<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended November 2, 1996
Commission file number 1-683
AM International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 34-0054940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
431 Lakeview Court Mt. Prospect, IL 60056
(Address of principal executive offices) (Zip Code)
(847) 375-1700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
X Yes No
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
X Yes No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
7,008,421 shares of Registrant's
Common Stock, $.01 par value, were outstanding as of December 16, 1996.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
AM International, Inc.
Condensed Consolidated Statement of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended
November 2, October 28,
1996 1995
<S> <C> <C>
Revenues $27,699 $42,994
Cost of sales 20,453 32,105
Gross margin 7,246 10,889
Operating expenses
Selling, general and
administrative 8,385 13,687
Unusual items, net (2,095) 0
Total operating expenses 6,290 13,687
Operating income (loss) 956 (2,798)
Non-operating income (expense):
Interest income 296 53
Interest expense (853) (831)
Other, net 120 116
Income (loss) before income taxes,
discontinued operations 519 (3,460)
Income tax expense (benefit) 0 0
Net income (loss) before
discontinued operations 519 (3,460)
Net income (loss) of discontinued
operations, net of tax 0 (310)
Net income (loss) $ $
519 (3,770)
Per share of common stock: (b)
Income (loss) from continuing
operations $0.07 $(0.49)
Income (loss) from discontinued
operations - (0.04)
Net income (loss) $0.07 $(0.54)
Weighted average shares of common
stock and common stock equivalents
outstanding (in thousands) 7,009 7,009
</TABLE>
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<TABLE>
AM International, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
November 2, July 31,
1996 1996
<S> Assets <C> <C>
Current assets:
Cash and cash equivalents $35,123 $2,560
Accounts receivable, net 15,973 19,774
Inventories, net 14,652 11,602
Prepaid expenses and other assets 925 1,069
Net assets held for sale 0 7,698
Net assets of discontinued operations 0 42,940
Total current assets 66,673 85,643
Property, plant and equipment, net 10,619 10,867
Other assets, net 1,008 1,452
Total assets $78,300 $97,962
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $8,587 $14,381
Accounts payable 7,071 15,435
Service contract deferred income 13,179 12,924
Payroll related expenses 10,576 13,227
Other current liabilities 16,210 17,956
Total current liabilities 55,623 73,923
Long-term debt 7,257 8,527
Other long-term liabilities 12,823 13,216
Total liabilities 75,703 95,666
Commitments and contingencies (Note 4)
Shareholders' equity:
Common stock, $.01 par value; 40
million shares authorized;
7,010,000 issued as of November 2, 70 70
1996 and July 31, 1996
Capital in excess of par value 36,248 36,248
Less: treasury stock, at cost, 1,579
shares as of November 2,1996 and
July 31, 1996 (6) (6)
Accumulated earnings (deficit) (33,715) (34,234)
Cumulative translation adjustment 0 218
Total shareholders' equity 2,597 2,296
Total liabilities and shareholders'
equity $78,300 $97,962
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
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<TABLE>
AM International, Inc.
Condensed Consolidated Statement of Cashflows
(Dollars in thousands)
Three Months Ended
November 2, October 28,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $519 $(3,770)
Adjustments to reconcile net
income to cash flow from operating
activities:
Depreciation of
property, plant and 511 331
equipment
Amortization and
writedown of other assets - 110
Discontinued
operations - 303
Change in
assets and
liabilities:
Accounts
receivable, net 3,801 5,494
Inventory,net (3,050) (685)
Prepaid expenses and
other assets 588 (446)
Accounts payable and (12,506) (7,384)
accruals
Other, net (611) 654
Cash flow from
operating activities (10,748) (5,393)
Cash Flows from Investing Activities:
Capital
expenditures (263) (2,287)
Net proceeds from divested operations 50,638 -
Discontinued operations - (561)
Cash flow from 50,375
investing activities (2,848)
Cash Flows from Financing Activities:
Net borrowings (payments) under short-
term borrowing agreements (5,794) 8,877
Principal borrowings
(payments) on long-term (1,270) (881)
debt
Discontinued
operations - (7,676)
Cash flow from
financing activities (7,064) 320
Increase (decrease) in
cash and cash equivalents 32,563 (7,921)
Cash and cash equivalents at 2,560 12,563
beginning of period
Cash and cash equivalents at end
of period 35,123 4,642
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
AM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 1 - Basis of Presentation
The Condensed Consolidated Financial Statements included here have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion
of management, the Condensed Consolidated Financial Statements reflect
all adjustments, which are of a recurring nature, necessary for fair
presentation. Certain prior year amounts have been reclassified to
conform with the current year presentation. The accompanying Condensed
Consolidated Financial Statements and the related notes should be read
in conjunction with the Consolidated Financial Statements and the
related notes thereto included in the Company's Annual Report on Form 10
- - K for the year ended July 31, 1996 as amended.
Note 2 - Discontinued Operations
The results of operations, net of taxes, and the net assets of Sheridan
Systems and the divested AM Multigraphics - International operations are
presented in the consolidated financial statements as discontinued
operations.
The results of the discontinued operations are not necessarily
indicative of the results of operations which may have been obtained had
the continuing and discontinued operations been operating
independently.
Note 3 - Borrowing Arrangements
The Company's short and long-term borrowings are comprised of the
following:
November 2, 1996 July 31, 1996
<S> <C> <C>
Revolving Credit Facility - $5,430
General Unsecured Claims &
Priority Tax Claims 12,941 13,795
Capital Leases 2,903 3,683
Total $15,844 $22,908
Classified in the Consolidated Balance Sheet
as follows:
Short-term $8,587 $14,381
Long-term 7,257 8,527
Total $15,844 $22,908
</TABLE>
<PAGE>
Through October 12, 1996, the date the facility expired, the Company
maintained a $25,000 three year secured domestic Revolving Credit
Facility (subject to borrowing base limitations) with BT Commercial
Corporation and LaSalle National Bank. The Revolving Credit Facility
included a $10,000 sub-facility for the issuance of letters of credit.
As security for utilization of the Revolving Credit Facility, the
Company granted a security interest and general lien upon its domestic
assets. As of July 31, 1996 the Company had borrowings of $5,430 under
the Revolving Credit Facility and was utilizing $3,347 of the facility
to secure outstanding letters of credit.
In August, 1996 the Company completed the sale of substantially all of
the assets and liabilities of the Sheridan Systems division for gross
proceeds of $50,100. The proceeds of the sale were used in part to pay
off all outstanding borrowings on the Revolving Credit Facility and to
cash collateralize outstanding letters of credit. At November 2, 1996,
the Company had restricted cash on deposit of $3,703 to cover
outstanding letters of credit. The Company is presently operating its
business with existing cash reserves which are sufficient to finance
current operations.
On October 13, 1993 the Company concluded a reorganization when the
United States Bankruptcy Court for the District of Delaware confirmed
the Company's Plan of Reorganization (Plan). The Plan provides that
holders of allowed general unsecured claims receive cash payments toward
satisfaction of the full amount of their claims in equal quarterly
payments payable on the last business day of each calendar quarter
ending after October 13, 1993 over a five-year period, together with
interest at 5% per annum. Holders of priority tax claims are paid 10%
of the allowed claim together with accrued and unpaid interest at 8% per
annum on the then outstanding amount on each anniversary of October 13,
1993 which occurs prior to the sixth anniversary of the date of
assessment and the balances of such claims along with accrued and unpaid
interest on the sixth anniversary. For financial reporting purposes
interest on general unsecured claims has been imputed at 9% per annum.
At November 2, 1996 the Company had $834 of restricted cash which
pertains to the settlement of disputed claims in accordance with the
Plan.
<PAGE>
Note 4- Capital Structure
The Company's charter authorizes 50 million shares of stock, of which 40
million shares are reserved for issuance as Common Stock and 10 million
shares are reserved for issuance as Preferred Stock. The Board of
Directors has authorized the issuance of 7,010,000 of such shares of
$.01 par value Common Stock. The Company's 1994 Long Term Incentive Plan
provides for the issuance of 1,400,000 shares of new $0.01 par value
Common Stock. Options to purchase the Common Stock are awarded at a
price not less than 100% of the market price on the date of the grant,
become excersiable at various dates generally from one to four years
after the date of grant, and expire ten years after the date of grant.
At November 2, 1996, options to purchase 334,200 shares were outstanding
at option prices ranging from $4.440 to $12.125. The Company has not
issued any Preferred Stock. The Common Stock and all other equity
securities issued under the new charter are voting securities (although
the voting rights of any preferred stock issued would differ from those
of the Common Stock) and will not have any preemptive rights to
subscribe for additional shares. The Common Stock is not subject to
conversion or redemption and when issued is fully paid and non-
assessable. The Company's warrants that were issued in accordance with
the Plan expired unexercised.
Note 5 - Commitments and Contingencies
The Company received creditor claims during its bankruptcy proceedings
which the Company believes are duplicative, erroneous or exaggerated and
to which the Company believes it has valid defenses. The Company has
filed objections to these disputed claims in the United States
Bankruptcy Court in Delaware. As of November 2, 1996 disputed claims
amounted to $20,900. During the first quarter the Company expunged or
settled approximately $10,400 in disputed claims for amounts within
previously established reserves. The disputed claims are primarily
comprised of environmental and product liability claims. The Company
has been notified of various environmental matters in connection with
certain current or former Company locations in Illinois, Ohio, Indiana,
Pennsylvania, and Rhode Island. The Company is also involved in various
other administrative and legal proceedings incidental to its business,
including product liability and general liability lawsuits against which
the Company is partially insured. The disputed claims are in many cases
in excess of recorded reserves. At the present time, it is management's
opinion, based on information available to the Company and management's
experience in such matters, that the resolution of these legal
proceedings is not expected to have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
<PAGE>
<TABLE>
Note 6 - Components of Certain Balance Sheet Accounts
The components of certain balance sheet accounts are as follows:
November 2, 1996 July 31, 1996
<S> <C> <C>
Accounts receivable:
Accounts receivable $16,583 $20,596
Allowance for doubtful accounts (610) (822)
Total accounts receivable, net $15,973 $19,774
Inventories:
Raw materials $140 $1,407
Work-in-process 198 2,959
Finished goods 14,314 7,236
Total inventories, net $14,652 $11,602
</TABLE>
Inventories and cost of goods sold reported in the interim financial
statements are based, in part, on accounting estimates relating to
inventory obsolescence and differences resulting from periodic and
physical inventories.
Accumulated depreciation deducted from property, plant and equipment
was $6,144 at November 2, 1996 and $5,399 at July 31, 1996.
Note 7 - Unusual Items, Net
On September 20, 1996 the Company completed the sale of its 2,148,000
shares of AM Japan Co., Ltd. (AM Japan) and the Company received
proceeds of approximately $10,600, net of certain costs. At July 31,
1996, the Company's investment in AM Japan amounted to $7,698 and was
reflected as Net assets held for sale in the Consolidated Balance
Sheet. This amount consisted primarily of receivables, inventory,
property and equipment, intangible assets, net of accounts payable and
accrued liabilities. A gain of approximately $2,600 was recorded by the
Company in the quarter ended November 2, 1996 after providing for
expenses related to the sale.
On October 17, 1996, the Company's Canadian subsidiary filed for a
voluntary assignment in bankruptcy. Reserves for the cost to exit
Canada, which had been established in the fiscal year ended July 31,
1996, were adequate and no additional costs were recognized in the
quarter ended November 2, 1996.
<PAGE>
On December 2, 1996, the Company and Xeikon, N. V. entered into an
agreement under which the parties agreed not to renew the present
distribution agreement. The distribution agreement provided for the
Company to sell and service digital color presses in North America. As
part of this agreement, Xeikon America, Inc. has acquired certain assets
from the Company and assumed certain liabilities of the Company. The
divestiture of the assets resulted in a net loss of approximately $500
which the Company recorded in the quarter ending November 2, 1996.
Note 8 - Significant Events
On October 29, 1996 the Company entered into a definitive Merger
Purchase Agreement with a corporation newly formed by affiliates of
Pacholder Associates, Inc., a Cincinnati-based provider of investment
management, financial advisory and investment banking services to
institutional clients. The agreement provides for the merger of a subsidiary
of the purchaser with and into the Company pursuant to which
the current shareholders of the Company will receive $5.00 per common
share and the Company will become a wholly-owned subsidiary of the
purchaser. On November 26, 1996, the Company announced that the
corporation formed by affiliates of Pacholder Associates, Inc. had
obtained a financing commitment to provide debt financing, subject to
certain conditions, in connection with the proposed transaction from the
Provident Bank. The transaction remains subject to certain closing
conditions, including approval by a majority of the shareholders of the
Company at a meeting tentatively scheduled for early 1997.
It is expected that if the merger agreement and the merger are not
approved by the Company's stockholders, or if certain other conditions
to the consummation of the transaction are not satisfied or waived, the
Company's management, under the general direction of the Board, will
seek to manage the Company as an ongoing business and may seek other
purchasers for the Company or another strategic alternative.
<PAGE>
<TABLE>
AM INTERNATIONAL, INC.
QUARTERLY REPORT
November 2, 1996
Management's Discussion and Analysis
The discussion of the results of continuing operations and financial
condition presented below should be read in conjunction with
Management's Discussion and Analysis included in the Company's Annual
Report to Shareholders for the year ended July 31, 1996. The results of
operations, net of taxes, and the net assets of Sheridan Systems and the
divested AM Multigraphics - International operation are presented in the
consolidated financial statements as discontinued operations.
As previously reported, the Company has, over the past several years,
formulated and executed various restructuring plans in order to improve
operating results. These plans have included the exit from certain
unprofitable foreign subsidiaries, the divestitures of non-core product
lines, the exit from manufacturing operations at AM Multigraphics and
the implementation of strategic investments in new products and
capabilities. Included in the quarterly results of the continuing
operations are results of two foreign subsidiaries, however, the Company
sold its interest in AM Japan Co., Ltd. in September, 1996, and in
October 1996, the Company's Canadian subsidiary filed a voluntary
assignment in bankruptcy.
Consolidated Results of Operations
Three Months Ended
($ in millions) November 2, 1996 October 28,1995
<S> <C> <C>
Revenues $27.7 $43.0
Gross margin 7.2 10.9
Gross margin % 26.2% 25.3%
Operating expenses 8.4 13.7
Unusual items (2.1) 0.0
(income)
Operating income 0.9 (2.8)
(Loss)
Non-operating 0.4 0.7
expense, net
Net income (loss) $0.5 $(3.5)
</TABLE>
<PAGE>
Summary
The net income for the first quarter ended November 2, 1996 of $0.5
million ($0.07 per common share) improved by $4.0 million, as compared
with a net loss of $3.5 million ($0.49 per common share) for the
comparable prior year quarter.
Revenues for the first quarter of $27.7 million were $15.3 million below
the corresponding prior year period. Revenues from the subsidiaries in
Japan and Canada, which the Company has divested, were $2.2 million as
compared to $9.0 million in the prior year. Market demand for the
Company's duplicator products has declined due to inroads from competing
printing technologies. As a result of these competitive inroads, the
installed base of duplicator equipment has experienced long term decline
which has led to decreased sales of equipment , supplies and services.
In 1995, the Company initiated efforts to transition out of
manufacturing, and become a distributor of pre-press equipment, supplies
and services to the graphics arts markets. The Company has announced
its exit from the manufacture and distribution of press and post-press
product lines. The Company has recently completed the build out of
offset duplicator presses and the sell off of press and post-press
inventories is expected to be completed during the current fiscal year.
Revenues from discontinued press and post-press machine product lines
were $3.3 million in the first quarter, a decline of $5.3 million from
the prior year comparable period.
In order to better focus its efforts on the continuing core supply and
service businesses, the Company and one of its suppliers (Xeikon N.V.)
mutually agreed in December, 1996 to terminate a distribution
agreement which had been in effect since 1993. Revenues from that
product line were $1.1 million in the current quarter, and $2.4 million
in the comparable prior year period.
Gross margin of $7.2 million was $3.6 million lower than the comparable
prior year period. The divested foreign operations accounted for $1.5
million of the decline. The balance of the decrease in margin was
largely due to lower revenue levels, particularly in press and post-
press product lines.
Operating expenses in the first quarter of $8.4 million were $5.3
million lower than the prior year period. The decrease in expenses was
primarily the result of cost reduction actions taken by the Company
which lowered headcount, facility and other selling, general and
administrative costs. The divestitures of operations in Canada and
Japan accounted for $2.1 million of the decrease.
Unusual item income represented the $2.6 million gain on the sale of the
Company's ownership interest in its majority owned Japanese subsidiary.
As previously reported, during the fourth quarter of 1996 the Company
committed to sell its interest in AM Japan Co., Ltd. and completed the
sale on September 20, 1996. In addition, a $0.5 million loss was
recorded for the disposition of net assets employed following the
decision to exit distribution of the Xeikon digital color press.
Reserves for the cost to exit Canada, which had been established in the
fiscal year ended July 31, 1996, were adequate and no additional costs
were recognized.
Non-operating expenses are primarily net interest, and decreased $.2
million from the prior year largely due to increased interest income on
investment of the proceeds from divestitures received in the first
quarter ended November 2, 1996.
<PAGE>
Liquidity and Capital Resources
The Company's total cash and cash equivalents were $35.1 million as of
November 2, 1996, an increase of $32.6 million over July 31, 1996. The
net proceeds from the divestitures of Sheridan Systems and AM Japan of
$50.6 million were received during the quarter. The primary source of
cash from operating activities was a reduction in accounts receivable of
$3.8 million, resulting from collection of the relatively higher
outstanding balances which existed at July 31, 1996.
The primary uses of cash in operating activities were a repayment of the
Company's revolving credit facility of $5.4 million, and payment of
trade payables of $8.4. In addition, there were reductions in accrued
liabilities for certain restructuring payments including severance and
accrued vacation, Change of Control obligations related to the sale of
the Sheridan Systems division, and a settlement of a lease obligation
related to a divested foreign subsidiary. The decrease in long term
borrowings reflects the required quarterly payment under the Company's
Plan of Reorganization.
The Company's revolving credit facility expired October 12, 1996.
Working capital requirements are currently being met by existing cash
reserves.
In late October the Company entered into a definitive Merger Purchase
Agreement with a corporation newly formed by affiliates of Pacholder
Associates, Inc. The agreement provides for the merger of a subsidiary
of the purchaser with and into the Company pursuant to which the current
shareholders of the Company will receive $5.00 per common share and the
Company will become a wholly-owned subsidiary of the purchaser. The
Provident Bank has committed to provide debt financing in connection
with the proposed transaction for the surviving corporation subject to
certain closing conditions. The transaction remains subject to certain
closing conditions, including approval by a majority of the shareholders
of the Company at a meeting tentatively scheduled for early 1997.
<PAGE>
PART II OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) Registrant held a Special Meeting of Stockholders on August 26,
1996.
(c) The only matter voted upon at the Special Meeting of Stockholders
was a proposal to approve the sale by Registrant of substantially all of
the assets of its Sheridan Systems division pursuant to an Asset
Purchase Agreement dated as of July 9, 1996 among Registrant, AM
Graphics International Limited and Heidelberger Druckmaschinen AG. The
inspectors of Election certified the following vote tabulation:
FOR AGAINST ABSTAIN NON-VOTES
6,355,120 28,388 6,389 0
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter Agreement dated October 29, 1996 between Thomas D.
Rooney and Registrant effecting a satisfaction and discharge of the
Change-In-Control and Termination Benefits Agreement between Mr.
Rooney and the Registrant dated July 7, 1995 (Management contract
or compensatory plan, contract or arrangement)
27 Financial Data Schedule
(b) Reports on Form 8 - K
(i) A current Report on Form 8 - K dated August 27, 1996 was
filed relating to the completed sale of substantially all of
the assets of the Company's Sheridan Systems division and the
definitive agreement to sell the Company's majority owned
subsidiary, AM Japan Co., Ltd.
(ii) A current Report on Form 8 - K dated September 20, 1996
was filed relating to the completed sale of the Company's
majority owned subsidiary. AM Japan Co., Ltd.
(iii) A current Report on Form 8-K dated October 29, 1996 was
filed relating to the Merger Purchase Agreement among AM
International, Inc. 8044 Acquisition Inc. and 8044 Acquisition
Sub Inc.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AM INTERNATIONAL, INC.
Date: December 16, 1996 /s/ Thomas D. Rooney
Thomas D. Rooney
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> NOV-02-1997
<CASH> 35,123
<SECURITIES> 0
<RECEIVABLES> 16,583
<ALLOWANCES> (610)
<INVENTORY> 14,652
<CURRENT-ASSETS> 66,673
<PP&E> 16,763
<DEPRECIATION> (6144)
<TOTAL-ASSETS> 78,300
<CURRENT-LIABILITIES> 55,623
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 2527
<TOTAL-LIABILITY-AND-EQUITY> 78,300
<SALES> 27,699
<TOTAL-REVENUES> 27,699
<CGS> 20,453
<TOTAL-COSTS> 26,743
<OTHER-EXPENSES> (120)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 557
<INCOME-PRETAX> 519
<INCOME-TAX> 0
<INCOME-CONTINUING> 519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 519
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
<PAGE>
AM International, Inc.
9399 West Higgins Road
Suite 900
Rosemont, Illinois 60018
October 29, 1996
Mr. Thomas D. Rooney
1420 Carlisle Drive
Inverness, Illinois 60010
Dear Mr. Rooney:
Reference is hereby made to your Change in Control and Termination
Benefits Agreement with AM International, Inc. (the "Company") dated as
of July 7, 1995 (the "Agreement"). This letter is to effect a
satisfaction and discharge of your and the Company's respective
obligations under the Agreement. You will be entitled to receive, on
the date of the Closing or commencing upon the date of the Closing, the
cash payments and benefits set forth on Schedule A to this letter
agreement. In addition, pursuant to Section 2 of the Agreement and in
accordance with the Escrow Agreement dated July 7, 1995 between the
Company, Bank of America Illinois (the "Escrow Agent") and you, you are
entitled to receive a lump sum cash amount equal to $250,000 (plus
interest thereon in accordance with Section 2 of the Escrow Agreement)
upon the earliest to occur of (i) the date of the Closing, so long as
you are employed by the Company on the date of the Closing, (ii)
February 27, 1997, so long as you are employed by the Company on
February 27, 1997, and (iii) the effective date on which your employment
by the Company terminates by reason of a Qualifying Termination, your
death, or termination of your employment by the Company by reason of
your Incapacity (as defined in the Agreement) or disability.
All amounts paid or released to you may be subject to withholding for
federal, state or local taxes. The Company hereby undertakes to deliver
to the Escrow Agent, on or prior to the Closing Date, a certificate in
the form of Schedule B to this letter.
Terms used in this letter and in the Schedules hereto which are not
defined herein and are defined in the Merger Purchase Agreement among
8044 Acquisition, Inc., 8044 Acquisition Sub Inc. and the Company, dated
as of the date hereof (the "Merger Agreement"), shall have the meanings
set forth in the Merger Agreement. This letter shall not affect your
rights under the Agreement, including, without limitation, your right to
terminate your employment for Good Reason. This letter shall be of no
force or effect in the event the Closing does not occur; provided,
however, that in such event this letter shall not affect the terms and
conditions of the Agreement or the Escrow Agreement.
<PAGE>
AM INTERNATIONAL, INC.
By:_/s/ Jerome D. Brady___
Name: Jerome D. Brady
Title: President and Chief
Executive Officer
ACKNOWLEDGED AND AGREED
this 29th day of October, 1996
By: /s/ Thomas D. Rooney
Name: Thomas D. Rooney
Title: Vice President and Chief Financial Officer
President, AM Multigraphics
<PAGE>
SCHEDULE A
TO LETTER TO THOMAS D. ROONEY
DATED OCTOBER 29, 1996
At the Closing, the Company shall pay to Thomas D. Rooney (the
"Executive"), in immediately available funds, the following: (1footnote)
1. Pursuant to Section 3(a)(1)(i) of the Agreement an amount equal to
the Executive's base salary through and including the Closing Date, to
the extent not theretofore paid;
2. Pursuant to Section 3(a)(1)(ii) of the Agreement, an amount equal to
$14,140 (i.e., the product of 2,828 multiplied by $5.00), representing
payment in full for all Deferred Compensation Shares held by or for the
account of the Executive;
3. Pursuant to Section 3(a)(1)(ii) of the Agreement, an amount equal to
any accrued vacation pay of the Executive, through and including the
Closing Date, to the extent not theretofore paid;
4. Assuming the Closing occurs no earlier than November 27, 1996 (the
date which is three months after the sale of AM Graphics, as defined in
the Agreement), pursuant to Section 3(a)(2) of the Agreement, an amount
equal to the product of (i) two times the Executive's highest rate of
annual base salary in effect at any time from and after July 7, 1995 to
the day prior to the date of the Closing (which base salary as of the
date hereof is $199,500, which, when doubled, equals $399,000)
multiplied by (ii) a fraction, the numerator of which is equal to 24
minus the number of months which elapse during the 12-month period
commencing on November 27, 1996 (including a partial month with a
partial month being expressed as a fraction, the numerator of which is
the number of days which have elapsed in such month and the denominator
of which is the number of days in such month) and the denominator of
which is 24;
5. With respect to the Executive's annual bonus, the amount will not be
determined in accordance with Section 3(a)(3) of the Agreement, but
rather will be paid in accordance with the Executive's EICP Grant;
provided, however, that if the Executive's employment is terminated for
any reason prior to payment of the 1997 EICP awards, Executive will be
entitled to receive the grant which would have been payable in
accordance with Section 3(a)(3) of the Agreement as if Executive's
employment had been terminated for Good Reason on the Closing Date.
FOOTNOTE: 1. All amounts payable to Mr. Rooney under the Company's
401(k) plan, savings plans, retirement plan, deferred compensation
plans, and other plans under which he is a participant, and which are
not otherwise referred to in this Schedule, shall be paid to Mr. Rooney
according to their respective terms.
<PAGE>
6. With respect to the Executive's supplemental retirement benefit, the
amount, if any, determined in accordance with Section 3(b) of the
Agreement; and
7. With respect to unvested employer contributions to Retirement Plans,
the amount, if any, determined in accordance with Section 3(c)(1) of the
Agreement.
Commencing upon the date of the Closing, pursuant to Section 3(c)(2) of
the Agreement, the Company shall:
1. For a period of two years commencing on the date of the Closing,
continue to keep in full force and effect (or shall cause a successor to
keep in full force and effect or shall cause to be provided by a third-
party provider) all policies of medical, prescription, dental, accident,
disability and life insurance with respect to the Executive and his
dependents with the same level of coverage, upon the same terms and
otherwise to the same extent as such policies shall have been in effect
immediately prior to the date of the Closing or, if more favorable to
the Executive, as provided generally with respect to other peer
executives of the Company and its affiliated companies. The obligation
of the Company to continue coverage of the Executive and his spouse and
other dependents under such policies shall cease at such time as the
Executive and his spouse and other dependents obtain substantially
comparable coverage under another policy or policies, including a policy
maintained by another employer.
<PAGE>
SCHEDULE B
Certificate and Waiver
, 1997 [insert first to occur of date of Closing and 2/27/97]
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attention:
Re: Escrow Account No. (the "Escrow Account")
Gentlemen:
Reference is made to that certain Change in Control and
Termination Benefits Agreement dated as of July 7th, 1995 (the
"Agreement") between AM International, Inc. (the "Company") and Thomas
D. Rooney (the "Employee"); each capitalized term used herein and not
otherwise defined herein shall have the meaning assigned thereto in the
Agreement.
The undersigned, on behalf of the Company, hereby certifies to
Bank of America Illinois that the Employee is entitled to have the funds
held in the Escrow Account released to the Employee.
The Company hereby waives, for itself and on behalf of its
successors and assigns, all rights the Company may have (i) to receive a
copy of the certificate from the Employee to the Escrow Agent, dated the
date of this Certificate and Waiver, in the form of Annex I to the
Escrow Agreement (the "Certificate"), and (ii) to dispute any
certifications of the Employee set forth in the Certificate.
Please release all funds held in the Escrow Account and
deliver such funds in accordance with the instructions of the Employee.
AM INTERNATIONAL, INC.
By:
Name:
Title:
Certificate
, 1997 [insert first to occur of date of Closing and 2/27/97]
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Re: Escrow Account No. (the "Escrow Account")
<PAGE>
Ladies and Gentlemen:
Reference is made to that certain Change in Control and
Termination Benefits Agreement dated as of July 7th, 1995 (the
"Agreement") between AM International, Inc. ("AMI") and the undersigned;
each capitalized term used herein and not otherwise defined herein shall
have the meaning assigned thereto in the Agreement.
The undersigned hereby certifies to Bank of America Illinois
that at least one of the following statements is true and correct as of
the date hereof:
1. A Change in Control (other than a Change in Control
resulting from a sale of all or substantially all of the
assets of AM Graphics) has occurred at least three months
prior to the date hereof and on the three-month
anniversary date of such Change in Control the
undersigned was an employee of AMI or the person who
assumed the Agreement and the Escrow Agreement.
2. A Change in Control (other than a Change in Control
resulting from a sale of all or substantially all of the
assets of AM Graphics) has occurred and the Employee's
employment by AMI or the person who assumed the Agreement
and the Escrow Agreement was terminated after, or on the
same date as, such Change in Control by reason of a
Qualifying Termination, death of the Executive, or
termination of employment by AMI or the person who
assumed the Agreement and the Escrow Agreement by reason
of the Executive's Incapacity or disability.
3. A Change in Control resulting from a sale of all or
substantially all of the assets of AM Graphics has
occurred in accordance with Section 1(c)(4)(ii) of the
Agreement, the consummation of the sale of all or
substantially all of the domestic assets of AM
Multigraphics has occurred prior to, or on the same date
as, such Change in Control, and the undersigned was an
employee of AMI on the date of such Change in Control.
4. A Change in Control resulting from a sale of all or
substantially all of the assets of AM Graphics has
occurred in accordance with Section 1(c)(4)(ii) of the
Agreement, the consummation of the sale of all or
substantially all of the domestic assets of AM
Multigraphics has occurred after the date of such Change
in Control, and the undersigned was an employee of AMI on
the date of such sale of assets of AM Multigraphics.
<PAGE>
5. A Change in Control resulting from a sale of all or
substantially all of the assets of AM Graphics has
occurred in accordance with Section 1(c)(4)(ii) of the
Agreement at least six months prior to the date hereof
and, on the six-month anniversary date of such Change in
Control, the undersigned was an employee of AMI.
6. A Change in Control resulting from a sale of all or
substantially all of the assets of AM Graphics has
occurred in accordance with Section 1(c)(4)(ii) of the
Agreement and the Employee's employment by AMI was
terminated after, or on the same date as, such Change in
Control by reason of a Qualifying Termination, death of
the Executive, or termination of employment by AMI by
reason of the Executive's Incapacity or disability.
7. A Change in Control has occurred and the Employee's
employment by AMI was terminated prior to such Change in
Control for a reason other than for Cause or the
Executive's Incapacity at a time when AMI was a party to
a letter of intent which contemplates effecting, or a
binding written agreement (subject to customary closing
conditions) to effect, a transaction constituting a
Change in Control.
Please release all funds representing proceeds of all Securities held in
the Escrow Account and deliver such funds to .
Thomas D. Rooney
<PAGE>
