<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-21314 COMMISSION FILE NUMBER 33-43734
U.S. CAN CORPORATION UNITED STATES CAN COMPANY
(Exact name of registrant (Exact name of registrant
as specified in its charter) as specified in its charter)
06-1094196 06-1145011
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
DELAWARE DELAWARE
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
900 COMMERCE DRIVE 900 COMMERCE DRIVE
OAK BROOK, ILLINOIS 60521 OAK BROOK, ILLINOIS 60521
(Address of Principal Executive (Address of Principal Executive
Offices, Including Zip Code) Offices, Including Zip Code)
(708) 571-2500 (708) 571-2500
(Registrant's Telephone Number, (Registrant's Telephone Number,
Including Area Code) Including Area Code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 (THE "EXCHANGE ACT") DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90
DAYS. YES /X/ NO / /
(EXPLANATORY NOTE: UNITED STATES CAN COMPANY (A WHOLLY OWNED SUBSIDIARY OF U.S.
CAN CORPORATION) IS NOT REQUIRED BY SECTION 13 OR 15(D) OF THE EXCHANGE ACT TO
FILE SUCH REPORTS, BUT HAS AGREED, PURSUANT TO THE INDENTURE UNDER WHICH ITS
13 1/2% SENIOR SUBORDINATED NOTES DUE 2002 WERE ISSUED, TO FILE ALL REPORTS
REQUIRED BY SECTION 13 OR 15(D) WHETHER OR NOT REQUIRED BY LAW.)
AS OF JULY 31, 1996, 12,927,072 SHARES OF U.S. CAN CORPORATION'S COMMON STOCK
WERE OUTSTANDING. AS OF JULY 31, 1996, 1,000 SHARES OF UNITED STATES CAN
COMPANY'S COMMON STOCK WERE OUTSTANDING.
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U.S. CAN CORPORATION
UNITED STATES CAN COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
U.S. Can Corporation Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995......................................... 3
United States Can Company Condensed Balance Sheets
June 30, 1996 and December 31, 1995......................................... 4
U.S. Can Corporation Condensed Consolidated Statements of Operations
Quarterly Periods Ended June 30, 1996 and July 2, 1995...................... 5
United States Can Company Condensed Statements of Operations
Quarterly Periods Ended June 30, 1996 and July 2, 1995...................... 6
U.S. Can Corporation Condensed Consolidated Statements of Cash Flows
Quarterly Periods Ended June 30, 1996 and July 2, 1995...................... 7
United States Can Company Condensed Statements of Cash Flows
Quarterly Periods Ended June 30, 1996 and July 2, 1995...................... 8
Notes to Condensed Consolidated Financial Statements and Condensed
Financial Statements........................................................ 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................... 14
OTHER INFORMATION
PART II
Item 1. Legal Proceedings........................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......................... 18
Item 6. Exhibits and Reports on Form 8-K............................................ 18
</TABLE>
2
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U.S. CAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000'S OMITTED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 740 $ 136
Accounts receivable, less allowances of $6,649 and $5,451 in 1996 and
1995, respectively...................................................... 74,976 51,279
Inventories............................................................... 86,864 78,252
Prepaid expenses and other current assets................................. 10,975 10,786
Prepaid income taxes...................................................... 5,027 6,732
--------- ---------
Total current assets.................................................. $ 178,582 $ 147,185
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................................... 2,586 2,576
Buildings................................................................. 50,397 44,954
Machinery, equipment and construction in process.......................... 328,262 306,319
--------- ---------
$ 381,245 $ 353,849
Less -- Accumulated depreciation and amortization......................... (137,456) (123,748)
--------- ---------
Total property, plant and equipment................................... $ 243,789 $ 230,101
--------- ---------
MACHINERY REPAIR PARTS...................................................... $ 5,264 $ 5,395
INTANGIBLES................................................................. 66,353 62,301
OTHER ASSETS................................................................ 10,539 10,454
--------- ---------
Total assets.......................................................... $ 504,527 $ 455,436
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................................... $ 17,484 $ 17,216
Cash overdrafts........................................................... 6,134 5,395
Accounts payable.......................................................... 35,212 32,560
Accrued payrolls and benefits............................................. 19,730 19,282
Accrued insurance......................................................... 5,787 5,830
Other current liabilities................................................. 22,414 17,954
--------- ---------
Total current liabilities............................................. $ 106,761 $ 98,237
--------- ---------
SENIOR DEBT................................................................. $ 158,041 $ 127,360
SUBORDINATED DEBT........................................................... 100,000 100,000
--------- ---------
Total long-term debt.................................................. $ 258,041 $ 227,360
--------- ---------
OTHER LONG-TERM LIABILITIES:
Postretirement benefits................................................... $ 25,519 $ 25,080
Deferred income taxes..................................................... 20,288 19,962
Other long-term liabilities............................................... 2,110 2,970
--------- ---------
Total other long-term liabilities..................................... $ 47,917 $ 48,012
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 10,000,000 shares authorized, none issued
or outstanding.......................................................... $ -- $ --
Common stock, $.01 par value; 50,000,000 shares authorized 12,934,315 and
12,902,111 shares issued in 1996........................................ 129 129
Paid-in capital........................................................... 104,098 103,913
Unearned restricted stock................................................. (1,831) (2,052)
Treasury common stock, at cost; 13,976 and 37,908 shares in 1996 and 1995,
respectively............................................................ (151) (319)
Retained deficit.......................................................... (10,437) (19,844)
--------- ---------
Total stockholders' equity............................................ $ 91,808 $ 81,827
--------- ---------
Total liabilities and stockholders' equity......................... $ 504,527 $ 455,436
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these balance sheets.
3
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UNITED STATES CAN COMPANY
CONDENSED BALANCE SHEETS
(UNAUDITED)
(000'S OMITTED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 740 $ 136
Accounts receivable, less allowances of $6,649 and $5,451 in 1996 and
1995, respectively................................................. 74,976 51,279
Inventories.......................................................... 86,864 78,252
Prepaid expenses and other current assets............................ 10,975 10,125
Prepaid income taxes................................................. 3,730 6,096
---------- ----------
Total current assets............................................ $ 177,285 $ 145,888
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Land................................................................. 2,586 2,576
Buildings............................................................ 50,397 44,954
Machinery, equipment and construction in process..................... 328,262 306,319
---------- ----------
$ 381,245 $ 353,849
Less -- Accumulated depreciation and amortization.................... (137,456) (123,748)
---------- ----------
Total property, plant and equipment............................. $ 243,789 $ 230,101
---------- ----------
MACHINERY REPAIR PARTS................................................... $ 5,264 $ 5,395
LONG-TERM RECEIVABLE FROM PARENT......................................... 1,047 1,472
INTANGIBLES.............................................................. 66,353 62,301
OTHER ASSETS............................................................. 10,539 10,454
---------- ----------
Total assets......................................................... $ 504,277 $ 455,611
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................................. $ 17,484 $ 17,216
Cash overdrafts...................................................... 6,134 5,395
Accounts payable..................................................... 35,212 32,560
Payable to Parent.................................................... 1,206 1,057
Accrued payrolls and benefits........................................ 19,730 19,282
Accrued insurance.................................................... 5,787 5,830
Other current liabilities............................................ 22,414 17,954
---------- ----------
Total current liabilities....................................... $ 107,967 $ 99,294
---------- ----------
SENIOR DEBT.............................................................. $ 158,041 $ 127,360
SUBORDINATED DEBT........................................................ 100,000 100,000
---------- ----------
Total long-term debt................................................. $ 258,041 $ 227,360
---------- ----------
OTHER LONG-TERM LIABILITIES:
Postretirement benefits.............................................. $ 25,519 $ 25,080
Deferred income taxes................................................ 21,027 20,701
Other long-term liabilities.......................................... 2,110 2,970
---------- ----------
Total other long-term liabilities............................... $ 48,656 $ 48,751
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, 1,000 shares authorized and outstanding................ $ 1 $ 1
Paid-in capital...................................................... 94,300 94,300
Retained deficit..................................................... (4,688) (14,095)
---------- ----------
Total stockholder's equity........................................ $ 89,613 $ 80,206
---------- ----------
Total liabilities and stockholder's equity...................... $ 504,277 $ 455,611
========== ==========
</TABLE>
The accompanying Notes to Condensed Financial Statements
are an integral part of these balance sheets.
4
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U.S. CAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTERLY PERIOD
ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES........................................... $180,596 $165,981 $344,207 $320,042
COST OF SALES....................................... 157,466 144,757 299,595 276,969
-------- -------- -------- --------
Gross income...................................... $ 23,130 $ 21,224 $ 44,612 $ 43,073
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 7,080 7,101 13,930 13,692
-------- -------- -------- --------
Operating income.................................. $ 16,050 $ 14,123 $ 30,682 $ 29,381
INTEREST EXPENSE ON BORROWINGS...................... 6,334 6,345 12,520 12,147
AMORTIZATION OF DEFERRED FINANCING COSTS............ 376 382 802 739
CONSOLIDATION EXPENSE............................... 0 82 0 164
OTHER EXPENSE....................................... 511 446 1,003 717
-------- -------- -------- --------
Income before income taxes........................ $ 8,829 $ 6,868 $ 16,357 $ 15,614
PROVISION FOR INCOME TAXES.......................... 3,752 2,908 6,950 6,532
-------- -------- -------- --------
NET INCOME.......................................... $ 5,077 $ 3,960 $ 9,407 $ 9,082
======== ======== ======== ========
PER SHARE DATA:
Net income........................................ $ 0.39 $ 0.31 $ 0.72 $ 0.71
======== ======== ======== ========
Weighted average shares and equivalent shares
outstanding (000's)............................ 13,074 12,856 13,042 12,860
======== ======== ======== ========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
5
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UNITED STATES CAN COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
QUARTERLY PERIOD
ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES........................................... $180,596 $165,981 $344,207 $320,042
COST OF SALES....................................... 157,466 144,757 299,595 276,969
-------- -------- -------- --------
Gross income...................................... $ 23,130 $ 21,224 $ 44,612 $ 43,073
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 7,080 7,101 13,930 13,692
-------- -------- -------- --------
Operating income.................................. $ 16,050 $ 14,123 $ 30,682 $ 29,381
INTEREST EXPENSE ON BORROWINGS...................... 6,334 6,345 12,520 12,147
AMORTIZATION OF DEFERRED FINANCING COSTS............ 376 382 802 739
CONSOLIDATION EXPENSE............................... 0 82 0 164
OTHER EXPENSE....................................... 511 446 1,003 717
-------- -------- -------- --------
Income before income taxes........................ $ 8,829 $ 6,868 $ 16,357 $ 15,614
PROVISION FOR INCOME TAXES.......................... 3,752 2,908 6,950 6,532
-------- -------- -------- --------
NET INCOME.......................................... $ 5,077 $ 3,960 $ 9,407 $ 9,082
======== ======== ======== ========
</TABLE>
The accompanying Notes to Condensed Financial Statements
are an integral part of these statements.
6
<PAGE> 7
U.S. CAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 30, JULY 2,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 9,407 $ 9,082
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization........................................ 16,351 14,002
Plant consolidation costs paid....................................... -- (1,633)
Consolidation expense................................................ -- 164
Deferred income taxes................................................ 640 1,568
Change in operating assets and liabilities, net of acquired
businesses --
Accounts receivable.................................................. (23,697) (11,243)
Inventories.......................................................... (8,612) 943
Accounts payable..................................................... 2,652 (19,309)
Accrued payrolls and benefits, insurance and other................... 2,964 (305)
Postretirement benefits.............................................. 349 283
Other, net........................................................... (3,248) 441
-------- --------
Net cash used in operating activities.............................. $ (3,194) $ (6,007)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................... $(13,952) $(19,187)
Acquisition of businesses, net of cash acquired......................... (13,711) (29,167)
Machinery repair parts usage (purchases), net........................... 131 (18)
-------- --------
Net cash used in investing activities.............................. $(27,532) $(48,372)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................................................ $ 56 $ 50
Net borrowings under the revolving line of credit and changes in cash
overdrafts........................................................... 34,839 67,161
Borrowings of other long-term debt, including capital lease
obligations.......................................................... 1,976 16
Payments of other long-term debt, including capital lease obligations... (5,127) (11,661)
Payments of debt refinancing costs...................................... (285) (719)
Payments of common stock issuance costs................................. -- (22)
Purchase of treasury stock, net......................................... (129) (124)
-------- --------
Net cash provided by financing activities.......................... $ 31,330 $ 54,701
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS..................................... $ 604 $ 322
CASH AND CASH EQUIVALENTS, beginning of period............................ 136 123
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................................. $ 740 $ 445
======== ========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
7
<PAGE> 8
UNITED STATES CAN COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 30, JULY 2,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 9,407 $ 9,082
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization........................................ 16,351 14,002
Plant consolidation costs paid....................................... 0 (1,633)
Consolidation expense................................................ 0 164
Deferred income taxes................................................ 640 1,568
Change in operating assets and liabilities, net of acquired
businesses --
Accounts receivable.................................................. (23,697) (11,243)
Inventories.......................................................... (8,612) 943
Accounts payable..................................................... 2,652 (19,309)
Accrued payrolls and benefits, insurance an.......................... 2,964 (305)
Postretirement benefits.............................................. 349 283
Other, net........................................................... (3,248) 441
-------- --------
Net cash used in operating activities.............................. $ (3,194) $ (6,007)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................... $(13,952) $(19,187)
Acquisition of businesses, net of cash acquired......................... (13,711) (29,167)
Machinery repair parts usage (purchases), net........................... 131 (18)
-------- --------
Net cash used in investing activities.............................. $(27,532) $(48,372)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under the revolving line of credit and changes in cash
overdrafts........................................................... 34,839 $ 67,161
Changes in payable to Parent............................................ (73) (96)
Borrowings of other long-term debt, including capital lease
obligations.......................................................... 1,976 16
Payments of other long-term debt, including capital lease obligations... (5,127) (11,661)
Payments of debt refinancing costs...................................... (285) (719)
-------- --------
Net cash provided by financing activities.......................... $ 31,330 $ 54,701
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS..................................... $ 604 $ 322
CASH AND CASH EQUIVALENTS, beginning of period............................ 136 123
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................................. $ 740 $ 445
======== ========
</TABLE>
The accompanying Notes to Condensed Financial Statements
are an integral part of these statements.
8
<PAGE> 9
U.S. CAN CORPORATION AND SUBSIDIARY
UNITED STATES CAN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) PRINCIPLES OF REPORTING
The condensed consolidated financial statements include the accounts of
U.S. Can Corporation (the "Corporation") and its wholly owned subsidiary, United
States Can Company ("U.S. Can"), and the condensed financial statements include
only the accounts of U.S. Can. The consolidated group is hereinafter referred to
as the Company. These financial statements have been prepared in accordance with
generally accepted accounting principles for interim reporting. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements, which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation, have not been audited by independent public accountants.
Operating results for any interim period are not necessarily indicative of
results that may be expected for the full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission; however, management believes that the
disclosures contained herein are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the previously filed financial statements and footnotes
included in the Corporation's and U.S. Can's Joint Annual Report on Form
10-K/A-1 for the year ended December 31, 1995.
Quarterly accounting periods are based upon two four-week periods and one
five-week period. Management believes that this technique provides a more
consistent view of accounting data resulting in greater comparability than the
calendar month basis would provide.
(2) ACQUISITIONS
In early 1995, the Company completed its acquisition of the stock of Metal
Litho International, Inc. and the portion of a related partnership not
previously owned by MLI (collectively, "MLI") for approximately $10.1 million in
cash, plus the assumption of approximately $4.2 million of debt. The former MLI
plant, located in Trenton, New Jersey, is a full service metal decorating
facility, providing coil shearing and tin plate coating and printing. In March
1995, the Company completed its acquisition of the stock of Plastite Corporation
("Plastite") for approximately $7.3 million, plus future contingent payments of
approximately $2.5 million. The former Plastite plant, located in Morrow,
Georgia, manufactures plastic paint cans and pails in two sizes.
In April 1995, the Company completed an acquisition of certain assets of
Prospect Industries Corporation ("Prospect") for approximately $8.8 million. The
acquired assets, located in North Brunswick, New Jersey, are used to manufacture
metal pails for the chemical and coatings industries. U.S. Can's North Brunswick
operation includes coil cutting, coating and lithography, as well as
manufacturing of tops and bottoms. In May 1995, the Company completed an
acquisition of the stock of Hunter Container Corporation ("Hunter") for
approximately $4.0 million, plus the assumption of $2.5 million of debt. The
former Hunter facility, located in Vernalis, California, manufactures a broad
line of proprietary and specialty metal containers.
In April 1996, the Company acquired from Alltrista Corporation
("Alltrista") substantially all of the machinery, equipment and coatings and
inks inventory of, as well as certain proprietary technology used in, Alltrista
Metal Services ("AMS"), a division of Alltrista (collectively referred to
hereinafter as the "Assets"), and assumed a liability of approximately $0.5
million. The Assets were purchased for approximately $9.6 million. The Company
also agreed to purchase the Chicago, Illinois, Baltimore, Maryland and
9
<PAGE> 10
Trussville, Alabama real property and buildings formerly used in AMS's business
for approximately $4.8 million. In a related transaction, in June 1996, the
Company completed the purchase of AMS's remaining inventory for approximately $8
million. AMS was engaged in the business of metal cutting and decorating, as
well as the manufacture, sale and licensure of certain proprietary products. In
July 1996, the Company discontinued operations at the former AMS operations in
Baltimore, Maryland and Trussville, Alabama.
Each of the foregoing business acquisitions was accounted for as a purchase
for financial reporting purposes. Accordingly, certain recorded assets and
liabilities of the acquired companies were revalued at estimated fair values as
of the acquisition date. Such revaluation adjustments, all made pursuant to the
purchase method of accounting, resulted in increased amortization and
depreciation in periods following the acquisition. Management has used its best
judgment and available information in estimating the fair value of those assets
and liabilities. Any changes to these estimates are not expected to be material.
The operating results of each acquired business are included in the
consolidated statement of operations from the date of acquisition. Amortization
of any excess purchase price over the estimated fair value of the net assets
acquired is made over a period of forty years.
In February 1996, the Company announced its intention to establish a paint
can and general line manufacturing plant in the Dallas, Texas area. This
decision followed the Company's agreement with Sherwin-Williams on the material
terms of a long-term container purchase agreement. This Texas facility will
initially produce gallon round paint cans for the coatings industry. In the
future, if circumstances warrant, the Company may expand this facility to
include steel pails, plastic pails and/or other general line containers.
In May 1996, the Company announced the selection of South Wales as the site
of a new aerosol container manufacturing facility. This plant, expected to be
operational in 1997, represents an initial investment of $20 million (spread
over two to three years), and will supply The Gillette Company's U.K.
operations.
(3) INVENTORIES
Inventories are stated at cost determined by the last-in, first-out
("LIFO") cost method, not in excess of market. Inventory costs include elements
of material, labor and factory overhead. Current (first-in, first-out) cost of
inventories was lower than inventories valued at LIFO by approximately $374,000
at June 30, 1996. At December 31, 1995, the current cost of inventories was
approximately $150,000 higher than inventories valued at LIFO. The Company's
gross income margin continues to be sufficient to absorb the
higher-than-current-cost carrying value of its inventories. Inventories reported
in the accompanying balance sheets were classified as follows (000's omitted):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Raw materials............................................ $ 24,425 $ 21,066
Work in process.......................................... 39,836 34,138
Finished goods........................................... 18,936 19,549
Machine shop inventory................................... 3,667 3,499
------- -------
$ 86,864 $ 78,252
======= =======
</TABLE>
10
<PAGE> 11
(4) CREDIT AGREEMENT
On April 29, 1994, U. S. Can entered into a four-year credit agreement (the
"Credit Agreement") with a group of banks providing a $130 million line of
credit consisting of a $95 million revolving credit line (the "Revolving Credit
Facility") and a $35 million term loan (the "Term Loan"). As of June 30, 1996,
$7,000,000 of the Term Loan had been repaid under the terms of the Credit
Agreement. Funds available under the Credit Agreement are used for working
capital and other general corporate purposes. The loans outstanding under the
Credit Agreement bear interest at a floating rate equal to, at the election of
U.S. Can, one of the following: (i) the Base Rate per annum (currently 8.25%),
or (ii) based on the current pricing ratio, a reserve-adjusted Eurodollar rate
plus 1.125% per annum, for specified interest periods (selected by U.S. Can) of
one, two, three or six months. The "Base Rate" is the higher of: (i) the Federal
Funds rate plus 1/2 of 1% per annum or (ii) the rate of interest publicly
announced from time to time by Bank of America Illinois, Chicago, Illinois as
its "reference rate." For letters of credit issued under the Credit Agreement,
U.S. Can pays fees equal to: (a) the applicable Eurodollar Margin, currently
1.125% per annum, multiplied by the aggregate face amount outstanding on each
such letter of credit and (b) an amount payable to the issuing bank equal to
0.2% per annum of the aggregate face amount outstanding on each such letter of
credit, both of which are payable quarterly in arrears. Currently, U.S. Can is
required to pay a commitment fee of 0.375% per annum of the average daily unused
portion of each lender's commitment under the Credit Agreement.
The Credit Agreement is secured by the accounts receivable and inventory of
U.S. Can. The Term Loan is also secured by a mortgage on U.S. Can's Elgin,
Illinois facility and certain equipment located at the Elgin facility. In early
April 1996, the lenders under the Credit Agreement provided U.S. Can a temporary
$10 million increase in the Revolving Credit Facility due to seasonal inventory
requirements. In late April 1996, these lenders provided U.S. Can an additional
temporary $20 million increase in the Revolving Credit Facility due to the
acquisition of certain assets from Alltrista. The Revolving Credit Facility will
be automatically reduced by $10 million on September 30, 1996, and by $20
million on December 31, 1996. As of June 30, 1996, borrowings under the Credit
Agreement totaled $123.3 million, an additional $11.7 million in letters of
credit had been issued pursuant thereto, and $18.0 million of unused credit
remained available thereunder.
In July 1996, the lenders under the Credit Agreement provided to U.S. Can a
supplemental $97 million credit facility (the "Acquisition Facility") to fund
certain permitted acquisitions and, at U.S. Can's option, prepay the Revolving
Credit Facility by an amount not to exceed $20 million on December 31, 1996.
While the Acquisition Facility is in place, U.S. Can may not use the Revolving
Credit Facility to fund acquisitions. The Acquisition Facility matures on April
30, 1997, but U.S. Can may, at its option and subject to certain restrictions,
elect to convert the outstanding borrowings thereunder to term loans with a
five-year amortization period. Base rate and Eurodollar loans outstanding under
the Acquisition Facility bear interest at a higher margin than other borrowings
under the Credit Agreement. Under the amended Credit Agreement, U.S. Can's
interest rate margins vary depending upon U.S. Can's ratio of total funded debt
to earnings, before interest, taxes, depreciation and amortization. In addition,
U.S. Can is required to pay an acquisition loan activation fee in an amount
equal to 0.25% of the amount by which the loans outstanding at any time under
the Acquisition Facility exceed $50 million. In connection with the Acquisition
Facility, U.S. Can pledged substantially all of its unencumbered personal
property (including machinery and equipment) and owned real estate to secure its
obligations under the Acquisition Facility. U.S. Can is also required to pledge
the stock and/or assets, and provide the guaranty, of any company or operations
acquired using a borrowing under the Acquisition Facility.
11
<PAGE> 12
The terms of the Credit Agreement impose restrictions that affect, among
other things, U.S. Can's ability to (i) incur additional indebtedness, (ii)
create liens on assets, (iii) sell assets, (iv) engage in mergers, acquisitions
or consolidations, (v) make investments, (vi) pay dividends or make
distributions and (vii) engage in certain transactions with affiliates and
subsidiaries. The Credit Agreement also requires U.S. Can to comply with certain
financial ratios and tests.
Under and pursuant to the Credit Agreement, U.S. Can may pay cash dividends
on account of any shares of any class of capital stock of U.S. Can (or on any
warrants, options or rights with respect thereto) in an amount not to exceed 25%
of Net Income (as defined in the Credit Agreement) in any given fiscal year, but
in any event not more than 25% of consolidated cumulative Net Income
attributable to the period commencing subsequent to April 29, 1994, and ending
on the date of such proposed cash dividends; provided that either: (i) the Term
Loan has been indefeasibly paid in full in cash or (ii) the Leverage Ratio (as
defined in the Credit Agreement) as of the last day of the last fiscal quarter
of such fiscal year does not exceed 3.50 to 1.00; and, provided further, that no
Default or Event of Default (as defined in the Credit Agreement) exists
immediately prior to any such cash dividend or would result therefrom.
Notwithstanding the foregoing, in no event may U.S. Can pay such cash dividends
prior to the delivery of the annual audited consolidated financial statements to
the banks for the fiscal year ended in which either of the conditions contained
in clauses (i) or (ii) above has been satisfied. Because amounts remain
outstanding under the Term Loan, the Credit Agreement currently prohibits U.S.
Can from paying cash dividends.
The Credit Agreement also contains subjective covenants providing that U.S.
Can would be in default if, in the judgment of the lenders, there is a material
adverse change in the financial condition of U.S. Can. Management is not aware
of, nor does it anticipate, any facts, events or occurrences which could
reasonably be expected to have a material adverse effect on the operations of
U.S. Can that would cause the lenders to demand repayment of the amounts
borrowed under the Senior Credit Agreement prior to April 29, 1998. Accordingly,
the borrowings thereunder have been classified as long-term debt in the
accompanying balance sheets.
U.S. Can was in compliance with all terms and restrictive covenants of the
Credit Agreement and its other long-term debt agreements as of June 30, 1996.
(5) SUPPLEMENTAL CASH FLOW INFORMATION
U.S. Can paid interest on borrowings of $12,560,000 and $12,268,000 for the
six-month periods ended June 30, 1996 and July 2, 1995, respectively.
The Corporation and U.S. Can paid approximately $1,655,000 and $4,989,000
of income taxes for the six-month periods ended June 30, 1996 and July 2, 1995,
respectively.
During the six-month periods ended June 30, 1996 and July 2, 1995, the
Corporation issued stock valued at approximately $943,000 and $3,067,000,
respectively, into certain of its employee benefit plans. During the first
six-months of 1996 the company received no tax benefits on the exercise of
non-qualified stock options. The company did receive approximately $87,000 of
such benefits during the first six months of 1995.
(6) LEGAL PROCEEDINGS
On February 28, 1995, Continental Holdings Inc. ("CHI"), an affiliate of
Peter Kiewit Sons', Inc. ("Kiewit"), filed a Complaint against U.S. Can and
others in the United States District Court of the State of New Jersey, asserting
claims based upon alleged indemnity obligations of U.S. Can to Kiewit, as
successor in
12
<PAGE> 13
interest to Continental Can Company, USA, Inc. ("CCC"), arising from the 1987
acquisition by U.S. Can of the general packaging business of CCC. These alleged
indemnity obligations relate to environmental liabilities, reimbursable
insurance deductibles and reinsurance amounts, and certain personal injury
claims and employment discrimination claims. The Complaint includes counts for
breach of contract, declaratory judgment, indemnification and contribution,
CERCLA remedies, state environmental law remedies and unjust enrichment. CHI
seeks unspecified compensatory damages, consequential and incidental damages,
interest, attorneys' fees and costs of litigation, equitable relief,
environmental response costs, and restitution. No aggregate dollar amount of
damages is specified in the Complaint. However, in an initial discovery
disclosure served on U.S. Can, CHI alleged that its damages to the date of such
disclosure were approximately $4.4 million. U.S. Can has filed an Answer to the
Complaint, asserted affirmative defenses and made counterclaims against CHI
seeking reimbursement for expenses and accruals relating to postretirement
medical and life insurance benefits for former employees of CCC, and expenses
incurred as a result of CCC's breach of its contractual indemnification
obligations to U.S. Can. The case has been transferred to the United States
District Court for the Northern District of Illinois. U.S. Can believes it has
meritorious defenses to all of CHI's claims.
The National Labor Relations Board has issued a decision finding the
Company in violation of certain sections of the National Labor Relations Act as
a result of the Company's closure of certain facilities in 1991 and failure to
offer inter-plant job opportunities to affected employees. Management does not
believe that the resolution of this matter will have a material adverse effect
on the Company's financial condition or results of operations.
The Company understands that the groundwater in San Leandro, California is
contaminated at shallow and intermediate depths, and that the area of concern
partially extends to the groundwater below a facility formerly owned by the
Company. In late April 1996, the California Department of Toxic Substances
Control ("CDTSC") issued to certain of the past and present owners of this
facility, including U.S. Can, an order directing such owners to conduct
remediation activities at this site. Although there can be no assurance that the
Company will not incur material costs and expenses in connection with the CDTSC
order, extensive environmental testing has been performed at this facility and
management does not believe that substantial remediation activities at this
facility are justified. Representatives of the Company have met with the CDTSC
and agreed to undertake additional site assessment work. The San Leandro
facility was closed in 1989 and was sold, except for a related parcel of land,
in 1994. The remaining parcel was sold in 1995. In connection with the sale, the
Company agreed to indemnify the purchaser against any environmental claims
related to the Company's ownership of the property.
The Company is involved in various other environmental and legal actions
and administrative proceedings. Management is of the opinion that their outcome
will not have a material effect on the Company's financial position or results
of operations.
(7) SUBSEQUENT EVENTS
On August 1, 1996, the Company announced that it signed a definitive
agreement to purchase certain aerosol can businesses of Crown Cork & Seal
Company, Inc. ("Crown") located in the United Kingdom and Italy as well as the
aerosol can businesses of a Crown subsidiary, Carnaud Metalbox S.A. ("CMB")
located in France, Spain and Germany. The purchase price includes $52.8 million
in cash and the assumption of net indebtedness totaling $5.8 million, subject to
a post-closing adjustment for changes in working capital from April 30, 1996
through closing. Closing, which is subject to approval of various European
regulatory
13
<PAGE> 14
authorities, is currently expected to occur in the third quarter. The operations
to be acquired produce approximately 24% of all European tinplate aerosol cans
and, in 1995, the businesses to be acquired generated sales of $119 million and
earnings, before interest, taxes, depreciation and amortization, of more than
$14 million.
On August 2, 1996, U.S. Can completed the acquisition of all of the
outstanding stock of three related companies, CPI Plastics, Inc., CP Ohio, Inc.
and CP Illinois, Inc. (collectively, "CPI"), engaged in manufacturing molded
plastic drums and pails and poultry products at locations in Newnan, Georgia,
Alliance, Ohio and Jerseyville, Illinois. To acquire the stock, U.S. Can paid
approximately $15 million in cash to the stockholders of CPI, subject to
adjustment for the change in net working capital (as defined in the acquisition
agreement) from December 31, 1995 through the closing date, plus potential
contingent payments (in an amount not to exceed $1 million) based upon CPI's
financial performance for the years 1996 and 1997. This acquisition was financed
with borrowings under the Acquisition Facility. For additional information
regarding the Acquisition Facility, see Note (4) of the Notes to Condensed
Consolidated Financial Statements and Condensed Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following narrative discusses the results of operations, liquidity and
capital resources for the Corporation and U.S. Can on a consolidated basis. The
consolidated group is referred to herein as the Company. The Corporation's only
business interest is in its ownership of U.S. Can's common stock. Operating
results for the Company and U.S. Can are identical. This section should be read
in conjunction with the Corporation's and U.S. Can's Joint Annual Report on Form
10-K/A-1 for the fiscal year ended December 31, 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained therein.
RESULTS OF OPERATIONS
QUARTERLY PERIOD ENDED JUNE 30, 1996 VS. QUARTERLY PERIOD ENDED JULY 2, 1995
Net Sales
Net sales for the quarterly period ended June 30, 1996 totaled $180.6
million, an increase of 8.8% over the corresponding period in 1995. In 1996,
U.S. Can realized additional sales in its Metal Services line as a result of the
1996 acquisition of the assets of AMS. Increased unit volumes in aerosol and
paint containers and custom and specialty products also contributed to the sales
growth.
Gross Income
Gross income of $23.1 million for the second quarter of 1996 was $1.9
million, or 9.0%, higher than gross income for the second quarter of 1995. Gross
margin of 12.8% of net sales equalled that of the first quarter of 1995.
Operating Income
The Company's operating income of $16.0 million for the second quarter of
1996 was $1.9 million, or 13.6%, higher than operating income for the second
quarter of 1995. Income was favorably impacted by higher volume and an overhead
reduction program begun in late 1995. Operating income as a percent of net sales
was 8.9% for the second quarter of 1996 as compared to 8.5% for the second
quarter of 1995. Selling, general and
14
<PAGE> 15
administrative expenses decreased slightly period to period and decreased as a
percent of net sales from 4.3% of net sales in the second quarter of 1995 to
3.9% of net sales in the second quarter of 1996.
Interest and Other Expenses
Interest expense on borrowings remained flat in the second quarter of 1996
as compared to the second quarter of 1995, as a result of increased borrowing,
offset by lower interest rates. Amortization of deferred financing costs and
other expense remained constant in the second quarter of 1996 as compared to the
second quarter of 1995.
Net Income
Due to the factors discussed above, net income in the second quarter of
1996 was $5.1 million, compared to $4.0 million in the first quarter of 1995.
Primary earnings per share were $0.39 in the second quarter of 1996 compared to
$0.31 in the first quarter of 1995, an increase of 26%. Weighted average shares
outstanding increased slightly from period to period primarily as a result of
option exercises.
SIX-MONTH PERIOD ENDED JUNE 30, 1996 VS. SIX-MONTH PERIOD ENDED JULY 2, 1995
Net Sales
Net sales for the six-month period ended June 30, 1996 totaled $344.2
million, an increase of 7.6% over the corresponding period in 1995. Sales gains
for the year-to-date period reflect volume gained through acquisitions as well
as volume growth in the Company's core business. U.S. Can has realized
additional sales as a result of the 1995 acquisitions of the stock of MLI,
Plastite and Hunter, and of certain assets of Prospect, and the 1996 AMS
acquisition. Increased unit volumes in aerosol and paint containers and custom
and specialty products, as well as increased revenue from Metal Services, also
contributed to the sales growth.
Gross Income
Gross income of $44.6 million for the first half of 1996 was $1.5 million,
or 3.6%, higher than gross income for the first half of 1995. The 1996 AMS
acquisition and higher margins on certain products contributed to this increase.
Gross margin declined to 13.0% of net sales in the first half of 1996 from 13.5%
of net sales in the first half of 1995. The Company made a significant advance
purchase of steel in late 1994 and, as a result, the Company did not feel the
full impact of the 1995 steel price increase in the first quarter of 1995. The
cost savings in 1995 realized from this advance purchase of steel and increased
sales in 1996 in lower margin products contributed to the decrease in gross
margin.
Operating Income
The Company's operating income of $30.7 million for the first half of 1996
was $1.3 million, or 4.4%, higher than operating income for the first half of
1995. Income was favorably impacted by higher volume and an overhead reduction
program begun in late 1995. The first quarter of 1995 compared favorably to this
year due to late 1994 material purchases in advance of a January 1995 steel
price increase. Operating income as a percent of net sales was 8.9% for the
first half of 1996 as compared to 9.2% for the first half of 1995. The Company
experienced a slight increase in selling, general and administrative expenses
period to period. However, these expenses as a percent of net sales decreased
from 4.3% of net sales in the first half of 1995 to 4.0% of net sales in the
first half of 1996.
15
<PAGE> 16
Interest and Other Expenses
Interest expense on borrowings increased by approximately $373,000 in the
first half of 1996 as compared to the first half of 1995. The increase is a
result of increased borrowing, primarily to finance the Company's acquisitions,
offset by lower interest rates. Amortization of deferred financing costs and
other expense increased in the first half of 1996 by $185,000 as compared to the
first half of 1995. The increase is primarily a result of new borrowings and
goodwill amortization related to the acquisitions.
Net Income
Due to the factors discussed above, first half net income was $9.4 million,
up 4% from the first half of 1995. Primary earnings per share were $0.72 for the
first half of 1996, up 2% from the first half of 1995. Weighted average shares
outstanding increased slightly from period to period primarily as a result of
option exercises.
LIQUIDITY AND CAPITAL RESOURCES
"SAFE HARBOR" statement under the Private Securities Litigation Reform Act
of 1995: With the exception of historical information, the matters discussed in
this section are forward-looking statements that involve risks and uncertainties
including, but not limited to, market conditions, competition, raw material
costs, environmental laws and regulations, and other risks indicated in the
Company's other filings with the Securities and Exchange Commission.
The Company's cash requirements for operations, acquisitions and capital
expenditures during the six-month period ended June 30, 1996 were financed by
internally generated cash flows and borrowings under the Revolving Credit
Facility. The Revolving Credit Facility is provided to U.S. Can under the Credit
Agreement. For a more detailed discussion of the Credit Agreement, see Note (4)
of the unaudited Notes to Condensed Consolidated Financial Statements and
Condensed Financial Statements.
In early April 1996, the lenders under the Credit Agreement provided U.S.
Can a temporary $10 million increase in the Revolving Credit Facility due to
seasonal inventory requirements. In late April 1996, these lenders provided U.S.
Can an additional temporary $20 million increase in the Revolving Credit
Facility due to the acquisition of certain assets from Alltrista. The Revolving
Credit Facility will be automatically reduced by $10 million on September 30,
1996, and by $20 million on December 31, 1996. In July 1996, the Company's
lenders provided U.S. Can the Acquisition Facility to fund certain permitted
acquisitions and, at U.S. Can's option, prepay the Revolving Credit Facility by
$20 million on December 31, 1996. The Acquisition Facility matures on April 30,
1997, but U.S. Can may, at its option and subject to certain restrictions, elect
to convert the outstanding loans under the Acquisition Facility to term loans
with a five-year amortization period. For a more detailed discussion of the
Acquisition Facility, see Note (4) of the unaudited Notes to Condensed
Consolidated Financial Statements and Condensed Financial Statements. The
Company is evaluating several alternatives for more permanent long-term
financing.
In April 1996, U.S. Can completed the acquisition of certain assets from
Alltrista for a purchase price of approximately $14.9 million. In a related
transaction, in June 1996, U.S. Can purchased certain inventory from AMS for
approximately $8 million. The cash portion of the purchase price was funded by
the Revolving Credit Facility. For a more detailed discussion of this
acquisition, see Note (2) of the unaudited Notes to Condensed Consolidated
Financial Statements and Condensed Financial Statements.
16
<PAGE> 17
In August 1996, the Company completed the acquisition of all of the
outstanding stock of CPI for approximately $15 million, subject to certain
post-closing adjustments and potential future contingent payments. The cash
portion of the purchase price was funded by the Acquisition Facility. In August
1996, the Company also announced the signing of a definitive agreement to
purchase certain European aerosol container manufacturing operations from Crown.
The purchase price includes $52.8 million in cash, subject to a post-closing
adjustment for certain changes in working capital. Closing is currently expected
to occur in the third quarter and this transaction is expected to be funded
through a borrowing under the Acquisition Facility. For a more detailed
discussion of these acquisitions, see Note (7) of the unaudited Notes to
Condensed Consolidated Financial Statements and Condensed Financial Statements.
Under the terms of the Credit Agreement, $9,000,000 of the term loan had
been repaid as of July 30, 1996. As of June 30, 1996, U.S. Can had borrowings of
$123.3 million outstanding under the Credit Agreement, $11.7 million in letters
of credit had been issued pursuant thereto, and $18.0 million of unused credit
remained available thereunder. As of August 7, 1996, U.S. Can had borrowings of
$146.0 million outstanding under the Credit Agreement (including the Acquisition
Facility), $11.7 million in letters of credit had been issued pursuant thereto,
and $7.8 million of unused credit remained available thereunder (including the
two temporary increases to the Revolving Credit Facility). As of June 30, 1996,
U.S. Can was in compliance with all restrictive covenants of the Credit
Agreement and its other long-term debt agreements.
Management believes that cash flow from operations, amounts available under
the Revolving Credit Facility and proceeds from equipment financings should
provide sufficient funds to meet short-term and long-term capital expenditure
and debt amortization requirements, and other cash needs in the ordinary course
of business. The Company would expect to finance acquisitions and investments
through use of the Acquisition Facility or some combination of cash, stock
and/or debt financing.
17
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of the San Leandro, California remediation order, see Note
(6) of the unaudited Notes to Condensed Consolidated Financial Statements and
Condensed Financial Statements contained in Item 1 of Part I of this report
(which is incorporated herein in its entirety by this reference).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation's Annual Meeting of Stockholders was held on April 25,
1996. The following persons were nominated and elected to serve as Directors of
the Corporation for a term of three years or until their successors have been
duly elected and qualified:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
- --------------------- ----------- --------
<S> <C> <C> <C>
Ricardo Poma 10,402,570 58,495
Michael J. Zimmerman 10,402,609 58,456
</TABLE>
In addition, the Corporation's appointment of Arthur Andersen LLP to serve
as its independent auditor for fiscal year 1996 was ratified in accordance with
the following vote:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
- --------------------- ----------- --------
<S> <C> <C> <C>
10,451,628 6,525 2,912
</TABLE>
The 1996 Employee Stock Purchase Plan was presented and adopted in
accordance with the following vote:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTE
- --------------------- ----------- -------- --------
<S> <C> <C> <C>
10,318,613 82,068 24,506 35,878
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENT (IF APPLICABLE)
- ------ ----------------------------------------------------------------------- ---------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of U.S. Can Corporation.......... * 4.3
3.2 Restated Certificate of Incorporation of United States Can Company..... @ 3.1
3.3 By-Laws of U.S. Can Corporation........................................ & 4.1
3.4 By-Laws of United States Can Company................................... X 3.3
4.1 Amendment No. 7 to Credit Agreement, dated July 24, 1996, together with
a list of all omitted schedules........................................
10.1 Asset Purchase Agreement dated as of April 29, 1996, between U.S. Can
and Alltrista.......................................................... ** 2.1
10.2 Engagement agreement and related agreement dated April 25, 1996, with
Salomon Brothers Inc...................................................
27.1 Financial Data Schedule (EDGAR version only)...........................
</TABLE>
- -------------------------
* Previously filed with Registration Statement on Form S-3 of the Corporation,
filed on June 1, 1994 (Registration No. 33-79556).
** Previously filed with Form 8-K Current Report of the Corporation and U.S.
Can, filed on May 14, 1996.
@ Previously filed with Form 10-K Annual Report of U.S. Can for the fiscal year
ended December 31, 1992.
18
<PAGE> 19
& Previously filed with Registration Statement on Form S-8 of the Corporation,
filed on March 23, 1994 (Registration No. 33-76742).
X Previously filed with Registration Statement on Form S-1 of U.S. Can, filed
on November 1, 1991 (Registration No. 33-43734).
The registrant agrees to furnish supplementally a copy of any omitted schedule
to Amendment No. 7 to Credit Agreement to the Commission upon request.
(b) U.S. Can Corporation and United States Can Company filed a joint report
on Form 8-K concerning the AMS acquisition on May 14, 1996, and a joint
report on Form 8-K/A-1 concerning the AMS acquisition on June 25, 1996.
19
<PAGE> 20
SIGNATURES
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.
U.S. CAN CORPORATION
Date: August 13, 1996 By: /s/ TIMOTHY W. STONICH
----------------------------------
Timothy W. Stonich
Executive Vice President-Finance,
Chief Financial Officer and
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the undersigned, in his capacity as the principal
financial officer of the registrant.
Date: August 13, 1996 /s/ TIMOTHY W. STONICH
------------------------------------
Timothy W. Stonich
Executive Vice President-Finance,
Chief Financial Officer and
Secretary
20
<PAGE> 21
SIGNATURES
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.
UNITED STATES CAN COMPANY
Date: August 13, 1996 By: /s/ TIMOTHY W. STONICH
------------------------------------
Timothy W. Stonich
Executive Vice President-Finance,
Chief Financial Officer and
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the undersigned, in his capacity as the principal
financial officer of the registrant.
Date: August 13, 1996 /s/ TIMOTHY W. STONICH
--------------------------------------
Timothy W. Stonich
Executive Vice President-Finance,
Chief Financial Officer and Secretary
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S>
4.1 Amendment No. 7 to Credit Agreement, dated July 24, 1996, together with a list of
all omitted schedules
10.2 Engagement agreement and related agreement dated April 25, 1996, with Salomon
Brothers Inc
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
<PAGE> 1
EXHIBIT 4.1
AMENDMENT NO. 7
THIS AMENDMENT NO. 7 (this "Amendment"), dated as of July 24, 1996, among
United States Can Company, a Delaware corporation (the "Borrower"), the various
financial institutions that are or may become parties to the Credit Agreement
described hereinbelow (individually, a "Lender" and collectively, the
"Lenders"), Bank of America Illinois, an Illinois banking corporation, as agent
for the Lenders (in such capacity, the "Agent") and BA Securities, Inc., a
Delaware corporation, as arranger for the Lenders (the "Arranger"), is made
pursuant to Section 9.1 of that certain Credit Agreement, dated as of April 29,
1994 (as amended or modified and in effect on the date hereof, the "Existing
Credit Agreement" and, as amended or otherwise modified in this Amendment, the
"Amended Credit Agreement"; capitalized terms used but not defined herein
having the same respective meanings as in the Amended Credit Agreement), among
the Borrower, the Lenders and the Agent.
WITNESSETH:
WHEREAS, the Borrower has requested that the Lenders amend the Existing
Credit Agreement in the manner hereinafter appearing; and, subject to the terms
and conditions set forth herein, the Lenders have agreed to so amend the
Existing Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE 1. - AMENDMENTS
1.1. The following new Section 2.1.3 is hereby added to the Existing
Credit Agreement:
SECTION 2.1.3. Acquisition Loan Commitment.
From time to time on any Business Day occurring prior
to the Acquisition Loan Commitment Termination Date,
each Lender, severally and for itself alone, agrees to
make Loans (relative to such Lender, its "Acquisition
Loans") to the Borrower equal to such Lender's
Acquisition Percentage of the aggregate amount of the
Borrowing of Acquisition Loans requested by the
Borrower to be made on such day. The commitment of
each Lender described in this Section 2.1.3 is herein
referred to as its "Acquisition Loan Commitment";
provided that (a) the aggregate principal amount of
all Acquisition Loans which any Lender shall be
committed to have made hereunder shall not at any time
exceed the product of (i) such Lender's Acquisition
Percentage and (ii) the Acquisition Loan Commitment
Amount and (b) the aggregate principal amount of all
Acquisition Loans which the Lenders shall be committed
to have made hereunder shall not at any time exceed
the Acquisition Loan Commitment Amount. No amounts
paid or prepaid with respect to any Acquisition Loan
may be reborrowed.
1.2. Section 2.2 of the Existing Credit Agreement is hereby amended
in its entirety to read as follows:
<PAGE> 2
SECTION 2.2 Reduction of Commitment Amounts. The Revolving
Credit Commitment Amount and the Acquisition Loan Commitment Amount
are subject to reduction from time to time pursuant to this Section
2.2.
SECTION 2.2.1 Optional Reduction of Revolving Credit
Commitment Amount. The Borrower may, from time to time on
any Business Day, voluntarily reduce the amount of the
Revolving Credit Commitment Amount by paying to the
Agent for the account of the Lenders such amount as is
necessary to reduce the outstanding principal balance
of the Revolving Loans plus Letter of Credit
Obligations to such reduced Revolving Credit
Commitment Amount; provided that all such reductions
shall require at least one (1) Business Day's prior
written notice to the Agent and be permanent and that
any partial reduction of the Revolving Credit
Commitment Amount shall be in a minimum amount of
$2,500,000 and in an integral multiple of $1,000,000
in excess thereof.
SECTION 2.2.2 Mandatory Reduction of Revolving
Credit Commitment Amount. The Revolving Credit
Commitment Amount shall be automatically and
permanently reduced by $10,000,000 from $125,000,000
to $115,000,000 on September 30, 1996 and by
$20,000,000 from $115,000,000 to $95,000,000 on
December 31, 1996.
SECTION 2.2.3 Optional Reduction of Acquisition Loan
Commitment Amount. The Borrower may, on any Business Day,
voluntarily reduce the amount of the Acquisition Loan
Commitment Amount to zero by paying to the Agent for
the account of the Lenders the outstanding principal
balance of all Acquisition Loans; provided that such
reduction shall require at least one (1) Business
Day's prior written notice to the Agent and be
permanent.
1.3. The second sentence of Section 2.4(a) of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
Each such notice (a "Notice of Borrowing") shall be
requested by telephone with same day written
confirmation by facsimile transmission, substantially
in the form of Exhibit B hereto, specifying therein
the date, the principal amount of such Loans that are
to be Revolving Loans and Acquisition Loans,
respectively, and the type of Borrowing, and, in the
case of a Borrowing of Eurodollar Loans, the initial
Interest Period thereof, and, in the case of a
Borrowing requested on the Closing Date, the principal
amount of such Loans that are to be Revolving Loans
and Term Loans, respectively.
1.4. The last sentence of Section 2.6 of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
Notwithstanding anything contained in this Section 2.6
to the contrary, no portion of the outstanding
principal amount of any Term-Out Loans or Term Loans
may be made or continued as, or be converted into,
Eurodollar Loans if, after giving effect to such
action, the Interest Period applicable thereto shall
extend beyond the date of any scheduled repayment of
such
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Term-Out Loans pursuant to Section 2.8.1(g), or of such Term Loans
pursuant to Section 2.8.1(c), as the case may be, unless a
sufficient principal amount of such Loans is being maintained as
Base Rate Loans or Eurodollar Loans having an Interest Period
ending on or prior to the date of any such scheduled repayment or
mandatory prepayment to permit such repayment to be applied in full
to such Loans being maintained as Base Rate Loans.
1.5. Section 2.8.1(d) of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
(d) shall, concurrently with the receipt by the
Borrower or any Subsidiary of any Net Disposition
Proceeds (or, in the case of a prepayment of
Eurodollar Loans (subject to the requirements of this
Section 2.8.1), on the last day of the current
Interest Period for such Eurodollar Loans), make a
mandatory prepayment of the outstanding principal
amount, if any, first, of all Acquisition Loans and
then, of all Term Loans;
1.6. Section 2.8.1(e) of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
(e) shall, concurrently with the receipt by the
Borrower or any Subsidiary of any Net Securities
Proceeds (or, in the case of a prepayment of
Eurodollar Loans (subject to the requirements of this
Section 2.8.1), on the last day of the current
Interest Period for such Eurodollar Loans), make a
mandatory prepayment of the outstanding principal
amount, if any, of all Acquisition Loans;
1.7. Section 2.8.1(f) of the Existing Credit Agreement is hereby
amended by deleting the period at the end thereof and substituting a semicolon
in lieu thereof.
1.8. The following new clause (g) is hereby added to Section
2.8.1 of the Existing Credit Agreement:
(g) shall, on the last Business Day of each of
the months of January, April, July and October,
commencing with the first such day following the
Term-Out Election Date and ending with the last such
day before the Term-Out Loan Commitment Termination
Date, make a mandatory payment of all Term-Out Loans
equal to the Term-Out Payment; provided that on the
first such day following the Term-Out Election Date,
such mandatory payment shall be equal to the product
of (i) the Term-Out Payment multiplied by (ii) the
number of days elapsed since the Term-Out Election
Date divided by ninety (90) days;
1.9. The following new clause (h) is hereby added to Section
2.8.1 of the Existing Credit Agreement:
(h) shall, upon the receipt by the Borrower of
the proceeds of any Acquisition Loans made under
Section 4.4(a)(ii), make a mandatory prepayment of the
outstanding principal amount of all Revolving Loans.
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1.10. The penultimate paragraph of Section 2.8.1 of the Existing
Credit Agreement is hereby amended by inserting the phrase ", clause (g) and
clause (h)" immediately before the words "of this Section 2.8.1" in the seventh
to last line thereof and by adding the following sentences thereto:
Prepayments of Acquisition Loans may not be
reborrowed. Repayments and prepayments of Term-Out
Loans may not be reborrowed.
1.11. Section 2.8.2(a) of the Existing Credit Agreement is
hereby amended by inserting phrase "and Term-Out Loans" immediately after the
words "Term Loans".
1.12. Section 2.9.3(c) of the Existing Credit Agreement is
hereby amended by deleting the words "Term Loan or Revolving".
1.13. Section 2.10(b) of the Existing Credit Agreement is hereby
amended by inserting the phrase "Acquisition Loan Commitment," immediately
before the words "Revolving Credit Commitment" in the tenth to last line of the
first paragraph thereof.
1.14. Section 2.14(a) of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
(a) Commitment Fees. The Borrower agrees to pay
to the Agent, for the account of each Lender, a
commitment fee (the "Revolving Commitment Fee") in an
amount equal to the product of (i) the Applicable
Revolving Commitment Fee Percentage multiplied by (ii)
the daily average amount by which the Revolving Credit
Commitment Amount exceeds the sum of the outstanding
principal balance of the Revolving Loans plus the then
Letter of Credit Obligations for the period from the
Amendment No. 7 Effective Date until the Revolving
Credit Commitment Termination Date. The Revolving
Commitment Fee shall be payable quarterly in arrears
on the last day of each fiscal quarter for the period
then ended and on the Revolving Credit Commitment
Termination Date.
The Borrower also agrees to pay to the Agent, for
the account of each Lender, a commitment fee (the
"Acquisition Commitment Fee") in an amount equal to
the product of (iii) the Applicable Acquisition
Commitment Fee Percentage multiplied by (iv) the daily
average amount by which the Acquisition Loan
Commitment Amount exceeds the sum of the outstanding
principal balance of the Acquisition Loans for the
period from the Amendment No. 7 Effective Date until
the Acquisition Loan Commitment Termination Date. The
Acquisition Commitment Fee shall be payable quarterly
in arrears on the last day of each fiscal quarter for
the period then ended and on the Acquisition Loan
Commitment Termination Date.
1.15. The following new clause (e) is hereby added to
Section 2.14 of the Existing Credit Agreement:
(e) Acquisition Loan Activation Fee. On the date
of any Borrowing of Acquisition Loans, if the
aggregate principal amount of all Acquisition Loans,
including such Borrowing,
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<PAGE> 5
made hereunder exceeds $50,000,000, the Borrower agrees to pay to
the Agent an activation fee (the "Acquisition Loan Activation Fee")
equal to the product of (i) 0.25% multiplied by (ii) (A) the amount
of such Borrowing, if the aggregate principal amount of all
Acquisition Loans made hereunder before such Borrowing, is
$50,000,000 or greater, or (B) the aggregate principal amount of
all Acquisition Loans, including such Borrowing, made hereunder
minus $50,000,000, if the aggregate principal amount of all
Acquisition Loans made hereunder before such Borrowing is less than
$50,000,000, to be shared among the Lenders based upon their
respective Acquisition Percentages.
1.16. Section 2.15(g) of the Existing Credit Agreement is hereby
amended by inserting the following phrase immediately before the phrase "to the
unpaid principal amount of any Revolving Loans outstanding" in the seventh and
eighth lines thereof:
"to the unpaid principal amount of any Acquisition
Loans outstanding that are being maintained as Base
Rate Loans, third"
1.17. Section 2.18 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
SECTION 2.18. Warranty. Each Notice of Borrowing,
Continuation/Conversion Notice or Term-Out Election
Notice pursuant to Section 2.4, 2.6 or 2.22 and the
delivery of each Letter of Credit Request pursuant to
Section 3.2 shall automatically constitute a warranty
by the Borrower to the Agent and each Lender to the
effect that, on the date of such requested Borrowing,
continuation or conversion (other than any conversion
from a Eurodollar Loan to a Base Rate Loan required by
Section 2.12 or 2.19), election of the Term-Out Option
or the issuance of the requested Letter of Credit, as
the case may be, both (a) the warranties contained in
the Loan Documents (except to the extent changes in
facts or conditions are expressly permitted or
required hereunder or thereunder) shall be true and
correct in all material respects as of such requested
date as though made on the date thereof, and (b) no
Event of Default or Unmatured Event of Default shall
have then occurred and be continuing or will result
therefrom.
1.18. Section 2.20 of the Existing Credit Agreement is hereby
amended by inserting the phrase "Acquisition Loans, the" immediately before the
words "Revolving Loans" in the first line thereof.
1.19. Section 2.21 of the Existing Credit Agreement is hereby
amended by deleting the word "Borrower" from the tenth line thereof and by
inserting the word "Agent" in lieu thereof and by deleting the first sentence
and substituting the following two sentences in lieu thereof:
The Borrower shall use the proceeds of any Acquisition
Loans to make prepayments of Revolving Loans not to
exceed $20,000,000 in the aggregate on December 31,
1996 or to fund Acquisitions. The Borrower shall use
the proceeds of any Revolving Loans and any Term
Loans, and shall utilize any Letter of Credit, to
refinance the Existing Agreement, to provide ongoing
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<PAGE> 6
working capital, to fund Acquisitions and other general corporate
purposes; provided, that if Acquisition Loans may be borrowed, the
Borrower shall not use the proceeds of any Revolving Loans to fund
Acquisitions.
1.20. The following new Section 2.22 is hereby added to the
Existing Credit Agreement:
SECTION 2.22. Term-Out Option. On any Business
Day on or before the Acquisition Loan Commitment
Termination Date, the Borrower may elect to convert
all of the outstanding Acquisition Loans on such date
(the "Term-Out Election Date"), into Term-Out Loans
(the "Term-Out Option") by delivering to the Agent the
following no later than 11:00 a.m. (Chicago time),
five Business Days prior to the Term-Out Election
Date:
(a) notice to the Agent of such election (the
"Term-Out Election Notice");
(b) payment to the Agent of the Term-Out Fee, to
be shared among the Lenders based upon their
respective Acquisition Percentages; and
(c) documentation and evidence in form and
substance satisfactory to the Agent of the following:
(i) (A) such documents as the Agent may reasonably
request to evidence and perfect security interests
in the "Intellectual Property Collateral" (as
defined in the Additional Security
Agreement) in the United States Patent and
Trademark Office, the United States
Copyright Office and corresponding offices
in other countries of the world, (B) such
other evidence that all other actions
necessary or, in the opinion of the Agent,
desirable to perfect and protect the
priority of the security interests and liens
created by the Collateral Documents, and to
enhance the Agent's ability to preserve and
protect its interests in and access to the
Collateral, have been taken and (C) evidence
that payments of all fees, taxes and other
expenses in connection therewith shall have
been made;
(ii) a current survey of each of such properties,
which survey shall contain a flood plain
certification, shall be prepared in accordance
with the Minimum Standard Detail Requirements for
Land and Title Surveys as adopted by the American
Land Title Association and the American
Congress on Surveying and Mapping, and shall
be prepared and certified to the Agent, the
title insurance company insuring the Lien of
the New Mortgage thereon and the Borrower by
a licensed surveyor or engineer;
(iii) a recent date down endorsement of each title
insurance policy relating to each interest in real
property described in the Mortgage or the New
Mortgages, but if title insurance policies
have not been issued pursuant to the Title
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<PAGE> 7
Commitments under Section 2.24(b), the Borrower shall
cause such title insurance policies to be issued and
deliver such title insurance policies to the Agent;
(iv) Phase I environmental reports prepared by reputable
environmental engineering or consulting firms
consented to by the Agent, such consent not to be
unreasonably withheld, as to the compliance
with Environmental Laws of each interest in
real property described in the New
Mortgages, the results of which reports
shall be reasonably satisfactory to the
Agent; and
(v) opinions of local counsel to the Borrower with
respect to the New Mortgages, if requested by the
Agent in the Agent's sole discretion.
The Term-Out Election Notice shall be by telephone
with same day written confirmation by facsimile
transmission, specifying therein the Term-Out Election
Date, the Term-Out Amount and the Term-Out Fee. Once
given, the Term-Out Election Notice (whether in
writing or by telephone) shall be irrevocable and
binding on the Borrower. Promptly upon receipt of
such notice (which shall be effective upon receipt by
the Agent), the Agent shall advise each Lender
thereof. Subject to Section 2.18, upon the Borrower's
election of the Term-Out Option, (x) any references in
this Agreement to Acquisition Loans shall be deemed to
refer to Term-Out Loans; and (y) no new Acquisition
Loans may be borrowed.
1.21. The following new Section 2.23 is hereby added to the
Existing Credit Agreement:
SECTION 2.23. Expiration of Acquisition
Facility. At such time after the Acquisition Loan
Commitment Termination Date that the Agent shall have
received payment in full of all unpaid principal
amounts of and interest on all Acquisition Loans, as
soon as is reasonably practicable thereafter, the
Agent shall deliver to the Borrower all estoppel
letters, releases and termination statements necessary
to terminate any Liens held by the Agent for the
benefit of the Lenders in any real property, fixtures,
equipment, general intangibles and other personal
property taken pursuant to Section 2.1 of Amendment
No. 7 or at any time after the Amendment No. 7
Effective Date.
1.22. The following new Section 2.24 is hereby added to the
Existing Credit Agreement:
SECTION 2.24. Title Commitments.
(a) No later than thirty (30) days after the
Amendment No. 7 Effective Date, the Agent shall
have received, in form and substance satisfactory
to it, the Title Commitments dated down to show
the recording of the applicable New Mortgage
relating to each interest in real property
covered by the Title Commitments.
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<PAGE> 8
(b) On the earlier of (i) six months after
the earliest date down of the Title Commitments
pursuant to clause (a) and (ii) the Term-Out
Election Date, the Borrower shall have caused the
title insurance policies relating to the Title
Commitments to be issued; provided that the
Acquisition Loan Commitment Amount shall not have
been reduced to zero pursuant to Section 2.2.3.
1.23. Section 3.3 of the Existing Credit Agreement is hereby
amended by inserting the word "Revolving/Term" immediately before the words
"Eurodollar Margin" in the fourth line thereof.
1.24. The following new Section 4.4 is hereby added to the
Existing Credit Agreement:
SECTION 4.4 Conditions Precedent to Each
Acquisition Loan. The obligation of each Lender to
make any Acquisition Loan shall be subject to the
further conditions precedent:
(a) One of (i), (ii) or (iii) must occur: (i) the
Borrower shall represent, warrant and covenant to the
Agent and the Lenders as of the date of such
Borrowing, and the Agent shall have received (and upon
such receipt the Agent shall promptly forward to the
Lenders) evidence reasonably satisfactory to each of
the Agent and the Lenders of, the following:
(A) that the proceeds of such Borrowing
shall be used to fund an Acquisition;
(B) that the Acquisition Target shall not
engage in any business other than (A) the
businesses engaged in by the Borrower and its
Subsidiaries on the Amendment No. 7 Effective
Date and (B) any businesses or activities
substantially similar or related thereto.
(C) that the Acquisition Price shall not
exceed an amount equal to the product of six (6)
multiplied by the average of the EBITDA of the
Acquisition Target for the last two years, as
computed by the Borrower and supported by audited
financial statements or parts of consolidated
financial statements, or if such audited
financial statements are not available, such
financial statements as are reasonably acceptable
to the Agent;
(D) that the amount of such Borrowing shall
not exceed 160% of the book value of the assets
of the Acquisition Target to be acquired by the
Borrower or one of its Subsidiaries, as supported
by audited financial statements; and
(E) that the Borrower is in compliance with
all of its covenants and agreements in Article VI
hereof, both before and after giving effect to
the consummation of such Acquisition;
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<PAGE> 9
(ii) the proceeds of the Acquisition Loans shall
be directly applied to the prepayment of all Revolving
Loans; provided that (A) the date of such Borrowing is
on December 31, 1996 and (B) the aggregate principal
amount of all Acquisition Loans made under this
Section 4.4(a)(ii) shall not exceed $20,000,000; or
(iii) the Majority Lenders shall have consented
in writing to the making of such Borrowing.
(b) If required by Section 2.14(e), the Agent
shall have received from the Borrower, for the account
of the Lenders, the Acquisition Loan Activation Fee.
(c) If the proceeds of such Borrowing shall be
used to fund an Acquisition, (i) the Borrower has
pledged all of the outstanding capital stock of the
Acquisition Target to the Agent, for the benefit of
the Lenders, pursuant to an amendment to the Pledge
Agreement, (ii) to the extent possible on or before
the date of such Borrowing but if not possible, as
promptly as practicable thereafter but in no event
later than thirty (30) days thereafter, with respect
to foreign assets of the Acquisition Target, and seven
(7) days thereafter, with respect to all other aspects
of the Acquisition Target, the Acquisition Target has
executed and delivered to the Agent each of a security
agreement, a guaranty and a mortgage in form and
substance substantially similar (but modified as
necessary to meet the requirements of different legal
jurisdictions) to the Ellisco Security Agreement, the
Ellisco Guaranty and the New Mortgage, respectively
(the "Acquisition Target Documents"), and (iii) the
Borrower and the Acquisition Target have taken (and,
in the case of the collateral described in the
Acquisition Target Documents, shall have taken within
the time permitted for the execution and delivery of
the Acquisition Target Documents, if necessary) all
other steps reasonably requested by the Agent to grant
to the Agent for the benefit of the Secured Parties a
first priority Lien in the collateral described in the
Pledge Agreement and the Acquisition Target Documents
subject to no Liens whatsoever except for Liens
permitted under the Pledge Agreement and the
Acquisition Target Documents, respectively.
(d) The aggregate principal amount of all
Acquisition Loans made before December 31, 1996 shall
not exceed $77,000,000, and the aggregate principal
amount of all Acquisition Loans at any time shall not
exceed $97,000,000.
(e) The Agent shall have received (and upon such
receipt the Agent shall promptly forward to the
Lenders) a certificate in the form of Exhibit I (the
"Acquisition Loan Compliance Certificate") dated as of
the date of such Borrowing signed by the Borrower's
chief financial officer certifying as to the Pricing
Ratio as of the date of such Borrowing, after giving
effect to the Acquisition Loans and, if applicable,
the Acquisition.
1.25. Section 6.2.(a)(ii) of the Existing Credit Agreement is
hereby amended by deleting the last word "and" therefrom.
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<PAGE> 10
1.26. Section 6.2.(a)(iii) of the Existing Credit Agreement is
hereby amended by deleting the last period and substituting the phrase "; and"
in lieu thereof.
1.27. The following new clause (iv) is hereby added to Section
6.2(a) of the Existing Credit Agreement:
(iv) the Borrower may make Acquisitions; provided
that (A) the Borrower has not elected the Term-Out
Option, (B) the Acquisition Loan Commitment Loan
Amount does not exceed the aggregate principal amount
of all Acquisition Loans after giving effect to any
Acquisition Loans in connection with the Acquisition,
(C) the Acquisition Price of any one Acquisition does
not exceed $70,000,000, and (D) the conditions
precedent in Section 4.4 have been satisfied.
1.28. Section 6.2(c) of the Existing Credit Agreement is hereby
amended by inserting the following phrase immediately before the phrase
"provided that no Default" in the third to last line thereof:
"(v) the Borrower may refinance the Subordinated
Notes with new Subordinated Debt or equity securities
or a combination thereof; provided that the terms and
conditions of any such new Subordinated Debt are as
follows: (A) the principal amortization is not
shorter, (B) the interest rate is not greater, (C) the
covenants are not more restrictive, (D) the
subordination provisions are not less protective of
senior debt and (E) the terms and conditions are
otherwise no less favorable to the Borrower than the
terms and conditions of the Subordinated Notes;"
1.29. Section 6.2(i) of the Existing Credit Agreement is hereby
amended by inserting the following phrase immediately after the words "twelve
consecutive months" in the seventh line thereof:
"; provided that the Borrower may refinance the
Subordinated Notes with new Subordinated Debt or
equity securities or a combination thereof if the
terms and conditions of any such new Subordinated Debt
are as follows: (A) the principal amortization is not
shorter, (B) the interest rate is not greater, (C) the
covenants are not more restrictive, (D) the
subordination provisions are not less protective of
senior debt and (E) the terms and conditions are
otherwise no less favorable to the Borrower than the
terms and conditions of the Subordinated Notes"
1.30. Section 6.3(b) of the Existing Credit Agreement is hereby
amended by adding the following phrase immediately before the final period
thereof:
"; provided, further, that if the Borrower has elected
the Term-Out Option, the amount of Capital
Expenditures permitted by this Section 6.3(b) in a
fiscal year shall be reduced by $5,000,000 for each
$25,000,000 principal amount or fraction thereof of
Acquisition Loans that are outstanding as of the end
of that fiscal year"
1.31. Section 6.3(f) of the Existing Credit Agreement is hereby
amended by deleting the amount "$7,000,000" from the third line thereof and
substituting the amount "$64,100,000" in lieu thereof and by
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<PAGE> 11
deleting the date "March 31, 1994" in the fifth and sixth lines thereof and
substituting the date "December 31, 1995" in lieu thereof.
1.32. Section 9.11(a) of the Existing Credit Agreement is hereby
amended by inserting the phrase ", the Arranger" immediately after the words
"the Agent" in the second line thereof.
1.33. The definition of "Applicable Commitment Fee Percentage"
in Schedule I of the Existing Credit Agreement is hereby deleted in its
entirety.
1.34. The definition of "Applicable Eurodollar Margin" in
Schedule I of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
"Applicable Eurodollar Margin" means, as the
context may require, either the Applicable Acquisition
Eurodollar Margin or the Applicable Revolving/Term
Eurodollar Margin.
1.35. The definition of "Base Rate" in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as
follows:
"Base Rate" means (a) the higher of:
(i) the rate of interest publicly announced from
time to time by Bank of America Illinois in Chicago,
Illinois, as its reference rate. It is a rate set by
Bank of America Illinois based upon various factors
including Bank of America Illinois's costs and desired
return, general economic conditions and other factors,
and is used as a reference point for pricing some
loans, which may be priced at, above, or below such
announced rate. Any change in the reference rate
announced by Bank of America Illinois shall take
effect at the opening of business on the day specified
in the public announcement of such change; and
(ii) 0.50% per annum above the latest Federal
Funds Rate; plus
(b) the Applicable Base Rate Margin.
1.36. The definition of "Collateral Documents" in Schedule I
of the Existing Credit Agreement is hereby amended by inserting the
phrase "the New Mortgages, the Additional Security Agreement," immediately
before the words "the bailee letters" in the third line thereof.
1.37. The definition of "Commitment" in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
"Commitment" means, as the context may require or
allow, a Lender's Acquisition Loan Commitment,
Revolving Credit Commitment or Term Loan Commitment.
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<PAGE> 12
1.38. The definition of "Commitment Fee" in Schedule I of the
Existing Credit Agreement is hereby deleted in its entirety.
1.39. The definition of "Commitment Termination Date" in
Schedule I of the Existing Credit Agreement is hereby amended in its entirety
to read as follows:
"Commitment Termination Date" means, as the
context may require or allow, the Acquisition Loan
Commitment Termination Date, the Revolving Credit
Commitment Termination Date or the Term Loan
Commitment Termination Date.
1.40. The definition of "EBITDA" in Schedule I of the Credit
Agreement is hereby amended by adding the following proviso immediately before
the final period thereof:
"; provided that the "EBITDA" of the Borrower and its
consolidated Subsidiaries may include the EBITDA of
any Acquisition Target that has been acquired within
the current fiscal year for such Acquisition Target's
most recent fiscal year, as supported by audited
financial statements"
1.41. The definition of "Loan" in Schedule I of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
"Loan" means, as the context may require or
allow, any Acquisition Loan, Revolving Loan, Term Loan
or Term-Out Loan.
1.42. The definition of "Net Securities Proceeds" in Schedule I
of the Existing Credit Agreement is hereby amended by inserting the following
phrase immediately before the final period:
"; provided that "Net Securities Proceeds" shall not
include any proceeds applied to the prepayment of the
Subordinated Notes refinanced with any new
Subordinated Debt or equity securities or a
combination thereof as permitted hereby and any
related prepayment premiums required by the terms of
the Subordinated Notes"
1.43. The definition of "Percentage" in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as
follows:
"Percentage" means, relative to any Lender, its
Acquisition Percentage, Revolving Percentage or Term
Percentage, as applicable.
1.44. The definition of "Pricing Period" in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
"Pricing Period" means the period commencing on a
Pricing Commencement Date and ending on the next
Pricing End Date thereafter.
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1.45. The definition of "Pricing Ratio" in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
"Pricing Ratio" means, as of any Pricing
Reference Date, a fraction equal to Total Funded Debt
divided by EBITDA for the most recent four fiscal
quarters then ended.
1.46. The definition of "Required Debt Amortization" in
Schedule I of the Existing Credit Agreement is hereby amended by
deleting the parenthetical at the end thereof and substituting the following
parenthetical in lieu thereof:
"(other than, to the extent included therein, any such
principal payments permitted or required pursuant to
Section 2.8.1(a), 2.8.1(b), 2.8.1(d), 2.8.1(e),
2.8.1(f), 2.8.1(g) or 2.8.1(h))"
1.47. The definition of "Stated Maturity Date" in Schedule I
of the Existing Credit Agreement is hereby amended in its entirety to
read as follows:
"Stated Maturity Date" means, (a) in the case of
the Acquisition Loans, the Acquisition Loan Commitment
Termination Date, (b) in the case of the Revolving
Loans, the Revolving Credit Commitment Termination
Date, (c) in the case of the Term Loans, the Term Loan
Commitment Termination Date and (d) in the case of the
Term-Out Loans, the Term-Out Loan Commitment
Termination Date.
1.48. The definition of "Term Loan Commitment Amount" in
Schedule I of the Existing Credit Agreement is hereby amended by
deleting the amount "$35,000,000" and inserting the amount "$28,000,000" in
substitution therefor.
1.49. The definition of "Voting Percentage in Schedule I of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
"Voting Percentage" of any Lender means, at any
time, the percentage which (i) the sum of such
Lender's Acquisition Loan Commitment at such time plus
such Lender's Revolving Credit Commitment at such time
plus such Lender's Term Loan Commitment at such time
is of (ii) the sum of the Acquisition Loan Commitment
Amount at such time plus the Revolving Credit
Commitment Amount at such time plus the Term Loan
Commitment Amount at such time, in each case as shown
by the applicable entries in the Register or in the
records of the Agent.
1.50. Schedule I of the Existing Credit Agreement is hereby
amended by adding the following definitions in the appropriate
alphabetical order:
"Acquisition" means a merger or consolidation of
the Borrower or one of its Subsidiaries with, or the
acquisition by the Borrower or one of its Subsidiaries
of all or substantially all of the outstanding capital
stock or assets of, any Person other than the Borrower
or any of its Subsidiaries (such Person is herein
defined as an "Acquisition Target").
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<PAGE> 14
"Acquisition Commitment Fee" has the meaning
specified in Section 2.14.
"Acquisition Loan" has the meaning specified in
Section 2.1.3.
"Acquisition Loan Activation Fee" has the meaning
specified in Section 2.14(e).
"Acquisition Loan Commitment" has the meaning
specified in Section 2.1.3.
"Acquisition Loan Commitment Amount" means
$97,000,000 as such amount may be reduced pursuant to
Section 2.2.3.
"Acquisition Loan Commitment Termination Date"
means April 30, 1997 or, if the Borrower has elected
the Term-Out Option, the Term-Out Loan Commitment
Termination Date, or such earlier date of termination
in whole of all of the Acquisition Loan Commitments
pursuant to Section 2.2.3 or 7.2.
"Acquisition Loan Compliance Certificate" shall
have the meaning specified in Section 4.4(e).
"Acquisition Percentage" means, relative to any
Lender, its Percentage of the Acquisition Loan
Commitment Amount as set forth opposite such Lender's
name on Schedule II or if such Lender has entered into
an Assignment and Acceptance, the Percentage set forth
for such Lender in the Register maintained by the
Agent pursuant to Section 9.7(d).
"Acquisition Price" means, with respect to an
Acquisition, the aggregate fair market values of the
cash, securities and other Property paid by the
Borrower in consideration for such Acquisition.
"Acquisition Target" has the meaning specified in
the definition of "Acquisition".
"Acquisition Target Documents" has the meaning
specified in Section 4.4(c).
"Additional Security Agreement" means the
security agreement of July __, 1996 executed by the
Borrower in favor of the Agent for the benefit of the
Secured Parties to secure the Obligations.
"Amendment No. 7" means Amendment No. 7 to this
Agreement, dated as of July __, 1996.
"Amendment No. 7 Effective Date" means the date
on which the Agent shall have received all of the
items required under Section 2.1 of Amendment No. 7.
-14-
<PAGE> 15
"Applicable Acquisition Base Rate Margin" means,
during any Pricing Period, the amount set forth below
for such Applicable Acquisition Base Rate Margin,
depending on the Pricing Ratio as of the Pricing
Reference Date for such Pricing Period:
<TABLE>
<CAPTION>
GREATER THAN OR GREATER THAN OR
EQUAL TO 2.50 TO EQUAL TO 3.00 TO GREATER THAN OR
LESS THAN 1.00 BUT LESS THAN 1.00 BUT LESS THAN EQUAL TO 3.50 TO
PRICING RATIO 2.50 TO 1.00 3.00 TO 1.00 3.50 TO 1.00 1.00
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable
Acquisition Base
Rate Margin 0.0% 0.0% 0.25% 0.375%
====================================================================================================
</TABLE>
; provided that if and for so long as the Borrower
is in default of its obligations to deliver a
Compliance Certificate under Section 6.4(b) or
Section 6.4(c), the Applicable Acquisition Base
Rate Margin shall be 0.775%.
"Applicable Acquisition Commitment Fee
Percentage" means, during any Pricing Period, the
amount set forth below for such Applicable
Acquisition Commitment Fee Percentage, depending
on the Pricing Ratio as of the Pricing Reference
Date for such Pricing Period:
<TABLE>
<CAPTION>
GREATER THAN OR GREATER THAN OR
EQUAL TO 2.50 TO EQUAL TO 3.00 TO GREATER THAN OR
LESS THAN 1.00 BUT LESS THAN 1.00 BUT LESS THAN EQUAL TO 3.50 TO
PRICING RATIO 2.50 TO 1.00 3.00 TO 1.00 3.50 TO 1.00 1.00
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable
Acquisition
Commitment Fee
Percentage 0.20% 0.25% 0.325% 0.375%
====================================================================================================
</TABLE>
; provided that if and for so long as the Borrower
is in default of its obligation to deliver a
Compliance Certificate under Section 6.4(b) or
Section 6.4(c), the Applicable Acquisition
Commitment Fee Percentage shall be 0.775%.
"Applicable Acquisition Eurodollar Margin"
means, during any Pricing Period, the amount set
forth below for such Applicable Acquisition
Eurodollar Margin, depending on the Pricing Ratio
as of the Pricing Reference Date for such Pricing
Period:
-15-
<PAGE> 16
<TABLE>
<CAPTION>
GREATER THAN OR GREATER THAN OR
EQUAL TO 2.50 TO EQUAL TO 3.00 TO GREATER THAN OR
LESS THAN 1.00 BUT LESS THAN 1.00 BUT LESS THAN EQUAL TO 3.50 TO
PRICING RATIO 2.50 TO 1.00 3.00 TO 1.00 3.50 TO 1.00 1.00
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable
Acquisition
Eurodollar Margin 0.75% 1.00% 1.25% 1.375%
====================================================================================================
</TABLE>
; provided that if and for so long as the Borrower
is in default of its obligation to deliver a
Compliance Certificate under Section 6.4(b) or
Section 6.4(c), the Applicable Acquisition
Eurodollar Margin shall be 1.75%.
"Applicable Base Rate Margin" means, as the
context may require, either the Applicable
Acquisition Base Rate Margin or the Applicable
Revolving/Term Base Rate Margin.
"Applicable Revolving/Term Base Rate Margin"
means zero percent per annum; provided that if and
for so long as the Borrower is in default of its
obligation to deliver a Compliance Certificate
under Section 6.4(b) or Section 6.4(c), the
Applicable Revolving/Term Base Rate Margin shall
be 0.525%.
"Applicable Revolving Commitment Fee
Percentage" means, during any Pricing Period, the
amount set forth below for such Applicable
Revolving/Term Commitment Fee Percentage,
depending on the Pricing Ratio as of the Pricing
Reference Date for such Pricing Period:
<TABLE>
<CAPTION>
GREATER THAN OR GREATER THAN OR
EQUAL TO 2.50 TO EQUAL TO 3.00 TO GREATER THAN OR
LESS THAN 1.00 BUT LESS THAN 1.00 BUT LESS THAN EQUAL TO 3.50 TO
PRICING RATIO 2.50 TO 1.00 3.00 TO 1.00 3.50 TO 1.00 1.00
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable
Revolving
Commitment Fee
Percentage 0.20% 0.25% 0.325% 0.375%
====================================================================================================
</TABLE>
; provided that if and for so long as the Borrower
is in default of its obligation to deliver a
Compliance Certificate under Section 6.4(b) or
Section 6.4(c), the Applicable Revolving
Commitment Fee Percentage shall be 0.525%.
"Applicable Revolving/Term Eurodollar Margin"
means, during any Pricing Period, the amount set
forth below for such Applicable Revolving/Term
Eurodollar Margin, depending on the Pricing Ratio
as of the Pricing Reference Date for such Pricing
Period:
-16-
<PAGE> 17
<TABLE>
<CAPTION>
GREATER THAN OR GREATER THAN OR
EQUAL TO 2.50 TO EQUAL TO 3.00 TO GREATER THAN OR
LESS THAN 1.00 BUT LESS THAN 1.00 BUT LESS THAN EQUAL TO 3.50 TO
PRICING RATIO 2.50 TO 1.00 3.00 TO 1.00 3.50 TO 1.00 1.00
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable
Revolving/Term
Eurodollar Margin 0.50% 0.75% 1.00% 1.125%
================================================================================================
</TABLE>
; provided that if and for so long as the Borrower
is in default of its obligation to deliver a
Compliance Certificate under Section 6.4(b) or
Section 6.4(c), the Applicable Revolving/Term
Eurodollar Margin shall be 1.50%.
"Arranger" means BA Securities, Inc., its successors and
assigns.
"Environmental Statement means the statement
of the Borrower regarding environmental matters
relating to the interests in real property covered
by the New Mortgages as of June 30, 1996 as
described in Attachment B hereto..
"New Mortgages" means the mortgages of July
__, 1996 executed by the Borrower in favor of the
Agent for the benefit of the Secured Parties to
secure the Obligations on the interests in real
property at the locations listed on Schedule IV
hereto.
"Pricing Commencement Date" means the later
of (i) the forty-fifth day after the end of a
fiscal quarter and (ii) the date of a Borrowing of
Acquisition Loans.
"Pricing End Date" means the earlier of (i)
the forty-fourth day after the end of a fiscal
quarter and (ii) the day immediately preceding the
date of a Borrowing of Acquisition Loans.
"Pricing Reference Date" means, with respect
to any Pricing Period, either (i) if the Pricing
Commencement Date for such Pricing Period is the
date of a Borrowing of Acquisition Loans, the
Pricing Commencement Date, or (ii) if the Pricing
Commencement Date is not a date of a Borrowing of
Acquisition Loans, the last day of the fiscal
quarter most recently ended prior to the Pricing
Commencement Date; provided that the Pricing
Reference Date cannot be earlier than the Pricing
Reference Date of a previous Pricing Period.
"Revolving Commitment Fee" has the meaning specified in
Section 2.14(a).
"Term-Out Amount" means the outstanding
principal amount of all Acquisition Loans on the
Term-Out Election Date.
"Term-Out Election Date" has the meaning specified in
Section 2.22.
"Term-Out Fee" means the greater of:
(i) one percent (1%) of the Term-Out Amount;
and
(ii) $250,000.
-17-
<PAGE> 18
"Term-Out Loan" means any Acquisition Loan
subsequent to the election of the Term-Out Option
by the Borrower.
"Term-Out Loan Commitment Termination Date"
means the fifth anniversary of the Term-Out
Election Date.
"Term-Out Option" has the meaning specified in Section 2.22.
"Term-Out Payment" means an amount equal to
the Term-Out Amount divided by the Term-Out
Payment Quarters.
"Term-Out Payment Quarters" means twenty (20).
"Title Commitments" has the meaning specified in
Section 2.1(d)(i) of Amendment No. 7.
1.51. Schedule II to the Existing Credit Agreement is hereby amended
in its entirety by substituting Schedule II hereto in lieu thereof.
1.52. The Existing Credit Agreement is hereby amended by adding to
the end thereof a new Schedule IV in the form of Schedule IV hereto.
1.53. Schedules 5.1(i) and 5.1(l) of the Existing Credit Agreement
are hereby amended by adding the item described on Attachment C hereto to each
such schedule.
1.54. Schedule 5.1(l) of the Existing Credit Agreement is hereby
amended by adding the Environmental Statement thereto.
1.55. Exhibit A to the Existing Credit Agreement is hereby amended
in its entirety by substituting Exhibit A hereto in lieu thereof.
1.56. Exhibit B to the Existing Credit Agreement is hereby amended
in its entirety by substituting Exhibit B hereto in lieu thereof.
1.57. Exhibit C to the Existing Credit Agreement is hereby amended
in its entirety by substituting Exhibit C hereto in lieu thereof.
1.58. The Existing Credit Agreement is hereby amended by adding to
the end thereof a new Exhibit I in the form of Exhibit I hereto.
-18-
<PAGE> 19
ARTICLE 2. - CONDITIONS
2.1. This Amendment shall become effective as of the date hereof on
the date (the "Amendment Effective Date") that the Agent shall have received
each of the following, in form and substance satisfactory to it:
(a) counterparts hereof executed by the Borrower and the
Lenders;
(b) a certificate, dated as of the Amendment Effective Date,
of the Secretary or Assistant Secretary of the Borrower as to
resolutions of its Board of Directors then in full force and effect
authorizing the execution and delivery of this Amendment and the
incumbency and signatures of its officers signing this Amendment;
(c) a certificate, dated as of the Amendment Effective Date,
of an authorized officer of the Borrower as to (i) no Default or Event
of Default as of the Amendment Effective Date after giving effect to
this Amendment, (ii) the correctness of the representations and
warranties contained in the Loan Documents in all material respects as
of the Amendment Effective Date after giving effect to this Amendment,
(iii) no amendments or other modifications to the Borrower's Certificate
of Incorporation and By-Laws having occurred since the date that the
certified copies of such documents were delivered by the Borrower
pursuant to Sections 4.1(b) and 4.1(c) of the Existing Credit Agreement,
respectively, and (iv) the satisfaction of each of the conditions
precedent contained in this Article II;
(d) evidence that each New Mortgage and any related fixture
and other financing statements shall have been duly recorded or filed or
provision shall have been made therefor satisfactory to the Agent and
its counsel and the title insurance company insuring the Lien of such
New Mortgage for the recording or filing thereof and that the payment of
all fees, taxes and other expenses in connection therewith shall have
been made and, with respect to each parcel of real property or lease or
other interest in real property described in such New Mortgage:
(i) a commitment to issue either (A) an ALTA Loan
Policy-1992 title insurance policy, or (B) if not available, a
title insurance policy in form satisfactory to the Agent (a "Title
Commitment"), in either case issuable to the Agent in amounts
satisfactory to the Agent by a title insurance company acceptable
to the Agent, subject to no exceptions other than those acceptable
to the Agent, and containing the following endorsements to the
extent available in the States where the parcels of real property
are located: revolving credit, usury, doing business (to the
extent that the insured property is located in a state other than
Illinois), standard form variable rate, first loss, last dollar
variable rate and an endorsement deleting the so-called
"creditor's rights" exception;
-19-
<PAGE> 20
(ii) copies of all documents referred to in the Title
Commitments, to the extent not previously delivered to the Agent;
(iii) to the extent not included in clause (ii) above,
certified copies of all material leases (including ground leases)
and, as to certain properties identified by the Agent, other
material contracts affecting title to such property or interest;
and
(iv) affidavits from the Borrower satisfactory to title
insurers.
(e) the First Amendment to the Mortgage executed by the
Borrower;
(f) a recent date down endorsement of each title insurance
policy relating to an interest in real property described in the
Mortgage;
(g) the Additional Security Agreement executed by the
Borrower;
(h) (i) such documents (including executed copies of any
requested financing statements) as the Agent may reasonably request to
evidence and perfect all Liens granted by the Additional Security
Agreement, (ii) such other evidence that all other actions necessary or,
in the opinion of the Agent, desirable to perfect and protect the
priority of the security interests and liens created by the Collateral
Documents, and to enhance the Agent's ability to preserve and protect
its interests in and access to the Collateral, have been taken and (iii)
evidence that payments of all fees, taxes and other expenses in
connection therewith shall have been made;
(i) an opinion of counsel for the Borrower as to this
Amendment and the transactions contemplated hereby, in form and
substance satisfactory to the Agent;
(j) payment to the Agent of a fee equal to the product of
(i) 0.375% multiplied by (ii) the Acquisition Loan Commitment Amount, to
be shared among the Lenders based upon their respective Acquisition
Percentages; and
(k) payment to the Agent, for the account of the Arranger,
an arrangement fee, in the amounts set forth in a letter agreement
between the Borrower, the Agent and the Arranger dated July 19, 1996.
2.2. The Agent agrees to notify the Borrower and the Lenders of such
Amendment Effective Date promptly after such Amendment Effective Date occurs.
ARTICLE 3. - GENERAL
3.1. To induce the Agent and the Lenders to enter into this
Amendment, the Borrower warrants to the Agent and the Lenders that: (a) the
warranties contained in the Loan Documents, as amended by the
-20-
<PAGE> 21
Amendment, are true and correct in all material respects as of the date hereof
with the same effect as though made on the date hereof; (b) after giving effect
to this Amendment, no Event of Default or Default exists; (c) this Amendment
has been duly authorized by all necessary corporate proceedings and duly
executed and delivered by the Borrower, and the Amended Credit Agreement and
each of the other Loan Documents are the legal, valid and binding obligations
of the applicable Loan Party, enforceable against such Loan Party in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity; (d) no
consent, approval, authorization, order, registration or qualification with any
Governmental Authority or securities exchange is required for, and in the
absence of which would adversely affect, the legal and valid execution and
delivery or performance by the Borrower of this Amendment or the performance by
the Borrower of the Amended Credit Agreement or any other Loan Document to
which it is a party; (e) the Agent has a first priority lien in the Collateral
subject to no other liens, claims or encumbrances whatsoever other than the
"Permitted Liens" (as defined in the Additional Security Agreement); (f) the
information contained in the Environmental Statement is true, correct and
complete as of the date hereof; and (g) the interests in real property
described in the Mortgage and the New Mortgages include all of the fee
interests held by the Borrower and its Subsidiaries except those at the
locations listed on Attachment A hereto.
3.2. This Amendment may be executed in any number of counterparts
and by the different parties on separate counterparts and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment.
3.3. Except as specifically provided above, the Existing Credit
Agreement and the other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed in all respects. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of the Agent or any Lender
under the Existing Credit Agreement or any of the other Loan Documents, nor
constitute a waiver or modification of any provision of any of the other Loan
Documents, and the Obligations shall continue to be secured in all respects by
the Collateral.
3.4. On and after the Amendment Effective Date, each reference in
the Existing Credit Agreement and related documents to "Credit Agreement," "this
Agreement" or words of like import, shall, unless the context otherwise
requires, be deemed to refer to the Amended Credit Agreement.
3.5. The Borrower agrees to pay on demand all reasonable costs and
expenses incurred at any time by the Agent and the Arranger (including the
reasonable attorney fees and expenses for the Agent and the Arranger, including
the allocated cost of internal counsel) in connection with the syndication,
preparation, negotiation, execution and administration of this Amendment and all
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith.
3.6. This Amendment shall be binding upon the Borrower, the Agent,
the Lenders and their respective successors and assigns, and shall inure to the
benefit of the Borrower, the Agent, the Lenders and their respective successors
and assigns as provided in the Amended Credit Agreement.
-21-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
UNITED STATES CAN COMPANY
By: /s/ Peter Andres
----------------
Name: Peter Andres
----------------
Title: VP/Treasurer/Assistant Secretary
--------------------------------
BANK OF AMERICA ILLINOIS, as Agent
By: /s/ David A. Johanson
---------------------
Name: David A. Johanson
---------------------
Title: Vice President
---------------------
-22-
<PAGE> 23
BANK OF AMERICA ILLINOIS, individually
By: /s/ Tracy J. Alfery
---------------------------------
Name: Tracy J. Alfery
---------------------------------
Title: Vice President
---------------------------------
BA SECURITIES, INC., as Arranger
By: /s/ Thomas M. Brown
---------------------------------
Name: Thomas M. Brown
---------------------------------
Title: Vice President
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Randall Taylor
---------------------------------
Name: Randall Taylor
---------------------------------
Title: V.P.
---------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Ronald L. DellArtino
---------------------------------
Name: Ronald L. DellArtino
---------------------------------
Title: Vice President
---------------------------------
-23-
<PAGE> 24
FLEET NATIONAL BANK
By: /s/ Stephen P. Kanarian
----------------------------
Name: Stephen P. Kanarian
----------------------------
Title: Vice President
----------------------------
BANK OF SCOTLAND
By: /s/ Catherine M. Onifrey
----------------------------
Name: Catherine M. Onifrey
----------------------------
Title: Vice President
----------------------------
THE NORTHERN TRUST COMPANY
By: /s/ Arthur J. Fogel
----------------------------
Name: Arthur J. Fogel
----------------------------
Title: Vice President
----------------------------
SOCIETE GENERALE
By: /s/ Joseph A. Philbin
----------------------------
Name: Joseph A. Philbin
----------------------------
Title: Vice President
----------------------------
-24-
<PAGE> 25
LIST OF OMITTED SCHEDULES
Attachment A - Locations of Fee Interests of Borrower Not Covered by Mortgage
or New Mortgages
Attachment B - Environmental Statement
Attachment C - Addition to Schedules 5.1(i) and 5.1(l)]
Exhibit A - Form of Assignment and Acceptance
Schedule 1 to Assignment and Acceptance
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Continuation/Conversion Notice
Exhibit I - Form of Acquisition Loan Compliance Certificate
Schedule 1 to Acquisition Loan Compliance Certificate
Schedule II - List of Percentages and Applicable Lending Offices
Schedule IV - Locations of Properties Covered by New Mortgages
-25-
<PAGE> 1
EXHIBIT 10.2
April 25, 1996
U.S. Can Corporation
900 Commerce Drive
Oak Brook, IL 60521
Attention: Mr. Timothy W. Stonich
Executive Vice President
and Chief Financial Officer
Ladies and Gentlemen:
The purpose of this letter is to confirm the engagement of Salomon Brothers
Inc ("Salomon") by U.S. Can Corporation (the "Company") on an exclusive basis to
render financial advisory and investment banking services to the Company in
connection with the possible acquisition (by merger, tender offer or otherwise)
by the Company (or a subsidiary of the Company) of Crown, Cork and Seal Company,
Inc.'s selected European Aerosol Can Businesses (the "Subject Company") or the
possible purchase by the Company (or a subsidiary of the Company) of all or a
significant portion of the assets, or of the equity securities, of the Subject
Company, in a transaction with Aggregate Consideration (as defined in Section 2
herein) greater than $20 million (an "Acquisition Transaction").
Section 1. Services to be Rendered. Salomon will perform such of the
following financial advisory and investment banking services as the Company may
reasonably request:
(a) Salomon will familiarize itself to the extent it deems appropriate
and feasible with the business, operations, properties, financial condition
and prospects of the Company and the Subject Company, it being understood
that Salomon shall, in the course of such familiarization, rely entirely
upon publicly available information and such other information as may be
supplied by the Company or the Subject Company, without independent
investigation;
(b) Salomon will advise and assist the Company in considering the
desirability of effecting an Acquisition Transaction, and, if the Company
believes such a transaction to be desirable, in developing a general
strategy for accomplishing an Acquisition Transaction, including advice
with respect to the structuring of the terms, conditions and financing of
any proposed Acquisition Transaction;
(c) Salomon will advise and assist management of the Company in making
presentations to the Board of Directors of the Company concerning a general
acquisition strategy, the Subject Company and any proposed Acquisition
Transaction;
(d) Salomon will advise and assist the Company in the course of its
negotiation of an Acquisition Transaction and, if requested by the Company,
will participate directly in such negotiations;
(e) If so requested by the Company, Salomon will render, in accordance
with its customary practice, an opinion (the "Opinion") as to the fairness,
from a financial point of view, to the Company of the consideration to be
paid by the Company in an Acquisition Transaction, with the understanding
that in rendering the Opinion Salomon will rely, without independent
investigation, on information furnished to it by the Company (which
information the Company hereby warrants shall be complete and accurate in
all material respects, and not misleading in any material respect), the
Subject Company or other relevant parties or publicly available and that
the Opinion may be in such form as Salomon shall determine and Salomon may
qualify the Opinion in such manner as Salomon believes appropriate. The
Opinion shall not address the Company's underlying business decision to
effect an Acquisition Transaction. Notwithstanding anything to the contrary
elsewhere herein, the Company may reproduce the Opinion in full in any
disclosure document or proxy statement relating to such Acquisition
Transaction (the "Statement") that the Company must file under the
Securities Exchange Act of 1934 and distribute to its shareholders. In such
event, the Company may also include references to the Opinion and to
<PAGE> 2
Salomon and its relationship with the Company (in each case in such form as
Salomon shall approve) in the Statement;
(f) Salomon will advise and assist the Company in connection with any
interest rate, currency rate or other hedge program(s) of the Company
relating to an Acquisition Transaction, including, if the Company so
requests, assisting in the structuring of such program(s), the
identification of acceptable counterparties (which may include Salomon or
one of its affiliates) in connection therewith and the management of any
related auctions;
(g) Salomon will render such other financial advisory and investment
banking services as may from time to time be agreed upon by Salomon and the
Company.
Section 2. Fees. The Company shall pay to Salomon for its services
hereunder the following cash fees:
(a) $50,000, payable promptly following the Company being invited to
perform due diligence with respect to the Subject Company; plus
(b) $25,000, payable upon submission by the Company of a proposal
regarding an Acquisition Transaction; plus
(c) an additional fee equal to a percentage of the Aggregate
Consideration, determined according to the table on Appendix A reduced by
5%, (less the amounts payable under the immediately preceding clauses (a)
and (b)) such additional fee to be contingent upon the consummation of an
Acquisition Transaction and payable at the closing thereof.
For purposes hereof, the term Aggregate Consideration shall mean the
total amount of cash and the fair market value (on the date of payment) of
all other property paid or payable directly or indirectly by the Company in
connection with an Acquisition Transaction or a transaction related thereto
(including, without limitation, amounts paid by the Company, pursuant to
covenants not to compete, employment contracts, employee benefit plans or
other similar arrangements). Aggregate Consideration shall also include the
value of any long-term liabilities of the Subject Company (including the
principal amount of any indebtedness for borrowed money and any
intercorporate debt) (x) repaid or retired in connection with or
anticipation of an Acquisition Transaction or (y) existing on the Subject
Company's balance sheet at the time of an Acquisition Transaction (if such
Acquisition Transaction takes the form of a merger or a sale of stock) or
assumed by the Company in connection with an Acquisition Transaction (if
such Acquisition Transaction takes the form of a sale of assets). If an
Acquisition Transaction takes the form of a sale of assets, the term
Aggregate Consideration shall also include (i) the value of any current
assets not sold, minus (ii) the value of any current liabilities not
assumed by the Company.
Section 3. Related Financial Transactions and Fees.
(a) If, prior to an Acquisition Transaction or within one year
following its consummation, the Company or any of its affiliates determines
to sell (or cause the Subject Company or any of its affiliates to sell), in
a public offering or a private placement, any debt securities (other than
senior bank debt) and/or equity securities (such debt or equity securities
being the "Securities") in connection with the financing of such
Acquisition Transaction or refinancing of such Acquisition Transaction debt
(including any issuance of Securities required to be made pursuant to a
bridge loan agreement) or the refinancing of the Subject Company's existing
debt, the Company, the Subject Company or its affiliate shall retain
Salomon as lead underwriter (in the case of a public offering) or as lead
placement agent (in the case of a private placement) of the Securities. Any
such sale of Securities shall be pursuant to an underwriting agreement or
placement agent agreement, as the case may be, containing customary
representations, warranties, covenants, conditions and indemnities and
providing for customary underwriting discounts or placement fees, the exact
amounts to be mutually agreed upon.
(b) If, prior to an Acquisition Transaction or within one year
following its consummation, the Company determines to sell (or cause the
Subject Company to sell) any subsidiary or division or other significant
portion of the assets of the Subject Company, the Company shall afford
Salomon a reasonable opportunity to compete with other parties on an equal
basis to act as its exclusive financial advisor in
2
<PAGE> 3
connection with such proposed sale. Any such engagement shall be pursuant
to an engagement letter containing customary provisions and terms and
providing for customary fees, the exact amounts to be mutually agreed upon.
(c) In connection with the hedge programs described in Section 1
hereof, the Company agrees to afford Salomon a reasonable opportunity to
compete with other parties on an equal basis in offering to the Company any
interest rate, currency or other hedge products and not to enter into any
exclusive or preferential agreements with such other parties with respect
to such hedge products unless and until Salomon has been afforded such an
opportunity. Any hedge products to be provided by Salomon to the Company
shall be pursuant to separate written agreement(s) containing customary
provisions and providing for customary fees, the exact amounts to be
mutually agreed upon.
Section 4. Expenses. In addition to any fees that may be payable to Salomon
hereunder and regardless of whether any Acquisition Transaction is proposed or
consummated, the Company hereby agrees, from time to time upon request, to
reimburse Salomon for all reasonable fees and disbursements of Salomon's counsel
(which counsel's fees shall not exceed $25,000 without the prior approval of the
Company) and all of Salomon's reasonable travel and other out-of-pocket expenses
incurred in connection with any actual or proposed Acquisition Transaction or
otherwise arising out of Salomon's engagement hereunder.
Section 5. Indemnity. Salomon and the Company have entered into a separate
letter agreement, dated the date hereof, providing for the indemnification of
Salomon by the Company in connection with Salomon's engagement hereunder.
Section 6. Termination of Engagement. Salomon's engagement hereunder may be
terminated by either the Company or Salomon at any time, with or without cause,
upon written advice to that effect to the other party; provided, however, that
Salomon will be entitled to its full fee under Section 2 hereof and to render
the services provided for in Sections 4(a), 4(b) and 4(c) hereof in the event
that at any time prior to the expiration of one year after such termination an
Acquisition Transaction is consummated; and provided, further, that the
provisions of this Section 6 and of Sections 4 and 7 hereof shall survive such
termination.
Section 7. Miscellaneous.
(a) THIS LETTER AGREEMENT AND THE RELATED INDEMNIFICATION AGREEMENT
REFERRED TO ABOVE SHALL BE DEEMED MADE IN NEW YORK. SUCH AGREEMENTS SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO SUCH
STATE'S RULES CONCERNING CONFLICTS OF LAWS. ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS
ENGAGEMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS
WAIVED.
(b) The Company expressly acknowledges that all opinions and advice
(written or oral) given by Salomon to the Company in connection with
Salomon's engagement are intended solely for the benefit and use of the
Company (including its management, directors and attorneys) in considering
the transaction to which they relate and the Company agrees that no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor shall any public references to Salomon be made by the Company
(or such persons), without the prior written consent of Salomon, which
consent shall not be unreasonably withheld.
(c) The Company expressly acknowledges that Salomon has been retained
solely as an advisor to the Company, and not as an advisor to or agent of
any other person, and that the Company's engagement of Salomon is not
intended to confer rights upon any persons not a party hereto (including
shareholders,
3
<PAGE> 4
employees or creditors of the Company) as against Salomon, Salomon's
affiliates or their respective directors, officers, agents and employees.
* * *
Please confirm that the foregoing is in accordance with your understandings
and agreements with Salomon Brothers Inc by signing and returning to Salomon
Brothers Inc the duplicate of this letter enclosed herewith.
Very truly yours,
SALOMON BROTHERS INC
By /s/ CHARLES BOBRINSKOY
--------------------------------------
Managing Director
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
U.S. CAN CORPORATION
By /s/ TIMOTHY W. STONICH
- --------------------------------------
Title: Executive Vice President,
Chief Financial Officer and
Secretary
4
<PAGE> 5
April 25, 1996
Salomon Brothers Inc
8700 Sears Tower
Chicago, IL 60606
In connection with your engagement to advise and assist us with the matters
detailed in our engagement letter describing investment banking services to be
provided by Salomon Brothers Inc, we indemnify and hold harmless you and your
affiliates, the respective directors, officers, agents and employees of you and
your affiliates and each other person, if any, controlling you or any of your
affiliates, to the full extent lawful, from and against any losses, claims,
damages or liabilities (or actions, including shareholder actions, in respect
thereof) related to or arising out of such engagement or your role in connection
therewith, and will reimburse you and any other party entitled to be indemnified
hereunder for all expenses (including reasonable counsel fees) as they are
incurred by you or any such other indemnified party in connection with
investigating, preparing or defending any such action or claim, whether or not
in connection with pending or threatened litigation in which you are a party. We
will not, however, be responsible for any claims, liabilities, losses, damages
or expenses which are finally judicially determined to have resulted primarily
from your bad faith of from your negligence. We also agree that neither you, nor
any of your affiliates, nor any officer, director, employee or agent of you or
any of your affiliates, nor any person controlling you or any of your
affiliates, shall have any liability to us for or in connection with such
engagement except for any such liability for losses, claims, damages,
liabilities or expenses incurred by us that result primarily from your bad faith
or negligence. The foregoing agreement shall be in addition to any rights that
you or any indemnified party may have at common law or otherwise, including, but
not limited to, any right to contribution. We hereby consent to personal
jurisdiction and service and venue in any court in which any claim which is
subject to this agreement is brought against you or any other indemnified party.
It is understood that, in connection with your engagement, you may also be
engaged to act for us in one or more additional capacities, and that the terms
of this engagement or any such additional engagement may be embodied in one or
more separate written agreements. This indemnification shall apply to said
engagement, any such additional engagement and any modification of said
engagement or such additional engagement, and shall remain in full force and
effect following the completion or termination of your engagement(s).
Very truly yours,
United States Can Company
By: /s/ TIMOTHY W. STONICH
------------------------------------
Agreed:
SALOMON BROTHERS INC.
By: /s/ CHARLES BOBRINSKOY
------------------------------------
5
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> U.S. CAN CORPORATION
<CIK> 0000895726
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 740
<SECURITIES> 0
<RECEIVABLES> 81,625
<ALLOWANCES> 6,649
<INVENTORY> 86,864
<CURRENT-ASSETS> 178,582
<PP&E> 381,245
<DEPRECIATION> 137,456
<TOTAL-ASSETS> 504,527
<CURRENT-LIABILITIES> 106,761
<BONDS> 258,041
0
0
<COMMON> 129
<OTHER-SE> 91,679
<TOTAL-LIABILITY-AND-EQUITY> 504,527
<SALES> 344,207
<TOTAL-REVENUES> 344,207
<CGS> 299,595
<TOTAL-COSTS> 313,525
<OTHER-EXPENSES> 1,663
<LOSS-PROVISION> 142
<INTEREST-EXPENSE> 12,520
<INCOME-PRETAX> 16,357
<INCOME-TAX> 6,950
<INCOME-CONTINUING> 9,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,407
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
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