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EXHIBIT C(5)
BANK OF AMERICA, N.A.
BANC OF AMERICA SECURITIES, LLC
100 N. Tryon Street
Charlotte, North Carolina 28255
CITICORP NORTH AMERICA, INC.
SALOMON SMITH BARNEY INC.
399 Park Avenue
New York, New York 10043
July 27, 2000
CONFIDENTIAL
Pac Packaging Acquisition Corporation
900 Commerce Drive
Oak Brook, Illinois 60523
Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
Re: Commitment Letter for U.S. Can Corporation Acquisition Financing
Ladies and Gentlemen:
Berkshire Partners LLC (the "Sponsor") has advised Bank of America, N.A. ("Bank
of America"), Banc of America Securities LLC ("BAS") and Citi/SSB (as defined
below) that it intends to recapitalize U.S. Can Corporation ("USC" or the
"Recapitalized Company") through the merger of its newly formed subsidiary, Pac
Packaging Acquisition Corporation ("TransitoryCo"), with and into USC with USC
being the surviving entity. In addition the Sponsor will or will cause the
Recapitalized Company to refinance all of the outstanding funded indebtedness of
the Recapitalized Company, with the exception of the assumed debt referenced in
Schedule I attached hereto, including tendering for redemption of the
Recapitalized Company's 10 1/8% senior subordinated notes due 2006 (the
"Refinancing"), as more specifically described in the Sources and Uses Table
attached hereto as Schedule I, with the respective amounts expended in
connection therewith being set forth therein. The merger with the Recapitalized
Company by TransitoryCo, the Refinancing, the financings described herein and
all other transactions related thereto shall be collectively referred to as the
"Transaction".
You have also advised us that you propose to finance the Transaction, the
related premiums, fees and expenses and the ongoing general corporate needs of
United States Can Company, a wholly owned subsidiary of the Recapitalized
Company (the "Borrower") and its subsidiaries after completion of the
Transaction from the following sources: (a) no less than $160 million in common
and preferred equity (including rollover equity) provided by the Sponsor and
certain existing shareholders and members of existing management of the
Recapitalized Company (at least $100
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July 27, 2000
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million of which shall be provided by the Sponsor) on terms to be agreed upon by
you and us (the "Equity Financing"), (b) approximately $400 million from senior
credit facilities (the "Credit Facilities") of the Borrower comprised of term
loan facilities aggregating $260 million (the "Term Loan Facilities") and a $140
million revolving credit facility (the "Revolving Credit Facility") and (c) $150
million in gross proceeds from the Borrower's issuance of senior subordinated
unsecured notes (the "Senior Subordinated Notes"), or alternately, senior
subordinated unsecured bridge notes issued as interim financing to the Senior
Subordinated Notes (together with any exchange notes related thereto, the
"Bridge Notes"; the Senior Subordinated Notes or the Bridge Notes may be
referred to as the "Subordinated Debt Financing"). The Revolving Credit Facility
will also be used to finance the continuing operations of the Borrower and its
subsidiaries after consummation of the Transaction.
For purposes of this Commitment Letter, "Citi/SSB" shall mean Citicorp North
America, Inc. ("Citicorp") and/or any affiliate thereof, including Salomon Smith
Barney Inc. ("SSB"), as Citi/SSB shall determine to be appropriate to provide
the services contemplated herein.
In connection with the foregoing, (a) Bank of America is pleased to advise you
of its commitment (this letter being the "Commitment Letter") to act as
exclusive administrative agent (in such capacity, the "Administrative Agent")
and to provide $240 million of the total principal amount of the Credit
Facilities, and (b) Citi/SSB is pleased to advise you of its commitment to act
as syndication agent (in such capacity, the "Syndication Agent") and to provide
$160 million of the total principal amount of the Credit Facilities, in each
case pro rata among the Term Loan Facilities and the Revolving Credit Facility
and subject to the terms and conditions of this letter and the Summary of Terms
and Conditions attached hereto as Exhibit A (the "Term Sheet"). Bank of America
and Citi/SSB may be collectively referred to herein as the "Banks" and the
Administrative Agent and the Syndication Agent may be collectively referred to
herein as the "Agents". The commitments of the Banks hereunder are several and
not joint. Furthermore, BAS and Citi/SSB are pleased to advise you of their
willingness, as Joint Lead Arrangers and Book Managers for the Credit Facilities
(the "Joint Lead Arrangers"), to form a syndicate of financial institutions,
including Bank of America and Citi/SSB, (the "Lenders") reasonably acceptable to
you for the Credit Facilities. No additional agents, co-agents, arrangers or
book managers will be appointed and no other titles will be awarded without our
prior written approval and consultation with you.
BAS and Citi/SSB intend to commence syndication efforts promptly, and you agree
to actively assist, and to cause the Recapitalized Company to assist, BAS and
Citi/SSB in achieving a syndication of the Credit Facilities that is
satisfactory to the Joint Lead Arrangers. Such assistance by you and the
Recapitalized Company shall include (a) your providing and causing your advisors
to provide us and the other Lenders upon request with all information reasonably
deemed necessary by us to complete syndication, including, but not limited to,
information and evaluations prepared by TransitoryCo, the Borrower and the
Recapitalized Company and their advisors, or on their behalf, relating to the
Transaction; (b) assistance in the preparation of an Offering Memorandum to be
used in connection with the syndication; (c) your using commercially reasonable
efforts to ensure that the syndication efforts benefit materially from existing
lending relationships of the Sponsor and the Recapitalized Company; and (d)
otherwise assisting us in our syndication efforts, including by making senior
management and advisors of the Sponsor, the Borrower and the Recapitalized
Company and their subsidiaries available from time to time to attend and make
presentations
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July 27, 2000
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regarding the business and prospects of the Borrower, the Recapitalized Company
and their subsidiaries, as appropriate, at one or more meetings of prospective
Lenders.
It is understood and agreed that Bank of America and BAS, after consultation
with you and Citi/SSB, will manage and control all aspects of the syndication,
including decisions as to the selection of proposed Lenders and any titles
offered to proposed Lenders, when commitments will be accepted and the final
allocations of the commitments among the Lenders. It is understood that no
Lender participating in the Credit Facilities will receive compensation from you
in order to obtain its commitment, except on the terms contained herein and in
the Term Sheet. It is also understood and agreed that the amount and
distribution of the fees among the Lenders will be at the sole discretion of
Bank of America and BAS after consultation with Citi/SSB and that any
syndication prior to execution of the definitive documentation for the Credit
Facilities will reduce the commitments of the Banks.
The commitments of Bank of America and Citicorp hereunder and the agreements of
BAS and Citi/SSB to provide the services described herein are subject to the
agreement in the preceding paragraph and the satisfaction of each of the
following conditions precedent in a manner acceptable to us in our sole
discretion: (a) each of the terms and conditions set forth herein and in the
Term Sheet; (b) the execution of the fee letter of even date herewith among the
Sponsor, TransitoryCo, Bank of America, BAS and Citi/SSB (the "Fee Letter"); (c)
the absence of a material breach of any representation, warranty or agreement of
the Sponsor, TransitoryCo or the Borrower set forth herein; (d) consummation of
the transactions set forth in the Agreement and Plan of Merger, dated as of June
1, 2000, between TransitoryCo and the Recapitalized Company, as amended by the
First Amendment to Agreement and Plan of Merger dated June 28, 2000, on
substantially the terms set forth therein or on such other terms as may be
satisfactory to Bank of America, BAS and Citi/SSB; (e) our satisfaction that
prior to and during the syndication of the Credit Facilities there shall be no
competing offering, placement or arrangement of any debt securities or bank
financing by or on behalf of the TransitoryCo, the Borrower, the Recapitalized
Company or any of their subsidiaries (other than the Senior Subordinated Notes
or Bridge Notes described herein; (f) the negotiation, execution and delivery of
definitive documentation for the Credit Facilities consistent with the Term
Sheet and otherwise satisfactory to Bank of America, BAS and Citi/SSB (the
"Credit Agreement Documents"); (g) no material adverse change in or material
disruption of conditions in the financial, banking or capital markets after the
date hereof which we, in our reasonable discretion, deem material in connection
with the syndication of the Credit Facilities shall have occurred and be
continuing; (h) no change, occurrence or development that could, in our
reasonable opinion, have a material adverse effect on the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of TransitoryCo, the Borrower and the Recapitalized
Company and their subsidiaries taken as a whole, shall have occurred or become
known to us; and (i) our not becoming aware after the date hereof of any
information or other matter which in our judgment is inconsistent in a material
and adverse manner with any information or other matter disclosed to us prior to
the date hereof (in which case we may, in our sole discretion, suggest
alternative financing amounts or structures that ensure adequate protection for
the Lenders or terminate this letter and any commitment or undertaking
hereunder.
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In addition, it is understood and agreed that the Sponsor shall advise the Joint
Lead Arrangers of its involvement in any debt offering in excess of $100 million
occurring on or prior to the closing of the Transaction.
You hereby represent, warrant and covenant that (a) all information, other than
the Projections (defined below), which has been or is hereafter made available
to us or the Lenders by you or any of your representatives in connection with
the transactions contemplated hereby (the "Information") when taken as a whole
is and will be complete and correct in all material respects and when taken as a
whole does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained therein
not misleading, and (b) all financial projections concerning TransitoryCo, the
Borrower and the Recapitalized Company and their respective subsidiaries that
have been or are hereafter made available to us or the Lenders by you or any of
your representatives (the "Projections") have been or will be prepared in good
faith based upon assumptions you believe to be reasonable. You agree to furnish
us with such Information and Projections as we may reasonably request (including
due diligence investigations of the Recapitalized Company prepared by your
accountants and advisors to the extent permitted by such accountants and
advisors) and to supplement the Information and the Projections from time to
time until the closing date for the Credit Facilities (the "Closing" or the
"Closing Date") so that the representation, warranty and covenant in the
preceding sentence is correct on the Closing Date. You understand that in
arranging and syndicating the Credit Facilities the Banks and the Joint Lead
Arrangers will be using and relying on the Information and the Projections
without independent verification thereof.
By acceptance of this offer, and upon the closing of the Transaction, you agree
to pay all reasonable out-of-pocket fees and expenses (including reasonable
attorneys' fees and expenses and due diligence expenses) incurred before or
after the date hereof by the Banks and the Joint Lead Arrangers in connection
with the Credit Facilities, the syndication thereof and the other transactions
contemplated hereby.
You agree to indemnify and hold harmless the Banks, the Joint Lead Arrangers and
each of their affiliates and their directors, officers, employees, advisors and
agents (each, an "Indemnified Party") from and against (and will reimburse each
Indemnified Party as the same are incurred) any and all losses, claims, damages,
liabilities, and expenses (including, without limitation, the reasonable fees
and expenses of counsel and the allocated cost of internal counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (a) the Transaction or any
similar transaction and any of the other transactions contemplated thereby, or
(b) the Credit Facilities or any other financings, or any use made or proposed
to be made with the proceeds thereof, unless and only to the extent that, as to
any Indemnified Party, that such losses, claims, damages, liabilities or
expenses has resulted from the gross negligence or willful misconduct of such
Indemnified Party. In the case of any investigation, litigation or proceeding to
which the indemnity in this paragraph applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by you,
your shareholders or creditors or an Indemnified Party and whether or not the
Transaction is consummated. You agree that no Indemnified Party shall have any
liability to you or your subsidiaries or affiliates or to your or their
respective security holders or creditors for any
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July 27, 2000
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indirect or consequential damages arising out of, related to or in connection
with the Transaction or any of the financings.
The terms of this Commitment Letter, the Term Sheet and the Fee Letter are
confidential and, except for disclosure on a confidential basis to your
accountants, attorneys and other professional advisors retained by you in
connection with the Credit Facilities or as may be required by law, may not be
disclosed in whole or in part to any other person or entity (including the
Recapitalized Company) without our prior written consent; provided, however, it
is understood and agreed that you may disclose the terms of this Commitment
Letter and the Term Sheet (but not the Fee Letter) (i) on a confidential basis
to the board of directors, senior management and advisors of the Recapitalized
Company in connection with their consideration of the Transaction, and (ii)
after your acceptance of this Commitment Letter and the Fee Letter, in filings
with the SEC and other applicable regulatory authorities and stock exchanges,
and in proxy and other materials disseminated to stockholders and other
purchasers of securities of the Recapitalized Company.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether any definitive documentation for the
Credit Facilities shall be executed and notwithstanding the termination of this
Commitment Letter or any commitment or undertaking hereunder. Except for its
obligations to assist with syndication of the Credit Facilities as provided
above, the Sponsors' obligations hereunder shall terminate upon the execution
and delivery of definitive documentation for the Credit Facilities.
In connection with the services and transactions contemplated hereby, you agree
that the Banks and the Joint Lead Arrangers are permitted to access, use and
share with any of their bank or non-bank affiliates, agents, advisors (legal or
otherwise) or representatives, any information concerning the Sponsor,
TransitoryCo, the Borrower, the Recapitalized Company or any of their respective
affiliates that is or may come into the possession of the Banks, the Joint Lead
Arrangers or any of such affiliates. The Banks, the Joint Lead Arrangers and
their affiliates will treat all non-public information relating to the Sponsor,
TransitoryCo, the Borrower, the Recapitalized Company and their respective
affiliates with the same degree of care as they treat their own confidential
information.
You acknowledge that Bank of America, BAS and Citi/SSB may provide debt
financing, equity capital or other services (including financial advisory
services) to parties whose interests regarding the transactions described herein
and otherwise may conflict with your interests. Consistent with Bank of
America's, BAS's and Citi/SSB's policy to hold in confidence the affairs of its
customers, Bank of America, BAS and Citi/SSB will not furnish confidential
information obtained from you, the Recapitalized Company, the Borrower or your
and their affiliates to any of its other customers. Furthermore, Bank of
America, BAS and Citi/SSB will not use in connection with the transactions
contemplated hereby, or furnish to you, the Recapitalized Company or the
Borrower confidential information obtained by Bank of America, BAS and Citi/SSB
from any other person.
This Commitment Letter and the Fee Letter shall be governed by laws of the State
of New York. Each of us hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Commitment Letter, the Term Sheet,
the Fee Letter, the transactions contemplated hereby and
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thereby or the actions of the Banks and the Joint Lead Arrangers in the
negotiation, performance or enforcement hereof.
This Commitment Letter, together with the Term Sheet and the Fee Letter, are the
only agreements that have been entered into among us with respect to the Credit
Facilities and set forth the entire understanding of the parties with respect
thereto. This Commitment Letter, the Term Sheet and the Fee Letter may be
modified or amended only by the written agreement of all of us. This Commitment
Letter and the Fee Letter are not assignable by you without our prior written
consent and is intended to be solely for the benefit of the parties hereto and
the Indemnified Parties.
This offer will expire at 5:00 p.m. Eastern time on July 27, 2000 unless you
execute this Commitment Letter and the Fee Letter and return them to us by that
time (which may be by facsimile transmission), whereupon this Commitment Letter
and the Fee Letter (each of which may be signed in one or more counterparts)
shall become binding agreements. Thereafter, this undertaking and commitment
will expire on the earliest to occur of (a) the closing of the Transaction
without the use of the Credit Facilities, (b) the acceptance by the
Recapitalized Company or any of its affiliates of an offer for all or any
substantial part of the capital stock or assets of the Recapitalized Company
other than the offer contemplated hereby, and (c) November 30, 2000, unless
definitive documentation for the Credit Facilities is executed and delivered
prior to such date. This letter supersedes and replaces that letter dated June
1, 2000 among the parties hereto.
We are pleased to have the opportunity to work with you in connection with this
important financing.
If the foregoing is in accordance with your understanding, please execute and
return this letter to us.
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ William A. Bowen, Jr.
-----------------------------------------
Title: Managing Director
CITICORP NORTH AMERICA, INC.
By:/s/ David J. Wirdnam
-----------------------------------------
Title: Director
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July 27, 2000
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BANC OF AMERICA SECURITIES LLC
By: /s/ William A. Bowen, Jr.
-----------------------------------------
Title: Managing Director
SALOMON SMITH BARNEY INC
By: /s/ David J. Wirdnam
-----------------------------------------
Title: Director
Accepted and agreed to as of ________________, 2000:
PAC PACKAGING ACQUISITION CORPORATION
By: /s/ Paul W. Jones
-----------------------------------------
Title: President
BERKSHIRE PARTNERS LLC
By: /s/ Richard K. Lubin
-----------------------------------------
Title: Managing Director
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SCHEDULE I
SOURCES AND USES TABLE
SOURCES
Term Loan Facilities $260,000,000
Revolving Credit Facility (Amount funded at Closing)(1) $40,648,000
Senior Subordinated Notes / Bridge Notes $150,000,000
Equity Financing $160,000,000
Available Cash $2,000,000
Assumed Debt $36,400,000
Total Sources $649,048,000
USES
Purchase Capital Stock(2) $276,900,000
Refinance Existing Debt(3) $290,748,000
Payment of Fees & Expenses(4) $45,000,000
Assumed Debt $36,400,000
TOTAL USES $649,048,000
--------------------------------
(1) Total amount of Revolving Credit Facility will be $140 million.
(2) Based on $20.00 per share.
(3) Includes $5 million of accrued interest.
(4) Includes bond tender premium.
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UNITED STATES CAN COMPANY
SUMMARY OF TERMS & CONDITIONS
July 27, 2000
===============================================================================
BORROWER: United States Can Company, a wholly owned
subsidiary of U.S. Can Corporation ("USC" or the
"Recapitalized Company"). In addition, certain
designated non-US subsidiaries of USC (the
"Foreign Subsidiary Borrowers") may be borrowers,
on a several basis, with respect to the
multi-currency subfacility referred to below.
USC will have no business other than holding the
stock of the Borrower and guaranteeing the Credit
Facilities.
GUARANTORS: USC and all existing and future direct and
indirect domestic subsidiaries of USC (other than
the Borrower). In addition, USC and the
subsidiaries of the Foreign Subsidiary Borrowers
will also guarantee the loans extended to the
Foreign Subsidiary Borrowers. All guarantees shall
be guarantees of payment and not of collection.
ADMINISTRATIVE AGENT: Bank of America, N.A. (the "Administrative Agent"
or "Bank of America").
JOINT LEAD ARRANGERS &
JOINT BOOK MANAGERS: Banc of America Securities LLC ("BAS") and
Salomon Smith Barney Inc. ("SSB").
SYNDICATION AGENT: Citicorp North America, Inc. (the "Syndication
Agent" or "Citicorp"; the Syndication Agent,
together with the Administrative Agent,
collectively referred to as the "Agents").
LENDERS: A syndicate of financial institutions (including
Bank of America and Citicorp) arranged by the
Joint Lead Arrangers, which institutions shall be
reasonably acceptable to the Borrower and the
Joint Lead Arrangers (collectively, the "Lenders").
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CREDIT FACILITIES: An aggregate principal amount of up to $400.0
million will be available under the conditions
hereinafter set forth:
Revolving Credit Facility: $140.0 million revolving
credit facility, which will include (i) $25.0
million sublimit for the issuance of standby and
commercial letters of credit (each a "Letter of
Credit") and (ii) a $75 million (U.S. Dollar
equivalent) multi-currency sublimit for borrowings
by Foreign Subsidiary Borrowers in available foreign
currencies (which shall include British Pounds
Sterling, German Deutsche Marks and Euros), to
be provided and issued by a Lender (approved by the
Administrative Agent) acting as a fronting bank (the
"Multi-Currency Fronting Bank"), with each Lender
purchasing an irrevocable and unconditional
participation in the loans extended by such
Multi-Currency Fronting Bank. Letters of Credit will
be issued by Bank of America (in such capacity, the
"Letter of Credit Fronting Bank"), and each Lender
will purchase an irrevocable and unconditional
participation in each Letter of Credit.
Tranche A Term Loan Facility: $80.0 million term
loan facility.
Tranche B Term Loan Facility: $180.0 million term
loan facility.
PURPOSE: The proceeds of the Credit Facilities shall be used:
(i) to finance a portion of the costs of the
Transaction, including premiums, fees and expenses
incurred in connection with therewith in an amount
not to exceed $47 million; and (ii) to provide for
working capital and general corporate purposes
of the Borrower and its subsidiaries, including
Permitted Acquisitions (to be defined).
INTEREST RATES: The Credit Facilities shall bear interest as set
forth on Addendum I.
MATURITY: Revolving Credit Facility: The Revolving Credit
Facility shall terminate and all amounts outstanding
thereunder shall be due and payable in full 6 years
from Closing.
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Term Loan Facilities: The Tranche A Term Loan
Facility and the Tranche B Term Loan Facility
(collectively the "Term Loan Facilities") shall
be subject to repayment according to the Scheduled
Amortization (as shown below), with the final
payment of all amounts outstanding, plus accrued
interest, being due 6 years from Closing for the
Tranche A Term Facility and 8 years from Closing for
the Tranche B Term Facility.
AVAILABILITY/
SCHEDULED
AMORTIZATION: Revolving Credit Facility: Loans under the Revolving
Credit Facility ("Revolving Credit Loans", and
together with the Term Loans, the "Loans") may be
made, and Letters of Credit may be issued subject to
availability under the aggregate committed amount
for the Revolving Credit Facility.
Term Loan Facilities: The loans made under the
Tranche A Term Loan Facility ("Tranche A Term
Loans") and the loans made under the Tranche B Term
Loan Facility ("Tranche B Term Loans") will be
available in a single borrowing at Closing. The Term
Loan Facilities will be subject to quarterly
amortization of principal, based upon the annual
amounts shown below (the Scheduled Amortization).
Tranche A Tranche B
Loan year 1 $4.0 million $1.0 million
Loan year 2 $8.0 million $1.0 million
Loan year 3 $8.0 million $1.0 million
Loan year 4 $12.0 million $1.0 million
Loan year 5 $16.0 million $1.0 million
Loan year 6 $32.0 million $1.0 million
-------------
Loan year 7 ----- $87.0 million
Loan year 8 ----- $87.0 million
-------------
Total $80.0 million $180.0 million
SECURITY: First priority, perfected security interest (subject
to no other liens except for permitted liens to be
determined) in (i) 100% of the issued and
outstanding capital stock of the Borrower and each
of the other direct and indirect domestic
subsidiaries of USC, (ii) 65% of the voting capital
stock and 100% of the non-voting capital stock of
each direct foreign subsidiary of USC or any of its
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domestic subsidiaries (or such greater or lesser
percentage, as applicable which would not result in
a repatriation of earnings under U.S. law) and (iii)
all other present and future assets and properties
of USC and its direct and indirect domestic
subsidiaries (including, without limitation,
accounts receivable, inventory, real property,
machinery, equipment, contracts, trademarks,
copyrights, patents, license agreements, and general
intangibles). In addition the loans extended to the
Foreign Subsidiary Borrowers under the
multi-currency subfacility will also be secured by
the assets of the Foreign Subsidiary Borrowers and
their subsidiaries.
The foregoing security shall ratably secure the
Credit Facilities and any interest rate swap/foreign
currency swap or similar agreements with a Lender
(or an affiliate of a Lender) under the Credit
Facilities.
MANDATORY
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the amortization set forth above, the
Credit Facilities will be prepaid by an amount equal
to (a) 100% of the net cash proceeds of all asset
sales by USC or any of its subsidiaries (including
stock of subsidiaries), subject to baskets and
reinvestment provisions to be agreed upon; (b) 75%
(if the senior debt/EBITDA ratio is equal to or
greater than 3.0:1.0) or 50% (if the senior
debt/EBITDA ratio is less than 3.0:1.0) of Excess
Cash Flow (to be defined) pursuant to an annual cash
sweep; (c) 100% of the net cash proceeds from the
issuance of any debt (excluding proceeds from the
issuance of Senior Subordinated Notes, the proceeds
of which are applied to permanently reduce
outstanding Bridge Notes and other permitted debt to
be negotiated) by USC or any of its subsidiaries;
and (d) 50% of the net cash proceeds from the
issuance of equity by USC or any of its
subsidiaries, excluding (a) proceeds from any
issuance of equity within one year of the
anniversary date of the Closing which are applied to
permanently reduce outstanding Bridge Notes, (b) any
equity invested by the Sponsor and other rollover
shareholders, and (c) any equity invested in
connection with a permitted acquisition; provided
that with respect to clause (b) and (c) such
proceeds shall be excluded only if the Bridge
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Notes are not outstanding). Prepayments shall be
applied pro rata to reduce the Tranche A Term Loans
and the Tranche B Term Loans and within each tranche
pro rata with respect to each remaining installment
of principal; provided, however, that with respect
to clause (a) above, any prepayment shall be applied
pro rata across all the Credit Facilities (with
corresponding commitment reductions in the case of
prepayments applied to the Revolving Credit
Facility). Any holders of Tranche B Term Loans may,
so long as there is a principal balance outstanding
with respect to Tranche A Term Loans, decline to
accept any mandatory prepayment described above and,
under such circumstances, all amounts that would
otherwise be used to prepay Tranche B Term Loans
above shall be allocated pro rata among the Tranche
A Term Loans and the Tranche B Term Loans held by
Lenders accepting such prepayments.
OPTIONAL
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Credit Facilities in
whole or in part at any time without penalty,
subject to reimbursement of the Lenders' breakage
and redeployment costs in the case of prepayment of
LIBOR borrowings during an interest period.
Prepayments of the Term Loan Facilities shall be
applied pro rata to reduce the Tranche A Term Loans
and the Tranche B Term Loans and within each tranche
pro rata with respect to each remaining installment
of principal. Any holders of Tranche B Term Loans
may, so long as there is a principal balance
outstanding with respect to Tranche A Term Loans,
decline to accept any voluntary prepayment and,
under such circumstances, all amounts that would
otherwise be used to prepay Tranche B Term Loans
shall be allocated pro rata among the Tranche A
Term Loans and the Tranche B Term Loans held by
Lenders accepting such prepayments.
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CONDITIONS
PRECEDENT
TO CLOSING: Usual and customary for financing transactions of
this type and for the particular financing
transaction contemplated hereby, including but not
limited to the following:
(i) Concurrent Transactions; Documentation. The
Equity Financing, the Subordinated Debt
Financing and the Refinancing shall have
been consummated on terms satisfactory to
the Agents in all respects, and all conditions
precedent to the consummation of the Equity
Financing and the Subordinated Debt Financing
shall have been satisfied or, with the prior
approval of the Agents, waived. The Borrower,
the Guarantors and the Lenders shall have
entered into definitive documentation with
respect to the Credit Facilities in form and
substance reasonably satisfactory to the Agents
and their counsel.
(ii) Purchase Agreement; Consummation of the
Transaction. Consummation of the transactions
set forth in the Agreement and Plan of Merger,
dated as of June 1, 2000, between TransitoryCo
and USC, as amended by the First Amendment to
Agreement and Plan of Merger dated June 28,
2000 (the "Purchase Agreement"), on
substantially the terms set forth therein. The
Agents and their counsel shall be reasonably
satisfied with (a) the capitalization,
structure and equity ownership of the
Recapitalized Company and its subsidiaries,
before and after giving effect to the
Transactions and (b) the sources and uses
of funds relating to the Transactions. The
Purchase Agreement shall not have been
altered, amended or otherwise changed or
supplemented in any material respect or any
material condition precedent therein waived,
without the prior written consent of the
Agents. The Transaction shall have been
consummated in all material respects in
accordance with the terms of the Purchase
Agreement and in compliance with applicable
laws and regulatory
6
<PAGE> 15
approvals, and all conditions precedent to the
obligations of USC and its subsidiaries under
the Purchase Agreement shall have been
satisfied or, with the prior approval of the
Agents, waived.
(iii) Capitalization; Etc. The corporate, capital
and ownership structure (including charter and
by-laws) and stockholders' agreements,
management agreements, franchise agreements,
employment agreements, stock option and other
employee benefit plans and management of USC
and its subsidiaries (after giving effect to
the Transaction) shall be satisfactory to the
Agents in all material respects.
(iv) Due Diligence. The Agents and their counsel
shall have completed and be satisfied with the
results of their business, legal,
environmental, tax, pension, regulatory and
accounting due diligence review of the
business, assets, liabilities (actual and
contingent), operations, properties, condition
(financial or otherwise), management, material
agreements, prospects and value of USC and
its subsidiaries; it being understood that the
Agents have substantially completed and are
satisfied with the results of their due
diligence investigation of USC and its
subsidiaries to date. This condition is deemed
satisfied or waived unless any additional
information is disclosed to or discovered by
the Agents after the date hereof which the
Agents deem materially adverse in respect of
the business, assets, liabilities (actual and
contingent), operations, properties, condition
(financial or otherwise), management, material
agreements, prospects or value of USC and its
subsidiaries.
(v) Financial Statements. The Agents shall have
received and, in each case, be satisfied with
(a) interim estimated monthly consolidated
financial statements for each fiscal month of
USC after December 31, 1999 (which estimated
monthly financial statements shall be made
available for each month by the 15th day of the
7
<PAGE> 16
succeeding month), (b) interim internal monthly
consolidated and consolidating financial
statements for each fiscal month of USC after
December 31, 1999 (which monthly financial
statements shall be made available for each
month by the 25th day of the succeeding month),
(c) monthly working capital detail for the
trailing twelve months and first projected year
and (d) a pro forma consolidated balance
sheet of USC and its subsidiaries as of Closing
as well as pro forma consolidated financial
statements of USC and its subsidiaries for the
year ended December 31, 1999 and for the
twelve months ended June 30, 2000
(collectively, the "Adjusted Pro Forma
Financial Statements"), together with a
certificate of the chief financial officer of
the Recapitalized Company to the effect that
such statements accurately present the pro
forma financial position of the Recapitalized
Company and its subsidiaries in accordance with
GAAP, in each case giving effect to (i) the
Transaction, (ii) all completed, probable and
pending acquisitions and/or divestitures
(including, without limitation, the assets
of the Wheeling Closure Facility and the
Warren Lithography Facility), (iii) the annual
management fee of $750,000 payable to the
Sponsor, and (iv) the financings and other
transactions contemplated hereby and reflecting
estimated purchase price accounting
adjustments, prepared by independent public
accountants of recognized national standing and
meeting the requirements of Regulation S-X
under the Securities Act of 1933, as amended,
applicable to a Registration Statement under
such Act on Form S-1. Such pro forma financial
statements (A) for the twelve months ended
December 31, 1999 shall evidence minimum
EBITDA of $107 million, (B) for the twelve
months ended June 30, 2000 shall evidence
minimum EBITDA of $101.5 million, and (C) for
the most recent twelve month period ending
prior to the Closing (for which financial
statements are available as required in clause
(a) above) shall evidence minimum EBITDA of
$101.50 million; provided that the EBITDA
figures in this clause (v) shall exclude up to
$3.3 million of the
8
<PAGE> 17
one-time expenses and any pro forma cost
savings resulting from the reduction in force
announced by the Borrower in July, 2000.
(vi) Ratio of Total Debt to Adjusted Pro Forma
Consolidated EBITDA. The Agents shall have
received evidence that the ratio of (i) the
consolidated total debt of the Recapitalized
Company and its subsidiaries as of the end of
the most recent fiscal quarter for which
unaudited statements have been provided, on a
pro forma basis, after giving effect to the
Transactions, to (ii) the consolidated EBITDA
of the Recapitalized Company and its
subsidiaries, as determined pursuant to the
Adjusted Pro Forma Financial Statements (the
"Adjusted Pro Forma Consolidated EBITDA"), for
the period of four fiscal quarters ending as of
the end of the most recent fiscal quarter for
which unaudited statements have been provided
would not exceed 4.85 to 1.0.
(vii) Material Adverse Change. No material adverse
change (including any event which, in the
opinion of the Agents, is reasonably likely to
result in such a material adverse change) in
the business, assets, liabilities (actual and
contingent), operations, properties, condition
(financial or otherwise), management, material
agreements or prospects of USC and its
subsidiaries, taken as a whole, shall have
occurred since the date of the most recent
audited financial statements of USC delivered
to the Agents as of the date of the Commitment
Letter, and no material inaccuracy in such
financial statements shall exist (it being
understood that for all purposes hereof, the
financial information disclosed on the
Borrower's Quarterly Report on Form 10-Q for
the quarter ended April 2, 2000 shall not be
deemed to constitute or evidence, in whole or
in part, such a material adverse change).
(viii) Solvency. The Administrative Agent shall have
received a certification addressed to the
Administrative Agent and the Lenders as to the
9
<PAGE> 18
solvency of USC and its subsidiaries on a
consolidated basis (after giving effect to the
Transaction) from an independent firm selected
by the Agents.
(ix) Other Obligations. On or prior to the date of
the initial extensions under the Credit
Facilities, (A) all fees and expenses due and
payable to the Agents, any other Lender and/or
their affiliates pursuant to the Commitment
Letter, the Fee Letter or otherwise shall have
been paid in full as contemplated therein, and
(B) each of the Sponsor and TransitoryCo shall
have complied with all of their respective
obligations under the Commitment Letter and the
Fee Letter, and each such letter shall be in
full force and effect.
(x) Consents. All governmental, shareholder and
third-party consents (including, without
limitation, the termination or expiration of
the waiting period under the Hart-Scott-Rodino
Antitrust Improvement Act) and approvals
necessary in connection with the Transaction
and the other transactions contemplated hereby
shall have been obtained; all such consents and
approvals shall be in full force and effect;
and all applicable waiting periods shall have
expired without any action being taken by any
authority that could restrain, prevent or
impose any material adverse conditions on the
Transaction or such other transactions or that
could seek or threaten any of the foregoing.
(xi) Judgments, Etc. There shall not exist (A) any
order, decree, judgment, ruling or injunction
which restrains the consummation of the
Transaction in the manner contemplated by the
Purchase Agreement and (B) any pending or
threatened action, suit, investigation or
proceeding which could materially adversely
affect the ability of the Borrower or any of
the Guarantors to perform any of their
respective obligations under the definitive
documentation with respect to the Credit
Facilities or the ability of the Administrative
Agent or the Lenders to exercise their rights
thereunder.
10
<PAGE> 19
(xii) Opinions. The Agents shall have received
customary opinions of counsel to the Borrower
and the Guarantors (which shall cover, among
other things, authority, legality, validity,
binding effect and enforceability of the
definitive documentation with respect to
the Credit Facilities) in form and substance
satisfactory to the Agents, and such corporate
resolutions, certificates, and other documents
as the Agents shall reasonably require.
(xiii) Available Financing. After giving effect to the
Transaction and all extensions of credit under
the Revolving Credit Facility on the date of
Closing there shall be at least $90 million of
availability under the Revolving Credit
Facility.
(xiv) Financial Obligations. The Agents shall be
satisfied that USC and its subsidiaries are in
compliance with all existing financial
obligations after giving effect to the
Transaction.
(xv) Engagement Letter. An engagement letter with a
financial institution or financial institutions
reasonably acceptable to the Joint Lead
Arrangers pursuant to which the Borrower shall
have engaged such financial institution(s) to
act as underwriter, placement agent or initial
purchaser of any public or private offering of
debt securities by the Borrower, on terms and
conditions reasonably acceptable to the Joint
Lead Arrangers, shall be in full force and
effect.
(xvi) Outstanding Indebtedness. The Agents shall
have received satisfactory evidence that, after
giving effect to the Transactions, neither
Recapitalized Company nor its subsidiaries
shall have outstanding any indebtedness or
preferred stock other than (a) the loans and
other extensions of credit under the Credit
Facilities, (b) the Senior Debt Financing, (c)
the Preferred Stock issued in connection with
the Transaction, and (d) other limited
indebtedness to be agreed upon, including the
debt assumed in connection with the
Transaction. The terms and conditions
11
<PAGE> 20
of all indebtedness of the Recapitalized
Company and its subsidiaries that will remain
outstanding after the Closing Date (including
but not limited to terms and conditions
relating to the interest rate, fees,
amortization, maturity, subordination,
covenants, events of defaults and remedies)
shall be reasonably satisfactory in all
respects to the Lenders.
(xvii) Environmental and Employee Health and Safety.
The Agents shall be reasonably satisfied as to
the amount and nature of any environmental and
employee health and safety liabilities and
exposures to which the Borrower and its
subsidiaries may be subject after giving effect
to the Transactions, and with the plans of the
Borrower with respect thereto, and the Agents
shall have received environmental assessments
(including Phase I reports) reasonably
satisfactory to the Agents from an
environmental consulting firm satisfactory to
Agents. This condition is deemed satisfied or
waived unless any additional information is
disclosed to or discovered by the Agents after
the date hereof which the Agents deem
materially adverse in respect of the
environmental and employee health and safety
liabilities and exposures of USC and its
subsidiaries.
(xviii) Taxes. The Agents shall be reasonably satisfied
in all respects (a) with the tax position and
the contingent tax liabilities of Recapitalized
Company and its subsidiaries for prior
operating periods, and with the plans of
Recapitalized Company and its subsidiaries with
respect thereto, and (b) with any tax sharing
agreements among Recapitalized Company and its
subsidiaries after giving effect to the
Transactions.
(xix) Existing Management. Management of the
Recapitalized Company and its subsidiaries
(after giving effect to the Transactions)
shall be satisfactory to the Agents in all
material respects; it being understood that
management
12
<PAGE> 21
as of the date hereof is satisfactory to the
Agents.
(xx) Contractual Restrictions. The Agents shall be
satisfied that neither the Recapitalized
Company nor any of its subsidiaries is subject
to material contractual or other restrictions
that would be violated by the Transactions,
including the granting of guarantees and the
payment of dividends by subsidiaries.
(xv) Absence of Defaults. There shall not exist
or have occurred any defaults, prepayment
events or creation of liens under debt
instruments or other agreements as a result of
the Transactions or otherwise.
REPRESENTATIONS
& WARRANTIES: Usual and customary for financing transactions
of this type and for the particular financing
transaction contemplated hereby, including
but not limited to the following: (i) corporate
status; (ii) corporate power and
authority/enforceability; (iii) no violation of
law or contracts or organizational documents;
(iv) no material litigation; (v) correctness of
specified financial statements and no material
adverse change; (vi) no required governmental
or third party approvals; (vii) use of
proceeds/compliance with margin regulations;
(viii) status under Investment Company Act;
(ix) ERISA; (x) environmental matters; (xi)
perfected liens and security interests; and
(xii) payment of taxes.
COVENANTS: Usual and customary for financing transactions
of this type and for the particular financing
transaction contemplated hereby (with exceptions
to be negotiated), including but not limited
to the following: (i) delivery of financial
statements and other reports, including, without
limitation, the audited financial statements of
May Verpackungen for fiscal years 1998, 1999 and
2000 when available; (ii) delivery of compliance
certificates; (iii) delivery of notices of
default, material litigation and material
governmental and environmental proceedings; (iv)
compliance with laws; (v) payment of taxes;
(vi) maintenance of insurance; (vii) payment or
performance of obligations, (viii) preservation
of corporate existence,
13
<PAGE> 22
(ix) inspection rights, (x) maintenance of
books and records, (xi) maintenance of
properties, (xii) use of proceeds, (xiii)
further assurances, (xiv) limitation on liens
and negative pledges; (xv) limitations on
mergers, consolidations and sales of assets;
(xvi) limitations on incurrence of debt
(including layered debt); (xvii) limitations
on dividends and stock redemptions and the
redemption and/or prepayment of other debt;
(xviii) limitations on investments and
acquisitions; (xix) ERISA; (xx) limitation
on transactions with affiliates, (xxi)
limitation on capital expenditures, (xxii)
limitations on changes to line of business,
(xxiii) limitations on amendment of debt and
other material agreements, (xxiv) limitations
on the issuance and sale of capital stock of
restricted subsidiaries, (xxv) limitations
on restrictions on (a) distributions from
subsidiaries and (b) the ability of the
Borrower to prepay loans under the Credit
Facilities, (xxvi) limitations on activities
of USC, and (xxvii) within sixty days after the
Closing, the Borrower shall have entered into
interest rate protection agreements reasonably
satisfactory to the Agents, which agreements
shall provide coverage in an amount equal to at
least $150.0 million for a duration of at least
3 years from Closing.
Financial covenants to be measured quarterly
and to include (without limitation):
- Maintenance on a rolling four quarter basis
of a Maximum Leverage Ratio (total funded
debt/EBITDA),
- Maintenance on a rolling four quarter basis
of a Minimum Cash Interest Coverage Ratio
(EBITDA/cash interest expense),
- Maintenance on a rolling four quarter basis
of a Minimum Fixed Charge Coverage Ratio
(EBITDA less capital expenditures less cash
taxes)/(interest expense + scheduled
principal repayments), and
- Maintenance on a rolling four quarter basis
of a minimum level of EBITDA.
14
<PAGE> 23
USC shall have agreed that it will not engage
in any business, activity or operation other
than owning and holding the capital stock of
the Borrower, guaranteeing the Credit Facility
and the Subordinated Debt Financing and
pledging its assets (including the capital
stock of the Borrower) as security therefor,
and activities directly related thereto. Except
with respect to TransitoryCo, USC shall not be
permitted to merge with or into any other
person.
EVENTS OF DEFAULT: Usual and customary for financing transactions
of this type and for the particular financing
transaction contemplated hereby (with usual
and customary grace periods and baskets to be
negotiated), including but not limited to the
following: (i) nonpayment of principal,
interest, fees or other amounts; (ii) violation
of covenants; (iii) inaccuracy of
representations and warranties; (iv)
cross-default to other material agreements and
indebtedness; (v) bankruptcy or insolvency;
(vi) material judgments; (vii) ERISA; (viii)
actual or asserted invalidity of any loan
documents or security interests; or (ix) Change
in Control (to be defined).
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make
assignments in minimum amounts of $2.5 million
to other financial institutions approved by
the Borrower (absent a default or pending
default) and the Administrative Agent,
which approval shall not be unreasonably
withheld. Lenders will be permitted to
sell participations with voting rights
limited to significant matters such as
changes in amount, rate, and maturity date.
An assignment fee of $3,500 is payable by the
Lender to the Administrative Agent upon any
such assignment occurring (including, but
not limited to an assignment by a Lender to
another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the
loan agreement and other definitive credit
documentation will require the approval of
Lenders holding loans and commitments
representing more than 50% of the aggregate
amount of loans and commitments under the
Credit Facilities (the "Required Lenders"),
except that (a) the consent of all the Lenders
affected thereby shall be required with respect
to (i) increases in commitment
15
<PAGE> 24
amounts, (ii) reductions of principal,
interest, or fees, (iii) extensions of final
maturities, (iv) releases of all or
substantially all collateral and (v) releases
of all or substantially all guarantors and (b)
the consent of the Lenders holding at least 50%
of the Tranche A Term Loan Facility and at
least 50% of the Tranche B Term Loan Facility
shall be required with respect to any amendment
that changes the allocation of any payment
between the Tranche A and Tranche B Term Loan
Facilities.
INDEMNIFICATION: The Borrower shall indemnify the Agents, the
Joint Lead Arrangers and the Lenders from and
against all losses, liabilities, claims,
damages or expenses relating to their loans,
the Borrower's use of loan proceeds or the
commitments, including but not limited to
reasonable attorneys' fees and settlement
costs. This indemnification shall survive and
continue for the benefit of the Agents, the
Joint Lead Arrangers and the Lenders at all
times after TransitoryCo's and the Sponsor's
acceptance of the Lenders' commitment for the
Credit Facilities, notwithstanding any
failure of the Credit Facilities to close.
CLOSING: On or before November 30, 2000
GOVERNING LAW: State of New York.
FEES/EXPENSES: As outlined in ADDENDUM I.
OTHER: This term sheet is intended as an outline only
and does not purport to summarize all the
conditions, covenants, representations,
warranties and other provisions which would be
contained in definitive legal documentation for
the Credit Facilities contemplated hereby. Each
of the Borrower and the Guarantors shall waive
its right to a trial by jury.
16
<PAGE> 25
ADDENDUM I
FEES AND EXPENSES
COMMITMENT FEE: A 50 basis points per annum (calculated on
the basis of actual number of days elapsed in a
year of 360 days) Commitment Fee calculated on
the unused portion of the Credit Facilities
shall commence to accrue upon execution of a
definitive credit agreement and shall be paid
thereafter quarterly in arrears.
INTEREST RATES: Subject to performance pricing (as set forth
below) the Revolving Credit Facility and Tranche
A Term Loan Facility shall bear interest at
a rate equal to LIBOR plus 325 bps (calculated
on the basis of actual number of days elapsed in
a year of 360 days) or the Alternate Base Rate
(defined as the higher of (i) the Bank of
America prime rate and (ii) the Federal Funds
rate plus 1/2%) plus 225 bps (calculated on the
basis of actual number of days elapsed in a year
of 365/366 days). The Tranche B Term Loan
Facility shall bear interest at a rate equal
to LIBOR plus 375 basis points or the
Alternative Base Rate plus 275 basis points;
provided that if the Borrower has a BB rating or
better from S&P and a Ba2 rating or better from
Moody's the Tranche B Term Loan shall bear
interest at a rate equal to LIBOR plus 350
basis points or the Alternative Base Rate plus
250 basis points. If during the 180 day period
following the Closing, any breakage costs,
charges or fees are incurred with respect to
LIBOR loans on account of the syndication of
the Credit Facilities, the Borrower shall
immediately reimburse the Administrative
Agent (for the benefit of the assigning
Lender(s)) for any such costs, charges or fees.
Such right of reimbursement to be in addition
to and not in limitation of customary cost and
yield protection.
The Borrower may select interest periods of 1,
2, 3 or 6 months for LIBOR loans, subject to
availability.
A penalty rate shall apply on all amounts
outstanding under the Credit Facilities
(including Letters of Credit) (a) upon the
occurrence of a payment default or (b)
subsequent to any other Event of Default, upon
the affirmative action by the Required Lenders,
at a rate per annum of 2% above the applicable
interest rate or letter of credit fee.
<PAGE> 26
July 27, 2000
Page 18
PERFORMANCE
PRICING: The LIBOR and Alternate Base Rate margins (and
the letter of credit fees) for the Revolving
Credit Facility and the Tranche A Term Loan
Facility will be subject to performance pricing
step-downs, commencing 5 business days
following the delivery of the compliance
certificate with respect to the quarterly
financial statements dated March 31, 2001,
based upon the Borrower's total debt/EBITDA
ratio, as outlined in the table below:
------------------------ --------------------------------------
-------------------------------------
Applicable Percentage for Revolving
Credit Facility and Tranche A Term
Loan Facility
--------------------------------------
----------------- -------------------
total debt/EBITDA LIBOR Loans Base Rate Loans
Ratio
------------------------- ----------------- -------------------
> 4.75 to 1.0 325 bps 225 bps
-
------------------------- ----------------- -------------------
< 4.75 to 1.0
but 300 bps 200 bps
> 4.50 to 1.0
-
------------------------- ----------------- -------------------
< 4.50 to 1.0
but 275 bps 175 bps
> 4.00 to 1.0
-
------------------------- ----------------- -------------------
< 4.00 to 1.0 250 bps 150 bps
but
> 3.50 to 1.0
-
------------------------- ----------------- -------------------
------------------------- ----------------- -------------------
< 3.50 to 1.0 225 bps 125 bps
------------------------- ----------------- -------------------
COST AND YIELD
PROTECTION: Usual for transactions and facilities of this
type, including, without limitation, in
respect of prepayments, changes in capital
adequacy and capital requirements or their
interpretation, legality, unavailability,
increased costs in connection with LIBOR loans
or letters of credit and payments free and
clear of withholding or other taxes.
LETTER OF
CREDIT FEES: The Borrower shall pay a per annum letter of
credit fee (calculated on the basis of actual
number of days elapsed in a year of 360 days)
on the outstanding amount of all Letters
of Credit. The applicable letter of credit fee
shall be the applicable percentage over LIBOR
(the "LIBOR Margin") in effect from time to
time for LIBOR based loans outstanding under
the Revolving Credit Facility.
In addition, the Borrower shall pay the
Fronting Bank for its own account a per annum
fronting fee of 1/8% (calculated on the basis
of actual number of days elapsed in a year of
360 days) on the outstanding amount of all
Letters of Credit. The letter of credit
fronting fee shall be due quarterly in arrears.
<PAGE> 27
July 27, 2000
Page 19
EXPENSES: Upon Closing, the Borrower will pay all
reasonable costs and expenses associated
with the preparation, due diligence,
administration, syndication and enforcement of
all documents executed in connection with the
Credit Facilities, including, without
limitation, the legal fees of the Agents' and
Joint Lead Arrangers' counsels.
