-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lj0gTnrRy1PwVxu69q6XqN+zbSZVyysFizmThGXiMdNyhJkjLD0AUEXPuGpmlKif OA3msKNjPTJm3g/PeEt7hA== 0000950137-96-001416.txt : 19960814 0000950137-96-001416.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950137-96-001416 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US CAN CORP CENTRAL INDEX KEY: 0000895726 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061094196 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13678 FILM NUMBER: 96611374 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES CAN COMPANY /DE/ CENTRAL INDEX KEY: 0000880657 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061145011 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-43734 FILM NUMBER: 96611375 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60521 10-Q 1 FORM 10-Q, DATED 6-30-96 1 ================================================================================ 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. ================================================================================ 2 U.S. CAN CORPORATION UNITED STATES CAN COMPANY FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 TABLE OF CONTENTS
PAGE ---- 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
2 3 U.S. CAN CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (000'S OMITTED, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1996 1995 --------- ------------ 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 ========= =========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these balance sheets. 3 4 UNITED STATES CAN COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) (000'S OMITTED, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1996 1995 --------- ------------ 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 ========== ==========
The accompanying Notes to Condensed Financial Statements are an integral part of these balance sheets. 4 5 U.S. CAN CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE DATA)
QUARTERLY PERIOD ENDED SIX MONTHS ENDED -------------------- -------------------- JUNE 30, JULY 2, JUNE 30, JULY 2, 1996 1995 1996 1995 -------- -------- -------- -------- 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 ======== ======== ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 5 6 UNITED STATES CAN COMPANY CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (000'S OMITTED)
QUARTERLY PERIOD ENDED SIX MONTHS ENDED -------------------- -------------------- JUNE 30, JULY 2, JUNE 30, JULY 2, 1996 1995 1996 1995 -------- -------- -------- -------- 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 ======== ======== ======== ========
The accompanying Notes to Condensed Financial Statements are an integral part of these statements. 6 7 U.S. CAN CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (000'S OMITTED)
SIX MONTHS ENDED -------------------- JUNE 30, JULY 2, 1996 1995 -------- -------- 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 ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 7 8 UNITED STATES CAN COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (000'S OMITTED)
SIX MONTHS ENDED -------------------- JUNE 30, JULY 2, 1996 1995 -------- -------- 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 ======== ========
The accompanying Notes to Condensed Financial Statements are an integral part of these statements. 8 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 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):
JUNE 30, DECEMBER 31, 1996 1995 -------- ------------ 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 ======= =======
10 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 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 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 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 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 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 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 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:
NOMINEE FOR WITHHELD - --------------------- ----------- -------- Ricardo Poma 10,402,570 58,495 Michael J. Zimmerman 10,402,609 58,456
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:
FOR AGAINST WITHHELD - --------------------- ----------- -------- 10,451,628 6,525 2,912
The 1996 Employee Stock Purchase Plan was presented and adopted in accordance with the following vote:
FOR AGAINST WITHHELD NON-VOTE - --------------------- ----------- -------- -------- 10,318,613 82,068 24,506 35,878
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
INCORPORATION EXHIBIT BY REFERENCE NUMBER DESCRIPTION OF DOCUMENT (IF APPLICABLE) - ------ ----------------------------------------------------------------------- --------------- 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)...........................
- ------------------------- * 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 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 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 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 22 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ------------------------------------------------------------------------------------ 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)
EX-4.1 2 AMEND #7 TO CREDIT AGREEMENT 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: 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 -2- 3 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. -3- 4 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, -4- 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 -5- 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 -6- 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. -7- 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; -8- 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. -9- 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 -10- 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. -11- 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. -12- 13 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"). -13- 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- 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:
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 - ---------------------------------------------------------------------------------------------------- Applicable Acquisition Base Rate Margin 0.0% 0.0% 0.25% 0.375% ====================================================================================================
; 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:
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 - ---------------------------------------------------------------------------------------------------- Applicable Acquisition Commitment Fee Percentage 0.20% 0.25% 0.325% 0.375% ====================================================================================================
; 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- 16
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 - ---------------------------------------------------------------------------------------------------- Applicable Acquisition Eurodollar Margin 0.75% 1.00% 1.25% 1.375% ====================================================================================================
; 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:
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 - ---------------------------------------------------------------------------------------------------- Applicable Revolving Commitment Fee Percentage 0.20% 0.25% 0.325% 0.375% ====================================================================================================
; 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- 17
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 - ---------------------------------------------------------------------------------------------------- Applicable Revolving/Term Eurodollar Margin 0.50% 0.75% 1.00% 1.125% ================================================================================================
; 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- 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- 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- 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- 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- 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- 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- 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- 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- EX-10.2 3 ENGAGEMENT AGREEMENT 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 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 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 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 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 EX-27 4 FDS
5 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. U.S. CAN CORPORATION 0000895726 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 740 0 81,625 6,649 86,864 178,582 381,245 137,456 504,527 106,761 258,041 0 0 129 91,679 504,527 344,207 344,207 299,595 313,525 1,663 142 12,520 16,357 6,950 9,407 0 0 0 9,407 0.72 0.72
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