UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the Quarterly Period Ended
June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 33-64814
SWEETHEART HOLDINGS INC.*
(Exact name of registrant as specified in its charter)
Delaware 06-1281287
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10100 Reisterstown Road, Owings Mills, 21117
Maryland (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 410/363-1111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the Registrant's common stock as of:
August 5, 1997
Sweetheart Holdings Inc. Common Stock, $0.01 par value - 1,046,000 shares
* The Registrant is the guarantor of the 9 5/8 % Senior Secured Notes due
2000 and the 10 1/2% Senior Subordinated Notes due 2003 (collectively, the
"Notes") of Sweetheart Cup Company Inc., a wholly owned subsidiary of the
Registrant.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
Sweetheart Holdings Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
<CAPTION>
(Unaudited)
June 30, September 30,
1997 1996
----------------- ----------------
<S> <C> <C>
ASSETS
--------
CURRENT ASSETS
Cash and cash equivalents $ 5,560 $ 4,371
Restricted cash 25,523 28,870
Receivables, less allowances of $2,643 and $2,466, respectively 90,998 88,183
Inventories 190,898 192,937
Deferred income taxes 1,771 1,771
--------- ---------
Total current assets 314,750 316,132
Property, plant and equipment 564,507 527,394
Less - Accumulated depreciation 132,138 99,561
--------- ---------
Net property, plant and equipment 432,369 427,833
Other assets 16,809 18,645
--------- ---------
Total assets $ 763,928 $ 762,610
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 68,942 $ 70,472
Accrued payroll and related costs 46,589 47,828
Other current liabilities 43,577 33,918
Current portion of long-term debt and bonds 1,936 1,535
--------- ---------
Total current liabilities 161,044 153,753
Long-term debt 425,163 381,879
Long-term bonds 3,700 3,700
Deferred income taxes 2,605 17,803
Other liabilities 71,677 84,060
SHAREHOLDERS' EQUITY
Common stock -- Par value $.01 per share; 3,000,000 shares authorized;
1,046,000 shares issued and outstanding 101,100 101,100
Cumulative translation adjustment (504) (322)
Retained (deficit) earnings (486) 21,060
Note receivable related to purchase of common stock (371) (423)
--------- ---------
Total shareholders' equity 99,739 121,415
--------- ---------
Total liabilities and shareholders' equity $ 763,928 $ 762,610
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Sweetheart Holdings Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In Thousands)
<CAPTION>
For the quarter ended For the nine months ended
June 30, June 30,
------------------------------- --------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 236,366 $ 246,063 $ 609,523 $ 657,152
Cost of sales 202,135 204,617 555,441 579,525
---------- --------- --------- ----------
Gross income 34,231 41,446 54,082 77,627
Selling, general and administrative
expense 20,039 19,206 60,327 55,636
---------- --------- --------- ----------
Operating income (loss) 14,192 22,240 (6,245) 21,991
Interest expense 10,798 9,880 30,854 29,138
Other income, net 1,115 380 1,187 1,254
---------- --------- --------- ----------
Income (loss) before income tax
expense (benefit) 4,509 12,740 (35,912) (5,893)
Income tax expense (benefit) 1,803 5,098 (14,365) (2,358)
---------- --------- --------- ----------
Net income (loss) $ 2,706 $ 7,642 $ (21,547) $ (3,535)
========== ========= ========= ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Sweetheart Holdings Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
<CAPTION>
For the nine months ended
June 30,
-------------------------------
1997 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (21,547) $ (3,535)
Depreciation and amortization 35,489 31,745
Deferred income tax benefit (14,821) (2,890)
(Increase) decrease in receivables (2,815) 6,696
Decrease (increase) in inventories 2,039 (11,408)
Decrease in accounts payable (1,530) (414)
Other, net (5,315) 832
---------- ---------
Net cash (used in) provided by operating activities (8,500) 21,026
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (37,503)
Proceeds from sale of property, plant and equipment - (30,202)
---------- ---------
Net cash used in investing activities (37,503) (30,695)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of debt 219,709 132,299
Repayment of debt (175,916) (124,221)
Decrease (increase) in restricted cash 3,347 (2,492)
Payment received on common stock note receivable 52 77
---------- ---------
Net cash provided by financing activities 47,192 5,663
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,189 (4,006)
---------- ---------
CASH AND CASH EQUIVALENTS, beginning of period 4,371 8,001
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 5,560 $ 3,995
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 20,941 $ 19,425
========== =========
Income taxes paid $ 854 $ 2,146
========== =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP) for
interim financial information and with the instructions of Form 10-Q and rule
10-01 of regulation S-X. Accordingly, these statements do not include all the
information required by GAAP for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of Sweetheart Holdings Inc. and
subsidiaries' (the "Company") financial position as of June 30, 1997 and the
results of operations and cash flows for the nine months ended June 30, 1997
have been included. Operating results for the nine month period ended June 30,
1997 are not necessarily indicative of the results to be expected for the year
ending September 30, 1997.
(2) RESTRICTED CASH
The cash balances of Sweetheart Receivables Corporation are restricted
from transfer to other entities within the Company. Restricted cash is held by
the Note Trustee in an amount equal to four months interest expense plus a
holdback based on a multiple of historical collection experience, and a
percentage of amounts due from companies with no domestic credit rating. The
balance of restricted cash was $25.5 million at June 30, 1997 and $28.9 million
at September 30, 1996.
(3) INVENTORIES
The components of inventories were as follows (in thousands):
June 30, September 30,
1997 1996
------------ ------------
Raw materials and supplies $ 52,510 $ 55,265
Finished goods and partly-finished
products 138,388 137,672
-------- --------
$190,898 $192,937
======== ========
(4) SWEETHEART CUP COMPANY INC. SUMMARIZED FINANCIAL INFORMATION
Sweetheart Holdings Inc. is the guarantor of the 9 5/8% Senior Secured
Notes due 2000 and the 10 1/2% Senior Subordinated Notes due 2003 of Sweetheart
Cup Company Inc., a wholly owned subsidiary of Sweetheart Holdings Inc.
Summarized financial information for Sweetheart Cup Company Inc. is presented as
follows (in thousands):
(Unaudited) September
June 30, 1997 30,1996
--------------- ---------------
Current assets $593,513 $572,259
Noncurrent assets 171,821 174,006
Current liabilities 133,496 127,728
Noncurrent liabilities 555,550 519,635
(Unaudited) (Unaudited)
For the quarter ended For the nine months ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
Net sales $236,366 $246,063 $609,523 $657,152
Gross income 31,639 44,253 46,345 67,658
Net Income(loss) 2,283 13,641 (22,431) 3,780
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
The Company operates in two principal business lines: Foodservice and Food
Packaging. Foodservice products include disposable hot and cold drink cups,
lids, food containers, plates, bowls, cutlery and ice cream cones. These
products are sold directly and through distributors to fast food chains, full
service restaurants, hospitals, airlines, theaters and other institutional
customers. Food Packaging products include paper and plastic containers for the
dairy and food processing industries. Food Packaging also designs, manufactures
and leases filling and packaging machines that fill and seal the Company's
containers in customers' plants.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
Net sales decreased to $236.4 million for the three months ended June 30,
1997 from $246.1 million for the same period in 1996, a decrease of $9.7 million
or 3.9%. The decrease in net sales reflects a 1.0 % increase in domestic sales
volume offset by a 4.2% decrease in domestic sales price. Foodservice sales
volume increased 2.6% while Food Packaging sales volume decreased 11.2%. Sales
volume measures the dollar value of unit sales, assuming constant prices between
periods. The decrease in Food Packaging volume is primarily attributable to
decreases in demand experienced by key accounts in their customer base in both
the cultured and frozen segments. Foodservice and Food Packaging selling prices
decreased 4.3% and 3.5%, respectively. Price has been negatively impacted by
falling raw material prices and by competition in the marketplace. The benefits
of lower raw material prices are generally passed on to customers. Canadian
sales increased 5.1% from the same period in 1996.
Cost of sales decreased to $202.1 million for the three months ended
June 30, 1997 from $204.6 million for the same period in 1996, a decrease of
$2.5 million or 1.2%. As a percentage of net sales, cost of sales increased to
85.5% for the three months ended June 30, 1997 from 83.1% for the same period in
1996. The Company has implemented initiatives which have reduced variable
manufacturing costs to offset price conditions in the marketplace described
above. As a result, raw material and labor costs have been held constant as a
percentage of sales. As overhead spending has remained at 1996 levels, this
cost as a percentage of sales has increased.
Gross income decreased to $34.2 million for the three months ended
June 30, 1997 from $41.5 million for the same period in 1996, a decrease of $7.3
million.
Selling, general and administrative expenses increased by $0.8 million
or 4.2%, from $19.2 million in the third quarter of 1996 to $20.0 million for
the three ended June 30, 1997. This increase is entirely attributable to
expenditures on the new MIS system. All other expenses have actually decreased
$0.7 million for the three months ended June 30, 1997 compared with the same
period in 1996 despite normal inflation in the wage base.
Operating income decreased to $14.2 million for the three months ended
June 30, 1997 from $22.3 million for the same period in 1996, a decrease of $8.1
million due to the reasons described above.
Interest expense increased $.9 million or 9.1% to $10.8 million for
the three months ended June 30, 1997 from $9.9 million for the same period in
1996. This increase is a result of higher revolving loan borrowings.
Income tax expense decreased to $1.8 million for the three months
ended June 30, 1997 from $5.1 million for the same period in 1996.
Net income decreased to $2.7 million for the three months ended June
30, 1997 from $7.6 million for the same period in 1996, a decrease of $4.9
million, due to the reasons described above.
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
Net sales decreased to $609.5 million for the nine months ended June 30,
1997 from $657.1 million for the same period in 1996, a decrease of $47.6
million or 7.2%. The decrease in net sales reflects a 1.2% decrease in domestic
sales volume and a 5.1% decrease in domestic sales price. Foodservice sales
volume increased 0.5% while Food Packaging sales volume decreased 12.3%. Sales
volume measures the dollar value of unit sales, assuming constant prices between
periods. The decrease in Food Packaging volume is primarily attributable to
decreases in demand experienced by key accounts in their customer base in both
the cultured and frozen segments. Foodservice and Food Packaging selling prices
decreased 5.4% and 3.5%, respectively. Price has been negatively impacted by
falling raw material prices and by competition in the marketplace. The benefits
of lower raw material prices are generally passed on to customers. Canadian
sales decreased 2.7% from the same period in 1996.
Cost of sales decreased to $555.4 million for the nine months ended
June 30, 1997 from $579.5 million for the same period in 1996, a decrease of
$24.1 million or 4.2%. As a percentage of net sales, cost of sales increased to
91.1% for the nine months ended June 30, 1997 from 88.2% for the same period in
1996. The Company has implemented initiatives which have reduced variable
manufacturing costs to offset price conditions in the marketplace described
above. As a result, raw material and labor costs have been held constant as a
percentage of sales. As overhead spending has remained at 1996 levels, this
cost as a percentage of sales has increased. In addition, year-to-date results
have been impacted by changes in overhead absorption relating to planned
inventory reductions. Overhead costs are allocated and absorbed into inventory
when inventory is produced and expensed when inventory is sold. As a result,
profit comparisons can be materially affected when a change in inventory levels
during a period differs significantly from the change in the prior year period.
In 1996, inventory levels increased, resulting in an absorption of fixed costs
into inventory. In 1997, inventory levels declined, and the fixed costs
associated with inventories sold were recognized. This has resulted in a year-
to-year unfavorable impact on cost of sales of $4.0 million.
Gross income decreased to $54.1 million for the nine months ended June
30, 1997 from $77.6 million for the same period in 1996, a decrease of $23.5
million due to the reasons described above.
Selling, general and administrative expenses increased to $60.3
million for the nine months ended June 30, 1997 from $55.6 million for the same
period in 1996, an increase of $4.7 million or 8.4%. $2.7 million of this
increase relates to expenditures on the new MIS system, while the remainder
reflects investment in the Foodservice distribution selling activity and normal
inflation in the wage base. All other selling, general and administrative
expenses have remained below prior year levels.
Operating loss was $6.2 million for the nine months ended June 30,
1997 compared to operating income of $22.0 million for the same period in 1996,
a decrease of $28.2 million due to the reasons described above.
Interest expense increased $1.8 million or 6.2% to $30.9 million for
the nine months ended June 30, 1997 from $29.1 million for the same period in
1996. This decrease is a result of higher revolving loan borrowings.
Income tax benefit increased to $14.4 million for the nine months
ended June 30, 1997 from $2.4 million for the same period in 1996.
Net loss increased to $21.5 million for the nine months ended June 30,
1997 from $3.5 million for the same period in 1996, an increase of $18.0
million, due to the reasons described above.
1997 OUTLOOK
As discussed above, competitive pressure on pricing as well as the impact
of fixed overhead absorption due to planned reductions in inventory levels have
impacted the year-to-date results. The Company expects that pricing will hold
at current levels or increase for the remainder of the year. As well, fixed
overhead costs absorbed into inventory will be expensed in the fourth quarter as
the Company continues its initiatives surrounding reduction of inventory levels.
The Company continues to implement cost savings initiatives in both the
manufacturing and selling, general and administrative expense areas. In light
of year-to-date results, the Company anticipates that full year 1997 results
will fall short of those achieved in 1996.
The Company has an on-going strategic planning process which allows it to
focus on prioritizing markets, customers, products and operations to achieve
optimal returns. The current market trends and financial results achieved have
prompted the Company to reassess its business strategy. The Company is
evaluating its core product lines for competitiveness and is also identifying
opportunities to lower product cost and the fixed cost structure. As a result
of this process, the Company is currently considering offers to purchase its
Bakery operations. In addition, other product lines, business units and
operations are being evaluated for competitiveness and further changes are
possible as a result of this evaluation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is highly seasonal with the majority of its net
cash inflows from operations realized in the last two quarters of the fiscal
year. The Company builds inventory to prepare for the higher seasonal demands
of the summer months when away-from-home consumption increases. As a result,
the Company uses its revolving credit facilities to meet its production
requirements during periods of reduced cash flow.
For the nine months ended June 30, 1997, $37.5 million of net capital
additions, $8.5 million of cash used for operations, $1.1 million increase in
cash balances, and the payment of $0.1 million of industrial revenue bond
principal were funded through a $3.3 million decrease in restricted cash
balances, $43.7 million of domestic revolving loan borrowings, and $0.2 million
of Canadian operating facility borrowings. The maximum combined month end
outstanding balance of the domestic revolving loan and Canadian operating
facilities during the nine months ended June 30, 1997 was $68.2 million, while
the average balance outstanding totaled approximately $52.3 million. At June
30, 1997, the Company had approximately $8.5 million of combined availability
under its domestic revolving loan and Canadian operating facilities.
The Company is required under its credit facilities to comply with certain
financial ratios and covenants on a quarterly basis. In light of current
financial results, the credit facilities were amended in advance of quarter-end
to eliminate any risk of non-compliance for the quarter. Depending on
performance, the Company may seek amendments related to the fourth quarter.
The Company's principal uses of cash for the next several years will
be capital expenditures, debt service requirements, and seasonal working capital
needs. In addition, the Company may be required to fund various contingent
liabilities at any time, including amounts accrued for litigation, claims and
assessments reflected on the balance sheet as other current liabilities.
Management believes that cash generated by operations and funds available from
borrowings under the domestic revolving loan facility and the Canadian operating
facility may be sufficient to meet the Company's expected operating needs,
including capital expenditures and debt service requirements. However, as a
result of anticipated additional cash flow needs referred to in the 1997 Outlook
section above (including additional capital expenditures to increase operating
efficiency), as well as the desire to have more flexible debt covenants, the
Company is currently exploring various financing options which may involve a
refinancing of its debt.
NET OPERATING LOSS CARRYFORWARDS
As of September 30, 1996, the Company had approximately $126 million of
net operating loss ("NOL") carryforwards for federal income tax purposes.
Although the Company has taken certain steps to allow utilization of the NOL
carryforwards and anticipates that a substantial portion of its NOL
carryforwards will be available to offset future taxable income, there can be no
assurance that its NOL carryforwards will become available or that the Company
will generate future taxable income. Accordingly, all or a portion of its NOL
carryforwards could expire unutilized. The Company has reserved a portion of
the tax benefit of its NOL carryforwards for financial statement purposes. The
Company believes that future taxable income will be attainable due primarily to
capital spending programs for cost reduction opportunities and new product
development
ENVIRONMENTAL ISSUES
On June 24, 1997 the Company received a request for information from the
Environmental Protection Agency ("EPA") pursuant to Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act and
Section 3007 of the Resource Conservation and Recovery Act, concerning the Lily-
Tulip Brown Fields Site (the "Site") in Old Town, Maine. This Site may have
been previously owned or operated by a company whose stock was acquired by the
Company. The EPA notice requires the Company to provide certain information
concerning the Company and the ownership and operation of the Site. Although
the EPA notice does not claim that the Company is responsible for the cleanup of
the Site, the Company currently is gathering the information requested and
reviewing its potential liability, if any. The Company also is investigating
potential claims it may have against one or more former owners or operators of
the Site.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this filing, including those in the
footnotes to the financial statements, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties and actual
results could differ materially. Such risks and uncertainties include, but are
not limited to, general economic and business conditions, competitive market
pricing, increases in raw material, energy and other manufacturing costs,
fluctuations in demand for the Company's products, potential equipment
malfunctions and pending litigation. For additional information see the
Company's annual report on Form 10-K for the most recent fiscal year.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the Aldridge litigation, on March 14, 1997, the United States
District Court entered an order denying Plaintiffs' Motion for
Amendment, Reconsideration or Correction of the Court's Order of March
22, 1996 in which judgment was granted in favor of the Company. On
April 11, 1997, the Plaintiffs' filed a Notice of Appeal of this order
with the United States Court of Appeals for the Eleventh Circuit.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Jerry J. Jasinowski was elected as director of the Company commencing
August 1, 1997. Mr. Jasinowski is the President and CEO of the
National Association of Manufacturers.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.34 Third Amendment to Credit Agreement dated June 17, 1997
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the three month period
ended June 30, 1997.
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, its duly authorized officer and principal financial officer.
SWEETHEART HOLDINGS INC.
(registrant)
Date: August 5, 1997 By: /s/ William F. Spengler
-----------------------
William F. Spengler
Vice President, Finance and Chief
Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Sweetheart Holdings Inc. Third quarter 1997 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 31083
<SECURITIES> 0
<RECEIVABLES> 93641
<ALLOWANCES> 2643
<INVENTORY> 190898
<CURRENT-ASSETS> 314750
<PP&E> 564507
<DEPRECIATION> 132138
<TOTAL-ASSETS> 763928
<CURRENT-LIABILITIES> 161044
<BONDS> 428863
0
0
<COMMON> 10
<OTHER-SE> 99729
<TOTAL-LIABILITY-AND-EQUITY> 763928
<SALES> 609523
<TOTAL-REVENUES> 609523
<CGS> 555441
<TOTAL-COSTS> 555441
<OTHER-EXPENSES> 60327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30854
<INCOME-PRETAX> (35912)
<INCOME-TAX> (14365)
<INCOME-CONTINUING> (21547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21547)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
THIRD AMENDMENT TO CREDIT AGREEMENT
-------------------------------------
THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June
17, 1997, among SWEETHEART HOLDINGS INC., a Delaware corporation ("Holdings"),
SWEETHEART CUP COMPANY INC., a Delaware corporation (the "Borrower"), the
financial institutions party hereto (the "Banks"), and BANKERS TRUST COMPANY, as
Agent for the Banks (the "Agent"). All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
WITNESSETH:
-------------
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a
Credit Agreement, dated as of August 30, 1993 (as amended, modified or
supplemented through the date hereof, the "Credit Agreement); and
WHEREAS, subject to the terms and conditions contained in this Amendment,
the parties hereto wish to amend the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 9.02(v)(y) of the Credit Agreement is hereby amended by
inserting the text "(or $14,000,000 in case of the fiscal year of Holdings ended
December 31, 1997, so long as approximately $13,325,000 of such amount consists
of Net Proceeds from the sale of the Heidelberg Press, the Stevens Flexograph
Press and related tooling, blanking and sheeting equipment owned by the
Borrower)" after the word "Holdings" appearing in clause (B) of the proviso to
said Section."
2. Section 9.10 of the Credit Agreement is hereby amended by deleting
from the table appearing therein the ratio "1.70:1" set forth opposite the
fiscal quarter ended June 30, 1997 and inserting the new ratio "1.60:1" in lieu
thereof.
3. Section 9.11 of the Credit Agreement is hereby amended by deleting
from the table appearing therein the amount "$405,000,000" set forth opposite
the fiscal quarter ended closest to June 30, 1997 and inserting the amount
"$410,000,000" in lieu thereof.
4. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Third Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all material
respects on the Third Amendment Effective Date both before and after giving
effect to this Amendment, with the same effect as though such representations
and warranties had been made on and as of the Third Amendment Effective Date
(it being understood that any representation or warranty made as of a
specific date shall be true and correct in all material respects as of such
specific date.)
5. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
6. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
8, This Amendment shall become effective on the date (the "Third
Amendment Effective Date") when each of Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at its Notice Office. The Agent shall
promptly notify the Borrower and the Banks in writing of the Third Amendment
Effective Date.
9. From and after the Third Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as amended
hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
SWEETHEART HOLDINGS INC.
By /s/ Roger Lindahl
-------------------
Treasurer
SWEETHEART CUP COMPANY INC.
By /s/ Roger Lindahl
--------------------
Treasurer
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ T. J. Morris
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Vice President
HSBC AMERICAS, INC.
By /s/ J. B. Lyons
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Senior Vice President
ABN AMRO BANK, N.V.
San Francisco International Branch
By /s/ Dianne D. Barkley
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Group Vice President
By /s/ Gina M. Brusatori
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Vice President
FIRST NATIONAL BANK OF MARYLAND
By /s/ B.W. Thropp
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Vice President
U.S. BANK OF OREGON
By /s/ Douglas A. Rich
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Vice President
