-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JiXCCLVfRSlFxZ3xw9iE6Big4WFHLkJzlhjVhkjE1O/0bbt+o/+VdZIXVLBbFajq BnQsOQpKTzjzumHwhq/NLQ== 0000907098-94-000007.txt : 19940330 0000907098-94-000007.hdr.sgml : 19940330 ACCESSION NUMBER: 0000907098-94-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940327 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MLX CORP /MI CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: 5070 IRS NUMBER: 380811650 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-13198 FILM NUMBER: 94518570 BUSINESS ADDRESS: STREET 1: 1000 CENTER PLACE CITY: NORCROSS STATE: GA ZIP: 30093 BUSINESS PHONE: 4047980677 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 10-K 1 FORM 10-K CONFORMED COPY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 OR ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number I-4795 MLX CORP. (Exact name of registrant as specified in its charter) Georgia 38-0811650 (State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.) 1000 Center Place, Norcross, Georgia 30093 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (404)798-0677 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act:Common Stock, $.01 par value Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section Number 229.405 of this chapter) 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 amendments to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates of the Registrant was $7,244,000 as of March 1, 1994, based on the bid (asked) price as reported on the NASDAQ Small Cap Market. The number of shares outstanding of the Registrant's Common Stock, par value $.01, as of the close of business on March 1, 1994 was 2,535,950. DOCUMENTS INCORPORATED BY REFERENCE Portions of Part I, II & IV hereof incorporate information by reference from Registrant's 1993 Annual Report to Shareholders, a copy of which is filed with the Commission as Exhibit 13 hereto. Portions of Part III hereof incorporate information by reference from Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with Registrant's 1994 Annual Meeting of Shareholders. PART I Item 1. Business. (A) General Development of Business The Registrant is engaged in the design and manufacture of high-energy friction materials which are used primarily in aircraft brakes and heavy equipment brakes, transmission and clutches. Reference is made to the information set forth in the Registrant's 1993 Annual Report to Shareholders under "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the development of the business since January 1, 1993, which information is incorporated herein by reference. In June 1993, the Company merged with and into a wholly-owned subsidiary in order to reincorporate in the State of Georgia. This transaction was approved by the Company's shareholders at the annual meeting of shareholders on June 2, 1993. (B) Financial Information About Industry Segments Reference is made to information set forth in Note J of the Notes to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. (C) Narrative Description of Business Reference is made to the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Other Data" contained in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Additional information concerning the business of the Registrant follows. General: Today, MLX owns and manages the S. K. Wellman ("Wellman") subsidiary. Wellman is one of the world's leading manufacturers of high-energy friction materials. The friction materials manufactured and sold by Wellman are used in a variety of applications which require material which will withstand and function under extreme conditions of high energy and heat. These types of conditions exist in aircraft brakes and heavy equipment brakes, transmissions and clutches. Wellman has manufacturing facilities located in Brook Park, Ohio; LaVergne, Tennessee; Concord, Ontario, Canada; and Orzinuovi, Italy. Wellman also has administrative offices and research facilities located in Solon, Ohio and sales and/or distribution offices in Madison, Wisconsin; Peoria, Illinois; Detroit, Michigan; Cleveland, Ohio; Akron, Ohio; Edmonton, Alberta, Canada; Vancouver, British Columbia, Canada; Concord, Ontario, Canada; and Orzinuovi, Italy. At December 31, 1993 Wellman had 511 employees. Approximately 213 of these employees were covered under collective bargaining agreements which expire on April 22, 1994. MLX provides managerial and administrative support to Wellman. This support is provided in the areas of strategic management, income tax compliance, legal strategy and capital and lending resources. Products: The friction materials manufactured by Wellman are made of a variety of materials, including metallic (either copper or iron based), graphitic, ceramic, and composite fiber (paper). These friction materials are used in commercial, military and general aviation aircraft brakes; friction disks for use in automatic and power shift transmissions; and clutch buttons, which are used as the main contact point between the engine and transmission. Wellman also manufactures other types of clutch facings and opposing disks to complement its clutch button business. Raw materials used by Wellman are available from multiple sources. Customers: Wellman's customers for the aircraft brake friction materials are primarily aircraft wheel and brake manufacturers. Wellman's principal customers for its friction disks are heavy equipment manufacturers such as Caterpillar Inc., John Deere & Company, and the Allison Division of General Motors Corporation. The principal customers for its clutch buttons are heavy equipment component suppliers such as Dana Corporation. More than 80% of friction disk and clutch button production is sold to original equipment manufacturers with the balance sold to end users (under the "Velvetouch" tradename) through distributors and equipment rebuilders. Competition: The Registrant believes that the domestic market for the products that it manufactures is approximately $200 million and that the total worldwide approximates $300 million. The Registrant believes that it is either the largest or the second largest manufacturer of each of the products it sells, with market share ranging between 20% and 60% of such markets. In each of its markets, the Registrant competes with a number of companies; however, there are only one or two competitors in each of its markets which are comparable in size to the Registrant. Competition is primarily based upon the ability to engineer a product which meets the customers' specifications, consistent quality, price and delivery. Research and Development: Research, product development and engineering are an important aspect of Wellman's business. Each of Wellman's products are specifically engineered to meet a customer's applications. The Registrant believes that it has the most extensive research, development and engineering capabilities and testing equipment in the industry. Product research, development and engineering expenditures for Wellman were approximately $3,365,000 in 1993, $3,164,000 in 1992 and $3,344,000 in 1991. (D) Financial Information About Foreign and Domestic Operations and Export Sales Reference is made to the information set forth in Note J of the Notes to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Item 2. Properties. The Registrant and its consolidated subsidiaries utilize the following properties.
Square Location How Held Footage Utilization Brook Park,Ohio Owned1 111,000 Manufacturing Cleveland, Ohio Leased 14,300 Materials Storage Akron, Ohio Leased 20,400 Distribution Solon, Ohio Owned1 50,000 Administration & rearch LaVergne, Tennessee Owned1 76,100 Manufacturing Concord, Ontario, Leased1 15,200 Manufacturing & Canada distribution Orzinuovi, Italy Owned 65,000 Manufacturing & sales Norcross, Georgia Leased 3,000 Executive & administration
Management believes that none of the leased facilities is critical to its operations. The leases are generally for an initial term of five years and generally contain one or more renewal option periods. Management considers the properties to be suitable for their present use. Item 3. Legal Proceedings. An interpleader action was filed in the U.S. District Court for the Northern District of Georgia on October 9, 1992, by Mr. Alfred R. Glancy III, a director of the Company, as the custodian of the shares of Common Stock held pursuant to a Voting Trust. Mr. Glancy requested that the court determine whether or not the Voting Trust was effectively terminated as a result of the actions of one of the trustees of the Voting Trust. Upon Mr. Glancy's motion, the interpleader action was dismissed with prejudice on March 11, 1994. Mr Glancy has indicated that he will distribute the trust shares to their beneficial owners, and the Company has agreed to permit the Voting Trust to terminate. The Company agreed to the termination of the Voting Trust prior to its scheduled expiration (June 30, 1994) because the adoption of share transfer restrictions at last year's annual meeting of shareholders obviated the need for the trust. [FN] 1 These facilities and equipment at these locations are a portion of the collateral securing the Senior Lending Facility due in 1997 (S. K. Wellman) described in Note D of the Notes to the Consolidated Financial Statements contained in the Registrant's 1993 Annual Report to Shareholders. Other than the interpleader action described above, the Registrant is unaware of any litigation which is expected to have a material effect on the results of operations or financial condition of the Registrant. Item 4. Submission of Matters to a Vote of Security Holders No response under this item is required. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Reference is made to the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Market, Share Ownership and Dividend Information" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Item 6. Selected Financial Data. Reference is made to the information set forth in "Financial Review" under "Selected Financial Information" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Reference is made to the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. Reference is made to the information set forth under "Consolidated Financial Statements" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Reference is made to the information set forth under "Quarterly Data" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. No response under this item is required. PART III Item 10. Directors and Executive Officers of the Registrant. For information with respect to Directors and Executive Officers of the Registrant, the Registrant incorporates by reference herein the information appearing under the caption, "Business Experience of Directors and Executive Officers" and, with respect to compliance with Item 405 of Regulation S-K, "Security Ownership of Certain Beneficial Owners" under the table containing the "Amount and Nature of Beneficial Ownership" of executive officers and directors contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders. Item 11. Executive Compensation. Registrant incorporates by reference herein information appearing under the caption "Remuneration of Directors and Executive Officers" contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management. Registrant incorporates by reference herein information appearing under the caption "Security Ownership of Certain Beneficial Owners" contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders. Item 13. Certain Relationships and Related Transactions. Registrant incorporates by reference herein information appearing under the caption "Employment Agreements With Executive Officers" and "Compensation Committee Interlocks and Related Transactions' contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Documents Filed as part of the Report. (1) The following consolidated financial statements of the Registrant and its subsidiaries, included in its 1993 Annual Report to Shareholders, are incorporated in Item 8 herein by reference: Consolidated Balance Sheets at December 31, 1993 and 1992. Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991. Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991. Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991. Notes to Consolidated Financial Statements - December 31, 1993. (2) The following consolidated financial statement schedules of the Registrant and its subsidiaries are included in Item 14(d): Schedule III - Condensed Financial Information of Registrant Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Prroperty, Plant and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short Term Borrowings Schedule X - Supplementary Income Statement Information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instruction or are inapplicable, and therefore have been omitted. (3) Exhibits required by Item 601 of Regulation S-K: Exhibit 3.1 & 4.1 - Articles of Incorporation of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1993). Exhibit 3.2 & 4.2 - By-Laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1993). Exhibit 4.3 & 9.1 - Voting Trust Agreement dated Deecember 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.4 & 9.2 - Amendment No. 1 dated October 26, 1987 to the Voting Trust Agreement dated December 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.5 & 9.3 - Amendment No. 2, dated April 2, 1991, to the Voting Trust Agreement dated December 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.6 - Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.7 - Amendment No. 1 dated October 26, 1987 to the Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.8 - Amendment No. 2 dated June 4, 1990 to the Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991). Exhibit 4.9* - MLX Exchange Agreement dated as of April 13, 1990, as amended and restated as of March 19, 1992, as amended and restated as of April 21, 1993, among the Registrant, the Lenders listed therein, and Morgan Guaranty Trust Company of New York, as Bond Agent. Exhibit 4.10 - MLX Limited Guarantee, dated as of March 19, 1992 (incorporated herein by reference to Exhibit 2.17 to the Registrant's Current Report on Form 8-K, dated April 10, 1992). Exhibit 4.11 - Management Services Agreement, dated as of March 19, 1992, between the Registrant and Pameco Holdings, Inc. (incorporated herein by reference to Exhibit 2.16 of Registrant's Current Report on Form 8-K dated April 10, 1992). Exhibit 4.12 - Amendment to Management Services Agreement, dated as of November 30, 1992, between the Registrant and Pameco Holdings, Inc. (incorporated herein by reference to Exhibit 4.12 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.13 - Nomination Agreement, dated as of December 15, 1992, among the Registrant and the Investors listed therein (incorporated herein by reference to Exhibit 4.13 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.14 - Exchange Agreement, dated as of January 15, 1993, among MLX Corp. and the Investors listed therein (incorporated herein by reference to Exhibit 4.14 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.15 - Loan and Security Agreement, dated as of January 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.15 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.16 - First Amendment to Loan and Security Agreement, dated as of February 19, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.16 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.17 - Second Amendment to Loan and Security Agreement, dated as of March 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.17 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.18 - Stock Pledge Agreement (S.K. Wellman S.p.A.), dated as of January 15, 1993 between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.18 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.19 - Stock Pledge Agreement (S.K. Wellman S.p.A.), dated as of January 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.19 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.20 - Stock Pledge Agreeme (The S.K. Wellman Company of Canada Limited), dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.20 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.21 - Patent Collateral Assignment and Security Agreement, dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.21 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.22 - Trademark Security Agreement, dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.22 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 4.23* - Exchange Agreement dated as of April 2, 1993 among MLX Corp. and the Bondholders Listed Herein. Exhibit 10.1# - Employment Agreement dated February 10, 1991, between the Registrant and Brian R. Esher (incorporated herein by reference to Exhibit 10.1 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990). Exhibit 10.2# - First Amendment to Employment Agreement, dated as of March 19, 1992, between the Registrant and Brian Esher. Exhibit 10.3 - Severance/Consulting Agreement dated January 14, 1991, between the Registrant and William P. Panny (incorporated herein by reference to Exhibit 10.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990). Exhibit 10.4 - Purchase Agreement, dated as of March 19, 1992, among the Registrant, Pameco Holdings, Inc., and Pameco Corporation (incorporated herein by reference to Exhibit 2.1 of Registrant's Current Report on Form 8-K dated April 10, 1992). Exhibit 10.5# - MLX Corp. Stock Option Plan, dated as of December 29, 1989 (incorporated herein by reference to Exhibit 10.5 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 10.6# - Senior Management Discretionary Bonus Plan, dated as of January 21, 1992 (incorporated herein by reeference to Exhibit 10.6 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 13* - 1993 Annual Report to Shareholders of the Registrant. With the exception of information expressly incorporated herein by reference, the 1993 Annual Report is not deemed to be filed with the Commission. Exhibit 21 - Subsidiaries of the Registrant (incorporated herein by reference to Exhibit 22 of Registrant's Report on Form 10-K for the year ended December 31, 1992). Exhibit 24* - Consent of Independent Accountants. _____________ [FN] *Filed with this Report on Form 10-K #Management compensatory plan or arrangement (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1993. SIGNATURES Pursuant to the requirement's 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, hereunto duly authorized. MLX Corp. Dated: March 11, 1994 By: /s/ Thomas C. Waggoner Thomas C. Waggoner Vice President & Chief Financial Officer Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities indicated, on March 11, 1994. Signature Title /s/ BRIAN R. ESHER Chairman of the Board, President & Chief Executive Officer (Principal Executive Officer) and Director /s/ THOMAS C. WAGGONER Vice President & Chief Financial Officer (Principal Financial & Accounting Officer) /s/ WILLEM F.P. de VOGEL Director /s/ ALFRED R. GLANCY III Director /s/ S. STERLING McMILLAN III Director /s/ J. WILLIAM UHRIG Director /s/ W. JOHN ROBERTS Director /s/ H. WHITNEY WAGNER Director Report of Independent Auditors Board of Directors MLX Corp. We have audited the consolidated balance sheets of MLX Corp. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MLX Corp. and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note A to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes and postretirement benefits. ERNST & YOUNG March 11, 1994 Atlanta, Georgia SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT MLX Corp. December 31, 1993 and 1992 (in thousands)
CONDENSED BALANCE SHEETS 1993 1992 ASSETS Current Assets: Cash and cash equivalents $ 695 $ 413 Dividend receivable from subsidiary - 2,523 Prepaid expenses and other - 115 Total Current Assets 695 3,051 Investment in Subsidiaries* 12,612 13,571 Other Assets: Leasehold improvements and equipment - net 7 47 Intangible assets - net 415 345 Other 1 1 Total Other Assets 423 393 $13,730 $17,015 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 6 $ 10 Payables to subsidiaries* - 1 Other accrued liabilities 1,083 1,022 Current portion of long-term debt - 718 Federal income taxes payable 150 - Dividends payable on Series A Preferred Stock 638 - Total Current Liabilities 1,877 1,751 Long-Term Liabilities: Minority interest notes payabl - 2,384 Zero coupon bonds 1,005 9,472 Note payable to bank - 3,302 Variable Rate Subordinated Note 1,397 - Note payable to subsidiary* 2,127 1,950 4,529 17,108 Shareholders' Equity: Preferred stock 6,981 5,100 Common stock 25 254 Capital in excess of par value 60,551 57,319 Retained earnings deficit since December 11, 1984 (58,836) (63,629) 8,721 (956) Other equity deductions (1,397) (888) Total Shareholders' Equity 7,324 (1,844) $13,730 $17,015 *Eliminated in consolidation.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (cont.) MLX Corp. YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands)
CONDENSED STATEMENTS OF OPERATIO 1993 1992 1991 Revenues: Interest and other income $ 125 $ 348 $ 384 Dividends from subsidiaries* 5,900 - 5,002 Management fees from subsidiarie 950 600 1,650 Management fee from related party 82 470 - Total Revenues 7,057 1,418 7,036 Expenses: General and administrative expenses 1,355 1,408 2,006 Interest expense: Subsidiary indebtedness* 151 295 377 Other indebtedness 366 1,334 1,595 Earnings (loss) before taxes, equity in earnings (losses) of subsidiaries, discontinued operations and extraordinary item 5,185 (1,619) 3,058 Charge in lieu of federal income taxes (1,243) (1,110) - Provision for federal AMT taxes (150) - - Credit for subsidiary tax sharing 1,360 2,129 876 Earnings (loss) before equity in earnings (losses) of subsidiaries, discontinued operations and extraordinary item 5,152 (600) 3,934 Equity in earnings (losses) of subsidiaries, after payment of dividends* (3,113) 1,985 (18,233) Loss on disposal of discontinued operations - - (8,935) Extraordinary gain on early retirement of debt (net of charge in lieu of federal income taxes of $1,869 in 1993 and $1,661 in 1992) 3,627 4,124 - Net earnings (loss) $ 5,666 $ 5,509 $(23,234) CONDENSED STATEMENTS OF CASH FLOWS Net Cash Provided by Operating Activities $ 254 $ 1,211 $ 215 Investing Activities: Purchase of property - - (24) Financing Activities: Proceeds from sale of common stock - - 78 Dividends and advances from subsidiary 6,538 - - Reduction of debt (6,510) (1,835) (661) 28 (1,835) (583) Increase (Decrease) in cash $ 282 $ (624) $ (392) * Eliminated in consolidation.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT MLX CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F Balance at Other Charges Balance at Classification Beginning of Additions at Cost Retirements Add (deduct) End of Period (1) Period Year ended December 31, 1993: Land and improvements $ 1,192,000 $ 0 $ 0 $ (13,000) $ 1,179,000 Buildings and improvements 6,934,000 83,000 0 (84,000) 6,933,000 Machinery and equipment 14,883,000 1,835,000 (68,000) (643,000) 16,007,000 Construction in process 631,000 (98,000) 0 0 533,000 $23,640,000 $1,820,000 $(68,000) $ (740,000) $24,652,000 Year ended December 31, 1992: Land and improvements $ 1,219,000 $ 0 $ 0 $ (27,000) $ 1,192,000 Buildings and improvements 7,114,000 0 (5,000) (175,000) 6,934,000 Machinery and equipment 15,342,000 907,000 (110,000) (1,256,000) 14,883,000 Construction in process 409,000 222,000 0 0 631,000 $24,084,000 $1,129,000 $(115,000) $(1,458,000) $23,640,000 Year ended December 31, 1991: Land and improvements $ 1,216,000 $ 5,000 $ 0 $ (2,000) $ 1,219,000 Buildings and improvements 7,205,000 43,000 (120,000) (14,000) 7,114,000 Machinery and equipment 14,337,000 1,238,000 (144,000) (89,000) 15,342,000 Construction in process 301,000 108,000 0 0 409,000 $23,059,000 $1,394,000 $(264,000) $ (105,000) $24,084,000 (1) Foreign translation adjustments.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT MLX CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F Balance at Additions Charged Other Charges Balance at Classification Beginning of to Costs and Retirements Add (deduct) End of Period Expemses (1) Period Year ended December 31, 1993: Land and improvements $ 59,000 $ 22,000 $ 0 $ 0 $ 81,000 Buildings and improvements 1,751,000 359,000 0 (15,000) 2,095,000 Machinery and equipment 9,553,000 1,372,000 (60,000) (453,000) 10,412,000 $11,363,000 $1,753,000 $ (60,000) $ (468,000) $12,588,000 Year ended December 31, 1992: Land and improvements $ 42,000 $ 17,000 $ 0 $ 0 $ 59,000 Buildings and improvements 1,439,000 341,000 (5,000) (24,000) 1,751,000 Machinery and equipment 8,576,000 1,811,000 (91,000) (743,000) 9,553,000 $10,057,000 $2,169,000 $ (96,000) $ (767,000) $11,363,000 Year ended December 31, 1991: Land and improvements $ 25,000 $ 17,000 $ 0 $ 0 $ 42,000 Buildings and improvements 1,188,000 353,000 (98,000) (4,000) 1,439,000 Machinery and equipment 6,834,000 1,896,000 (114,000) (40,000) 8,576,000 $ 8,047,000 $2,266,000 $(212,000) $ (44,000) $10,057,000 (1) Foreign translation adjustments
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS MLX CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E Additions Balance at Beginning Charged to Costs Charged to Other Deductions-Describe Balance at End Description of Period and Expenses Accounts-Describe (1) of Period Year Ended December 31, 1993: Reserve and allowances deducted from asset accounts Valuation allowance for deferred tax assets - $124,000,000 - $3,000,000 $121,000,000 (1) Reduction in net operating loss carryover due to offset against taxable income.
SCHEDULE IX - SHORT-TERM BORROWINGS MLX CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F Maximum Amount Average Amount Weighted Balance at Weighted Outstanding Outstanding Average Interest Catagory of Aggregate End of Average During the During the Rate During Short-Term Borrowings Period Interest Rate Period Period (1) the Period (2) Year ended December 31, 1993: Revolving Credit Facility $2,345,036 9.82% $4,424,605 $2,968,932 9.05% Year ended December 31, 1992: Revolving Credit Facility $1,332,180(3) 8.49% $4,368,019 $2,334,262 8.50% Revolving Credit Facility 0(3) 15.60% 3,224,550 1,896,970 15.60% Year ended December 31, 1991: Revolving Credit Facility $4,368,019(3) 8.95% $10,027,000 $7,023,309 9.75% Revolving Credit Facility 3,224,550(3) 14.50% 3,592,339 3,230,969 14.50% (1)Average amount outstanding computed by dividing calendar month end loan balances plus previous year-end balance by 13. (2)The weighted average interest rate during the period was computed by dividing the actual interest expense by average short-term debt outstanding. (3)The revolving credit facilities expired in 1993. The facilities were replaced by a new lender in early 1993. The new facility expires in 1997.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION MLX CORP. AND SUBSIDIARIES
COL. A COL. B ITEM Charged to Costs and Expenses Year ended December 31 1993 1992 1991 Maintenance and repairs $1,111,000 $1,086,000 $ 768,000 Depreciation and amortization of intangible assets, preoperating costs and similar deferrals $ 919,000 $1,252,000 $1,356,000 Taxes other than payroll and income taxes (A) (A) (A) Royalties (A) (A) (A) Advertising costs (A) (A) (A) (A) Expense amount represents less than 1% of total sales.
EX-13 2 1993 ANNUAL REPORT COVER [DESCRIPTION] GRAPHIC #1: Artwork - MLX Logo 1993 ANNUAL REPORT MLX CORP. CORPORATE PROFILE Formed as a result of a reorganization in 1984, MLX Corp is today a publicly held company owned by an estimated 11,000 beneficial shareholders. MLX owns and manages the S.K. Wellman group of specialty friction materials businesses and seeks to diversify and grow by expanding internally and acquiring other businesses with a similar strategy. MLX has a federal net operating loss carryforward exceeding $300 million to offset federal taxable income from its investments. The S.K. Wellman subsidiaries are engaged in the global design and manufacture of specialty friction and related products intended for use in extremely demanding environments. Wellman produces friction components under very precise tolerances for use in brake, clutch and transmission applications in heavy equipment, farm machinery, military equipment, recreational vehicles, trains and over the road trucks as well as brake applications for commercial and military aircraft. Wellman participates in both the original equipment and replacement markets and relies on an extensive research and development and engineering staff to continually provide improved products and performance to its Fortune 500 and international customers. Table of contents Financial Highlights 1 Letter to Shareholders 2 About S.K. Wellman 4 Five Year Financial Review 6 Management's Discussion and Analysis 7 Consolidated Financial Statements and Notes 10 Report of Independent Auditors 23 Corporate Data 24 The Year In Review IBC FINANCIAL HIGHLIGHTS
1993 1992 1991 (in 000's except per share data) Net Sales $ 57,036 $ 53,862 $ 50,714 Operating Earnings 6,218 5,373 3,738 Interest Expense, net (2,100) (2,612) (3,399) Earnings from Continuing Operations 2,039 1,385 57 Net Earnings 5,666 5,509 (23,234) Earnings per Share from Continuing Operations (Net of Dividends and Accretion on Preferred Stock) $ 0.45 $ 0.55 $ 0.02 Long-Term Debt 14,845 25,711 39,385 Shareholders' Equity (Deficit) 7,324 (1,844) (14,252)
Earnings per share data have been restated to reflect the 1993 one for ten reverse stock split. [DESCRIPTION] GRAPHIC #2: (3) Bar Graphs: Revenues, in thousands; Net Tangible Shareholders' Equity, in thousands; Earnings from Continuing Operations, in thousands. [FN] *Includes intangible assets of the RACGroup (discontinued as of December 31, 1991). LETTER TO SHAREHOLDERS 1993 was an outstanding year for your Company. We achieved a record annual sales level (excluding the discontinued operations), and in all areas of our business -- debt reduction, profits, asset management, new product development, quality, customer service levels and shareholder services -- we had a very active and productive year. Finally, and very importantly, we were able for the first time in over two years to turn our attention away from financial restructuring obligations and focus full time on operations and expansion opportunities. This focus, coupled with the performance of our S.K. Wellman operating team, has resulted in the numerous positive financial trends which you see displayed in graphs throughout this annual report. Our consolidated sales level in 1993 of $57.0 million is a record sales performance for the Company (excluding the discontinued operations). This represents an increase of $3.2 million or 5.9% over the 1992 performance. This was not a "one-quarter" phenomenon. Instead, it was a steady growth trend achieved through new product introductions, diversification and aggressive marketing. In fact, by year end we had exceeded comparable, prior-year quarterly sales for seven consecutive quarters. This revenue growth, combined with our on-going cost control and production efficiency efforts, enabled us to significantly improve our operating earnings performance in 1993. Our operating earnings level of $6.2 million in 1993 is an increase of 15.7% over that of 1992 and represents the fourth consecutive year of improvement in this measure. This achievement is an annualized growth rate of 31% in operating earnings since 1989. 1993 also represented a significant turning point for MLX as we achieved an attractive, balanced capital structure after our numerous financial restructuring efforts which had gone on for years. As a result of the 1992 disposition of the unprofitable Refrigeration and Air Conditioning Group, the program to exchange Series A Preferred Stock for our Zero Coupon Bonds and on-going profitable operations, your Company was able to achieve positive net tangible shareholders' equity for the first time since MLX began active operations in 1986. At the same time, these efforts resulted in a consolidated debt level of only $14.8 million -- our lowest level since MLX began active operations. Also in 1993, we completed three transactions which were approved by our shareholders at our most recent annual meeting in June. First, effective June 25, 1993, we executed a one for ten reverse stock split coupled with a reincorporation of MLX as a Georgia corporation. This was designed to reduce our administrative costs for periodic reporting and to set the stage for relisting on the NASDAQ exchange. At this same time, we implemented certain shareholder-approved transfer restrictions on our common stock which are aimed at safeguarding our $339 million net operating loss carryforward which can be used to offset future taxes. Outside of our friction-related operating companies, this net operating loss carryforward is our most significant asset. [DESCRIPTION] GRAPHIC #3: (1) Bar Graph Chart: Long-Term Debt, in thousands, for years 1989 through 1993. We were pleased to report to you this year in our third quarter report to shareholders that we regained our listing on the NASDAQ Small Cap Market under the trading symbol "MLXR." This should provide you with a more active and efficient market for your share transactions. We hope to qualify for listing on the NASDAQ National Market System during 1994 which will further enhance our common stock listing. A large measure of our success in 1993, as in prior years, can be attributed to our operating team at S.K. Wellman headed up by Ron Grambo. Ron's 35 years of experience in the specialty friction business and the skill and motivation of his operating team represent a strong, strategic advantage enjoyed by S.K. Wellman. I am especially proud of the fact that we have achieved the attractive operating results of 1993 without relying on the nonrecurring effects of financial restructuring. Instead, I believe we have based these positive trends on a solid operating foundation -- including skilled operating personnel, a commitment to research and development, efficient production operations and a renewed focus on market responsiveness. This places us in a strong position to go forward. At the same time, we have strengthened our balance sheet and have addressed the financial exposures related to certain employee benefit plans. We expect to significantly increase our capital spending in 1994 with a goal of achieving additional production efficiencies and flexibilities as well as continuing expansion into new product areas at S.K. Wellman. We plan to continue to broaden our product lines and capabilities. In addition, we will continue to evaluate acquisition opportunities as they arise. We have developed specific criteria for this purpose and plan to critically evaluate target companies - -- both within the specialty friction industry and in other areas. We are pleased to announce that in 1993 we added two new members to our board of directors. Both William Uhrig and Whitney Wagner are affiliated with Three Cities Research, Inc., a significant shareholder, and they bring a wealth of financial and strategic experience to our board. We hope that you are as pleased with the 1993 operating results as we are here at MLX, and we thank you for your continued support. Sincerely, [SIGNATURE] Name and Title: Brian R. Esher Chairman, President and Chief Executive Officer March 11, 1994 [DESCRIPTION] GRAPHIC #4: (1) Bar Graph Chart: Latest Twelve Months Results, in thousands, showing Operating Earnings and Income Before Extraordinary Item. [DESCRIPTION] GRAPHIC #5: Photo and Caption: Thomas C. Waggoner (left), Brian R. Esher (center) and Ronald E. Grambo (right) S. K. WELLMAN S.K. Wellman is a leading global designer and manufacturer of high-energy friction materials and related products. The Company operates manufacturing plants in Brook Park, Ohio; LaVergne, Tennessee; and Orzinuovi, Italy and a remanufacturing facility in Concord, Ontario. The Company is headquartered in Solon, Ohio where it has an extensive research and development and administrative facility. S.K. Wellman supplies its products to world-class manufacturers in the construction, aircraft, farming, transportation, logging and mining industries. It also sells its products under the "Velvetouch" brand to rebuilders and other users through an extensive distribution network which sells and supports the Company's products in over 30 countries around the world. In 1994 S.K. Wellman is celebrating its 70th year of providing high- performance friction materials to its customers. Throughout the years, the Company has built a solid reputation of providing quality and innovation in products used in brakes, clutches, transmissions and other friction-related areas. Wellman has been successful because it has developed strategic, competitive advantages in certain critical areas. These include research and development, quality assurance, customer relations and engineering and production expertise. [DESCRIPTION] GRAPHIC #6: Photo and Caption: Employees at the LaVergne, Tennessee plant celebrate receiving the John Deere Supplier Quality Certification Award. (L-R) Edna Young, Brenda Patterson, Clarence Williams and Jim Fields. RESEARCH AND DEVELOPMENT Research and development is a critical component of providing ever improving friction materials and products to solve customer needs. Wellman annually spends more than $3 million on research and development applications and manufacturing engineering and boasts a trained staff of 40 highly experienced team members in these areas. These professionals develop new friction materials to meet specific application demands, develop cost-efficient manufacturing processes and work with our customers to plan for the evolution of their product technology and assist them in finding solutions to their needs. While all of the Wellman manufacturing locations include engineering and R&D support functions, the primary research and development effort takes place in the world headquarters facility in Solon, Ohio. Portions of this 50,000 square foot facility are specifically designed to house this research function --including testing bays where dynamometer equipment can simulate our product under application conditions and automatically capture and evaluate the test data. These dynamometers represent millions of dollars of capital investment dedicated to serving and supporting our customer application needs. [DESCRIPTION] GRAPHIC #7: (1) Bar Chart: R&D AND ENGINEERING EXPENDITURES, % of sales QUALITY ASSURANCE Most of S.K. Wellman's major customers require periodic certifications of their principal suppliers to insure that both manufacturer and supplier are meeting a common quality objective. These certifications are conducted on-site and cover areas such as: EDI Order Transfer Total Quality Management Employee Training Continuous Improvement Parts Traceability Production Planning Just in Time Delivery Capability Statistical Process Control Engineering and Technical Support Materials Control and Handling S.K. Wellman holds supplier quality certifications from world-class manufacturers such as Caterpillar Inc., Clark Hurth Components Company, Deere & Company, B.F. Goodrich, and Ford New Holland, Inc. PARTNERSHIPS WITH CUSTOMERS The key to S.K. Wellman's success for 70 years is its dedication and focus on meeting customer needs and on providing our customers with continuous improvements in products and performance. Part of the Wellman strategy in this area includes being involved in active partnerships with its customers. To meet this objective, Wellman engineers are closely involved with customers at the concept stage and contribute ideas to the customer's product program. This cooperative role now extends to having our personnel involved on customer task forces to solve specific performance problems and develop test criteria. This can easily be a long-term commitment since many major product items require years in development and certification. [DESCRIPTION] GRAPHIC #8: Photo and Caption: Richard E. Dowell, Director of Organic R&D (left) and Horst Becker, Director of Metallic R&D (right) examine dynamometer test results with Technician Ronald F. Fhay. (seated) EXPERIENCED WELLMAN TEAM Our most valuable asset at S.K. Wellman is our team of skilled employees who year after year have dedicated themselves to our principles of customer satisfaction, continuous operational improvement and our relentless pursuit of technological breakthroughs in friction materials. This team includes an executive staff with a combined average experience of 18 years and a skilled hourly work force with an average tenure of over 9 years. This vast pool of expertise results in a continuous flow of new and innovative product solutions with the highest standards of quality and service excellence. [DESCRIPTION] GRAPHIC #9: Artwork: 70 Year Gold Banner [DESCRIPTION] GRAPHIC #10: Photo and Caption: The S.K. Wellman management team includes: (seated L-R) Ronald E. Grambo, Thomas W. Hites, James W. Feldhouse, Brian R. Esher and Giovanni Cipolla. (standing L-R) Frederic A. Kowalcyk, Thomas C. Waggoner, Anthony M. Gambatese and Douglas O. Firman. FINANCIAL REVIEW SELECTED FINANCIAL INFORMATION
Years ended December 31 1993 1992 1991 1990 1989 Operating Data Net sales $57,036 $53,862 $50,714 $55,228 $55,981 Gross margin 13,862 12,586 10,711 13,329 16,965 Operating expenses (excluding restructuring and other nonrecurring costs) 7,644 7,213 6,973 8,811 8,819 Operating earnings (loss) S.K. Wellman 6,541 5,712 4,563 5,473 9,594 Corporate (323) (339) (825) (955) (1,448) Restructuring and other nonrecurring costs -- -- -- (660) (6,040) Total operating earnings 6,218 5,373 3,738 3,858 2,106 Interest expense, net (2,100) (2,612) (3,399) (3,333) (2,396) Other income (expense) (162) 367 (75) 331 (93) Income taxes (1,917) (1,428) (7) (413) (585) Minority interests -- (315) (200) (310) (680) Earnings (loss) from continuing operatio 2,039 1,385 57 133 (1,648) Discontinued operatio -- -- (23,291) (26,505) (10,607) Extraordinary gain on early retirement of debt 3,627 4,124 -- -- -- Net earnings (loss) $ 5,666 5,509 $(23,234) (26,372) $(12,255) Discontinued Operations Net sales $ -- $ -- $333,279 $394,849 $405,988 Gross margin -- -- 83,820 97,101 109,761 Operating expenses -- -- (81,090) (105,488) (90,718) Other expenses -- -- (17,086) (18,118) (29,650) Loss on disposal -- -- (8,935) -- -- Net loss from discontinued operations $ -- $ -- $(23,291) $(26,505) $(10,607) Financial Position Working capital $ 8,990 $ 9,752 $ 10,331 $ 14,589 $ 13,856 Depreciation and amortization 2,671 3,421 3,622 3,396 3,158 Total assets 33,761 33,128 41,718 47,945 46,562 Long-term liabilities 17,053 26,631 40,980 46,253 20,280 Minority interests -- -- 2,045 1,845 1,724 Shareholders' equity (deficit) 7,324 (1,844) (14,252) 8,852 23,112 Per Share Data Average common shares outstanding and dilutive options 2,620 2,541 2,540 2,268 1,697 Earnings (loss) per share: Continuing operations $ 0.45 $ 0.55 $ 0.02 $ 0.06 $ (0.97) Discontinued operations -- -- (9.17) (11.69) (6.25) Extraordinary gain on early retirement of debt 1.38 1.62 -- -- -- Total $ 1.83 $ 2.17 $ (9.15) $ (11.63) $ (7.22) Dollars in thousands (except earnings per share data) Earnings per share data have been restated to reflect the 1993 one for ten reverse stock split.
MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Basis of Presentation -- Effective June 25, 1993, MLX implemented a one for ten reverse stock split as approved by shareholders at the 1993 annual meeting of shareholders. Historical per share data in the consolidated financial statements and in the discussion below have been retroactively adjusted to reflect this reverse split. On March 19, 1992 MLX sold its investment in its Refrigeration and Air Conditioning Group (RAC Group). The RAC Group has been reported as a discontinued operation in accordance with APB Opinion No. 30. Accordingly, the results of continuing operations and balance sheet reported in the consolidated financial statements and discussed below are those of the consolidated group (MLX Corp. and the S.K. Wellman subsidiary) as it is now comprised. 1993 vs. 1992 -- Revenues for S.K. Wellman in 1993 were $57.0 million compared to a 1992 level of $53.9 million, an increase of 5.9%. This increase resulted principally from higher sales of transmission and clutch components for use in construction equipment, farm machinery and on-highway hauling vehicles. In addition, after-market sales increased by 15.4% compared to 1992 due to higher demand for sales for U.S. military applications and to export customers. 1993 sales of aircraft brake components decreased by approximately 10.5% compared to 1992 due to lower mid-year demand from commercial airline customers. In addition, reported 1993 sales from the Italian plant, as expressed in U.S.dollars, decreased by $700,000, or 7.3%, compared to 1992. However, if the weighted average currency exchange rate for 1992 had remained constant in 1993, reported 1993 sales from this plant would have increased by $1.7 million, or 18%. The gross margin achieved in 1993 increased to 24.3% compared to 23.4% in 1992. This favorable result was due principally to improved efficiencies in production operations which offset the unfavorable shift in product mix away from higher margin commercial aircraft products. Consolidated selling, general and administrative expenses for 1993 rose by 6% to $7.6 million compared to $7.2 million in 1992. At S.K. Wellman, such expenses rose by a nominal amount to $6.3 million. At MLX Corp. charges in this area increased to $1.3 million (from $1.1 million in 1992) since 1992 had a nonrecurring credit of $675,000 resulting from a change in estimate in medical claim reserves which was partially offset by a charge of $450,000 for potential litigation and professional obligations. Consolidated interest expense dropped from $2.6 million in 1992 to $2.1 million in 1993. The interest incurred at S.K. Wellman rose to $1.7 million in 1993 (compared to $1.3 million in 1992) as a result of amounts borrowed to pay off the MLX senior term loan and the minority interest obligations. At MLX the interest charge dropped to $400,000 in 1993 (compared to $1.3 million in 1992) due to the pay off of the senior term loan and the exchange of certain of the Zero Coupon Bonds for Series A Preferred Stock. Included in the results for 1993 is an extraordinary gain from early retirement of debt of $3.6 million resulting from the exchange in the second quarter of Series A Preferred Stock and 1993 Variable Rate Notes for certain of the remaining Zero Coupon Bonds. The gain is reported net of a charge in lieu of federal income taxes of $1.9 million and is discussed in Note B of the Notes to Consolidated Financial Statements. Earnings applicable to common stock for 1993 have been reduced for dividend and accretion obligations on the Series A Preferred Stock issued as of December 31, 1992 and April 22, 1993. In 1993, the Company had earnings before extraordinary items of $2.0 million, $0.45 per share (net of obligations on the Series A Preferred Stock), and net income of $5.7 million, or $1.83 per share. In 1992, the Company had earnings before extraordinary item of $1.4 million, or $0.55 per share, and net income of $5.5 million, or $2.17 per share. The Company is able to offset substantially all of its federal taxable income with its pre-reorganization tax loss carryforwards and therefore has a federal tax liability only for Alternative Minimum Tax amounts. Accordingly, the charge in lieu of federal income taxes included in the statements of operations for the years ended December 31, 1993 and 1992 is not accruable or payable. These pro-forma charges for 1993 and 1992 (excluding the pro-forma charge provided for extraordinary gains) were $1.2 million and $1.1 million, respectively. The following table illustrates the effect of this pro-forma charge on the Company's earnings from continuing operations and earnings per share. There was no such pro-forma charge for 1991.
Dollars in thousands (except per share data) 1993 1992 1991 Earnings from Continuing Operations (before extraordinary item) $2,039 $1,385 $ 57 Less Dividends and Accretion on Preferred Stock (873) -- -- Plus Pro-forma Federal Tax Charge Not Due or Payable 1,243 1,110 -- Total Earnings $2,409 $2,495 $ 57 Total Earnings per Common Share $ 0.92 $ 0.98 $0.02
1992 vs. 1991 -- Revenues for S.K. Wellman in 1992 were $53.9 million compared to revenues of $50.7 million for 1991, an increase of 6.3%. This increase resulted from higher sales of transmission products and from higher sales of clutch components used in on-highway hauling vehicles. These increases were partially offset by the scheduled termination of a military contract for providing aircraft brake components. Because of this termination, overall sales of aircraft components to both commercial and military applications were down by 5.2%. In addition, export sales of sintered discs from the Italian plant increased by 11% and the sales of cellulose fiber discs from the Italian plant continued to increase (20% over 1991 levels) consistent with a long-term trend in such sales. Margins at S.K. Wellman in 1992 increased to 23.4% compared to 21.1% in 1991. This improvement resulted from favorable shifts in product mix and from improved efficiencies in plant operations resulting in lower scrap rates, lower labor charges and higher production yields. Consolidated selling, general and administrative expenses for 1992 rose by 3.4% to $7.2 million compared to $7.0 million in 1991. At S.K. Wellman such expenses were $6.1 million (compared to $5.9 million in 1991). At MLX Corp., changes in estimates in medical claim reserves resulted in a credit to expense of $675,000 in 1992 while no such credit occurred in 1991. The expenses in 1992 also included a nonrecurring charge of $450,000 for potential legal and professional obligations. Consolidated interest expense in 1992 dropped to $2.6 million from $3.4 million in 1991. The interest incurred at S.K. Wellman in 1992 ($1.3 million) decreased from the 1991 amount of $1.9 million due to lower average borrowings. At MLX Corp., interest dropped from $1.5 million in 1991 to $1.3 million in 1992 due principally to the reduction in the effective accretion rate on the Zero Coupon Bonds. Included in the 1992 results is an extraordinary gain of $4.1 million resulting from the exchange (effective December 31, 1992) of Preferred Stock for Zero Coupon Bonds and MLX senior term loan as discussed in Note B of the Notes to Consolidated Financial Statements. In 1992, the Company had earnings before extraordinary item of $1.4 million or $0.55 per share and net income of $5.5 million or $2.17 per share. In 1991, the Company had net income from continuing operations of $57,000 or $0.02 per share. FINANCIAL POSITION AND LIQUIDITY Consolidated working capital at December 31, 1993 was $9.0 million compared to $9.8 million at December 31, 1992. This decrease resulted from a continuing focus on lower inventory levels and the liability (reported as short-term) for dividends payable on Series A Preferred Stock. S.K. Wellman finances its operations with cash from operations and the use of a senior credit facility. In 1993 the Company successfully executed a new senior credit agreement with a new lender which extends through January 1997. During 1993, the proceeds from this facility were used to pay down certain obligations of MLX Corp. and to replace the previous senior facility and the two Industrial Revenue Bonds. The 1993 senior credit facility has three term components with varying amortization obligations through maturities ranging from July 1995 to January 1997. In addition, there is a revolving loan component with a limit of $7.2 million, subject to certain availability formulas, and an expiration date of January 1997. The amount available under the revolving loan facility at December 31, 1993 was $5.1 million which exceeded the amount outstanding on that date by $2.8 million. Management believes that the existing lending facilities provide adequate working capital resources for its anticipated needs in 1994. The 1993 senior credit facility limits cash dividends and loans which S.K. Wellman may make to MLX Corp. Under the most restrictive covenants, retained earnings in the amount of approximately $2 million were free from limitations on the payment of dividends to MLX Corp. at December 31, 1993. The Zero Coupon Bonds were originally issued in 1990 and were subsequently amended in connection with the sale of the RAC Group in 1992. As of the end of 1993, approximately 94.2% of these bonds had been exchanged for 1993 Variable Rate Notes and shares of Series A Preferred Stock. The remaining outstanding Zero Coupon Bonds mature in 2002 and require no payments of principal or interest until maturity except in very limited circumstances. Early redemption of the Bonds is at the Company's option. The Series A Preferred Stock was issued as of December 31, 1992 and April 22, 1993 and provides for dividend rates which commence at prime plus 2.5% (but not less than 9%) and escalate gradually to a peak of prime plus 7% (but not less than 14%) for all periods after January 1, 1999. The dividend rate at December 31, 1993 was 9%. Dividends accumulate in arrears unless paid, and the redemption of the Preferred Stock is solely at the option of the Company. The 1993 Variable Rate Notes were issued in April 1993 in exchange for certain of the Zero Coupon Bonds. The notes have an escalating interest rate feature (currently at 9%) and mature in 2002. The agreement governing the Notes requires that interest due on the Notes be paid (on a pro-rata basis) whenever dividends on the Series A Preferred Stock are paid. Effective December 31, 1992 the Company purchased the 13.7% minority interest in its S.K. Wellman subsidiary under the terms of the agreement. Notes were issued to the holders of such minority interests, and these notes were paid off in February and December 1993. The Company adopted Statement of Financial Accounting Standards No. 106 in the first quarter of 1993 on a prospective basis to account for certain retiree health benefits. The adoption of this standard is expected to increase annual benefit costs by approximately $27,000. OTHER DATA Capital Expenditures -- Capital expenditures in 1993 amounted to $1.8 million, all of which pertains to S.K. Wellman. These expenditures were made to improve quality control procedures, expand existing new production capabilities in other areas and to automate certain engineering design steps. In 1992, capital expenditures amounted to $1.1 million for capital projects which enhanced research and development capabilities, reduced scrap rates and increased worker safety. There were no material commitments for capital expenditures outstanding at December 31, 1993. The expected level of capital expenditures for 1994 is approximately $2.5 million. Seasonality -- Sales of S.K. Wellman generally do not follow a seasonal pattern. However, extended holiday shutdowns of major customer production sites can result in minor reductions in sales volume in the third and fourth quarters for the European operation and in the fourth quarter for the North American operation. Backlog -- The backlog of unshipped orders for the ensuing three months (the period which generally represents a firm customer commitment) at December 31, 1993 was $13.0 million. At December 31, 1992, the backlog for such period was $12.2 million. Employees -- At December 31, 1993 the Company had 511 employees compared to 483 at December 31, 1992. Approximately 213 are covered by collective bargaining agreements as of December 31, 1993. Environmental Status -- In connection with the loan application procedures for the new senior lender, S.K. Wellman performed certain tests for environmental contamination for each of the three owned U.S. operating sites. These tests revealed minor surface contamination at one site and no other condition requiring remediation. In 1993 the Company removed this contaminated soil following specific disposal guidelines. Costs incurred in connection with the removal were not significant. Market, Share Ownership and Dividend Information -- As of December 31, 1993 (and commencing on August 30, 1993) the Company's common shares were traded in the NASDAQ Small Cap Market under the trading symbol "MLXR". From January 26, 1993 until August 30, 1993, the Company's shares were traded on the Domestic OTC Electronic Bulletin Board regulated by NASD. Prior to that time and commencing on March 27, 1992, the Company's shares were traded on the NASDAQ Small Cap Market. Prior to that date the Company's shares were traded on the NASDAQ National Market. As of December 31, 1993 the Company estimated there were approximately 7,100 shareholders of record of its common stock. In addition, the Company believes that there are approximately 3,100 shareholders whose shares are registered in names of nominees. In connection with the reverse stock split implemented in June 1993, approximately 3,200 shareholders who held fewer than 10 pre-split shares were eliminated as shareholders and given the right to redeem their shares at $1 each. MLX's current policy is to retain earnings to finance future growth and for debt repayment, and accordingly, does not expect to pay any cash dividends on its common stock in the foreseeable future. In addition, certain covenants relating to indebtedness of MLX and S.K. Wellman prohibit the payment of common stock cash dividends. QUARTERLY DATA (Unaudited)
In thousands, except per share data 1st 2nd 3rd 4th Net sales $ 14,4628 $ 14,143 $ 13,892 $ 14,573 Operating earnings 1,534 1,452 1,717 1,515 Extraordinary gain on early retirement of debt -- 3,627 -- -- Net earnings 375 4,221 672 398 Earnings applicable to common stockholders 195 3,982 430 186 Net earnings per common share: Continuing operations $ 0.08 $ 0.13 $ 0.16 $ 0.07 Extraordinary gain on early retirement of debt -- 1.37 -- -- Total $ 0.08 $ 1.50 $ 0.16 $ 0.07 Stock price range per common share $9.38-3.13 $9.38-5.00 $9.00-4.25 $5.75-4.13 Trading Volume 73 45 64 55 1992 Net sales $ 12,385 $ 13,923 $ 13,786 $ 13,768 Operating earnings 958 1,557 1,410 1,448 Extraordinary gain on early retirement of debt -- -- -- 4,124 Net earnings (loss) (36) 349 484 4,712 Earnings applicable to common stockholders (36) 349 484 4,712 Net earnings per common share: Continuing operations $ (0.01) $ 0.14 $ 0.19 $ 0.23 Extraordinary gain on early retirement of debt __ __ __ 1.62 Total $ (0.01) $ 0.14 $ 0.19 $ 1.85 Stock price range per common share $ 8.80-2.50 $5.00-1.90 $4.10-1.90 $5.00-3.40 Trading Volume N/A N/A N/A 96
CONSOLIDATED BALANCE SHEETS
MLX Corp. and Subsidiaries December 31 1993 1992 Current Assets Cash and cash equivalents $ 985 $ 667 Accounts receivable 8,357 8,273 Inventories 8,449 8,888 Prepaid expenses and other current assets 583 265 Total Current Assets 18,374 18,093 Property, Plant and Equipment, net 12,064 12,277 Intangible Assets, net 2,785 2,732 Other Assets 538 26 Total Assets $33,761 $33,128 Current Liabilities Accounts payable $ 3,362 $ 3,033 Accrued compensation and benefits 2,809 2,458 Other accrued liabilities and expenses 1,969 1,607 Accrued taxes 553 525 Dividends payable on Series A Preferred Stock 638 -- Current portion of long-term debt 53 718 Total Current Liabilities 9,384 8,341 Long-Term Debt 14,792 24,993 Other Long-Term Liabilities 2,261 1,638 Shareholders' Equity Preferred Stock, no par value -- authorized 1,500,000 shares; none outstanding -- -- Preferred stock, Series A, $30 par value -- authorized 500,000 shares; 264,000 shares outstanding (200,000 shares in 1992) 6,981 5,100 Common stock, $.01 par value -- authorized 38,500,000 shares; 2,536,000 shares outstanding (25,415,000 shares in 1992) 25 254 Capital in excess of par value 60,551 57,319 Retained earnings deficit since December 11, 1984 (58,836) (63,629) 8,721 (956) Other equity adjustments (1,397) (888) Total Shareholders' Equity (Deficit) 7,324 (1,844) Total Liabilities and Shareholders' Equity $ 33,761 $ 33,128 See notes to consolidated financial statements Dollars in thousands (except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
MLX Corp. and Subsidiaries Years ended December 31 1993 1992 1991 Net Sales $57,036 $53,862 $50,714 Costs and Expenses Cost of products sold 43,174 41,276 40,003 Selling, general and administrative expenses 7,644 7,213 6,973 50,818 48,4489 46,976 Operating Earnings From Continuing Operations 6,218 5,373 3,738 Interest expense (net of interest income of $39 in 1993, $30 in 1992 and $140 in 1991) (2,100) (2,612) (3,399) Other income (expense) (162) 36 (75) Earnings Before Income Taxes, Minority Interests, and Extraordinary Item 3,956 3,128 264 Provision for Income Taxes: Federal taxes due and payable 150 - - Charge in lieu of federal income taxes 1,243 1,110 - Foreign, state and local income taxes 524 318 7 Minority interests in net earnings of consolidated subsidiaries - 315 200 Earnings from Continuing Operations 2,039 1,385 57 Discontinued Operations: Loss from operations - - (14,356) Loss on disposal of business - - (8,935) Loss From Discontinued Operations - - (23,291) Extraordinary gain on early retirement of debt (net of charge in lieu of federal income taxes of $1,869 in 1993 and $1,661 in 1992) 3,627 4,124 - Net Earnings (Loss) 5,666 5,509 (23,234) Dividends and Accretion on Preferred Stock (873) - - Earnings Applicable to Common Stock $4,793 $5,509 $(23,234) Earnings (Loss) per Share: Earnings 6from continuing operations (net of dividends and accretion on preferred stock) $ 0.45 $ 0.55 $ 0.02 Loss from discontinued operations - - (9.17) Extraordinary gain on early retirement of debt 1.38 1.62 - Net Earnings (Loss) $ 1.83 $ 2.17 $ (9.15) Average Outstanding Common Shares and Dilutive Options 2,620 2,541 2,540 See notes to consolidated financial statements Dollars in thousands (except per share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
MLX Corp. and Subsidiaries Years Ended December 31 1993 1992 1991 Cash Flows From Operating Activities: Earnings from continuing operations $5,666 $ 5,509 $ 57 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities from continuing operations: Extraordinary gain on early retirement of debt (5,496) (5,785) - Charge in lieu of federal income taxes 3,112 2,771 - Depreciation and amortization 2,671 3,421 3,622 Minority interests in net earnings of consolidated subsidiaries - 315 200 Changes in operating assets and liabilities of continuing operations: Accounts receivable (84) (2) (212) Inventories and prepaid expenses (390) 1,264 3,111 Accounts payable and accrued expenses 1,630 (1,094) (1,728) Other (1,053) (919) 97 Net cash provided by operating activities from continuing operations 6,056 5,480 5,147 Net cash used in operating activities from discontinued operations - - (6,750) Net cash provided by (used in) operating activities. 6,056 5,480 (1,603) Cash Flows From Investing Activities: Purchase of property, plant and equipment (1,820) (1,129) (1,384) Repurchase of minority interests - - (40) Investing cash flows from discontinued operations - - 677 Net cash used in investing activities (1,820) (1,129) (747) Cash Flows From Financing Activities: Borrowings on long-term debt 10,740 - - Repayment of debt (14,611) (6,460) (6,134) Financing cash flows from discontinued operations - - 9,887 Other (47) - 78 Net cash provided by (used in) financing activities (3,918) (6,460) 3,831 Net increase (decrease) in cash and cash equivalents 318 (2,109) 1,481 Cash and cash equivalents at January 1 667 2,776 5,127 Cash and Cash Equivalents at December 31 (including cash of discontinued operations of $3,832 in 1991). $ 985 $ 667 $ 6,608 See notes to consolidated financial statements Dollars in thousands
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
MLX Corp. and Subsidiaries Series A Capital in Retained Other Preferred Common Excess of Earnings Equity Stock Stock Par Value Deficit Adjustments Total Balances at January 1, 1991 $ -- $ 254 $54,528 $(45,904) $ (26) $ 8,852 Issuance of 40,023 shares of common stock in connection with employee stock purchase plan -- -- 20 -- 58 78 Foreign currency translation adjustment -- -- -- -- 52 52 Net loss -- -- -- (23,234) -- (23,234) Balances at December 31, 1991 -- 254 54,548 (69,138) 84 (14,252) Issuance of 200,000 shares of preferred stock in connection with the retirement of debt 5,100 -- -- -- -- 5,100 Foreign currency translation adjustment -- -- -- -- (972) (972) Benefit of pre- reorganization tax loss carryforwards -- -- 2,771 -- -- 2,771 Net earnings -- -- -- 5,509 -- 5,509 Balances at December 31, 1992 5,100 254 57,319 (63,629) (888) (1,844) Issuance of 64,000 shares of preferred stock in connection with the retirement of debt 1,646 -- -- -- -- 1,646 Dividends and accretion on preferred stock 235 -- -- (873) -- (638) Foreign currency translation adjustment -- -- -- -- (509) (509) Benefit of pre- reorganization tax loss carryforwards -- -- 3,112 -- -- 3,112 One for ten reverse stock split -- (229) 118 -- -- (111) Stock options exercised -- -- 2 -- -- 2 Net earnings -- -- -- 5,666 -- 5,666 Balances at December 31, 1993 $6,981 $ 25 $60,551 $(58,836) $(1,397) $7,324 See notes to consolidated financial statements Dollars in thousands
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The financial statements include the accounts of MLX Corp. (MLX or the Company) and its wholly-owned subsidiaries. The wholly-owned subsidiaries include S.K. Wellman Limited, Inc. (S.K. Wellman -- the principle entity of the Company's specialty friction materials manufacturing group) and each of its wholly-owned subsidiaries. Upon consolidation, all significant intercompany accounts and transactions have been eliminated. Cash Equivalents: Cash equivalents consist of investments in short-term asset management accounts. Such investments are stated at cost plus accrued interest which approximates market value. For purposes of the accompanying Consolidated Statements of Cash Flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Inventories: Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. The components of inventories are as follows:
In thousands 1993 1992 Manufactured goods $ 2,298 $ 2,350 Raw materials and work in progress 6,151 6,538 $ 8,449 $ 8,888
Property, Plant and Equipment: Properties are recorded at cost and include expenditures for additions and major improvements. Expenditures for repairs and maintenance are charged to operations as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. The components of property, plant and equipment are as follows:
In thousands 1993 1992 Land and improvements $ 1,179 $ 1,192 Buildings and leasehold improvements 6,933 6,934 Machinery and equipment 16,007 14,883 Construction in progress 533 631 24,652 23,640 Accumulated depreciation and amortization (12,588) (11,363) $ 12,064 $ 12,277
Accrued Insurance: The Company sponsors funded health and workers' compensation plans for the majority of its employees. Premiums are based on experience and accrued insurance is based on a pre-calculated contractual obligation to the insurance company. During 1991 and a portion of 1992 the Company was self-insured for both health and workers' compensation claims. Health accruals under the previous plan were based on current claims plus estimates of incurred but not reported claims. In 1992 the Company recorded income of $675,000 related to a change in its estimate of necessary claims accrual due to better than expected claims experience. Intangible Assets: Intangible assets are amortized using the straight-line method over the average lives indicated in the following table. The components of intangible assets are as follows:
In thousands 1993 1992 Life Excess of cost of acquired businesses over the fair value of the net assets acquired $ 2,445 $ 2,324 10 years Deferred financing costs 1,509 580 11 years Proprietary formulations and patents 1,806 1,806 10 years Pension costs 1,018 1,014 15 years 6,778 5,724 Accumulated amortization (3,993) (2,992) $ 2,785 $ 2,732
Accounting Changes: Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The adoption of Statement 109 did not have an impact on the Company's financial position or results of operations. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions" which requires the projected future costs of providing postretirement health care benefits be recognized as an expense as employees render service instead of when benefits are paid. The Company has elected to recognize the transition obligation on a prospective basis. The transition obligation (approximately $540,000 at January 1, 1993) for prior service costs at the time of adoption of the Standard is being amortized into general and administrative expense over 20 years. Federal Income Taxes: Any tax benefits resulting from the utilization of the Company's federal net operating loss or other carryforwards existing at December 11, 1984, the date of confirmation of the Plan of Reorganization (Confirmation Date), are excluded from operations and credited to capital in excess of par value in the year such tax benefits are realized. Earnings (Loss) Per Common Share: Primary earnings (loss) per common share is based on the weighted average number of shares outstanding during each year and dilutive common stock equivalents. Earnings applicable to common stock is determined by adjusting net earnings (loss) for dividends and accretion on preferred stock. Reclassifications: Certain reclassifications have been made in the 1992 financial statements to conform with the 1993 presentation. NOTE B - GAIN ON EARLY RETIREMENT OF DEBT Effective December 31, 1992, the Company exchanged shares of its Series A Preferred Stock (see Note F) with an approximate fair value of $5.1 million (face value of $6.0 million) for Zero Coupon Bonds with a carrying value of $7.7 million and a portion of the MLX Senior Term Loan with a carrying value of $3.1 million. In addition, senior term loan with a carrying value of $2.6 million was replaced with a note for $2.5 million (since repaid). The resulting net gain on early retirement of debt of $4.1 million was reported as of December 31, 1992 as an extraordinary item. During the quarter ended June 30, 1993, the Company exchanged shares of its Series A Preferred Stock (see Note F) with an approximate fair value of $1.6 million (face value of $1.9 million) and 1993 Variable Rate Notes with an approximate fair value of $1.4 million for Zero Coupon Bonds with a carrying value of $8.5 million. The resulting net gain on early retirement of debt of $3.6 million was reported in the quarter ended June 30, 1993 as an extraordinary item. NOTE C - DISCONTINUED OPERATIONS On March 19, 1992 the Company reached an agreement with its Refrigeration & Air Conditioning (RAC) Group senior lenders (the Lenders) and a third party investment group, which included a director, (the Buyers) to sell its equity interest in its RAC Group for $40 million and certain other concessions. The proceeds of this sale were transferred to the Lenders in exchange for the release of the Company's guarantee of $52 million of debt owed to the Lenders, satisfaction of all remaining RAC Group obligations under previous lending agreements, and modification of certain terms of the MLX Senior Term Loan and Zero Coupon Bonds. The divestiture of the RAC Group resulted in a loss on disposal of $8.9 million in 1991. This loss represented the Company's investment in the RAC Group on December 31, 1991. The accompanying consolidated financial statements reflect the operating results and cash flows of the discontinued operations separately from continuing operations for all years presented. NOTE C - DISCONTINUED OPERATIONS (continued) The operating results of the discontinued operations were as follows for the year ended December 31, 1991:
In thousands Net sales $333,279 Loss from operations before income taxes (13,974) Income taxes (382) Loss from discontinued operations $(14,356)
The following table provides supplemental information pertaining to the discontinued operations included in the Consolidated Statement of Cash Flows for the year ended December 31, 1991: In thousands Cash Flows from Operating Activities: Net loss from discontinued operations $(23,291) Adjustments to reconcile net loss to net cash used in discontinued operating activities: Depreciation and amortization 5,127 Loss on disposal of discontinued operations 8,935 Changes in operating assets and liabilities: Accounts receivable 6,802 Inventories and prepaid expenses (3,575) Other (748) Net cash used in operating activities $ (6,750) Cash Flows from Investing Activities: Proceeds from sale of property, plant and equipment $ 1,534 Purchase of property, plant and equipment (857) Net cash provided by financing activities $ 677 Cash Flows from Financing Activities: Proceeds from issuance of debt $ 10,498 Repayment of debt (719) Other 108 Net cash provided by financing activities $ 9,887
MLX entered into an agreement with the Buyers pursuant to which MLX shares management, operational, and administrative functions with the RAC Group (renamed Pameco Corporation). The costs for such services are also shared. MLX received $81,500 (net of amounts paid) in 1993 and $470,000 in 1992 from Pameco Corporation which is included as a reduction of selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. NOTE D - LONG-TERM DEBT The components of long-term debt are as follows: In thousands 1993 1992 S.K. Wellman: North American Revolving Credit Facility $ -- $ 1,332 1993 Senior Credit Facility: Revolving credit facility 2,345 -- Real Estate term facility 6,450 -- Mezzanine component 1,350 -- Equipment term note 420 -- Seller note, due 1995 1,703 1,703 Industrial Development Revenue Bonds -- 6,800 Note Payable to Bank 175 -- MLX: Zero coupon bonds net of unamortized discount of $147 in 1993 and $1,566 in 1992 1,005 9,471 Senior term loan -- 4,021 Variable rate subordinated notes 1,397 -- Notes payable to former minority interest holders -- 2,384 14,845 25,711 Less current portion of debt (53) (718) $14,792 $24,993
S.K. Wellman: S.K. Wellman's primary credit facility at December 31, 1993 was the 1993 senior credit facility which provides for four borrowing components with varying rates and repayment obligations. It is secured by a lien of substantially all the North American assets of S.K. Wellman and a pledge of the common stock of the Italian subsidiary. The loan and security agreement for the 1993 senior credit facility requires S.K. Wellman to, among other things, maintain certain levels of working capital, net worth and profitability. This agreement also limits cash dividends and loans to MLX Corp. Under the most restrictive covenants, retained earnings in the amount of approximately $2 million were free from limitations on the payment of dividends to MLX Corp. at December 31, 1993. In December 1993 the loan and security agreement was amended to extend the expiration of the facility through January 1997. The 1993 senior credit facility has a revolving credit component with a maximum borrowing limit of $7.2 million which expires in January 1997. This revolving loan bears interest at prime rate plus 2.0% (dropping to prime plus 1.5% after certain conditions are met). The amount which may be borrowed is subject to certain availability formulas regarding accounts receivable and inventory. The 1993 senior credit facility also includes a real estate term loan component with an initial balance of $7.3 million. This loan requires monthly amortization ranging from $87,000 to $122,000 with any remaining unpaid balance payable in January 1997. The loan bears an initial interest rate of prime plus 2.25% which drops to prime plus 1.75% after certain conditions are met. The 1993 senior credit facility also includes a $2 million 30-month mezzanine term facility (expiring in July 1995) with monthly amortization requirements of $67,000 and an interest rate of prime plus 3.5%. This facility may be prepaid, under certain circumstances, with no penalty. The 1993 senior credit facility has an additional line of credit intended to fund capital expenditures up to a maximum of $1.5 million. At December 31, 1993 $420,000 was outstanding under the arrangement. This note bears interest at rates equal to those of the revolving credit facility and requires monthly amortization payments of $7,500 with any remaining unpaid balance payable in January 1997. Advances may be made at any time until January 1995. The proceeds of the note payable to a bank were used to fund certain capital expenditures in Italy. The note bears interest at 9%, is unsecured, and is due in varying quarterly installments through December 1996. The seller note bears interest at 8%, which is payable semi-annually by S.K. Wellman's Italian subsidiary. MLX and S.K. Wellman have guaranteed the Italian subsidiary's performance under this note. The North American revolving credit facility was terminated on January 15, 1993 and replaced with the 1993 senior credit facility which has more favorable terms and maturities. The Industrial Development Revenue Bonds were repaid in February 1993 with proceeds from and in connection with the execution of the 1993 senior credit facility. MLX: The Company has outstanding Zero Coupon Bonds with a maturity date of March 2002. As of December 1992 and April 1993 certain of the Bonds were exchanged for MLX Series A Preferred Stock (see Note B) and Variable Rate Notes. Subsequent to these exchanges, Zero Coupon Bonds with a net carrying value at December 31, 1993 of $1.0 million remain outstanding. Such Bonds have a maturity value of $1.2 million and have an accretion rate of 1.7% for financial reporting purposes. The redemption value of the Bonds remaining after the exchange was $553,000 at December 31, 1993. NOTE D - LONG-TERM DEBT (continued) In April 1993 MLX issued variable rate subordinated notes to certain holders of its Zero Coupon Bonds (See Note B). These notes, which are unsecured, bear interest at an initial rate of the prime rate plus 2.5% (8.5% at December 31, 1993) but not less than 9%, increasing to a maximum rate of the prime rate plus 7%, but not less than 14% on January 1, 1999. The notes were initially recorded at their estimated fair value and are being increased to the redemption value of $1,444,000 during the period from date of issuance until March 19, 2002 (date of maturity). The notes are due in 2002 or, on a pro-rata basis, whenever shares of the Series A Preferred Stock are repurchased. Effective December 31, 1992, a portion of the MLX senior term loan with a net carrying value of $3.1 million was exchanged for MLX Series A Preferred Stock (see Note B). In connection with the execution of the 1993 senior credit facility at S.K. Wellman, sufficient funds were transferred to MLX to pay off all remaining balances of principal and interest under this loan. Effective December 31, 1992, MLX executed notes for $2.4 million to holders of the minority interests in its S.K. Wellman Limited, Inc. subsidiary to purchase their minority holdings. In connection with the execution of the 1993 senior credit facility these notes were paid down by $1.9 million. In December 1993 all remaining principal and interest obligations on these notes were paid off with funds transferred from S. K. Wellman. Aggregate maturities and other required reductions of debt for the next five years are: 1994 - $53,000; 1995 - $3.4 million; 1996 - $1.2 million; 1997 - $7.7 million; and 1998 - none. The Company intends to pay installments due in 1994 with borrowings under the revolving credit facility. Accordingly, such amounts have been classified as long-term. Interest paid was $1.5 million in 1993, $1.2 million in 1992, and $2.5 million in 1991. NOTE E - REVERSE STOCK SPLIT On June 2, 1993, the stockholders authorized a reverse stock split whereby each 10 common shares owned prior to the reverse stock split became one common share. The reverse stock split was implemented on June 25, 1993, and fractional common shares (approximately 62,000 common shares) were or will be repurchased for $1.00 per share. All references in the financial statements with regard to average number of shares of common stock and related prices and per share amounts have been restated to reflect the one for ten reverse stock split. NOTE F - SHAREHOLDERS' EQUITY AND STOCK OPTIONS The assets and liabilities of foreign operations are translated into U.S. dollars at current exchange rates with the resulting cumulative translation adjustment, $(1,127,000) at December 31, 1993 and $(617,000) at December 31, 1992, recorded as a separate component of shareholders' equity. Exchange adjustments resulting from foreign currency translations included in other income (expense) in the accompanying Consolidated Statements of Operations were $(255,000) in 1993, $(461,000) in 1992, and $(154,000) in 1991. The Company has a stock option plan which provides that options may be granted to key employees, including officers and directors, to purchase common stock at a price not less than market value on the date the option is granted. The stock options are exercisable over periods not exceeding 5 years. A summary of transactions under the plan is as follows:
1993 1992 1991 Number Price Per Number Price Per Number Price Per of Shares Share of Shares Share of Shares Share Outstanding at beginning of year 87,000 $2.50-33.70 75,490 $5.00-33.70 76,475 $14.40-33.70 Granted 11,800 4.25-8.44 86,000 2.50 71,290 5.00-8.80 Exercised (867) 2.50-8.44 -- -- -- -- Canceled for reissuance1 -- -- (24,450) 5.00-31.30 -- -- Canceled (3,200) 2.50-33.70 (50,040) 5.00-33.70 (72,275) 14.40-31.30 Outstanding at end of year 94,733 $2.50-8.44 87,000 $2.50-33.70 75,490 $ 5.00-33.70 At December 31: Exercisable 58,834 29,665 27,320 Reserved for future grant 17,151 25,750 37,260 1 As a result of the sale of the RAC Group in March of 1992, certain options held by employees of that group were canceled. Options were also canceled for MLX employees and reissued at the market price as of the new date of issuance. Certain other key employees of MLX were also issued options during 1992.
On February 11, 1991, MLX issued options to its Chief Executive Officer (CEO) to acquire 190,400 shares of the Company's common stock at $5.00 per share (the market value at date of grant), which are not reflected in the table above. At December 31, 1993, all such options are exercisable and will expire in February 1998. The options contain a clause that in the event that any new or existing shareholders increase their percentage ownership interest of the Company's common stock by 5% or more, the options are immediately converted to a Stock Appreciation Rights (SAR). The 1992 transaction described in Note B caused an ownership change in excess of 5%. Therefore, at the transaction date the CEO held an SAR. Following the conversion of the options to an SAR, the MLX Board (excluding the CEO) voted to terminate the SAR and restore the options in accordance with the terms of the CEO's option agreement. The Company is authorized to issue up to 500,000 shares designated as Series A Preferred Stock with a par value and liquidation preference of $30 per share. The Series A Preferred Stock is non-voting. Cumulative dividends on the Series A Preferred Stock are payable when, and if declared, at an initial rate of the prime rate plus 2.5% (8.5% at December 31, 1993), but not less than 9%, increasing to a maximum rate of the prime rate plus 7%, but not less than 14% on January 1, 1999. The dividend rate will be 1% greater than the rate reflected above for any period after March 31, 1994 during which dividends for more than one quarter remain unpaid. The Series A Preferred Stock is redeemable at the option of the Company at any time at a cash redemption price equal to $30 per share plus any and all cumulative dividends accrued and unpaid on the date of redemption. An aggregate of 264,000 shares of Series A Preferred Stock was issued (see Note B) to certain holders of Zero Coupon Bonds as of December 1992 and April 1993. The Series A Preferred Stock was initially recorded at its estimated fair value and is being increased to the redemption price of $30 per share during the period from date of issuance until January 1, 1999 (commencement of maximum annual dividend rate). The annual accretion, based on the interest method, is charged to retained earnings and amounted to $235,000 in 1993. NOTE G - INCOME TAXES Effective January 1, 1993, the Company adopted the liability method of accounting for income taxes as required by FASB Statement 109, "Accounting for Income Taxes." At December 31, 1993, MLX has net operating loss carryforwards, existing as of the Confirmation Date, of approximately $280 million which are available to offset future taxable income for federal income tax purposes. Such carryforwards expire as follows: $19.4 million in 1995, $41.3 million in 1996, $144.3 million in 1997, $1.2 million in 1998 and $73.8 million in 1999. Also available are investment tax credit carryforwards, existing as of the Confirmation Date, of approximately $800,000 which expire in 1994. Any tax benefit derived from the utilization of these net operating loss and investment tax credit carryforwards is excluded from operations and credited to capital in excess of par value in the year such tax benefits are utilized. Subsequent to the Confirmation Date, the Company has available (for federal income tax purposes), net operating loss carryforwards of approximately $59.2 million, which expire as follows: $2.7 million in 2000, $2.2 million in 2002, $5.0 million in 2005, $2.0 million in 2006 and $47.3 million in 2007. The components of the income tax provision are as follows:
In thousands 1993 1992 1991 Charge in Lieu of Federal Income Taxes: Continuing Operations $1,243 $1,110 $ -- Extraordinary Gain 1,869 1,661 -- Total $3,112 $2,771 $ -- Federal Alternative Minimum Taxes $ 150 $ -- $ -- Foreign, State and Local Income Taxes: Foreign $ 168 $ (82) $ (188) State and Local 356 400 195 Total $ 524 $ 318 $ 7
The charge in lieu of federal income taxes in 1993 and 1992 is computed by applying the statutory rate to earnings before income taxes adjusted for items which are not deductible (includable) for income tax purposes of ($2,000) in 1993 and $617,000 in 1992 (principally results from foreign operations and goodwill amortization) and further adjusted for foreign, state and local taxes. NOTE G - INCOME TAXES (continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of December 31, 1993 are as follows (in thousands): Federal Net Operating Loss Carryforward $ 115,000 State Net Operating Loss Carryforward 3,000 Reserves and Other 3,000 Total 121,000 Valuation Allowance for Deferred Tax Assets (121,000) Net Deferred Tax Assets $ --
The valuation allowance for deferred tax assets decreased $3 million from January 1, 1993. Undistributed earnings of the Company's foreign subsidiaries were not significant at December 31, 1993. These earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes payable to various foreign countries. Cash paid for foreign, state and local taxes amounted to $504,000, $500,000 and $293,000 in 1993, 1992 and 1991, respectively. NOTE H - EMPLOYEE BENEFIT The Company and its subsidiaries sponsor a defined contribution plan which covers a majority of their employees. This plan provides for voluntary employee contributions, a matching Company contribution and a discretionary Company contribution. Expenses from continuing operations related to this plan were $470,000, $128,000 and $104,000 in 1993, 1992 and 1991, respectively. The Company and certain of its subsidiaries sponsor two non-contributory defined benefit pension plans covering certain of their U.S. and Canadian employees. Benefits under one plan are based on compensation during the years immediately preceding retirement. Under the other plan, the benefits are based on a fixed annual benefit for each year of credited service. It is the Company's policy to make contributions to these plans sufficient to meet minimum funding requirements of the applicable laws and regulations, plus such additional amounts, if any, as the Company's actuarial consultants advise to be appropriate. Plan assets consist principally of equity securities and fixed income instruments. In 1992 the Company terminated one of its defined benefit plans and recognized a curtailment gain of $200,000. The Company settled the obligation under the plan in 1993, which resulted in a loss of $230,000. A summary of the components of net periodic pension costs for the plans is as follows: In thousands 1993 1992 1991 Service cost $ 105 $ 344 $ 434 Interest cost 259 439 428 Actual return on plan assets (281) (197) (324) Net amortization and deferral 88 (90) 83 $ 171 $ 496 $ 621 Assumptions used were: Weighted average discount rate 7.44% 8.03% 8.07% Rate of increase in compensation levels -- 6.00% 6.00% Weighted average expected long-term rate of return on assets 8.63% 8.66% 8.30%
The following table presents the funded status and amounts recognized in the consolidated balance sheets at December 31, 1993 and 1992 related to the defined benefit plans:
December 31, 1993 December 31, 1992 Assets Exceed Accumulated Assets Exceed Accumulated Accumulated Benefits Accumulated Benefits In thousands Benefits Exceed Assets Benefits Exceed Assets Actuarial present value of benefit obligations: Vested benefit obligations $ (423) $(1,407) $ (405) $(4,467) Accumulated benefit obligations $ (434) $(1,613) $ (416) $(4,815) Projected benefit obligations $ (537) $(1,613) $ (518) $(4,815) Plan assets at fair value 1,012 984 907 3,547 Projected benefit obligations less than (in excess of) plan assets 475 (629) 389 (1,268) Unrecognized net loss 93 86 188 108 Prior service cost not yet recognized in net periodic pension cost -- 200 -- 220 Unrecognized net obligation at January 1 (284) 214 (320) 95 Adjustment required to recognize minimum liability -- (500) -- (423) Prepaid (accrued) pension cost at December 31 $ 284 $ (629) $ 257 $(1,268)
The Company provides a fixed non-contributory benefit towards postretirement health care for certain of its U.S. subsidiary's retired union employees. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7%. Postretirement benefit costs amounted to $62,000 for the year ended December 31, 1993. Postretirement benefit cost for 1992, which was recorded on a cash basis, has not been restated. Such amounts for 1992 are not considered significant. NOTE I - LEASES The Company leases certain office and warehouse facilities and equipment under noncancellable operating leases. Rental expense from continuing operations for 1993, 1992 and 1991 approximated $312,000, $351,000, and $442,000, respectively. Future minimum lease commitments for continuing operations under these agreements which have an original or existing term in excess of one year as of December 31, 1993 are: 1994 - $275,000; 1995 - $214,000; 1996 - $130,000; 1997 - $74,000; and 1998 - $1,000. NOTE J - SEGMENT INFORMATION The Company's continuing operations are engaged in the design, manufacture and sale of high-energy friction materials which are used primarily in jet aircraft brakes and heavy equipment brakes, transmissions and clutches. The following table presents geographic segment information for the years ended December 31, 1993, 1992 and 1991:
Other In thousands Corporate United States Italy Foreign Consolidated 1993: Net Sales $ -- $46,923 $8,487 $1,626 $57,036 Inter-area sales to affiliates -- 853 3 292 1,148 Earnings (loss) from continuing operations (888) 2,943 (66) 50 2,039 Identifiable assets 1,119 23,253 7,521 1,868 33,761 1992: Net Sales $ -- $42,987 $9,157 $1,718 $53,862 Inter-area sales to affiliates -- 731 82 139 952 Earnings (loss) from continuing operations (601) 2,291 (428) 123 1,385 Identifiable assets 921 22,824 7,494 1,889 33,128 1991: Net Sales $ -- $40,374 $8,271 $2,069 $50,714 Inter-area sales to affiliates -- 581 -- 192 773 Earnings (loss) from continuing operations (1,205) 1,390 (74) (54) 57 Identifiable assets 5,687 24,444 9,609 1,978 41,718
Inter-area sales to affiliates represent products which are transferred between geographic areas on a basis intended to approximate the market value of the products. Inter-area sales to affiliates are not included in the net sales of each geographic segment. Earnings (loss) from continuing operations by geographic area is defined as sales less all expenses (excluding extraordinary gain on early retirement of debt). Identifiable assets are those assets used exclusively in the operations of each geographic area. Corporate assets consist principally of cash and cash equivalents, prepaid expenses and intangible assets. Product research, development, and engineering expenses were $3.4 million, $3.2 million and $3.3 million in 1993, 1992 and 1991, respectively. As a percent of sales, these expenditures were 5.9%, 5.9% and 6.6%, respectively. The percentage of net sales to major customers was as follows:
1993 1992 1991 Customer A 16% 15% 15% Customer B 9% 12% 12% Customer C 14% 14% 11% Customer D 9% 9% 8%
The Company manufactures and sells sintered friction materials to original equipment manufacturers, aircraft component and aftermarket customers. The Company's customers are not concentrated in any specific geographic region. The Company performs ongoing evaluations of its customers' financial condition and generally does not require collateral. Receivables generally are due within 60 days. Credit losses consistently have been within the range of management's expectations. REPORT OF INDEPENDENT AUDITORS Board of Directors MLXCorp. We have audited the accompanying consolidated balance sheets of MLX Corp. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. 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 in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MLX Corp. and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note A to the financial statements, in 1993 the Company changed its method of accounting for income taxes and postretirement benefits. SIGNATURE March 11, 1994 Atlanta, Georgia CORPORATE DATA BOARD OF DIRECTORS Brian R. Esher Alfred R. Glancy III(1)(2) Chairman of the Board, President Chairman, President and Chief & Chief Executive Executive Officer of the Company Officer, MCN Corporation W.John Roberts(1)(2) S. Sterling McMillan, III(1) Retired Senior Vice President-Finance Vice Chairman, Greenleaf Capital and Treasurer, Amerisure Companies Management, Inc. Willem F.P. de Vogel(2) J. William Uhrig(1) President, Three Cities Research, Inc. Managing Director, Three Cities Research, Inc. H. Whitney Wagner (1) Member of Audit Committee Managing Director, Three Cities (2) Member of Compensation Research, Inc. Committee MLX CORPORATE MANAGEMENT Brian R. Esher Thomas C. Waggoner Chairman of the Board, President & Chief Vice President & Chief Financial Executive Officer Officer James D. Askren, II Theodore R. Kallgren Vice President, Secretary & Legal Counsel Vice President, Finance & Treasurer S.K. WELLMAN OPERATING MANAGEMENT Ronald E. Grambo Frederic A. Kowalcyk President Vice President, Velvetouch Division James W. Feldhouse Anthony M. Gambatese Vice President, Operations Vice President, Sales Thomas W. Hites Douglas O. Firman Vice President, Human Resources Corporate Controller Giovanni Cipolla Gail D. Terry General Manager, European Operations Operations Manager, Canada CORPORATE DATA Executive Office Legal Counsel 1000 Center Place Kilpatrick & Cody Norcross, Georgia 30093 Atlanta, Georgia Independent Auditors Stock Transfer Agent & Registrar Ernst & Young American Stock Transfer & Trust Atlanta, Georgia Company New York, New York MLX Corp. common stock is traded in the NASDAQ Small Cap Market under the symbol "MLXR" For more information about the Company or to obtain a copy of the Company's annual report on Form 10-K, contact the Investor Relations Department at (404) 798-0677 or write to MLX Corp., 1000 Center Place, Norcross, Georgia 30093. The annual meeting of shareholders of MLX Corp. will be held on May 4, 1994 at 10:00 a.m. at the Georgia International Convention Center, 1902 Sullivan Road, College Park, Georgia (adjacent to the Sheraton Gateway at the Atlanta airport). THE YEAR IN REVIEW Financial Performance *Achieved a sales level for 1993 of $57.0 million surpassing the previous record set in 1988 (net of discontinued operations). This was achieved in spite of the effects of the Lire/Dollar currency exchange ratio which served to reduce our reported European sales. *Ended 1993 having exceeded the comparable prior year quarter sales level for seven consecutive quarters. *Reduced consolidated long-term debt for both MLX and Wellman to its lowest level since MLX commenced active operations in 1986. The year end level of long-term debt was $14.8 million. *Recorded operating earnings of $6.2 million to achieve a cumulative annualized growth rate of 31% in this measure since 1989. *Emphasized working capital management and achieved inventory turns of 4.9 compared to 4.3 in 1992. Major Transactions *Exchanged shares of Series APreferred Stock and Variable Rate Notes for Zero Coupon Bonds with a carrying value of $8.5 million resulting in an extraordinary gain, net of taxes, of $3.6 million. *Met the NASDAQ listing qualifications and regained the Company's listing on the NASDAQ Small Cap Market under the trading symbol "MLXR" -- providing our shareholders with a more efficient and active trading market for their shares. *Repaid or replaced various debt obligations at both MLX and Wellman to simplify our financing structure and eliminate out of date covenant restrictions. *Executed a one for ten reverse stock split to reduce administrative expenses and facilitate the NASDAQ relisting. This was linked with the Company's reincorporation in Georgia to further reduce administrative expenses. *Implemented the shareholder-approved transfer restrictions on the Company's common stock to further safeguard the Company's $339 million net operating loss carryforward. Domestic and International Operations *Successfully executed a new senior credit agreement at Wellman to gain more favorable terms and maturity features. Proceeds were used to repay the Wellman Industrial Revenue Bonds and to finance capital expenditures to gain operating efficiencies. *Continued to invest in our research and development and engineering capabilities by funding expenditures exceeding $3.0 million for the fourth consecutive year. *Expanded our production capabilities for clutch components by increasing and modernizing our facilities at our Brook Park, Ohio site. *Strengthened the Wellman marketing and product development functions to emphasize responsiveness to market opportunities. MLX Corp. World Headquarters 1000 Center Place Norcross, Georgia 30093 (404) 798-0677 FAX (404) 798-0633 S.K. Wellman World Headquarters 6180 Cochran Road Solon, Ohio 44139 (216) 498-2275 FAX (216) 498-2290 [DESCRIPTION] GRAPHIC #11: Artwork - MLX Logo [DESCRIPTION] APPENDIX: Listing of 1993 Annual Report Graphics GRAPHIC #1: Artwork - MLX Logo WHERE: Located on Cover GRAPHIC #2: Artwork - (3) Bar Graph Charts: Revenues, in thousands; Net Tangible Shareholders' Equity, in thousands; and Earnings From Continuing Operations, in thousands WHERE: Located on Page 1, Financial Highlights GRAPHIC #3: Artwork - (1) Bar Graph Chart: Long-Term Debt, in thousands, for the years 1989 through 1993 WHERE: Located on Page 2, first page of Letter to Shareholders' GRAPHIC #4: Artwork - (1) Bar Graph Chart: Latest Twelve Month Results, in thousands, Showing Operating Earnings and Income Before Extraordinary Item WHERE: Located on Page 3, second page of Letter to Shareholders' GRAPHIC #5: Photo and Caption: Thomas C. Waggoner (left), Brain R. Esher (center) and Ronald E. Grambo (right) WHERE: Located on Page 3, second page of Letter to Shareholders' GRAPHIC #6: Photo and Caption: Employees at the LaVergne, Tennessee plant celebrate receiving the John Deere Supplier Quality Certification Award. (L-R) Edna Young, Brenda Patterson, Clarence Williams and Jim Fields. WHERE: Located on Page 4, first page of S.K. Wellman profile GRAPHIC #7: Artwork - (1) Bar Graph Chart: R&D and Engineering Expenditures, % of sales WHERE: Located on Page 4, first page of S.K. Wellman profile GRAPHIC #8: Photo and Caption: Richard E. Dowell, Director of Organic R&D (left) and Horst Becker, Director of Metallic R&D (right) examine dynamometer test results with Technician Ronald F. Fhay (seated) WHERE: Located on Page 5, second page of S.K. Wellman profile GRAPHIC #9: Artwork - 70 Year Gold & Blue Banner WHERE: Located on Page 5, second page of S.K. Wellman profile GRAPHIC #10: Photo and Caption: The S.K. Wellman management team includes: (seated L-R) Ronald E. Grambo, Thomas W. Hites, James W. Feldhouse, Brian R. Esher and Giovanni Cipolla. (standing L-R) Frederic A. Kowalcyk, Thomas C. Waggoner, Anthony M. Gambatese and Douglas O. Firman. WHERE: Located on Page 5, second page of S.K. Wellman profile GRAPHIC #11: Artwork - MLX Logo WHERE: Located on Back Cover EX-24 3 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-32841 and No. 33-13130) pertaining to the MLX Corp. Stock Option Plan and in the related Prospectuses of our report dated March 11, 1994, with respect to the consolidated financial statements and schedules of MLX Corp. included in the Annual Report on Form 10-K for the year ended December 31, 1993. ERNST & YOUNG March 24, 1994 Atlanta, Georgia EX-4.23 4 EXCHANGE AGREEMENT - 4/2/93 EXCHANGE AGREEMENT Dated as of April 2, 1993 among MLX CORP. and THE BONDHOLDERS LISTED HEREIN TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . 1 ARTICLE 2. AUTHORIZATION AND EXCHANGE CLOSING. . . . . . . 4 ARTICLE 3. CONDITIONS TO CLOSING . . . . . . . . . . . . . 4 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MLX . . . . . 5 ARTICLE 5. REPRESENTATIONS OF EACH HOLDER. . . . . . . . . 7 ARTICLE 6. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 7 ARTICLE 7. TRANSFER RESTRICTIONS ON 1993 BONDS . . . . . . 8 ARTICLE 8. SUBORDINATION OF 1993 BONDS . . . . . . . . . . 9 ARTICLE 9. OPTIONAL PREPAYMENTS. . . . . . . . . . . . . . 12 ARTICLE 10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . 12 ARTICLE 11. EXCHANGE OF 1993 BONDS. . . . . . . . . . . . . 13 ARTICLE 12. REPLACEMENT OF 1993 BONDS . . . . . . . . . . . 13 ARTICLE 13. EXPENSES. . . . . . . . . . . . . . . . . . . . 14 ARTICLE 14. AMENDMENTS AND WAIVERS. . . . . . . . . . . . . 14 ARTICLE 15. NOTICES . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.. . . . . . . . . . . . . . . . 14 ARTICLE 17. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . 15 ARTICLE 18. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . 15 ARTICLE 19. HEADINGS. . . . . . . . . . . . . . . . . . . . 15 ARTICLE 20. GOVERNING LAW . . . . . . . . . . . . . . . . . 15 ARTICLE 21. COUNTERPARTS. . . . . . . . . . . . . . . . . . 15 ARTICLE 22. SEVERABILITY. . . . . . . . . . . . . . . . . . 15 EXHIBIT A FORM OF VARIABLE RATE SUBORDINATED BONDS SCHEDULE 1 PRINCIPAL AMOUNT OF 1993 BONDS TO BE ISSUED AND ZERO COUPON BONDS TO BE EXCHANGED AND REDEEMED EXCHANGE AGREEMENT This EXCHANGE AGREEMENT is dated as of April 2, 1993, and is entered into among MLX CORP. and the persons listed on the signature pages hereof under the caption "BONDHOLDERS" (collectively, together with other persons who may acquire 1993 Bonds in exchange for Zero Coupon Bonds, the "Bondholders"). WHEREAS, the Bondholders are holders of certain Zero Coupon Bonds issued by MLX pursuant to that certain MLX Exchange Agreement dated as of April 13, 1990, as amended and restated as of March 19, 1992 (the "Original Exchange Agreement"); and WHEREAS, the parties hereto wish to exchange certain of the Zero Coupon Bonds for newly-issued Variable Rate Subordinated Bonds issued by MLX pursuant to the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS The following terms, as used herein, have the following respective meanings: "Accredited Investors" has the meaning ascribed to such term in Rule 501(a) under the Securities Act. "Affiliate" has the meaning given to such term in Rule 12b-2 under the Exchange Act, but no Holder or any Affiliate of a Holder shall be deemed to be an Affiliate of MLX for purposes of this Agreement. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Closing" means the issuance of 1993 Bonds by MLX in exchange for the Zero Coupon Bonds of the Holders as described in Section 2.3 hereof. "Closing Date" means the date on which any Closing hereunder occurs. "Commission" means the Securities and Exchange Commission and any other similar or successor agency of the federal government administering the Securities Act or the Exchange Act. "Credit Agreement" means that certain Loan and Security Agreement dated January 15, 1993 among Barclays Business Credit Inc., S.K. Wellman Limited, Inc. and The S.K. Wellman Corp. as the same may be amended, modified, supplemented or restated from time to time. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and employee payroll and benefits arising in the ordinary course of business, (iv), all obligations of such Person as lessee under capital leases, (v) all obligations, whether contingent or non- contingent, of such Person to reimburse any bank or other Person in respect of amounts paid or payable under a letter of credit or similar instrument, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others guaranteed by such Person. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Friction" means S.K. Wellman Limited, Inc. f/k/a SinterMet Corporation, a Michigan corporation, and its successors. "Holder" means any Bondholder and any transferee of any such holder that is bound by the provisions of this Agreement or a like agreement pursuant to which 1993 Bonds are issued in exchange for Zero Coupon Bonds. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, any Person shall be deemed to own subject to a Lien any asset which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "MLX" or the "Company" means MLX Corp., a Michigan corporation, and its successors. "1993 Bonds" means the (i) Variable Rate Subordinated Bonds, aggregating $1,443,804 in principal amount, issued pursuant to this Exchange Agreement to the Bondholders signatory hereto, and the (ii) Variable Rate Subordinated Bonds, if any, issued pursuant to a like exchange agreement in exchange for Zero Coupon Bonds to one or more Bondholders, each of which shall be in substantially the form of Exhibit A hereto. "Original Exchange Agreement" means the MLX Exchange Agreement dated as of April 13, 1990, as amended and restated as of March 19, 1992, among MLX and the Bondholders and Bond Agent that are parties thereto. "Outstanding" means, when used with reference to the 1993 Bonds at any time, all 1993 Bonds theretofore duly issued except (i) 1993 Bonds theretofore reported as lost, stolen, mutilated or destroyed or surrendered for transfer, exchange or replacement, in respect of which replacement 1993 Bonds have been issued by MLX, (ii) 1993 Bonds surrendered to MLX for prepayment pursuant to Article 11 of this Agreement, (iii) 1993 Bonds theretofore paid in full and (iv) 1993 Bonds theretofore cancelled by MLX. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Preferred Shares" means shares of MLX's Series A Preferred Stock, par value and liquidation preference $30.00 per share, whether outstanding on the date hereof or subsequently issued in exchange for Zero Coupon Bonds. "Required Bondholders" means, on any date, registered Holders of (in the aggregate) in excess of 50% of the aggregate principal amount of 1993 Bonds Outstanding on such date. "Required Holders" means, on any date, Holders of (in the aggregate) in excess of 66 2/3% of the Outstanding Preferred Shares and 1993 Bonds, considered collectively, with each $30.00 of principal amount of 1993 Bonds being equal to one Preferred Share for purposes of calculating such percentage. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means any and all obligations of MLX (including, without limitation, any interest that accrues after the filing of a petition initiating any voluntary or involuntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law that is allowed by the applicable bankruptcy court), reimbursement obligations, fees, commissions and other amounts under or with respect to (A) the Credit Agreement, (B) the Subordinated Promissory Notes, each dated January 15, 1993, originally issued by the Company to Teribe Limited and National City Venture Corporation, in the principal amounts of $2,022,222 and $592,363, respectively, and (C) any refinancing, renewal, replacement or substitution of the foregoing agreements or notes. "Subsidiary" means, in the case of any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Zero Coupon Bonds" means the Secured Subordinated Zero Coupon Bonds of MLX issued pursuant to the Original Exchange Agreement, as such Bonds have been amended from time to time. ARTICLE 2. AUTHORIZATION AND EXCHANGE CLOSING 2.1 Authorization of 1993 Bonds. MLX will authorize the issuance of an aggregate of up to $1,443,804 principal amount of 1993 Bonds to the Bondholders signatory hereto prior to or simultaneously with the Closing hereunder. Such 1993 Bonds shall be in substantially the form set forth as Exhibit A attached hereto. 2.2 Exchange of 1993 Bonds for Zero Coupon Bonds. Subject to the terms and conditions set forth herein, and in reliance upon the representations, warranties and agreements set forth herein, each Bondholder shall deliver to MLX the certificate or certificates evidencing the entire principal amount of Zero Coupon Bonds that is set forth opposite such Bondholder's name on Schedule 1 hereto on the Closing Date, and thereupon MLX will, in consideration thereof, cancel such Zero Coupon Bonds and issue to each Bondholder the principal amount of 1993 Bonds set forth opposite such Bondholder's name on Schedule 1 hereto. 2.3 The Closing. The delivery of the Zero Coupon Bonds by the Bondholders and the simultaneous issuance and delivery of the 1993 Bonds by MLX (the "Closing") shall take place at one or more closings as soon as practicable after one or more of the Bondholders have executed and delivered this Agreement and the other conditions to the Closing set forth in Article 3 hereof have been satisfied with respect to such Bondholders, at the offices of Kilpatrick & Cody, Atlanta, Georgia, or at such other place or on such other date as may be mutually agreeable to MLX and the Bondholders, but in no event later than April 7, 1993. The exchange or redemption of any Bonds may take place pursuant to the terms and conditions of this Agreement at a time subsequent to any other Closing hereunder if the Company and the Bondholder so elect. The date and time of any particular Closing as finally determined pursuant to this Section is referred to herein as the "Closing Date." ARTICLE 3. CONDITIONS TO CLOSING This Exchange Agreement will become effective as of a particular Closing Date with respect to the parties to such closing if and only if the following conditions precedent are satisfied or waived by the applicable Bondholders or by MLX as applicable: (i) MLX and the Bondholders shall have received duly executed counterparts hereof signed by each of the parties hereto; (ii) the representations and warranties of MLX contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date; (iii) all corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be in form and substance satisfactory to MLX and the Bondholders; (iv) the Bondholders shall have received such other documents, in form and substance satisfactory to them, as to the matters incident to the transactions contemplated hereby as the Bondholders may reasonably request; (v) the Articles of Incorporation of the Company shall have been amended to provide that any vote, consent, demand or action referred to in Section 6 of the Resolutions contained in the Certificate of Amendment dated January 8, 1993 shall be made or taken by the Required Holders rather than by 66 2/3% of the Preferred Shares; (vi) counsel to The Equitable Life Assurance Society of the United States and The Equitable Variable Life Insurance Company, shall have received payment in full by certified or bank check of all of its fees and expenses not in excess of $15,000.00; and (viii) that certain Exchange Agreement, dated January 15, 1993, among MLX and certain holders of Zero Coupon Bonds other than the Bondholders hereunder shall be in full force and effect, shall not have been amended or modified without the consent of the Required Bondholders, and the closing thereunder shall have occurred in accordance with the terms thereof. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MLX MLX represents and warrants as of the date of this Agreement and as of the Closing Date that: 4.1 Corporate Existence and Power. Each of MLX and its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 4.2 Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by MLX of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable United States federal, Michigan or other law or regulation or of its certificate or articles of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon it or result in the creation or imposition of any Lien on any of its assets. MLX has all requisite corporate power and authority to enter into this Agreement and to carry out the provisions and satisfy the conditions of this Agreement. 4.3 1993 Bonds. The 1993 Bonds to be issued and delivered to the Holders pursuant to the terms of this Agreement, when so issued and delivered, will be validly authorized and issued and will constitute valid and binding obligations of the Company, enforceable in accordance with their terms. 4.4 Binding Effect. This Agreement constitutes a valid and binding agreement of MLX enforceable against MLX in accordance with its terms except as (i) the enforceability thereof may be limited by any applicable bankruptcy, insolvency or other similar law affecting the enforceability of creditors' rights generally and (ii) rights with respect thereto may be limited by equitable principles of general applicability. 4.5 SEC Documents. MLX is subject to the reporting requirements of Section 13 of the Exchange Act and has filed the following documents pursuant to such requirements: (i) its Annual Report on Form 10-K for its fiscal year ended December 31, 1991; (ii) the Proxy Statement for its annual meeting of shareholders held on May 20, 1992; (iii) its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1992; and (iv) its Current Report on Form 8-K dated April 10, 1992. Said reports and proxy statement include all regular and periodic reports and proxy statements required to be filed by MLX with the Commission since December 31, 1991 and are herein collectively called the "MLX SEC Documents." MLX has also provided the Bondholders with copies of all the press releases issued by MLX since November 1, 1992. As of their respective dates, the MLX SEC Documents complied in all material respects with the requirements of the Exchange Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading. The financial statements contained in the MLX SEC Documents were prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial condition of MLX as of the dates thereof and the results of its operations for the periods covered thereby. Since the date of the Annual Report on Form 10-K referred to in the foregoing clause (i), there have been no material changes in the business, operations, financial condition or properties of MLX required to be reported to the Commission other than changes referred to in subsequent MLX SEC Documents, and MLX does not know of any material fact relating to its business which it has not disclosed to the Bondholders in writing or in the MLX SEC Documents which materially affects adversely or, so far as MLX can now reasonably foresee, will materially affect adversely, the business, prospects, operations, financial condition or principal properties of MLX and its Subsidiaries or the ability of MLX to perform its obligations under this Agreement. ARTICLE 5. REPRESENTATIONS OF EACH HOLDER Each Holder hereby represents that: 5.1 Accredited Investor Status. Such Holder is an Accredited Investor and will acquire the 1993 Bonds for its own account, for investment and not with a view to the distribution thereof, other than to Affiliates who are Accredited Investors, nor with any present intention of distributing the same, other than to Affiliates who are Accredited Investors; provided that the disposition of property by the Bondholders shall at all times be and remain within their control. 5.2 Unregistered Securities. Such Holder understands that the 1993 Bonds have not been registered under the Securities Act or registered or qualified under any state securities or "blue sky" laws by reason of their issuance in a transaction which does not require registration under the Securities Act or registration or qualification under the securities or "blue sky" laws of any state, and that such 1993 Bonds may be sold only if registered under the Securities Act and registered or qualified under applicable state securities or "blue sky" laws or exempt from such registration or qualification. 5.3 Access to Information. Such Holder has been furnished with the information it has requested from MLX and has had an opportunity to discuss with officers of MLX the business and financial affairs of MLX. ARTICLE 6. ADDITIONAL AGREEMENTS 6.1 Consents of Required Holders. Without the affirmative vote or written consent, in person or by proxy, of the Required Holders, and, in the case of the Section 6.1(7) only, the affirmative vote or written consent, in person or by proxy, of both the Required Holders and the Required Bondholders: (1) neither MLX nor any Subsidiary shall authorize or issue any shares of stock of any class or series on a parity with, or having priority over, the Preferred Shares; (2) MLX shall not amend or repeal any provisions of, or add any provision to, its Articles of Incorporation or By-Laws that would affect adversely the rights, preferences or privileges of the Preferred Shares or the 1993 Bonds; (3) neither MLX nor any Subsidiary shall declare or pay any dividend, make any distribution, repurchase or redeem any shares of capital stock (other than Preferred Shares), except to the extent that such dividend or other payment is made to MLX or a Subsidiary; (4) neither MLX nor any Subsidiary shall dispose of all or substantially all of its respective assets; (5) neither MLX nor any Subsidiary shall acquire by merging or consolidating with, or by purchasing a substantial portion of the assets or stock of, or by any other manner, any business or corporation, partnership, association or other entity or division thereof, or otherwise acquire or agree to acquire any assets otherwise than in the ordinary course of business, other than any such acquisition for a total purchase price not in excess of $500,000; (6) MLX shall not, and shall not agree to, amend or waive any provision of the Credit Agreement, or incur any additional indebtedness for borrowed money or purchase money indebtedness or guarantee any such indebtedness, if to do so would materially adversely affect MLX's ability to pay interest on and otherwise satisfy its obligations with respect to the 1993 Bonds; and (7) neither MLX nor any Subsidiary shall increase the amount of indebtedness under the Credit Agreement or incur any additional indebtedness for borrowed money or purchase money indebtedness or guarantee any such indebtedness except for any such indebtedness in an aggregate amount not exceeding $500,000. 6.2 No Redemption of Zero Coupon Bonds. Neither MLX nor any of its Subsidiaries shall redeem or repurchase any of the Zero Coupon Bonds outstanding after giving effect to the transactions contemplated by this Agreement unless, concurrently with any such redemption or repurchase, the same principal amount of 1993 Bonds, or, if the aggregate principal amount of 1993 Bonds then outstanding is less than the aggregate principal amount of Zero Coupon Bonds being redeemed or repurchased, all of the 1993 Bonds then outstanding, are redeemed or repurchased. 6.3 No Amendment of Zero Coupon Bonds. MLX shall not amend, supplement or alter the terms and conditions of the Zero Coupon Bonds or the Original Exchange Agreement so as to (i) accelerate the maturity date of the Zero Coupon Bonds, (ii) increase the interest rate payable on the Zero Coupon Bonds, (iii) increase the principal amount of the Zero Coupon Bonds, (iv) accelerate the principal amortization of the Zero Coupon Bonds, (v) provide for payments of principal other than as provided in the Zero Coupon Bonds as constituted on the date hereof, (vi) provide for the payment of expenses incident to a Zero Offer (as defined in Section 6.4) in excess of $15,000, or (vii) improve the priority accorded the Zero Coupon Bonds vis-a- vis the 1993 Bonds. 6.4 Other Zero Coupon Bond Transactions. If MLX shall at any time offer to any holder of Zero Coupon Bonds the right, or receive an offer (which it desires to accept), to exchange or effect any other transaction in respect of the Zero Coupon Bonds (other than for a redemption or repurchase, which is governed by Section 6.2 hereof, any such transaction being referred to as the "Zero Offer"), then at the same time as MLX makes such offer, or simultaneously with the receipt of any such offer, MLX shall make an offer to the Bondholders signatory hereto, on a basis consistent with the exchange or conversion rate upon which the Zero Coupon Bonds are exchanged for 1993 Bonds pursuant to this Agreement, to amend the terms and conditions of the 1993 Bonds so that such Bondholders shall be entitled to receive the same economic benefits (including, but not limited to, rate of amortization and priority of payment) to be accorded to the then holders of the Zero Coupon Bonds; provided, that if the Zero Coupon Bonds are converted into equity securities, the offer shall be to amend the 1993 Bonds to provide for the same economic benefits to be accorded under the equity securities while retaining a fixed maturity date and denomination as debt as the 1993 Bonds. Such Bondholders shall have a period of 30 days after receipt of such offer from MLX to either accept or reject in writing the offer made by MLX without modification or amendment, which written acceptance or rejection must be received by MLX on or before 5:00 p.m., local time, of such 30th day at the address provided for notice herein, as the same may be changed from time to time. If neither a written acceptance nor written rejection is received by such time, then the Bondholder in whose favor this right is extended shall be deemed to have rejected such offer and shall thereafter have no further right to receive the benefit of such offer, and MLX shall be free to consummate the transactions provided for in the offer. Such written rejection or deemed rejection shall be final, conclusive and binding upon the Bondholders signatory hereto and shall extinguish any and all rights, remedies or other recourse of whatever nature, whether provided at law, in equity or pursuant to this Agreement, to thereafter dispute anything whatsoever in connection with the Zero Offer. 6.5 Waivers. The Bondholders hereby waive any Default or Event of Default that may arise or be deemed to arise under the Original Exchange Agreement (or under any Collateral Document or Related Document referred to therein or executed in connection therewith) as a result of the transactions contemplated by this Agreement, or by that certain Exchange Agreement, dated January 15, 1993, among MLX and certain holders of Zero Coupon Bonds other than the Bondholders hereunder, or by that certain Securities Purchase Agreement, dated as of December 15, 1992, among MLX and certain holders of securities of MLX. 6.6 Financial Information. MLX shall deliver to each of the Bondholders: (1) (i) as soon as available, and in any event within 90 days after the end of each fiscal year of MLX, a consolidated balance sheet of MLX and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of operations and cash flow and consolidated statement of change in shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, such consolidated financial statements to be reported on by Ernst & Young or other independent accountants of nationally recognized standing; and (ii) as soon as available, and in any event within 90 days after the end of each fiscal year of Friction, a consolidated balance sheet of Friction and its consolidated subsidiaries as at the end of such fiscal year and the related consolidated statements of operations and cash flow and consolidated statement of change in shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, such consolidated financial statements to be reported on by Ernst & Young or other independent accountants of nationally recognized standing; and (2) (i) as soon as available, and in any event within 45 days after the end of each of the first three quarters of each fiscal year of MLX, a consolidated balance sheet of MLX and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of operations for such quarter and for the portion of MLX's fiscal year ended at the end of such quarter and cash flow for such portion of such fiscal year and the corresponding portion of MLX's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, conformity with generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of MLX; and (ii) as soon as available, and in any event within 45 days after the end of each of the first three quarters of each fiscal year of Friction, a consolidated balance sheet of Friction and its consolidated subsidiaries as at the end of such fiscal year and the related consolidated statements of operations for such quarter and for the portion of Friction's fiscal year ended at the end of such quarter and cash flow for such portion of such fiscal year and the corresponding portion of Friction's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, conformity with generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of Friction. 6.7 Interest on 1993 Bonds and Dividends on Preferred Shares. Interest, dividends and other payments or distributions in respect of the 1993 Bonds and the Preferred Shares shall be paid pro rata on the 1993 Bonds and the Preferred Shares, respectively, whenever a payment of interest, dividends and other payments or distributions in respect of the 1993 Bonds and the Preferred Shares is made on either. When interest has not been paid currently on the 1993 this Bonds, all interest payable on the 1993 Bonds and all dividends declared upon the Preferred Shares, and any other preferred stock issued in exchange for Zero Coupon Bonds, shall be paid or declared, as the case may be, pro rata on the 1993 Bonds and the Preferred Shares so that the amount of interest paid per 1993 Bond and dividends declared per Preferred Share shall in all cases bear to each other the same ratio that accrued and unpaid dividends per Preferred Share and accrued interest on the 1993 Bonds bear to each other. For purposes of this Section 6.7, each $30.00 of principal amount of the 1993 Bonds shall be deemed to be equivalent to one Preferred Share. ARTICLE 7. TRANSFER RESTRICTIONS ON 1993 BONDS 7.1 Securities Act Transfer Restrictions. No Holder of 1993 Bonds shall sell or otherwise transfer or dispose of such 1993 Bonds, or any interest therein, except (i) to an Affiliate that agrees to be bound by the provisions of this Agreement, (ii) to any Accredited Investor that represents to MLX that it is acquiring such Bonds for investment and not with a view to the distribution thereof and that agrees to be bound by the provi- sions of this Agreement, (iii) pursuant to Rule 144 or other exemption from registration under the Securities Act or (iv) pursuant to a registration statement covering such 1993 Bonds that has been declared effective under the Securities Act. Prior to any proposed transfer the holder shall give notice to MLX of such holder's intention to effect such transfer, which notice shall describe the manner and circumstances of the proposed transfer in reasonable detail and, if reasonably requested by MLX, shall (except in the case of transfers by any holder to an Affiliate) be accompanied by an opinion of counsel for such holder or other counsel reasonably satisfactory to MLX addressed to MLX and to the effect that the proposed transfer thereof may be effected without registration under the Securities Act. 7.2 Restrictive Legends. Each certificate representing 1993 Bonds issued pursuant to this Agreement shall, unless such requirement is waived by MLX, include a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE EXCHANGE AGREEMENT DATED AS OF APRIL 2, 19939, A COPY OF WHICH MAY BE OBTAINED FROM MLX AT ITS PRINCIPAL EXECUTIVE OFFICES." ARTICLE 8. SUBORDINATION OF 1993 BONDS 8.1 Agreement to Be Bound. Each holder of a 1993 Bond by his acceptance thereof covenants and agrees that the 1993 Bonds shall be issued subject to the provisions contained in this Article 8 and each Person holding any 1993 Bond, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. All 1993 Bonds shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness. 8.2 Priority of Senior Indebtedness. No payment or prepayment of any principal of or interest on the 1993 Bonds shall be made, nor shall assets be applied to the repurchase, redemption or retirement of the 1993 Bonds, if, at the time of such payment, prepayment, repurchase, redemption or retirement or immediately after giving effect thereto, (i) there shall exist a default in the payment or mandatory prepayment of any amount due on or in respect of any Senior Indebtedness or (ii) there shall exist an event of default (other than a default in the payment of any amount due) with respect to any Senior Indebtedness, as such terms are defined in any instrument or agreement under which such Senior Indebtedness is outstanding, permitting the holders thereof to accelerate the maturity thereof. 8.3 Acceleration of 1993 Bonds; Insolvency. Upon (i) any acceleration of the principal amount due on the 1993 Bonds or (ii) any payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of MLX, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment thereof duly provided for, before the holders of the 1993 Bonds shall be entitled to receive or retain any assets so paid or distributed in respect thereof. Upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, to which the holders of the 1993 Bonds would be entitled but for these provisions shall be paid by MLX or by any receiver, trustee in bankruptcy, liquidating trustee, agent or the person making such payment or distribution, or by the holders of the 1993 Bonds if received by them or it, directly to the holders of Senior Indebtedness (pro rata to each of such holders on the basis of the respective amounts of Senior Indebtedness held by such holders or their representatives), to the extent necessary to pay all such Senior Indebtedness in full, in moneys or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the holders of the 1993 Bonds. If, notwithstanding the provisions of the preceding paragraph or of Section 8.2, any such payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, shall be received by the holders of the 1993 Bonds while a default or event of default of the types referred to in Section 8.3 has occurred and is continuing or in connection with the acceleration of the 1993 Bonds or the dissolution, winding up, liquidation or reorganization of MLX before all Senior Indebtedness is paid in full, or provision made for such payment, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. The foregoing subordination provisions shall be for the benefit of the holders of the Senior Indebtedness and may be enforced directly by such holders against the holders of the 1993 Bonds. 8.4 Subrogation. Subject to the indefeasible payment in cash in full of all Senior Indebtedness, the holders of the 1993 Bonds (together with the holders of any other Debt of MLX which is not subordinate in right of payment to the 1993 Bonds and by its terms grants such right of subrogation to the holders thereof) shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of MLX made on the Senior Indebtedness until the principal and accrued interest of the 1993 Bonds shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the holders of the 1993 Bonds would be entitled except for these provisions shall, as among MLX, its creditors other than the holders of Senior Indebtedness, and the holders of 1993 Bonds, be deemed to be a payment by MLX to or on account of Senior Indebtedness, it being understood that these provisions are and are intended solely for the purpose of defining the relative rights of the holders of the 1993 Bonds, on the one hand, and the holders of Senior Indebtedness, on the other hand. 8.5 Obligations Unaffected. Nothing contained in this Article or in the 1993 Bonds is intended to or shall impair as among MLX, its creditors other than the holders of Senior Indebtedness and the holders of the 1993 Bonds, the obligation of MLX, which shall be absolute and unconditional, to pay to the holders of the 1993 Bonds the principal of and accrued interest on the 1993 Bonds, as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the holders of the 1993 Bonds and creditors of MLX other than the holders of Senior Indebtedness, nor shall anything herein prevent any holder of the 1993 Bonds from exercising all remedies otherwise permitted by applicable law upon the occurrence of a default under this Agreement, subject to rights, if any, under this Article of the holders of Senior Indebtedness in respect of cash, property or securities of MLX received upon the exercise of any such remedy. 8.6 Reliance of Holders of Senior Indebtedness. Each holder of the 1993 Bonds by his acceptance thereof shall be deemed to acknowledge and agree that the subordination provisions of this Article are, and are intended to be, an inducement and a consideration of each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of such 1993 Bonds, to acquire and hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness. ARTICLE 9. OPTIONAL PREPAYMENTS MLX may, upon at least three Business Days notice to the Holder thereof, prepay the 1993 Bonds, in whole at any time, or from time to time in part, in principal amounts aggregating $100,000 or any larger multiple of $100,000, at a price per 1993 Bond equal to the principal amount thereof outstanding plus all interest accrued thereon on the date of prepayment. Any notice given pursuant to this Article and received by the Holder after 11:00 a.m. (New York City time) on any Business Day shall be deemed to have been received on the next Business Day. Each such optional prepayment shall be applied to prepay ratably the 1993 Bonds of all holders of outstanding 1993 Bonds pro rata based on the aggregate principal amounts of outstanding 1993 Bonds held by each holder. If a 1993 Bond is redeemed only in part, a new bond shall be delivered by MLX to the holder thereof in exchange therefor at no cost to the holder in the principal amount not redeemed. ARTICLE 10. EVENTS OF DEFAULT The following events shall constitute events of default ("Events of Default"): (a) If MLX shall fail to pay when due any principal of any 1993 Bond, then, in such event, such principal amount of each 1993 Bond shall thereupon become and be immediately due and payable, anything in this Agreement or in any of the 1993 Bonds contained notwithstanding, although no amount shall be paid thereon if prohibited by Article 8. (b) If MLX shall fail to observe or perform any covenant contained in Section 6.2, 6.3, 6.4, 6.6 or 6.7 hereof, and (i) in respect of any of Section 6.2, 6.3, 6.4 or 6.7, such failure shall have continued uncured for 30 days, and (ii) in respect of Section 6.6, such failure shall have continued uncured for 30 days after MLX receives written notice from the Required Bondholders of such failure, the principal amount of each 1993 Bond shall thereupon become and be immediately due and payable, anything in this Agreement or in any of the 1993 Bonds contained notwithstanding, although no amount shall be paid thereon if prohibited by Article 8. (c) If MLX shall fail to observe or perform in any material manner any covenant contained in Section 6.1 hereof, then the Required Holders may, for so long as such Event of Default continues, deliver written notice to MLX of such Event of Default and MLX will have 30 days from the delivery of such notice to cure such default. If MLX fails to cure the default within such period, then the Required Holders may demand, at any time within 30 days from the expiration of the cure period of MLX, that MLX redeem and repurchase all of the outstanding Preferred Shares and 1993 Bonds at a cash purchase price with respect to the 1993 Bonds that is equal to the aggregate principal amount outstanding and all interest accrued thereon and unpaid on the date of redemption. Such redemption will take place within 30 days of the delivery of such redemption demand by the Required Holders. Notwithstanding the foregoing, MLX shall not be obligated to repurchase any 1993 Bonds if prohibited by Article 8 of this Agreement. If the Required Holders do not demand that the 1993 Bonds be repurchased, or if such repurchase is prohibited by Article 8 of this Agreement, then the interest rate payable on the 1993 Bonds shall be one percent (1%) higher than the rate otherwise provided for in the 1993 Bond from the date of delivery to MLX of the Required Holders' notice of default until such time as the default is cured or the 1993 Bonds are repurchased. (d) If (i) MLX becomes insolvent; (ii) MLX commences a voluntary case under the Federal Bankruptcy Code, or a petition is brought by MLX seeking similar relief or alleging that it is insolvent or unable to pay its debts as they mature; or (iii) a proceeding under the Federal Bankruptcy Code is instituted against MLX and an order for relief is entered in such proceeding or such proceeding is consented to or acquiesced in by MLX or is not dismissed within 60 days of the date upon which it was instituted, or a petition is otherwise brought against MLX seeking similar relief or alleging that it is insolvent, or unable to pay its debts as they mature, and such petition is consented to or acquiesced in by MLX or is not dismissed within 60 days of the date upon which it was brought, then the principal of, interest accrued on and other amounts payable under each 1993 Bond then Outstanding shall automatically become and be due and payable immediately, anything in this Agreement or in any of the 1993 Bonds contained notwithstanding, although no amount shall be paid thereon if prohibited by Article 8. ARTICLE 11. EXCHANGE OF MLX BONDS Subject to Section 7.1, at the request at any time of any holder of one or more of the 1993 Bonds to MLX, MLX at its expense (except for any transfer tax or any other tax arising out of the exchange) will issue in exchange therefor new 1993 Bonds, in such denomination or denominations of $100,000 or any larger multiple of $100,000 (plus one 1993 Bond in a lesser denomination, if required) as such holder may request, in an aggregate principal amount equal to the aggregate principal amount of the 1993 Bond or 1993 Bonds surrendered and substantially in the form thereof, dated the date of the 1993 Bond or 1993 Bonds so surrendered and payable to such person or persons or order as may be designated by such holder. ARTICLE 12. REPLACEMENT OF 1993 BONDS Upon receipt of evidence satisfactory to MLX of the loss, theft, destruction or mutilation of any 1993 Bond and, in the case of any such loss, theft, or destruction, upon delivery of a bond of indemnity satisfactory to MLX, or in the case of any such mutilation, upon surrender and cancellation of such 1993 Bond, MLX will issue a new 1993 Bond of like tenor as if the lost, stolen, destroyed or mutilated 1993 Bond were then surrendered for exchange in lieu of such lost, stolen, destroyed or mutilated 1993 Bond. ARTICLE 13. EXPENSES All of the expenses incurred by MLX in connection with the authorization, preparation, execution and performance of its obligations under this Agreement, including without limitation, all fees and expenses of its agents, representative, counsel and accountants shall be paid by MLX. All of the expenses incurred by any of the Holders in connection with the authorization, preparation, execution, performance and enforcement of this Agreement shall be paid by such Holder, other than fees, expenses and disbursements of legal counsel to the Bondholders who are signatory hereto up to aggregate amount not to exceed $15,000, which shall be paid by MLX. ARTICLE 14. AMENDMENTS AND WAIVERS This Agreement may be amended with the consent of MLX and the Required Bondholders. Any requirement or condition contained in this Agreement may be waived by the Holder or Holders intended to be benefited by such requirement or condition without the consent of any other Holder or Holders. ARTICLE 15. NOTICES All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party at its address or telex number set forth on the signature pages hereof or such other address or telex number as such party may hereafter specify for the purpose by notice to the Holder and MLX. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Article and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by telecopier, when such communication is transmitted to the telecopier number specified in this Article 15 and the sender of such communication has received verbal confirmation of its receipt or (iv) if given by any other means, when delivered at the address specified in this Article. ARTICLE 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement, any investigation at any time made by the Holders or on the Holders' behalf, and the issuance of the Preferred Shares and any disposition thereof. All statements contained in any certificate or other instrument delivered by or on behalf of MLX pursuant hereto shall constitute representations and warranties by MLX hereunder. ARTICLE 17. ENTIRE AGREEMENT This Agreement and the 1993 Bonds embody the entire agreement and understanding between the Holders and MLX and supersede all prior agreements and understandings relating to the subject matter hereof. ARTICLE 18. SUCCESSORS AND ASSIGNS All covenants and agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. ARTICLE 19. HEADINGS The headings of the articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof. ARTICLE 20. GOVERNING LAW THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ARTICLE 21. COUNTERPARTS This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. ARTICLE 22. SEVERABILITY Any provision hereof which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. MLX CORP. By: Title: 5305 Oakbrook Parkway Norcross, Georgia 30093 Telecopy: (404) 279-4261 Attention: Thomas Waggoner THE BONDHOLDERS: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: Title: 1285 Avenue of the Americas 19th Floor New York, New York 10019 Telecopier: (212) 554-1230 Attention: Kate Kutasi THE EQUITABLE VARIABLE LIFE INSURANCE COMPANY By: Title: 1285 Avenue of the Americas 19th Floor New York, New York 10019 Telecopy: (212) 554-1230 Attention: Kate Kutasi EXHIBIT A TO THE EXCHANGE AGREEMENT THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. MLX CORP. Variable Rate Subordinated Bonds Due 2002 New York, New York For value received, MLX CORP., a Michigan corporation ("MLX"), promises to pay to or registered assigns, the principal sum of ($ ) on March 19, 2002 in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The principal amount due hereunder shall be repaid from time to time as and at the time that shares of MLX's Series A Preferred Stock (the "Preferred Shares") are redeemed, in each case in an amount that is sufficient to repay that percentage of the then outstanding principal amount of this Bond which is equal to the percentage that the Preferred Shares being redeemed represent of the aggregate shares of Series A Preferred Stock then outstanding. The principal of this Bond shall bear interest at the rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed) reflected below from time to time in effect for the corresponding period:
Period Interest Rate Date of issuance to 12/31/94 Prime Rate plus 2.5%, but not less than 9% 1995 Prime Rate plus 3.5%, but not less than 10% 1996 Prime Rate plus 3.5%, but not less than 11% 1997 Prime Rate plus 5.0%, but not less than 12% 1998 Prime Rate plus 6.0%, but not less than 13% January 1, 1999 and beyond Prime Rate plus 7.0%, but not less than 14%
Provided, that the interest rate will be 1% greater than the rate reflected above for any period after March 31, 1994 during which interest that has accrued with respect to more than one calendar quarter remains unpaid. The failure to pay interest as provided hereunder shall not constitute an event of default hereunder and shall give the Holder of this Bond no rights other than the right to accrue a greater rate of interest as described in the immediately preceding sentence, including the right to accelerate payment of the principal amount of this Bond. Interest will accrue from the date of original issuance and will be payable in cash quarterly on March 31, June 30, September 30 and December 31, of each year, with the first payment on March 31, 1993. As used herein, the term "Prime Rate" shall mean the rate of interest announced by Barclays Bank PLC, or its successor, from time to time as its Prime Rate. For purposes of calculating the interest rate hereunder, the Prime Rate of such bank in effect at the close of business on the first business day of each period described above shall be the Prime Rate hereunder for such entire period. In the event the Prime Rate is discontinued as a standard, MLX shall designate a comparable reference rate as a substitute therefor. This Bond is one of a duly authorized issue of Variable Rate Subordinated Bonds issued pursuant to the Exchange Agreement dated as of April 2, 1993 (as thereafter amended, the "Exchange Agreement") among MLX and the Bondholders listed therein. This Bond is subject to the provisions of and is entitled to the benefits of the Exchange Agreement. The Exchange Agreement provides, inter alia, for optional prepayments of the principal of the Bonds from time to time, in each case at a price equal to the principal amount outstanding and accrued interest thereon at the date of prepayment. In addition, the payment of the principal of and interest on this Bond is subordinated in right of payment to the prior payment in full of certain other obligations of MLX to the extent and manner set forth in the Exchange Agreement. Each holder of this Bond, by accepting the same, agrees to and shall be bound by the provisions of the Exchange Agreement. No reference herein to the Exchange Agreement and no provision hereof or thereof shall alter or impair the obligation of MLX, which is absolute and unconditional, to pay the principal hereof and interest herein described. This Bond is delivered in and shall be construed and enforced in accordance with and governed by the laws of the State of New York. MLX may treat the person in whose name this Bond is registered as the owner and holder of this bond for the purpose of receiving payments on this Bond and for all other purposes whatsoever and MLX shall not be affected by any notice to the contrary. IN WITNESS WHEREOF, MLX CORP. has caused this Bond to be dated, and to be executed on its behalf by its officer thereunto duly authorized and its corporate seal to be hereunto duly affixed. MLX CORP. [Corporate Seal] By Title: EX-4.9 5 MLX EXCHANGE AGREEMENT - 4/21/93 MLX EXCHANGE AGREEMENT Dated as of April 13, 1990 (as amended and restated as of March 19, 1992) as amended and restated as of April 21, 1993 among MLX CORP., and THE HOLDERS LISTED HEREIN AMENDED AND RESTATED MLX EXCHANGE AGREEMENT MLX EXCHANGE AGREEMENT dated as of April 13, 1990, as amended and restated as of April 21, 1993, among MLX CORP. and the BONDHOLDERS listed on the signature pages hereof under the caption "BONDHOLDERS." WHEREAS, certain of the parties hereto originally entered into the MLX Exchange Agreement dated as of April 13, 1990 (the "Original Exchange Agreement"); and WHEREAS, the MLX Bonds referred to below and 8,500,000 shares of MLX Common Stock have been issued pursuant to the Original Exchange Agreement; and WHEREAS, the Original Exchange Agreement was amended and restated as of March 19, 1992 (the Original Exchange Agreement, as so amended and restated being hereafter referred to as the "Existing Exchange Agreement"); and WHEREAS, each Bondholder owns the MLX Bonds set forth opposite its name on Schedule 1 hereto; and WHEREAS, the parties hereto wish to amend the Existing Exchange Agreement, effective as of the date hereof, to make mutually satisfactory changes in the terms of the Existing Exchange Agreement and, solely for the convenience of the parties hereto, to restate the Existing Exchange Agreement as so amended; NOW, THEREFORE, the parties hereto amend and restate the Existing Exchange Agreement in its entirety as set forth herein. ARTICLE 1. DEFINITIONS The following terms, as used herein, have the following respective meanings: "Accredited Investors" has the meaning ascribed to such term in Rule 501(a) under the Securities Act. "Accreted Amount" means with respect to any MLX Bond at any date on which such amount is calculated (a "Calculation Date") an amount equal to the sum of (i) the Issue Price of such MLX Bond plus (ii) the accrued amortization of the Accruing Issue Discount of such MLX Bond calculated using a constant rate of interest per annum compounded daily and computed by the Company in accordance with generally accepted accounting principles consistently applied from and including date hereof to but excluding the Calculation Date. "Accruing Issue Discount" means, with respect to any MLX Bond, the difference between the Issue Price of such MLX Bond and the principal amount of such MLX Bond. "Affiliate" has the meaning given to such term in Rule 12b-2 under the Exchange Act, but no Holder or any affiliate of a Holder shall be deemed to be an Affiliate of MLX for purposes of this Agreement. "Agreement" means the Existing Exchange Agreement dated as of April 13, 1990, as amended and restated as of the date hereof among MLX and the Bondholders listed herein. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2% plus the Federal Funds Rate for such day. "Bondholder" means, as the context may require, any holder of MLX Bonds and any transferee of any such holder that is bound by the provisions of this Agreement. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Collateral Agent" means, with respect to any Collateral Document, Morgan Guaranty Trust Company of New York as collateral agent under or with respect to such Collateral Document, and its successors in such capacity. "Collateral Documents" means the MLX (Friction) Pledge Agreement, the Security Agreement, the Insurance Policy (as defined in the Security Agreement), and all supplementary assignments, pledge agreements or other documents delivered to the Collateral Agent pursuant thereto in order to evidence and perfect the pledges, security interests and mortgages granted therein, including, without limiting the foregoing, Form UCC-l financing statements, all as amended or modified from time to time. "Commission" means the Securities and Exchange Commission and any other similar or successor agency of the federal government administering the Securities Act or the Exchange Act. "Consolidated Subsidiary" means, as to any Person at any date, any Subsidiary or other entity the accounts of which' would be consolidated with those of such Person in its consolidated financial statements as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and employee payroll and benefits arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations, whether contingent or non- contingent, of such Person to reimburse any bank or other Person in respect of amounts paid or payable under a letter of credit or similar instrument, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, constitute an Event of Default. "Demand Registration" means any registration of Registrable Shares under the Securities Act by MLX initiated at the request of Holders of Registrable Shares pursuant to Section 7.1. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "Event of Default" has the meaning set forth in Article 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Friction" means SinterMet Corporation, a Michigan corporation, and its successors. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" means, as the context may require, any Bondholder, any holder of the Shares and any transferee of any such holder that is bound by the provisions of this Agreement. "Initial Aggregate Principal Amount" means $20,000,000. "Issue Price" means, with respect to any MLX Bond, the amount which bears the same proportion to $8,186,074.03 as the principal amount of such MLX Bond bears to the Initial Aggregate Principal Amount. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, any person shall be deemed to own subject to a Lien any asset which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "MLX" or the "Company" means MLX Corp., a Michigan Corporation, and its successors. "MLX Bonds" means the Secured Subordinated Zero Coupon Bonds of MLX issued pursuant to the Original Exchange Agreement, as such Bonds have been and shall be amended pursuant to the Existing Exchange Agreement and this Agreement, and substantially in the form of Exhibit A hereto. "MLX Common Stock" means the common stock, par value $0.01 per share, of MLX. "MLX (Friction) Pledge Agreement" means the MLX (Friction) Pledge Agreement dated as of April 13, 1990 between MLX and the CollateraL Agent as amended and restated as of the date hereof. "Net Cash Proceeds" means, with respect to any Prepayment Event described in clauses (a)l (c), (d) and (e) of the definition of that term, an amount equal to the excess of (i) cash proceeds received by MLX from or in respect of such Prepayment Event (including any cash proceeds received as income or other proceeds of any noncash proceeds from or in respect of such event) less (x) any expenses reasonably incurred by MLX in respect of such event and (y) any taxes paid or payable by MLX (as estimated by the chief financial officer of MLX) in respect of any such transaction over (ii) the amounts necessary to satisfy any cash collateral requirements or prepayment requirements relating to Debt and means with respect to any Prepayment Event described in clause (b) of the definition of that term, an amount equal to the excess of cash proceeds received by MLX from or in respect of such Prepayment Event. "Outstanding" means, when used with reference to the MLX Bonds at any time, all MLX Bonds theretofore duly issued except (i) MLX Bonds theretofore reported as lost, stolen, mutilated or destroyed or surrendered for transfer, exchange or replacement, in respect of which replacement MLX Bonds have been issued by MLX, (ii) MLX Bonds surrendered to MLX for prepayment pursuant to Article 11, (iii) MLX Bonds theretofore paid in full and (iv) MLX Bonds theretofore cancelled by MLX; provided that, for the purpose of determining whether holders of the requisite principal amount of MLX Bonds have made or concurred in any declaration, waiver, consent, approval, notice, annulment of acceleration or other communication under this Agreement or any MLX Bonds, MLX Bonds registered in the name of, as well as MLX Bonds owned beneficially by, MLX, any Subsidiary or any Affiliate of either shall not be deemed to be Outstanding. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Prepayment Event" means (a) any sale, transfer or other disposition of any asset of MLX other than (i) accounts receivable of MLX arising prior to 1984 and in an amount not exceeding $1,000,000 in the aggregate and (ii) any sales of assets of MLX in the ordinary course of its business for an amount not exceeding $100,000 in the aggregate since the date hereof, (b) the receipt by MLX of any dividend or other distribution on any shares of capital stock of Friction, (c) the issuance, sale, transfer or other disposition of any shares of capital stock of Friction, or (d) the issuance, sale, transfer or other disposition of any shares of capital stock of MLX. "Registrable Shares" means (i) the Shares (and any shares of MLX Common Stock issued in exchange or substitution therefor) and (ii) any shares of MLX Common Stock issued upon a reclassification or issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, Shares; provided that Shares which are Restricted Shares shall not be Registrable Shares for purposes of this Agreement prior to April 30, 1994. "Registration Expenses" means all expenses incurred in connection with a registration of any Registrable Shares under the Securities Act, including, without limitation, (i) all Commission and securities exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses of complying with securities or "blue sky" laws as required by Section 7.3(iv) (including reasonable fees and disbursements of counsel for the underwriters in connection with "blue sky" qualifications of Registrable Shares being sold by holders of such Registrable Shares), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of such Registrable Shares on any securities exchange pursuant to Section 7.3(x) hereof, (v) the fees and disbursements of counsel for MLX and its independent public accountants, including the expenses of any special audits or comfort letters required for such registration, (vi) the fees and disbursements of one separate firm of attorneys (plus local counsel if appropriate) for all the Selling Shareholders, (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities and (viii) the reasonable fees and expenses of any special experts retained in connection with any registration; provided that Registration Expenses shall not include any underwriting or selling discounts or commissions or any transfer taxes in connection with any offer and sale of MLX Common Stock pursuant to a registration statement under the Securities Act, which discounts, commissions and transfer taxes shall be paid by each Person offering MLX Common Stock pursuant to such registration statement, including each Selling Shareholder and MLX (if MLX Common Stock is being offered for its own account) pro rata based on the number of shares of MLX Common Stock so registered to which such discounts, commissions and transfer taxes relate. "Regulation Y Holder" means any Holder that is subject to the provisions of Regulation Y of the Board of Governors of the Federal Reserve System (12 CFR 225) or any successor to such regulation, and any Affiliate of such Holder, so long as such Person shall hold Registrable Shares. "Required Bondholders" means on any date registered holders of (in the aggregate) in excess of 50% of the aggregate principal amount of MLX Bonds outstanding on such date. "Restricted Shares" means 50% of the Shares received by a Holder pursuant to the Original Exchange Agreement and held by such Holder prior to March 31, 1991. "Securities" means collectively, the MLX Bonds and the Shares. "Securities Act" means the Securities Act of 1933, as amended. "Security Agreement" means the security Agreement dated as of April 30, 1991, as amended and restated as of the date hereof. "Selling Shareholders" means Holders of Registrable Shares requesting registration of all or a portion of such Registrable Shares pursuant to Section 7.1 or 7.2 in connection with an offer and sale thereof. "Senior Indebtedness" means any and all obligations of MLX (including, without limitation, obligations to pay principal, interest (including, without limitation, any interest that accrues after the filing of a petition initiating any proceeding referred to in paragraphs (a) and (b) of Article 11 hereof and is allowed by the applicable bankruptcy court), reimbursement obligations, fees, commissions and other amounts) under or with respect to Debt that is not, by its terms, subordinated in right of payment to the Debt evidenced by the MLX Bonds. "Shares" means the 8,500,000 shares of MLX Common stock issued by MLX pursuant to the Original Exchange Agreement. "Subsidiary" means, in the case of any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Transfer Agent and Registrar" means American Stock Transfer & Trust Company, as Transfer Agent and Registrar for the MLX Common Stock, and its successors in such capacity. ARTICLE 2. WAIVER OF DEFAULTS; RELEASE OF SECURITY 2.1 Waiver. The Bondholders signing on the signature pages hereof, in their capacity as the holders of in excess of eighty percent (80%) of the aggregate principal amount of the Outstanding MLX Bonds and on behalf of all Bondholders, hereby waive any and all Defaults, Events of Default or other violations or breaches of the Existing Exchange Agreement, any Collateral Document or Related Document (as defined in the Existing Exchange Agreement), in each case arising on or prior to the date hereof. 2.2 Release of Security. The Bondholders signing on the signature pages hereof, in their capacity as the holders of in excess of eighty percent (80%) of the aggregate principal amount of the Outstanding MLX Bonds and on behalf of all Bondholders, hereby release and discharge any and all of the Bondholders' right, title and interest in and to any and all assets or properties provided by MLX as collateral security for its obligations hereunder pursuant to the Security Agreement, the MLX (Friction) Pledge Agreement and the other Collateral Documents. The undersigned Bondholders shall take all such action as may be reasonably necessary to cause the Collateral Agent to release and discharge any and all of such collateral security as it may hold or have the benefit of, whether directly or indirectly, under, pursuant or with respect to any Collateral Document, and shall issue such orders and directions to the Collateral Agent as may be reasonably necessary to effect the release and discharge of such collateral security pursuant hereto; MLX shall reasonably cooperate with such Bondholders in this regard. 2.3 Effectiveness. On and after the date hereof the rights and obligations of MLX and the Bondholders shall be governed by this Amended and Restated Exchange Agreement. 2.4 Deemed Amendment of MLX Bonds. Effective the date hereof, the MLX Bonds will be deemed amended as set forth on Exhibit A hereto. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MLX MLX represents and warrants as of the date hereof that: 3.1 Corporate Existence and Power. Each of MLX and its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 3.2 Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by MLX of this Agreement is within its corporate powers have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable United States federal, Michigan or other law or regulation or of its certificate of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon it or result in the creation or imposition of any Lien on any of its assets. MLX has all requisite corporate power and authority to enter into this Agreement, to carry out the provisions and conditions of this Agreement and the MLX Bonds and to amend the MLX Bonds as provided by this Agreement. 3.3 Binding Effect. This Agreement and the MLX Bonds constitutes a valid and binding agreement of MLX, in each case enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by any applicable bankruptcy, insolvency or other similar law affecting the enforceability of creditors rights generally and (ii) rights with respect thereto may be limited by equitable principles of general applicability. 3.4 No Conflicting Requirements. After giving effect to this Agreement, neither MLX nor any of its Subsidiaries is in violation of, or in default under, any term or provision of any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule, regulation, judgment, decree, order, writ or injunction applicable to it, which violations or defaults in the aggregate could reasonably be expected to materially and adversely affect the business, properties, financial position or results of operations of MLX and its Subsidiaries, considered as a whole. 3.5 Registration Rights. Except as set forth in Article 7 hereof, MLX is under no obligation (whether upon the occurrence of certain events or otherwise) to register under the Securities Act any of its outstanding shares of MLX Common Stock. 3.6 Registration of Securities. Subject to the accuracy of the Holders' representations and warranties in Article 4, the amendment of the MLX Bonds pursuant to the terms of this Agreement do not require registration under the Securities Act or registration or qualification under any applicable state "blue sky" or securities laws. ARTICLE 4. REPRESENTATIONS OF EACH HOLDER AND CERTAIN BONDHOLDERS Each Holder hereby represents that: 4.1 Such Holder is an Accredited Investor and acquired the Securities for its own account, for investment and not with a view to the distribution thereof, other than to Affiliates who are Accredited Investors, nor with any present intention of distributing the same, other than to Affiliates who are Accredited Investors. 4.2 Such Holder understands that the Securities have not been registered under the Securities Act or registered or qualified under any state securities or "blue sky" laws by reason of their issuance in a transaction which does not require registration under the Securities Act or registration or qualification under the securities or "blue sky" laws of any state, and that such Securities may be sold only if registered under the Securities Act and registered or qualified under applicable state securities or "blue sky" laws or exempt from such registration or qualification. 4.3 Such Holder has been furnished with the information it has requested from MLX and has had an opportunity to discuss with officers of MLX the business and financial affairs of MLX. 4.4 Such Bondholder is the legal and beneficial owner of that aggregate principal amount of MLX Bonds Outstanding as of the date hereof set forth opposite its respective name on Schedule 1 hereto. ARTICLE 5. COVENANTS OF MLX From the date hereof, MLX agrees that, so long as MLX has any obligation hereunder or under any MLX Bond: 5.1 Information. MLX will deliver to each of the Holders, within 15 days after it files them with the Commission, copies of its annual report and of the other information, documents and reports as MLX is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. 5.2 Compliance with Laws. MLX will comply, and will cause each of its Subsidiaries to comply, with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where such noncompliance, together with all other non-compliances, would not have a materially adverse effect on MLX and its Subsidiaries, taken as a whole, or on the ability of MLX to perform its obligations hereunder or under the MLX Bonds. ARTICLE 6. TRANSFER RESTRICTIONS ON SECURITIES 6.1 Securities Act Transfer Restrictions on all Securities. Subject to Sections 6.3 and 6.4, no Holder of Securities (other than holders of MLX Common Stock sold pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act) shall sell or otherwise transfer or dispose of such Securities, or any interest therein, except (i) to an Affiliate that agrees to be bound by the provisions of this Agreement, (ii) to any Accredited Investor that represents to MLX that it is acquiring such Securities for investment and not with a view to the distribution thereof and that agrees to be bound by the provisions of this Agreement, (iii) pursuant to Rule 144 or other exemption from registration under the Securities Act or (iv) in the case of the Shares, pursuant to a registration statement covering such Shares that has been declared effective under the Securities Act. Prior to any proposed transfer the holder shall give notice to MLX of such holder's intention to effect such transfer, which notice shall describe the manner and circumstances of the proposed transfer in reasonable detail and, if reasonably requested by MLX, shall (except in the case of transfers by any holder to an Affiliate) be accompanied by an opinion of special counsel for such holder or other counsel reasonably satisfactory to MLX addressed to MLX and to the effect that the proposed transfer thereof may be effected without registration under the Securities Act. 6.2 Restrictive Legends. Each certificate representing Securities issued pursuant to this Agreement (other than in connection with the sale of any Securities pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act) shall include a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE MLX EXCHANGE AGREEMENT DATED AS OF APRIL 13, 1990, AS AMENDED AND RESTATED AS OF MARCH 19, 1992 AND APRIL 22, 1993 AND AS FURTHER AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM MLX AT ITS PRINCIPAL EXECUTIVE OFFICES." 6.3 Special Transfer on Restricted Shares. No holder of Restricted Shares shall, prior to April 30, 1994, sell or otherwise transfer or dispose of such Restricted Shares, or any interest therein, except to a Tax Affiliate of such Holder. For purposes of this Section 6.3, "Tax Affiliate" means any member of an affiliate group of corporations for purposes of Section 1504(a) of the Code, including for such purposes any Corporation listed in Section 1504(b) of the Code. 6.4 Additional Restrictions on Transfer by Regulation Y Holders. (a) Without limiting the provisions of Sections 6.1, 6.2 and 6.3, no Regulation Y Holder may transfer any of the Shares except (i) to MLX; (ii) to any Affiliate of such Regulation Y Holder; (iii) in a registered offering or pursuant to Rule 144 under the Securities Act; (iv) in connection with any merger, consolidation or reorganization of MLX or any sale of at least a majority of the outstanding MLX Common Stock (excluding, for purposes of calculating such majority, the shares of MLX Common Stock proposed to be transferred by such Regulation Y Holder); (v) to any other Person (a "Third Party"), provided that in the case of transfers to Third Parties, if counsel to such Regulation Y Holder shall have advised such Regulation Y Holder that it is necessary in order to comply with any law or regulation applicable to such Regulation Y Holder, (A) such Regulation Y Holder shall have first offered to MLX the right to purchase all of such shares of MLX Common Stock, pursuant to a written offer which shall have been open to acceptance for a period of at least 10 days, for cash at a price not exceeding the price obtainable in the private sale to such Third Party and (B) such Regulation Y Holder shall not knowingly make any such sale to a Third Party of more than 2% of the shares of MLX Common Stock then outstanding; or (vi) upon the advice of counsel to such Regulation Y Holder that such transfer is permitted under the laws and regulations applicable to such Regulation Y Holder. (b) If it becomes unlawful for any Regulation Y Holder to continue to hold some or all of the shares of MLX Common Stock held by it, or restrictions are imposed on any such Regulation Y Holder by any statute, regulation or governmental authority which, in the reasonable judgment of such Regulation Y Holder, make it unduly burdensome to continue to hold such shares of MLX Common Stock, such Regulation Y Holder may, subject to the provisions of Sections 6.1, 6.2 and 6.3 sell or otherwise dispose of its shares of MLX Common Stock, and MLX agrees to assist such Regulation Y Holder in disposing of such shares in a prompt and orderly manner. (c) Notwithstanding any other provision of this Agreement to the contrary, without the prior written consent of each Regulation Y Holder affected thereby, MLX will not directly or indirectly purchase, redeem, retire or otherwise acquire for value any shares of MLX Common Stock if as a result of such purchase, redemption, retirement or other acquisition such Regulation Y Holder will own more than 24.99% of the shares of MLX Common Stock then outstanding. ARTICLE 7. REGISTRATION RIGHTS 7.1 Demand Registration. (a) If at any time or from time to time, Holders of at least a majority of the outstanding Registrable Shares request in writing that MLX file a registration statement (on such form and containing such information as any managing underwriter or underwriters for the proposed offering may reasonably request) under the Securities Act with respect to the offering and sale by such Holders of such Registrable Shares, MLX shall promptly give written notice of such request to each Holder of Registrable Shares and shall offer to each such Holder the opportunity to include in such registration statement the number of Registrable Shares owned by such Holder. Within 30 days after receipt of such notice, Holders wishing to have Registrable Shares included in such registration statement shall deliver to MLX a Stock Pricing Schedule in customary form, and MLX shall include in such registration statement the applicable number of Registrable Shares set forth in each such Holder's Stock Pricing Schedule. MLX shall thereafter forthwith, and in any event not more than 60 days after its receipt of such notice, file such registration statement and use its good faith best efforts to cause it to be promptly declared effective by the Commission so as to permit or facilitate the sale or distribution of all or such portion of the number of Registrable Shares requested to be registered. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering shall advise MLX in writing (and deliver a copy thereof to each Holder requesting registration of Registrable Shares) that, in its opinion, the marketing factors require a limitation of the number of Registrable Shares to be offered and sold, then the Registrable Shares to be offered shall be reduced pro rata to that number of Registrable Shares that such managing underwriter or underwriters believes will not jeopardize the success of the offering. The managing underwriter or underwriters for any offering pursuant to this Section shall be selected by Holders of a majority of the Registrable Shares being offered in such offering and shall be reasonably acceptable to MLX. (b) MLX shall not be required to file more than three registration statements pursuant to the provisions of paragraph (a) hereof; provided that no registration statement will be counted against this limit unless (i) with respect to such registration statement, MLX has complied with all of the applicable conditions specified in Section 7.3 (and with respect to subsections (iv) and (xii) of Section 7.3, without regard to any "best efforts" or similar qualification if the failure to comply with either of such sections materially interfered with the proposed offering) and (ii) such registration statement has become effective and the Registrable Shares of the Holders included in such registration statement at the time it became effective have actually been sold thereunder. Notwithstanding the foregoing, if any Demand Registration occurs prior to April 30, 1994, the Holders of Registrable Shares shall have the right to request one additional Demand Registration, which additional Demand Registration shall not count as the second Demand Registration or the third Demand Registration for purposes of Section 7.1(c). Registration Expenses relating to such additional Demand Registration shall be paid by MLX. (c) Registration Expenses shall be (i) paid by MLX in the case of the first Demand Registration, (ii) paid by the Selling Shareholders in the case of the second Demand Registration and (iii) divided equally between MLX, on the one hand, and the Selling Shareholders, on the other hand in the case of the third Demand Registration; provided that if any Demand Registration occurs prior to April 30, 1994, Registration Expenses with respect to the first request for registration of Restricted Shares occurring after April 30, 1994 shall be paid by MLX and shall not be counted as a Demand Registration for purposes of this paragraph (c). Registration Expenses with respect to any Demand Registration that are to be paid by Selling Shareholders shall be divided pro rata among such Selling Shareholders according to the number of Registrable Shares of each such Selling Shareholder that was registered pursuant to paragraph (a) hereof. (d) No demand may be made by Holders of Registrable Shares under this Section during the period from the receipt by such Holders of a notice from MLX under Section 7.2 to the effect that MLX proposes to register shares of MLX Common Stock for its own account until the earlier of (i) 45 days after the effectiveness of a registration statement initiated by MLX under Section 7.2 and (ii) the date on which MLX shall have abandoned any such registration statement; provided that Holders of Registrable Shares shall have been offered the opportunity to include shares of MLX Common Stock in such registration statement in accordance with Section 7.2; and provided further that MLX shall during such period be using its good faith best efforts to cause such registration statement to promptly become effective. 7.2 Piggy-back Registration. If at any time or from time to time MLX proposes to register under the Securities Act any shares of MLX Common Stock in connection with a cash underwritten offering for its own account (other than in connection with an exchange offer or a registration statement on Forms S-4, S-8 or other similar forms), then MLX shall in each case give written notice of such proposed filing to each Holder of Registrable Shares and such notice shall offer to such Holder the opportunity to include in such registration statement such number of Registrable Shares as such Holder may request. Within 30 days after receipt of such notice, Holders wishing to have Registrable Shares included in such registration statement shall deliver to MLX a Stock Pricing Schedule in the form of Exhibit B hereto, and MLX shall include in such registration statement the applicable number of Registrable Shares set forth in each such Holder's Stock Pricing Schedule. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering shall advise MLX in writing (and shall deliver a copy thereof to such Selling Shareholders) that, in its opinion, the marketing factors require a limitation of the number of Registrable Shares to be offered and sold, then the Registrable Shares to be offered for the account of such Holders shall, together with the shares of MLX Common Stock to be offered by all other Persons (including MLX), be reduced pro rata based on the number of shares of MLX Common Stock proposed to be included in the registration statement by all Persons, including such Selling Shareholders. 7.3 Preparation and Filing. Whenever MLX is required to, or to use its best efforts to, effect the registration of any Registrable Shares in connection with an offer and sale thereof by Selling Shareholders, MLX will as expeditiously as possible: (i) prepare and file with the Commission a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to promptly become and remain effective for the period set forth in clause (ii) below and promptly notify the Selling Shareholders (x) when such registration statement becomes effective, (y) when a post effective amendment to such registration statement becomes effective and (z) of any request by the Commission for any amendment or supplement to such registration statement or any prospectus relating thereto or for additional information; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement for a period of not less than 90 days after the effective date of such registration statement to the extent necessary to permit the completion of the sale or distribution of such securities within such period; provided that if MLX shall take any action with respect to the acquisition of the stock or assets of any business entity that would require MLX to amend any prospectus included in a registration statement which becomes effective under the provisions hereof by including financial statements which conform to the requirements of Regulation S-X promulgated by the Commission, the Selling Shareholders shall suspend the offering or sale of such Registrable Shares for a period not to exceed 45 days so that MLX may prepare such financial statements (which MLX shall prepare as promptly as possible) and the 90-day period referred to above in this paragraph (ii) shall be extended for a period equal to such delay; (iii) furnish to each Selling Shareholder, prior to filing a registration statement, copies of such registration statement as proposed to be filed and thereafter such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus), reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which MLX shall have filed with the Commission and financial statements, reports and proxy statements mailed to shareholders of MLX as such Selling Shareholder may reasonably request in order to facilitate the disposition of the Registrable Shares being offered by such Selling Shareholder; (iv) use its best efforts to register or qualify, not later than the effective date of any filed registration statement, the Registrable Shares covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as each Selling Shareholder reasonably requests; provided that MLX will not be required to (i) qualify to do business as a foreign corporation or as a dealer in any jurisdiction where it is not so qualified, (ii) subject itself to taxation in any jurisdiction where it is not subject to taxation, (iii) consent to general service of process in any jurisdiction where it is not subject to general service of process or (iv) take any action that would subject it to service of process in suits other than those arising out of the offer or sale of the Registrable Shares covered by the registration statement; (v) make available, upon reasonable notice and during business hours, for inspection by the managing underwriter or underwriters for the Selling Shareholders (and their counsel and counsel for the Selling Shareholders) (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents, agreements and properties of MLX (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause MLX's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with the registration statement; (vi) obtain a comfort letter from MLX's independent public accountants dated within five business days prior to the effective date of the registration statement (and as of such other dates as such Selling Shareholders managing underwriter or underwriters may reasonably request) in customary form and covering such matters of the type customarily covered by such comfort letters as such managing underwriter or underwriters reasonably requests; (vii) obtain an opinion of counsel dated the effective date of the registration statement (and as of such other dates as such Selling Shareholders' managing underwriter or underwriters may reasonably request) in customary form and covering such matters of the type customarily covered by such opinions as counsel designated by such managing underwriter or underwriters reasonably requests; (viii) during the period when the registration statement is required to be effective, notify each Selling Shareholder of the happening of any event as a result of which the prospectus included in the registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and MLX will forthwith prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (ix) in the case of an underwritten offering, enter into an underwriting agreement containing customary terms, including, without limitation, such indemnity and contribution provisions and any managing underwriter or underwriters customarily requires or may reasonably require; (x) cause such Registrable Shares to be traded on each securities exchange on which similar securities issued by MLX are then traded; provided that the applicable listing requirements are satisfied; (xi) refrain from filing any registration statement to register MLX Common Stock for its own account or for the account of any other security holder during the period commencing with the receipt of the written request from the Selling Shareholders to file a registration statement and ending 60 days after such registration statement is declared effective by the Commission; and (xii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. Each Selling Shareholder shall timely furnish to MLX such information regarding the distribution of such Registrable Shares as MLX may from time to time reasonably request. Each Selling Shareholder agrees that upon receipt of any notice from MLX of the happening of any event of the kind described in paragraph (viii) above, it will forthwith discontinue disposition of Registrable Shares pursuant to the registration statement covering such Registrable Shares until such Selling Shareholder's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (viii) above. If MLX gives any such notice, MLX shall keep any such registration statement effective for that number of additional days equal to the number of days during the period from and including the date of the giving of such notice pursuant to paragraph (viii) above to and including the date on which copies of such supplemented or amended prospectus are made available to such Selling Shareholders. 7.4 Indemnification. (a) MLX will indemnify and hold harmless, to the full extent permitted by law, each Selling Shareholder, its directors and officers and each person who controls each Selling Shareholder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against and from all losses, claims, damages, liabilities and amounts paid in settlement of any claim, action or proceeding (which settlement may not be effected without MLX's prior written consent, which consent shall not be unreasonably withheld), arising from or based upon any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or arising from or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and MLX shall reimburse any indemnified party for all expenses (including, without limitation, reasonable attorney's fees and expenses as incurred, subject to the limitations specified in paragraph (c) hereof) incurred by it or on its behalf in connection with investigating or defending any such claim, action or proceeding; provided, that MLX will not be liable in any such case to the extent that any such loss, claim, damage, liability, amount paid in settlement of any claim, action or proceeding or expense arises from or is based upon any untrue or alleged untrue statement or omission or alleged omission made in such registration statement, such prospectus or preliminary prospectus or such post-effective amendment or supplement in reliance upon and in conformity with information furnished in writing to MLX by or on behalf of such Selling Shareholder, its directors, officers or controlling persons (or any underwriters acting on behalf of such Selling Shareholder) specifically for use in the preparation thereof. MLX will indemnify and hold harmless the underwriters for the offering, their directors and officers and each person who controls such underwriters (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of a Selling Shareholder. The foregoing indemnification with respect to any preliminary prospectus shall not inure to the benefit of any Selling Shareholder or underwriter (or to the benefit of any person controlling such Selling Shareholder or underwriter) from whom the person asserting any such losses, claims, damages, liabilities, amounts paid in settlement of any claim, action or proceeding or expenses purchased Registrable Shares offered by such Selling Shareholder if a copy of the final prospectus had not been sent or given to such person at or prior to the written confirmation of the sale of such Registrable Shares to such person and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the final prospectus and MLX has furnished such Selling Shareholder or underwriter with a sufficient number of copies of such final prospectus. This indemnity shall be in addition to, and not in lieu of, any liability which MLX otherwise may have. (b) Each Selling Shareholder will furnish to MLX as promptly as MLX may reasonably request in writing such information with respect to such Selling Shareholder as MLX reasonably requests for use in connection with any registration statement or prospectus and MLX may exclude from registration any Registrable Shares of a Selling Shareholder who refuses or fails timely to provide such information. Each Selling Shareholder will indemnify and hold harmless, to the full extent permitted by law, MLX, its directors and officers and each person who controls MLX (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and each duly authorized person who acts on behalf of MLX and its respective directors and officers, against and from any losses, claims, damages, liabilities and amounts paid in settlement of any claim, action or proceeding (which settlement may not be effected without such Selling Shareholder's prior written consent, which consent shall not be unreasonably withheld) arising from or based upon any untrue or alleged untrue statement of a material fact or any omission or alleged omission of a material fact required to be stated in the registration statement or prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and each Selling Shareholder shall reimburse any indemnified party for all expenses (including, without limitation, reasonable attorney's fees and expenses as incurred, subject to the limitations specified in paragraph (c) hereof) incurred by it or on its behalf in connection with any such claim, action or proceeding; but only to the extent that any such loss, claim, damage, liability, amount paid in settlement of any claim, action of proceeding or expense arises from or is based upon any untrue or alleged untrue statement or omission or alleged omission made in such registration statement, such prospectus or preliminary prospectus or such post-effective amendment or supplement in reliance upon and in conformity with information furnished in writing to MLX by or on behalf of such Selling Shareholder specifically for use in the preparation thereof. This indemnity shall be in addition to, and not in lieu of, any liability which the Selling Shareholder may otherwise have. The liability of any Selling Shareholder under this paragraph shall not exceed the initial public offering price of the Registrable Shares sold by such Selling Shareholder. (c) Any person entitled to indemnification hereunder agrees to give prompt written notice to the indemnifying party after the receipt by such person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such person will claim indemnification or contribution pursuant to this Section 7.4(c) (but the failure to do so will not relieve the indemnifying party of any liability that it may have to such indemnified party). If the indemnifying party assumes the defense of a claim, it will not be obligated to pay the fees and expenses of counsel to the indemnified party with respect to such claim, unless (i) the indemnifying party shall not have retained counsel to represent the indemnified party within a reasonable time after the indemnified party shall have notified the indemnifying party of the commencement of such action, suit or proceeding or investigation or (ii) the indemnifying and indemnified parties are both named parties to any such action (including any impleaded parties) and the indemnified party has reasonably concluded that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party (in each case such indemnified party shall promptly notify the indemnifying party in writing that it intends to employ separate counsel at the expense of the indemnifying party). If the indemnified party so notifies the indemnifying party that the indemnified party intends to employ separate counsel, the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel; provided, that the indemnifying party shall not be responsible for more than one separate firm of attorneys (plus local counsel if appropriate) for all the Selling Shareholders or for MLX, their respective directors and officers, and those persons who control such Selling Shareholders or MLX, as the case may be. The indemnifying party will not be subject to any liability for any settlement made without its consent, which consent will not unreasonably be withheld. (d) If the indemnification or reimbursement provided for in this Section from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities, amounts paid in settlement of claims, actions or proceedings or expenses referred to therein as subject to indemnification, then the indemnifying party, in lieu of indemnifying or reimbursing such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, amounts paid in settlement of claims, actions or proceedings or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities, amounts paid in settlement of claims, actions or proceedings or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities, amounts paid in settlement of claims, actions or proceedings and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.4(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the second sentence of this Section 7.4(d). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 7.5 Compliance with Reporting Requirements. With a view to making available to holders of Securities the benefits of certain rules and regulations of the Commission which may at any time permit the sale of Securities to the public without registration, MLX agrees to (i) make and keep public information available as such terms are used and defined in Rule 144 under the Securities Act; (ii) use its best efforts to file with the Commission in a timely manner all reports required to be filed pursuant to Sections 13 or 15 of the Exchange Act; and (iii) furnish to each holder of Securities promptly upon request a written statement by MLX as to its compliance with the reporting requirements referred to in Rule 144(c)(1) and a copy of such other reports of the type contemplated by Rule 144(c)(1) as any holder of Securities may reasonably request in availing itself of any rule or regulation of the Commission with respect to the sale by such holder of any Securities without registration. ARTICLE 8. RIGHTS OF CERTAIN SHAREHOLDERS 8.1 Exchange Rights. Any Regulation Y Holder of voting MLX Common Stock may, from time to time by notice to MLX, exchange shares of voting MLX Common Stock for an equal number of shares of nonvoting MLX Common Stock which shall have terms, rights and preferences substantially identical to the Shares initially issued hereunder other than the voting rights. In addition, any Holder of nonvoting MLX Common Stock may from time to time by notice to MLX exchange shares of nonvoting MLX Common Stock for an equal number of shares of voting MLX Common Stock which shall have terms, rights and preferences substantially identical to the Shares initially issued hereunder; provided that no Holder of nonvoting MLX Common Stock may exchange nonvoting MLX Common Stock for voting MLX Common Stock to the extent that, as a result of such exchange, such Holder and its Affiliates would directly or indirectly, own, control or have power to vote a greater number of shares of MLX Common Stock than, in the opinion of such Holder, such Holder would have the power to vote under any law, regulation, rule or other requirement of any governmental authority at the time applicable to such Holder and its Affiliates. Upon receipt of any such notice, and in any event not later than ten days thereafter, MLX shall instruct the Transfer Agent and Registrar to deliver to such Holder new certificates representing the number of shares of voting or nonvoting MLX Common Stock, as the case may be, requested by such Holder against delivery by such Holder to the Transfer Agent and Registrar of certificates representing the voting or nonvoting MLX Common Stock, as the case may be, to be exchanged therefor. Without limiting the provisions of Section 8.2, MLX's obligations under this Section 8.1 shall be limited to the number of shares of MLX Common Stock authorized for issuance at the time any Regulation Y Holder gives notice in accordance with this Section 8.1. 8.2 Authorized and Reserved Shares of MLX Common Stock. MLX hereby represents that (i) 4,585,168 shares of MLX Common Stock issuable pursuant to this Article 8 have been duly authorized and reserved for issuance upon notice from a Regulation Y Holder as provided herein and are issuable without any further action other than as specified in this Article 8, (ii) by no later than the completion of the next regular or special meeting of the holders of MLX Common Stock, upon applicable shareholder approval, all shares of MLX Common Stock issuable pursuant to this Article 8 will have been duly authorized and reserved for issuance upon notice from a Regulation Y Holder as provided herein and will be issuable without any further action other than as specified in this Article 8, and (iii) when issued in accordance with this Article 8, all shares of MLX Common Stock referred to in clauses (i) and (ii) will have been validly issued and will be fully paid and non-assessable, and the issuance of such shares is not and will not be subject to any preemptive or similar rights. ARTICLE 9. SUBORDINATION OF MLX BONDS 9.1 Agreement to Be Bound. Each holder of an MLX Bond by his acceptance thereof covenants and agrees that the MLX Bonds shall be issued subject to the provisions contained in this Article 9 and each Person holding any MLX Bond, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. All MLX Bonds shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness. 9.2 Priority of Senior Indebtedness. No payment or prepayment of any principal of the MLX Bonds shall be made, nor shall assets be applied to the repurchase, redemption or retirement of the MLX Bonds, if, at the time of such payment, prepayment, repurchase, redemption or retirement or immediately after giving effect thereto, (i) there shall exist a default in the payment or mandatory prepayment of any amount due on or in respect of any Senior Indebtedness or (ii) there shall exist an event of default (other than a default in the payment of any amount due) with respect to any Senior Indebtedness, as such terms are defined in any instrument or agreement under which such Senior Indebtedness is outstanding, permitting the holders thereof to accelerate the maturity thereof. 9.3 Acceleration of MLX Bonds; Insolvency. Upon (i) any acceleration of the principal amount or Accreted Amount due on the MLX Bonds or (ii) any payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of MLX, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment thereof duly provided for, before the holders of the MLX Bonds shall be entitled to receive or retain any assets so paid or distributed in respect thereof. Upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, to which the holders of the MLX Bonds would be entitled but for these provisions shall be paid by MLX or by any receiver, trustee in bankruptcy, liquidating trustee, agent or the person making such payment or distribution, or by the holders of the MLX Bonds if received by them or it, directly to the holders of Senior Indebtedness (pro rata to each of such holders on the basis of the respective amounts of Senior Indebtedness held by such holders or their representatives), to the extent necessary to pay all such Senior Indebtedness in full, in moneys or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the holders of the MLX Bonds. If, notwithstanding the provisions of the preceding paragraph or of Section 9.2, any such payment or distribution of assets of MLX of any kind or character, whether in cash, property or securities, shall be received by the holders of the MLX Bonds while a default or event of default of the types referred to in Section 9.3 has occurred and is continuing or in connection with the acceleration of the MLX Bonds or the dissolution, winding up, liquidation or reorganization of MLX before all Senior Indebtedness is paid in full, or provision made for such payment in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. The foregoing subordination provisions shall be for the benefit of the holders of the Senior Indebtedness and may be enforced directly by such holders against the holders of the MLX Bonds. 9.4 Subrogation. Subject to the indefeasible payment in cash in full of all Senior Indebtedness, the holders of the MLX Bonds shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of MLX made on the Senior Indebtedness until the principal of the MLX Bonds shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the holders of the MLX Bonds would be entitled except for these provisions shall, as among MLX, its creditors other than the holders of Senior Indebtedness, and the holders of MLX Bonds, be deemed to be a payment by MLX to or on account of Senior Indebtedness, it being understood that these provisions are and are intended solely for the purpose of defining the relative rights of the holders of the MLX Bonds, on the one hand, and the holders of Senior Indebtedness, on the other hand. 9.5 Obligations Unaffected. Nothing contained in this Article or in the MLX Bonds is intended to or shall impair as among MLX, its creditors other than the holders of Senior Indebtedness and the holders of the MLX Bonds, the obligation of MLX, which shall be absolute and unconditional, to pay to the holders of the MLX Bonds the principal of the MLX Bonds, as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the holders of the MLX Bonds and creditors of MLX other than the holders of Senior Indebtedness, nor shall anything herein prevent any holder of the MLX Bonds from exercising all remedies otherwise permitted by applicable law upon the occurrence of a default under this Agreement, subject to rights, if any, under this Article of the holders Senior Indebtedness in respect of cash, property or securities of MLX received upon the exercise of any such remedy. 9.6 Reliance of Holders of Senior Indebtedness. Each holder of the MLX Bonds by his acceptance thereof shall be deemed to acknowledge and agree that the subordination provisions of this Article are, and are intended to be, an inducement and a consideration of each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of such MLX Bonds, to acquire and hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness. ARTICLE 10. PREPAYMENTS 10.1 Optional Prepayments. MLX may, upon at least three Business Days' notice to the Bond holders, prepay the.MLX Bonds, in whole at any time, or from time to time in part, at a price per MLX Bond equal to the Accreted Amount thereof on the date of prepayment; provided that no optional prepayments shall be permitted hereunder as long as there remain any amounts owing by MLX in respect of Senior Indebtedness. Any notice given pursuant to this subsection and received by a Bondholder after 11:00 a.m. (Atlanta time) on any Business Day shall be deemed to have been received by such Bondholder on the next Business Day. 10.2 Mandatory Prepayment. MLX shall (i) notify the Bondholder (as far in advance as possible, but in any event not later than the date of receipt of Net Cash Proceeds in respect thereof) of the occurrence of a Prepayment Event in respect of which MLX shall receive Net Cash Proceeds and of the amount of such Net Cash Proceeds and (ii) immediately upon receipt thereof pay such Net Cash Proceeds to the Bondholders for the prepayment of MLX Bonds. Each mandatory prepayment shall be made at a price per MLX Bond equal to the Accreted Amount thereof on the date of prepayment. 10.3 Application of Proceeds of Prepayment. Any prepayment pursuant to this Article shall be made on a date (a "Prepayment Date") designated by MLX in its notice to the Bondholders pursuant to Section 10.1 or 10.2, as the case may be, which date shall be a Business Day not less than one day after the date of such notice and shall, subject to Article 9, be applied to redeem that aggregate principal amount of MLX Bonds which has the same proportion to the aggregate principal amount of MLX Bonds then Outstanding on such date as the amount of such prepayment bears to the aggregate Accreted Amount on such date of all MLX Bonds then Outstanding. If an MLX Bond is redeemed only in part, a new MLX Bond shall be delivered by MLX to the holder thereof in exchange therefor at no cost to the holder in the principal amount not redeemed. ARTICLE 11. EVENTS OF DEFAULT If any one or more of the following events ("Events of Default") shall occur and be continuing: (a) MLX or any of its Subsidiaries shall (i) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or (iii) shall make a general assignment for the benefit of creditors, or (iv) shall fail generally to pay its debts as they become due, or (v) shall take any corporate action to authorize any of the foregoing; (b) an involuntary case or other proceeding shall be commenced against MLX or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against MLX or any of its Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; then, and in every such event, the Required Bondholders may, by notice to MLX, declare the Accreted Amount of each MLX Bond then Outstanding to be due and payable immediately. Upon such declaration, such Accreted Amount of each MLX Bond shall thereupon become and be immediately due and payable, anything in this Agreement or in any of the MLX Bonds contained notwithstanding, although no amount shall be paid thereon if prohibited by Article 9. ARTICLE 12. INTEREST UPON DEFAULT IN PAYMENT OR PREPAYMENT OF PRINCIPAL If MLX shall default in the payment or prepayment of the Accreted Amount of any MLX Bond, whether upon acceleration, maturity or otherwise, such overdue Accreted Amount of such MLX Bond shall bear interest at a rate per annum (compounded daily and computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed) equal to the sum of 4% plus the Base Rate. Such interest shall accrue from and including the date of such default to but excluding the date on which such Accreted Amount of such MLX Bond is paid and shall be payable on demand. ARTICLE 13. EXCHANGE OF MLX BONDS Subject to Section 6.1, at the request at any time of any holder of one or more of the MLX Bonds to MLX, MLX at its expense (except for any transfer tax or any other tax arising out of the exchange) will issue in exchange therefor new MLX Bonds, in such denomination or denominations of $100,000 or any larger multiple of $100,000 (plus one MLX Bond in a lesser denomination, if required) as such holder may request, in an aggregate principal amount equal to the aggregate principal amount of the MLX Bond or MLX Bonds surrendered and substantially in the form thereof, dated the date of the MLX Bond or MLX Bonds so surrendered and payable to such person or persons or order as may be designated by such holder. ARTICLE 14. REPLACEMENT OF MLX BONDS Upon receipt of evidence satisfactory to MLX of the loss, theft, destruction or mutilation of any MLX Bond and, in the case of any such loss, theft, or destruction, upon delivery of a bond of indemnity satisfactory to MLX, or in the case of any such mutilation, upon surrender and cancellation of such MLX Bond, MLX will issue a new MLX Bond of like tenor as if the lost, stolen, destroyed or mutilated MLX Bond were then surrendered for exchange in lieu of such lost, stolen, destroyed or mutilated MLX Bond. ARTICLE 15. AMENDMENTS AND WAIVERS This Agreement may be amended (or any provision hereof waived) with the consent of MLX and the Required Bondholders; provided that no such amendment or waiver shall (i) change the amount of or the date for any payment with respect to any MLX Bond without the consent of the holder of the MLX Bond so affected and MLX, (ii) change the percentage of MLX Bonds, the holders of which are required to take any action under any provision of this Agreement, change this Article 15 or change the definitions of "Accreted Amount", "Accruing Issue Discount" or "Issue Price" without the consent of the holders of all the MLX Bonds then Outstanding and MLX, or (iii) amend any provision of Article 11 without the consent of holders of 80% or more of the aggregate principal amount of MLX Bonds outstanding on such date and MLX; and provided, further, that the provisions of Article 7 may be amended or waived with the consent of MLX and the Holders of at least 66 2/3% in number of the Registrable Shares (the "Required Holders") and after all of MLX's obligations to the Bondholders (as holders of MLX Bonds) hereunder and under the MLX Bonds have been satisfied in full, the provisions of this Agreement (other than Article 7) may be amended or waived with the consent of MLX and the Required Holders. MLX and each holder of MLX Bonds then or thereafter Outstanding shall be bound by any amendment or waiver effected in accordance with the provisions of this Article, whether or not such MLX Bond shall have been marked to indicate such modification, but any MLX Bond issued thereafter shall bear a notation as to any such modification. Promptly after obtaining the written consent of the holders herein required, MLX shall transmit a copy of such modification to all of the holders of the MLX Bonds then Outstanding. ARTICLE 16. HOME OFFICE PAYMENT As long as any payee named in the MLX Bonds outstanding on the date hereof shall be the holder of any MLX Bond, MLX will make payments of principal by check payable to the order of the holder of any such MLX Bond duly mailed or delivered to the Bondholders at the Bondholders' address specified on the signature pages hereof or, if not so specified, at the address appearing on the Company's records, or at such other address as the Bondholders may designate in writing to MLX, or, if requested by the Bondholder or other institutional holder of the MLX Bonds, by wire transfer to its (or its nominee's) account at any bank or trust company in the United States of America, notwithstanding any contrary provision herein or in any MLX Bond with respect to the place of payment. All such payments shall be made in federal or other immediately available funds. The Bondholders agree that, on or before the date any MLX Bond is assigned or transferred, they will notify MLX of the name and address of the transferee of such MLX Bond. ARTICLE 17. NOTICES All notices, requests and other communications to any party hereunder or any Bondholder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party at its address or telex number set forth on the signature pages hereof or such other address or telex number as such party may hereafter specify for the purpose by notice to such party or Bondholder. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Article and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by telecopier, when such communication is transmitted to the telecopier number specified in this Article 17 and the sender of such communication has received verbal confirmation of its receipt or (iv) if given by any other means, when delivered at the address specified in this Article. ARTICLE 18. ENTIRE AGREEMENT This Agreement and the MLX Bonds embody the entire agreement and understanding between the Holders and MLX and supersede all prior agreements and understandings relating to the subject matter hereof. ARTICLE 19. SUCCESSORS AND ASSIGNS All covenants and agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. ARTICLE 20. HEADINGS The headings of the articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof. ARTICLE 21. GOVERNING LAW THIS AGREEMENT AND EACH MLX BOND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA. ARTICLE 22. COUNTERPARTS This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. ARTICLE 23. SEVERABILITY Any provision hereof or of the MLX Bonds which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. MLX CORP By Title: 5305 Oakbrook Parkway Norcross, GA 30093 Telecopier: (404) 279-4200 AIG CAPITAL CORP. By Title: 70 Pine Street New York, New York 10270 Telecopier: (212) 425-8366 US WEST FINANCIAL SERVICES, INC. By Title: 14785 Preston Road, Suite 350 Dallas, Texas 75240 Telecopier: (214) 851-7499 TERBEM LIMITED MITVEST LIMITED TINVEST LIMITED BOBST INVESTMENT CORP. TCR INTERNATIONAL PARTNERS, L.P. By Title: c/o Three Cities Research, Inc. 135 East 57th Street New York, New York 10022 Attention: Portfolio Management Telecopier: (212) 980-1142
SCHEDULE I Principal Amount AIG Capital Corp. $574,114.00 US West Financial Services, Inc. 577,952.00 Terbem Limited 2,413,087.00 Mitvest Limited 322,762.00 Tinvest Limited 1,379,075.00 Bobst Investment Corp. 410,788.00 TCR International Partners, L.P. 1,157,232.00 $6,835,010.00
EXHIBIT A TO THE MLX EXCHANGE AGREEMENT THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS SECURITY WAS ISSUED ON MARCH 19, 1992 AT AN ISSUE PRICE OF $409.4013 FOR EACH $1,000 ORIGINAL PRINCIPAL AMOUNT. ACCORDINGLY, (i) THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT ("OID") FOR EACH $1,000 ORIGINAL PRINCIPAL AMOUNT OF THIS SECURITY IS $590.5987 AND (ii) THE YIELD TO MATURITY FOR PURPOSES OF ALLOCATING OID IS 0.024457% COMPOUNDED DAILY. MLX CORP. Subordinated Zero Coupon Bonds Due 2002 Atlanta, Georgia For value received, MLX CORP., a Michigan corporation ("MLX"), promises to pay to or registered assigns, the principal sum of ($ ) on March 19, 2002 in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The principal of this Bond shall not bear interest except in the case of a default in payment or prepayment of principal, whether upon acceleration, maturity or otherwise, and in such case the Accreted Amount (as defined by reference in the MLX Exchange Agreement) of this Bond shall bear interest at a rate per annum (compounded daily and computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed) equal to the sum of 4% plus the Base Rate (as defined in the MLX Exchange Agreement). Such interest shall accrue from and including the date of such default to but excluding the date on which such defaulted amount is paid and shall be payable on demand. Payment on account of the principal of and any such interest on this Bond shall be paid by check mailed, or wire transfer as provided in the MLX Exchange Agreement (as hereinafter defined), to the registered address designated by the holder hereof for such purpose. This Bond is one of a duly authorized issue of Subordinated Zero Coupon Bonds, aggregating $20,000,000 in principal amount, issued pursuant to the MLX Exchange Agreement dated as of April 13, 1990 as amended and restated as of April 22, 1993 (as thereafter amended, the "Exchange Agreement") among MLX and the Bondholders listed therein. This Bond is subject to the provisions of and is entitled to the benefits of the MLX Exchange Agreement. The MLX Exchange Agreement provides, inter alia, for mandatory prepayments of the principal of the MLX Bonds from time to time upon the occurrence of certain events at a price equal to the Accreted Amount thereof at the date of prepayment. In addition, the payment of the principal of and interest, if any, on this Bond is subordinated in right of payment to the prior payment in full of certain other obligations of MLX to the extent and manner set forth in the MLX Exchange Agreement. Each holder of this Bond, by accepting the same, agrees to and shall be bound by the provisions of the MLX Exchange Agreement. If an Event of Default, as defined in the MLX Exchange Agreement, shall occur and be continuing, the Accreted Amount of this Bond may be declared due and payable in the manner and with the effect provided in the MLX Exchange Agreement. No reference herein to the MLX Exchange Agreement and no provision hereof or thereof shall alter or impair the obligation of MLX, which is absolute and unconditional, to pay the principal thereof and interest, if any, hereon described. This Bond is delivered in and shall be construed and enforced in accordance with and governed by the laws of the State of Georgia. MLX may treat the person in whose name this Bond is registered as the owner and holder of this Bond for the purpose of receiving payments on this Bond and for all other purposes whatsoever and MLX shall not be affected by any notice to the contrary. IN WITNESS WHEREOF, MLX CORP. has caused this Bond to be dated, and to be executed on its behalf by its officer thereunto duly authorized and its corporate seal to be hereunto duly affixed. MLX CORP. [Corporate Seal] By Title: -----END PRIVACY-ENHANCED MESSAGE-----