<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1999 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 1-14482
------------
UNISOURCE WORLDWIDE, INC.
--------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-5369500
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Cassatt Road, Berwyn, PA 19312
------------------------------------
(Address of principal executive offices)
(Zip Code)
(610) 296-4470
--------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 28, 1999.
Common Stock, par value $0.001 70,232,945 shares
<PAGE>
INDEX
UNISOURCE WORLDWIDE, INC.
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 1999 3-4
and September 30, 1998
Condensed Consolidated Statements of Operations - Three and 5
Six-Month Periods Ended March 31, 1999 and March 31, 1998
Condensed Consolidated Statements of Cash Flows - Six-Month 6
Periods Ended March 31, 1999 and March 31, 1998
Notes to Condensed Consolidated Financial Statements - 7-9
March 31, 1999
Item 2. Management's Discussion and Analysis of Results 10-18
of Operations and Financial Condition and Liquidity
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
- ---------
INDEX TO EXHIBITS 21
- -----------------
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
- -----------------------------------------
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and shares)
MARCH 31, SEPTEMBER 30,
ASSETS 1999 1998
- -------------------------------------------------------- ------------------
CURRENT ASSETS
Cash $ 37,541 $ 49,960
Accounts receivable, net 561,367 640,443
Inventories 352,416 353,270
Prepaid expenses and deferred taxes 83,264 87,746
--------------- ------------------
Total current assets 1,034,588 1,131,419
--------------- ------------------
LONG-TERM RECEIVABLES 3,310 5,723
PROPERTY AND EQUIPMENT, AT COST 429,700 428,884
Less accumulated depreciation 214,835 201,599
--------------- ------------------
214,865 227,285
--------------- ------------------
GOODWILL, NET 578,880 580,932
DEFERRED COSTS AND OTHER ASSETS 24,985 21,292
--------------- ------------------
$1,856,628 $1,966,651
=============== ==================
See notes to condensed consolidated financial statements.
3
<PAGE>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and shares)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
- ------------------------------------------------------------ ----------------- ------------------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 1,123 $ 1,155
Notes payable 3,836 3,651
Trade accounts payable 421,743 451,123
Accrued salaries, wages and commissions 34,124 40,520
Restructuring costs 46,939 61,588
Other accrued expenses 115,273 107,356
----------------- ------------------
Total current liabilities 623,038 665,393
----------------- ------------------
LONG-TERM DEBT 435,684 505,199
OTHER LIABILITIES
Deferred taxes 14,740 11,770
Restructuring costs 28,568 30,414
Other long-term liabilities 51,440 55,517
----------------- ------------------
94,748 97,701
----------------- ------------------
SHAREHOLDERS' EQUITY
Common stock, par value $0.001, authorized - 250,000,000
shares; issued 3/31/99 - 70,227,582 and `
9/30/98 - 70,245,536 shares 70 70
Additional paid-in capital 832,254 832,268
Unearned compensation (2,437) (2,727)
Retained deficit (86,129) (87,533)
Cumulative other comprehensive losses:
Foreign currency translation adjustments (40,575) (43,711)
Cost of common shares in treasury; 3/31/99 - 3,052 and
9/30/98 - 1,205 shares (25) (9)
----------------- ------------------
703,158 698,358
----------------- ------------------
$1,856,628 $1,966,651
================= ==================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
MARCH 31, MARCH 31,
---------------------------------- -----------------------------------
1999 1998 1999 1998
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Printing & Imaging $1,008,204 $1,220,247 $2,052,938 $2,392,912
Supply Systems 598,951 647,673 1,234,748 1,344,143
--------------- --------------- ---------------- ---------------
TOTAL REVENUES 1,607,155 1,867,920 3,287,686 3,737,055
--------------- --------------- ---------------- ---------------
COST OF GOODS SOLD
Printing & Imaging 858,666 1,063,979 1,754,591 2,082,626
Supply Systems 448,442 490,887 928,659 1,018,373
--------------- --------------- ---------------- ---------------
Total Cost of Goods Sold 1,307,108 1,554,866 2,683,250 3,100,999
--------------- --------------- ---------------- ---------------
GROSS PROFIT 300,047 313,054 604,436 636,056
EXPENSES
Selling and administrative 279,723 288,880 560,795 575,138
Special Charges:
Restructuring implementation 3,841 - 6,813 -
costs
Information technology write-off - - - 168,000
--------------- --------------- ---------------- ---------------
Total Expenses 283,564 288,880 567,608 743,138
--------------- --------------- ---------------- ---------------
INCOME (LOSS) FROM OPERATIONS 16,483 24,174 36,828 (107,082)
INTEREST EXPENSE 10,588 12,620 22,052 24,743
--------------- --------------- ---------------- ---------------
INCOME (LOSS) BEFORE TAXES 5,895 11,554 14,776 (131,825)
PROVISION (BENEFIT) FOR INCOME TAXES 2,535 4,867 6,354 (37,899)
--------------- --------------- ---------------- ---------------
NET INCOME (LOSS) $ 3,360 $ 6,687 $ 8,422 $ (93,926)
=============== =============== ================ ===============
BASIC EARNINGS (LOSS) PER SHARE $ 0.05 $ 0.10 $ 0.12 $ (1.37)
=============== =============== ================ ===============
DILUTED EARNINGS (LOSS) PER SHARE $ 0.05 $ 0.10 $ 0.12 $ (1.37)
=============== =============== ================ ===============
DIVIDENDS PER SHARE $ 0.05 $ 0.20 $ 0.10 $ 0.40
=============== =============== ================ ===============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended March 31,
---------------------------------------
1999 1998
------------------ ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 8,422 $ (93,926)
Additions (deductions) to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 17,129 17,634
Amortization 10,101 10,951
Provision for losses on accounts receivable 5,752 6,249
Information technology write-off - 168,000
Deferred tax benefit - (39,800)
Payments related to restructuring costs and
information technology write-off (17,728) (9,632)
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures:
Sale of accounts receivable - 150,000
Other changes in accounts receivable 73,324 48,325
Decrease (increase) in inventories 854 (16,264)
Decrease (increase) in prepaid expenses 1,625 (6,064)
Decrease in accounts payable and accrued (25,827) (48,437)
expenses
Miscellaneous (353) (1,770)
------------------ ----------------
Net cash provided by operating activities 73,299 185,266
------------------ ----------------
INVESTING ACTIVITIES
Cost of companies acquired, net of cash acquired (1,789) (46,079)
Proceeds from divestiture - 48,126
Proceeds from the sale of property and equipment 1,128 939
Collection of notes receivable 2,413 -
Expenditures for property and equipment (6,314) (19,667)
Deferred cost expenditures (5,036) (11,673)
------------------ ----------------
Net cash used in investing activities (9,598) (28,354)
------------------ ----------------
FINANCING ACTIVITIES
Debt repayments (69,362) (123,802)
Payment of dividends (7,018) (27,627)
Other 260 1,463
------------------ ----------------
Net cash used in financing activities (76,120) (149,966)
------------------ ----------------
NET (DECREASE) INCREASE IN CASH (12,419) 6,946
CASH AT BEGINNING OF YEAR 49,960 45,384
------------------ ----------------
CASH AT END OF PERIOD $ 37,541 $ 52,330
================== ================
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
UNISOURCE WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
Note 1: Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements for
Unisource Worldwide, Inc. (the "Company" or "Unisource") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
In the opinion of management, all adjustments (consisting of the special charges
and normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three and six-month periods
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1999. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended September 30, 1998 ("1998 Annual Report").
Note 2: Comprehensive Income
--------------------
In the first quarter of fiscal 1999, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income is generally defined as all changes in shareholders' equity except those
resulting from transactions with shareholders. Comprehensive income (loss) is
as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months
March 31, Ended
March 31,
(in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $3,360 $6,687 $ 8,422 $ (93,926)
Change in cumulative translation adjustment 3,306 2,112 3,136 (7,386)
------ ------ ------- ---------
Total comprehensive income (loss) $6,666 $8,799 $11,558 $(101,312)
====== ====== ======= =========
</TABLE>
7
<PAGE>
Note 3: Debt
----
On September 25, 1998, the Company entered into an amended and restated $900
million credit agreement (the "credit facility"), which will mature on November
22, 2001. The amount of the credit facility has been voluntarily reduced to $725
million during the current quarter due to lower borrowing requirements. The
credit facility is secured by accounts receivable and inventories. The credit
facility includes financial covenants requiring a ratio of funded debt to
capitalization of less than 65% decreasing 5% annually to 55%, and a minimum net
worth of $575 million plus 50% of consolidated net income (without deduction for
net losses) after September 30, 1998, and an initial minimum consolidated EBITDA
(earnings before interest, taxes, depreciation and amortization, and excluding
special charges) to consolidated interest expense coverage of 2.25 times, which
increases in 0.25 increments periodically to 3.5 times as of June 30, 2001. The
amount available under the credit facility at March 31, 1999 was $288.4 million.
Note 4: Earnings Per Share
-------------------
Basic earnings (loss) per share for the three-month periods ended March 31, 1999
and 1998, and the six-month periods ended March 31, 1999 and 1998, were
calculated based upon the weighted average number of Company shares outstanding
for the respective periods, exclusive of non-vested restricted stock.
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
(in thousands, except per share data) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 3,360 $ 6,687 $ 8,422 $(93,926)
======= ======= ======= ========
Denominator for basic earnings (loss) per share 69,835 68,611 69,849 68,578
Effect of dilutive securities:
Stock options 123 147 113 - (a)
------- ------- ------- --------
Denominator for diluted earnings (loss) per share 69,958 68,758 69,962 68,578
======= ======= ======= ========
Basic earnings (loss) per share $ 0.05 $ 0.10 $ 0.12 $ (1.37)
======= ======= ======= ========
Diluted earnings (loss) per share $ 0.05 $ 0.10 $ 0.12 $ (1.37) (a)
======= ======= ======= ========
</TABLE>
(a) No incremental shares related to options are included due to the
antidilutive effect on the loss per share.
Note 5: Restructuring Implementation
----------------------------
On July 29, 1998, the Company announced an extensive restructuring program
designed to increase profitability by decreasing overall costs, growing
profitable market segments and enhancing customer service. During the quarter
ended March 31, 1999, the Company closed an additional 20 facilities reducing
the total number of U.S. locations from 424 at the inception of the
restructuring program to 340. Net facility space was reduced by over 600,000
square feet during the quarter, almost 1,000,000 square feet year-to-date, and
1,636,000 square feet program-to-date. Over one-half of the three million square
foot reduction goal has been achieved to date. Workforce reductions for the
quarter were approximately 150 and totaled 650 from the inception of the
program through March 31, 1999.
8
<PAGE>
Costs of $12.7 million were charged against the restructuring reserve during the
second quarter, and $17.7 million year-to-date through March 31, 1999. In
addition, restructuring implementation costs incurred in the three and six-month
periods ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in millions) March 31, 1999 March 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Relocation/recruitment $2.9 $4.9
Communications/consulting 0.4 0.9
Other costs 0.5 1.0
---- ----
Total restructuring implementation costs $3.8 $6.8
==== ====
</TABLE>
Note 6: Information Technology Write-Off
--------------------------------
In January 1998, the Company announced it had completed an in-depth study and
evaluation of the cost/benefit relationship of NADS, its North American
Distribution System, under development since 1994, and concluded that this
information technology system would not cost-effectively meet the Company's
future information technology needs. In the first quarter of fiscal 1998, the
Company recorded a $168 million ($109 million after-tax) or $1.60 per share
special charge to write-off capitalized development and related costs associated
with NADS. The charge, which was primarily non-cash, consisted of $155 million
related to the write-off of deferred costs, along with $13 million for
terminating the existing outsourcing contracts and other related costs.
Note 7: Divestiture
-----------
In October 1997, the Company sold a significant portion of its United States-
based Grocery Supply Systems business for approximately $48 million in cash.
The pre-tax effect of the sale was not material; however, the Company recorded a
tax charge of $5.7 million ($0.08 per share) in the first quarter of fiscal
1998. The tax charge related mainly to non-deductible intangible assets related
to the business sold.
Note 8: Income Tax Expense (Benefit)
----------------------------
The income tax expense (benefit) was $6,354,000 and ($37,899,000) equating to
overall effective tax rates of 43.0% and 28.7% for the six months ended March
31, 1999 and 1998, respectively. The components of the effective tax rate for
the six months ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
Income (Loss) Income Tax
(in thousands) Before Taxes Expense (Benefit) Effective Rate
-------------------------------------------------------------
<S> <C> <C> <C>
Income before taxes - excluding $ 36,175 $ 15,201 42.0%
special charges
Special charge (168,000) (58,800) 35.0%
Grocery divestiture - tax charge -- 5,700 --
--------- -------- ----
$(131,825) $(37,899) 28.7%
========= ======== ====
</TABLE>
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- --------------------------------------------------------------------------
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
UGI Merger/Georgia-Pacific Offer
On February 28, 1999, the Company entered into a merger agreement with UGI
Corporation pursuant to which Unisource shareholders would receive .566 shares
of UGI common stock for each share of Unisource common stock. The UGI
transaction is conditioned upon, among other things, shareholder approval by
both companies.
On May 7, 1999, Unisource received an unsolicited proposal from Georgia-Pacific
Corporation to acquire the Company at a price of $12 per common share in cash.
The offer has been approved by Georgia-Pacific's Board of Directors and is not
subject to any financing contingencies. On May 10, 1999, Unisource's Board of
Directors authorized its management to begin discussions with Georgia-Pacific
concerning its proposal.
There can be no assurances that either of these proposed transactions will be
completed.
Paper Pricing Trends
Unisource has experienced fluctuations in revenues and net income from quarter
to quarter due to a combination of factors, including changes in pulp and paper
prices. These changes can significantly impact the Company's Printing & Imaging
Business, which accounted for 63% of revenues and 50% of gross profit in the
second quarter of fiscal 1999.
Declining prices produce lower revenues and gross profits, providing less
coverage for fixed expenses. Market conditions in Printing & Imaging have
weakened, compared to the same period in the prior year, resulting in lower
paper prices. Causes include: weaknesses in the pulp market; mills' relatively
high uncoated and coated freesheet inventories; the threat of imports resulting
from weak Asian markets; and the strong U.S. dollar. Paper prices for the second
quarter of fiscal 1999 remain significantly below levels of a year ago, however,
there have been indications recently that paper prices will stabilize in the
second half of the year.
END-USER BROKERAGE BUSINESS
On January 19, 1999, the Company filed a lawsuit against four former employees
of its New York-based Websource division, all of whom had previously resigned.
Websource is an end-user-focused brokerage business serving national-scope
printers and publishers. The suit alleges that the former employees breached
the duty of loyalty they owed to Unisource by - while still employed by
Unisource - enticing and attempting to entice Unisource employees, customers and
suppliers to leave Unisource; misusing and misappropriating Unisource's trade
secrets and confidential information; failing to use their full energies and
efforts to promote Unisource's business; and working to establish a newly-formed
company as a direct competitor to Unisource.
The suit also names as a defendant the new company, which was recently
incorporated to broker paper to the magazine, catalog, direct mail,
documentation and book industries on a nationwide basis, putting it in direct
competition with Websource. Three of the four former Websource employees named
in the suit are principals of the newly-formed company.
10
<PAGE>
While the Company has taken aggressive steps to protect this important business,
management estimates that lost business at Websource could reduce income from
operations by $5 million to $8 million for the current fiscal year. For the six
months ended March 31, 1999, the volume loss at Websource negatively impacted
income from operations by approximately $2 million.
RESTRUCTURING AND BUSINESS IMPROVEMENT ACTIONS
On July 29, 1998, the Company announced an extensive restructuring program
designed to increase profitability by decreasing overall costs, growing
profitable market segments and enhancing customer service. Through March 31,
1999, the Company has reduced the total number of U.S. locations from 424 to 340
and its net facility space by 1.6 million square feet, achieving over one-half
of its 3 million square foot reduction goal. Workforce reductions through March
31, 1999, were approximately 650 positions. In April, the workforce was reduced
by an additional 130 positions.
Costs of $12.7 million were charged against the restructuring reserve in the
quarter ended March 31, 1999 and $17.7 million year-to-date. In addition,
restructuring implementation costs incurred in the second quarter of fiscal 1999
were $3.8 million and were comprised of relocation/recruitment - $2.9 million;
communications/consulting - $0.4 million; and other costs - $0.5 million.
MEXICAN OPERATIONS
In September 1998, the Company determined that its Mexican operations did not
fit its long-term strategy and announced its intention to divest such operations
and focus on its U.S. and Canadian operations. The Company recorded an
associated pre-tax charge of $70.0 million in the fourth quarter of fiscal 1998.
YEAR 2000 COMPLIANCE
Computer systems that use only the final two digits to represent years are
unable to distinguish between years beginning with 19 and those that begin with
20. If not corrected, many computer applications could fail or create erroneous
results when dealing with dates later than December 31, 1999. The Year 2000
problem is believed to affect virtually all companies and organizations.
With the exception of some packaging and maintenance-related machinery, products
sold by Unisource do not contain any date-sensitive hardware, software or
embedded computer technology. Unisource's business transaction systems use a
variety of information technology hardware and software for processing and
shipping customer orders, procurement, invoicing, financial reporting, human
resources and logistics. In addition to such IT systems, the Company relies on
other equipment and systems that contain embedded computer technology, such as
bar code, phone and voice-mail systems.
Any Year 2000 effect on the third parties with whom Unisource has commercial
relationships, including vendors, customers and others who provide services to
the Company, could also affect Unisource.
11
<PAGE>
Compliance Program. The Company's Year 2000 initiative consists of four phases.
Phase I: Conduct a comprehensive inventory of all of the Company's significant
IT and non-IT equipment and systems to determine which are Year 2000 compliant
and which need to be remediated or replaced.
Phase II: Remediate or replace all significant equipment and systems that are
not Year 2000 compliant.
Phase III: Test all equipment and systems believed to be Year 2000 compliant,
including those that were remediated or replaced during Phase II.
Phase IV: Implement the remediated or replaced systems into the Company's
operations and continue to monitor and evaluate the compliance of such systems
with Year 2000 issues.
Phase I has been completed with regard to our significant systems, and Phase II
is well under way. As of March 31,1999, approximately 90% of the Company's
business transaction systems have been remediated, replaced or are already Year
2000 compliant (Phases I to IV completed). Concurrent with the Phase II
corrective measures, the Company is conducting the testing and implementation
phases as appropriate. Unisource anticipates that all of its business
transaction systems will be compliant by June 30, 1999. The Company expects that
its other significant embedded computer technology systems and equipment will be
Year 2000 compliant by September 30, 1999.
Unisource has contacted its technology and service providers as well as its key
customers and suppliers to determine the extent to which their systems are Year
2000 compliant and the extent to which Unisource could be affected if they are
not. Based upon responses received to date, the Company cannot determine the
extent to which it could be impacted by such third parties' failure to be Year
2000 compliant.
Risks Associated With Year 2000. The failure by Unisource or its suppliers,
customers and third parties with whom it has business dealings to correct on a
timely basis their material Year 2000 problems could result in an interruption
in, or failure of, the Company's normal business activities, e.g., the ability
to purchase products and maintain adequate inventory levels, to service
customers or to invoice and collect payments from customers. Such failures
could materially and adversely affect the Company's results of operations,
liquidity and financial condition. The inherent uncertainty in the issues
associated with the Year 2000 problem makes it difficult, if not impossible, to
determine the likelihood or the extent of the impact of such failure.
Contingency Plans. Although Unisource believes that its systems will be ready
for the Year 2000, the Company may experience incidences of non-compliance and
may be affected by the non-compliance of third parties. If certain suppliers
are unable to deliver products on a timely basis due to Year 2000 issues,
Unisource anticipates that other suppliers will be able to meet the Company's
requirements.
12
<PAGE>
Unisource currently has plans in place to address power failures and other
computer outages, which include processing orders, invoices and collections
manually. The Company is in the process of expanding those plans to address
additional issues that may result from Year 2000 non-compliance.
Costs. The steps that Unisource is taking to make its systems Year 2000
compliant will cost approximately $12 million. Of this amount, $5.9 million was
expended and charged to operations in fiscal 1998, $3.9 million was expended in
the first two quarters of fiscal 1999, and the rest will be incurred in the
remainder of fiscal 1999. Unisource anticipates that all of these costs will be
funded through its operating cash flows.
The Company is in the process of a major IT transformation and cannot adequately
distinguish between dedicated Year 2000 capital costs and those related to
business transformation that will also address Year 2000 compliance.
13
<PAGE>
RESULTS OF OPERATIONS
---------------------
Revenues and income (loss) before taxes for the three and six-month periods
ended March 31, 1999 compared to the three and six-month periods ended March 31,
1998 were as follows:
<TABLE>
<CAPTION>
(in millions) Three Months Ended March 31, Six Months Ended March 31,
---------------------------------------- ------------------------------------------
1999 1998 % Change 1999 1998 % Change
----------- ----------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Printing & Imaging $1,008.2 $1,220.2 (17.4) $2,052.9 $2,392.9 (14.2)
Supply Systems 599.0 647.7 (7.5) 1,234.8 1,344.2 (8.1)
-------- -------- -------- --------
$1,607.2 $1,867.9 (14.0) $3,287.7 $3,737.1 (12.0)
======== ======== ======== ========
Gross Profit:
Printing & Imaging $ 149.5 $ 156.3 (4.4) $ 298.3 $ 310.3 (3.9)
Supply Systems 150.5 156.8 (4.0) 306.1 325.8 (6.0)
-------- -------- -------- --------
300.0 313.1 (4.2) 604.4 636.1 (5.0)
Selling and
Administrative Expense 279.7 288.9 (3.2) 560.8 575.2 (2.5)
-------- -------- -------- --------
Operating Income Before
Special Charges 20.3 24.2 (16.1) 43.6 60.9 (28.4)
Special Charges:
Restructuring Implementation 3.8 - 6.8 -
Information Technology - - - 168.0
Write-off
Operating Income (Loss) 16.5 24.2 36.8 (107.1)
Interest Expense 10.6 12.6 22.0 24.7
-------- -------- -------- --------
Income (Loss) Before Taxes $ 5.9 $ 11.6 $ 14.8 $ (131.8)
======== ======== ======== ========
</TABLE>
THREE-MONTH PERIOD ENDED MARCH 31, 1999
Revenues decreased $260.7 million, or 14.0%, to $1.61 billion in the second
quarter of fiscal 1999 as compared to the same period in fiscal 1998. Overall
decreases in pricing accounted for an estimated 7.5% of this decline with
Printing & Imaging pricing down 9.3% ($113.6 million impact) and Supply
Systems down 4.4% ($28.2 million). Volume decreases accounted for
approximately 3% of the revenue decline in the quarter with Printing & Imaging
volumes down by 3% ($35.9 million) and Supply Systems volumes down 2.5% ($16.1
million). The remainder of the revenue decline was attributable to volume
loss at Websource and the weakness in the Canadian and Mexican currencies
compared to the same period last year
14
<PAGE>
Gross profit decreased by $13.1 million or 4.2%, to $300.0 million in the second
quarter of fiscal 1999, compared to the prior year's quarter. The decline in
gross profit dollars is attributable to the declines in revenues discussed
above; however, the decline was partially offset by an improvement in gross
profit percentages. Gross profit percentages in Printing & Imaging increased
from 12.8% in 1998 to 14.8% in 1999, while Supply Systems increased from 24.2%
to 25.1% in the second quarter of fiscal 1999. Overall, total gross profit as a
percentage of revenues increased from 16.8% to 18.7%. Historically, gross
profit percentages improve in periods of declining prices, although the impact
of certain sales initiatives including minimum order sizes and customer
profitability focus has also contributed to the improvement.
Selling and administrative expense decreased by $9.2 million, or 3.2%, in the
second quarter of fiscal 1999, compared to the second quarter of fiscal 1998.
The net decrease is primarily due to savings associated with the restructuring
program initiated in fiscal 1998.
Income from operations decreased $7.7 million for the quarter compared to the
prior year's quarter. Excluding $3.8 million of restructuring implementation
costs recorded in fiscal 1999, income from operations decreased $3.9 million or
16.1%. The decrease in income from operations is primarily attributable to the
pricing declines discussed above. The positive impact of improved gross profit
percentages and restructuring benefits offset most of the negative impact of
pricing and volume declines and general expense inflation. Operating margin,
excluding restructuring implementation costs, was 1.3% for the quarter,
compared to 1.3% for the corresponding period of fiscal 1998.
Interest expense decreased by $2.0 million to $10.6 million during the quarter
compared to the same period of the prior year. The decrease was attributable
primarily to lower average outstanding borrowings, net of an increase in average
borrowing rates.
Foreign Operations
Revenues from foreign operations decreased $17.6 million (7.9%) to $206.6
million for the three-month period ended March 31, 1999, as compared to the same
period of the prior year. Revenues from Canadian operations decreased $9.5
million to $182.9 million, principally due to pricing declines and the negative
impact of foreign currency translation in the period offset by an approximately
3% increase in volume. Revenues from Mexican operations decreased $9.0 million
to $21.8 million due to pricing declines, business volume loss and the negative
impact of foreign currency translation in the period. Revenues from other
foreign sales offices increased $0.9 million to $1.9 million over the same
period of the prior year.
Income from operations from foreign operations increased $1.0 million to $6.3
million for the three-month period ended March 31, 1999, as compared to the
same period of the prior year. Canadian income from operations increased $0.9
million to $5.4 million and Mexican income from operations decreased $0.2
million to $1.0 million for the three-month period ended March 31, 1999. Other
foreign sales offices' operating loss decreased by $0.3 million for the quarter.
There is no allocation of general corporate expenses to foreign operations.
In the quarter ended March 31, 1999, weakened foreign currencies negatively
impacted reported revenue and income from operations by $14.3 million and $0.6
million, respectively, as compared to the same period in 1998.
15
<PAGE>
SIX-MONTH PERIOD ENDED MARCH 31, 1999
Revenues for this period decreased $449.4 million, or 12.0%, to $3.29 billion as
compared to the same period in fiscal 1998. Overall decreases in pricing
accounted for an estimated 7% of this decline with Printing & Imaging pricing
down an estimated 9.2% ($220.1 million) and Supply Systems down 3.4% ($46.3
million). Volume decreases (excluding Websource) in base operations accounted
for 1.9% of the revenue decline in the six months with Printing & Imaging
volumes down by 1.8% ($43.9 million) and Supply Systems volumes down 1.9% ($26.1
million). The Company's divestiture of its U.S. grocery business in the first
quarter of fiscal 1998 resulted in reduced Supply Systems revenue of $23.1
million for the six-month period as compared to the same period last year. The
remainder of the decline was due to volume loss at the Company's Websource
division and the weakness in the Canadian and Mexican currencies.
Gross profits decreased by $31.7 million or 5.0% as compared to the same period
in fiscal 1998. This decrease is associated with the declines in revenues
discussed above; however, the decline was partially offset by improvement in
gross profit percentages. Printing & Imaging gross profit as a percentage of
revenues increased from 13.0% to 14.5% while Supply Systems increased from 24.2%
to 24.8% for the six-month period. Overall, total gross profit increased from
17.0% to 18.4%.
Selling and administrative expense decreased by $14.4 million, or 2.5%, for the
six-month period ended March 31, 1999, when compared with the corresponding
period of fiscal 1998. The decrease is primarily due to savings associated with
the restructuring program initiated in fiscal 1998.
Income from operations increased $143.9 million for the six-month period, as
compared to the same period of fiscal 1998. Excluding special charges, income
from operations for the six-month period decreased $17.3 million, or 28.4%, as
compared to the same period of fiscal 1998. The decrease in income from
operations is primarily attributable to Printing & Imaging pricing declines
discussed above. The positive impact of improved gross profit percentages and
restructuring benefits partially offset the effects of pricing and volume
declines and general expense inflation. Operating margin, excluding special
charges, was 1.3% for the six months, compared to 1.6% for the corresponding
period of fiscal 1998.
Interest expense decreased by $2.7 million as compared to the first six months
of fiscal 1998. The decrease was attributable to lower average outstanding
borrowings, net of an increase in average borrowing rates.
Foreign Operations
Revenues from foreign operations decreased $43.6 million to $409.7 million for
the six-month period ended March 31, 1999, as compared to the same period of
fiscal 1998. Revenues from Canadian operations decreased $25.4 million to $360.8
million due principally to pricing declines and the negative impact of foreign
currency translation in the period offset by and approximate 3% increase in
volume. Revenues from Mexican operations decreased $18.1 million to $45.7
million due to pricing declines, the negative impact of foreign currency
translation and, volume declines. Revenues from other foreign sales offices
decreased $0.1 million to $3.2 million for the six-month period ended March 31,
1999.
16
<PAGE>
Operating income from foreign operations decreased $2.1 million to $11.1 million
for the six-month period, as compared to the same period of fiscal 1998.
Canadian operating income decreased $1.3 million to $9.5 million, primarily due
to pricing and the negative impact of foreign currency translation. Mexican
operating income decreased $1.1 million. The other foreign sales offices'
operating loss decreased by $0.3 million for the six-month period ended March
31, 1999.
During fiscal 1998, Mexico was considered a hyper-inflationary economy for
accounting purposes, and the changes in exchange rates applied to the Company's
net monetary assets are reflected in net income. Based upon the net monetary
assets and the devaluation of the Mexican Peso, the Company recorded a $445,000
charge for the six-month period ended March 31, 1998.
For the six months ended March 31, 1999, weakened foreign currencies negatively
impacted revenue and income from operations by $36.9 million and $1.3 million
respectively, as compared to the same period in 1998.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Net cash provided by operating activities for the six-month period ended March
31, 1999 was $73.3 million. During the same period inventory turns improved to
7.9 from 6.6, average inventory on hand was $406.2 million (FIFO basis) as
compared to $556.0 million, and days payables outstanding improved to 27.6 from
26.0. Average days sales outstanding were 42.6 for the six months ended March
31, 1999, as compared to 42.2 for the same period last year. Included in
operating activities were cash expenditures of $17.7 million in connection with
the Company's restructuring programs. Remaining cash expenditures for
restructuring and related implementation costs are estimated at $110 - $120
million, a significant portion of which will be expended in calendar 1999.
Investing activities included capital expenditures of $6.3 million and deferred
cost expenditures of $5.0 million primarily related to the proposed transaction
with UGI Corporation and financing costs. Cash used in financing activities
included $69.4 million of debt repayments and dividend payments of $7.0 million.
On March 31, 1999, total debt of $440.6 million was outstanding. The Company had
a $900 million bank credit facility commitment ("credit facility") as of
December 31, 1998. The Company voluntarily reduced the credit facility to $725
million during the current quarter, due to lower borrowing requirements. As of
the end of the quarter the Company had $288.4 million available under the
facility. The bank facility matures on November 22, 2001, however, it would be
terminated upon completion of the UGI merger. Any other transaction that would
constitute a change-in-control would be an event of default under the credit
facility.
17
<PAGE>
The Company's $150 million U.S. and CAN$95 million (US$63.0 million) Canadian
asset securitization programs are scheduled to mature on June 30, 1999 and June
15, 1999, respectively. The Company is currently negotiating extensions for
these programs but believes that if these programs are not renewed, replacement
financing would be available, including the use of funds available under the
credit facility. The Company had $150 million and $56.3 million (CAN$85.0
million), respectively, of receivables sold under the U.S. and Canadian asset
securitization programs as of March 31, 1999.
Upon the announcement of the proposed merger with UGI Corporation, Unisource
management decided to defer the proposed issuance of $225 million of long-term
debt. Coinciding with the issuance of the $225 million in debt was to have been
a reduction of the credit facility to $600 million. That reduction has also been
deferred.
The Company believes that its operating cash flow, together with financing
arrangements, will be sufficient to finance current operating requirements,
including capital expenditures, acquisitions, restructuring costs, Year 2000
compliance costs, other cash requirements, and future dividends.
All statements, other than statements of historical fact, made in this report,
including, without limitation, (i) statements relating to the restructuring
program and the timing thereof, the projected costs and expenses associated
with the restructuring program, and the financial results and benefits to be
realized from such restructuring, (ii) statements relating to anticipated future
pricing levels and the effect thereof upon the Company's business, (iii)
statements relating to lost business at Websource, including the effect such
lost business would have upon the Company's future operating income, (iv)
statements relating to Year 2000, including, the Company's Year 2000 initiative,
and the implementation and timing thereof, the effect of Year 2000 upon the
Company (either directly or as a result of the effect of Year 2000 upon third
parties), the risks associated with Year 2000, the Company's contingency plans
(including the Company's ability to utilize other suppliers), the amount of, and
the Company's ability to fund, the costs of its Year 2000 initiative, (v) the
Company's intention to issue long-term debt, (vi) the Company's intention and
ability to renew its asset securitization programs or to find suitable
replacements therefor, and (vii) statements qualified by the words "believes,"
"anticipates," "expects," "intends," "may," "estimates," "will," and other words
or expressions similar thereto, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although the Company believes these statements
are based upon reasonable assumptions with respect to future events and
circumstances, such statements are subject to risks and uncertainties which
could cause actual results or circumstances to differ materially. Such risks
and uncertainties include, without limitation, delays, difficulties, or
increased costs associated with the implementation of the restructuring plan,
leverage and debt service requirements (including sensitivity to interest rate
fluctuations), operating in a competitive environment, general economic
conditions, the ability to attract and retain qualified personnel, changes or
volatility in pulp and paper prices, the effect of Year 2000 upon the Company or
third parties with whom the Company conducts business, delays, difficulties or
increased costs associated with consolidation of the Company's information
technology systems and the upgrading of such systems to be Year 2000 compliant
and the outcome of the litigation instituted by the Company against certain of
its former Websource employees. For further detail and information concerning
such risks and uncertainties, please consult Part I, Item 1, of the Company's
annual report on Form 10-K for the fiscal year ended September 30, 1998, which
is on file with the Securities and Exchange Commission.
18
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) The following Exhibit are furnished pursuant to Item 601 of Regulation
S-K:
Exhibit No. Description
----------- -----------
10.18 Agreement and Plan of Merger dated as of February 28,
1999 among Registrant, UGI Corporation and Vulcan
Acquisition Corp., incorporated by reference to
Exhibit 2 to UGI Corporation's Form S-4 Registration
Statement filed on March 26, 1999 (file no. 333-
75089).
10.19 First Amendment to Receivables Sale Agreements dated
as of January 26, 1999 among Portfolio Receivables,
LLC, Registrant, and Canadian Imperial Bank of
Commerce.
10.20 Amending Agreement made as of October 23, 1998 between
Unisource Canada, Inc., The Trust Company of Bank of
Montreal, Registrant, and Nesbitt Burns, Inc.
10.21 First Amendment dated as of February 3, 1999 to the
Amended and Restated Credit Agreement dated as of
September 25, 1998 among Registrant, Unisource Capital
Corporation, Unisource Canada, Inc., The Chase
Manhatten Bank, The Toronto-Dominion Bank, and Toronto
Dominion (Texas) Inc.
10.22 Second Amendment dated as of March 15, 1999 to the
Amended and Restated Credit Agreement dated as of
September 25, 1998 among Registrant, Unisource Capital
Corporation, Unisource Canada, Inc., The Chase
Manhattan Bank, The Toronto-Dominion Bank, and
Toronto Dominion (Texas) Inc.
10.23 Amendment No. 1 to Rights Agreement dated as of
February 28, 1999 between Registrant and National
City Bank.
27 Financial Data Schedule for the Six-Month Period Ended
March 31, 1999
(b) Reports on Form 8-K
- Report, dated March 2, 1999, reporting the signing of an Agreement
and Plan of Merger between Unisource and UGI Corporation.
- Report dated January 26, 1999, reporting the issuance of a press
release announcing the Company's results for the three month
period ended December 31, 1999.
19
<PAGE>
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. This report has also been signed by the
undersigned in his capacity as the principal accounting officer of the
Registrant.
UNISOURCE WORLDWIDE, INC.
Date: May 17, 1999 /s/ Robert M. McLaughlin
------------------------
Robert M. McLaughlin
Vice President, Finance
(Principal Accounting Officer)
20
<PAGE>
INDEX TO EXHIBITS
-------------------
Exhibit
Number Description
------ -----------
10.18 Agreement and Plan of Merger dated as of February 28,
1999 among Registrant, UGI Corporation and Vulcan
Acquisition Corp., incorporated by reference to
Exhibit 2 to UGI Corporation's Form S-4 Registration
Statement filed on March 26, 1999 (file no. 333-
75089).
10.19 First Amendment to Receivables Sale Agreements dated
as of January 26, 1999 among Portfolio Receivables,
LLC, Registrant, and Canadian Imperial Bank of
Commerce.
10.20 Amending Agreement made as of October 23, 1998 between
Unisource Canada, Inc., The Trust Company of Bank of
Montreal, Registrant, and Nesbitt Burns, Inc.
10.21 First Amendment dated as of February 3, 1999 to the
Amended and Restated Credit Agreement dated as of
September 25, 1998 among Registrant, Unisource Capital
Corporation, Unisource Canada, Inc., The Chase
Manhatten Bank, The Toronto-Dominion Bank, and Toronto
Dominion (Texas) Inc.
10.22 Second Amendment dated as of March 15, 1999 to the
Amended and Restated Credit Agreement dated as of
September 25, 1998 among Registrant, Unisource Capital
Corporation, Unisource Canada, Inc., The Chase
Manhattan Bank, The Toronto-Dominion Bank, and
Toronto Dominion (Texas) Inc.
10.23 Amendment No. 1 to Rights Agreement dated as of
February 28, 1999 between Registrant and National City
Bank.
27 Financial Data Schedule for the Six-Month Period Ended
March 31, 1999
21
<PAGE>
EXHIBIT 10.19
FIRST AMENDMENT TO RECEIVABLES SALE AGREEMENTS
----------------------------------------------
FIRST AMENDMENT TO RECEIVABLES SALE AGREEMENTS dated as of January 26, 1999
(this "Amendment") among Portfolio Receivables, LLC (the "Seller"), Unisource
Worldwide, Inc. ("Unisource"), Asset Securitization Cooperative Corporation (the
"Primary Purchaser") and Canadian Imperial Bank of Commerce, as a purchaser (in
such capacity, the "Secondary Purchaser," and together with the Primary
Purchaser, the "Purchasers") and as servicing agent (in such capacity, the
"Servicing Agent").
WITNESSETH
----------
WHEREAS, the Seller, Unisource, the Primary Purchaser and the Servicing Agent
entered into that certain Receivables Sale Agreement dated as of October 1, 1997
(the "Primary Sale Agreement");
WHEREAS, the Seller, Unisource, the Secondary Purchaser and the Servicing
Agent entered into that certain Receivables Sale Agreement dated as of October
1, 1997 (the "Secondary Sale Agreement," and together with the Primary Sale
Agreement, the "Agreements");
WHEREAS, the parties hereto wish to amend the Agreements in the manner and
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Unless otherwise defined herein, the capitalized terms used herein shall
have the meanings assigned to such terms in the Agreements.
SECTION 2. AMENDMENTS TO THE PRIMARY SALE AGREEMENT.
(a) Clause (1) of the definition "Eligible Receivable" in Article I of the
Primary Sale Agreement is hereby amended by deleting the number "90" contained
therein and substituting in replacement thereof the number "60".
(b) Article I of the Primary Sale Agreement is hereby amended by deleting
the definition "Investment Grade Rating" in its entirety.
(c) Article II of the Primary Sale Agreement is hereby amended by adding
the following sentence at the end thereof:
The offering facility created by this Agreement shall terminate on
April 30, 1999, unless earlier terminated by any party to this
Agreement upon notice to the other parties to this Agreement.
<PAGE>
(d) Section 8.2.1(a)(i) of the Primary Sale Agreement is hereby amended to
read in its entirety as follows:
(i) the Originator's CORPORATE CREDIT rating from Standard & Poor's
================
falls below BB-;
(e) Section 9.1(k) of the Primary Sale Agreement is hereby amended in its
entirety to read as follows:
(k) The balance sheets of the Originator and its subsidiaries as
at September 30, 1998, and the related statements of income and cash
flows of the Originator and its subsidiaries for the twelve months
then ended, copies of which have been furnished to the Servicing
Agent, fairly present the financial condition of the Originator and
its subsidiaries as at such date and the results of the operations of
the Originator and its subsidiaries for the period ended on such date,
all in accordance with GAAP consistently applied, and since September
30, 1998, there has been no material adverse change in such condition
or operations.
SECTION 3. AMENDMENTS TO THE SECONDARY SALE AGREEMENT.
(a) Clause (1) of the definition "Eligible Receivable" in Article I of the
Secondary Sale Agreement is hereby amended by deleting the number "90" contained
therein and substituting in replacement thereof the number "60".
(b) Article I of the Secondary Sale Agreement is hereby amended by deleting
the definition "Investment Grade Rating" in its entirety.
(c) Section 2.1(c) of the Secondary Sale Agreement is hereby amended to
read in its entirety as follows:
(c) The Expiration Date shall be April 30, 1999.
(d) Section 8.2.1(a)(i) of the Secondary Sale Agreement is hereby amended
to read in its entirety as follows:
(ii) the Originator's CORPORATE CREDIT rating from Standard & Poor's
================
falls below BB-;
(e) Section 9.1(k) of the Secondary Sale Agreement is hereby amended in its
entirety to read as follows:
(k) The balance sheets of the Originator and its subsidiaries as
at September 30, 1998, and the related statements of income and cash
flows of the Originator and its subsidiaries for the twelve months
then ended, copies of which have been furnished to the Servicing
Agent, fairly present the financial condition of the Originator and
its subsidiaries as at such date and the results of the operations of
the Originator and its subsidiaries for the period ended on such date,
2
<PAGE>
all in accordance with GAAP consistently applied, and since September
30, 1998, there has been no material adverse change in such condition
or operations.
SECTION 4. EFFECTIVE DATE.
This Amendment and the amendments to the Agreements shall be effective on
the first date on which each of the parties hereto shall have executed and
delivered one or more counterparts of this Amendment to the Servicing Agent.
SECTION 5. EXPENSES.
The Seller agrees to pay on demand all costs and expenses incurred in
connection the preparation, execution, delivery and administration of this
Amendment, including, without limitation, the reasonable fees and disbursements
of counsel to the Purchasers and the Servicing Agent.
SECTION 6. EXECUTION IN COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original, and all of
which counterparts, when taken together, shall constitute but one and the same
agreement.
SECTION 7. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SECTION 8. Severability of Provisions.
Any provision of this Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 9. CAPTIONS.
The captions in this Amendment are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
SECTION 10. AGREEMENTS TO REMAIN IN FULL FORCE AND EFFECT.
This Amendment shall be deemed to be an amendment to the Agreements. All
references to the Agreements in any other agreement or document shall on and
after the Effective Date be deemed to refer to the Agreements as amended hereby.
3
<PAGE>
SECTION 11. NO PROCEEDINGS.
Each of the parties hereto hereby agrees that it will not institute
against, or join any other Person in instituting against, the Primary Purchaser
any bankruptcy, reorganization, insolvency or similar proceeding until the date
which is one year and one day since the last day on which any commercial paper
notes or medium-term notes issued by the Primary Purchaser shall have matured.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed by their duly authorized officers as of the date first above written.
PORTFOLIO RECEIVABLES, LLC
By: ________________________________
Authorized Signatory
UNISOURCE WORLDWIDE, INC.
By: ________________________________
Authorized Signatory
ASSET SECURITIZATION COOPERATIVE CORPORATION
By: ________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, as Secondary
Purchaser and as Servicing Agent
By: ________________________________
Authorized Signatory
5
<PAGE>
Exhibit 10.20
AMENDING AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 23rd day of October, 1998.
BETWEEN:
UNISOURCE CANADA, INC.,
a corporation continued under the laws of
Canada, and formerly known as PCA
Paper Acquisition Inc.,
(hereinafter referred to as the "Seller"),
- and -
THE TRUST COMPANY OF BANK OF MONTREAL,
a trust company incorporated under the
laws of Canada and licensed to carry on
business as a trustee in each of the Provinces
of Canada, in its capacity as trustee of
Canadian Master Trust, a trust established
pursuant to the laws of the Province of
Ontario (the "Trust"), without personal liability,
(in such capacity, hereinafter referred to as the "Trustee"),
- and -
UNISOURCE WORLDWIDE, INC.,
a corporation incorporated under the laws
of the State of Delaware, one of the United
States of America,
(hereinafter referred to as the "Guarantor"),
- and -
<PAGE>
-2-
NESBITT BURNS INC.,
a corporation incorporated under the
laws of Canada,
(hereinafter referred to as the "Securitization Agent").
WHEREAS the Seller, Alco Standard Corporation ("ALCO"), The Bankers' Trust
Company ("Bankers' Trust"), in its capacity as trustee of STARS Trust, and Bank
of Montreal, solely in the capacity as servicing agent, entered into a
receivables purchase agreement and guarantee made on the 4th day of September,
1992, as amended by (a) a side letter dated September 4, 1992 between the
Seller, ALCO and Bank of Montreal, (b) an amending agreement between each of the
original parties to the receivables purchase agreement made as of September 30,
1994, (c) an amending agreement between each of the original parties to the
receivables purchase agreement made as of March 31, 1995, (d) an amendment and
assignment agreement made as of May 30, 1996 between the Seller, Bankers' Trust,
the Trust, ALCO, Bank of Montreal and the Securitization Agent to provide for,
among other things, the assignment by Bankers' Trust to the Trust of all of
Bankers' Trust's rights and interests in, to and under the receivables purchase
agreement and related documents, and the assignment by Bank of Montreal to the
Securitization Agent of all of Bank of Montreal's rights and interests in, to
and under the receivables purchase agreement and related documents, (e) an
amending agreement between the Seller, the Trust, the Guarantor, the
Securitization Agent and IKON made as of June 27, 1997, (f) an amending
agreement between the Seller, the Trust, the Guarantor and the Securitization
Agent made as of June 15, 1998 and as extended by (g) a letter agreement dated
December 13, 1993 between each of the original parties to the receivables
purchase agreement and (h) a second letter agreement dated November 2, 1995
(such receivables purchase agreement, together with such amendments and
extensions, being hereinafter referred to as the "Receivables Purchase
Agreement");
AND WHEREAS the Trust has purchased, and proposes to continue to purchase,
short term trade and finance receivables from the Seller and to fund such
purchases by the issue and sale of notes which may be issued either at a
discount or be interest bearing ("Notes"), pursuant to the terms of the
Receivables Purchase Agreement;
AND WHEREAS the parties to the Receivables Purchase Agreement have agreed
that paragraph 7.1(p) of the Receivables Purchase Agreement shall be amended in
the manner contemplated below to amend the term "Event of Termination" (i) to
permit the Guarantor to maintain a lower Consolidated Net Worth; (ii) to extend
the period during which the Guarantor must maintain a certain Consolidated Net
Worth until September 30, 1999; (iii) to amend the permitted Leverage Ratio for
any particular fiscal quarter; and (iv) to define the permitted Interest
Coverage Ratio for any particular fiscal quarter.
<PAGE>
-3-
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the sum of
two dollars ($2.00) in lawful money of Canada now paid by each party to each
other party and the premises, covenants and agreements of the parties herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party, the parties hereby
covenant and agree as follows:
1. Amendments to the Receivables Purchase Agreement
-- ------------------------------------------------
1.1 Section 1.1 is amended by the addition, in the proper alphabetical
order, of the following definitions:
' "Consolidated Cash Interest Expense" means, for purposes of section
7.1(p), for any period, Consolidated Interest Expense for such period less
the sum of (a) pay-in-kind or accreted Consolidated Interest Expense not
involving any payment of cash, (b) to the extent included in Consolidated
Interest Expense, the amortization of fees paid by the Guarantor or any
Subsidiary in connection with the incurrence of any Indebtedness and (c)
the amortization of debt discounts, if any, or fees in respect of any
interest rate cap agreement or other agreement or arrangement entered into
by the Guarantor or any Subsidiary designed to protect the Guarantor or
such Subsidiary against fluctuations in interest rates.';
' "Consolidated EBITDA" means, for purposes of section 7.1(p), for any
period, Consolidated Net Income plus, to the extent deducted in computing
such Consolidated Net Income, without duplication, the sum of (a) income
tax expense, (b) Consolidated Interest Expense, (c) depreciation and
amortization expense, (d) restructuring implementation costs and expenses
incurred in the fiscal years ending September 30, 1999 and September 30,
2000 to the extent the aggregate amount of such costs and expenses does not
exceed US$49,000,000, (e) any extraordinary or non-recurring losses and (f)
other non-cash items reducing Consolidated Net Income, minus, to the extent
added in computing such Consolidated Net Income, without duplication, the
sum of (i) interest income, (ii) any extraordinary or non-recurring gains
and (iii) other non-cash items increasing Consolidated Net Income,
determined on a consolidated basis in accordance with US GAAP.';
' "Consolidated Interest Expense" means, for purposes of section 7.1(p),
with respect to the Guarantor and Subsidiaries on a consolidated basis for
any period, interest and fees accrued, accreted or paid by the Guarantor
and Subsidiaries during such period in respect of the Indebtedness of the
Guarantor and Subsidiaries, determined on a consolidated basis in
accordance with US GAAP, including (a) the amortization of debt discounts
to the extent included in interest expense in accordance with US GAAP, (b)
the amortization of all fees (including fees with respect to interest rate
cap agreements or other agreements or arrangements entered into by the
Guarantor or any Subsidiary designed to protect the
<PAGE>
-4-
Guarantor or such Subsidiary against fluctuations in interest rates)
payable in connection with the incurrence of Indebtedness to the extent
included in interest expense in accordance with US GAAP and (c) the portion
of any rents payable under capital leases allocable to interest expense in
accordance with US GAAP.'; and
' "Interest Coverage Ratio" means, for purposes of section 7.1(p), for any
fiscal quarter, the ratio of Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on the last day of such fiscal quarter
to Consolidated Cash Interest Expense for the period of four consecutive
fiscal quarters ending on the last day of such fiscal quarter.';
1.2 Section 7.1(p) is deleted in its entirety and the following is
substituted therefor: 1.1
"(p) (i) the Consolidated Net Worth of the Guarantor at any date falls
below the sum of (A) $575,000,000 plus (B) 50% of the
Consolidated Net Income, if positive, of the Guarantor for
each fiscal year ending on or after September 30, 1999, plus
(C) if such date is not the last day of a fiscal year, 50%
of the Consolidated Net Income, if positive, of the
Guarantor for the period consisting of any fiscal quarters
of the then current fiscal year (commencing with the fiscal
year ending on September 30, 1999) that have ended on or
before such date; or
(ii) the Leverage Ratio of the Guarantor, at any time during any
"Test Period" set forth below, equals or exceeds the ratio
set forth opposite such Test Period:
Test Period Ratio
----------- -----
Quarter ending September 30, 1998 .65 to 1
Quarter ending December 31, 1998 .65 to 1
Quarter ending March 31, 1999 .65 to 1
Quarter ending June 30, 1999 .65 to 1
Quarter ending September 30, 1999 .60 to 1
Quarter ending December 31, 1999 .60 to 1
Quarter ending March 31, 2000 .60 to 1
Quarter ending June 30, 2000 .60 to 1
Quarter ending September 30, 2000 .55 to 1
Each quarter ending after September 30, 2000 .55 to 1; or
(iii)the Interest Coverage Ratio for any fiscal quarter ending during
any Test Period set forth below falls below the ratio set
forth opposite such Test Period:
<PAGE>
-5-
Test Period Ratio
----------- -----
Quarter ending September 30, 1998 2.25 to 1
Quarter ending December 31, 1998 2.25 to 1
Quarter ending March 31, 1999 2.25 to 1
Quarter ending June 30, 1999 2.50 to 1
Quarter ending September 30, 1999 2.50 to 1
Quarter ending December 31, 1999 2.75 to 1
Quarter ending March 31, 2000 2.75 to 1
Quarter ending June 30, 2000 3.00 to 1
Quarter ending September 30, 2000 3.00 to 1
Quarter ending December 31, 2000 3.25 to 1
Quarter ending March 31, 2001 3.25 to 1
Quarter ending June 30, 2001 3.50 to 1
Each quarter ending after June 30, 2001 3.50 to 1"
2. MISCELLANEOUS
-------------
1.3 Except for the specific changes and amendments to the Receivables
Purchase Agreement contained herein, the Receivables Purchase Agreement and all
related documents are in all other respects ratified and confirmed and the
Receivables Purchase Agreement as amended hereby shall be read, taken and
construed as one and the same instrument.
1.4 All capitalized terms not herein defined shall have the respective
meanings ascribed to them in the Receivables Purchase Agreement.
1.5 This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which when taken together shall constitute one
and the same instrument.
1.6 Each party shall do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged and delivered, such further acts, deeds, mortgages,
transfers and assurances as are reasonably required for the purpose of
accomplishing and effecting the intention of this amending agreement.
IN WITNESS WHEREOF this amending agreement has been entered into by the
parties as of the date hereof.
UNISOURCE CANADA, INC.
by _________________________________
Name:
<PAGE>
-6-
Title:
THE TRUST COMPANY OF BANK OF MONTREAL IN ITS
CAPACITY AS TRUSTEE OF CANADIAN MASTER
TRUST, WITHOUT PERSONAL LIABILITY, BY
NESBITT BURNS INC., AS SECURITIZATION AGENT
OF CANADIAN MASTER TRUST
by _________________________________
Name:
Title:
______________________________________
Name: Jerry Marriott
Title: Vice-President, Securitization and
Structured Finance
UNISOURCE WORLDWIDE, INC.
by _________________________________
Name:
Title:
NESBITT BURNS INC., IN ITS CAPACITY AS
SECURITIZATION AGENT
by __________________________________
Name:
Title:
______________________________________
Name: Jerry Marriott
Title: Vice-President, Securitization and
Structured Finance
<PAGE>
Exhibit 10.21
FIRST AMENDMENT dated as of February 3, 1999 (this
"Amendment") to the Amended and Restated Credit Agreement dated
---------
as of September 25, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among
----------------
UNISOURCE WORLDWIDE, INC., a Delaware corporation, UNISOURCE
CAPITAL CORPORATION, a Delaware corporation, UNISOURCE CANADA,
INC., a Canadian corporation, the LENDERS party thereto, THE
CHASE MANHATTAN BANK, as Administrative Agent and U.S. Collateral
Agent, THE TORONTO-DOMINION BANK, as Canadian Agent and Canadian
Collateral Agent, and TORONTO DOMINION (TEXAS) INC., as
Documentation Agent.
The Company has requested that certain provisions of the Credit
Agreement be amended as provided for in this Amendment and the Lenders are
willing to so amend the Credit Agreement as provided for in this Amendment.
Accordingly, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein shall
--------------
have the meanings given to them in the Credit Agreement.
2. Amendment.
----------
(a) Section 1.01 of the Credit Agreement is hereby amended by:
(i) inserting at the end of the definition of "Permitted Notes"
the sentence "The Senior Notes are hereby deemed to constitute
Permitted Notes."; and
(ii) inserting the following definitions in the appropriate
order:
"'Senior Notes' means senior unsecured notes of the Company
issued under and with the terms set forth in the Senior Note
Indenture"
"'Senior Note Indenture' means an indenture substantially as
described in, and with terms and provisions concerning principal
amount, payments, amortization and maturity materially no less
favorable to the Lenders than the terms and provisions set forth
in, the description of notes dated January 21, 1999 without
giving effect to any amendments, modifications or waivers thereto
not approved in writing by the Required Lenders."
(b) Paragraph (d) of Section 2.08 of the Credit Agreement is hereby
amended by inserting following the amount "300,000,000" therein the
following parenthetical "(including any reduction under paragraph (b) of
this Section)".
<PAGE>
(c) Section 5.11 of the Credit Agreement is hereby amended by deleting
the amount "$300,000, 000" therein and substituting therefor
"$225,000,000".
(d) Section 6.07 of the Credit Agreement is hereby amended by:
(i) deleting the word "and" at the end of clause (iv) of the
proviso thereto and substituting therefor a comma; and
(ii) adding immediately before the period at the end thereof the
following words "and (vi) the foregoing shall not apply to
restrictions and conditions contained in the Senior Note Indenture
(provided such restrictions or conditions are identical to those
contained in the description of notes dated January 21, 1999 or
otherwise do not limit or restrict (A) Liens securing the
Obligations, (B) Guarantees of the Obligations and (C) the ability of
any Subsidiary to pay dividends or other distributions to, or to make
or repay loans or advances to, the Company or any "Wholly Owned
Restricted Subsidiary" (as such term is defined in the Senior Note
Indenture))".
3. Incorporation of Covenants and Events of Default. The Company agrees
-------------------------------------------------
to negotiate with the Administrative Agent and, not later than the date of
issuance of the Senior Notes, to enter into, and the Required Lenders hereby
authorize the Administrative Agent to enter into on their behalf, an amendment
to the Credit Agreement incorporating into the Credit Agreement the covenants
and events of default set forth in the Senior Note Indenture, mutatis mutandis.
4. No Other Amendments or Waivers; Confirmation. Except as expressly
---------------------------------------------
amended hereby, the provisions of the Credit Agreement are and shall remain in
full force and effect.
5. Representations and Warranties. The Company hereby represents and
-------------------------------
warrants to the Administrative Agent and the Lenders as of the date hereof:
(a) After giving effect to the amendments provided for herein, no
Default or Event of Default has occurred and is continuing.
(b) All representations and warranties of the Company contained in the
Credit Agreement (other than representations or warranties expressly made
only on and as of the Closing Date) are true and correct in all material
respects on and as of the date hereof with the same force and effect as if
made on and as of the date hereof.
(c) This Amendment has been duly authorized, executed and delivered
by the Company, and each of this Amendment and the Credit Agreement as
amended by this Amendment constitutes a legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
6. Effectiveness. This Amendment shall become effective only upon (a) the
--------------
receipt by the Administrative Agent of (i) counterparts hereof, duly executed
and delivered by the Company and the Required Lenders and (ii) an opinion of
counsel to the Company, in form reasonably satisfactory to the Administrative
Agent and covering such matters relating to this Amendment as the Administrative
Agent shall reasonably request, (b) the reduction of the Commitments by an
amount no less than $75,000,000 (it being understood that the
<PAGE>
3
Commitments shall be further reduced pursuant to Section 2.08(d) of the Credit
Agreement by the full amount of the gross proceeds of the issuance of the Senior
Notes up to an aggregate amount of $225,000,000), and (c) the effectiveness of
the amendment referred to in Section 3 above.
7. Expenses. The Company agrees to reimburse the Administrative Agent for
---------
its out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent.
8. GOVERNING LAW; COUNTERPARTS. (a) THIS AMENDMENT AND THE RIGHTS AND
----------------------------
OBLIGATIONS OF THE PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
UNISOURCE WORLDWIDE, INC.
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
--------------------------------
Name:
Title:
THE TORONTO DOMINION BANK,
By:
--------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION,
<PAGE>
4
By: /s/ John W. Pocalyko
------------------------------
Name: John W. Pocalyko
Title: Managing Director
MELLON BANK, N.A.,
By: /s/ Donald G. Cassidy, Jr.
--------------------------------
Name: Donald G. Cassidy, Jr.
Title: First Vice President
NATIONSBANK, N.A.,
By /s/ John W. Pocalyko
--------------------------------
Name: John W. Pocalyko
Title: Managing Director
DEN DANSKA BANK, AKTIESELSKAB, CAYMAN ISLANDS
BRANCH,
By:
--------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY,
By: /s/ Nicole Kidder
--------------------------------
Name: Nicole Kidder
Title: Second Vice President
PNC BANK, N.A. ,
By: /s/ Charmienne Ganeo
--------------------------------
Name: Charmienne Ganeo
Title: Corporate Banking Officer
<PAGE>
5
THE ROYAL BANK OF CANADA,
By: /s/ Sheryl L. Greenberg
--------------------------------
Name: Sheryl L. Greenberg
Title: Senior Manager
ISTITUTO BANCARIO SAN PAOLO DI TORINO, SPA,
By: /s/ Luca Sacchi
--------------------------------
Name: Luca Sacchi
Title: Vice President
THE SANWA BANK, LIMITED,
By:
--------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
By: /s/ J. Alan Edwards
--------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
SUNTRUST BANK, ATLANTA
By: /s/ W. David Wisdom
--------------------------------
Name: W. David Wisdom
Title: Group Vice President
By: /s/ Melissa W. Swint
--------------------------------
Name: Melissa W. Swint
Title: Operations Officer
UBS, AG, NEW YORK BRANCH
<PAGE>
6
By: /s/ Leo L. Baltz
--------------------------------
Name: Leo L. Baltz
Title: Director
By: /s/ Eric C. Hanson
--------------------------------
Name: Eric C. Hanson
Title: Associate Director
WELLS FARGO BANK, N.A.,
By: /s/ Greg Richardson
--------------------------------
Name: Greg Richardson
Title: Vice President
THE BANK OF NEW YORK,
By: /s/ Walter C. Parelli
--------------------------------
Name: Walter C. Parelli
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
By: /s/ Mark O'Connor
--------------------------------
Name: Mark O'Connor
Title: Vice President
CIBC INC.,
By: /s/ Gerald Girardi
--------------------------------
Name: Gerald Girardi
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
FLEET NATIONAL BANK,
<PAGE>
7
By: /s/ Jeff Lynch
--------------------------------
Name: Jeff Lynch
Title: Senior Vice President
FUJI BANK, LIMITED, NEW YORK BRANCH,
By:
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
By: /s/ Thomas C. Woodward
--------------------------------
Name: Thomas C. Woodward
Title: Senior Vice President
THE YASUDA TRUST AND
BANKING COMPANY LIMITED,
NEW YORK BRANCH,
By:
--------------------------------
Name:
Title:
BANK OF MONTREAL,
By:
--------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS,
By:
--------------------------------
Name:
Title:
BAYERISCHE LANDESBANK GIROZENTRALE,
<PAGE>
8
By: /s/ James H. Boyle
--------------------------------
Name: James H. Boyle
Title: Second Vice President
By: /s/ Alexander Kohnert
--------------------------------
Name: Alexander Kohnert
Title: First Vice President
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By: /s/ John V. Veltri
--------------------------------
Name: John V. Veltri
Title: S. Vice President
DUETSCHE BANK AG
NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Hans-Josef Thiele
--------------------------------
Name: Hans-Josef Thiele
Title: Director
By: /s/ Stephan A. Wiedemann
--------------------------------
Name: Stephan A. Wiedemann
Title: Director
TORONTO DOMINION (TEXAS), INC.,
as U.S. Lender,
By: /s/ Lynn Chasin
--------------------------------
Name: Lynn Chasi
Title: Vice President
<PAGE>
Exhibit 10.22
CONFORMED COPY
SECOND AMENDMENT dated as of March 15, 1999 (this "Amendment")
---------
to the Amended and Restated Credit Agreement dated as of
September 25, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among
----------------
UNISOURCE WORLDWIDE, INC., a Delaware corporation, UNISOURCE
CAPITAL CORPORATION, a Delaware corporation, UNISOURCE CANADA,
INC., a Canadian corporation, the LENDERS party thereto, THE
CHASE MANHATTAN BANK, as Administrative Agent and U.S. Collateral
Agent, THE TORONTO-DOMINION BANK, as Canadian Agent and Canadian
Collateral Agent, and TORONTO DOMINION (TEXAS) INC., as
Documentation Agent.
WHEREAS, the Company has entered into the Merger Agreement as set
forth below;
WHEREAS, the Company and the Required Lenders are party to the First
Amendment to the Credit Agreement dated as of February 3, 1999 (the "First
Amendment");
WHEREAS, as a result of the transactions contemplated by the Merger
Agreement, the conditions to effectiveness of the First Amendment have not and
will not be met and instead the Company has requested that certain provisions of
the Credit Agreement be amended as provided for in this Amendment; and
WHEREAS, the undersigned Lenders are willing, on the terms and subject
to the conditions set forth herein, to so amend the Credit Agreement as provided
for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein shall
--------------
have the meanings given to them in the Credit Agreement.
2. Amendment.
----------
(a) Section 1.01 of the Credit Agreement is hereby amended by
inserting the following definitions in the appropriate order:
"'Merger' means the merger of Vulcan Acquisition Corp. into the
Company as contemplated by the Merger Agreement."
"'Merger Agreement' means the merger agreement dated as of
February 28, 1999 by and among the Company, UGI Corporation and Vulcan
Acquisition Corp."
(b) Section 2.08 of the Credit Agreement is hereby amended by:
<PAGE>
2
(i) inserting following the amount "300,000,000" in paragraph
(d) thereof the following parenthetical "(less the amount of any
reductions under paragraph (b) of this Section)"; and
(ii) by inserting the following new paragraph (e) at the end
thereof:
"(e) On the date on which the Merger becomes effective, (i)
unless previously terminated, the Commitments shall terminate,
(ii) the Borrowers shall repay or prepay in accordance with
section 2.10, as the case may be, all outstanding Loans, (iii)
the Borrowers shall cash collateralize or otherwise secure all
outstanding Acceptances and Letters of Credit in a manner
reasonably satisfactory to each Lender and Issuing Bank affected
thereby and (iv) the Borrowers shall pay all other Obligations
owing under the Loan Documents whether or not due and payable on
such date."
(c) Section 5.11 of the Credit Agreement is hereby amended by:
(i) deleting the date "March 31, 1999" therein and substituting
therefor "the earlier of (i) September 30, 1999 and (ii) the date that
is ninety days after any date on which any party's obligation to enter
into the Merger pursuant to the Merger Agreement terminates for any
reason"; and
(ii) deleting the amount "$300,000, 000" therein and substituting
therefor "$225,000,000".
3. Amendment Fee. The Company agrees to pay to each Lender that executes
--------------
and delivers a copy of this Amendment to the Administrative Agent (or its
counsel) on or prior to March 15, 1999, an amendment fee in an amount equal to
0.15% of such Lender's Commitment (whether used or unused) as of the Amendment
Effective Date (and after giving effect to any reduction of Commitments on the
Amendment Effective Date); provided that the Company shall have no liability for
--------
any such amendment fee if this Amendment does not become effective. Such
amendment fee shall be payable (i) on the Amendment Effective Date, to each
Lender entitled to receive such fee as of the Amendment Effective Date and (ii)
in the case of any Lender that becomes entitled to such fee after the Amendment
Effective Date, within two Business Days after such Lender becomes entitled to
such fee.
4. No Other Amendments or Waivers; Confirmation. Except as expressly
---------------------------------------------
amended hereby, the provisions of the Credit Agreement are and shall remain in
full force and effect.
5. Representations and Warranties. The Company hereby represents and
-------------------------------
warrants to the Administrative Agent and the Lenders as of the date hereof:
(a) After giving effect to the amendments provided for herein, no
Default or Event of Default has occurred and is continuing.
(b) All representations and warranties of the Company contained in the
Credit Agreement (other than representations or warranties expressly made
only on and as of the Closing Date) are true and correct in all material
respects on and as of the date hereof with the same force and effect as if
made on and as of the date hereof.
<PAGE>
3
(c) This Amendment has been duly authorized, executed and delivered
by the Company, and each of this Amendment and the Credit Agreement as
amended by this Amendment constitutes a legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
6. Effectiveness. This Amendment shall become effective as of the date
--------------
(the "Amendment Effective Date") on which each of the following conditions is
met: (a) the receipt by the Administrative Agent of counterparts hereof, duly
executed and delivered by the Company and the Required Lenders, (b) the
reduction of the Commitments pursuant to Section 2.08(b) to an aggregate amount
no greater than $725,000,000 and (c) the receipt by the Administrative Agent,
for the account of each Lender entitled to receive an amendment fee on the
Amendment Effective Date pursuant to Section 3 above, of such amendment fee.
7. Expenses. The Company agrees to reimburse the Administrative Agent for
---------
its reasonable out-of-pocket expenses in connection with this Amendment,
including the reasonable fees, charges and disbursements of Cravath, Swaine &
Moore, counsel for the Administrative Agent.
8. GOVERNING LAW; COUNTERPARTS. (a) THIS AMENDMENT AND THE RIGHTS AND
----------------------------
OBLIGATIONS OF THE PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
UNISOURCE WORLDWIDE, INC.
By: /s/ Kathleen M. Burns
-----------------------
Name: Kathleen M. Burns
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK
<PAGE>
4
By: /s/ Jonathan E. Twichell
--------------------------
Name: Jonathan E. Twichell
Title: Vice President
THE TORONTO DOMINION BANK,
By: /s/ Michael A. Freeman
------------------------
Name: Michael A. Freeman
Title: Manager
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION,
By: /s/ John W. Pocalyko
----------------------
Name: John W. Pocalyko
Title: Managing Director
MELLON BANK, N.A.,
By: /s/ Donald G. Cassidy, Jr.
----------------------------
Name: Donald G. Cassidy, Jr.
Title: First Vice President
NATIONSBANK, N.A.,
By: /s/ John W. Pocalyko
----------------------
Name: John W. Pocalyko
Title: Managing Director
DEN DANSKE BANK, AKTIESELSKAB, CAYMAN
ISLANDS BRANCH,
By: /s/ John A. O'Neill
---------------------
Name: John A. O'Neill
Title: Vice President
By: /s/ Peter L. Hargraves
------------------------
Name: Peter L. Hargraves
Title: Vice President
THE NORTHERN TRUST COMPANY,
<PAGE>
5
By: /s/ David L. Love
-------------------
Name: David L. Love
Title: Second Vice President
PNC BANK, N.A. ,
By: /s/ Vicky Ziff
----------------
Name: Vicky Ziff
Title: Vice President
THE ROYAL BANK OF CANADA,
By: /s/ Don S. Bryson
-------------------
Name: Don S. Bryson
Title: Senior Manager
ISTITUTO BANCARIO SAN PAOLO DI TORINO
ISTITUTO MOBILIARE ITALIANO, SPA,
By: /s/ Carlo Pensico
-------------------
Name: Carlo Pensico
Title: First Vice President
By: /s/ Luca Sacchi
-----------------
Name: Luca Sacchi
Title: Vice President
THE SANWA BANK, LIMITED,
By: /s/ Joseph E. Leo
-------------------
Name: Joseph E. Leo
Title: Vice President and Area Manager
THE BANK OF NOVA SCOTIA,
By: /s/ J. Alan Edwards
---------------------
Name: J. Alan Edwards
Title: Authorized Signatory
SUNTRUST BANK, ATLANTA
<PAGE>
6
By: /s/ Freda Bethea
------------------
Name: Freda Bethea
Title: Operation Officer
By: /s/ W. David Wisdom
---------------------
Name: W. David Wisdom
Title: Vice President
UBS AG, NEW YORK BRANCH
By: /s/ Andrew N. Taylor
----------------------
Name: Andrew N. Taylor
Title: Associate Director
By: /s/ Paula Mueller
-------------------
Name: Paula Mueller
Title: Director
WELLS FARGO BANK, N.A.,
By: /s/ Greg Richardson
---------------------
Name: Greg Richardson
Title: Vice President
THE BANK OF NEW YORK,
By: /s/ Walter C. Parelli
-----------------------
Name: Walter C. Parelli
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI
TRUST COMPANY,
By: /s/ M. R. Marron
------------------
Name: M.R. Marron
Title: Vice President
CIBC INC.,
By: /s/ Gerald Girardi
--------------------
Name: Gerald Girardi
Title: Executive Director
<PAGE>
7
FLEET NATIONAL BANK,
By: /s/ Jeff Lynch
----------------
Name: Jeff Lynch
Title: Senior Vice President
FUJI BANK, LIMITED, NEW YORK BRANCH,
By: /s/ Raymond Ventura
---------------------
Name: Raymond Ventura
Title: Vice President & Manager
FIRST UNION NATIONAL BANK,
By: /s/ Thomas C. Woodward
------------------------
Name: Thomas C. Woodward
Title: Senior Vice President
THE YASUDA TRUST AND
BANKING COMPANY LIMITED,
By: /s/ Junichiro Kawamura
------------------------
Name: Junichiro Kawamura
Title: Vice President
BANK OF MONTREAL,
By: /s/ R.J. McClorey
-------------------
Name: R.J. McClorey
Title: Director
BANQUE NATIONALE DE PARIS,
By: /s/ Richard L. Sted
---------------------
Name: Richard L. Sted
Title: Senior Vice President
By: /s/ Thomas George
-------------------
Name: Thomas George
<PAGE>
8
Title: Vice President
Corporate Banking Division
BAYERISCHE LANDESBANK GIROZENTRALE,
By: /s/ Peter Obermann
--------------------
Name: Peter Obermann
Title: Senior Vice President
By: /s/ James H. Boyle
--------------------
Name: James H. Boyle
Title: Second Vice President
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By: /s/ John Dippo
----------------
Name: John Dippo
Title: Senior Vice President
DEUTSCHE BANK AG
NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Hans-Josef Thiele
-----------------------
Name: Hans-Josef Thiele
Title: Director
By: /s/ Stephan A. Wiedemann
--------------------------
Name: Stephan A. Wiedemann
Title: Director
TORONTO DOMINION (TEXAS), INC.,
as U.S. Lender,
By: /s/ Anne C. Favoriti
----------------------
Name: Anne C. Favoriti
Title: Vice President
<PAGE>
Exhibit 10.23
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of February 28, 1999 to the
Rights Agreement dated as of December 30, 1996 between UNISOURCE WORLDWIDE,
INC., a Delaware corporation (the "COMPANY"), and NATIONAL CITY BANK, as Rights
Agent (the "RIGHTS AGENT").
W I T N E S S E T H
WHEREAS, concurrently with the execution hereof, the Company has entered
into an Agreement and Plan of Merger among the Company, UGI Corporation, a
Pennsylvania corporation, and Vulcan Acquisition Corp., a Delaware corporation
(the "MERGER AGREEMENT"); and
WHEREAS, the Board of Directors of the Company has approved, authorized and
adopted the Merger Agreement and the transactions contemplated thereby and,
subject to certain conditions, is bound to recommend to the stockholders of the
Company the approval and adoption of the Merger Agreement; and
WHEREAS, the Board of Directors of the Company has determined that in
connection with the Merger Agreement and the transactions contemplated thereby,
it is desirable to amend the Rights Agreement dated as of December 30, 1996
between the Company and the Rights Agent (the "RIGHTS AGREEMENT") as set forth
herein; and
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company and
the Rights Agent desire to amend the Rights Agreement as set forth herein;
NOW, THEREFORE, the Rights Agreement is amended as follows:
SECTION 1. Proposed Merger. The following subsection (d) is hereby added
to Section 3 of the Rights Agreement in its appropriate position:
(d) Notwithstanding anything in this Agreement to the contrary, (i) no
Distribution Date, Stock Acquisition Date or Triggering Event shall be
deemed to have occurred, (ii) neither UGI Corporation nor any of its
Subsidiaries (collectively, the "Acquisition Group") shall be deemed to
have become an Acquiring Person and (iii) no holder of Rights shall be
entitled to any rights or benefits pursuant to Sections 7(a), 11(a), 13(a)
or any other provision of this Agreement, in each case by reason of (x) the
approval, execution, delivery and performance of the Agreement and Plan
<PAGE>
of Merger dated as of the date hereof among the Company, UGI Corporation, a
Pennsylvania corporation, and Vulcan Acquisition Corp., a Delaware
corporation (the "Merger Agreement"), by the parties thereto, (y) the
approval of the Merger Agreement by the stockholders of the parties thereto
or (z) the consummation of the transactions contemplated by the Merger
Agreement; provided that in the event that one or more members of the
Acquisition Group collectively become the Beneficial Owner of 20% or more
of the Common Shares then outstanding in any manner other than as set forth
in the Merger Agreement, the provisions of this sentence (other than this
proviso) shall terminate."
SECTION 2. Deletion of References to Continuing Directors. (a) Each
instance of the words "Continuing Directors" appearing in Sections 1(a),
11(a)(ii)(B), 11(a)(iii), 11(q), 13(e), 21 and Exhibit B of the Rights Agreement
is hereby replaced by "members of the Board of Directors of the Company".
(b) The definition of "Continuing Director" contained in Section 1(g) of
the Rights Agreement is hereby replaced by the words "intentionally omitted".
(c) Each instance of the word "such" following the appearance of the phrase
"(a "Qualifying Offer")" in Section 11(a)(ii)(B) is hereby replaced by the word
"the".
(d) Each proviso appearing in the first sentence of Section 23(a) of the
Rights Agreement is hereby deleted in its entirety.
(e) Subsection (ii) appearing in the the fourth sentence of Section 26 of
the Rights Agreement is hereby deleted in its entirety and the subsection
designation "(iii)" immediately following subsection (ii) is hereby changed to
"(ii)".
(f) Each instance of the parenthetical "(with, where specifically provided
for herein, the concurrence of the Continuing Directors)" in Section 28 of the
Rights Agreement is hereby deleted in its entirety.
(g) The words "or the Continuing Directors" appearing in the last sentence
of Section 28 of the Rights Agreement is hereby deleted.
SECTION 3. Effectiveness. This Amendment shall be deemed effective as of
the date first set forth above. Except as amended hereby, the Rights Agreement
shall remain in full force and effect and shall be otherwise unaffected hereby.
SECTION 4. Miscellaneous. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall
2
<PAGE>
be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.
This Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If any
term, provision, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid, illegal, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
UNISOURCE WORLDWIDE, INC.
By:
________________________
Name:
Title:
NATIONAL CITY BANK
By:
________________________
Name:
Title:
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF UNISOURCE WORLDWIDE, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1999
<CASH> 37,541,000
<SECURITIES> 0
<RECEIVABLES> 586,990,000
<ALLOWANCES> 25,623,000
<INVENTORY> 352,416,000
<CURRENT-ASSETS> 1,034,588,000
<PP&E> 429,700,000
<DEPRECIATION> 214,835,000
<TOTAL-ASSETS> 1,856,628,000
<CURRENT-LIABILITIES> 623,038,000
<BONDS> 435,684,000
0
0
<COMMON> 70,000
<OTHER-SE> 703,088,000
<TOTAL-LIABILITY-AND-EQUITY> 1,856,628,000
<SALES> 3,287,686,000
<TOTAL-REVENUES> 3,287,686,000
<CGS> 2,683,250,000
<TOTAL-COSTS> 2,683,250,000
<OTHER-EXPENSES> 561,856,000
<LOSS-PROVISION> 5,752,000
<INTEREST-EXPENSE> 22,052,000
<INCOME-PRETAX> 14,776,000
<INCOME-TAX> 6,354,000
<INCOME-CONTINUING> 8,422,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,422,000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
