuant to this Section 1.06 shall
result in a greater number of Borrowings of Eurodollar Loans than is
permitted under Section 1.02. Each such conversion shall be effected by the
Borrower giving the Administrative Agent at its Notice Office prior to
12:00 Noon (New York time) at least three Business Days' in the case of
conversions into Eurodollar Loans, or one Business Day's in the case of
conversions into Base Rate Loans, prior notice (each a "Notice of
Conversion") specifying the Loans to be so converted and, if to be
converted into Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall give each Bank prompt
notice of any such proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be incurred on and after the Second Restatement Effective Date from the
Banks pro rata on the basis of their respective Commitments. It is
understood that no Bank shall be responsible for the default by any other
Bank of its obligation to make Loans hereunder and that each Bank shall be
obligated to make the Loans provided to be made by it hereunder regardless
of the failure of any other Bank to fulfill its Commitment hereunder.
1.08 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan made to the
Borrower from the Second Restatement Effective Date or if later the date of
the Borrowing thereof until maturity thereof (whether by acceleration or
otherwise) at a rate per annum which shall be the Applicable Margin plus
the Alternate Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan made to the Borrower from the
Second Restatement Effective Date or if later the date of the Borrowing
thereof until maturity thereof (whether by acceleration or otherwise) at a
rate per annum which shall, during each Interest Period applicable thereto,
be the Applicable Margin plus the Adjusted LIBOR Rate for such Interest
Period.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan shall bear interest at a rate per
annum equal to the greater of (i) the rate which is 2% in excess of the
rate then borne by such Borrowings or (ii) the rate which is 2% plus the
Applicable Margin plus the Base Rate. Interest which accrues under this
Section 1.08(c) shall be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each March, June, September and December, (ii) in respect
of each Eurodollar Loan, on the last day of each Interest Period applicable
thereto and, in the case of an Interest Period in excess of three months,
on the date occurring three months after the first day of such Interest
Period and (iii) in respect of each Loan, on any prepayment or conversion
(on the amount prepaid or converted), at maturity (whether by acceleration
or otherwise) and, after such maturity, on demand.
(e) The Administrative Agent shall determine the interest rate
applicable to Eurodollar Loans for each Interest Period and shall promptly
notify the Borrower and the Banks thereof. Each such determination shall,
absent manifest error, be final and conclusive and binding on all parties
hereto.
1.09 Interest Periods. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the
initial Interest Period applicable thereto) or on the third Business Day
prior to the expiration of an Interest Period applicable to such a
Borrowing (in the case of subsequent Interest Periods), the Borrower shall
have the right to elect, by giving the Administrative Agent notice thereof,
the interest period (each an "Interest Period") applicable to such
Borrowing, which Interest Period shall, at the option of the Borrower, be
either a one, two, three or six month period, provided that: (i) all Loans
comprising a Borrowing shall have the same Interest Period; (ii) the
initial Interest Period for any Borrowing of Eurodollar Loans shall
commence on the date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day
on which the next preceding Interest Period expires; (iii) if any Interest
Period begins on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month; (iv) if
any Interest Period would otherwise expire on a day which is not a Business
Day, such Interest Period shall expire on the next succeeding Business Day;
provided, however, that if any Interest Period would otherwise expire on a
day which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day; (v) no Interest Period in
respect of a Borrowing of Loans shall extend beyond the Maturity Date; and
(vi) no Interest Period for Eurodollar Loans may be selected at any time
that a Default or Event of Default then exists. If prior to the expiration
of any Interest Period, the Borrower has failed to elect or is prohibited
from electing a new Interest Period to be applicable to such Borrowing as
provided above, if such Borrowing is a Borrowing of Eurodollar Loans, the
Borrower shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such
current Interest Period.
1.10. Increased Costs, Illegality, etc. (a) In the event
that any Bank shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto
but, with respect to clause (i) below, may be made only by the
Administrative Agent):
(i) on any date for the determination of an Adjusted LIBOR Rate
that, by reason of any changes arising after the Initial Borrowing
Date affecting the London interbank market, adequate and fair means do
not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted LIBOR Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder (A) with
respect to any Eurodollar Loan because of (x) any change (excluding
any change in gross or net income taxes imposed by any jurisdiction or
political subdivision or taxing authority having authority over such
Bank) since the Initial Borrowing Date in any applicable law or
governmental rule, regulation, guideline, order or request (whether or
not having the force of law) (or in the interpretation or administra-
tion thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order) such as, for
example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Adjusted
LIBOR Rate, as the case may be, and/or (y) other circumstances affect-
ing the London interbank market or such Bank's position therein,
without duplication; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Bank with
any law, governmental rule, regulation, guideline or order, or has
become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the
London interbank market or the position of such Bank in such market;
then, and in any such event, such Bank (or the Administrative Agent) shall
on such date give notice (by telephone confirmed in writing) to the
Borrower, except in the case of clause (i) above, to the Administrative
Agent, of such determination (which notice the Administrative Agent shall
promptly transmit to each Bank). Thereafter (x) in the case of clause (i)
above as such clause relates to Eurodollar Loans, Eurodollar Loans shall no
longer be available until such time as the Administrative Agent notifies
the Borrower and the Banks that the circumstances giving rise to such
notice by the Administrative Agent no longer exist, and any Notice of
Borrowing or Notice of Conversion given by the Borrower with respect to
Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by the Borrower, (y) in the case of
clause (ii) above, the Borrower shall pay to such Bank, within 10 days of
receipt of the notice referred to below, such additional amounts (in the
form of an increased rate of, or a different method of calculating,
interest or otherwise as the Bank in its sole discretion shall determine)
as shall be required to compensate such Bank for such increased costs or
reductions in amounts received or receivable hereunder (a written notice as
to the additional amounts owed to such Bank, setting forth the basis for
the calculation thereof, submitted to the Borrower by such Bank shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall take
one of the actions specified in Section 1.10(b) as promptly as possible
and, in any event, within the time period required by law.
(b) At any time that any Loan is affected by the circumstances
described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the
case of a Loan affected pursuant to Section 1.10(a)(iii) shall) either
(x) if the affected Loan is then being made pursuant to a Borrowing or a
conversion, either cancel said Borrowing or conversion or, if the notice
therefor relates solely to Eurodollar Loans, convert the Notice of
Borrowing or Notice of Conversion therefor into a Notice of Borrowing or
Notice of Conversion, as the case may be, for Base Rate Loans, in either
case by giving the Administrative Agent telephonic notice (confirmed in
writing) thereof on the same date that the Borrower was notified by the
Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii)
or (y) if the affected Loan is then outstanding, upon at least three
Business Days' written notice to the Administrative Agent, prepay in full
each Borrowing pursuant to which an affected Loan is outstanding or, if the
notice relates solely to Eurodollar Loans, require the affected Bank to
convert such Loan into a Base Rate Loan; provided that, if more than one
Bank is similarly affected at any time, then the Banks must be treated the
same pursuant to this Section 1.10(b).
(c) If any Bank determines at any time that any change in or
effectiveness of any applicable law or governmental rule, regulation,
guideline or order concerning capital adequacy (including without
limitation those announced or published prior to the Initial Borrowing
Date), or any change in interpretation or administration thereof by any
governmental authority, central bank or comparable agency, will have the
effect of increasing the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank or reduce
the rate of return on such capital based on the existence of such Bank's
Commitment hereunder, its obligations and commitments in respect of Letters
of Credit or its obligations hereunder, then the Borrower agrees to pay to
such Bank, within 10 days of the receipt of the notice referred to below,
such additional amounts as shall be required to compensate such Bank or
such controlling corporation for the increased cost or reduced rate of
return on capital as a result of such increase of capital or reduction, as
the case may be. In determining such additional amounts, each Bank will
act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided that such Bank's determination of
compensation owing under this Section 1.10(c) shall, absent manifest error,
be final and conclusive and binding on all the parties hereto. Each Bank,
upon determining that any additional amounts will be payable pursuant to
this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show the basis for calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) within 10 days of receipt of notice.
1.11. Compensation. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other
funds required by such Bank to fund its Eurodollar Loans) which such Bank
may sustain: (i) if for any reason (other than a default by such Bank or
the Administrative Agent) a Borrowing of, or conversion from or into,
Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower
or deemed withdrawn pursuant to Section 1.10(b)); (ii) if any repayment or
conversion of any of its Eurodollar Loans occurs on a date which is not the
last day of an Interest Period with respect thereto whether or not such
prepayment occurs by reason of the exercise of rights or remedies held by
or on behalf of such Bank pursuant to Section 9; (iii) if any prepayment of
any of its Eurodollar Loans is not made on any date specified in a notice
of prepayment given by the Borrower; or (iv) as a consequence of (x) any
other default by the Borrower to repay its Loans when required by the terms
of this Agreement or the Notes of such Bank or (y) any election made
pursuant to Section 1.10(b).
Section 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request (x) any Issuing Bank
at any time and from time to time on or after the Second Restatement
Effective Date and prior to the Maturity Date, to issue, and subject to the
terms and conditions contained herein such Issuing Bank shall issue, for
the account of the Borrower, an irrevocable standby letter of credit
denominated in Dollars and otherwise in such form as has been approved by
such Issuing Bank and the Administrative Agent (each a "Standby Letter of
Credit") in support of such obligations of the Borrower and its
Subsidiaries as are acceptable to such Issuing Bank and the Administrative
Agent and (y) any Issuing Bank at any time and from time to time on or
after the Second Restatement Effective Date and prior to the Maturity Date,
to issue, and subject to the terms and conditions contained herein such
Issuing Bank shall issue, for the account of the Borrower an irrevocable
trade letter of credit denominated in Dollars and otherwise in such form as
has been approved by such Issuing Bank and the Administrative Agent, in
support of such obligations of the Borrower and its Subsidiaries as are
acceptable to such Issuing Bank and the Administrative Agent (each a "Trade
Letter of Credit", and, together with each "Standby Letter of Credit",
individually, a "Letter of Credit"; and the "Trade Letters of Credit" and
the "Standby Letters of Credit", collectively, the "Letters of Credit").
It is hereby acknowledged and agreed that each of the Letters of Credit
described on Schedule II, which were issued by Chase as Issuing Bank under
the Original Credit Agreement and remain outstanding on the Second
Restatement Effective Date, shall constitute a "Letter of Credit" for all
purposes of this Agreement.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings at such time, would exceed $20,000,000; (ii) no Letter of
Credit shall be issued the Stated Amount of which, when added to (x) all
Letter of Credit Outstandings at such time and (y) the sum of the aggregate
principal amount of all Loans then outstanding, would exceed the Total
Commitment less the Acquisition Basket Amount; and (iii) each Letter of
Credit shall by its terms terminate not later than one year after the date
of issuance thereof and in any event not later than the Maturity Date;
provided that the Issuing Bank may, with the consent of the Required Banks,
issue a Letter of Credit terminating beyond the Maturity Date so long as
the Borrower cash collateralizes such Letter of Credit thirty days prior to
the Maturity Date in a manner acceptable to the Issuing Bank and the
Required Banks.
2.02 Minimum Stated Amount. The Stated Amount of each Letter of
Credit shall not be less than an amount acceptable to the respective
Issuing Bank.
2.03 Letter of Credit Requests. (a) Whenever the Borrower
desires that a Letter of Credit be issued for its account, it shall give
the respective Issuing Bank (with copies to be sent to the Administrative
Agent and the other Bank) at least three Business Days prior written
request therefor. Each such request shall be executed by the Borrower and
shall be in the form of Exhibit C attached hereto (each a "Letter of Credit
Request").
(b) The execution and delivery of each Letter of Credit Request
shall be deemed to be a representation and warranty by the Borrower that
such Letter of Credit may be issued in accordance with, and will not
violate the requirements of, Section 2.01. Unless the respective Issuing
Bank has received notice from the Administrative Agent or the Required
Banks, which notice has not been rescinded, before it issues any Letter of
Credit that one or more of the conditions specified in Section 5 applicable
to such Credit Event is not then satisfied, or that the issuance of such
Letter of Credit would violate Section 2.01, then such Issuing Bank may
issue the requested Letter of Credit for the account of the Borrower in
accordance with such Issuing Bank's usual and customary practices. Upon
its issuance of any Letter of Credit, such Issuing Bank shall promptly
notify the Administrative Agent of such issuance, which notice to the
Administrative Agent shall be accompanied by a copy of the Letter of Credit
actually issued.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit (or upon the Second
Restatement Effective Date in the case of Letters of Credit existing on
such date), such Issuing Bank shall be deemed to have sold and transferred
to each Bank other than such Issuing Bank (each such other Bank in such
capacity, as "Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and received from such
Issuing Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such Participant's Percentage, in such
Letter of Credit of such Issuing Bank, each substitute letter of credit,
each drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. Upon the request of the Administrative Agent or the
Required Banks, such Issuing Bank shall take such actions in order to
transfer such guaranties or security interests, and any documents and
instruments relating thereto, to the Administrative Agent or the Collateral
Agent but any failure to make such transfer shall not restrict or impair
the rights held pursuant to this Agreement by any Bank in such security
interests and guaranties. Upon any change in the Commitments of the
Participants pursuant to Section 12.04, it is hereby agreed that, with
respect to all outstanding Letters of Credit and Unpaid Drawings, there
shall be an automatic adjustment to the participations pursuant to this
Section 2.04 to reflect the new Percentages of the assigning and assignee
Participant.
(b) In determining whether to pay under any Letter of Credit,
the respective Issuing Bank shall not have any obligation relative to the
Participants other than to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and
that they appear to comply on their face with the requirements of such
Letter of Credit. In taking any actions with respect to any security
interest or guaranty relating to any Letter of Credit issued by it, the
respective Issuing Bank shall be entitled to the protections and
indemnities afforded the Collateral Agent hereunder and under the Security
Documents, and shall only be obligated to take any actions in accordance
with the obligations of the Collateral Agent, provided that the such
Issuing Bank shall only foreclose on such security interest and enforce
such guaranty if instructed to do so by the Administrative Agent or the
Required Banks. Notwithstanding the proviso contained in the immediately
preceding sentence, nothing in such proviso shall restrict or impair any
Issuing Bank's right to take such actions as such Issuing Bank may
reasonably determine to be required to preserve and protect property
subject to any such security interest and, in the event such Issuing Bank
reasonably determines that: (i) property subject to any such security
interest is perishable or threatens to speedily and materially decline in
value and (ii) there then exists an event which, in the reasonable
determination of the Issuing Bank, but for the failure of the
Administrative Agent or the Required Banks to issue such instruction, would
entitle the Issuing Bank to foreclose upon such property, then the Issuing
Bank may foreclose upon such property notwithstanding the failure of the
Administrative Agent or the Required Banks to issue such instruction,
provided that nothing in this sentence shall impose any duty on the Issuing
Bank to take the foregoing actions. Any action taken or omitted to be
taken by such Issuing Bank under or in connection with any Letter of Credit
if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Issuing Bank any resulting liability
to any Participant.
(c) In the event that any Issuing Bank makes any payment under
any Letter of Credit and the Borrower shall not have reimbursed such amount
in full to such Issuing Bank pursuant to Section 2.05(a), such Issuing Bank
shall promptly notify each Participant of such failure, and each
Participant shall promptly and unconditionally pay to the Administrative
Agent for the account of such Issuing Bank the amount of the Participant's
Percentage of such unreimbursed payment in Dollars and in same day funds.
If any Issuing Bank so notifies, prior to 11:00 A.M. (New York time) on any
Business Day, such Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to the Administrative Agent
for the account of such Issuing Bank the Participant's Percentage of the
amount of such payment on such Business Day in same day funds. If and to
the extent such Participant shall not have so made its Percentage of the
amount of such payment available to such Issuing Bank, such Participant
agrees to pay to the Administrative Agent for the account of such Issuing
Bank, forthwith on demand such amount, together with interest thereon, for
each day from such date until the date such amount is paid to such Issuing
Bank at the overnight Federal Funds Rate. The failure of any Participant
to make available to any Issuing Bank its Percentage of any payment under
any Letter of Credit shall not relieve any other Participant of its
obligation hereunder to make available to such Issuing Bank its Percentage
of any payment under any Letter of Credit on the date required, as
specified above, but no Participant shall be responsible for the failure of
any other Participant to make available to such Issuing Bank such other
Participant's Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which it has received any payments from any
Participant pursuant to clause (c) above, such Issuing Bank shall pay to
the Administrative Agent for the account of such Participant, in Dollars
and in same day funds, an amount equal to the Participant's Percentage of
such payment of a reimbursement obligation.
(e) Upon the request of any Participant, each respective Issuing
Bank shall furnish to such Participant copies of any Letter of Credit
issued by it and such other documentation as may reasonably be requested by
such Participant.
(f) As between the Borrower and the respective Issuing Bank, the
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by the respective beneficiaries of such Letters of
Credit. Further, and not in limitation of the foregoing, the respective
Issuing Bank shall not be responsible for the following:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of (A) any documents submitted by any party in connection
with the application for and issuance of such Letters of Credit, or
(B) any document submitted by any party in connection with any drawing
under any such Letter of Credit which purports to comply with the
requirements of such Letter of Credit, even if (in the case of (A) or
(B)) such document should in fact prove to be in any and all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason;
(iii) failure of the beneficiary of any such Letter of Credit to
comply fully with conditions required in order to draw upon such
Letter of Credit;
(iv) errors, omissions, interruptions or delays in the
transmission or delivery of any messages by mail, cable, telegraph,
telecopier, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any such Letter of
Credit or the proceeds thereof;
(vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing of any such Letter of Credit;
and
(viii) any consequences arising from causes beyond the control of
such Issuing Bank, including without limitation any acts of
governments.
(g) The obligations of the Participants to make payments to any
Issuing Bank with respect to Letters of Credit shall be irrevocable and not
subject to any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative
Agent, the Documentation Agent, any Issuing Bank, any Bank, any
Participant or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions;
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) The
Borrower hereby agrees to reimburse the respective Issuing Bank, by making
payment to the Administrative Agent for the account of such Issuing Bank in
immediately available funds at the Payment Office, for any payment made by
such Issuing Bank under any Letter of Credit (each such amount so paid
until reimbursed, an "Unpaid Drawing") immediately after, and in any event
by no later than 2:00 p.m. (New York time) on the Business Day immediately
succeeding the date of such payment, with interest on the amount so paid by
such Issuing Bank, to the extent not reimbursed prior to 1:00 p.m.
(New York time) on the date of such payment, from and including the date
paid to but excluding the date reimbursement is made as provided above, at
a rate per annum which shall be the Applicable Margin for Base Rate Loans
(plus 2% if not reimbursed by 1:00 p.m. on the second Business Day
following notice to the Borrower of such payment) plus the Alternate Base
Rate in effect from time to time, such interest to be payable on demand.
(b) The obligations of the Borrower under this Section 2.05 to
reimburse any Issuing Bank with respect to Unpaid Drawings (including, in
each case, interest thereon) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or de-
fense to payment which the Borrower or any other Credit Party may have or
have had against the Administrative Agent, the Documentation Agent, any
Issuing Bank, any Participant or any Bank, including, without limitation,
any defense based upon the failure of any drawing under a Letter of Credit
(each a "Drawing") to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of
such Drawing; provided, however, that the Borrower shall not be obligated
to reimburse any Issuing Bank for any wrongful payment made by such Issuing
Bank under a Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of such Issuing Bank.
2.06 Increased Costs. If at any time the introduction or
effectiveness of or any change in any applicable law, rule or regulation
(including without limitation those announced or published prior to the
date of this Agreement), or in the interpretation or administration thereof
by any governmental authority, central bank or comparable authority charged
with the interpretation or administration thereof, or compliance by any
Issuing Bank or any Participant with any request or directive by any such
authority (whether or not having the force of law) shall either (i) impose,
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against letters of credit issued, or participated in, by any
Issuing Bank or any Participant, or (ii) impose on any Issuing Bank or any
Participant any other conditions affecting this Agreement or any Letter of
Credit; and the result of any of the foregoing is to increase the cost to
the Issuing Bank or the Participant of issuing, maintaining or
participating in any Letter of Credit, or reduce the amount of any sum
received or receivable by any Issuing Bank or Participant hereunder with
respect to Letters of Credit, then, within 10 days of the receipt of the
certificate referred to below (which certificate shall be given by the
respective Issuing Bank or Participant promptly after it determines such
increased cost or reduction is applicable to Letters of Credit or its
participation therein) to the Borrower by the respective Issuing Bank or
Participant (a copy of which certificate shall be sent by such Issuing Bank
or Participant to the Administrative Agent), the Borrower shall pay to such
Issuing Bank or Participant such additional amount or amounts as will
compensate such Issuing Bank or Participant for such increased cost or
reduction. A certificate submitted to the Borrower by such Issuing Bank or
Participant (a copy of which certificate shall be sent by such Issuing Bank
or Participant to the Administrative Agent), setting forth the basis for
the calculation of such additional amount or amounts necessary to
compensate such Issuing Bank or Participant as aforesaid shall be
conclusive and binding on the Borrower absent manifest error.
Section 3. Fees; Commitment; Reductions of Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Administrative
Agent for distribution to each Bank a commitment commission (the
"Commitment Commission") for the period from the Second Restatement
Effective Date until and including the Maturity Date (or such earlier date
upon which the Total Commitment shall have been terminated), computed at a
rate equal to 1/2 of 1% per annum on the daily average Unutilized
Commitment of such Bank. Accrued Commitment Commissions shall be due and
payable quarterly in arrears on last Business Day of each March, June,
September and December of each year and on the Maturity Date (or such
earlier date upon which the Total Commitment shall have been terminated).
(b) The Borrower agrees to pay the Administrative Agent on the
earlier of (x) the date of the repayment of the ESOP Loans pursuant to
Section 12.17(b)(iv) and (y) January 5, 1998, a fee (the "Restatement Fee")
equal to $100,000 for each Bank for distribution to each Bank.
(c) The Borrower agrees to pay the Administrative Agent for pro
rata distribution to the respective Issuing Bank and the Participants
(based upon their respective Percentages) a fee in respect of each Letter
of Credit (the "Letter of Credit Fee") for the period from and including
the date of issuance of such Letter of Credit to and including the
termination date of such Letter of Credit on the daily average Stated
Amount of such Letter of Credit, computed at the rate per annum equal to
the then Applicable Margin for Eurodollar Loans. Accrued Letter of Credit
Fees shall be due and payable quarterly in arrears on the last Business Day
of each March, June, September and December and on the Maturity Date (or
such earlier date upon which the Total Commitment shall have been
terminated).
(d) The Borrower agrees to pay to the Administrative Agent for
the account of the respective Issuing Bank a facing fee in respect of each
Letter of Credit issued by such Issuing Bank (the "Facing Fee") agreed to
from time to time by such Issuing Bank and the Borrower.
(e) The Borrower agrees to pay to the respective Issuing Bank
upon each drawing under a Letter of Credit such amount as shall be agreed
by such Issuing Bank and the Borrower.
(f) The Borrower shall pay to the Administrative Agent, for its
own account, such fees as shall have been agreed upon by such parties.
3.02 Voluntary Reduction of Commitments At any time upon at
least five Business Days' prior notice to the Administrative Agent at its
Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, without
premium or penalty, to permanently reduce the Total Commitment in whole or
in part, in integral multiples of $5,000,000, provided that no such
reduction shall exceed the amount equal to the amount of the Total
Unutilized Commitment as in effect immediately before giving effect to such
reduction. Any such reduction shall apply proportionately to reduce the
Commitment of each Bank.
3.03 Mandatory Reduction of Commitments. On each date upon which
a mandatory prepayment of Loans would be required to be made pursuant to
Sections 4.02(b), and 4.02(c) if Loans were then outstanding, the Total
Commitment shall be permanently reduced by the amount of such required
prepayment (determined as if Loans were outstanding on the full amount of
the Total Commitment). Each reduction to the Total Commitment pursuant
to this Section 3.03 shall apply proportionately to reduce the Commitment
of each Bank.
Section 4. Prepayments; Payments.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay the Loans made to it, without premium or penalty, in whole or in
part from time to time on the following terms and conditions: (i) the
Borrower shall give the Administrative Agent prior to 11:00 A.M. (New York
time) at its Notice Office at least three Business Days' prior notice of
its intent to prepay the Loans, which notice shall identify (a) the amount
of such prepayment, (b) the Type of Loans to be prepaid and (c) in the case
of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which
made, which notice the Administrative Agent shall promptly transmit to the
respective Banks; (ii) each partial prepayment of the Loans of the Borrower
shall be in an aggregate principal amount of at least $1,000,000, provided
that no partial prepayment of Eurodollar Loans made pursuant to any
Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than $5,000,000; and (iii) prepayments of
Eurodollar Loans may be made pursuant to this Section 4.01 only on the last
day of an Interest Period applicable thereto. Each prepayment pursuant to
this Section 4.01 in respect of any Loans shall be applied pro rata among
all Loans.
4.02 Mandatory Prepayments. (a) If on any date the sum of the
aggregate outstanding principal amount of Loans plus the amount of Letter
of Credit Outstandings exceeds the Total Commitment as then in effect less
the Acquisition Basket Amount, then there shall be required to be repaid by
the Borrower on such date that principal amount of Loans as is equal to
such excess. If, after giving effect to the repayment of all outstanding
Loans, the Letter of Credit Outstandings exceeds the Total Commitment then
in effect less the Acquisition Basket Amount, then there shall be paid to
the Administrative Agent at the Payment Office on such date an amount of
cash or Cash Equivalents equal to the amount by which such sum exceeds the
Total Commitment then in effect less the Acquisition Basket Amount, such
cash or Cash Equivalents to be held as security for the obligations of the
Borrower hereunder in a manner satisfactory to the Borrower, the
Administrative Agent and the Required Banks.
(b) In addition to any other mandatory repayments pursuant to
this Section 4.02 and subject to Section 4.02(e), the Loans shall be
required to be paid on each date of the receipt by the Borrower or any of
its Subsidiaries of any Net Cash Proceeds from any sale or other
disposition of assets by the Borrower or any of its Subsidiaries (excluding
(i) sales of inventory in the ordinary course of business, (ii) sales of
obsolete equipment in the ordinary course of business the proceeds of which
are promptly used to purchase replacement equipment therefor and (iii)
sales the Net Sale Proceeds of which are less than $100,000) in an amount
equal to 100% of the Net Cash Proceeds therefrom, provided that no amount
shall be required to be applied pursuant to this Section 4.02(b) other than
as a result of Designated Asset Sales until such time as the aggregate Net
Cash Proceeds which but for this proviso are required to be so applied and
have not been so applied equals or exceeds $1,000,000.
(c) In addition to any other mandatory repayments pursuant to
this Section 4.02 and subject to Section 4.02(e), the Loans shall be
required to be repaid on each date of, and in an amount equal to the
proceeds (net of underwriting discounts and commissions and other
reasonable costs associated therewith) from, any sale of equity by the
Borrower or any of its Subsidiaries (excluding (i) sales of equity by any
Subsidiary to the Borrower or any wholly-owned Subsidiary of the Borrower,
(ii) the issuance of stock of the Borrower to the ESOP whether in the form
of a contribution or purchase, (iii) the issuance of stock to employees or
directors pursuant to employee benefit or similar plans, (iv) stock issued
in payment for the stock of another corporation then being acquired by the
Borrower or a Subsidiary, provided that such acquisition is permitted by
this Agreement and the other Credit Documents, (v) stock issued by
Hoeganaes to Persons (other than the Borrower or a Subsidiary) which are
shareholders of Hoeganaes to the extent such issuance does not increase
such shareholder's proportionate ownership interest in Hoeganaes) and
(vi) stock issued by any Subsidiary to any Person that is a shareholder of,
or any Affiliate of a shareholder of, Hoeganaes to the extent such issuance
does not exceed the proportionate ownership of Hoeganaes held by such
shareholder (or such shareholder's Affiliate).
(d) With respect to each repayment of Loans pursuant to this
Section 4.02, the Borrower may designate the specific Loans which are to
be repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, provided that: (i) repayments of
Eurodollar Loans made pursuant to this Section 4.02 may only be made on the
last day of an Interest Period applicable thereto unless all Eurodollar
Loans with Interest Periods ending on such date of required prepayment and
all Base Rate Loans have been paid in full; (ii) if any repayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an amount
less than $5,000,000 such Borrowing shall immediately be converted into
Base Rate Loans; and (iii) each repayment shall be applied pro rata among
all Loans.
(e) Notwithstanding the foregoing, the amounts required to be
applied to the repayment of the Loans under Section 4.02(c) by reason of
the sale of assets of, or equity in, Hoeganaes, shall be limited to the
amount which is otherwise required to be so applied multiplied by a
fraction the numerator of which is the number of shares of Hoeganaes owned
by the Borrower and its Subsidiaries on the date of the required payment
and the denominator of which is the number of shares of Hoeganaes
outstanding on the date of the required payment.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Bank or
Banks entitled thereto not later than 2:00 p.m. (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office of the Administrative Agent. Whenever any payment to be made
hereunder or under any Note shall be contemplated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal,
interest shall be payable at the applicable rate during such extension.
4.04 Net Payments. (a) All payments made by the Borrower
hereunder, under any Note or under any other Credit Document will be made
without setoff, counterclaim or other defense. All such payments will be
made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein (but excluding, except as provided below, any tax imposed on or
measured by the net income of a Bank pursuant to the laws of the
jurisdiction (or any political subdivision or taxing authority thereof) in
which the principal office or lending office of such Bank is located) and
all interest, penalties or similar liabilities with respect thereto
(collectively, together with any amounts payable pursuant to the next
sentence, "Taxes"). The Borrower shall also reimburse each Bank, upon the
written request of such Bank, for taxes imposed on or measured by the net
income of such Bank pursuant to the laws of the United States of America
(or any State or political subdivision thereof) or the jurisdiction (or any
political subdivision or taxing authority thereof) in which the principal
office or lending office of such Bank is located as such Bank shall
determine are payable by such Bank in respect of Taxes paid to or on behalf
of such Bank pursuant to this or the preceding sentence. If any Taxes are
so levied or imposed, the Borrower agrees to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due hereunder, under any Note or under any other
Credit Document, after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein or in such
Note. The Borrower will furnish to the Administrative Agent within 45 days
after the date the payment of any Taxes, or any withholding or deduction on
account thereof, is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by the Borrower. The Borrower will
indemnify and hold harmless the Administrative Agent and each Bank, and
reimburse the Administrative Agent or such Bank upon its written request,
for the amount of any Taxes so levied or imposed and paid or withheld on
behalf of such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Administrative Agent, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to
Section 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor
forms) certifying to such Bank's entitlement to a complete exemption from
United States withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Bank is not a "bank"
within the meaning of Section 881 (c)(3)(A) of the Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i)
above, (x) a certificate (any such certificate, a "Section 4.04(b)(ii)
Certificate") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such
Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement
and under any Note; provided, however, that any Bank which has previously
delivered such forms which would otherwise satisfy the requirements of this
sentence shall hereafter be deemed to have complied with the requirements
of this sentence. In addition, each Bank agrees that from time to time,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service form 4224 or
1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may
be, and such other forms as may be required in order to confirm or
establish the entitlement of Bank to a continued exemption form or
reduction in United States withholding tax with respect to payments under
this Agreement and any Note, or it shall immediately notify the Borrower
and the Administrative Agent of its inability to deliver any such Form or
Certificate. Notwithstanding anything to the contrary contained in Section
4.04(a), (x) the Borrower shall be entitled, to the extent it is required
to do so by law, to deduct or withhold income or similar taxes imposed by
the United States (or any political subdivision or taxing authority thereof
or therein) from interest, fees or other amounts payable hereunder for the
account of any Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Bank has not provided to the Borrower and
Administrative Agent U.S. Internal Revenue Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower
shall not be obligated pursuant to Section 4.04(a) hereof to gross-up
payments to be made to a Bank in respect of income or similar taxes imposed
by the United States if such Bank has not provided to the Borrower and the
Administrative Agent the Internal Revenue Services Forms required to be
provided to the Borrower and the Administrative Agent pursuant to this
Section 4.04(b) or to the extent that such Forms do not establish a
complete exemption from withholding of such taxes.
Section 5. Conditions Precedent.
5.01 Conditions Precedent to the Second Restatement Effective
Date. The occurrence of the Second Restatement Effective Date is subject
to the satisfaction of the following conditions:
(a) Execution of Agreement; Notes. (i) This Agreement shall
have been executed and delivered as set forth in Section 12.10 and (ii)
there shall have been delivered to the Administrative Agent for the account
of the Banks the appropriate Notes in the amount, maturity and as otherwise
provided in this Agreement;
(b) Officer's Certificate. On the Second Restatement Effective
Date, the Administrative Agent shall have received a certificate dated such
date signed by an appropriate corporate officer of the Borrower stating
that to the best of such officer's knowledge all of the applicable condi-
tions set forth in Sections 5.01(d), (e), (h), (i) and (j) have been
satisfied as of such date;
(c) Opinions of Counsel. The Administrative Agent shall have
received an opinion, addressed to each of the Banks and dated the Second
Restatement Effective Date, (i) from Jones, Day, Reavis & Pogue, special
counsel to the Borrower and its Subsidiaries, covering the matters set
forth in, and substantially in the form of, Exhibit D hereto and such other
matters incident to the transactions contemplated herein as the
Administrative Agent may request, (ii) from Stephen R. Smith, Vice
President and General Counsel of the Borrower, covering the matters set
forth in and substantially in the form of Exhibit E hereto and such other
matters incident to the transactions contemplated herein as the
Administrative Agent may request;
(d) Existing Security Documents. (i) Except to the extent
heretofore released, each of the Subsidiary Guaranties, Security Agreements
and Pledge Agreements executed and delivered pursuant to the Original
Credit Agreement, as amended and restated prior to the Second Restatement
Effective Date or required to be executed and delivered on the Second
Restatement Effective Date by the terms of this Agreement shall be in full
force and effect on the Second Restatement Effective Date, (ii) the
security interests and Liens granted to the Collateral Agent pursuant to
such Security Documents shall continue in full force and effect (except to
the extent heretofore released) and shall inure to the benefit of the
Secured Parties, (iii) no filings, recordings, registrations or other
actions shall be necessary or desirable to maintain the perfection and
priority of the security interests granted pursuant thereto in the
Collateral covered thereby and (iv) each of the Credit Parties (other than
the Borrower) shall have executed and delivered a Confirmation and
Ratification Agreement in the form of Exhibit F;
(e) Material Events. On the Second Restatement Effective Date,
no event, action or proceeding shall have occurred or condition shall exist
(and the Banks shall have become aware of no facts or conditions not
previously known) which the Administrative Agent or the Required Banks
shall reasonably determine could have a material adverse effect on (x) the
rights or remedies of the Banks or the Administrative Agent, (y) the abil-
ity of the Borrower or any of its Subsidiaries to perform their respective
obligations under the Credit Documents or (z) the business, property, as-
sets, liabilities, condition (financial or otherwise), operations, results
of operations or prospects of the Borrower and its Subsidiaries taken as a
whole;
(f) Original Credit Agreement. The Borrower shall have paid to
the Administrative Agent for payment to the Banks under the Original Credit
Agreement (i) all amounts due and payable under the Original Credit
Agreement, as amended and restated immediately prior to the Second
Restatement Effective Date, including, but not limited to, all principal,
Fees (as defined in the Original Credit Agreement, as amended and restated
immediately prior to the Second Restatement Effective Date), interest, and
breakage costs (except for principal and interest on the ESOP Loans) and
(ii) all other fees and expenses then due and payable (including, without
limitation, legal fees and expenses) thereunder;
(g) Fees. On the Second Restatement Effective Date, the
Borrower shall have paid to the Administrative Agent and the Banks all Fees
(as defined in this Agreement) and expenses (including, without limitation,
reasonable fees and expenses of counsel) agreed upon by such parties to be
paid on or prior to such date;
(h) Litigation. On the Second Restatement Effective Date, there
shall be no actions, suits or proceedings (including any action, suit or
proceeding for injunctive relief) pending or threatened by any entity
(private or governmental) (i) with respect to this Agreement, the other
Credit Documents or the transactions contemplated thereby, or (ii) which
the Administrative Agent or the Required Banks shall determine is
reasonably likely to have a material adverse effect on the operations,
business, property, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole;
(i) Approvals. On the Second Restatement Effective Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with (i) the consummation of the Loan, (ii) the confirmation,
execution, delivery and performance of any Credit Document which is
required to be confirmed or executed and delivered by the Second
Restatement Effective Date, and to which the Borrower or any of its
Subsidiaries is a party or (iii) the legality, validity, binding effect or
enforceability of any such Credit Document and the transactions
contemplated therein or such other transactions otherwise referred to
therein, shall have been obtained and remain in effect; and
(j) Special Conditions Pertaining to the Disposition. The
obligation of each Bank to make Loans and to issue or participate in
Letters of Credit on or after the Second Restatement Effective Date shall
be subject to the satisfaction of the following conditions:
(i) Valid Execution of all Disposition Documents; Completion
of the Disposition. The "Closing," as defined in all instruments,
agreements, financing statements, financing release statements, legal
opinions and any and all documents necessary to effectuate the
Disposition (the "Disposition Documents") shall have occurred;
(ii) Proceeds from the Disposition. As a result of the
Disposition, the Borrower shall have received proceeds (the
"Disposition Proceeds"), which net of reasonable costs of sale in
connection therewith, brokerage fees and income taxes, other than
income taxes not currently payable, equals or exceeds $60,000,000;
(iii) Application of the Disposition Proceeds.
Simultaneous with the execution of this Agreement and the providing
of Loans hereunder, the Borrower shall use the Disposition Proceeds
to (i) be held as ESOP Loan Security to the extent of and in
accordance with Section 12.17(b)(iii) and (ii) repay all of the
outstanding principal on the Loans less an amount equal to the ESOP
Loan Security;
(k) Outstanding Letters of Credit. National Bank of Canada
shall deliver to The Interlake Corporation and the Administrative Agent a
letter from the National Bank of Canada stating that the letters of
credit issued by the National Bank of Canada pursuant to the Original
Credit Agreement are no longer subject to the terms of the Original
Credit Agreement.
5.02 Conditions to All Credit Events. The obligation of each
Bank to make any Loans or to issue or participate in Letters of Credit
(including without limitation the Loans and Letters of Credit described in
this Section 5.02) on and after the Second Restatement Effective Date is
subject, at the time of each such Credit Event, to the satisfaction of
Section 1.01(iv) and the following conditions:
(a) No Default. There shall exist no Default or Event of
Default.
(b) Representations and Warranties. All representations and
warranties herein and in the other Credit Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of
such Credit Event.
(c) Notice of Borrowing; Letter of Credit Requests. In
the case of a Borrowing, the Administrative Agent shall have received
a Notice of Borrowing meeting the requirements of Section 1.03. In
the case of the issuance of a Letter of Credit, the Issuing Bank shall
have received a Letter of Credit Request meeting the requirements of
Section 2.03, and shall not have received a notice of the type
described in the penultimate sentence of Section 2.03(b), unless such
notice has been rescinded.
5.03 Special Condition to Certain Loans. (a) The obligation of
each Bank to make Loans on and after the Second Restatement Effective Date
the proceeds of which are to be used to make Permitted Acquisitions shall
be subject at the time of such Loans to the matters required in Section
7.09.
(b) The Borrower may only incur Loans (other than Loans incurred
in compliance with (a) above) if the cash and Cash Equivalents held by the
Borrower are less than $2,500,000 at the time of incurrence thereof.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by the Borrower to each of the
Banks that all the applicable conditions specified in this Section 5 have
been satisfied or waived as of that time. All of the documents and papers
referred to in this Section 5, unless otherwise specified, shall be
delivered to the Administrative Agent at the Notice Office for the account
of each of the Banks and in sufficient copies or counterparts for each of
the Banks and shall be satisfactory in form and substance to the
Administrative Agent.
Section 6. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the
Loans and issue and participate in Letters of Credit, the Borrower makes
the following representations, warranties and agreements as of the Second
Restatement Effective Date, and as of the date of each subsequent Credit
Event, which shall survive the execution and delivery of this Agreement and
the Notes and the making of the Loans and the issuance of Letters of
Credit:
6.01 Organizational Status Each of the Borrower and its
Subsidiaries (i) is a duly organized and validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation, (ii)
has the power and authority to own its property and assets and to transact
the business in which it is engaged and (iii) is duly qualified as a
foreign corporation and in good standing in each jurisdiction where the
ownership, leasing or operation of property or the conduct of its business
requires such qualification except where the failure to be so qualified
would not be reasonably likely to have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise),
or prospects of the Borrower and its Subsidiaries taken as a whole.
6.02 Power and Authority. Each of the Credit Parties has the
corporate or other legal power to execute, deliver and perform the terms
and provisions of each of the Credit Documents to which it is a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance by it of each of such Credit Documents. Each of
the Credit Parties has duly executed and delivered each of the Credit
Documents to which it is purported to be a party, and each of such Credit
Documents constitutes its legal, valid and binding obligation enforceable
in accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors'
rights and general equitable principles.
6.03 No Violation. Neither the execution, delivery or
performance by any Credit Party of the Credit Documents to which it is a
party, nor compliance by it with the terms and provisions thereof, (i) will
contravene any provision of any law, statute, rule or regulation or any
order, writ, injunction or decree of any court or governmental in-
strumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien (except pursuant to the
Security Documents) upon any of the property or assets of any Credit Party
or any of its Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
material agreement, contract or instrument to which such Credit Party or
any of its Subsidiaries is a party or by which it or any of its property or
assets are bound or to which it may be subject, or (iii) will violate any
provision of the Certificate of Incorporation or By-Laws or comparable
organizational documents of the Borrower or any of its Subsidiaries.
6.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or
registration with (except as have been obtained or made), or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Credit Document or (ii) the
legality, validity, binding effect or enforceability of any Credit
Document.
6.05 Pledge Agreements. The security interests created in favor
of the Collateral Agent under each of the Pledge Agreements will at all
times from and after the execution thereof, and assuming that the
Collateral Agent maintains possession of the respective Pledge Agreement
Collateral, constitute, to the maximum extent permitted under applicable
law, first priority perfected security interests in the Pledge Agreement
Collateral thereunder subject to no Lien of any other Person, except that
the shares of stock of Hoeganaes are subject to the provisions of Sections
6 and 8 of the Hoeganaes Stockholders Agreement. Except as shall be
accomplished prior to the execution and delivery of a Pledge Agreement, no
consents, filings or recordings are required in order to perfect the
security interests purported to be created by such Pledge Agreement, and no
actions or filings are required to maintain and protect such security
interests except which have been effected or obtained prior to the
execution and delivery of the respective Pledge Agreement.
6.06 Other Security Documents. The Security Documents (excluding
the Pledge Agreements) create, or will create when executed and delivered,
as security for the obligations purported to be secured thereby to the
maximum extent permitted under applicable law, a valid, enforceable and
first perfected security interest in and Liens on all of the respective
Collateral in favor of the Collateral Agent for the benefit of the Secured
Parties, superior to and prior to the rights of all third Persons (except
that (x) security interests in the Security Document Collateral (other than
the Mortgaged Properties) may be subject to the security interests
evidenced by Permitted Liens related thereto, (y) security interest in the
Mortgaged Properties may be subject to Permitted Encumbrances existing
prior to the filing of the Mortgage encumbering such Mortgaged Property and
(z) Liens created pursuant to the Additional Security Documents may be
subject to Liens approved by the Administrative Agent at the time of the
execution and delivery of such Additional Security Documents), and no
actions or filing are required to maintain and protect such security
interests except as have been effected or obtained prior to the execution
and delivery of the respective Security Documents. On and after the date
which is 60 days after the Second Restatement Effective Date, the
Collateral, including the Mortgaged Properties, shall comprise
substantially all of the assets of the Borrower and its Subsidiaries except
for the assets described on Schedule III hereto. Each Credit Party has
good title to all Security Document Collateral free and clear of all Liens
other than the exceptions described in the first sentence of this Section
6.06.
6.07 Financial Statements; Financial Condition; Undisclosed
Liabilities, etc. (a) The consolidated statements of financial condition
of the Borrower and its Subsidiaries at December 29, 1996 and September 28,
1997, and the related consolidated statements of income and retained
earnings and cash flows of the Borrower and its Subsidiaries for the fiscal
year or three-month period, as the case may be, ended on such dates and
heretofore furnished to the Banks present fairly the consolidated financial
condition of the Borrower and its Subsidiaries at the dates of such
statements of financial condition and the consolidated results of the
operations of the Borrower and its Subsidiaries at the date of such
statements of financial condition and the consolidated results of the
operations of the Borrower and its Subsidiaries for such fiscal year or
three-month period, as the case may be. All such financial statements have
been prepared in accordance with generally accepted accounting principles
and practices consistently applied. Since September 28, 1997, there has
been no material adverse change in the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
(b) Except as fully reflected in the financial statements
delivered pursuant to Section 6.07(a) or in Schedule IV hereto, there were
as of the Second Restatement Effective Date no liabilities or obligations
(excluding current obligations incurred in the ordinary course of business)
with respect to the Borrower or any of its Subsidiaries of any nature what-
soever (whether absolute, accrued, contingent or otherwise and whether or
not due), and the Borrower does not know of any basis for the assertion
against the Borrower or any of its Subsidiaries of any such liability or
obligation which, either individually or in aggregate, are or would be
reasonably likely to be material to the Borrower and its Subsidiaries taken
as a whole.
(c) The pro forma projected balance sheet for the Borrower as of
December 29, 1997 and the pro forma income statement for the Borrower as of
October 26, 1997 (the "Projections") are based on good faith estimates and
assumptions made by the management of the Borrower and its Subsidiaries
and, on the Second Restatement Effective Date, the management believed that
the Projections were reasonable and attainable.
(d) On and as of the Second Restatement Effective Date, after
giving effect to all Indebtedness incurred, and to be incurred, and Liens
created, and to be created, by each Credit Party in connection therewith,
(i) the sum of the assets, at a fair valuation, of the Borrower and its
Subsidiaries taken as a whole will exceed their debts; (ii) the Borrower
and its Subsidiaries taken as a whole have not incurred and do not intend
to, or believe that they will, incur debts beyond their ability to pay such
debts as such debts mature; and (iii) the Borrower and its Subsidiaries
taken as a whole will have sufficient capital and assets with which to
conduct their businesses. For purposes of this Section 6.07(d) "debt"
means any liability on a claim, and "claim" means (x) right to payment,
whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured; or (y) right to an equitable
remedy for breach of performance if such breach gives rise to a payment,
whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured or
unsecured.
6.08 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened (i) with
respect to any Credit Document or (ii) that are reasonably likely to
materially and adversely affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of the ESOP or the Borrower
and its Subsidiaries taken as a whole.
6.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on
behalf of the Borrower or any of its Subsidiaries in writing to any Bank
(including without limitation all information contained in the Credit
Documents for purposes of or in connection with this Agreement) is true and
accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any fact
necessary to make such information (taken as a whole) not misleading at
such time in light of the circumstances under which such information was
provided.
6.10. Use of Proceeds; Margin Regulations. (a) All proceeds
of the Loans shall be used by the Borrower for Permitted Acquisitions in
accordance with the terms of this Agreement, the Borrower's and its
Subsidiaries' working capital requirements and general corporate purposes.
(b) No part of the proceeds of any Loan will be used by the
Borrower or any Subsidiary thereof to purchase or carry any Margin Stock or
to extend credit to others for the purpose of purchasing or carrying any
Margin Stock. Neither the making of any Loan nor the use of the proceeds
thereof will violate or be inconsistent with the provisions of Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System.
6.11. Tax Returns and Payments. The Borrower and each of its
Subsidiaries filed all federal tax returns and all other material tax
returns, domestic or foreign, required to be filed by it and has paid all
income taxes payable by it which have become due pursuant to such tax
returns and all other material taxes and assessments payable by it which
have become due, other than those not yet delinquent and except for those
contested in good faith and for which adequate reserves have been
established. The Borrower and each of its Subsidiaries paid, or provided
adequate reserves (in the good faith judgment of the management of the
Borrower or such Subsidiary) for the payment of, all federal, state and
local (including foreign) income taxes applicable for all prior fiscal
years and for the current fiscal year to the date hereof.
6.12. Compliance with ERISA. Each Plan is in substantial
compliance with ERISA; no Plan which is a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) is insolvent or in reorganization within the
meaning of Sections 418E and 418 of the Code, respectively; excluding Plans
which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA),
the aggregate Unfunded Current Liability for all Plans does not exceed $5
million and no Plan has an accumulated or waived funding deficiency within
the meaning of Section 412 of the Code; neither the Borrower nor any of its
Subsidiaries nor any ERISA Affiliate has incurred any material liability to
or on account of a Plan pursuant to Section 515, 4062, 4063, 4064, 4201 or
4204 of ERISA which has not been satisfied or reasonably expects to incur
any liability under any of the foregoing Sections on account of the termi-
nation of participation in or contributions to any such Plan; no
proceedings have been instituted to terminate any Plan other than pursuant
to Section 4041(b) of ERISA; no condition exists which presents a material
risk to the Borrower or any of its Subsidiaries or any ERISA Affiliate of
incurring a material liability to or on account of a Plan pursuant to any
of the Sections of ERISA and the Code specifically referred to in this
Section 6.12; no lien imposed under the Code or ERISA on the assets of the
Borrower or any of its Subsidiaries or any ERISA Affiliate exists or is
reasonably likely to arise on account of any Plan; and each of the Borrower
and its Subsidiaries may terminate contributions to any other employee
benefit plans maintained by them without incurring any liability to any
person interested therein material to the Borrower and its Subsidiaries
taken as a whole. All representations made in this Section 6.12 with
respect to Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) shall be to the best knowledge of the Borrower.
6.13. Capitalization. On the Second Restatement Effective
Date the authorized capital stock of the Borrower consists of (i)
100,000,000 shares of common stock, $1.00 par value per share (the "Common
Stock"), (ii) 15,000,000 shares of Non-Voting Common Stock, $1.00 par value
per share (the "Non-Voting Common Stock"), and (iii) 2,000,000 shares of
Serial Preferred Stock, $1.00 par value per share. Of the authorized
shares of Serial Preferred Stock, 35,000 are designated Series A1
Convertible Exchangeable Preferred Stock, par value $1.00 per share (the
"Series A1 Preferred"), 35,000 are designated Series A2 Convertible
Exchangeable Preferred Stock, par value $1.00 per share (the "Series A2
Preferred"), 5,000 are designated Series A3 Convertible Preferred Stock,
$1.00 par value per share (the "Series A3 Preferred"), 35,000 are
designated Series B1 Convertible Preferred Stock, par value $1.00 per share
(the "Series B1 Preferred"), 35,000 are designated Series B2 Convertible
Preferred Stock, par value $1.00 per share (the "Series B2 Preferred") and
5,000 are designated Series B3 Convertible Preferred Stock, $1.00 par value
per share (the "Series B3 Preferred"). Immediately prior to the Second
Restatement Effective Date, the number of issued shares of Common Stock was
23,373,695. On the Second Restatement Effective Date, the number of issued
shares of Series A2 Preferred is 35,000, the number of issued shares of
Series A3 Preferred is 5,000, and no shares of Non-Voting Common Stock,
Series A1 Preferred, Series B1 Preferred, Series B2 Preferred or Series B3
Preferred are issued. On the Second Restatement Effective Date, all of the
issued shares of capital stock of the Borrower will have been duly and
validly issued and will be fully paid and non-assessable. The Borrower has
no outstanding securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock, except (i) shares of capital
stock (and the Exchange Debentures if issued) issuable upon the conversion
or exchange of one or more of the Series A1, A2, A3, B1, B2 or B3 Preferred
and Non-Voting Common Stock or upon conversion of the Exchange Debentures,
(ii) shares of Common Stock issuable upon the exercise of outstanding stock
options and stock appreciation rights granted pursuant to the Borrower's
1986 Stock Incentive Program, (iii) shares of Common Stock issuable upon
the exercise of the outstanding stock options granted pursuant to the
Borrower's 1989 Stock Incentive Program, (iv) shares of Common Stock
issuable upon the exercise of rights heretofore granted, pursuant to the
Rights Agreement between the Borrower and First National dated as of
January 26, 1989, as heretofore amended, with respect to shares of Common
Stock now or hereafter issued and (v) shares of Common Stock which may be
purchased by the ESOP to the extent permitted under Section 8.06(x). The
Borrower is not subject to any obligations (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock
or make any payments in connection with stock appreciation rights except
(i) cash payments made in settlement of outstanding stock appreciation
rights granted pursuant to the Borrower's 1986 Stock Incentive Program,
(ii) shares delivered in payment of the option price of outstanding stock
options granted pursuant to the 1986 or 1989 Stock Incentive Programs,
(iii) shares of Common Stock received in lieu of cash as reimbursement for
withholding taxes payable with respect to stock awards, (iv) the
obligations of the Borrower under the Preferred Stock Purchase Agreement,
and the Series A3 Purchase Agreement, the Certificates of Designation
relating to the Series A1, A2 and A3 Preferred and Series B1, B2 and B3
Preferred, the Exchange Debentures and, with respect to the Non-Voting
Common Stock, the Borrower's Restated Certificate of Incorporation, (v) the
obligations of the Borrower pursuant to the ESOP and (vi) the obligations
of Chem-tronics, Inc. pursuant to The Chem-tronics Employee Stock Ownership
Plan effective as of October 1, 1980.
6.14. Subsidiaries. The Persons listed on Schedule V are the
only direct and indirect Subsidiaries and Inactive Subsidiaries of the
Borrower. Schedule V correctly sets forth the percentage ownership (direct
and indirect) of the Borrower in each class of capital stock of each of its
Subsidiaries and Inactive Subsidiaries and also identifies the direct owner
thereof.
6.15. Compliance with Statutes, etc. (a) Except as set
forth on Schedule VI, the Borrower and each of its Subsidiaries are in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of their businesses and the ownership of
their property, except such noncompliances as are not likely to, in the
aggregate, have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.
(b) Except as set forth on Schedule VI, each of the Borrower and
its Subsidiaries has complied with all applicable foreign, federal, state
and local environmental laws (including, without limitation, RCRA and
CERCLA), regulations and ordinances governing its business, products,
properties or assets with respect to all discharges into the ground and
surface water, emissions into the ambient air and generation, accumulation,
storage, treatment, transpor-tation, labeling or disposal of waste
materials or process by-products for which failure to comply is likely to
have a material adverse effect on the property, assets, business,
operations, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole, and, except as set forth on Schedule
VI hereto, neither of the Borrower nor its Subsidiaries is liable for any
material (to the Borrower and its Subsidiaries taken as a whole) penalties,
fines or forfeitures for failure to comply with any of the foregoing in the
manner set forth above. Except as set forth in Schedule VI hereto, all
licenses, permits or registrations required for the business of the
Borrower and its Subsidiaries, as conducted as of the Second Restatement
Effective Date, under any foreign, federal, state or local environmental
laws, regulations or ordinances have been obtained, or have been applied
for and are pending as set forth on Schedule VI hereto, and each of the
Borrower and its Subsidiaries is in substantial compliance therewith,
except such licenses, permits or registrations the failure to secure or to
comply therewith is not likely to have a material adverse effect on the
property, assets, business, operations, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
Neither the Borrower nor any of its Subsidiaries is in any material respect
in noncompliance with, breach of or default under any applicable writ,
order, judgment, injunction, or decree to which any such Person is a party
or which would materially and adversely affect the ability of such Person
to operate any manufacturing plant or other real property and, to the best
of the Borrower's knowledge, no event has occurred and is continuing which
would constitute noncompliance, breach of or default thereunder. Except as
set forth on Schedule VI hereto, there are no legal or governmental
proceedings pending or, to the best of the Borrower's knowledge threatened,
which (a) question the validity, term or entitlement of the Borrower or any
of its Subsidiaries for any permit, license, order or registration required
for the operation of any facility which the Borrower or any of its
Subsidiaries currently operates in the United States, which individually or
in the aggregate, are material to the Borrower and its Subsidiaries taken
as a whole and (b) wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the financial viability of any facility
thereof, which individually or in the aggregate, are material to the
Borrower and its Subsidiaries taken as a whole.
(c) There are no facts, circumstances, conditions or occurrences
on any Mortgaged Property or, to the Borrower's knowledge, any property
adjoining or in the vicinity of any Mortgaged Property, (i) which would
form the basis of any environmental claim against the Borrower or any of
its Subsidiaries or any Mortgaged Property or assets located thereon, or
(ii) which would cause such Mortgaged Property or such assets to be subject
to any restrictions on the ownership, occupancy, use or transferability
thereof under any environmental law, and in each case, would be reasonably
likely to result in a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.
6.16. Investment Company Act. Neither the Borrower nor any
of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6.17. Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
6.18. Patents, Licenses, Franchises and Formulas. Except as
set forth in Schedule VII, each of the Borrower and its Subsidiaries owns
all the patents, trademarks, permits, service marks, trade names,
copyrights, licenses, franchises and formulas, or rights with respect to
the foregoing, or each has obtained assignments of all licenses and other
rights of whatever nature necessary for the present conduct of its
businesses, without any known conflict with the rights of others which, or
the failure to obtain which, as the case may be, is likely to result in a
material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
6.19. Restrictions on Subsidiaries. There are no
restrictions on the Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (i) the transfer of cash or other assets (x) between the
Borrower and any of its Subsidiaries or (y) between any Subsidiaries of the
Borrower or (ii) the Borrower or any of its Subsidiaries from granting
Liens or security interests in their respective assets to the Collateral
Agent, other than (x) applicable restrictions of law imposed on
Subsidiaries by the jurisdictions in which such Subsidiaries are
incorporated or do business and (y) those restrictions imposed by the
Hoeganaes Stockholders Agreement.
6.20. Properties. The Borrower and each of its Subsidiaries
have good title to all properties owned by them, including all property
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as referred to in Section 6.07(a) (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business), free and clear of all Liens, other than as otherwise permitted
by Section 8.01.
6.21 Existing and Continued Security Interests. The Borrower on
behalf of itself and on behalf of its Subsidiaries represent and warrants
that:
(i) Except as set forth herein, the execution, delivery and
performance of this Agreement shall not in any way affect the
respective obligations of the Borrower and its Subsidiaries under any
Credit Document, or any other document executed in connection
therewith other than the Original Credit Agreement, as amended and
restated prior to the Second Restatement Effective Date, to which
either the Borrower or any of its Subsidiaries is a party, including
without limitation, the respective obligations of the Borrower and its
Subsidiaries (if any) under (x) the Amended and Restated Company
Security Agreement (attached hereto as Annex A), (y) the Amended and
Restated Subsidiary U.S. Security Agreement (attached hereto as Annex
B), and (z) any and all documents executed therewith;
(ii) Each Credit Document and each other document executed in
connection therewith, except as heretofore released and other than the
Original Credit Agreement, as amended and restated immediately prior
to the Second Restatement Effective Date, are hereby assumed under and
made a part of this Agreement; and
(iii) On the date hereof, the obligations of the Borrower and
each of its Subsidiaries under the Credit Documents and the documents
executed in connection therewith, except as heretofore released and
other than the Original Credit Agreement as amended and restated prior
to the Second Effective Restatement Date, remain absolute and
unconditional and are not subject to any defense, set-off or
counterclaim; provided that, in the case of each of the Credit
Documents, the Borrower hereby acknowledges and agrees that the
"Obligations" (as defined therein) include all of the Obligations
under and as defined in this Agreement, after giving effect to the
Second Restatement Effective Date and any increase in the amounts
owing to the Banks or the agents.
Section 7. Affirmative Covenants. The Borrower covenants and
agrees that on and after the Second Restatement Effective Date and until
the Total Commitment has terminated, all Letters of Credit are terminated
and the Loans, any Unpaid Drawings and the Notes, together with interest,
Fees and all other obligations incurred hereunder and thereunder, are paid
in full:
7.01 Information Covenants. The Borrower will furnish to each
Bank:
(a) Monthly Reports. Within 20 Business Days after the end
of each fiscal month other than the last such month of any fiscal
quarter of the Borrower, the consolidated balance sheet of the Borrower
as at the end of such month and the related consolidated statements of
income and sources and uses of cash for such month and for the elapsed
portion of the fiscal year ended with the last day of such month, in
each case setting forth comparative figures for the corresponding
month in the prior fiscal year, together with a discussion of the
results thereof, and a schedule of all intercompany Indebtedness
specifically setting forth the details of the obligor, the payee, and
other relevant terms of repayment and whether such Indebtedness is
evidenced by a promissory note or an instrument.
(b) Quarterly Financial Statements. Within 45 days after
the close of each quarterly accounting period in each fiscal year of
the Borrower other than the last such quarter of any fiscal year, the
consolidated and consolidating balance sheet of the Borrower in the
general form as last delivered prior to the Second Restatement
Effective Date as at the end of such quarterly period and the related
consolidated and consolidating statements of income and sources and
uses of cash for such quarterly period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly period, in
each case setting forth comparative figures for the related periods in
the prior fiscal year, all of which shall be certified by the Vice
President-Finance of the Borrower subject to normal year-end audit
adjustments.
(c) Annual Financial Statements. Within 75 days after the
close of each fiscal year of the Borrower, the consolidated and
consolidating balance sheets of the Borrower in the general form as
last delivered prior to the Second Restatement Effective Date as at
the end of such fiscal year and the related consolidated and
consolidating statements of income and retained earnings and sources
and uses of cash for such fiscal year, in each case setting forth
comparative figures for the preceding fiscal year and, in the case of
said consolidated financial statements, certified by Price Waterhouse
or independent certified public accountants of recognized national
standing acceptable to the Administrative Agent or the Required Banks
and in the case of such consolidating financial statements, certified
by the Vice President-Finance of the Borrower, in each case together
with a report of such accounting firm stating that in the course of
its regular audit of the financial statements of the Borrower, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm obtained no knowledge of any Default
or Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(d) Budgets. As promptly as same are furnished to the Board
of Directors of the Borrower, but in any event within 30 days after the
first day of each fiscal year of the Borrower, a budget in form
satisfactory to the Administrative Agent prepared by the Borrower for
the twelve months beginning on the first day of such fiscal year
accompanied by the statement of the Vice President-Finance of the
Borrower to the effect that, to the best of his knowledge, such budget
is a reasonable estimate for the period covered thereby. Within 30
days after the first day of the third fiscal quarter of the Borrower,
the Vice President-Finance of the Borrower shall deliver either (i) a
certificate to the effect that, to the best of his knowledge, the
budget previously delivered remains a reasonable estimate for the
remainder of the period covered thereby or (ii) a budget summary for
such remaining period covering any significant changes to the budget
previously delivered.
(e) Officer's Certificates. At the time of the delivery of
the financial statements provided for in Section 7.01(b) and (c), a
certificate of the Vice President-Finance of the Borrower to the
effect that to the best of his knowledge, no Default or Event of
Default has occurred and is continuing, or if the Vice
President-Finance is unable to make the certifications required herein,
he shall supply a statement setting forth the reasons for such
inability, specifying the nature and extent of such reasons. Such
certificate shall also set forth the calculations required to establish
whether the Borrower was in compliance with the provisions of Sections
8.08 through 8.10, inclusive, at the end of such fiscal quarter or
year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after any of the Chairman, President,
Vice President-Finance or chief legal officer of the Borrower obtains
actual knowledge thereof, notice of (i) the occurrence of any event
which constitutes a Default or Event of Default or (ii) any litigation
or governmental proceeding pending (x) against the Borrower or any of
its Subsidiaries which could materially and adversely affect the
business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
a whole or (y) with respect to any Credit Document.
(g) Management Letters. Promptly after the Borrower's
receipt thereof, a copy of any "management letter" received from its
certified public accountants.
(h) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, which the Borrower (x) has filed with the Securities
and Exchange Commission or any governmental agencies substituted
therefor (the "SEC") or any comparable agency outside of the United
States or (y) has delivered to holders of, or to any agent or trustee
with respect to, Indebtedness of the Borrower in their capacity as
such a holder, agent or trustee.
(i) Other Information. From time to time, such other
information or documents (financial or otherwise) as the
Administrative Agent, acting in its own capacity or at the request of
any Bank, may reasonably request.
7.02 Books, Records and Inspections. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with generally
accepted accounting principles and all requirements of applicable law shall
be made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Administrative Agent
or the Required Banks, upon two Business Days' notice, to visit and inspect
any of the properties of the Borrower or such Subsidiary, and to examine
the books of account of the Borrower or such Subsidiary and discuss the
affairs, finances and accounts of the Borrower or such Subsidiary with, and
be advised as to the same by, its and their officers, and to conduct audits
of the Borrower's books and records and each of its Subsidiaries' books and
records, all at such reasonable times and intervals and to such reasonable
extent as the Administrative Agent or the Required Banks may request.
7.03 Maintenance of Property, Insurance. The Borrower will, and
will cause each of its Subsidiaries to, (i) keep all property useful and
necessary in its business in good working order and condition, (ii)
maintain with financially sound and reputable insurance companies insurance
which provides substantially the same (or greater) coverage and against at
least such risks as are maintained by other corporations similarly situated
with like property, provided that in no event will any deductible or
self-insurance retention per occurrence (i) in respect of liability claims,
exceed $2.5 million or (ii) in respect of casualty damage, exceed $2.5
million, and (iii) furnish to each Bank, upon written request by the
Administrative Agent, full information as to the insurance carried. The
provisions of this Section 7.03 shall be deemed to be supplemental to, but
not duplicative of, the provisions of any of the Security Documents that
require the maintenance of insurance.
7.04 Corporate Franchises. The Borrower will, and will cause
each of its Subsidiaries to, do or cause to be done, all things necessary
to preserve and keep in full force and effect its existence and its
material rights, franchises, licenses and patents; provided, however, that
nothing in this Section 7.04 shall prevent (x) the withdrawal by the
Borrower or any of its Subsidiaries of its qualification to do business as
a foreign corporation in any jurisdiction, or the failure to preserve
franchises, patents and licenses, in any such case where such withdrawal or
failure could not reasonably be expected to have a material adverse effect
on the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole or (y) any action expressly permitted by Section 8.02.
7.05 Compliance with Statutes, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards
and controls), except such noncompliances as could not reasonably be
expected to, in the aggregate, have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
7.06 ERISA. As soon as possible and in any event within 10 days
after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows
or has reason to know any of the following, the Borrower will deliver to
each of the Banks a certificate of the Vice President - Finance of the
Borrower setting forth details as to such occurrence and such action, if
any, which the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices given to or filed
with or by the Borrower, its Subsidiaries, ERISA Affiliates, the PBGC, a
Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred, that an accumulated funding deficiency (as
defined in Section 412 of the Code) has been incurred or an application has
been made or is reasonably likely to be made to the Secretary of the
Treasury for a waiver of the minimum funding standard or an extension of
any amortization period under Section 412 of the Code with respect to a
Plan, that a Plan has been or is reasonably likely to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA,
that a Plan has an Unfunded Current Liability giving rise to a lien under
ERISA or the Code, that proceedings have been instituted by the PBGC or are
reasonably likely to be instituted by the PBGC to terminate a Plan, that a
proceeding has been instituted to collect from the Borrower or a Subsidiary
a delinquent contribution to a Plan pursuant to Section 515 of ERISA, or
that the Borrower, any Subsidiary or an ERISA Affiliate will or is
reasonably likely to incur any liability (including any contingent or
secondary liability) to or on account of the termination of or withdrawal
by the Borrower, a Subsidiary or an ERISA Affiliate from a Plan under
Sections 4062, 4063, 4064, 4201 or 4204 of ERISA. With respect to each
Plan which is a single-employer plan (as defined in Section 4001(a)(15) of
ERISA) the Borrower will deliver to the Administrative Agent a complete
copy of the annual report (Form 5500 series) therefor required to be filed
with the Internal Revenue Service and with respect to each Plan which is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) the Borrower
will deliver to the Administrative Agent a complete copy of each annual
report (Form 5500 series) therefor provided after the date of this
Agreement to the Borrower or its respective Subsidiaries or ERISA
Affiliates by the administrator of said Plan. Copies of annual reports
required to be delivered to the Banks hereunder shall be delivered no later
than 10 days after the date such report has been filed with the Internal
Revenue Service by the Borrower or any of its Subsidiaries or any ERISA
Affiliate.
7.07 End of Fiscal Years; Fiscal Quarters. Without the prior
written consent of the Required Banks, the Borrower shall not, and shall
not permit any of its Subsidiaries to, change the manner of determining the
date on which any of their fiscal quarters or fiscal years shall end.
7.08 Performance of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other agreement
by which it is bound, except such non-performances as could not reasonably
be expected to, in the aggregate, have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
7.09 Permitted Acquisitions. All Permitted Acquisitions shall be
made in compliance with the provisions of this Section 7.09.
(a) The Borrower shall provide the Administrative Agent and the
Documentation Agent with 15 Business Days' prior written notice of any
proposed Permitted Acquisition, copies of all definitive documents
governing same and all financial information necessary to support the
requirements of clause (b) below.
(b) The Borrower shall provide information, in all respects
satisfactory to the Administrative Agent, the Documentation Agent and
the Required Banks, indicating on a pro forma basis for the period at
least one year prior to and one year after the date of the proposed
Permitted Acquisition compliance with all covenants and agreements set
forth in this Agreement.
(c) The Administrative Agent and the Documentation Agent shall
use their respective reasonable efforts to respond to any such request
for consent within ten Business Days after receipt of the Borrower's
notice of such Permitted Acquisition.
(d) The Borrower may consummate the proposed Permitted
Acquisition if consented to by the Administrative Agent, the
Documentation Agent and the Required Banks (which consent may be
withheld in the sole discretion of any such Person).
7.10. Inactive Subsidiaries. If at any time after the Second
Restatement Effective Date, any Inactive Subsidiary of the Borrower ceases
to be an Inactive Subsidiary other than by virtue of ceasing to exist, it
shall be deemed a Subsidiary of the Borrower under this Agreement, and the
Borrower shall cause such Subsidiary to take all such action as is
necessary to execute and deliver Guaranties and Security Documents (or
counterparts thereof) as if such Inactive Subsidiary were first acquired or
created as a Subsidiary at such time.
7.11. Cash Management. The Borrower shall, and shall cause
its Subsidiaries to, deposit or invest with the Banks all cash and Cash
Equivalents owned or held by the Borrower and/or such Subsidiaries, other
than an amount equal to $2,000,000 at any one time, provided, that,
notwithstanding the foregoing, any Foreign Subsidiary may hold cash and
Cash Equivalents in banks and institutions other than Banks in accordance
with its ordinary course of business cash management.
Section 8. Negative Covenants. The Borrower agrees that on
and after the Second Restatement Effective Date and until the Total
Commitment has terminated, all Letters of Credit have terminated and the
Loans, any Unpaid Drawings and the Notes, together with interest, Fees and
all other obligations incurred hereunder and thereunder, are paid in full:
8.01 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
or with respect to any property or assets (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable with recourse to
the Borrower or any of its Subsidiaries), or assign any right to receive
income or permit the filing of any financing statement under the UCC or any
other similar notice of Lien under any similar recording or notice statute;
provided that the provisions of this Section 8.01 shall not prevent the
creation, incurrence, assumption or existence of the following:
(i) Liens securing judgments which have been bonded or stayed
within 45 days after arising in the ordinary course of business, to
the extent such judgment does not constitute an Event of Default,
provided the Liens are being contested in good faith and by appro-
priate procedures, and Liens for taxes, governmental assessments or
charges in the nature of taxes not yet due, or Liens for taxes,
governmental assessments or charges in the nature of taxes which have
been bonded or stayed within 45 days after arising and being contested
in good faith and by appropriate procedures for which adequate
reserves have been established;
(ii) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law, which were incurred in the
ordinary course of business, such as carriers', warehousemen's,
materialmen's, repairmen's and mechanics' liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the
business of the Borrower and its Subsidiaries or (y) which are being
contested in good faith by appropriate procedures, which procedures
have the effect of preventing or staying while pending the forfeiture
or sale of the property or assets subject to any such Lien;
(iii) Liens in existence on the Second Restatement Effective Date
and acceptable to the Administrative Agent which are listed, and the
property subject thereto described, in Schedule VIII hereto (the
"Permitted Liens");
(iv) Liens created pursuant to the Security Documents;
(v) Utility deposits and pledges or deposits in connection with
worker's compensation, unemployment insurance and other social
security legislation;
(vi) Liens securing Indebtedness in the amount permitted by
Section 8.05(d) upon (i) any property or assets acquired (whether by
purchase, merger or otherwise) after the date hereof (and not
theretofore owned by the Borrower or any of its Subsidiaries), or (ii)
improvements made on any property or assets now owned or hereafter
acquired, securing the purchase price thereof or created or incurred
simultaneously with, or within 180 days after, such acquisition or the
making of such improvements or existing at the time of such
acquisition (whether or not assumed) or the making of such improve-
ments, if (x) such Lien shall be limited to the property or assets so
acquired or the improvements so made, (y) the amount of the
obligations or indebtedness secured by such Liens shall not be
increased after the date of the acquisition of such property or assets
or the making of such improvements, except to the extent improvements
are made to such property or assets after the date of the acquisition
or the making of the initial improvements, and (z) the principal
amount of the obligation or Indebtedness secured by such Lien shall
not exceed 100% of the cost or fair value (which may be determined in
good faith by the Board of Directors of the Borrower), whichever is
lower, of the property or assets or improvements at the time of the
acquisition or making thereof;
(vii) Liens arising under Capital Leases to the extent permitted
by Section 8.05(d);
(viii) Liens on assets of the ESOP and the ESOP Trust in favor of
participants and beneficiaries of the ESOP; and
(ix) Liens in the form of cash collateral securing the
obligations of the Borrower and its Subsidiaries permitted by Section
8.05(g).
8.02 Consolidation, Merger, Sale of Assets, etc. The Borrower
will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger
or consolidation, or convey, sell, lease or otherwise dispose of (or agree
to do any of the foregoing at any future time) all or any part of its
property or assets, or enter into any partnerships, joint ventures or
sale-leaseback transactions, or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets (other
than purchases or other acquisitions of inventory, materials and equipment
in the ordinary course of business) of any Person except that:
(i) the Borrower and its Subsidiaries may in the ordinary
course of business sell and lease inventory;
(ii) Capital Expenditures shall be permitted to the extent not
in violation of Section 8.08;
(iii) the Borrower and its Subsidiaries may sell or otherwise
dispose of any assets which, in the reasonable judgment of such
Person, have become uneconomic, obsolete or worn out;
(iv) the Borrower and its Subsidiaries may sell assets the book
value of which in any one case does not exceed $2,500,000, provided
that (x) the aggregate book value of assets sold or otherwise disposed
of pursuant to this clause (iv) in any one fiscal year does not exceed
$7,500,000 and (y) the proceeds of each such sale or disposition are
applied to repay the Loans to the extent required by Section 4.02;
(v) the Borrower and its Subsidiaries may make Designated
Asset Sales, provided that the proceeds of any such sale are applied to
repay the Loans to the extent provided in Section 4.02;
(vi) the Borrower may merge with one or more wholly-owned
Subsidiaries provided the Borrower is the surviving entity and the
Borrower or a Subsidiary may transfer assets in the ordinary course of
business to the Borrower or a Subsidiary which is a Subsidiary
Assignor, a Subsidiary Guarantor and a Subsidiary Pledgor, and a
Subsidiary which is not a Subsidiary Assignor, Subsidiary Guarantor or
Subsidiary Pledgor may transfer assets in the ordinary course of
business to the Borrower or a Subsidiary;
(vii) purchases, acquisitions or investments permitted by
Section 8.06 shall be permitted;
(viii) with the prior written consent of the Required Banks,
any other assets which do not constitute all or substantially all of
the Collateral may be sold or transferred and any wholly-owned
Subsidiary may merge or consolidate with one or more such other
wholly-owned Subsidiaries, provided that (x) if either such
wholly-owned Subsidiary was a Subsidiary Assignor, Subsidiary Guarantor
or Subsidiary Pledgor immediately prior to the merger or consolidation,
the surviving entity is a wholly-owned Subsidiary which is a
Subsidiary Assignor, a Subsidiary Guarantor or a Subsidiary Pledgor,
respectively, and (y) no Default or Event of Default exists or would
result therefrom;
(ix) those Subsidiaries listed on Schedule IX may be wound up,
liquidated, and/or dissolved so long as upon such winding-up,
liquidation and/or dissolution, the assets of such Subsidiaries are
transferred to the immediate parent of such Subsidiary, or to the
Borrower, or to a Subsidiary which is a Subsidiary Assignor, a
Subsidiary Guarantor or a Subsidiary Pledgor;
(x) any Subsidiary which has made a Distribution permitted
under Section 8.03 may be wound up, liquidated and/or dissolved so
long as, immediately following such Distribution, the assets of such
Subsidiary are less than $25,000; and
(xi) Permitted Acquisitions shall be permitted in compliance
with Section 7.09.
To the extent the Required Banks waive any provision of this
Section 8.02 with respect to the sale of any Collateral, or any Collateral
is sold as permitted by this Section 8.02, such Collateral shall be sold
free and clear of the Liens created by the Security Documents, and the
Collateral Agent shall be authorized to take such actions as it deems
appropriate in connection therewith.
8.03 Distributions. The Borrower shall not authorize, declare or
pay, or permit any of its Subsidiaries to authorize, declare or pay, any
Distributions, except that:
(i) any Subsidiary of the Borrower may make Distributions to
the Borrower or any wholly-owned Subsidiary of the Borrower;
(ii) payments required to be made in respect of stock appreciation
rights outstanding on the Second Restatement Effective Date shall be
permitted;
(iii) the settlement of stock options outstanding on the Second
Restatement Effective Date shall be permitted, provided that the
aggregate amount paid in respect of such settlements shall not exceed
$1.5 million, and the issuance of stock options to employees in
cancellation of or consideration of the surrender and cancellation of
outstanding options, to the extent such issuance, surrender or
cancellation may be deemed a Distribution, shall be permitted;
(iv) Hoeganaes shall be permitted to make Distributions in
respect of its capital stock on a pro rata basis to its shareholders,
and any Subsidiary of Hoeganaes shall be permitted to make
Distributions to Hoeganaes or any Subsidiary of Hoeganaes;
(v) the redemption of outstanding shareholder rights shall be
permitted, provided that the aggregate amount paid in respect of such
redemption shall not exceed $400,000;
(vi) the retirement or acquisition by way of transfer from any
Person to the Borrower of capital stock of the Borrower in payment of
all or any portion of the exercise price of any warrants, options or
rights to acquire capital stock of the Borrower shall be permitted;
(vii) the retirement or acquisition by way of transfer from any
Person to the Borrower of capital stock of the Borrower acquired by
such Person from the Borrower pursuant to a grant or award of such
capital stock of the Borrower made by the Borrower shall be permitted,
provided that such retirement or acquisition is in satisfaction of all
or any portion of income and/or employment taxes to be withheld by the
Borrower with respect to such Person and; provided further, that the
aggregate amount paid in respect of such retirements and acquisitions
shall not exceed $2,000,000; and
(viii) the retirement or acquisition of shares of Series A1, A2,
A3, B1, B2 or B3 Preferred or Non-Voting Common Stock upon exchange or
conversion of the same for any such capital stock or Common Stock
pursuant to the Preferred Stock Purchase Agreements shall be
permitted.
8.04 Leases. The Borrower will not permit the aggregate payments
(including, without limitation, any property taxes paid as additional rent
or lease payments) by the Borrower and its Subsidiaries on a consolidated
basis under agreements to rent or lease any real or personal property
(other than Capital Leases), during any fiscal year of the Borrower to
exceed $20,000,000.
8.05 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement, including
without limitation Indebtedness permitted under 12.17, and the other Credit
Documents;
(b) Indebtedness of the Borrower or its Subsidiaries existing on
the Second Restatement Effective Date to the extent same is listed on
Schedule X and any extensions, renewals or refinancings thereof provided
that the aggregate principal amount thereof is not increased ("Existing
Debt");
(c) Indebtedness of the Borrower or its Subsidiaries under any
Hedging Agreement existing prior to the Second Restatement Effective Date;
(d) Indebtedness arising under Capital Leases and the
Indebtedness secured by Liens permitted pursuant to Section 8.01(vi),
provided that (i) the aggregate principal amount of Indebtedness under this
clause (d) incurred in any fiscal year of the Borrower shall not exceed
$20,000,000 and (ii) after giving effect to the incurrence of such
Indebtedness, the Borrower, on a pro forma basis, would be in compliance
with the provisions of Section 8.10 on the last day of the fiscal quarter
last ended for which financial statements are available;
(e) Indebtedness of the Borrower under Section 6(c) of the
Hoeganaes Stockholders Agreement arising in connection with the purchase of
shares permitted by Section 8.06;
(f) Indebtedness (i) of the Borrower or The Interlake Companies,
Inc. to any Subsidiary including but not limited to any Subsidiary which is
a Subsidiary Assignor or a Subsidiary Guarantor (for purposes of this
clause (f) only, each Subsidiary Assignor or Subsidiary Guarantor, a
"Subsidiary Credit Party"), (ii) of a Subsidiary Credit Party to either (a)
the Borrower, (b) The Interlake Companies, Inc. or (c) any other Subsidiary
Credit Party; provided, however, if the Indebtedness permitted under this
clause (ii) is of a Subsidiary Credit Party which is not a Foreign
Subsidiary, then only Indebtedness to the extent permitted under
subparagraph (f)(ii)(a) or (b) hereof, (iii) of any Subsidiary which is not
a Subsidiary Credit Party to any other Subsidiary (other than Hoeganaes)
which is not a Subsidiary Credit Party, (iv) notwithstanding the foregoing,
Indebtedness of any Subsidiary which is not a Subsidiary Credit Party to a
Subsidiary Credit Party shall be permitted if (x) the aggregate principal
amount thereof does not exceed $45,000,000 at any time outstanding or (y)
the proceeds of any Indebtedness incurred in excess of the amount permitted
under clause (x) are returned (by way of dividend or otherwise) to a
Borrower within five Business Days of the incurrence thereof and the
Administrative Agent shall have received five Business Days prior written
notice of the incurrence of such Indebtedness and subsequent notice that
the dividend or other returning payment has been made, (v) of any
Subsidiary Credit Party which is a Foreign Subsidiary to any Foreign
Subsidiary which is not a Subsidiary Credit Party and (vi) among the
Borrower and its Subsidiaries outstanding as of November 30, 1993, provided
that such Indebtedness shall only be permitted (A) if described in writing
to the Administrative Agent on or before such date and (B) if either (1)
such Indebtedness is otherwise permitted under clauses (i) through (v) of
this clause (f) or (2) the repayment of such Indebtedness shall, based on
a certificate of the chief financial officer of the Borrower, create costs,
adverse tax or legal consequences which the Administrative Agent determines
(in its sole discretion) are material;
(g) Obligations of the Borrower or a Subsidiary in respect of
letters of credit, guaranties and other similar instruments supporting
obligations incurred in the ordinary course of business, provided that the
aggregate principal amount of Indebtedness under this clause (g) shall not
exceed $15,000,000 at any one time outstanding;
(h) other Indebtedness of the Borrower, provided that the
aggregate principal amount of Indebtedness under this clause (h) shall not
exceed $20,000,000 at any one time outstanding;
(i) Indebtedness arising in connection with performance bonds
and surety bonds supporting obligations other than for borrowed money
incurred in the ordinary course of business consistent with past practices;
and
(j) Indebtedness of the Borrower to the National Bank of Canada
in respect of letters of credit originally issued under the Original Credit
Agreement as the same may be renewed from time to time.
8.06 Advances, Investments and Loans. Other than in connection
with any Permitted Acquisition, the Borrower will not, and will not permit
any of its Subsidiaries to, lend money or credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any other
Person, or hold any cash or Cash Equivalents, except that the following
shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary
trade terms;
(ii) the Borrower and its Subsidiaries may acquire and hold cash
and Cash Equivalents, provided that so long as any Loans are
outstanding the aggregate amount of cash and Cash Equivalents held by
the Borrower and its Subsidiaries shall not exceed $2,500,000;
(iii) the Borrower and its Subsidiaries may make advances to
employees for moving, relocation, employee home purchase program and
travel expenses, drawing accounts and similar expenditures in the
ordinary course of business;
(iv) the Borrower may make contributions to the ESOP to pay the
administrative expenses of the ESOP; provided that contributions of
capital stock of the Borrower to the ESOP need not be so used and
loans to the ESOP permitted under Section 8.06(x) need not be so used;
(v) The Borrower or any Subsidiary may purchase shares of stock
of Hoeganaes offered to it pursuant to Section 6(c) of the Hoeganaes
Stockholders Agreement, provided that (A) after giving effect to such
purchase no Default or Event of Default would exist and (B) in the
event such purchase is not permitted by Clause (A) the Required Banks
shall consent to such purchase;
(vi) the Borrower and its Subsidiaries may acquire Indebtedness
of other Persons (other than pursuant to clause (vii) below) in
connection with the sale of assets permitted by Section 8.02, provided
that (x) the aggregate principal thereof, when added to outstanding
Indebtedness owed the Borrower and its Subsidiaries described in
clause (vii) of this Section 8.06 at the time such Indebtedness is
acquired, shall not exceed $5 million and (y) the cash proceeds of
such Indebtedness are applied to repay the Loans to the extent
required by Section 4.02;
(vii) Indebtedness acquired by the Borrower or a Subsidiary under
Section 6(c) of the Hoeganaes Stockholders Agreement in connection
with a transaction permitted by Section 8.02(vii), provided that the
cash proceeds, as received, of such Indebtedness are applied to repay
the Loans to the extent required by Section 4.02;
(viii) the Borrower and its Subsidiaries may make the intercompany
loans permitted by Section 8.05(f) and the intercompany transfer of
assets permitted by Section 8.02(vi);
(ix) the Borrower and its Subsidiaries may form new
Subsidiaries, provided that all transactions with, and investments in,
such new Subsidiaries shall comply with the provisions of this
Agreement;
(x) the Borrower may make one or more loans at any time or from
time to time to the ESOP Trust that shall not exceed $2,500,000 in the
aggregate provided, that the note or notes evidencing any such loan,
and any additional stock of the Borrower purchased by the ESOP with
the proceeds of any such Loan and not yet released from the suspense
account created or maintained in connection with each Loan, are
pledged to the Collateral Agent pursuant to security arrangements
satisfactory to it and the Borrower; and
(xi) (x) the Borrower and its Subsidiaries may make advances or
loans to, or investments in, Subsidiaries of the Borrower in an amount
not to exceed $1,000,000 annually and (y) the Borrower and its
Subsidiaries may make investments described in the proviso to the
definition of Capital Expenditures.
8.07 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate, other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate, except that
(i) loans, advances, transfers, sales or purchases of shares and other
transactions may be incurred and made to the extent permitted by Sections
8.02, 8.03, 8.05 and 8.06 and (ii) the Borrower and its Subsidiaries may
effect intercompany transactions and transfers of goods and services in the
ordinary course of business and in conformity with the business practices
in effect on the Second Restatement Effective Date.
8.08 Capital Expenditures. (a) The Borrower will not, nor will
it permit any of its Subsidiaries to, make or incur Capital Expenditures in
any period set out below, in excess of the amount that, together with any
amounts expended pursuant to Section 8.06(x) in such period, is set forth
below opposite such period:
Period Amount
Second Restatement Effective Date
through March 29, 1998 $20,000,000
Second Restatement Effective Date
through the Maturity Date $40,000,000
8.09 Minimum Consolidated Net Worth. The Borrower's Consolidated
Net Worth at any time may not be less than an amount equal to (i) the
Borrower's Consolidated Net Worth at December 25, 1994 (i.e., negative
$257,280,386), minus (ii) $30,000,000, plus (iii) Cumulative Consolidated
Net Income at such time.
8.10. Minimum Consolidated EBITDA. Consolidated EBITDA for
any four fiscal quarter period ending on the last day of any fiscal quarter
set forth below shall be greater than the amount set forth opposite such
fiscal quarter:
Fiscal Period Amount
For the fourth quarter of 1997 $72,000,000
For the first quarter of 1998 $66,000,000
For the second quarter of 1998 $60,000,000
8.11. Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements, etc. The Borrower will not, and will not permit
any of its Subsidiaries to, (i) make any voluntary or optional payment or
prepayment on or redemption or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto
money or securities before due for the purpose of paying when due) (a) any
Existing Debt or Indebtedness under Senior Notes or Permanent Subordinated
Debentures; provided that the Borrower may make Note Repurchases in an
aggregate amount not to exceed the amount of Disposition Proceeds at
purchase prices not to exceed one hundred ten percent of the face value of
such Senior Notes or Permanent Subordinated Debentures, or (b) Indebtedness
under Section 6 of the Hoeganaes Stockholders Agreement, or the Convertible
Preferred Stock, (ii) amend or modify, or permit the amendment or
modification of, any provision of any agreement (including, without
limitation, any purchase agreement, indenture, loan agreement or security
agreement) relating to any of the foregoing, (iii) amend, modify or change
its Certificate of Incorporation or By-Laws or comparable organizational
documents (including, without limitation, by the filing or modification of
any certificate of designation), or any agreement entered into by it, with
respect to its capital stock (except changes which could not reasonably be
expected to materially adversely affect the Banks), or enter into any new
agreement with respect to its capital stock, except for those which could
not reasonably be expected to materially adversely affect the Banks, (iv)
amend, modify or change any, or enter into any new shareholders'
agreements, except to the extent such action could not reasonably be
expected to materially adversely affect the Banks, (v) amend, modify or
change the Hoeganaes Stockholders Agreement, the Hoeganaes Research and
Development Agreement or (vi) offer any shares of stock of Hoeganaes
pursuant to Section 6(c) of the Hoeganaes Stockholders Agreement.
Notwithstanding the foregoing, the Borrower or Arwood Corporation shall be
permitted to prepay any amounts payable by Arwood Corporation under a Loan
Agreement, dated as of August 1, 1979, by and between The Industrial
Development Authority of the State of New Hampshire and Arwood Corporation,
in the event of a default by First W-G Acquisition Corporation (or any
successor thereof) under such Loan Agreement.
8.12. Limitation on Restrictions on Subsidiary Dividends,
Other Distributions and on Granting of Liens. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of (I) any Subsidiary of the Borrower to (a)
pay dividends or make any other distributions on its capital stock or any
other interest or participation in its profits, owned by the Borrower or
any Subsidiary of the Borrower, or pay or repay any Indebtedness owed to
the Borrower or a Subsidiary, (b) make loans or advances to the Borrower or
(c) transfer any of its properties or assets to the Borrower or its
Subsidiaries or (II) the Borrower or any of its Subsidiaries to grant Liens
or security interests on the assets of such Person in favor of the Banks,
except for such encumbrances or restrictions existing under or by reason of
(i) applicable law, (ii) this Agreement, (iii) to the extent restricting
the disposition of any property serving as security therefor, any
agreements relating to Indebtedness permitted pursuant to Section 8.05(d)
and (g), (iv) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or any of its
Subsidiaries, and (v) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of the Borrower
or any of its Subsidiaries.
8.13. Limitation on Issuances of Capital Stock by
Subsidiaries. The Borrower shall not permit any of its Subsidiaries to
issue any capital stock (including by way of sales of treasury stock) or
any options or warrants to purchase, or securities convertible into,
capital stock, except for (i) transfers and replacements of then
outstanding shares of capital stock and (ii) stock splits, stock dividends
and issuances which do not decrease the percentage ownership of the
Borrower or any of its Subsidiaries in any class of the capital stock of
such Subsidiary, provided that if the stock of the respective Subsidiary
issuing any shares of stock or other securities as permitted by this
Section 8.13 is pledged pursuant to a Pledge Agreement, then any shares
issued pursuant to preceding clauses (i) and (ii) shall be delivered
directly to the Collateral Agent for pledge pursuant to the respective
Pledge Agreement.
8.14. Business. The Borrower will not, and will not permit
its Subsidiaries to, engage (directly or indirectly) in any business other
than the business in which the Borrower and its Subsidiaries are engaged on
the Second Restatement Effective Date, plus reasonable extensions and
expansions thereof.
Section 9. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any payment of principal of its Loans or Notes, or (ii)
default, and such default shall continue for at least two Business Days, of
any payment of any Unpaid Drawing or interest on its Loans, Unpaid Drawings
or Notes, or of any Fees or any other amounts owing by it hereunder or
thereunder; or
9.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document
or in any certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect; or
9.03 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement
contained in Sections 7.09, 7.10, 7.11 and/or 8 (other than a default under
Section 8.01 arising by reason of a non-consensual Lien securing an
obligation not in excess of $2,500,000) or (ii) default in the due
performance or observance by it of any term, covenant or agreement (other
than those referred to in Sections 9.01 and 9.02 and clause (i) of this
Section 9.03) contained in this Agreement and such default shall continue
unremedied for a period of 30 days after written notice to the Borrower by
the Administrative Agent or the Required Banks. No waiver, modification,
alteration or amendment of this Section 9.03 or of any definition used in
this Section 9.03 or of any component definition used therein shall be
permitted without the prior written consent of the Required Banks; or
9.04 Default Under Other Agreements. (i) The Borrower or any of
its Subsidiaries shall (x) default in any payment of any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided
in the instrument or agreement under which such Indebtedness was created or
(y) default in the observance or performance of any agreement or condition
relating to any Indebtedness (other than the Obligations) or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or holders
of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is
required), any such Indebtedness to become due prior to its stated maturity
or (ii) any Indebtedness of the Borrower or any of its Subsidiaries shall
be declared to be due and payable, or required to be prepaid other than by
a regularly scheduled or other mandatory required prepayment, prior to the
stated maturity thereof; provided that it shall not constitute an Event of
Default pursuant to this Section 9.04 unless the aggregate amount of all
Indebtedness referred to in clauses (i) and (ii) above exceeds $2,500,000
at any one time; or
9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries, and the petition
is not controverted within 30 days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Borrower or any of its Subsidiaries, or the
Borrower or any of its Subsidiaries commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or any of its
Subsidiaries, or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of
30 days, or the Borrower or any of its Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or the Borrower or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or
any substantial part of its property to continue undischarged or unstayed
for a period of 30 days; or the Borrower or any of its Subsidiaries makes
a general assignment for the benefit of creditors; or any corporate action
is taken by the Borrower or any of its Subsidiaries for the purpose of
effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to maintain the minimum
funding standard required for any plan year or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412
of the Code, (b) any Plan is, shall have been or is reasonably likely to be
terminated or the subject of termination proceedings under ERISA, (c) any
Plan shall have an Unfunded Current Liability or (d) the Borrower, any of
its Subsidiaries or an ERISA Affiliate has incurred or is reasonably likely
to incur a liability to or on account of a Plan under Section 515, 4062,
4063, 4064, 4201 or 4204 of ERISA; and there shall result from any event or
events described in clause (a), (b), (c) or (d) above (i) the imposition of
a lien upon the assets of the Borrower or any of its Subsidiaries or an
ERISA Affiliate or (ii) the granting of a security interest, or (iii) a
liability or a material risk of incurring a liability to the PBGC or the
Internal Revenue Service or a Plan or a trustee appointed under ERISA or a
penalty under Section 4971 of the Code; and which event or events described
in clauses (i), (ii) and (iii) above, in the reasonable opinion of the
Required Banks, would have a material adverse effect upon the business,
operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole; or
9.07 Pledge Agreements. Any Pledge Agreement shall cease to be
in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby in
favor of the Collateral Agent for the benefit of the Banks, or any Credit
Party shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to
any Pledge Agreement; or
9.08 Other Security Documents. Any Security Document (other than
a Pledge Agreement) shall cease to be in full force and effect, or shall
cease to give the Collateral Agent the Liens, rights, powers and privileges
purported to be created thereby in favor of the Collateral Agent for the
benefit of the Banks, or any Credit Party shall default in the due
performance and observance of any term, covenant or agreement on its part
to be performed or observed pursuant to any Security Document and such
default shall, in the case of such default or failure to observe any term,
covenant or agreement other than those found in Sections 2.04, 2.05 and
2.07 of any Security Agreement, continue unremedied for a period of 30 days
after written notice to such Credit Party by any of the Collateral Agent,
the Administrative Agent or the Required Banks; or
9.09 Guaranty. Any Guaranty or any provision thereof shall cease
to be in full force and effect as to any Guarantor (other than in
accordance with the express terms thereof), or any Guarantor or any Person
acting by or on behalf of any Guarantor shall deny or disaffirm such Guar-
antor's obligations under its Guaranty or the respective Guarantor shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any Guaranty;
or
9.10. Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving in the
aggregate for the Borrower and its Subsidiaries a liability of $2,500,000
or more in excess of available coverage under applicable insurance, and all
such judgments or decrees shall not have been vacated, discharged pending
appeal within 30 days from the entry thereof; or
9.11. Change in Control. (a) If during any period of two
consecutive years, individuals who at the beginning of any such period
constitute the Directors of the Borrower cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for
election by the Borrower's stockholders, of each Director of the Borrower
first elected during such period was approved by a vote of at least two-thirds
of the Directors of the Borrower then still in office who were Directors of
the Borrower at the beginning of any such period or (b) the acquisition,
whether directly or indirectly, by any Person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other
than an employee benefit or stock ownership plan of the Borrower) of more than
50% of the common stock of the Borrower shall have occurred or (c) any change
of control or similar event (including, without limitation, any Fundamental
Change, as defined in the form of Convertible Preferred Stock) shall occur
which requires, or gives any holder the right to require, the redemption of
the Convertible Preferred Stock; or
9.12. Environmental Liabilities. The Borrower makes payments
in excess of $5,000,000 pursuant to CERCLA in any single fiscal year with
respect to remediation at the St. Louis River Site, provided, that the
Borrower may carry over 100% of any year's unused remediation expenditures,
up to a maximum aggregate amount of $20,000,000;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent shall upon the
written request of the Required Banks, by written notice to the Borrower,
take any or all of the following actions, without prejudice to the rights
of the Administrative Agent, any Bank or the holder of any Note to enforce
its claims against any Credit Party (provided, that, if an Event of Default
specified in Section 9.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the
Administrative Agent to the Borrower as specified in clauses (i), (ii) and
(v) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitment terminated, whereupon the Commitments of
each Bank shall forthwith terminate immediately and any Fees shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans
and the Notes and all obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) in the case of the Collateral Agent,
exercise any rights or remedies in its capacity as Collateral Agent under
the Security Documents; (iv) terminate any Letter of Credit which may be
terminated in accordance with its terms; and (v) direct the Borrower to pay
(and the Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in Section 9.05 in respect of
the Borrower, it will pay) to the Collateral Agent at the Payment Office
such additional amounts of cash, to be held as security for the
reimbursement obligations of the Borrower for Drawings that may
subsequently occur thereunder, equal to the aggregate Stated Amount of all
Letters of Credit issued and then outstanding.
Section 10. Definitions and Accounting Terms.
10.01 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Acquisition Basket Amount" shall mean $86,000,000 (i) plus the
amount of any Letter of Credit issued or continued under this Agreement
which is not drawn and is returned to the letter of credit issuer or is
otherwise terminated (ii) less an amount equal to the principal amount of
Loans incurred to make Permitted Acquisitions in compliance with this
Agreement.
"Additional Security Documents" shall mean all agreements,
mortgages and other documentation delivered pursuant to Section 7.10.
"Adjusted CD Rate" shall mean, on any day, the sum (rounded to
the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most
recent weekly average dealer offering rate for negotiable certificates of
deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, if
such publication or a substitute containing the foregoing rate information
shall not be published by the Federal Reserve System for any week, the
weekly average offering rate determined by the Administrative Agent on the
basis of quotations for such certificates received by it from three
certificate of deposit dealers in New York of recognized standing or, if
such quotations are unavailable, then on the basis of other sources
reasonably selected by the Administrative Agent, by (y) a percentage equal
to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month
certificate of deposit of a member bank of the Federal Reserve System in
excess of $100,000 (including, without limitation, any marginal, emergency,
supplemental, special or other reserves), plus (2) the then daily net
annual assessment rate as estimated by the Administrative Agent for
determining the current annual assessment payable by the Administrative
Agent to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Adjusted LIBOR Rate" shall mean with respect to a Borrowing of
Eurodollar Loans for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16th of 1%) equal to the
product of (a) LIBOR in effect for such Interest Period and (b) a fraction
(expressed as a decimal) the numerator of which is the number 1 and the
denominator of which is the number 1 minus the then stated maximum rate of
all reserve requirements (including without limitation any marginal,
emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D). For purposes hereof, the term "LIBOR"
shall mean the arithmetic average (rounded upwards, if necessary, to the
next 1/16th of 1%) determined by the Administrative Agent at which dollar
deposits approximately equal in principal amount to the Administrative
Agent's portion of the respective Borrowing of Eurodollar Loans and for a
maturity comparable to such Interest Period are offered to the principal
London office of the Administrative Agent in the London interbank market at
approximately 11:00 A.M., London time, two Business Days prior to the
commencement of such Interest Period.
"Adjusted Net Income" for any fiscal period shall mean
Consolidated Net Income for such fiscal period (after provision for taxes)
plus the amount of all net non-cash charges (including, without limitation,
depreciation, deferred tax expense, non-cash interest expense, write-downs
of inventory and other non-cash charges), in each case that were deducted
in arriving at the Consolidated Net Income for such fiscal period less the
amount of all net non-cash gains and gains from sales of assets (other than
sales of inventory and equipment in the ordinary course of business) that
were added in arriving at said Consolidated Net Income for such fiscal
period.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Affiliate" shall mean, with respect to any Person, any other
Person (i) directly or indirectly controlling (including, but not limited
to, all directors and officers of such Person), controlled by, or under
direct or indirect common control with, such Person or (ii) that directly
or indirectly owns more than 5% of the voting securities of such Person.
A Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Second Amended and Restated Credit
Agreement, as modified, supplemented or amended from time to time.
"Alternate Base Rate" shall mean on any day the highest of (i)
the Prime Rate for such day, (ii) the Adjusted CD Rate plus 1% and (iii)
the Federal Funds Effective Rate plus 1/2%.
"Applicable Margin" shall mean a percentage per annum equal to
(i) in the case of Base Rate Loans and all other interest rates determined
by reference to the Alternate Base Rate, 1 % and (ii) in the case of
Eurodollar Loans, 2 %.
"Arwood Asset Purchase Agreement" shall mean one or more
agreements between (a) the Borrower, The Interlake Companies, Inc. and
Arwood Corporation, and (b) First W-G Acquisition Corporation, providing
for the sale of substantially all of the assets of Arwood Corporation.
"Assignment and Acceptance" shall have the meaning provided in
Section 12.04(b).
"Bank" shall mean each financial institution initially party
hereto in its capacity as a "Bank", as well as any institution which
becomes a "Bank" hereunder pursuant to Section 12.04.
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate Loans" shall mean any Loan designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan by the
Borrower from the Banks on a given date (or resulting from conversions on
a given date) having in the case of Eurodollar Loans the same Interest
Period.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized by law or other government action to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is
a Business Day described in clause (i) above and which is also a day for
trading by and between banks in the London interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate
of all expenditures, (whether paid in cash or accrued as liabilities during
that period), excluding interest capitalized during construction, by the
Borrower and its Subsidiaries during such period that, in conformity with
generally accepted accounting principles, are required to be included in or
reflected by the property and equipment or similar fixed asset accounts
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries, but excluding expenditures made in connection with the
replacement or restoration of assets, to the extent reimbursed or financed
from insurance proceeds paid on account of the loss of or damage to the
assets being replaced or restored, or from awards of compensation arising
from the taking by condemnation or eminent domain of such assets being
replaced or from the proceeds of the sale or other disposition of such
assets under the threat of such taking; provided that there shall be
included in the definition of Capital Expenditures up to $5,000,000 in any
fiscal year in expenditures of the Borrower other than Permitted
Acquisitions for (i) securities acquired by the Borrower and/or its
Subsidiaries of another Person representing at least 50% of the voting and
economic interests in such Person and (ii) assets the acquisition of which
would not otherwise constitute a Capital Expenditure and would not
otherwise be permitted under Section 8.06. With respect to equipment which
is purchased substantially simultaneously with the trade-in of existing
equipment owned by the Borrower or its Subsidiaries, only that portion of
the purchase price which exceeds the greater of the book value or the
trade-in amount of the equipment being traded in at such time shall be
included in Capital Expenditures.
"Capital Lease", as applied to any Person, shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which in conformity with generally accepted accounting principles, is, or
is required to be, accounted for as a capital lease on the balance sheet of
that Person.
"Capital Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
generally accepted accounting principles.
"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having maturi-
ties of not more than six months from the date of acquisition, (ii) time
deposits and certificates of deposit of any commercial bank incorporated in
the United States of recognized standing having capital and surplus in
excess of $100,000,000 with maturities of not more than six months from the
date of acquisition by such Person, (iii) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above, provided that there shall be no restriction
on the maturities of such underlying securities pursuant to this clause
(iii) entered into with a bank meeting the qualifications specified in
clause (ii) above, (iv) commercial paper issued by the parent corporation
of any commercial bank (provided that the parent corporation and the bank
are both incorporated in the United States) of recognized standing having
capital and surplus in excess of $500,000,000 and commercial paper issued
by any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor's Corporation or at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing not more than six months after the date of acquisition by such
Person, and (v) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses
(i) through (iv) above.
"Cash Flow" shall mean, for any period, the sum of (i)
Consolidated EBITDA for such period, minus (ii) Capital Expenditures
incurred during such period and permitted by Section 8.08.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as same may be amended from time to
time.
"Chase" shall mean The Chase Manhattan Bank.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. Section references to the Code are to the Code, as in
effect at the date of this Agreement, and to any subsequent provisions of
the Code amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all "Collateral" under, and as defined
in, any Security Document.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Banks pursuant to the Security Documents.
"Commitment" shall mean, with respect to each Bank, (i) prior to
the repayment of the ESOP Loans as provided in Section 12.17(b)(iv) the
amount, if any, set forth opposite such Bank's name in Schedule I, Part A,
directly below the column entitled "Commitment" and (ii) after the
repayment of the ESOP Loans as provided for in Section 12.17(b)(iv), the
amount, if any, set forth opposite such Bank's name in Schedule I, Part B,
directly below the column entitled "Commitment", as the respective amounts
under clause (i) or (ii) may be reduced from time to time pursuant to
Sections 3.02, 3.03 and 9 or otherwise modified as provided in Section
12.04.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Common Stock" shall have the meaning provided in Section 6.13.
"Company Pledge Agreement" shall mean the Pledge Agreement
entered into by the Borrower pursuant to the Original Credit Agreement, as
the same may be amended, modified or supplemented from time to time.
"Company Security Agreement" shall mean the Company Security
Agreement entered into pursuant to the Original Credit Agreement, as same
may be amended, modified or supplemented from time to time.
"Consolidated Cash Interest Expense" shall mean, for any period,
net interest expense, whether paid or accrued (including the interest
component of Capital Lease Obligations), of the Borrower and its
Subsidiaries on a consolidated basis, including, without limitation, (i)
all commissions, discounts and other fees and charges owed with respect to
letters of credit, (ii) net costs under Hedging Agreements and (iii)
interest capitalized during construction, but excluding, however, interest
expense not payable in cash (including amortization of discount and
deferred debt expenses and amortization of non-cash discount and non-cash
cost of any Hedging Agreements), all as determined in conformity with
generally accepted accounting principles.
"Consolidated Current Assets" shall mean, at any date, all the
current assets (other than cash and Cash Equivalents) of the Borrower and
its Subsidiaries determined on a consolidated basis in conformity with
generally accepted accounting principles.
"Consolidated Current Liabilities" shall mean, at any date, the
total current liabilities of the Borrower and its Subsidiaries determined
on a consolidated basis in conformity with generally accepted accounting
principles, less the current portion of the Funded Debt.
"Consolidated EBIT" shall mean, for each period, the earnings for
such period before extraordinary items, minority interests, provisions for
income taxes, and net interest expense.
"Consolidated EBITDA" shall mean, for any period, the sum of (i)
Consolidated EBIT for such period, plus (ii) depreciation and amortization
expenses deducted in determining Consolidated EBIT for such period.
"Consolidated Net Income" shall mean for any fiscal period the
net income of the Borrower and its Subsidiaries for such fiscal period
determined on a consolidated basis.
"Consolidated Net Worth" shall mean, on any date of determination
thereof, shareholders' equity (including preferred stock) of the Borrower
and its Subsidiaries on a consolidated basis.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, leases, dividends
or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation
or (y) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in
good faith.
"Continuing Bank" shall mean each Original Bank with a Commitment
under this Agreement (immediately upon giving effect to this Agreement on
the Second Restatement Effective Date).
"Convertible Preferred Stock" shall mean, collectively, the
Series A1, A2 and A3 Convertible Exchangeable Preferred Stock and the
Series B1, B2 and B3 Convertible Preferred Stock referred to in Section
6.13.
"Credit Documents" shall mean this Agreement and once executed
and delivered pursuant to the terms of the Original Credit Agreement or
this Agreement, each Note, each Letter of Credit Request, each Notice of
Borrowing, each Notice of Conversion, each Security Document, each Hedging
Agreement and each Guaranty, except as released prior to or in accordance
with the execution of this Agreement.
"Credit Event" shall mean the making of any Loan or the issuance
of any Letter of Credit.
"Credit Party" shall mean and include the Borrower and each
Subsidiary of the Borrower which has executed and delivered any Credit
Document.
"Cumulative Consolidated Net Income" shall mean, on any date,
Consolidated Net Income on a cumulative basis for all fiscal quarters of
the Borrower ending after December 25, 1994 (for which Consolidated Net
Income was a positive number), all determined on the basis of generally
accepted accounting principles as in effect on December 25, 1994.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Designated Asset Sales" shall mean the sale of the assets listed
on Schedule XI.
"Disposition" shall mean the sale (x) by The Interlake Companies,
Inc. of (i) Dexion (Australia) Pty Ltd., (ii) Dexion (North Asia_ Ltd.) and
its subsidiary, Dexion Storage Equipment (Shanghai) So. Ltd. and (iii)
Dexion Incorporated and (y) by Interlake DRC Limited of Dexion Group plc
and all of its subsidiaries including, but not limited to, Dexion Holding
GmbH and Dexion International Ltd.
"Disposition Documents" shall have the meaning set forth in
Section 5.01(j)(i).
"Disposition Proceeds" shall have the meaning set forth in
Section 5.01(j)(ii).
"Distribution" with respect to any Person shall mean that such
Person has declared or paid any dividend or returned any capital to its
stockholders or authorized or made any other distribution, payment or
delivery of property (other than capital stock of the Borrower) or cash to
its stockholders, as such, or redeemed, retired, purchased, or otherwise
acquired, directly or indirectly, for consideration, any shares of any
class of its capital stock outstanding on or after the Second Restatement
Effective Date (or any options or warrants issued by such Person with
respect to its capital stock), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Subsidiaries to
purchase or otherwise acquire for a consideration any shares of any class
of the capital stock of such Person outstanding on or after the Second
Restatement Effective Date (or any options or warrants issued by such
Person with respect to its capital stock). Without limiting the foregoing,
"Distributions" with respect to any Person shall also include all payments
made or required to be made by such Person with respect to any stock
appreciation rights plans, equity incentive or achievement plans or any
similar plans or the setting aside of any funds for the foregoing purposes.
"Documentation Agent" shall have the meaning provided in the
first paragraph hereof.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States (expressed in dollars).
"Drawing" shall have the meaning provided in Section 2.05(b).
"Eligible Assignee" shall mean (a) a commercial bank having
total assets in excess of $1,000,000,000, or (b) a finance company,
insurance company or other financial institution or fund, reasonably
acceptable to the Administrative Agent, who has regularly engaged in
making, purchasing, or investing in loans and having total assets in excess
of $300,000,000.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to
ERISA, as in effect at the date of this Agreement, and to any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.
"ERISA Affiliate" shall mean any person (as defined in Section
3(9) of ERISA) which together with the Borrower or any of its Subsidiaries
would be deemed to be a member of the same "controlled group" within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
"ESOP" shall mean The Interlake Corporation Employee Stock
Ownership Plan effective as of September 1, 1989.
"ESOP Trust" shall mean the trust created and maintained under
the ESOP pursuant to the ESOP Trust Agreement, as amended from time to time
to the extent permitted herein.
"ESOP Trust Agreement" shall mean The Interlake Corporation
Employee Stock Ownership Trust Agreement by and between the Borrower and
LaSalle National Trust, N.A. (successor to LaSalle National Bank) creating,
and governing the terms of, the ESOP Trust.
"Eurodollar Loans" shall mean any Loan designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.
"Event of Default" shall have the meaning provided in Section 9.
"Exchange Debentures" shall mean the Junior Convertible
Subordinated Debentures exchangeable in certain circumstances for
outstanding shares of Convertible Preferred Stock in accordance with the
terms thereof.
"Existing Debt" shall have the meaning provided in Section
8.05(b).
"Facing Fee" shall have the meaning provided in Section 3.01(d).
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized
standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred to
in Section 3.01.
"First National" shall mean The First National Bank of Chicago.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower
not incorporated under the laws of the United States or of any State
thereof.
"Funded Debt" shall at the time of determination thereof mean
Indebtedness of the Borrower and its Subsidiaries which by its terms is
payable more than one year from such date or which may be extended at the
option of the Borrower under a revolving credit or similar agreement to a
date more than one year from such date of determination, provided that all
Indebtedness hereunder shall at all times constitute Funded Debt.
"Guarantor" shall mean any Person guarantying the obligations of
another pursuant to a Guaranty.
"Guaranty" shall mean and include the Subsidiary Guaranties.
"Hedging Agreement" shall mean any interest rate or currency
fluctuation protection agreement or any other similar interest rate or
currency fluctuation hedging transaction, including, without limitation,
swaps, caps, floors, collars and similar agreements.
"Hoeganaes" shall mean Hoeganaes Corporation, a Delaware
corporation.
"Hoeganaes Research and Development Agreement" shall mean the
Research and Development Agreement dated February 8, 1994 between Hoeganaes
AB and Hoeganaes Corporation, as such Agreement was in effect on the Fifth
Amendment Effective Date without giving effect to any amendment,
modification, or supplement thereto without the prior written consent of
the Required Banks.
"Hoeganaes Stockholders Agreement" shall mean the Stockholders
Agreement dated February 8, 1994 by and between The Interlake Companies,
Inc., Hoeganaes Aktiebolag and Hoeganaes, as such Agreement was in effect
on the Fifth Amendment Effective Date without giving effect to any
amendment, modification or supplement thereto without the prior written
consent of the Required Banks.
"Inactive Subsidiary" shall mean any Subsidiary which is not
engaged in any business activities and the assets and liabilities of which,
in each case, are less than $10,000.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of
such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the face amount of all letters of credit issued
for the account of such Person, (iii) all liabilities of the types
described in clauses (i), (ii), (iv), (v) and (vi) of this definition which
are secured by any Lien on any property owned by such Person, whether or
not such liabilities have been assumed by such Person, (iv) the aggregate
amount required to be capitalized under leases under which such Person is
the lessee, (v) all Contingent Obligations of such Person and (vi) all
obligations of such Person under Hedging Agreements or other similar
agreements.
"Initial Borrowing Date" shall mean the date of the initial
incurrence of term loans as defined in, and pursuant to, the Original
Credit Agreement.
"Interest Period" shall have the meaning provided in Section
1.09.
"Issuing Bank" shall mean any Bank which at the request of the
Borrower and with the consent of the Administrative Agent agrees, in such
Bank's sole determination, to become an Issuing Bank for purposes of
issuing Letters of Credit pursuant to Section 2.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(c).
"Letter of Credit Outstandings" shall mean, at any time, the sum
of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the aggregate amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Lien" shall mean any mortgage, pledge, hypothecation,
encumbrance, lien (statutory or other), preference, priority or other
security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
lease having substantially the same effect as any of the foregoing and any
assignment or deposit arrangement in the nature of a security device).
"Loan" shall have the meaning set forth in 1.01.
"Margin Stock" shall have the meaning provided in Regulation U of
the Board of Governors of the Federal Reserve System.
"Material Subsidiary" shall mean (x) each Subsidiary which is not
a Foreign Subsidiary and (y) each Foreign Subsidiary other than a
Subsidiary (i) the fair market value of the assets of which are less than
$1 million and (ii) the consolidated net income of which for the fiscal
year most recently ended was less than $500,000.
"Maturity Date" shall mean June __, 1998.
"Mortgage" shall have the meaning assigned thereto in the
Original Credit Agreement.
"Mortgage Policies" shall have the meaning provided in the
Original Credit Agreement.
"Mortgaged Properties" shall mean and include all real properties
owned or leased by the Borrower and/or any of its Subsidiaries to the
extent listed on Schedule XII hereof.
"Net Cash Proceeds" shall mean the Net Sale Proceeds of any asset
sale which are paid in cash including the cash received by way of deferred
payments pursuant to a note receivable or otherwise (other than the portion
of such deferred payment constituting interest) but only as and when so
received.
"Net Sale Proceeds" shall mean, with respect to any sale of
assets, the amount of cash, the principal amount of promissory notes or
other debt securities, and the fair market value of all other non-cash
proceeds received in connection therewith, net of reasonable costs of sale
in connection therewith, brokerage fees, payments of Indebtedness
associated with Liens encumbering such assets and income taxes, other than
income taxes not currently payable in cash.
"New Banks" shall mean each of the Persons listed on Schedule I
hereto which is not a Continuing Bank.
"Non-Continuing Bank" shall mean each Original Bank who is not a
Continuing Bank.
"Non-Public Information" shall have the meaning set forth in
Section 12.16.
"Non-Voting Common Stock" shall have the meaning provided in
Section 6.13.
"Note" shall have the meaning provided in Section 1.05.
"Note Repurchase" shall mean any acquisition, repurchase,
redemption, retirement or other purchase of Permanent Subordinated
Debentures or Senior Notes.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
shown opposite its name on the signature pages hereof, or such other office
as the Administrative Agent may hereafter designate in writing as such to
the other parties hereto.
"Obligations" shall mean all amounts owing to the Administrative
Agent or any Bank pursuant to the terms of this Agreement or any other
Credit Document.
"Original Bank" shall mean a Bank with a commitment on Schedule
I of the Original Credit Agreement as amended and restated prior to the
Second Restatement Effective Date.
"Original Credit Agreement" shall mean the Credit Agreement,
dated as of September 27, 1989, among the Borrower, certain Subsidiaries,
the Banks, Chemical Bank (now The Chase Manhattan Bank), as Administrative
Agent and The First National Bank of Chicago, as Co-Agent, as amended and
restated as of May 28, 1992 and as in effect immediately prior to the
Second Restatement Effective Date.
"Original Loans" shall mean, collectively the Original Term Loans
and the Original Revolving Loans.
"Original Revolving Loans" shall mean the "Revolving Loans"
under, and as defined in, the Original Credit Agreement.
"Original Term Loans" shall mean the "Term Loans" under, and as
defined in, the Original Credit Agreement.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Administrative
Agent located at 270 Park Avenue, New York, New York 10017, or such other
office as the Administrative Agent may hereafter designate in writing as
such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA or any successor thereto.
"Percentage" shall mean, for each Bank, a fraction (expressed as
a percentage), the numerator of which is the Commitment of such Bank, as in
effect at the time of determination, and the denominator of which is the
Total Commitment, as in effect at such time.
"Permanent Subordinated Debentures" shall mean the Senior
Subordinated Debentures due 2002 of the Borrower as issued pursuant to
the Indenture dated as of June 18, 1992 between the Borrower and Harris
Trust and Savings Bank, as trustee.
"Permitted Acquisitions" shall mean the acquisition by the
Borrower or any Subsidiary thereof of substantially all of the assets or
not less than 50% of the capital stock of any other Person engaged in a
line of business in which the Borrower or such Subsidiary is engaged on the
Second Restatement Effective Date.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances
and other matters affecting title to any Mortgaged Property listed in the
Mortgage Policies in respect thereof and found acceptable by the Collateral
Agent in its reasonable judgment, (ii) as to any particular Mortgaged
Property at any time, such easements, encroachments, covenants, rights of
way, minor defects, irregularities or encumbrances on title which are not
unusual with respect to property similar in character to any such Mortgaged
Property and which do not, in the reasonable opinion of the Collateral
Agent, materially impair such Mortgaged Property for the purpose for which
it is held by the mortgagor thereof, or the lien held by the Collateral
Agent, (iii) zoning, land use and similar laws, rules and regulations
pertaining to the Mortgaged Properties, which are not violated by the
existing improvements and the present use made by the Mortgagor thereof of
the Land and Improvements (as defined in the respective Mortgage), (iv)
real estate taxes, general and special assessments not yet delinquent, (v)
Liens permitted under Sections 8.01(i), (iii) and (iv) to the extent
affecting the respective Mortgaged Property and (vi) such other items as
the Collateral Agent may consent to.
"Permitted Liens" shall have the meaning provided in Section
8.01(iii).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, limited liability company, trust or other
enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan (as
each such term is defined in Section 4001 of ERISA) subject to Title IV of
ERISA which is maintained or contributed to, or at any time during the five
calendar years preceding the Second Restatement Effective Date was
maintained or contributed to, for or on behalf of employees of the Borrower
or a Subsidiary or an ERISA Affiliate.
"Pledge Agreement Collateral" shall mean all "Collateral" under,
and as defined in, each of the Pledge Agreements.
"Pledge Agreements" shall mean and include, each Company Pledge
Agreement and each Subsidiary Pledge Agreement.
"Pledged Securities" shall mean all "Pledged Securities" under,
and as defined in, the Pledge Agreements.
"Preferred Stock Purchase Agreement" shall mean, collectively,
the Preferred Stock Purchase Agreement dated as of March 6, 1992 (the
"Purchase Agreement") between the Borrower and the other parties listed on
the signature pages thereto, the Certificates of Designation and the
Exchange Debentures (each as defined in the Purchase Agreement).
"Prime Rate" shall mean the rate which Chase announces from time
to time as its prime lending rate, the Prime Rate to change when and as
such prime lending rate changes. The Prime Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to
any customer. Chase may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.
"Projections" shall have the meaning provided in Section 6.07(c).
"RCRA" shall mean the Resources Conservation and Recovery Act, as
the same may be amended from time to time.
"Register" shall have the meaning provided in Section 12.04(d).
"Registered Notes" shall have the meaning provided in Section
12.04(e).
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Reportable Event" shall mean an event described in Section
4043(b) of ERISA with respect to a Plan (as to which the 30 day notice
requirement has not been waived by the PBGC) which is a single-employer
plan (as defined in Section 4001(a)(15) of ERISA).
"Required Banks" shall mean the Administrative Agent, the
Documentation Agent, and the Banks, the sum of whose commitments (or after
termination thereof, outstanding Loans) represent an amount greater than
fifty percent of the sum of the Total Commitment (or after the termination
thereof, the sum of the then total outstanding Loans).
"Restatement Fee" shall have the meaning provided in Section
3.01(b).
"Second Restatement Effective Date" shall have the meaning set
forth in Section 12.10.
"SEC" shall have the meaning provided in Section 7.01(h).
"Secured Party" shall mean the Banks and any other Person granted
the benefit of a security interest pursuant to the terms of any Security
Document.
"Security Agreement" shall mean the Company Security Agreement
and each Subsidiary Security Agreement.
"Security Document Collateral" shall mean the "Collateral" as
described and defined in each respective Security Document other than any
Pledge Agreement.
"Security Documents" shall mean, once executed and delivered
pursuant to the Original Credit Agreement or this Agreement, each Pledge
Agreement, each Security Agreement, the Cash Collateral Agreement, dated
March 14, 1990, executed by the Borrower and the Collateral Agent for the
benefit of the Banks, and each Mortgage.
"Senior Notes" shall mean the Senior Notes due 2001 of the
Borrower as issued pursuant to the Indenture dated as of June 26, 1995
between the Borrower and Bank One, Columbus, N.A. as Trustee.
"Series A1 Preferred" shall have the meaning provided in Section
6.13.
"Series A2 Preferred" shall have the meaning provided in Section
6.13.
"Series A3 Preferred" shall have the meaning provided in Section
6.13.
"Series A3 Purchase Agreement" shall mean the Preferred Stock
Purchase Agreement dated as of May 7, 1992 between the Borrower and the
other parties listed on the signature pages thereto and the Certificates of
Designation (as defined in the Series A3 Purchase Agreement).
"Series B1 Preferred" shall have the meaning provided in Section
6.13.
"Series B2 Preferred" shall have the meaning provided in Section
6.13.
"Series B3 Preferred" shall have the meaning provided in Section
6.13.
"Specified Bank" shall have the meaning provided in Section
12.04(e).
"St. Louis River Site" shall mean, the CERCLA (Superfund) site
located in West Duluth, Minnesota, in regard to which the Borrower and
others have been identified as responsible parties, and which is generally
referred to as the St. Louis River/Interlake/Duluth Tar site.
"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Stated Amount" of each Letter of Credit shall mean the maximum
amount available to be drawn thereunder, determined without regard to
whether any conditions to drawing could then be met.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of the stock of which of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such
Person and/or one or more Subsidiaries of such Person has more than a 50%
equity interest at the time, provided that no Person which constitutes an
Inactive Subsidiary shall be deemed to be a Subsidiary of the Borrower for
purposes of this Agreement. Unless otherwise expressly provided, all
references herein to "Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Assignor" shall mean each Subsidiary of the Borrower
other than Hoeganaes and any Foreign Subsidiary which is not a Subsidiary
Guarantor, all of which are listed on Schedule XIII.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
other than Hoeganaes.
"Subsidiary Guaranty" shall mean each Subsidiary Guaranty entered
into pursuant to the Original Credit Agreement, and once executed and
delivered, any guaranty entered into pursuant to Section 7.10 hereto, each
as may be amended, modified or supplemented from time to time.
"Subsidiary Pledge Agreement" shall mean each Subsidiary Pledge
Agreement entered into pursuant to the Original Credit Agreement or this
Agreement, and once executed and delivered, any pledge agreement entered
into pursuant to Section 7.10, each as may be amended, modified or
supplemented from time to time.
"Subsidiary Pledgor" shall mean each Subsidiary of the Borrower
which owns capital stock of a Material Subsidiary of the Borrower other
than Hoeganaes.
"Subsidiary Security Agreement" shall mean and include each of
the Subsidiary Security Agreements entered into pursuant to the Original
Credit Agreement and shall include, after the execution and delivery
thereof, any such security agreements entered into pursuant to Section
7.10, each as same may be amended, modified or supplemented from time to
time.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Unutilized Commitment" shall mean, at any time, the sum of
the Unutilized Commitments of each of the Banks.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if
any, by which the present value of the accrued benefits under the Plan as
of the close of its most recent plan year exceeds the fair market value of
the assets allocable thereto as of the close of its most recent plan year,
determined in accordance with Section 412 of the Code.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawings" shall have the meaning provided in Section
2.05(a).
"Unutilized Commitment" of any Bank at any time shall mean the
Commitment of such Bank less (i) the aggregate principal amount of Loans
made by such Bank and then outstanding and (ii) the product of such Bank's
Percentage and the Letter of Credit Outstandings at such time.
"Working Capital" shall mean Consolidated Current Assets less
Consolidated Current Liabilities.
Section 11. The Administrative Agent.
11.01 Appointment. The Banks hereby designate Chase as
Administrative Agent (for purposes of this Section 11, the term
"Administrative Agent" shall include Chase in its capacity as Collateral
Agent pursuant to the Security Documents) to act as specified herein and in
the other Credit Documents. Each Bank hereby irrevocably authorizes, and
each holder of any Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Administrative Agent to take such action on
its behalf under the provisions of this Agreement, the other Credit
Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such duties hereunder
and thereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Administrative Agent may perform
any of its duties hereunder by or through its officers, directors, agents
or employees. The Documentation Agent shall have no duties hereunder.
11.02 Nature of Duties. The Administrative Agent shall have
no duties or responsibilities except those expressly set forth in this
Agreement and the Security Documents. Neither the Administrative Agent nor
any of its officers, directors, agents or employees shall be liable for any
action taken or omitted by it or them hereunder or under any other Credit
Document or in connection herewith or therewith, unless caused by its or
their gross negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any
other Credit Document a fiduciary relationship in respect of any Bank; and
nothing in this Agreement or any other Credit Document, expressed or
implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any
other Credit Document except as expressly set forth herein.
11.03 Lack of Reliance on the Administrative Agent.
Independently and without reliance upon the Administrative Agent, each
Bank, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of each Credit Party in connection with the making and the
continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of
each Credit Party and, except as expressly provided in this Agreement, the
Administrative Agent shall have no duty or responsibility, either initially
or on a continuing basis, to provide any Bank with any credit or other
information with respect thereto, whether coming into its possession before
the making of the Loans, or at any time or times thereafter. The
Administrative Agent shall not be responsible to any Bank for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of this Agreement or
any other Credit Document (except insofar as this Agreement or any other
Credit Document expressly imposes obligations upon the Administrative
Agent) or the financial condition of any Credit Party or be required to
make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of any Credit Party or the existence
or possible existence of any Default or Event of Default.
11.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Banks
with respect to any act or action (including failure to act) in connection
with this Agreement or any other Credit Document, the Administrative Agent
shall be entitled to refrain from such act or taking such action unless and
until the Administrative Agent shall have received instructions from the
Required Banks; and the Administrative Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the foregoing, no
Bank shall have any right of action whatsoever against the Administrative
Agent as a result of the Administrative Agent acting or refraining from
acting hereunder or under any other Credit Document in accordance with the
instructions of the Required Banks or where otherwise expressly provided
herein, such other requisite number of Banks.
11.05 Reliance. The Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed
(in the absence of gross negligence on its part) to be the proper Person
and, with respect to all legal matters pertaining to this Agreement and any
other Credit Document and its duties hereunder and thereunder, upon advice
of counsel selected by it.
11.06 Indemnification. To the extent the Administrative
Agent is not reimbursed and indemnified by the Borrower, the Banks will
reimburse and indemnify the Administrative Agent, in proportion to their
respective Commitments, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative Agent in
performing its duties hereunder or under any other Credit Document, in any
way relating to or arising out of this Agreement or any other Credit
Document; provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative
Agent's gross negligence or willful misconduct.
11.07 The Administrative Agent in its Individual Capacity.
With respect to its obligation to make Loans and participate in Letters of
Credit under this Agreement, the Administrative Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights
and powers as though it were not performing the duties specified herein;
and the term "Banks," "holders of Notes" or any similar terms shall, unless
the context clearly otherwise indicates, include the Administrative Agent
in its individual capacity. The Administrative Agent and/or its Affiliates
may own stock of any Credit Party and may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other business
with any Credit Party or any Affiliate of any Credit Party as if it were
not performing the duties specified herein, and may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the
Banks.
11.08 Holders. The Administrative Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment, transfer or endorsement
thereof, as the case may be, shall have been filed with the Administrative
Agent. Any request, authority or consent of any Person or entity who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent
holder, transferee, assignee or endorsee, as the case may be, of such Note
or of any Note or Notes issued in exchange therefor.
11.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions
and duties hereunder and/or under the other Credit Documents at any time by
giving 25 Business Days' prior written notice to the Borrower and the
Banks. Such resignation shall take effect upon the appointment of a
successor Administrative Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall appoint
a successor Administrative Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 25 Business Day period, the Administrative Agent,
with the consent of the Borrower, shall then appoint a successor
Administrative Agent who shall serve as Administrative Agent hereunder or
thereunder until such time, if any, as the Banks appoint a successor
Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date
such notice of resignation was given by the Administrative Agent, the
Administrative Agent's resignation shall become effective and the Banks
shall thereafter perform all the duties of the Administrative Agent
hereunder and/or under any other Credit Document until such time, if any,
as the Banks appoint a successor Administrative Agent as provided above.
Section 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay
all reasonable out-of-pocket costs and expenses of the Administrative Agent
in connection with the preparation, execution and delivery of the Credit
Documents and the documents and instruments referred to therein (including,
without limitation, the reasonable fees and disbursements of one special
counsel and of any local or foreign counsel); (ii) pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent in connection with
any amendment, waiver or consent relating to the Credit Documents and the
documents and instruments referred to therein (including without
limitation, the reasonable fees and disbursements of one special counsel
and of any local or foreign counsel) and of the Administrative Agent and
each of the Banks in connection with the enforcement of the Credit
Documents and the documents and instruments referred to therein (including,
without limitation, the reasonable fees and disbursements of counsel for
the Administrative Agent and for each of the Banks; (iii) pay and hold each
of the Banks harmless from and against any and all present and future stamp
and other similar taxes with respect to the foregoing matters and save each
of the Banks harmless from and against any and all liabilities with respect
to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iv) indemnify the
Administrative Agent and each Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any
and all losses, liabilities, claims, damages, or expenses incurred by any
of them as a result of, or arising out of, or in any way related to, or by
reason of, any investigation, litigation or other proceeding (whether or
not the Administrative Agent or any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the consummation of any transactions
contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with
any such investigation, litigation or other proceeding (but excluding any
such losses, liabilities, claims, damages or expenses to the extent
incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified); provided that the Borrower shall not be required
to pay for the legal fees and expenses of more than one outside counsel for
all persons indemnified under this clause (iv) unless, in the written
opinion of outside counsel reasonably satisfactory to the Borrower,
representation of all such indemnified persons would be inappropriate due
to the existence of an actual or potential conflict of interest. The
Administrative Agent and each Bank agrees to notify the Borrower promptly
of any assertion against it (or any of its officers, directors, employees,
representatives or agents) of any claim or the commencement of any action
or proceeding relating to any transaction contemplated hereby, provided
that the failure of the Administrative Agent or such Bank to notify the
Borrower shall not affect the rights of the Administrative Agent, any Bank
or any other person entitled to indemnification pursuant to this Section
12.01 but the Borrower shall not be deemed to be in default of its
obligation to so indemnify until such notice has been received by the
Borrower and the Borrower has failed to perform as required by this Section
12.01.
12.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and continuance of an
Event of Default, each Bank is hereby authorized at any time or from time
to time, without presentment, demand, protest or other notice of any kind
to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held
or owing by such Bank (including without limitation by branches and
agencies of such Bank wherever located) to or for the credit or the account
of such Credit Party against and on account of the Obligations and
liabilities of such Credit Party under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations of such Party purchased by such Bank pursuant to Section
12.06(b), and all other claims of any nature or description arising out of
or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Bank shall have made any demand hereunder and
although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall
be in writing (including telegraphic, telex, telecopier or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered, if to Borrower, at its address specified opposite its signature
below or in any Credit Document executed by it; if to any Bank, at its
address specified opposite its signature below; and if to the
Administrative Agent, at its Notice Office; or, as to the Borrower or the
Administrative Agent, at such other address as shall be designated by such
party in a written notice to the other parties hereto and, as to each other
party, at such other address as shall be designated by such party in a
written notice to the Borrower and the Administrative Agent. All such
notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective upon
receipt, or in any event, three Business Days after being deposited in the
mails, delivered to the telegraph company, cable company or overnight
courier, as the case may be, or sent by telex or telecopier, except that
notices and communications to the Administrative Agent shall not be
effective until received by the Administrative Agent.
12.04 Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Administrative
Agent and the Banks and their respective successors and assigns. The
Borrower may not assign or transfer any of its rights or obligations
hereunder without the written consent of the Banks. Each Bank may sell
participations to any Person in all or part of any Loan, or all or any part
of its Notes or Commitments, to another bank or other entity, in which
event, without limiting the foregoing, the provisions of Sections 1.10,
1.11, 2.06 and 4.04 shall inure to the benefit of each purchaser of a
participation and the pro rata treatment of payments, as described in
Sections 4.01 and 4.02, shall be determined as if the Bank had not sold
such participation. In the event any Bank shall sell any participation,
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower relating to the Loans, including, without
limitation, the right to approve any amendment, modification or waiver of
any provision of this Agreement other than amendments, modifications or
waivers with respect to any (i) fees payable hereunder to the Banks, (ii)
the amount of principal or the rate of interest payable on, or the dates
fixed for the final repayment of principal of the Loans and (iii) the
release of the Lien on all or substantially all of the Collateral.
(b) Each Bank may assign to one or more Banks or Eligible
Assignees all or a portion of its interests, rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of the related Loans at the time owing to
it and the related Note or Notes held by it); provided, however, that (i)
other than in the case of an assignment to an Affiliate of the assigning
Bank or another Bank, each of the Administrative Agent and the Borrower
must give its prior written consent (provided that the Borrower's consent
shall not be required if a Default or Event of Default shall have occurred
and be occurring), which consent will not be unreasonably withheld, (ii) in
the event such assignment is not made to an Affiliate of the assigning Bank
or another Bank, the aggregate amount of the Commitment and/or Loans of the
assigning Bank subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered
to the Administrative Agent) shall in no event be less than $5,000,000 or
such lesser amount representing the entire remaining Commitment of such
assigning Bank, and, (iii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register (as defined below), an Assignment and Acceptance
in the form of Exhibit G hereto (each, an "Assignment and Acceptance") with
blanks appropriately completed, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $3,000 and,
provided further, that no such transfer or assignment by a Specified Bank
will be effective until recorded by the Administrative Agent on the
Register pursuant to Section 12.04(d) hereof. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be
at least five Business Days after the execution thereof (A) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereby
and (B) the Bank thereunder shall, to the extent provided in such
assignment, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Bank's rights and obligations under this Agreement,
such Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other
than the representation and warranty that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse
claim, such Bank assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or to in connection with the Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such Bank assignor makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower
of any of its obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 6.07 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the
Administrative Agent, such Bank assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all the obligations that by the
terms of this Agreement are required to be performed by it as a Bank.
(d) The Administrative Agent shall maintain at its Notice Office
a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Banks and the Commitments
of, and principal amount of the Loans owing to, each Bank from time to time
(the "Register"). The entries in the Register shall be conclusive in the
absence of manifest error and the Borrower, the Administrative Agent and
the Banks may treat each person the name of which is recorded in the
Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Bank at
any reasonable time and from time to time upon reasonable prior notice.
With respect to any Specified Bank, the Administrative Agent shall maintain
the Register, solely for purposes of this Section 12.04(d), as an agent of
the Borrower. The transfer of the Commitments and Loans of any Specified
Bank and the rights to the principal of, and interest on, any Loans or any
Loans made pursuant to such Commitments shall not be effective until such
transfer is recorded in the Register maintained by the Administrative Agent
with respect to ownership of such Commitments and Loans and prior to such
recordation all amounts owing to the transferor with respect to such
Commitments and Loans shall remain owing to the transferor. The
registration of an assignment or transfer by a Specified Bank of all or
part of its Commitments and Loans shall be recorded by the Administrative
Agent on the Register only upon the acceptance by the Administrative Agent
of a properly executed and delivered Assignment and Acceptance pursuant to
Section 12.04(b). Coincident with the delivery by a Specified Bank of such
Assignment and Acceptance to the Administrative Agent for acceptance and
registration of an assignment or transfer of all or part of a Loan, or as
soon thereafter as practicable, the assigning or transferor Specified Bank
shall surrender the Registered Note evidencing such Loan, and thereupon one
or more new Registered Notes in the same aggregate principal amount shall
be issued to the assigning or transferor Specified Bank and/or the new
Bank. The Administrative Agent shall indemnify and defend the Borrower for
and against any and all actions, claims, costs and damages which arise from
or out of the agency relationship established by this Section 12.04(d)
other than any actions, claims, costs and damages which result primarily
from the gross negligence or willful misconduct of the Borrower. Subject to
Section 11.02, neither the Administrative Agent nor the Borrower shall be
liable in any respect to the Banks in connection with the maintenance of
the transfer and registration system pursuant to this Section 12.04(d).
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Bank and the assignee thereunder together with any Note or
Notes subject to such assignment, the written consent to such assignment
and the Fee payable in respect thereto, the Administrative Agent shall, if
such Assignment and Acceptance has been completed with blanks appropriately
filled, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after receipt of
notice, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Notes new Notes to the
order of such assignee in accordance with the provisions of Section 1.05
hereof and, if the assigning Bank has retained Commitments and/or Loans
hereunder, new Notes to the order of the assigning Bank in an amount equal
to the Commitments and/or Loans retained by it hereunder. Such new Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form
of the respective Note. Thereafter, such surrendered Notes shall be marked
canceled and returned to the Borrower. Each new Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
and that could become completely exempt from withholding of any tax,
assessment or other charge or levy imposed by or on behalf of the United
States of America or any taxing authority thereof in respect of payment of
Obligations due to such Bank if the Obligations were in registered form for
U.S. Federal income tax purposes may request the Borrower (through the
Administrative Agent), and the Borrower thereby agrees, upon such Bank's
satisfaction of the requirements of Sections 4.04(b), to record such
Obligations in the Register and exchange any Notes evidencing such
Obligations for Notes in registered form ("Registered Notes") for U.S.
Federal income tax purposes (which form shall be in substantially the form
of Exhibit B, as the case may be, except that such Registered Notes shall
be made payable to such Bank or its registered assigns). Registered Notes
shall be deemed to be and shall be Notes for all purposes of the Credit
Agreement and the other Credit Documents. Any Bank that makes a request
pursuant to the second immediately preceding sentence and receives
Registered Notes in exchange for its Notes, together with any subsequent
transferee or assignee of such Bank, is hereinafter called a "Specified
Bank." Registered Notes may not be exchanged for Notes that are not in
registered form.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 12.04, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower furnished to such
Bank by or on behalf of the Borrower, provided that prior to any such dis-
closure, each such assignee or participant or proposed assignee or
participant shall have executed a confidentiality letter in the form of
Exhibit H hereto with respect to the preservation of the confidentiality of
any confidential information relating to the Borrower and its Subsidiaries
received from such Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Bank or any holder of a Note in
exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between any Credit Party and the
Administrative Agent or any Bank or the holder of any Note shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege hereunder or thereunder. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or
remedies which the Administrative Agent or any Bank or the holder of any
Note would otherwise have. No notice to or demand on any Credit Party in
any case shall entitle such Credit Party to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the
rights of the Administrative Agent, the Banks or the holder of any Note to
any other or further action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Administrative Agent
agrees that promptly after its receipt of each payment from or on behalf of
any Credit Party in respect of any Obligations of such Credit Party
hereunder or under any Credit Document, it shall distribute such payment to
the Banks pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise), which is applicable to the payment of the
principal of, or interest on, the Loans, Unpaid Drawings or Commitment
Commission, of a sum which with respect to the related sum or sums received
by other Banks is in a greater proportion than the total of such Obligation
then owed and due to such Bank bears to the total of such Obligation then
owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without
recourse or warranty from the other Banks an interest in the Obligations of
such Credit Party to such Banks in such amount as shall result in a
proportional participation by all the Banks in such amount; provided that
if all or any portion of such excess amount is thereafter recovered from
such Bank, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest.
12.07 Calculations; Computations. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting policies and
principles consistently applied throughout the periods involved (except as
set forth in the notes thereto). The Projections have been made and
prepared in accordance with the same accounting policies and principles as
the financial statements delivered pursuant to Section 6.07(a). All
calculations and computations determining compliance with Sections 4.02 and
8 shall utilize accounting principles and policies in conformity with those
used to prepare the financial statements referred to in Section 6.07(a).
(b) All computations of interest, Commitment Commission and Fees
hereunder shall be made on the actual number of days elapsed over a period
of 360 days. All interest shall accrue from the date funds are made
available to the Borrower to, but not including, the date of repayment
thereof or of the end of an Interest Period therefor; provided that if any
Loan is repaid on the same day on which it is borrowed hereunder, one day's
interest shall be paid on such Loan.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE BORROWER HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any
legal action or proceeding with respect to this Agreement or any other
Credit Document may be brought in the courts of the State of New York or of
the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, the Borrower hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower hereby irrevocably
designates, appoints and empowers CT Corporation System, with offices on
the date hereof at 1633 Broadway, New York, New York as its designee,
appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any such
action or proceeding. The Administrative Agent agrees to use reasonable
good faith efforts to mail, by registered or certified mail, to the
Borrower, at its address set forth opposite its signature below, copies of
any correspondence mailed or delivered to CT Corporation System in
connection with the immediately preceding sentence; provided that no
failure of the Borrower to receive, for any reason, copies of such
correspondence shall in any way affect the effectiveness of the delivery of
any legal process, summons, notice or documents delivered to the Borrower's
agent for service of process. If for any reason such designee, appointee
and agent shall cease to be available to act as such, the Borrower agrees
to designate a new designee, appointee and agent in New York City on the
terms and for the purposes of this provision satisfactory to the
Administrative Agent. The Borrower further irrevocably consents to the
service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth
opposite its signature below, such service to become effective thirty days
after such mailing. Nothing herein shall affect the right of the
Administrative Agent, any Bank or the holder of any Note to serve process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
or any other Credit Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or
claim in any such court, any such action or proceeding brought in any such
court has been brought in an inconvenient forum. The Borrower further
waives any right it may have to trial by jury in any court or jurisdiction,
including, without limitation, the jurisdictions and courts referred to in
clause (a) above.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Administrative Agent.
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Second Restatement Effective Date") on which (i) the
Borrower, the Administrative Agent, the Documentation Agent and each of
the Continuing Banks shall have signed a copy hereof (whether the same or
different copies) and shall have delivered the same to the Administrative
Agent at the Payment Office of the Administrative Agent or, in the case
of the Banks, shall have given to the Administrative Agent telephonic
(confirmed in writing), written telex or facsimile transmission notice
(actually received) at such office that the same has been signed and
mailed to it and (ii) the conditions set forth in Section 5.01 have been
satisfied.
12.11. Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Agreement.
12.12. Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Borrower and the Required Banks;
provided, however, that no such change, waiver, discharge or termination
shall, without the consent of each Bank affected thereby (i) extend the
final maturity of any Loan or Note, or reduce the rate or extend the time
of payment of interest or Fees thereon, or increase the Commitments of any
Bank over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in
the Total Commitment shall not constitute a change in the terms of any
Commitment of any Bank, (ii) release all or substantially all of the
Collateral or the Guaranties except, in each case as shall be otherwise
provided herein or in any other Credit Document, (iii) amend, modify or
waive any provision of this Section, (iv) reduce the percentage specified
in the definition of Required Banks or (v) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement. Notwithstanding anything to the contrary contained herein, the
modifications contemplated by 12.04 (to the extent needed to make new Banks
party to this Agreement) shall in each case be permitted in accordance with
the terms thereof.
12.13. Obligation to Make Payments in Dollars. The obligation
of the Borrower to make payment in Dollars of the principal of and interest
on the Notes and any other amounts due hereunder or under any other Credit
Document to the Payment Office of the Administrative Agent as provided in
Section 4.03 shall not be discharged or satisfied by any tender, or any
recovery pursuant to any judgment, which is expressed in or converted into
any currency other than Dollars, except to the extent such tender or
recovery shall result in the actual receipt by the Administrative Agent at
its Payment Office on behalf of the Banks or holders of the Notes of the
full amount of Dollars expressed to be payable in respect of the principal
of and interest on the Notes and all other amounts due hereunder or under
any other Credit Document. The obligation of the Borrower to make payments
in Dollars as aforesaid shall be enforceable as an alternative or
additional cause of action for the purpose of recovery in Dollars of the
amount, if any, by which such actual receipt shall fall short of the full
amount of Dollars expressed to be payable in respect of the principal of
and interest on the Notes and any other amounts due under any other Credit
Document, and shall not be affected by judgment being obtained for any
other sums due under this Agreement or under any other Credit Document.
12.14. Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 11.06 and 12.01
shall survive the execution and delivery of this Agreement and the Notes
and the making and repayment of the Loans.
12.15. Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of any branch, office, Subsidiary or
Affiliate of such Bank, provided that the Borrower shall not be responsible
for costs arising under Section 1.10, 1.11, 2.06 or 4.04 resulting from any
such transfer to the extent not otherwise applicable to such Bank prior to
such transfer.
12.16. Confidentiality. Subject to Section 12.04 the Banks
shall hold all Non-Public Information obtained pursuant to the requirements
of this Agreement in accordance with its customary procedure for handling
confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably
required by any bona fide assignee or participant in connection with the
contemplated transfer of any Loans or participation therein or as required
or requested by any governmental agency or representative thereof or
pursuant to legal process, provided that, unless specifically prohibited by
applicable law or court order, each Bank shall notify the Borrower of any
request by any governmental agency or representative thereof (other than
any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) for disclosure of any
such Non-Public Information prior to disclosure of such information, and
provided further that in no event shall any Bank be obligated or required
to return any materials furnished by the Borrower or any Subsidiary.
"Non-Public Information" shall mean information other than (i) information
which is publicly available or becomes publicly available other than as a
result of a breach by the relevant Bank of its obligations under this Section
12.16, (ii) information which becomes available to a Bank from a source
other than the Borrower or its representatives and not in contravention of
any other confidentiality obligations of which such Bank has actual
knowledge or (iii) information which was available to the relevant Bank on
a non-confidential basis prior to its disclosure by the Borrower to such
Bank.
12.17. Amendment and Restatement; ESOP Loans. (a) Upon the
effectiveness of this Agreement, the parties hereto agree that the Original
Credit Agreement is amended and restated in its entirety upon the terms and
conditions set forth herein, and except as described in clause (b)(ii),
below shall be of no further force or effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Original Credit Agreement and any and all amendments
thereto, with respect to the ESOP Loans (as defined in the Original Credit
Agreement):
(i) Upon the occurrence of the Second Restatement Effective
Date, the Continuing Banks will be deemed to have purchased the ESOP
Loans of the Non-Continuing Banks from such Non-Continuing Banks;
(ii) Until the repayment of the ESOP Loans, the ESOP Loans
will be (x) held by the Continuing Banks and (y) governed by the terms
and conditions of the Original Credit Agreement, as in effect
immediately prior to the Second Restatement Effective Date;
(iii) An amount of the Disposition Proceeds equal to the
outstanding obligations on the ESOP Loans on the Second Restatement
Effective Date paid to the Banks under the terms Section 5.01(j)(iii)
will be delivered to the Administration Agent and held by it for the
benefit of the Continuing Banks as security pursuant to security
arrangements satisfactory to the Administrative Agent (the "ESOP Loan
Security") for the repayment of the ESOP Loans (which Disposition
Proceeds may be applied to repay the ESOP Loans at any time); and
(iv) On January 2, 1998, the Administrative Agent will apply,
without any further instruction from any other Person, the ESOP Loan
Security to the outstanding principal of the ESOP Loans, and provided
that the ESOP Loans are repaid in full, the terms and conditions of
the Original Credit Agreement, as amended and restated immediately
prior to the Second Restatement Effective Date, will have no force and
effect, except as otherwise provided for in, or unless otherwise
incorporated by, this Agreement.
12.18 Conversion of Original Loans of Continuing Banks;
Termination of Commitments of Non-Continuing Banks. Notwithstanding
anything to the contrary contained in the Original Credit Agreement, this
Agreement or any other Credit Document, the Borrower and each of the Banks
hereby agree that on the Second Restatement Effective Date, (i) each Bank
with a Commitment as set forth on Schedule I (after giving effect to the
Second Restatement Effective Date) shall make or maintain (including by way
of conversion) that principal amount of Loans to the Borrower as is
required by Section 1.01, provided that if the Original Loans of any
Continuing Bank outstanding on the Second Restatement Effective Date
(immediately before giving effect thereto) exceed the aggregate principal
amount of Loans required to be made available by such Bank on such date
(after giving effect to the Second Restatement Effective Date), then
Original Loans of such Continuing Bank in an amount equal to such excess
shall be repaid on the Second Restatement Effective Date, together with
interest thereon, to such Continuing Bank and (ii) in the case of each
Non-Continuing Bank, all of such Non-Continuing Bank's Original Loans
outstanding on the Second Restatement Effective Date shall be repaid in
full on such date, together with interest thereon and all accrued Fees (and
any other amounts) owing to such Non-Continuing Bank, and the Commitment
(under, and as defined in, the Original Credit Agreement) of such
Non-Continuing Bank, if any, shall be terminated, effective upon the occurrence
of the Second Restatement Effective Date. Notwithstanding anything to the
contrary contained in the Original Credit Agreement, this Agreement or any
other Credit Document, the parties hereto hereby consent to the repayments
and reductions required above, and agree that in the event that any
Original Bank shall fail to execute a counterpart of this Agreement prior
to the occurrence of the Second Restatement Effective Date, such Original
Bank shall be deemed to be a Non-Continuing Bank and, concurrently with the
occurrence of the Second Restatement Effective Date, the Commitment (under,
and as defined in, the Original Credit Agreement) of such Original Bank, if
any, shall be terminated, all Original Loans of such Original Bank
outstanding on the Second Restatement Effective Date shall be repaid in
full, together with interest thereon and all accrued Fees (and any other
amounts) owing to such Original Bank, and concurrently with the occurrence
of the Second Restatement Effective Date, such Original Bank shall no
longer constitute a "Bank" under this Agreement and the other Credit
Documents, provided that all indemnities of the Credit Parties under the
Original Credit Agreement and the other Credit Documents (as in effect
prior to the Second Restatement Effective Date) for the benefit of such
Original Bank shall survive in accordance with the terms thereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
Address:
The Interlake Corporation
550 Warrenville Road
Lisle, IL 60532-4387
Attention:_______________
THE INTERLAKE CORPORATION
By: /s/Stephen Gregory
Name: Stephen Gregory
Title: Vice President - Finance
and Chief Financial Officer
BANKS
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention:_______________
THE CHASE MANHATTAN BANK,
Individually and as
Administrative Agent
By: /s/Timothy Storms
Name: Timothy Storms
Title: Managing Director
The First National Bank of
Chicago
One First National Plaza
Suite 0088
Chicago, IL 60670
Attention: _______________
THE FIRST NATIONAL BANK OF
CHICAGO
Individually, and as Documentation Agent
By: /s/Karen Kizer
Name: Karen Kizer
Title: Senior Vice President
SCHEDULE I
to
Credit Agreement
COMMITMENTS
Part A
Bank
The Chase Manhattan Bank $51,000,000
The First National Bank of Chicago $51,000,000
TOTAL Commitment $102,000,000
Part B
Bank
The Chase Manhattan Bank $53,000,000
The First National Bank of Chicago $53,000,000
TOTAL Commitment $106,000,000
Exhibit 4.16
NOTE
New York, New York
$53,000,000.00 December 22, 1997
FOR VALUE RECEIVED, THE INTERLAKE CORPORATION, a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of THE CHASE MANHATTAN BANK
(the "Bank"), in lawful money of the United States of America in immediately
available funds, at the office of The Chase Manhattan Bank (the "
Administrative Agent") located at 270 Park Avenue, New York, New York 10017 on
the Maturity Date (as defined in the Second Amended and Restated Credit
Agreement referred to below) the principal sum of FIFTY-THREE MILLION DOLLARS
or, if less, the unpaid principal amount of all Loans (as defined in the
Second Amended and Restated Credit Agreement) made by the Bank pursuant to the
Second Amended and Restated Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal amount
of each Loan in like money at said office from the date such Loan is made until
paid at the rates and at the times provided in Section 1.08 of the Second
Amended and Restated Credit Agreement.
This Note is one of the Notes referred to in the Second Amended and
Restated Credit Agreement, dated as of September 27, 1989 and amended and
restated as of December 22, 1997, among the Borrower, the financial
institutions named therein (including the Bank), the Administrative Agent and
the Document Agent (as so amended and restated and as the same may hereafter
be amended, modified or supplemented from time to time, the "Second Amended
and Restated Credit Agreement") and is entitled to the benefits thereof. This
Note is issued in replacement of the Notes as defined in and issued pursuant
to the Original Credit Agreement (as defined in the Second Amended and Restated
Credit Agreement). This Note is guaranteed pursuant to the Subsidiary
Guaranties and is secured by certain Security Documents (as defined in the
Second Amended and Restated Credit Agreement). As provided in the Second
Amended and Restated Credit Agreement, this Note is subject to voluntary and
mandatory prepayment prior to the Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Second Amended and Restated
Credit Agreement) shall occur and be continuing, the principal of and accrued
interest on this Note may be declared to be due and payable in the manner and
with the effect provided in the Second Amended and Restated Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
THE INTERLAKE CORPORATION
By:
Name:
Title:
Exhibit 4.17
NOTE
New York, New York
$53,000,000.00 December 22, 1997
FOR VALUE RECEIVED, THE INTERLAKE CORPORATION, a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of THE FIRST
NATIONAL BANK OF CHICAGO (the "Bank"), in lawful money of the United
States of America in immediately available funds, at the office of The
Chase Manhattan Bank (the "Administrative Agent") located at 270 Park
Avenue, New York, New York 10017 on the Maturity Date (as defined in the
Second Amended and Restated Credit Agreement referred to below) the
principal sum of FIFTY-THREE MILLION DOLLARS or, if less, the unpaid
principal amount of all Loans (as defined in the Second Amended and
Restated Credit Agreement) made by the Bank pursuant to the Second Amended
and Restated Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of each Loan in like money at said office from the date such Loan
is made until paid at the rates and at the times provided in Section 1.08
of the Second Amended and Restated Credit Agreement.
This Note is one of the Notes referred to in the Second Amended and
Restated Credit Agreement, dated as of September 27, 1989 and amended and
restated as of December 22, 1997, among the Borrower, the financial
institutions named therein (including the Bank), the Administrative Agent
and the Document Agent (as so amended and restated and as the same may
hereafter be amended, modified or supplemented from time to time, the
"Second Amended and Restated Credit Agreement") and is entitled to the
benefits thereof. This Note is issued in replacement of the Notes as
defined in and issued pursuant to the Original Credit Agreement (as
defined in the Second Amended and Restated Credit Agreement). This Note
is guaranteed pursuant to the Subsidiary Guaranties and is secured by
certain Security Documents (as defined in the Second Amended and Restated
Credit Agreement). As provided in the Second Amended and Restated Credit
Agreement, this Note is subject to voluntary and mandatory prepayment
prior to the Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Second Amended and
Restated Credit Agreement) shall occur and be continuing, the principal of
and accrued interest on this Note may be declared to be due and payable in
the manner and with the effect provided in the Second Amended and Restated
Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
THE INTERLAKE CORPORATION
By:
Name:
Title:
Exhibit 4.21
EXHIBIT F
Dated: December 22, 1997
CONFIRMATION AND GUARANTY OF SECURITY INTEREST
Section 1. Security Interests. Each of the undersigned hereby:
(a) acknowledges that it was a party to the Amended and Restated
Credit Agreement, dated as of September 27, 1989, amended and restated as
of May 28, 1992 (the "Original Credit Agreement") among The Interlake
Corporation (the "Borrower"), The Chase Manhattan Bank, as Administrative
Agent, The First National Bank of Chicago, as Co-Agent, and the financial
institutions from time to time party to the Original Credit Agreement,
(b) acknowledges and consents to the execution, delivery and
performance of (i) the Second Amended and Restated Credit Agreement, dated
as of September 27, 1989, amended and restated as of December 22, 1997
(the "Second Amended and Restated Credit Agreement") by and among the
Borrower, The Chase Manhattan Bank, as Administrative Agent, The First
National Bank of Chicago, as Documentation Agent, and financial
institutions from time to time a party to the Second Amended and Restated
Credit Agreement (the "Banks"), and (ii) all of the documents and
transactions contemplated by the Second Amended and Restated Credit
Agreement; and
(c) except as set forth herein, agrees that the execution,
delivery and performance of the documents considered in the above clause
(b) shall not in any way affect such entity's obligations (except as
expressly release therefrom) under any Credit Document, or any other
document executed in connection therewith other than the Original Credit
Agreement, to which such entity is a party, including, without limitation,
each such entity's respective obligations (if any) under the Amended and
Restated Company Security Agreement (attached hereto as Annex A) and the
Amended and Restated Subsidiary U.S. Security Agreement (attached hereto
as Annex B), each of which documents, and each other document executed in
connection therewith, other than the Original Credit Agreement (the
"Credit Documents"), are hereby assumed under and made a part by reference
of the Second Amended and Restated Credit Agreement which obligations on
the date hereof remain absolute and unconditional (except as expressly
released therefrom) and are not subject to any defense, set-off or
counterclaim; provided that, in the case of each of the Credit Documents,
the undersigned hereby acknowledge and agree that the "Obligations" (as
defined therein) include all of the Obligations under and as defined in
the Second Amended and Restated Credit Agreement after giving effect to
the Second Restatement Effective Date and any increase in the amounts
owing to the Banks or the Administrative Agent (as defined in the Second
Amended and Restated Credit Agreement). Unless otherwise defined herein,
capitalized terms used in this Confirmation of Guaranty and Security
Interests shall have the meanings set forth in the Second Amended and
Restated Credit Agreement.
Section 2. Counterparts. This Confirmation of Guaranty and Security
Interests may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and
the Administrative Agent.
CHEM-TRONICS, INC.
By:
Name:
Title:
GARY STEEL SUPPLY COMPANY
By:
Name:
Title:
INTERLAKE ARD CORPORATION
By:
Name:
Title:
INTERLAKE PACKAGING CORPORATION
By:
Name:
Title:
THE INTERLAKE COMPANIES, INC.
By:
Name:
Title:
Exhibit 10.1
THE INTERLAKE CORPORATION
1998 Senior Executive Incentive Program
Section 1. Purpose
l.l Purpose The purpose of the Senior Executive Incentive
Program ("the Program") is to promote improved performance in 1998 through
the provision of meaningful incentives for the achievement of specified
financial goals.
Section 2. Eligibility and Participation
2.l Eligibility Eligibility for participation in this Program
is limited to those Employees deemed to be, by virtue of the nature and scope
of their positions, most able to promote the achievement by the Company of
its financial objectives and its overall success.
2.2 Participation Participation in the Program will be
determined by the Board, based upon the recommendation of the Chief Executive
Officer and the Compensation Committee.
2.3 Award Opportunities. For each Participant, the Board will
designate, upon the recommendations of the Chief Executive Officer and the
Compensation Committee, the Threshold, Plan, Target and Stretch (for
operating unit participants only) goals for each relevant Performance
Measure, and the amount of Award payable to such Participant upon achievement
of such goals ("Award Opportunities").
2.4 Organizational Units. For each Participant the Board will
designate, upon the recommendations of the Chief Executive Officer and the
Compensation Committee, the Organizational Unit upon the performance of which
such Participant's Awards will be based (i.e., Corporate, Chem-tronics,
Inc., Hoeganaes Corporation or Interlake Material Handling, Inc.).
2.5 Changes In Participation During Year Contemporaneously with
the demotion or reassignment of a Participant, the Board or the Chief
Executive Officer may terminate a Participant's participation in this Program
without otherwise affecting the employment status of such Employee. The
Employee will be notified of such termination as soon as practicable
following such action. In the case of such a termination, any Award to which
the terminated Participant would have been entitled will be pro rated based
upon that portion of the Year during which he was a Participant, adjusted for
personal performance.
2.6 No Right to Participate No Participant or other Employee
at any time shall have a right to be selected for participation in this
Program, despite having been approved for participation in some other year,
nor any right to be selected for participation in any plan or program for any
other year, despite having been selected for participation in this Program.
Section 3. Award Determination
3.1 Performance Measures. Awards will be based on the
Performance Measures in the percentages indicated below.
Corporate Participants Weighting Factor
Corporate EBIT 70 %
Corporate ACWC/S 30 %
Total Corporate 100%
Participants in Organizational
Units Other Than Corporate Weighting Factor
Organizational Unit EBIT 56 %
Organizational Unit ACWC/S 24 %
Total Organizational Unit Portion 80%
Corporate EBIT 14 %
Corporate ACWC/S 6 %
Total Corporate Portion 20%
Total Organizational Unit 100%
3.2 Award Calculation. Each Participant's Award will equal the
sum of the amounts earned based on the Award Opportunities set for such
Participant in accordance with Section 2.3 for the relevant Performance
Measures set by the Board in accordance with Sections 2.3 and 3.1, with
interpolation between the Threshold, Plan, Target and Stretch goals in
determining the amount earned with respect to each Performance Measure. All
determinations of Awards by the Board will be conclusive, absent manifest
error.
3.3 EBIT Threshold. Notwithstanding any other provision of this
Section 3, a Participant may not, in the case of a Corporate Participant,
earn any Award, and in the case of any other Participant, earn any Award
based on the 80% Award Opportunity related to his or her Organizational Unit,
unless his or her Organizational Unit meets its EBIT Threshold. A
Participant in an Organizational Unit other than Corporate may not earn any
Award based on the 20% Award Opportunity related to Corporate performance
unless Corporate meets its EBIT Threshold.
3.4 Corporate Participants - No Default on Indebtedness. No
Corporate Participant may earn any Award if the Company shall, during the
course of the Year, default in the payment of principal or interest when due
under any note, debenture or other instrument evidencing borrowed money,
which default is not cured within the applicable cure period.
Section 4. Payment of Awards
4.1 Timing. Awards under the Plan will be paid as soon as
practicable following the end of the Year as the Board may determine.
4.2 Form of Payment. All Awards will be paid in cash.
4.3 Payment in the Event of Death. In the event of death, Awards
will be paid to the Participant's estate.
Section 5. Termination of Employment
5.l Voluntary Termination; Termination for Cause. In the event
a Participant voluntarily terminates employment, or is terminated for Cause,
all rights to Awards under this Program will be forfeited.
5.2 Other Terminations. In the event a Participant's employment
is terminated for any reason not covered by Section 5.1, including without
limitation by reason of death, total and permanent disability (as determined
by the Board of Directors) or retirement, or termination by the Company
other than for Cause, such Participant will be entitled to a pro rata portion
of any Award to which the Participant would have been entitled based upon
that portion of the Year during which he or she was a Participant.
Section 6. Rights of Participants
6.l Employment Nothing in this Program will interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Company.
6.2 Nontransferability No right or interest of any Participant
in this Program is assignable or transferable, nor may be made subject to any
lien, directly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge, and bankruptcy.
6.3 Board Member Participants No member of the Board who also
is a Participant will vote as to any action taken by the Board with respect
to awards to be made to him under the Program or with respect to his
designation as a Participant.
Section 7. Administration
7.l Administration This Program will be administered in
accordance with its terms and such rules, if any, as may be established from
time to time by the Board for the administration of this Program.
7.2 Disputes The determination of the Board as to any disputed
question arising under this Program, including questions of construction and
interpretation, will be final, binding, and conclusive upon all persons.
Section 8. Amendments
8.l Amendments The Board, in its absolute discretion, without
notice, at any time and from time to time, may modify or amend, in whole or
in part, any or all of the provisions of this Program including final Awards;
provided, that no such modification or amendment may, without the consent of
a Participant, reduce the right of a Participant (or his successor as the
case may be) to a payment or distribution hereunder to which he would have
otherwise become entitled under this Program by more than 20%.
8.2 Discretion The Board may make such discretionary grants of
cash awards hereunder as it deems appropriate.
Section 9. General
9.l Governing Law The Program will be construed in accordance
with and governed by the laws of the State of Illinois.
9.2 Withholding Taxes The Company has the right to deduct from
all payments under this Program any Federal, state or local taxes required
by the law to be withheld with respect to such payments.
9.3 Supersession of Prior Program The Plan hereunder
supersedes in its entirety, the Annual Plan under the 1997 Senior Executive
Incentive Compensation Program of The Interlake Corporation, except as to
Annual Awards and related matters in respect of periods prior to 1998. The
Plan hereunder shall not be deemed to supersede the Long Term Plan under the
1996 Senior Executive Incentive Compensation Program.
Section 10. Definitions
10.l Definitions When capitalized and used in this Program, the
following terms have the following meanings:
(a) "Award" means the amount of incentive compensation earned by
a Participant under the Plan.
(b) "Plan" means the annual plan for the Year set forth as part
of this Program,.
(c) "Performance Measures" means for each Participant the
relevant performance measures under the Plan as set by the
Board in accordance with Sections 2.3 and 3.1.
(d) "Average Controllable Working Capital to Sales Ratio"
("ACWC/S") means the ratio of the twelve-month average of
Controllable Working Capital (FIFO based) to the total annual
net sales of the Organizational Unit, except that Corporate
Average Controllable Working Capital to Sales Ratio is the
ratio of the twelve-month average Controllable Working
Capital (FIFO based) of all Organizational Units (other than
Corporate) to the total annual net sales of all such
Organizational Units.
(e) "Award Opportunities" has the meaning ascribed to it by
Section 2.3.
(f) "Board" means the Board of Directors of The Interlake
Corporation.
(g) "Cause" means "Cause" as defined in the Severance Pay
Agreements.
(h) "Company" means The Interlake Corporation.
(i) "Compensation Committee" means the Management Development
and Compensation Committee of the Board of Directors of The
Interlake Corporation.
(j) "Controllable Working Capital (FIFO based)" shall be the net
of each Organizational Unit's current assets and current
liabilities (other than cash, interest-bearing and
intercompany items and income tax related accounts) invested
in each such Organizational Unit, at the end of each four or
five-week period in each Year. It includes accounts
receivable, inventories (before any reserves for LIFO),
prepayments and other current assets, minus accounts payable,
accrued liabilities, accrued salaries and wages, and taxes
other than income. Each of such current assets and current
liabilities is subject to adjustment to eliminate items
which, in the opinion of the Board, are unusual in nature,
amount or both. Corporate Controllable Working Capital is
the sum of the Controllable Working Capital of all
Organizational Units other than Corporate.
(k) "EBIT" for any Organizational Unit means such Organizational
Unit's earnings before interest, taxes, minority interest and
extraordinary items.
(l) "Employee" means a regular, active, full-time salaried
employee of the Company who is in a position meeting the
defined eligibility criteria for participation set forth in
Section 3.1.
(m) "Organizational Unit" means a Participant's Organizational
Unit as designated by the Board as contemplated by Section
2.4.
(n) "Participant" means an Employee who is approved by the Board
to participate in the Plan.
(o) "Performance Measures" means the performance measures adopted
by the Board as provided in Section 2.3, consistent with
Section 3.1.
(p) "Year" means the 1998 fiscal year of the Company.
Exhibit 10.11
INCENTIVE STOCK OPTION AGREEMENT
Option Granted December 5, 1997
Under the 1997 Stock Incentive Program
of
The Interlake Corporation
WHEREAS, , (hereinafter called the "Optionee")
is a key employee of The Interlake Corporation (hereinafter called the
"Corporation") or a subsidiary thereof;
WHEREAS, the 1997 Stock Incentive Program of the Corporation ("Program"),
authorizing the granting to directors, officers and other key employees of
the Corporation and its subsidiaries of options to buy from the Corporation
shares of common stock, par value $1 a share, has been duly adopted by the
Corporation; and
WHEREAS, the execution of a stock option agreement in the form hereof has
been authorized by a resolution of the Management Development and Compensation
Committee (the "Committee") of the Board of Directors of the Corporation duly
adopted on December 5, 1997;
WHEREAS, the option granted hereby is intended to qualify as an "incentive
stock option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986, as amended, or any successor provision thereto;
NOW, THEREFORE, the Corporation hereby grants to the Optionee an option to
purchase shares of common stock, par value $1 a share,
of the Corporation (or any security into which such shares may be changed
by reason of any transaction or event described in Paragraph 15(a) of the
Program) at a price of Four and 375/1000ths Dollars ($4.375) per share,
upon the terms and conditions hereinafter set forth.
1. Until terminated, as hereinafter provided, this option may be
exercised in whole or in part from time-to-time as follows:
(a) In full, upon a "change in control," as hereinafter defined,
while the Optionee is employed by the Corporation and/or any subsidiary;
(b) Unless exercisable in full by reason of a change in control,
to the extent of the numbers of shares as of the dates set forth below,
so long as the Optionee shall have been in the continuous employ (which
for purposes of this sub-paragraph includes leaves of absence approved
by the Committee and for illness, military or government service, or other
reason) of the Corporation and/or any subsidiary from the date hereof to
such date
December 5, 1998 shares [25%]
December 5, 1999 shares [50%]
December 5, 2000 shares [75%]
December 5, 2001 shares [100 %]; and
(c) If an Optionee's employment terminates by reason of his
"retirement" or "disability," as hereinafter defined, or by reason of
death, and if an installment would have become exercisable within one
year subsequent to such event had the Optionee remained in the continuous
employ of the Corporation and/or any subsidiary, to the extent of the sum
of the number of shares purchasable pursuant to paragraph 1(b) above and
such additional installment.
2. The option price may, at the election of the Optionee, be paid (i) in
cash or by check acceptable to the Corporation or (ii) by transfer to the
Corporation of shares of common stock of the Corporation owned by the
Optionee and having a market value (valued as set forth in the Program)
equal to the total option price, or (iii) any combination of whole shares
owned by the Optionee and funds equal to the total option price. In
addition, the Optionee shall pay the Corporation an amount in cash or by
check equal to applicable federal and other withholding taxes. Upon
receipt of the payments referred to in the two preceding sentences, the
Corpora tion agrees to cause certificates for any shares purchased
hereunder to be delivered to the Optionee. For purposes of this Section
2, the requirement of payment in cash shall be deemed satisfied if the
Optionee makes arrangements satisfactory to the Corporation with a broker
to sell on the exercise date a number of shares being purchased and such
broker undertakes to deliver the option price to the Corporation after
settlement of such sale. Notwithstanding any other provision of this
Section 2, the right of the Optionee to make payment of the option price
by means of delivery of shares shall be subject to the Corporation not
being prohibited from accepting such shares for such purpose by the terms
of any financing agreement or instrument to which it is then subject.
3. This option shall terminate on the earliest of the following dates:
(a) On the date upon which the Optionee ceases to be an employee of
the Corporation or a subsidiary by reason of termination of employment for
cause;
(b) Three months after the Optionee ceases to be an employee of the
Corporation or a subsidiary, unless he ceases to be an employee by reason
of death, retirement or disability as hereinafter defined, or as described
in (a) above;
(c) One year after the termination of the Optionee's employment by
reason of "retirement" or "disability" as hereinafter defined, or by
reason of death; or
(d) December 5, 2007.
In the event the Optionee shall intentionally commit an act materially
inimical to the interests of the Corporation or a subsidiary, this option
shall terminate upon a finding by the Committee to that effect, notwithstanding
any other provision of this agreement. Nothing contained in this option shall
limit whatever right the Corporation or a subsidiary might otherwise have to
terminate the employment of the Optionee.
4. This option is not transferrable by the Optionee otherwise than by
will or the laws of descent and distribution, and is exercisable, during the
lifetime of the Optionee, only by the Optionee or by the Optionee's legal
guardian or legal representative.
5. This option shall not be exercisable if such exercise would involve a
violation of any applicable federal or state securities laws. The
Corporation hereby agrees to make reasonable efforts to comply with any
applicable securities laws.
6. The Committee shall make or provide for such adjustments in the
number of shares of common stock covered by this stock option, in the option
price applicable to this stock option, and in the kind of securities
covered thereby, as the Committee in its sole discretion, exercised in
good faith, determines is equitably required to prevent dilution or
enlargement of the rights of Optionees that otherwise would result from
(a) any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of the Corporation, or (b) any
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, repurchase or exchange of shares, issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Committee, in its discretion, may provide in
substitution for this stock option such alternative consideration as it in
good faith may determine to be equitable in the circumstances and may require
in connection therewith the surrender of this stock option. No adjustment
provided in this Paragraph 6 shall require the Corporation to sell any
fractional shares.
7. The term "subsidiary," as used in this agreement, has the meaning
ascribed to it in the Program. For purposes of this agreement, the
continuous employ of the Optionee with the Corporation or a subsidiary
shall not be deemed interrupted, and the Optionee shall not be deemed to
have ceased to be an employee of the Corporation or any subsidiary, by
reason of the transfer of his employment among the Corporation and its
subsidiaries.
8. The term "disability," as used in this agreement, means the
termination of an Optionee's employment under such circumstances as entitle
him to Long Term Disability Benefits under the Corporation's Salaried Employees
Group Insurance Plan, or a long term disability plan of the subsidiary by
which he is employed, and in which he participates at the time the
disability occurs. If an Optionee does not participate in a long term
disability plan, "disability" means the termination of an Optionee's
employment under such circumstances as would entitle him to long term
disability benefits if he were a participant in the Corporation's Salaried
Employees Group Insurance Plan. The term " retirement," as used in this
agreement, means the termination of the Optionee's employment by reason of
retirement on or after the Optionee's 65th birthday.
9. The term "change in control," as used in this agreement, means the
occurrence of any of the following events while the Optionee is employed
by the Corporation or a subsidiary:
(a) The Corporation is merged or consolidated or reorganized into
or with another corporation or other legal person and as a result of such
merger, consolidation or reorganization less than 75% of the outstanding
voting securities or other capital interests of the surviving, resulting
or acquiring corporation or other legal person are owned in the aggregate
by the stockholders of the Corporation immediately prior to such merger,
consolidation or reorganization;
(b) The Corporation sells all or substantially all of its business
and/or assets to any other corporation or other legal person, less than
75% of the outstanding voting securities or other capital interests of
which are owned in the aggregate by the stockholders of the Corporation,
directly or indirect ly, immediately prior to or after such sale;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report) each as promulgated pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act") disclosing that
any person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 25% or more of the
issued and outstanding shares of voting securities of the Corporation; or
(d) During any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the
Corporation cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the Corporation's
stockholders, of each new director of the Corporation was approved by a
vote of at least two-thirds of such directors of the Corporation then
still in office who were directors of the Corporation at the beginning of
any such period.
10. The holder of this Option shall not be, nor have any of the rights or
privileges of, a holder of the Corporation's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless
and until certificates representing such shares shall have been issued by
the Corporation to such holder.
11. The Corporation shall not be required to issue any fractional shares
of Common Stock pursuant to this option.
Executed at Lisle, Illinois, as of December 5, 1997.
THE INTERLAKE CORPORATION
By:
W. Robert Reum
Chairman of the Board,
President and Chief
Executive Officer
Receipt Acknowledged and Incentive Stock Option Agreement Accepted this
day of , 1997.
Signed:
Exhibit 10.12
NON-QUALIFIED STOCK OPTION AGREEMENT
Option Granted January 22, 1998
by
The Interlake Corporation
WHEREAS, (hereinafter called the "Optionee"), is a non-employee
director of The Interlake Corporation (hereinafter called the "Corporation")
or a subsidiary thereof;
WHEREAS, the Board of Directors of the Corporation has by resolution
dated January 22, 1998 authorized the granting to each non-employee director of
the Corporation of options to buy from the Corporation shares of common stock,
par value $1 a share; and
WHEREAS, the execution of a stock option agreement in the form
hereof has been authorized by such resolution of the Board of Directors of the
Corporation;
NOW, THEREFORE, the Corporation hereby grants to the Optionee an
option to purchase 10,000 shares of common stock, par value $1 per share, of
the Corporation (or any security into which such shares may be changed by
reason of any transaction or event described in Paragraph 6 below) at the
price of Four and Fifty-Three Thousand One Hundred Twenty Five Hundred
Thousandths Dollars ($4.53125) per share, upon the terms and conditions
hereinafter set forth.
1. Until terminated, as hereinafter provided, this option may
be exercised in whole or in part from time-to-time as follows:
(a) In full, upon a "change in control," as hereinafter
defined, while the Optionee is a director of the Corporation; and
(b) Unless exercisable in full by reason of a change in
control, to the extent of the following aggregate percentages of
the number of shares specified above, if the Optionee is still
a director of the Corporation at the start of the annual meeting
of shareholders occurring in the following year:
1999 33 percent
2000 66 percent
2001 100 percent
Upon the exercise of this option when fewer than all installments set
forth in sub-paragraph (b) are exercisable, any fractional share shall be
rounded down to the nearest whole share.
2. The option price may, at the election of the Optionee, be
paid (i) in cash or by check acceptable to the Corporation or (ii) by transfer
to the Corporation of shares of common stock of the Corporation having a value
(such shares to be valued, for purposes of this paragraph, at the average
of the high and low prices quoted on the New York Stock Exchange Composite
Transactions for the date upon which the Optionee's exercise of stock
option is received) equal to the total option price, or (iii) any
combination of whole shares and funds equal to the total option price.
Upon receipt of the payments referred to in the preceding sentence, the
Corporation agrees to cause certificates for any shares purchased
hereunder to be delivered to the Optionee.
3. This option shall terminate on the earliest of the following
dates:
(a) Two years after the Optionee ceases to be a director of the
Corporation; or
(b) January 22, 2008
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Corporation or a subsidiary, this
option shall terminate upon a finding by the Board of Directors of the
Corporation to that effect, notwithstanding any other provision of this
agreement.
4. This option is not transferrable by the Optionee otherwise
than by will or the laws of descent and distribution, and is exercisable,
during the lifetime of the Optionee, only by him or by his legal guardian or
legal representative.
5. This option shall not be exercisable if such exercise would
involve a violation of any applicable federal or state securities laws. The
Corporation hereby agrees to make reasonable efforts to comply with any
applicable securities laws.
6. The Board of Directors of the Corporation shall make or
provide for such adjustments in the number of shares of common stock covered
by outstanding stock options granted hereunder, in the option price
applicable to such stock options, and in the kind of securities covered
thereby, as the Board of Directors in its sole discretion, exercised in
good faith, determines is equitably required to prevent dilution or
enlargement of the rights of Optionees that otherwise would result from
(a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the
Corporation, or (b) any merger, consolidation, spin-off, reorganization,
partial or complete liquidation, repurchase or exchange of shares,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the
foregoing. No adjustment provided in this Paragraph 6 shall require the
Corporation to sell any fractional shares.
7. A "change in control," as used in this agreement, means the
occurrence of any one of the following events:
(a) The Corporation is merged or consolidated or reorganized
into or with another corporation or other legal person and as a
result of such merger, consolidation or reorganization less than
75% of the outstanding voting securities or other capital
interests of the surviving, resulting or acquiring corporation
or other legal person are owned in the aggregate by the
stockholders of the Corporation immediately prior to such merger,
consolidation or reorganization;
(b) The Corporation sells all or substantially all of its
business and/or assets to any other corporation or other legal
person, less than 75% of the outstanding voting securities or
other capital interests of which are owned in the aggregate by
the stockholders of the Corporation, directly or indirectly,
immediately prior to or after such sale;
(c) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) each as
promulgated pursuant to the Securities Exchange Act of 1934
(the "Exchange Act") disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of 25%
or more of the issued and outstanding shares of voting securities
of the Corporation; or
(d) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors
of the Corporation cease for any reason to constitute at least
a majority thereof unless the election, or the nomination for
election by the Corporation's stockholders, of each new director
of the Corporation was approved by a vote of at least two-thirds
of such directors of the Corporation then still in office who
were directors of the Corporation at the beginning of any such
period.
8. This option is intended to be a non-qualified stock option
and shall not be treated as an incentive stock option within the meaning of the
Internal Revenue Code of 1986, as the same has been heretofore or may
hereafter be amended.
Executed at Lisle, Illinois, as of January 22, 1998.
THE INTERLAKE CORPORATION
By
Stephen R. Smith
Vice President, Secretary
and General Counsel
Receipt Acknowledged and Non-Qualified Stock Option Agreement Accepted
this day of ________________, 1998.
Signed:
Name:
Exhibit 10.18
THE INTERLAKE CORPORATION
1997 STOCK INCENTIVE PROGRAM
1. Purpose. The purpose of The Interlake Corporation 1997
Stock Incentive Program (the "Program") is to attract and retain outstanding
individuals as directors, officers and key employees of The Interlake
Corporation (the "Corporation") and its Subsidiaries (as defined herein) and
to furnish incentives for superior performance by providing such persons
opportunities ("Benefits") to acquire shares of the Corporation's common
stock, $1 par value, or any security into which such shares may be changed
by reason of any transaction or event of the type described in Paragraph
15(a) hereof ("Common Stock").
2. Administration. The Program will be administered by the
Management Development and Compensation Committee (the "Committee") of the
Corporation's Board of Directors (the "Board"). The Committee shall
consist of not less than three directors as the Board may designate from
time to time, each of whom shall be a "Non-Employee Director" within the
meaning of Rule 16b-3 of the Securities and Exchange Commission and an
"Outside Director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The interpretation and
construction by the Committee of any provision of the Program or of any
agreement, notification or document evidencing the grant of any Benefits
and any determination by the Committee pursuant to any provision of this
Program or of any such agreement, notification or document shall be final
and conclusive. No member of the Committee shall be liable for any such
action or determination made in good faith.
3. Participants. Participants in the Program will consist of
such directors, officers or key employees of the Corporation or any Subsidiary
(or any person who has agreed to commence serving in any of such
capacities within 90 days following the granting of Benefits to such
person) as the committee in its sole discretion may designate from time to
time to receive Benefits hereunder (each a "Participant"). The
Committee's designation of a Participant at any time shall not require the
Committee to designate such person to receive a Benefit at any other time,
or, if so designated, to receive the same type or amount of Benefit at any
other time, or as may be received by any other Participant at any time.
The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective Benefits.
4. Types of Benefits. Benefits under the Program may be
granted in any one or a combination of (a) Stock Options, (b) Restricted
Shares, and (c) Shares in Lieu of Certain Cash Payments, all as described
below in Paragraphs 6 through 9 hereof.
5. Shares Reserved Under the Program. (a) Subject to
adjustment as provided in Section 15(a) of this Program, the number of shares
of Common Stock that may be issued or transferred (i) upon the exercise of
Stock Options, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, or (iii) as Shares in Lieu of Certain Cash Payments
shall not exceed in the aggregate 1,150,000 shares plus any shares
relating to Benefits that expire or are forfeited or cancelled. Such
shares may be shares of original issuance or treasury shares or a
combination of the foregoing. Upon the payment of any Option Price by the
transfer to the Corporation of shares of Common Stock or upon satisfaction
of any withholding amount by means of transfer or relinquishment of shares
of Common Stock, there shall be deemed to have been issued or transferred
under this Program only the net number of shares of Common Stock actually
issued or transferred by the Corporation.
(b) Notwithstanding anything in this Section 5, or elsewhere in
this Program, to the contrary, the aggregate number of shares of Common Stock
actually issued or transferred by the Corporation upon the exercise of
Incentive Stock Options shall not exceed 1,150,000 shares, subject to
adjustments as provided in Section 15(a) of this Program. Further, no
Participant shall be granted Stock Options for more than 575,000 shares of
Common Stock during any three year period, subject to adjustments as
provided in Section 15(a) of this Program.
(c) Notwithstanding any other provision of this Program to the
contrary, in no event shall any Participant in any calendar year receive more
than 100,000 Restricted Shares, subject to adjustments as provided in Section
15(a) of this Program.
6. Definitions. As used in the Program,
(a) The term "Date of Grant" means the date specified by
the Committee on which a grant of a Stock Option, Restricted
Shares or Shares in Lieu of Certain Cash Payments shall become
effective (which date shall not be earlier than the date on which
the Committee takes action with respect thereto).
(b) The term "Effective Date" shall be the date on which
the 1997 Stock Incentive Program is approved by the stockholders
of the Corporation in accordance with Section 18.
(c) The term "Incentive Stock Options" means Stock Options
that are intended to qualify as "incentive stock options" under
Section 422 of the Code or any successor provision.
(d) The term "Management Objectives" means measurable
performance objectives established by the Committee pursuant to
this Program for Participants who have received, when so
determined by the Committee, Stock Options or Restricted Shares.
Management Objectives may be described in terms of Corporation-
wide objectives or objectives that are related to the performance
of the Common Stock, the individual Participant or of the
Subsidiary, division, department, region or function within the
Corporation or Subsidiary in which the Participant is employed.
The Management Objectives may be made relative to the performance
of other corporations. If the Committee determines that a change
in the business, operations, corporate structure or capital
structure of the Corporation, or the manner in which it conducts
its business, or other events or circumstances render the
Management Objectives unsuitable, the Committee may in its
discretion modify such Management Objectives, in whole or in
part, as the Committee deems appropriate and equitable.
(e) The term "Market Value per Share" means, at any date,
the average of the high and low price of the Common Stock on that
date (or, if there are no sales on that date, the last preceding
date on which there was a sale) on (i) the New York Stock Exchange
Composite Transactions or (ii) any national securities exchange
on which the Common Stock is traded if it is not traded on the
New York Stock Exchange or (iii) The Nasdaq Stock Market if the
Common Stock is listed thereon and is not traded on any national
securities exchange, in each case as reported by The Wall Street
Journal, corrected for reporting errors.
(f) The term "Optionee" means the optionee named in an
agreement evidencing an outstanding Stock Option.
(g) The term "Option Price" means the purchase price per
share payable on exercise of a Stock Option.
(h) The term "Restricted Shares" means an award of shares
of Common Stock granted pursuant to Paragraph 8 of the Program.
(i) The term "Shares in Lieu of Certain Cash Payments"
means shares of Common Stock granted pursuant to Paragraph 9
hereof.
(j) The term "Stock Option" means an option to purchase
Common Stock granted pursuant to Paragraph 7 of the Program.
(k) The term "Subsidiary" means a corporation, company or
other entity (i) more than 50 percent of whose outstanding shares
or securities (representing the right to vote for the election of
directors or other managing authority) are, or (ii) which does
not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association), but
more than 50 percent of whose ownership interest representing the
right generally to make decisions for such other entity is, now
or hereafter, owned or controlled, directly or indirectly,
by the Corporation except that for purposes of determining
whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, "Subsidiary" means any corporation in
which at the time the Corporation owns or controls, directly or
indirectly, more than 50 percent of the total combined voting
power represented by all classes of stock issued by such
corporation.
7. Stock Options. The Committee may, from time to time and
upon such terms and conditions as it may determine, authorize the granting to
Participants of options to purchase shares of Common Stock. Each such grant
may utilize any or all the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains, subject to limitations set forth in
Section 5 of this Program.
(b) Each grant shall specify an Option Price which shall
not be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify that the Option Price shall be
payable at the time of exercise in cash or by check acceptable to
the Corporation. Any grant may also provide for payment of the
Option Price by the transfer to the Corporation of (i) shares of
Common Stock owned by the Optionee and having a Market Value at
the time of exercise equal to the total Option Price or (ii) a
combination of cash and shares of Common Stock owned by the
Optionee and having a combined Market Value equal to the total
Option Price.
(d) The Committee may also determine, at or after the Date
of Grant, that payment of the Option Price of any option (other
than an Incentive Stock Option) may also be made in whole or in
part in the form of Restricted Shares or other shares of Common
Stock that are forfeitable or subject to restrictions on transfer
(based, in each case, on the Market Value per Share on the date
of exercise) or other Stock Options (based on the difference
(the "Spread") between the Market Value and the exercise price
of such option on the date of exercise). Unless otherwise
determined by the Committee at or after the Date of Grant,
whenever any Option Price is paid in whole or in part by means
of any of the forms of consideration specified in this paragraph,
the shares of Common Stock received upon the exercise of the
Stock Options shall be subject to such risks of forfeiture
or restrictions on transfer as may correspond to any that apply
to the consideration surrendered, but only to the extent of
(i) the number of shares so surrendered, or (ii) the Spread of
any unexercisable portion of Stock Options.
(e) Any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a bank or broker
on a date satisfactory to the Corporation of some or all of the
shares to which such exercise relates.
(f) Successive grants may be made to the same Participant
whether or not any Stock Options previously granted to such
Participant remain unexercised.
(g) Each grant shall specify the period or periods of
continuous employment by the Optionee with the Corporation or of
continuous service by the Optionee as a director of the
Corporation which is necessary before a Stock Option or any
installment thereof will become exercisable and may provide that
the exercise of a Stock Option or any installment thereof
will be accelerated for any reason stated therein. Any grant may
specify Management Objectives that must be achieved as a condition
to the exercise of such Stock Option.
(h) Stock Options granted under the Program may be (i)
options which are intended to qualify under particular provisions
of the Code (including Incentive Stock Options), (ii) options
which are not intended to so qualify, or (iii) combinations of
the foregoing.
(i) No Stock Option shall be exercisable more than ten
years from the Date of Grant.
(j) Each grant of Stock Options shall be evidenced by an
agreement executed on behalf of the Corporation by an officer
thereof and delivered to the Optionee and containing such terms
and provisions, consistent with the Program, as the Committee
may approve.
8. Restricted Shares. The Committee may from time to time and
upon such terms and conditions as it may determine, authorize the granting to
Participants of Restricted Shares. A Restricted Share constitutes an immediate
transfer of ownership of Common Shares to the Participant in consideration of
the performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to. Each grant may utilize any
or all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Subject to the provisions of Section 5, each such grant
shall specify the number of shares of Common Stock to which it
relates.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant
that is less than Market Value pe r Share at the Date of Grant.
(c) Each such grant shall be subject to such conditions,
limitations, restrictions and other matters, and shall be subject
to forfeiture or lapse in such circumstances, as the Committee
may prescribe; provided, however, that all or a portion of the
shares of Common Stock covered by such grant shall be subject,
for a period to be determined by the Committee at the Date of
Grant, to a substantial risk of forfeiture within the meaning of
Section 83 of the Code or any successor or substitute provision
thereof and of the regulations issued thereunder. Any grant of
Restricted Shares may specify Management Objectives which, if
achieved, will result in termination or early termination of the
restrictions applicable to such shares. The Committee shall have
authority to cause a grant of Restricted Shares to provide that
termination of restrictions applicable to such Restricted Shares
or any installment thereof will be accelerated for any reason
stated therein.
(d) Each such grant shall specify that the Committee may at
any time amend, suspend or terminate the Restricted Share grant
covered thereby, provided that, in the case of an amendment, the
amended grant of Restricted Shares shall conform to the provisions
of the Program.
(e) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is to
continue, the transferability of the Restricted Shares shall be
prohibited or restricted in the manner and to the extent
prescribed by the Committee at the Date of Grant (which
restrictions may include, without limitation, rights of
repurchase or first refusal in the Corporation or provisions
subjecting the Restricted Shares to a continuing substantial
risk of forfeiture in the hands of any transferee).
(f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid thereon
during the period of such restrictions be automatically deferred
and reinvested in additional Restricted Shares, which may be
subject to the same restrictions and substantial risks of
forfeiture as the underlying award.
(g) Each grant or sale of Restricted Shares shall be
evidenced by an agreement executed on behalf of the Corporation
by any officer and delivered to and accepted by the Participant
and shall contain such terms and provisions, consistent with this
Program, as the Committee may approve. Unless otherwise directed
by the Committee, all certificates representing Restricted Shares
shall be held in custody by the Corporation until all restrictions
thereon shall have lapsed, together with a stock power executed
by the Participant in whose name such certificates are registered,
endorsed in blank and covering such Shares.
9. Shares in Lieu of Certain Cash Payments. The Committee may
also authorize the granting of shares of Common Stock in lieu of cash which
would otherwise be payable as a bonus, pursuant to any incentive
compensation plan or otherwise, to Participants. Each such grant may
utilize any or all of the authorizations, and shall be subject to all of
the limitations, contained in the following provisions:
(a) The proportion of any such bonus to be paid in shares
of Common Stock shall be as determined by the Committee.
(b) The number of whole shares to be delivered in lieu of
cash shall be determined by dividing the value of the portion of
the bonus to be paid in shares of Common Stock by the Market
Value per Share as of a date selected by the Committee. The value
of fractional shares shall be added to the cash portion of the
bonus.
(c) None of the shares of Common Stock granted pursuant to
this Paragraph 9 shall be subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Code or any
successor or substitute provision thereof and of the regulations
issued thereunder.
(d) Each grant shall be evidenced by a written notification
executed on behalf of the Corporation by an officer thereof and
delivered to the Participant.
(e) Except to the extent provided in this Paragraph 9, no
cash bonus, whether payable pursuant to an incentive compensation
plan or otherwise, shall constitute a part of the Program or be
affected by the Program.
10. Limitation of Transferability. Except as otherwise
determined by the Committee, no Stock Option shall be transferable otherwise
than by will or the laws of descent and distribution and Stock Options shall be
exercisable during the lifetime of the Participant to whom such Stock
Option has been granted only by him or by his guardian or legal
representative, and after such Participant's death shall be exercisable
only by his legal representative.
11. Other Provisions. The award of any Benefit under the Program
may also be subject to other provisions (whether or not applicable to the
Benefit awarded to any other Participant) as the Committee determines
appropriate, including, without limitation, restrictions on resale or other
disposition, such provisions as may be appropriate to comply with federal
and state securities laws and stock exchange requirements, and
understandings or conditions as to the Participant's employment, in
addition to those specifically provided for under the Program.
12. Manner of Action by the Corporation. The Secretary of the
Corporation (or such other officer as the Chief Executive Officer of the
Corporation may from time to time designate) shall supervise the maintenance of
records for all Participants in the Program. Any determination of such
officer, if approved by the Committee, shall be binding and conclusive for
all purposes.
13. Taxes. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment
or the realization of any such benefit that the Participant or such other
person make arrangements satisfactory to the Corporation for payment of
the balance of any taxes required to be withheld. At the discretion of
the Committee, any such arrangements may include relinquishment of a
portion of any such payment or benefit. The Corporation and any
Participant or such other person may also make similar arrangements with
respect to the payment of any taxes with respect to which withholding is
not required.
14. Tenure. A Participant's right, if any, to continue to serve
the Corporation as a director, officer or employee shall not be enlarged or
otherwise affected by the establishment of the Program or his designation
as a Participant.
15. Adjustment Provisions. (a) The Committee shall make or
provide for such adjustments in the number of shares of Common Stock covered by
outstanding Stock Options granted hereunder, in the Option Price
applicable to such Stock Options, and in the kind of securities covered
thereby, as the Committee in its sole discretion, exercised in good faith,
determines is equitably required to prevent dilution or enlargement of the
rights of Optionees that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Corporation, or (b) any merger,
consolidation, spin-off, reorganization, partial or complete liquidation,
repurchase or exchange of shares, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. Moreover, in the event
of any such transaction or event, the Committee, in its discretion, may
provide in substitution for any or all outstanding Benefits under this
Program such alternative consideration as it, in good faith, may determine
to be equitable in the circumstances and may require in connection
therewith the surrender of all Benefits so replaced. The Committee shall
also make or provide for such adjustments in the numbers of shares
specified in Section 5 of the Program as the Committee in its sole
discretion, exercised in good faith, determines is appropriate to reflect
any transaction or event described in the preceding sentence.
(b) Notwithstanding any other provision of the Program, and
without affecting the number of shares available hereunder, the Committee may
authorize the issuance or assumption of Benefits in connection with any
merger, consolidation, acquisition of property or stock, or reorganization
upon such terms and conditions as it may deem appropriate.
16. Fractional Shares. The Corporation shall not be required to
issue any fractional shares of Common Stock pursuant to this Program. The
Corporation may provide for the elimination of fractions or for the
settlement of fractions in cash.
17. Amendment and Termination of Benefits and the Program.
(a) The Committee may at any time and from time to time amend, suspend or
terminate the Program; provided, however, that any amendment which must be
approved by the stockholders of the Corporation in order to comply with
applicable law or the rules of the principal national securities exchange
upon which the shares of Common Stock are traded or quoted shall not be
effective unless and until such approval has been obtained. No Benefit
shall be granted pursuant to the Program after the tenth anniversary of
the Effective Date.
(b) The Committee may, with the concurrence of the affected
Optionee, amend or cancel any agreement evidencing Stock Options granted under
this Program; provided, however, that no such amendment will cause any Stock
Option to cease to qualify as "performance-based" within the meaning of
Section 162(m) of the Code. In the event of cancellation, the Committee
may authorize the granting of new Stock Options (which may or may not
cover the same number of shares which had been the subject of the prior
agreement) in such manner, at such Option Price, and subject to the same
terms, conditions and descriptions, as under the Program would have been
applicable had the cancelled Stock Options not been granted.
(c) In case of termination of employment or cessation of
services as a director, in each case by reason of death, disability or
retirement under a retirement plan of the Corporation or any Subsidiary or in
the case of hardship or other special circumstances of a Participant who holds
a Stock Option not immediately exercisable in full, or any Restricted Shares
as to which a condition, limitation, restriction or substantial risk of
forfeiture has not lapsed, the Committee may, in its sole discretion,
accelerate the time at which such Stock Option may be exercised or the
time at which such condition, limitation, restriction or substantial risk
of forfeiture will lapse.
(d) Presentation of the Program or any amendment to the Program
for stockholder approval is not to be construed to limit the Corporation's
authority to offer similar or dissimilar benefits through plans or programs
that are not subject to stockholder approval.
18. Effective Date. This 1997 Stock Incentive Program shall
become effective on the date (the "Effective Date") that it is approved by the
affirmative vote of a majority of the shares present or represented at an
annual or special meeting of stockholders of the Corporation and entitled
to vote on the subject matter; provided that such stockholder approval is
obtained within 12 months after the adoption of this 1997 Stock Incentive
Program by the Board.
Exhibit 21
LIST OF SUBSIDIARIES
THE INTERLAKE CORPORATION
State or Country
Corporate Name Parent Company of Incorporation
ARC Metals Corporation Hoeganaes Corporation Delaware
Arwood International, Inc. Interlake ARD Corporation New Jersey
Chem-tronics, Inc. The Interlake Companies, Inc. California
Conco-Tellus Inc. Interlake Material
Handling, Inc. Delaware
Gary Steel Supply Company The Interlake Companies,
Inc.(95%) Illinois
Certain Interlake
Management (5%)
Hoeganaes Corporation The Interlake Companies,
Inc.(80%) Delaware
Hoganas Aktiebolag (20%)
Hoeganaes Development, Inc. Hoeganaes Corporation Delaware
Interlake ARD Corporation The Interlake Companies, Inc. Delaware
Interlake Australian Mining
Ventures, Inc. The Interlake Companies, Inc. Ohio
Interlake DRC Limited The Interlake Companies, Inc. Delaware
Interlake Foreign Sales The Interlake Companies,
Corporation Inc.(70%) Barbados, W.I.
Hoeganaes Corporation (30%)
Interlake de Mexico, Interlake Material Handling,
S.A. de C.V. Inc. Mexico
Interlake Material Handling,
Inc. The Interlake Companies, Inc. Delaware
Interlake Newco Corporation The Interlake Corporation Delaware
Interlake Packaging
Corporation The Interlake Companies, Inc. Delaware
Interlake Steel Corporation The Interlake Companies, Inc. Arizona
Redirack, Inc. The Interlake Companies, Inc. Delaware
The Interlake Companies,
Inc. The Interlake Corporation Delaware
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