<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANCHOR GLASS CONTAINER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3220 59-3417812
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
ONE ANCHOR PLAZA
4343 ANCHOR PLAZA PARKWAY
TAMPA, FLORIDA 33634-7513
(813) 884-0000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
C. KENT MAY, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ANCHOR GLASS CONTAINER CORPORATION
ONE ANCHOR PLAZA
4343 ANCHOR PLAZA PARKWAY
TAMPA, FLORIDA 33634-7513
(813) 884-0000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
AGENT FOR SERVICE)
------------------------
COPIES TO:
RANDI L. STRUDLER, ESQ.
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 326-3939
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 7/8% Senior Notes due
2008........................ $50,000,000 100% $50,000,000 $14,750
- ------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee...... $14,750
==============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO CHANGE,
COMPLETION OR AMENDMENT WITHOUT NOTICE. THESE SECURITIES MAY NOT BE SOLD NOR MAY
AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE PROSPECTUS IS DELIVERED IN
FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED APRIL , 1998
PROSPECTUS
[ANCHOR GLASS LOGO]
$50,000,000
ANCHOR GLASS CONTAINER CORPORATION
OFFER TO EXCHANGE ITS 9 7/8% SENIOR NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT (AS DEFINED),
FOR ITS OUTSTANDING 9 7/8% SENIOR NOTES DUE 2008.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
----------------------------
Anchor Glass Container Corporation, a Delaware corporation ("Anchor" or the
"Company"), hereby offers to exchange (the "Exchange Offer") up to $50,000,000
aggregate principal amount of its new 9 7/8% Senior Notes due 2008 (the
"Exchange Notes") for an equal principal amount of its outstanding 9 7/8% Senior
Notes due 2008 (the "Outstanding Notes") sold by the Company on March 16, 1998,
upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal (the "Letter of Transmittal"). The
Exchange Notes and the Outstanding Notes are collectively referred to herein as
the "Notes." The terms of the Exchange Notes are identical in all material
respects to those of the Outstanding Notes, except for certain transfer
restrictions and registration rights relating to the Outstanding Notes. The
Exchange Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined) governing the Outstanding Notes.
Interest on the Exchange Notes will accrue from and including the Exchange
Date (as defined) and will be payable semi-annually in arrears on March 15 and
September 15 of each year, commencing on September 15, 1998, at the rate of
9 7/8% per annum. Additionally, interest on the Exchange Notes will accrue from
the last interest payment date on which interest was paid on the Outstanding
Notes surrendered in exchange therefor or, if no interest has been paid on the
Outstanding Notes, from the date of original issue of the Outstanding Notes to
but not including the Exchange Date. The Notes will mature on March 15, 2008.
The Notes are redeemable at any time at the option of the Company, in whole and
not in part, at a redemption price equal to the principal amount to be redeemed
plus the Applicable Make-Whole (as defined), together with accrued and unpaid
interest, if any, to the redemption date.
The Notes will be senior unsecured obligations of the Company ranking pari
passu in right of payment with all existing and future senior Indebtedness of
the Company and senior in right of payment to all existing and future
subordinated Indebtedness of the Company. The Notes will be effectively
subordinated in right of payment to all secured indebtedness of the Company to
the extent of the value of the assets securing such indebtedness, including the
First Mortgage Notes (as defined) and the Revolving Credit Facility (as
defined), and to the claims of creditors of the Company's subsidiaries, if any.
At March 31, 1998, the Company had approximately $172.1 million of secured
Indebtedness outstanding to which the Notes would have been effectively
subordinated to the extent of the value of the collateral securing such
Indebtedness. See "Risk Factors--Effective Subordination."
Upon a Change of Control (as defined), each holder of the Notes will have
the right to require the Company to repurchase such holder's Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase. Within 90 days after the consummation of any
Change of Control Offer pursuant to which the Company has repurchased at least
90% of the Notes outstanding immediately prior to such Change of Control Offer,
the Company may, at its option, redeem all of the remaining Notes at a
redemption price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. In addition, under certain
circumstances, the Company will be required to offer to purchase the Notes at
100% of the principal amount thereof plus accrued interest, if any, to the date
of repurchase with the net cash proceeds of certain Asset Sales (as defined).
See "Description of the Notes."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Outstanding Notes where they were acquired by such broker-dealer as a result
of market-making or other trading activities. Each broker-dealer that received
Outstanding Notes from the Company and not as a result of market-making or other
trading activities, in the absence of an exemption, must comply with the
registration requirements of the Securities Act. The Company will, for a period
of 180 days after consummation of the Exchange Offer, make copies of this
Prospectus available to any broker-dealer for use in connection with any such
resale.
Outstanding Notes held by "qualified institutional buyers" (as such term is
defined herein) are designated for trading in the Private Offerings, Resales and
Trading through the Automated Linkages Market (the "PORTAL Market") of the
National Association of Securities Dealers Inc. The Exchange Notes constitute
securities for which there is no established trading market. Any Outstanding
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
The Company does not intend to list the Exchange Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system, and no active public market for the Exchange Notes is currently
anticipated. If a market for the Exchange Notes should develop, such Exchange
Notes could trade at a discount from their principal amount. To the extent that
any Outstanding Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Outstanding Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Outstanding Notes or the Exchange Notes.
The Exchange Notes are being offered hereby in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
as of March 16, 1998 (the "Registration Rights Agreement") among the Company and
certain institutional accredited investors (the "Initial Purchasers") entered
into at the time of original issue of the Outstanding Notes. The Company will
not receive any proceeds from the Exchange Offer. The Company will pay all
expenses incident to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange pursuant to the Exchange Offer.
The date of acceptance and exchange (the "Exchange Date") of the Outstanding
Notes will be the second business day following the Expiration Date. Outstanding
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. In the event the Company terminates the Exchange Offer
and does not accept for exchange any Outstanding Notes with respect to the
Exchange Offer, the Company will promptly return such Outstanding Notes to the
holders thereof.
THE NOTES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
The date of this Prospectus is , 1998.
<PAGE> 3
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"), INCLUDING STATEMENTS REGARDING, AMONG OTHER ITEMS, (I) THE REALIZATION OF
ANCHOR'S PLANNED RESTRUCTURING PROGRAM AND THE COST SAVINGS ESTIMATED TO BE
ACHIEVED IN CONNECTION THEREWITH, (II) THE SUFFICIENCY OF CASH FLOW TO FUND
ANCHOR'S DEBT SERVICE REQUIREMENTS AND WORKING CAPITAL NEEDS AND (III)
ANTICIPATED TRENDS IN THE GLASS PACKAGING INDUSTRY. FORWARD-LOOKING STATEMENTS
ARE TYPICALLY IDENTIFIED BY THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"INTEND," "ESTIMATE" AND SIMILAR EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND
ANCHOR'S CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTEMPLATED
BY THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF FACTORS INCLUDING THOSE
DESCRIBED IN "RISK FACTORS." IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE
CAN BE NO ASSURANCE THAT THE RESULTS AND EVENTS CONTEMPLATED BY THE
FORWARD-LOOKING INFORMATION CONTAINED IN THIS PROSPECTUS WILL IN FACT TRANSPIRE.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THEIR DATES. ANCHOR DOES NOT UNDERTAKE ANY
OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS.
THIS PROSPECTUS CONTAINS HISTORICAL FINANCIAL INFORMATION REGARDING GLENSHAW
GLASS COMPANY, INC. ("GLENSHAW") AND CONSUMERS PACKAGING INC. ("CONSUMERS"),
AFFILIATES OF ANCHOR. PRIOR RESULTS OF CONSUMERS AND GLENSHAW ARE NOT INDICATIVE
OF THE COMPANY'S FUTURE RESULTS. THE NATURE AND RISKS OF THE RESTRUCTURING
CARRIED OUT AT CONSUMERS AND GLENSHAW, AND MARKET CONDITIONS FACED BY THEM,
DIFFER SUBSTANTIALLY FROM THE NATURE AND RISKS OF THE BUSINESS PLAN FOR ANCHOR
DESCRIBED UNDER "BUSINESS--BUSINESS STRATEGY."
------------------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Exchange Notes being
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and the Exchange
Notes, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions in such exhibit, to which reference is hereby made. Copies of the
Registration Statement may be examined without charge at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and the Commission's Regional Offices located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the Registration Statement can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of certain fees prescribed by the Commission. The Commission maintains
an Internet site on the World Wide Web at "http://www.sec.gov." which contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.
The Company is currently subject to the informational requirements of the
Exchange Act and in accordance therewith, files reports and other information
with the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
any material so filed can be obtained from the Public Reference Section of the
Commission, upon payment of certain fees prescribed by the Commission.
In addition, the Company is required by the terms of the Indenture to
furnish the Trustee and the holders of the Notes with annual reports containing
consolidated financial statements audited by its independent public accountants
and with quarterly reports containing unaudited condensed consolidated financial
statements for each of the first three quarters of each fiscal year.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the consolidated financial statements and notes thereto, included elsewhere in
this Prospectus. Unless otherwise noted, references to: (i) "Anchor" or "the
Company" shall mean Anchor Glass Container Corporation; (ii) "Consumers" shall
mean Consumers Packaging Inc. and its Canadian subsidiary, Consumers
International Inc. ("Consumers International"); (iii) "Consumers U.S." shall
mean Anchor's parent, Consumers U.S., Inc.; (iv) the "Anchor Acquisition" shall
mean the acquisition by the Company of certain assets and the assumption of
certain liabilities of Old Anchor on February 5, 1997; and (v) "Old Anchor"
shall mean the former Anchor Glass Container Corporation, which was a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code of
1978, as amended (the "Bankruptcy Code") and was renamed Anchor Resolution Corp.
following the Anchor Acquisition and which transferred all of its assets to The
Anchor Liquidating Trust which is liquidating such assets. Financial information
set forth in this Prospectus has been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP"). References to "C$"
are to Canadian Dollars. On April 20, 1998, the inverse of the Noon Buying Rate
was C$1.00 = U.S. $0.7003.
THE COMPANY
Anchor is the third largest manufacturer of glass containers in the United
States. Anchor produces a diverse line of flint (clear), amber, green and other
colored glass containers of various types, designs and sizes. The Company
manufactures and sells its products to many of the leading producers of beer,
liquor, wine, food, juice, tea, soda and mineral water. The Company focuses on
the production of beer containers as this product category accounted for
approximately 36% of the Company's 1997 net sales, 14% greater than the net
sales of its next largest category. For the period from February 5, 1997 to
December 31, 1997, the Company had net sales of $569.4 million and Adjusted
EBITDA of $69.8 million.
Consumers, Canada's only glass container manufacturer, currently owns
approximately 60% of Anchor indirectly on a fully diluted basis. By management's
estimates, Consumers produced in excess of 85% of all glass containers sold in
Canada in 1997, with U.S. glass container manufacturers (including Anchor)
having produced most of the remainder. The Company and Consumers had total
consolidated net sales of over C$1.2 billion in 1997, net of intercompany sales.
A new senior management team, including executives from Consumers and its
majority shareholder, G&G Investments, Inc. ("G&G"), who led the turnarounds at
both Consumers and Glenshaw Glass Company, Inc. ("Glenshaw"), have begun to
implement a series of turnaround initiatives at Anchor. Anchor's strategy to
continue to improve operating performance is to (i) establish and maintain
strong customer relationships, (ii) provide high quality products and service,
(iii) minimize manufacturing, distribution and overhead costs, and (iv) improve
production planning and product mix at the plant level to increase operating and
distribution efficiency. Consistent with this strategy, management of the
Company and of Consumers has closed two Anchor plants, removed two furnaces from
production at two other Anchor plants and closed one Consumers plant. Management
believes that its strategy to eliminate excess capacity is consistent with
certain recent actions of the Company's two major competitors. The consolidation
in the glass packaging industry has resulted in the three leading manufacturers
producing approximately 94% of 1997 U.S. domestic volume by management's
estimate.
COMPETITIVE STRENGTHS
Management believes the Company has the following key competitive
strengths:
- EXPERIENCED MANAGEMENT TEAM. John J. Ghaznavi, Chairman and Chief
Executive Officer of Anchor, and his team of managers are in the process
of implementing a turnaround program at Anchor that will focus on
reducing costs and optimizing production efficiency at the plant level.
Mr. Ghaznavi and this management team have successfully implemented
turnarounds at both Consumers and Glenshaw.
1
<PAGE> 5
In 1993, through G&G, Mr. Ghaznavi acquired a controlling interest in
Consumers, which had experienced annual losses since 1987. Following such
acquisition, Mr. Ghaznavi installed experienced management and technical
teams that restructured Consumers' business. By rationalizing operations,
improving productivity, focusing on niche markets and introducing new
production technology, as well as building and capitalizing on strong
customer relationships, Mr. Ghaznavi and his team of managers were able
to improve Consumers' operating and distribution efficiency. Consumers'
sales (excluding Anchor) increased from C$425.4 million in 1992 to
C$509.6 million in 1997 during a period of general industry decline,
while EBITDA (excluding Anchor) increased from C$37.4 million, or 8.8% of
sales, in 1992 to C$82.8 million, or 16.2% of sales, in 1997.
Mr. Ghaznavi and his team of managers also engineered a turnaround at
Glenshaw, a single-plant U.S. glass container manufacturer that focuses
on low-volume, customized production runs. During the years preceding Mr.
Ghaznavi's acquisition of Glenshaw through G&G in 1988, Glenshaw had
experienced declining sales and operating losses. Since its acquisition
by G&G, Glenshaw's sales have more than doubled and EBITDA has more than
tripled.
Mr. Ghaznavi has extensive industry and customer networks. From 1995
through 1997, he served as Chairman of the Board of Trustees of the Glass
Packaging Institute, the leading industry organization that includes as
its members manufacturers representing over 95% of North America's glass
container production and he remains a member of its board. Mr. Ghaznavi
intends to build on these industry and customer networks to establish new
customer relationships, as well as to recapture and strengthen Old
Anchor's former customer relationships.
In June 1997, the Company hired Richard Deneau as President and Chief
Operating Officer, Roger Erb as Senior Vice President of Operations and
Gordon Love as Senior Vice President of Sales and Marketing from
Ball-Foster Glass Container Co., L.L.C. ("Ball-Foster"). Mr. Deneau was
Chief Operating Officer of Ball-Foster for 18 months and was previously
associated in senior positions with American National Can Company and
Foster-Forbes, a predecessor of Ball-Foster. Mr. Erb and Mr. Love were
also previously associated with Foster-Forbes. This management team
brings in excess of 65 years of container manufacturing experience to
Anchor.
- EFFICIENT MANUFACTURING FACILITIES. From 1991 to 1997, Anchor (including
Old Anchor) invested in excess of $267.7 million to maintain and upgrade
its machines and furnaces at the facilities that management has
identified as ongoing plants, resulting in more efficient and modern
glass production facilities. As a result of these expenditures and the
reduction of capacity through plant closings, the Company believes it has
the manufacturing facilities which will allow it to significantly
increase efficiency upon improved allocation of production. In
conjunction with the issuance of the First Mortgage Notes (as defined),
American Appraisal Associates, Inc. ("AAA") estimated the market value
for real property and the liquidation in place value of the Company's
ongoing plants, machinery and mold facilities to be $243.0 million.
Additionally, AAA estimated the fair market value of these properties on
the premise of continued use to be approximately $312.4 million. See
Summarization Letters of AAA, attached as Annex A to this Prospectus.
- ACCESS TO OWENS TECHNOLOGY. Most of Anchor's production facilities
utilize proprietary glass manufacturing technology of Owens-Brockway
Glass Container Inc. ("Owens"), which is generally considered a
technological leader in the manufacture of glass containers. In February
1997, the Company entered into a Technical Assistance and License
Agreement (the "Technology Agreement") for a term of up to ten years with
Owens to use Owens' proprietary glass manufacturing technology.
Management believes that the Technology Agreement provides important
benefits to Anchor in both marketing and manufacturing its products.
2
<PAGE> 6
BUSINESS STRATEGY
Management believes it can further improve operating results by continuing
to:
- REDUCE COST STRUCTURE. The Company intends to seek additional ways in
which it can further reduce its cost structure. Management has
implemented its cost reduction strategy in the following areas, the
benefits of which had already begun to be recognized by the Company in
1997:
Plant Closings. Following the Anchor Acquisition, the Company
closed its Houston, Texas ("Houston") and Dayville, Connecticut
("Dayville") plants (the "Plant Closings") in order to reduce excess
capacity. In September 1997, Hillsboro Glass Company ("Hillsboro"), a
glass container manufacturing plant owned by G&G, discontinued
manufacturing. All of Hillsboro's rights and obligations to fill orders
under a supply contract between Consumers and one of its major customers
have been purchased by Consumers and Anchor. In addition, management will
continue to monitor business conditions and utilization of plant capacity
to determine the appropriateness of further plant closings. The Plant
Closings eliminate an estimated $24.0 million of annual fixed costs. In
connection with the Anchor Acquisition, Anchor recorded a reserve for
expenses estimated to be incurred in connection with the closing of the
Houston and Dayville plants of approximately $33.0 million to be spent
over a three year time frame, $21.6 million of which has already been
incurred.
Selling and Administrative Expense Savings. Anchor has implemented
a targeted expense reduction program, the objective of which is to create
a leaner organization through the elimination of excess layers of
management and consolidation of certain functions such as purchasing,
sales, engineering and MIS, with Consumers and Glenshaw. The Company has
realized an estimated $7.2 million in annual cost savings through the
elimination of 25% or 61 of Old Anchor's corporate headquarters positions
as of March 1997 (the "Headquarters Cost Reductions") and has realized an
additional estimated $6.2 million in annual cost savings from further
headquarters employee reductions and related expenses. Management
estimates that one-time severance costs approximate $2.2 million in
connection with these staff reductions, a majority of which has already
been incurred. Further, in connection with a plan to simplify the
corporate ownership structure of Consumers, Anchor and their affiliates,
Glenshaw may become a subsidiary of Anchor.
- IMPROVE PRODUCTION PLANNING AND PRODUCT MIX. With the elimination of
excess capacity, management believes it is improving efficiency and
operating results by reallocating production among the Company's
manufacturing facilities according to machine strength and by instituting
longer production runs with fewer mold and color changes. To implement
this strategy, individual plant managers are now responsible for managing
each plant's financial performance and each product sales organization is
responsible for managing the product mix and the financial performance of
its product line.
- STRENGTHEN CUSTOMER RELATIONS. The Company believes that reestablishing
the positive customer relationships Old Anchor benefitted from in the
past is essential to improving financial performance. Establishing
long-term customer relationships improves efficiency through longer
production runs and more predictable scheduling. Management at Anchor has
already begun to rebuild relationships with some of Old Anchor's larger
volume customers, including Anheuser-Busch Companies, Inc.
("Anheuser-Busch"), which purchased approximately 4.0 million gross (144
units equal one gross) in 1997 and placed a purchase order for
approximately 9.9 million gross in 1998, after substantially reducing its
purchases from Old Anchor. In addition, Anheuser-Busch has placed an
additional order with the Company that will be produced by an affiliate
of G&G for which the Company expects to receive a commission. See
"Certain Transactions." Further, the Company's willingness to work
closely with customers to produce unique package designs is also an
effective marketing tool and is expected to assist in reestablishing
customer relationships.
3
<PAGE> 7
- EXPLOIT SYNERGIES. Management is exploiting synergies that exist between
the Company and its affiliates, including Consumers and Glenshaw:
Purchasing. Management believes that it obtains lower costs on
certain of its raw materials by combining Anchor's purchasing with that
of its affiliates, thereby creating potential for more favorable bulk
purchasing rates. Management has already experienced cost savings as
compared to Old Anchor in bulk purchasing of soda ash, sand and natural
gas.
Freight Savings. Certain production has been, and will continue to
be, reallocated among Anchor plants and between Anchor and Consumers to
maximize regional production where possible. This represents an
opportunity for Anchor to reduce shipping distances and thus reduce
freight and allowance costs.
Marketing. Management believes that its affiliation with Consumers
and Glenshaw will create a competitive advantage in marketing to the
broader United States and Canadian markets. Consumers will market
Anchor's production capacity to those existing Canadian customers who
currently have their U.S. orders filled through competitors of Anchor.
RECENT DEVELOPMENTS
Anchor Acquisition and the First Mortgage Notes. On February 5, 1997, the
Company purchased from Old Anchor 11 operating plants, several idled plants and
other related assets, as well as the liabilities related to the purchased
assets, for consideration of $200.5 million in cash in addition to common and
convertible preferred stock of the Company. In addition, the Company contributed
$9.1 million in cash and convertible preferred stock of the Company with a face
value of $9.0 million to three defined benefit plans of Old Anchor, certain of
the liabilities in respect of which were assumed and which plans are now
maintained by the Company. The Company also incurred approximately $9.9 million
of fees and expenses in connection with the Anchor Acquisition. The Company
obtained the cash portion of the purchase price for the Anchor Acquisition,
including the defined benefit plan contributions, from (i) an $85.0 million cash
investment by Consumers in common stock and convertible preferred stock of the
Company representing approximately 59% of the Company's capital stock on a fully
diluted basis, (ii) a $130.0 million loan facility (the "Anchor Loan Facility"),
(iii) $0.1 million of borrowings under the Company's $110.0 million revolving
credit facility (the "Revolving Credit Facility"), and (iv) $4.4 million from
the sale of certain inventory to Owens. In addition, in connection with the
Anchor Acquisition, Owens acquired certain assets and assumed certain
liabilities of Old Anchor. The purchase price paid by the Company is subject to
adjustment. On June 13, 1997, Old Anchor delivered to the Company the closing
balance sheet, which indicated that Old Anchor believed that it was entitled to
additional payments from the Company and Owens totaling approximately $76.3
million. On July 28, 1997, the Company delivered its notice of disagreement to
Old Anchor, which requested a reduction of the purchase price of approximately
$96.8 million. Since that time, the parties have been negotiating the amount of
the adjustment and have reached a proposed settlement (the "Proposed
Settlement"). The Proposed Settlement requires the payment by the Company to Old
Anchor of an additional $1.0 million in cash and the issuance of 1,225,000
warrants to purchase additional shares of common stock, together valued at
approximately $7.1 million. In addition, the Company will issue 525,000 warrants
to purchase additional shares of common stock to an affiliate of Consumers,
valued at approximately $2.6 million. None of the warrants to be issued will
require any payment upon exercise. The effects of the Proposed Settlement have
been reflected in the Company's historical financial statements as of and for
the year ended December 31, 1997. The Proposed Settlement is subject to final
approval by the Company, Old Anchor and the bankruptcy court.
On April 17, 1997, Anchor issued its 11 1/4% First Mortgage Notes due 2005
(the "First Mortgage Notes") and used a portion of the net proceeds therefrom to
repay all outstanding Indebtedness under the Anchor Loan Facility and advances
outstanding under the Revolving Credit Facility. The remainder of the net
proceeds were used by the Company for working capital.
The Note Offering. On March 16, 1998, the Company sold the Outstanding
Notes (the "Note Offering"), the proceeds of which will be used for growth
capital expenditures and general corporate purposes. Pending such application,
the Company used such proceeds to temporarily repay the Revolving Credit
Facility.
4
<PAGE> 8
CORPORATE STRUCTURE
[ORGANIZATIONAL FLOW CHART]
- ---------------
(1) Owned directly or indirectly.
(2) Listed on The Toronto Stock Exchange under the symbol "CGC."
(3) On a fully diluted basis.
(4) In connection with a plan to simplify the corporate ownership structure of
Consumers, Anchor and their affiliates, Glenshaw may become a subsidiary of
Anchor or Consumers U.S.
------------------------
The principal executive offices of the Company are located at One Anchor
Plaza, 4343 Anchor Plaza Parkway, Tampa, Florida 33634-7513. The telephone
number is (813) 884-0000.
5
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer.................. The Company is offering to exchange up to
$50,000,000 aggregate principal amount of
its new 9 7/8% Senior Notes due 2008 for
an equal principal amount of its
outstanding 9 7/8% Senior Notes due 2008.
The terms of the Exchange Notes are
identical in all material respects to
those of the Outstanding Notes, except for
certain transfer restrictions and
registration rights relating to the
Outstanding Notes.
Purpose of the Exchange Offer....... The Exchange Notes are being offered to
satisfy certain obligations of the Company
under the Registration Rights Agreement.
Following the consummation of the Exchange
Offer, holders of Old Notes not tendered
will generally not have any further
registration rights and the Outstanding
Notes will continue to be subject to
certain restrictions on transfer. See "The
Exchange Offer -- Consequences of Failure
to Exchange."
Expiration Date; Withdrawal of
Tender.............................. The Exchange Offer will expire at 5:00
p.m., New York City time, on ,
1998, or such later date and time to which
it is extended by the Company (the
"Expiration Date"). The tender of
Outstanding Notes pursuant to the Exchange
Offer may be withdrawn at any time prior
to the Expiration Date. Any Outstanding
Notes not accepted for exchange for any
reason will be returned without expense to
the tendering holder thereof as promptly
as practicable after the expiration or
termination of the Exchange Offer.
Procedures for Tendering Outstanding
Notes............................... Each holder of Outstanding Notes wishing
to accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or
such facsimile, together with the
Outstanding Notes and any other required
documentation to the Exchange Agent (as
defined) at the address set forth in the
Letter of Transmittal. Outstanding Notes
may be physically delivered, but physical
delivery is not required if a confirmation
of a book-entry transfer of such
Outstanding Notes to the Exchange Agent's
account at The Depository Trust Company
("DTC" or the "Depository") is delivered
in a timely fashion. See "The Exchange
Offer--Procedures for Tendering
Outstanding Notes."
Conditions to the Exchange Offer.... The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of
Outstanding Notes being tendered for
exchange. The Exchange Offer is subject to
certain customary conditions, which may be
waived by the Company. The Company
currently expects that each of the
conditions will be satisfied and that no
waivers will be necessary. See "The
Exchange Offer--Conditions to the Exchange
Offer."
Exchange Agent...................... The Bank of New York (the "Exchange
Agent").
6
<PAGE> 10
Certain U.S. Federal Income Tax
Considerations.................... The exchange of an Outstanding Note for an
Exchange Note by a Holder pursuant to the
Exchange Offer will not constitute a
taxable exchange. Such an exchange will
not result in taxable income, gain or loss
being recognized by such Holder or by the
Company. Immediately after the exchange,
such Holder will have the same adjusted
basis and holding period in each Exchange
Note received as such Holder had
immediately prior to the exchange in the
corresponding Outstanding Note
surrendered. See "Certain U.S. Federal
Income Tax Considerations."
Consequences of Exchanging
Outstanding Notes Pursuant to the
Exchange Offer.................... Based on certain interpretive letters
issued by the staff of the Commission to
third parties in unrelated transactions,
holders of Outstanding Notes (other than
any holder who is an "affiliate" of the
Company within the meaning of Rule 405
under the Securities Act) who exchange
their Outstanding Notes for Exchange Notes
pursuant to the Exchange Offer generally
may offer such Exchange Notes for resale,
resell such Exchange Notes and otherwise
transfer such Exchange Notes without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such
Exchange Notes are acquired in the
ordinary course of the holders' business
and such holders are not participating in,
and have no arrangement or understanding
with any person to participate in, a
distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes
for its own account in exchange for
Outstanding Notes, where such Outstanding
Notes were acquired by such broker-dealer
as a result of market-making activities or
other trading activities, must acknowledge
that it will deliver a prospectus in
connection with any resale of such Notes.
See "Plan of Distribution." In addition,
to comply with the securities laws of
certain jurisdictions, if applicable, the
Exchange Notes may not be offered or sold
unless they have been registered or
qualified for sale in such jurisdiction or
an exemption from registration or
qualification is available and is complied
with. The Company has agreed, pursuant to
the Registration Rights Agreement and
subject to certain specified limitations
therein, to register or qualify the
Exchange Notes for offer or sale under the
securities or blue sky laws of such
jurisdictions as any holders of the Notes
request in writing. If a holder of
Outstanding Notes does not exchange such
Outstanding Notes for Exchange Notes
pursuant to the Exchange Offer, such
Outstanding Notes will continue to be
subject to the restrictions on transfer
contained in the legend thereon. If any
holder of such Outstanding Notes is an
affiliate of the Company, is engaged in or
intends to engage in or has any
arrangement or understanding with any
person to participate in the distribution
of the Exchange Notes to be acquired in
the Exchange Offer, such holder (i) could
not rely on the applicable interpretations
of the
7
<PAGE> 11
Commission and (ii) must comply with the
registration requirements of the
Securities Act in connection with any
resale transaction. In general, the
Outstanding Notes may not be offered or
sold unless registered under the
Securities Act, except pursuant to an
exemption from, or in a transaction not
subject to, the registration requirements
of the Securities Act and applicable state
securities laws.
8
<PAGE> 12
THE EXCHANGE NOTES
The Terms of the Exchange Notes are identical in all material respects to
those of the Outstanding Notes, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes.
Securities Offered................ $50,000,000 principal amount of 9 7/8% Senior
Notes due 2008.
Issuer............................ Anchor Glass Container Corporation
Maturity Date..................... March 15, 2008.
Interest Payment Dates............ Interest on the Exchange Notes will be
payable semiannually in arrears on each March
15 and September 15 of each year, commencing
September 15, 1998 and will accrue from and
including the Exchange Date. Additionally,
interest on the Exchange Notes will accrue
from the last interest payment date on which
interest was paid on the Outstanding Notes
surrendered in exchange therefor or, if no
interest has been paid on the Outstanding
Notes, from the date of original issue of the
Outstanding Notes to but not including the
Exchange Date. Holders whose Outstanding
Notes are accepted for exchange will be
deemed to have waived the right to receive
any interest accrued on the Outstanding
Notes.
Ranking........................... The Notes will be senior unsecured
obligations of the Issuer ranking pari passu
in right of payment with all existing and
future senior Indebtedness of the Company,
senior in right of payment to all existing
and future subordinated Indebtedness of the
Company. The Notes will be effectively
subordinated in right of payment to all
secured Indebtedness of the Company,
including the First Mortgage Notes and the
Revolving Credit Facility, to the extent of
the value of the assets securing such
Indebtedness and to the claims of creditors
of the Company's subsidiaries, if any. At
March 31, 1998, the Company had approximately
$172.1 million of secured Indebtedness
outstanding to which the Notes would have
been effectively subordinated to the extent
of the value of the collateral securing such
Indebtedness. See "Risk Factors--Effective
Subordination."
Optional Redemption............... The Notes are redeemable at any time at the
option of the Company, in whole and not in
part, at a redemption price equal to the
principal amount to be redeemed plus the
Applicable Make-Whole, together with accrued
and unpaid interest, if any, to the
redemption date. See "Description of the
Notes--Optional Redemption."
Change of Control................. Upon a Change of Control (as defined), each
holder of Notes will have the right to
require the Company to repurchase all or any
part of such holder's Notes at a repurchase
price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if
any, to the date of repurchase. Within 90
days after the consummation of any Change of
Control Offer pursuant to which the Company
has repurchased at least 90% of the Notes
outstanding immediately prior to such Change
of Control Offer, the Company may, at its
option, redeem all of the remaining
9
<PAGE> 13
Notes at a redemption price equal to 101% of
the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of
repurchase.
Certain Covenants................. The indenture relating to the Notes (the
"Indenture") will contain certain covenants
that limit the ability of the Company and its
Restricted Subsidiaries to, among other
things, incur additional Indebtedness, pay
dividends or make certain other restricted
payments, consummate certain asset sales,
enter into certain transactions with
affiliates, incur liens, merge or consolidate
with any other person or sell, assign,
transfer, lease, convey or otherwise dispose
of all or substantially all of the assets of
the Company. In addition, under certain
circumstances, the Company will be required
to offer to purchase the Notes, in whole or
in part, at a purchase price equal to 100% of
the principal amount thereof plus accrued and
unpaid interest, if any, to the date of
repurchase, with the net cash proceeds of
certain Asset Sales. See "Description of the
Notes."
Exchange Offer and Registration
Rights............................ Pursuant to a Registration Rights Agreement
(the "Registration Rights Agreement") between
the Company and the Initial Purchasers, the
Company has agreed (i) to file a registration
statement (the "Exchange Offer Registration
Statement") with respect to an offer to
exchange the Notes (the "Exchange Offer") for
senior notes of the Company with
substantially identical terms to the Notes
(the "Exchange Notes") (except that the
Exchange Notes will not contain terms with
respect to transfer restrictions or
Additional Interest (as defined)) within 90
days after the Issue Date, (ii) to use its
best efforts to cause such registration
statement to become effective under the
Securities Act within 210 days after the
Issue Date, (iii) upon the Exchange Offer
Registration Statement being declared
effective, to offer the Exchange Notes in
exchange for surrender of the Notes, (iv) to
keep the Exchange Offer open for at least 20
business days (or longer if required by
applicable law) and (v) to use its best
efforts to consummate the Exchange Offer
within 255 days after the Issue Date. In the
event that applicable law or interpretations
of the staff of the Commission do not permit
the Company to effect the Exchange Offer, or
if for any other reason the Exchange Offer is
not consummated, or if certain holders of the
Notes are not permitted to participate in, or
do not receive the benefit of, the Exchange
Offer, the Company will use its best efforts
to cause to become effective a shelf
registration statement with respect to the
resale of the Notes and to keep such shelf
registration statement effective until two
years after the Issue Date or such shorter
period ending when all the Notes have been
sold thereunder. The interest rate on the
Notes is subject to increase under certain
circumstances if the Company is not in
compliance with its obligations under the
Registration Rights Agreement. See "Exchange
Offer and Registration Rights."
For additional information regarding the Exchange Notes, see "Description of the
Notes."
10
<PAGE> 14
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
RISK FACTORS
Holders of Outstanding Notes should carefully consider all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under "Risk Factors" in connection with the Exchange
Offer.
11
<PAGE> 15
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited pro forma financial
information and certain historical financial information of the Company and the
Company's predecessor, Old Anchor. The summary historical financial data for the
period from February 5, 1997 to December 31, 1997 has been derived from, and
should be read in conjunction with, the Company's audited financial statements,
including the notes thereto, included elsewhere in this Prospectus, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The summary historical financial data for the period from January
1, 1997 to February 4, 1997 has been derived from and should be read in
conjunction with Old Anchor's audited consolidated financial statements,
including the notes thereto, included elsewhere in this Prospectus. The
historical financial information for Old Anchor may not be representative of
future operating results of the Company.
The unaudited summary pro forma financial information for the Company for
the years ended December 31, 1996 and 1997 is for illustrative purposes only and
is not necessarily indicative of what the actual results of operations and
financial position of the Company would have been as of and for the periods
indicated, nor does it purport to represent the Company's future financial
position and results of operations. Such unaudited summary pro forma financial
information has been derived from, and should be read in conjunction with, the
Company's unaudited pro forma consolidated financial information, including the
notes thereto and the related "Management's Discussion and Analysis of Pro Forma
Financial Condition and Results of Operations," included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
OLD ANCHOR ANCHOR PRO FORMA
PERIOD FROM PERIOD FROM YEAR ENDED
JANUARY 1, 1997 FEBRUARY 5, 1997 DECEMBER 31,
TO FEBRUARY 4, TO DECEMBER 31, --------------------
1997 1997(1) 1996 1997
--------------- ---------------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $ 62,560 $ 569,441 $ 722,681 $623,518
Cost of products sold.............................. 70,608 523,709 716,248 585,315
Selling and administrative expenses................ 3,745 25,120 39,570 28,865
Restructuring and other charges(2)................. -- -- 49,973 --
Write-up of assets held for sale(2)................ -- -- (3,767) --
-------- --------- --------- --------
Income (loss) from operations...................... (11,793) 20,612 (79,343) 9,338
Other income (expense), net........................ (595) (2,602) 1,995 58
Interest expense(3)................................ (2,437) (18,281) (24,367) (24,367)
-------- --------- --------- --------
Loss before reorganization items, income taxes and
extraordinary items.............................. (14,825) (271) (101,715) (14,971)
Reorganization items............................... (827) -- (5,008) (827)
Income taxes(4).................................... -- -- (1,825) --
Extraordinary items(5)............................. -- (11,200) -- --
-------- --------- --------- --------
Net loss........................................... (15,652) (11,471) (108,548) (15,798)
Preferred stock dividends.......................... -- (11,302) (12,483) (12,483)
-------- --------- --------- --------
Loss applicable to common stock.................... $(15,652) $ (22,773) $(121,031) $(28,281)
======== ========= ========= ========
OTHER FINANCIAL DATA:
Net cash provided by (used in) operating
activities....................................... $(11,427) $ 25,483 $ (8,471) $ 14,121
Net cash used in investing activities.............. (7,500) (257,255) (253,696) (264,745)
Net cash provided by financing activities.......... 17,478 232,832 249,377 242,705
Adjusted EBITDA(6)................................. (4,783) 69,764 28,752 64,306
Depreciation and amortization...................... 7,605 51,132 59,894 54,910
Capital expenditures............................... 7,186 41,634 45,308 48,820
Ratio of earnings to fixed charges(7).............. -- -- -- --
Ratio of Adjusted EBITDA to interest expense....... (1.96) 3.82 1.18 2.64
BALANCE SHEET DATA (AT END OF PERIOD):
Accounts receivable................................ $ 60,978 $ 56,940 56,940
Inventories........................................ 148,731 120,123 120,123
Total assets....................................... 651,801 627,568 667,100
Total debt(8)...................................... 570,335 163,793 203,325
Total stockholders' equity (deficiency in
assets).......................................... (284,959) 85,912 85,912
</TABLE>
(Footnotes on page 14)
12
<PAGE> 16
The following table sets forth certain historical financial information of
the Company's predecessor, Old Anchor. The summary historical financial data at
December 31, 1996 and for the two years ended December 31, 1996 has been derived
from, and should be read in conjunction with, Old Anchor's consolidated
financial statements, including the notes thereto and the related "Management's
Discussion and Analysis of Financial Condition and Results of Operations for Old
Anchor", included elsewhere in this Prospectus. The summary historical financial
data at December 31, 1993, 1994 and 1995 and for the two years ended December
31, 1994 have been derived from consolidated financial statements of Old Anchor,
which are not included in this Prospectus. Such historical information for Old
Anchor may not be representative of future operating results of the Company.
<TABLE>
<CAPTION>
OLD ANCHOR HISTORICAL
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996
---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $1,126,037 $1,089,317 $ 956,639 $ 814,370
Cost of products sold....................................... 1,028,332 996,780 906,393 831,612
Selling and administrative expenses......................... 51,137 52,371 48,998 39,570
Restructuring and other charges(2).......................... -- 79,481 10,267 49,973
Impairment of long-lived assets(9).......................... -- -- -- 490,232
Write-up of assets held for sale(2)......................... -- -- -- (8,967)
---------- ---------- ---------- ---------
Income (loss) from operations............................... 46,568 (39,315) (9,019) (588,050)
Other income (expense), net................................. 500 (2,385) 171 (10,020)
Interest expense(3)......................................... (62,535) (56,070) (56,871) (48,601)
---------- ---------- ---------- ---------
Loss before reorganization items, income taxes,
extraordinary items and cumulative effect of accounting
change.................................................... (15,467) (97,770) (65,719) (646,671)
---------- ---------- ---------- ---------
Reorganization items........................................ -- -- -- (5,008)
Income taxes(4)............................................. (2,400) (250) (250) (1,825)
Extraordinary items(5)...................................... (18,152) -- -- (2,336)
Cumulative effect of accounting change(4)................... 1,776 -- -- --
---------- ---------- ---------- ---------
Net loss.................................................... (34,243) (98,020) (65,969) (655,840)
Preferred stock dividends................................... -- -- -- --
---------- ---------- ---------- ---------
Loss applicable to common stock............................. $ (34,243) $ (98,020) $ (65,969) $(655,840)
========== ========== ========== =========
OTHER FINANCIAL DATA:
Net cash provided by (used in) operating activities......... $ 99,279 $ 27,914 $ 430 $ (28,411)
Net cash used in investing activities....................... (118,470) (96,655) (48,500) (63,892)
Net cash provided by financing activities................... 3,259 28,467 52,198 78,886
Adjusted EBITDA(6).......................................... 150,617 138,257 101,334 34,824
Depreciation and amortization............................... 103,549 100,476 99,915 101,656
Capital expenditures........................................ 89,901 93,833 70,368 46,254
Ratio of earnings to fixed charges(7)....................... -- -- -- --
Ratio of Adjusted EBITDA to interest expense................ 2.41 2.47 1.78 0.72
BALANCE SHEET DATA (AT END OF PERIOD):
Accounts receivable......................................... $ 58,128 $ 66,618 $ 40,965 $ 55,851
Inventories................................................. 173,204 176,769 180,574 144,419
Total assets................................................ 1,347,201 1,264,488 1,208,348 643,468
Total debt(8)............................................... 555,222 584,671 557,450 552,848
Total stockholder's equity (deficiency in assets)........... 412,752 324,554 289,603 (269,307)
</TABLE>
(footnotes on page 14)
13
<PAGE> 17
(footnotes from previous two pages)
(1) The Anchor Acquisition was consummated on February 5, 1997. Accordingly, the
information provided for Old Anchor for the period from January 1, 1997 to
February 4, 1997 is not comparable to the information provided for the
Company for the period from February 5, 1997 to December 31, 1997.
(2) Restructuring and other charges reflects Old Anchor's implementation of a
series of restructuring plans in an effort to respond to the continued
decline in industry sales volume combined with, in 1996, the loss of a
significant portion of the business of Old Anchor's largest customer. During
the year ended December 31, 1996, Old Anchor recorded an adjustment to the
carrying value of certain idled facilities held for sale. These assets were
previously written down to an estimated net realizable value. Upon a current
evaluation of quotes and offers on these properties in 1996, Old Anchor
increased their net carrying value by approximately $9.0 million. The
balance of the restructuring liability is anticipated to be expended and
charged against the liability over the next several years.
(3) Because of the Chapter 11 proceeding of Old Anchor, there had been no
accrual of interest on the $100.0 million 10.25% Senior Notes or the $200.0
million 9.875% Senior Subordinated Debentures of Old Anchor since September
12, 1996. If accrued, interest expense would have increased $9.1 million
during the year ended December 31, 1996 and $2.9 million during the period
from January 1, 1997 to February 4, 1997.
(4) Income tax provision reflects any additional valuation allowances required
to be recorded under Statement of Financial Accounting Standards No.
109--Accounting for Income Taxes ("SFAS 109"). The adoption of SFAS 109
effective January 1, 1993 resulted in an increase in the cumulative net
deferred tax asset of $1.8 million. Under SFAS 109, deferred income taxes
reflect the net tax effects of temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. If on the basis of available evidence, it is more likely than not
that all or a portion of the deferred tax asset will not be realized, the
asset must be reduced by a valuation allowance.
(5) Extraordinary items in the three periods ended December 31, 1993, 1996 and
1997 result from the write-off of financing costs related to debt
extinguished during the relevant periods, net of taxes. For pro forma
periods, extraordinary items are excluded as they represent non-recurring
charges.
(6) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) ("Adjusted EBITDA") is an amount equal to income (loss) before
reorganization items, income taxes, extraordinary items and cumulative
effect of accounting change plus the amounts of restructuring charges and
the impairment of long-lived assets, interest, depreciation and
amortization, other non-cash charges and less the amount of the write-up of
assets held for sale as calculated below, using income (loss) from
operations as a starting point:
<TABLE>
<CAPTION>
OLD ANCHOR ANCHOR PRO FORMA
PERIOD FROM PERIOD FROM YEAR ENDED
JANUARY 1, 1997 FEBRUARY 5, 1997 DECEMBER 31,
TO FEBRUARY 4, TO DECEMBER 31, ------------------
1997 1997 1996 1997
--------------- ---------------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Income (loss) from operations......................... $(11,793) $20,612 $(79,343) $ 9,338
Other income (expense), net........................... (595) (2,602) 1,995 58
Other noncash charges................................. 2,625 -- --
Write-up of assets held for sale...................... -- -- (3,767) --
Restructuring and other charges....................... -- -- 49,973 --
Depreciation and amortization......................... 7,605 49,129 59,894 54,910
-------- ------- -------- -------
Adjusted EBITDA....................................... $ (4,783) $69,764 $ 28,752 $64,306
======== ======= ======== =======
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
OLD ANCHOR HISTORICAL
---------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------
1993 1994 1995 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Income (loss) from operations............................... $ 46,568 $(39,315) $ (9,019) $(588,050)
Other income (expense), net................................. 500 (2,385) 171 (10,020)
Write-up of assets held for sale............................ -- -- -- (8,967)
Impairment of long-lived assets............................. -- -- -- 490,232
Restructuring and other charges............................. -- 79,481 10,267 49,973
Depreciation and amortization............................... 103,549 100,476 99,915 101,656
-------- -------- -------- ---------
Adjusted EBITDA............................................. $150,617 $138,257 $101,334 $ 34,824
======== ======== ======== =========
</TABLE>
The Company believes that, in addition to cash flow from operations and net
earnings, Adjusted EBITDA is a useful financial performance measurement for
assessing operating performance as it provides investors with an additional
basis to evaluate the ability of the Company to incur and service debt and
to fund capital expenditures. In evaluating Adjusted EBITDA, the Company
believes that investors should consider, among other things, the amount by
which Adjusted EBITDA exceeds interest costs for the period, how Adjusted
EBITDA compares to principal repayments on debt for the period and how
Adjusted EBITDA compares to capital expenditures for the period. To evaluate
Adjusted EBITDA, the components of Adjusted EBITDA, such as revenues and
operating expenses and the variability of such components over time, should
also be considered. Investors should be cautioned that the Company's method
of calculating Adjusted EBITDA may differ from the methods used by other
companies and, as a result, the Adjusted EBITDA measures disclosed herein
may not be comparable to other similarly titled measures disclosed by other
companies.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and extraordinary items plus fixed
charges. Fixed charges consist of interest and amortization of debt expense
plus a portion of operating lease expense representative of the interest
factor. There was a deficiency of earnings to cover fixed charges in 1993,
1994, 1995, and 1996 of $15.5 million, $97.8 million, $65.7 million, and
$651.7 million, respectively. There was a deficiency of earnings to cover
fixed charges for the period from January 1, 1997 to February 4, 1997, the
period from February 5, 1997 to December 31, 1997, pro forma years ended
December 31, 1996 and 1997 of $15.7 million, $0.3 million, $106.7 million
and $15.8 million, respectively.
(8) Total debt as of December 31, 1996 includes $462.3 million of pre-petition
liabilities and $90.5 million outstanding under Old Anchor's
debtor-in-possession credit facility.
(9) As a result of the declining profitability, decreasing cash flow and the
bankruptcy proceedings, the recoverable value of the carrying amount of
long-lived assets and intangibles was reviewed for impairment. Based upon
this review, the amount of remaining excess of the purchase price over the
fair value of net assets acquired of $457.2 million and $33.0 million of
other long-lived assets were written off in the year ended December 31,
1996. The excess cost over fair value of net assets acquired had been
amortized on a straight line basis over a 40 year period. Amortization
expense, included as a component of cost of products sold, was approximately
$13.9 million for each of the years ended December 31, 1994, 1995 and 1996.
See the Notes to Old Anchor's Consolidated Financial Statements included
elsewhere in this Prospectus.
15
<PAGE> 19
RISK FACTORS
An investment in the Notes represents a high degree of risk. There are a
number of factors, including those specified below, which may adversely affect
the Company's ability to make payments on the Notes. Holders of the Notes could
therefore lose a substantial portion or all of their investment in the Notes.
Consequently, an investment in the Notes should only be considered by persons
who can assume such risk. The risk factors described below are not necessarily
exhaustive and each potential investor is encouraged to perform its own
investigation with respect to the Company.
This Prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
statements regarding, among other items, (i) the expected realization of
Anchor's business strategy and the cost savings estimated to be achieved in
connection therewith and the costs associated therewith, (ii) the sufficiency of
cash flow and other sources of liquidity to fund Anchor's debt service
requirements, working capital needs and other significant expenditures and (iii)
anticipated trends in the glass packaging industry, including with respect to
industry capacity, product demand and pricing. Forward-looking statements are
typically identified by the words "believe," "expect," "anticipate," "intend,"
"estimate," "project" and similar expressions. These forward-looking statements
are subject to a number of risks and uncertainties, many of which are beyond
Anchor's control. Actual results could differ materially from those contemplated
by these forward-looking statements as a result of factors including those
described below. In light of these risks and uncertainties, there can be no
assurance that the results and events contemplated by the forward-looking
information contained in this Prospectus will in fact transpire. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates. Anchor does not undertake any obligation to update
or revise any forward-looking statements.
This Prospectus contains historical financial information regarding
Glenshaw and Consumers. Prior results of Consumers and Glenshaw are not
indicative of the Company's future results. The nature and risks of the
restructuring carried out at Consumers and Glenshaw, and market conditions faced
by them, differ substantially from the nature and the risks of the business
strategy for the Company described under "Business--Business Strategy."
LIMITED OPERATING HISTORY; INSOLVENCY OF OLD ANCHOR
The Company was formed in January 1997 to acquire certain assets and assume
certain liabilities of Old Anchor. Prior to the Anchor Acquisition, the Company
had no operations. In addition, former management of Old Anchor has largely been
replaced since the consummation of the Anchor Acquisition in February 1997 and
new management has concentrated on formulating and refining the Company's
business strategy. Since the Anchor Acquisition, the Company has had a limited
financial performance track record.
Additionally, Old Anchor sought protection under Chapter 11 of the
Bankruptcy Code in September 1996 and is being liquidated. In the bankruptcy,
previous investors in, and lenders to, Old Anchor incurred substantial losses.
From 1993 to 1996, Old Anchor had significant operating losses, incurring a 1996
net loss of approximately $655.8 million including a $490.2 million impairment
of long-lived assets. As of February 4, 1997, Old Anchor had an accumulated
deficit of approximately $838.9 million. The report of Arthur Andersen LLP,
independent public accountants, on Old Anchor's 1995, 1996 and 1997 Interim
Period financial statements includes an explanatory paragraph because of the
possible material effects of uncertainties resulting from Old Anchor's filing
for reorganization under Chapter 11 of the Bankruptcy Code and doubts about Old
Anchor's ability to continue as a going concern following its sale of
substantially all of its assets on February 5, 1997.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Anchor has incurred significant Indebtedness. At December 31, 1997, on a
pro forma basis after giving effect to the Offering and the application of the
net proceeds therefrom, Anchor's aggregate Indebtedness would have been $203.3
million, and its stockholders' equity would have been $85.9 million. At December
31,
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1997, Anchor's aggregate consolidated Indebtedness was $163.8 million and it had
outstanding advances of $10.5 million and outstanding letters of credit of $12.8
million under the Revolving Credit Facility. As of March 31, 1998, Anchor's
aggregate Indebtedness was $222.1 million. In addition, subject to the
restrictions in the indentures governing the First Mortgage Notes and the Notes
and the Revolving Credit Facility, the Company may incur additional Indebtedness
from time to time to finance capital expenditures or for other purposes.
Further, substantially all of the Company's assets have been pledged to secure
the First Mortgage Notes and the Revolving Credit Facility. On a pro forma
basis, the Company's earnings for fiscal 1996 and 1997 would have been
insufficient to cover its fixed charges. The Company's debt service requirements
(including interest and principal) over the next five years are expected to be
approximately $26.9 million annually. See "Unaudited Pro Forma Financial
Statements."
The level of the Company's Indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to service debt and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures or other
needs may be limited; and (iii) the Company's level of Indebtedness could limit
its flexibility in reacting to changes in the industry in which it competes and
economic conditions in general. Certain of the Company's competitors currently
operate on a less leveraged basis and have significantly greater operating and
financing flexibility than the Company.
The Company's ability to pay interest on the Notes, to repay portions of
its long-term Indebtedness (including the Notes) and to satisfy its other debt
obligations will depend upon its future operating performance and the
availability of refinancing Indebtedness, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of which
are beyond the Company's control. In addition, the indenture (the "Consumers
Indenture") governing Consumers International's 10 1/4% Senior Secured Notes
(the "Consumers International Notes") and Consumers' revolving credit facility
substantially restrict Consumers' ability to make further investments in the
Company whether through equity investments, loans or otherwise. Accordingly,
Anchor will not be able to rely on Consumers for liquidity or for payments on
the Notes. The Company anticipates that its operating cash flow, together with
borrowings under the Revolving Credit Facility, if any, will be sufficient to
meet its operating needs and to meet its debt service requirements as they
become due, assuming that the Company continues to realize a significant portion
of the benefits of its business strategy. See "Business--Business Strategy."
However, if this is not the case, the Company will be forced to seek
alternatives that may include reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its Indebtedness or seeking additional
equity capital. There can be no assurance that any such strategy could be
effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
In addition, the Company's Series A 10% Cumulative Convertible Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), issued to
certain creditors of Old Anchor and contributed to the Plans (as defined) in
connection with the Anchor Acquisition is subject to mandatory redemption in
2009, which could adversely affect Anchor's ability to refinance the Notes at
their maturity. See "Description of Capital Stock."
EFFECTIVE SUBORDINATION
Holders of secured Indebtedness of the Company, including the Indebtedness
under the First Mortgage Notes and the Revolving Credit Facility, have claims
with respect to the assets constituting collateral for such Indebtedness that
are prior to the claims of holders of the Notes under the Notes. In the event of
a default on the Notes or a bankruptcy, liquidation or reorganization of the
Company, such assets will be available to satisfy obligations with respect to
the Indebtedness secured thereby before any payment therefrom could be made on
the Notes. Accordingly, such secured Indebtedness would effectively be senior to
the Notes to the extent of the value of such collateral. To the extent the value
of such collateral is not sufficient to satisfy such secured Indebtedness, the
holders thereof would be entitled to share with holders of the Notes and the
holders of other claims against the Company, with respect to the Company's other
assets.
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In addition, the Notes will not be guaranteed by any future subsidiaries of
the Company. As a result, the holders of the Notes will be effectively
subordinated to claims of third party creditors and preferred shareholders of
these subsidiaries. Claims of creditors (other than the Company) of such
subsidiaries, including trade creditors, secured creditors, taxing authorities,
holders of guarantees issued by such subsidiaries and preferred shareholders of
such subsidiaries will generally have priority as to the assets of such
subsidiaries over the claims and equity interests of the Company and, as a
result, holders of Indebtedness of the Company (including the holders of the
Notes).
SIGNIFICANT EXPENDITURES; DEPENDENCE ON SUCCESSFUL IMPLEMENTATION OF BUSINESS
STRATEGY
Old Anchor experienced net losses from 1993 to 1996. The Company has
significant expenditures not deducted in calculating Adjusted EBITDA relating to
the operation of its business, including the following: (i) required pension
plan contributions for underfundings of $13.4 million in 1998, $13.9 million in
1999 and $40.5 million to be contributed over the three years thereafter; (ii)
payments in respect of the Company's supply agreement with The Stroh Brewery
Company ("Stroh's") of $7.0 million in 1998; (iii) significant capital
expenditures of approximately $55.0 million in 1998 and $56.0 million in 1999;
(iv) significant cash expenses of closing the Houston and Dayville plants and
certain plants previously closed by Old Anchor including an estimated $11.0
million and $3.0 million in 1998 and 1999, respectively; and (v) anticipated
borrowings under the Revolving Credit Facility.
The Company is also accruing annual dividend payment obligations of
approximately $5.6 million in respect of the Company's Series A Preferred Stock.
In addition, the Company's Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"), receives dividends only in kind until February
2000 and beginning thereafter will accrue annual dividend payments of $8.5
million.
In order to meet its fixed payment obligations and retain sufficient
borrowing availability under the Revolving Credit Facility to satisfy its
working capital requirements, the Company must achieve significant cash flow
from operations. The Company's pro forma net sales for 1997 declined by
approximately 14% as compared to pro forma net sales for 1996. In order to
improve operating results with this lower net sales amount, the Company must
achieve substantial cost savings and improvements in average selling prices
resulting from a shift in product mix toward products with higher average
selling prices and the Company will need to establish and maintain strong
relationships with major customers. In the event that the operating improvements
from management's business strategy are materially less than estimated and/or
require a longer time frame than anticipated to achieve or the estimated costs
of the plant closings are materially higher than anticipated, the Company's
ability to service its debt and pay its other fixed charges could be adversely
impacted.
The estimated cost savings described under "Business--Business Strategy,"
represent Anchor's current estimates of cost savings from implementation of
management's business strategy. These estimated future cost savings are based
upon a number of assumptions which may not be accurate, in which case the actual
results of such business strategy may differ materially from these estimates.
Moreover, these estimates relate only to estimated cost reductions on the items
described and therefore are not necessarily indicative of Anchor's financial
results, including Adjusted EBITDA and net income, which are affected by a
number of other factors, including demand and pricing for Anchor's products and
other costs associated with Anchor's production, distribution and other
activities.
In the event that Anchor's cash flow from operations is less than
anticipated or its cash expenditures are greater than anticipated and available
borrowings under the Revolving Credit Facility are used, there can be no
assurance that Anchor can raise additional funds through equity or debt
financings or asset sales given the financial and other covenants to which
Anchor is subject under the Indenture and the Revolving Credit Facility, Old
Anchor's recent insolvency, uncertainty regarding Anchor's future operating
performance, the pledge by Anchor of substantially all of its assets to secure
the First Mortgage Notes and the Revolving Credit Facility and the limitations
on investments by Consumers in Anchor imposed under Consumers' credit
facilities. See "--Substantial Leverage; Ability to Service Debt" and
"--Restrictive Covenants."
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RESTRICTIVE COVENANTS
The Indenture restricts the ability of the Company and its Restricted
Subsidiaries to, among other things, incur additional Indebtedness, incur liens,
pay dividends or make certain other restricted payments or investments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur Indebtedness that is subordinate in right of payment to any senior
Indebtedness and senior in right of payment to the Notes, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. The Indenture
also imposes restrictions on the ability of a subsidiary to pay dividends or
make certain payments to the Company. In addition, the indenture (the "First
Mortgage Indenture") governing the First Mortgage Notes and the Revolving Credit
Facility contain other and more restrictive covenants (including the requirement
to maintain specified financial ratios and satisfy certain financial tests), and
prohibit the Company from prepaying the Notes, except in certain circumstances.
There can be no assurance that the Company will meet such tests. A breach of any
of these covenants could result in an event of default under the First Mortgage
Indenture and/or the Revolving Credit Facility. If such an event of default
occurs, the lenders could elect to declare all amounts borrowed under the First
Mortgage Indenture and/or the Revolving Credit Facility, as the case may be,
together with accrued interest, to be immediately due and payable and to
terminate all commitments under the Revolving Credit Facility. If the Company
were unable to repay all amounts declared due and payable, the holders thereof
could proceed against the collateral granted to them to satisfy the Indebtedness
and other obligations due and payable. If Indebtedness under the First Mortgage
Indenture and/or the Revolving Credit Facility were to be accelerated, there can
be no assurance that the assets of the Company would be sufficient to repay in
full such Indebtedness and the other Indebtedness of the Company, including the
Notes. See "Description of the Notes--Certain Covenants" and "Description of
Indebtedness."
COMPETITION; THE GLASS CONTAINER MARKET
The Company is subject to intense competition from other glass container
producers as well as from makers of alternative forms of packaging, such as
aluminum cans and plastic containers. The Company's principal competitors among
glass container producers are Owens and Ball-Foster Glass Container Corporation
Co., L.L.C. ("Ball-Foster"), both of which are larger competitors with less
leverage and more financial resources than the Company. Over the past several
years, there has been a decline in the glass container industry, principally as
a result of the loss of market share in the soft drink and food industries to
alternative forms of packaging. Competitive pressures from alternative forms of
packaging, as well as consolidation in the glass container industry, have
resulted in excess capacity and have led to severe pricing pressures on glass
container manufacturers. See "Business--Competition."
DEPENDENCE ON KEY PERSONNEL AND G&G
Certain executive officers of the Company are key to the management and
direction of the Company. In addition, the Company has entered into a Management
Agreement (the "Management Agreement") with G&G, an affiliate of the Company,
for the provision of certain management services, including marketing,
managerial and technical assistance. See "Certain Transactions." The initial
term of the Management Agreement expires on February 5, 2000. Thereafter, the
Management Agreement automatically renews for periods of one year unless either
party gives notice of termination at least six months prior to the expiration of
the then current term. In addition, the Company does not, as a general rule,
enter into employment agreements with its executive officers and/or other key
employees. The loss of the services of such executive officers or of G&G, by
termination of the Management Agreement or otherwise, could have a material
adverse effect on the Company, and there can be no assurance that the Company
would be able to find replacements for such executive officers or G&G with
equivalent business experience and skills. See "Management--Directors and
Executive Officers of the Company" and "Certain Transactions."
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CONTROLLING STOCKHOLDER; TRANSACTIONS WITH RELATED PARTIES
Mr. Ghaznavi effectively controls Anchor through G&G's control of Consumers
and its subsidiaries, Consumers International and Consumers U.S. Consumers U.S.
owns approximately 60% of Anchor on a fully diluted basis and is entitled, as
sole holder of the Company's Class B Common Stock, par value $.10 per share (the
"Class B Common Stock"), to appoint five of the nine members of Anchor's Board
of Directors (the "Board of Directors") until February 5, 2000. In connection
with the Proposed Settlement, it is expected that the certificate of
incorporation of the Company will be amended to increase the number of directors
to be elected by the holders of Class B Common Stock. See "Management--Board of
Directors of the Company" and "Description of Capital Stock." As a result,
Anchor is part of a group of glass manufacturing companies with Consumers and
Glenshaw. A portion of the cost savings anticipated to be achieved by Anchor in
connection with the implementation of its business strategy is dependent upon
the successful reallocation of customers between Anchor and Consumers in order
to achieve freight cost savings and plant operational efficiencies. In addition,
it is anticipated that Anchor will be party to a number of arrangements with
Consumers, Glenshaw and other affiliated companies regarding, among other
things, bulk purchasing, production for customers (for which commissions may be
payable), managerial services, including the Management Agreement with G&G,
leasing of fleets and equipment and shipping. See "Certain Transactions." The
Revolving Credit Facility, the Indenture and the First Mortgage Indenture limit
commissions and other fees payable by the Company to Consumers and its
affiliates and otherwise require that transactions and agreements among the
companies be on terms no less favorable to the Company than could be obtained
from third parties and, for transactions in excess of certain thresholds, be
approved by the Company's independent directors and/or submitted to an
independent financial advisor. See "Description of Indebtedness" and
"Description of the Notes." The business, financial condition and results of
operations of the Company may be adversely affected by decisions made by
Consumers taking into account the needs of Consumers, Glenshaw and other
affiliated companies. Consumers is highly leveraged and a default by Consumers
on its indebtedness or an insolvency or bankruptcy of Consumers would not
constitute a default under the Indenture. A default on indebtedness, insolvency
or bankruptcy of Consumers could adversely affect Anchor's business and results
of operations, given that many members of management at Consumers are involved
in Anchor's affairs and that Anchor may be closely associated with Consumers,
its customers and suppliers, which could adversely affect trading prices for the
Notes or Anchor's ability to raise debt or equity capital.
LABOR RELATIONS
The Company is a party to collective bargaining agreements with labor
unions that will expire between March 1999 and August 1999. In the aggregate,
under those agreements the Company currently employs approximately 2,500
full-time employees. The Company's inability to negotiate acceptable contracts
with these unions could result in strikes by the affected workers and increased
operating costs as a result of higher wages or benefits paid to union members.
Although neither the Company nor Old Anchor historically has had any labor
disruptions, if the unionized workers were to engage in a strike or other work
stoppage, the Company could experience a significant disruption of its
operations and higher ongoing labor costs, which could have an adverse effect on
the Company's business, financial position and results of operations. See
"Business--Employees."
DEPENDENCE ON KEY CUSTOMERS
Anchor's two largest customers (Stroh's and Anheuser-Busch) accounted for
15.6% and 8.8% of its net sales in 1997, respectively. The termination by either
of such customers of its relationship with the Company could have a material
adverse effect upon the Company's business, financial position and results of
operations.
The Company's existing customers' purchase orders and contracts typically
vary from one to three years. Prices under these arrangements are tied to market
standards and therefore vary with market conditions. The contracts generally are
requirements contracts which do not obligate the customer to purchase any given
amount of product from the Company. Accordingly, notwithstanding the existence
of certain supply contracts, the Company faces the risk that customers will not
purchase the amounts expected by the Company pursuant
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to such supply contracts. In addition, the Company generally has a purchase
order relationship with Anheuser-Busch whereby Anheuser-Busch renegotiates with
the Company each year for the next year's purchase orders. Accordingly, past
purchase orders placed by Anheuser-Busch are not necessarily indicative of
future purchase orders.
SEASONALITY; RAW MATERIALS
Due principally to the seasonal nature of the brewing, iced tea and other
beverage industries, in which demand is stronger during the summer months, the
Company's shipment volume is expected to be higher in the second and third
quarters. Consequently, the Company normally builds inventory during the first
quarter in anticipation of seasonal demands during the second and third
quarters. Historically, the Company has scheduled shutdowns of its plants for
furnace rebuilds and machine repairs in the first and fourth quarters of the
year to coincide with scheduled holiday and vacation time under its labor union
contracts. These shutdowns adversely affect profitability during the first and
fourth quarters.
Sand, soda ash, limestone, cullet and corrugated packaging materials are
the principal raw materials used by the Company. Raw materials represented
approximately 28% of the cost of products sold for the Company in 1997. The
Company believes that a sufficient supply of these raw materials exists and that
the Company is not dependent upon any single supplier for any of them. Material
increases in the cost of any of the principal raw materials used by the Company
could have a material adverse impact on the Company's results of operations.
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION
Environmental Regulation and Compliance. The Company's operations are
subject to increasingly complex and detailed Federal, state and local laws and
regulations including, but not limited to, the Federal Water Pollution Control
Act of 1972, as amended, the U.S. Clean Air Act, as amended, and the Federal
Resource Conservation and Recovery Act, as amended, that are designed to protect
the environment. Among the activities subject to regulation are the disposal of
checker slag (furnace residue usually removed during furnace rebuilds), the
disposal of furnace bricks containing chromium, the disposal of waste, the
discharge of water used to clean machines and cooling water, dust produced by
the batch mixing process, underground storage tanks and air emissions produced
by furnaces. In addition, the Company is required to obtain and maintain permits
in connection with its operations. Many environmental laws and regulations
provide for substantial fines and criminal sanctions for violations. The Company
believes that it is in material compliance with applicable environmental laws
and regulations. It is difficult to predict the future development of such laws
and regulations or their impact on future earnings and operations, but the
Company anticipates that these standards will continue to require increased
capital expenditures. There can be no assurance that material costs or
liabilities will not be incurred.
Certain environmental laws, such as the U.S. Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund") and analogous
state laws provide for strict, joint and several liability for investigation and
remediation of releases of hazardous substances into the environment. Such laws
may apply to conditions at properties presently or formerly owned or operated by
an entity or its predecessors, as well as properties at which wastes
attributable to an entity or its predecessors were disposed. See
"Business--Environmental and Other Government Regulation."
The Company is engaged in investigation and remediation projects at plants
currently being operated and at closed facilities. In addition, Old Anchor was
named as a potentially responsible party ("PRP") under CERCLA with respect to a
number of sites. Of these sites, the Company has assumed responsibility with
respect to four sites that are currently active. While the Company may be
jointly and severally liable for costs related to these sites, in most cases, it
is only one of a number of PRPs who are also jointly and severally liable. With
respect to the four currently active sites for which the Company has assumed
responsibility, the Company estimates that its share of the aggregate cleanup
costs of such sites should not exceed $2.0 million, and that the likely range
after taking into consideration the contributions anticipated from other
potentially responsible parties could be significantly less. However, no
assurance can be given that the cleanup costs of such sites will not exceed $2.0
million or that the Company will have these funds available. The Company has
established
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reserves of approximately $16.0 million for environmental costs which it
believes are adequate to address the anticipated costs of remediation of these
operated and closed facilities and its liability as a PRP under CERCLA. The
timing and magnitude of such costs cannot always be determined with certainty
due to, among other things, incomplete information with respect to environmental
conditions at certain sites, the absence of regulatory determinations with
respect to environmental requirements at certain sites, new and amended
environmental laws and regulations, and uncertainties regarding the timing of
remedial expenditures.
Capital expenditures required for environmental compliance were
approximately $0.8 million for 1997 and are anticipated to be approximately $1.7
million annually in 1998 and 1999. However, there can be no assurance that
future changes in such laws, regulations or interpretations thereof or the
nature of the Company's operations will not require the Company to make
significant additional capital expenditures to ensure compliance in the future.
ERISA. The Company maintains three defined benefit plans and two profit
sharing plans that, prior to the Anchor Acquisition, were maintained by Old
Anchor. These plans are covered by the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), are tax-qualified under the Internal Revenue Code
of 1986, as amended (the "Code"), and subject to regulation by the Internal
Revenue Service and the Department of Labor. The three defined benefit plans are
also subject to regulation by the Pension Benefit Guaranty Corporation ("PBGC").
The Company's two profit sharing plans contain cash or deferred arrangements
under Section 401(k) of the Code. The Company' tax-qualified plans must meet
stringent requirements both in form and in operation in order to maintain their
tax-qualified status. These requirements are constantly changing with the
enactment of new pension legislation, the issuance of new Treasury regulations
and other guidance from the Internal Revenue Service. The loss of a plan's
qualified status could result in the assessment of tax on the plan's trust
income, disallowance of the Company's tax deduction for contributions, and
immediate income tax liability upon individual participants' benefits.
The defined benefit plan covering salaried employees was frozen at the end
of 1994, and, at the end of 1996, was not underfunded under Statement of
Financial Accounting Standards No. 87 ("SFAS No. 87"). However, the two defined
benefit plans that are maintained for hourly employees are significantly
underfunded and will require substantial cash contributions over the next few
years. At the end of 1997, these two plans in the aggregate had unfunded
benefits under SFAS No. 87 totaling approximately $50.4 million. Pension
underfunding contributions made to the three defined benefit plans during 1997,
excluding contributions made by the Company upon the closing of the Anchor
Acquisition, were approximately $15.1 million. In addition, the underfunding of
the two hourly plans required the payment of increased premiums to the PBGC
under its pension guaranty program of approximately $1.8 million in 1997.
Employee Health and Safety Regulation. The Company's operations are
subject to a variety of worker safety laws. The U.S. Occupational Safety and
Health Act of 1970 ("OSHA") and analogous state laws mandate general
requirements for safe workplaces for all employees. The Company believes that
its operations are in material compliance with applicable employee health and
safety laws.
Deposit and Recycling Legislation. In recent years, legislation has been
introduced at the Federal, state and local levels that would require a deposit
or tax, or impose other restrictions, on the sale or use of certain containers,
particularly beer and carbonated soft drink containers. To date, ten states have
enacted some form of deposit legislation, although no such new legislation has
been enacted since 1986. The enactment of additional laws or comparable
administrative actions that would require a deposit on beer or soft drink
containers, or otherwise restrict their use, could have a material adverse
effect on the Company's business. In jurisdictions where deposit legislation has
been enacted, the consumption of beverages in glass bottles has generally
declined due largely to the preference of retailers for handling returned cans
and plastic bottles. Container deposit legislation continues to be considered
from time to time at various governmental levels.
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to purchase all
outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase. The source of funds for
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any such purchase would be the Company's available cash or cash generated from
other sources. However, there can be no assurance that sufficient funds would be
available at the time of any Change of Control to make any required repurchases
of Notes tendered or, if applicable, that restrictions in the Outstanding Credit
Facility, the First Mortgage Indenture or any future credit facility would
permit the Company to make such required repurchases. See "Description of the
Notes--Change of Control."
LACK OF A PUBLIC MARKET FOR THE NOTES
The Outstanding Notes held by QIBs are designated for trading in the PORTAL
Market. The Exchange Notes constitute securities for which there is no
established trading market. The Company does not intend to list the Exchange
Notes on any securities exchange or to seek approval for quotation through any
automated quotation system, and no active public market for the Exchange Notes
is currently anticipated. If a market for the Exchange Notes should develop,
such Exchange Notes could trade at a discount from their principal amount. There
can be no assurance of the liquidity of any markets that may develop for the
Exchange Notes, the ability of holders of the Exchange Notes to sell their
Exchange Notes, or the price at which holders would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including prevailing interest rates, the Company's operating results
and the market for similar securities. To the extent that any Outstanding Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Outstanding Notes could be adversely affected.
No prediction can be made as to the effect, if any, that future sales of
Exchange Notes, or the availability of Exchange Notes for future sale, will have
on the market price of the Exchange Notes prevailing from time to time. Sales of
substantial amounts of Exchange Notes, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Exchange Notes.
No assurance can be given that sales of substantial amounts of Exchange Notes
will not occur in the foreseeable future or as to the effect that any such
sales, or the perception that such sales may occur, will have on the market or
the market price of the Exchange Notes. No assurance can be given as to the
liquidity of the trading market for the Exchange Notes or that an active public
market for the Exchange Notes will develop or, if developed, will continue. If
an active public market does not develop or is not maintained, the market price
and liquidity of the Exchange Notes may be adversely affected.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not be
subject to similar disruptions. Any such disruption may have an adverse effect
on holders of the Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a consequence of the offer or sale of the Outstanding Notes pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws, holders
of Outstanding Notes who do not exchange their Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Outstanding Notes as set forth in the legend
thereon. In general, the Outstanding Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the
Outstanding Notes under the Securities Act. See "Outstanding Notes Registration
Rights."
Upon consummation of the Exchange Offer, due to the restrictions on
transfer of the Outstanding Notes and the absence of such restrictions
applicable to the Exchange Notes, it is likely that the market, if any, for
Outstanding Notes will be relatively less liquid than the market for Exchange
Notes. Consequently, holders of Outstanding Notes who do not participate in the
Exchange Offer could experience significant diminution in the value of their
Outstanding Notes, compared to the value of the Exchange Notes.
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<PAGE> 27
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy certain of its
obligations under the Registration Rights Agreement. The Registration Rights
Agreement requires the Company to (i) file with the Commission a registration
statement (the "Exchange Offer Registration Statement") under the Securities Act
with respect to the Exchange Notes within 90 days after the issuance of the
Outstanding Notes (the "Issue Date"), (ii) use its best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act within 210 days after the Issue Date, (iii) keep the Exchange Offer open for
acceptance for not less than 20 business days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
holders of the Outstanding Notes, and (iv) use its best efforts to consummate
the Exchange Offer within 255 days after the Issue Date. In the event that the
Company fails to satisfy these or certain other of its obligations under the
Registration Rights Agreement, the interest rate on the Outstanding Notes will
be increased. See "Outstanding Notes Registration Rights."
Following the consummation of the Exchange Offer, holders of Old Notes not
tendered will generally not have any further registration rights and the
Outstanding Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the Outstanding Notes
could be adversely affected. See "--Consequence of Failure to Exchange."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the Exchange Offer), Exchange Notes for
an equal principal amount of Outstanding Notes. The terms of the Exchange Notes
are identical in all material respects to those of the Outstanding Notes, except
for certain transfer restrictions and registration rights relating to the
Outstanding Notes. The Exchange Notes will be entitled to the benefits of the
Indenture. See "Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered or accepted for exchange. As of the
date of this Prospectus, $50.0 million aggregate principal amount of the
Outstanding Notes is outstanding. Outstanding Notes tendered in the Exchange
Offer must be in denominations of a minimum principal amount of $1,000 or any
integral multiple thereof.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Outstanding Notes (other
than any holder who is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who exchange their Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer generally may offer such Exchange Notes for
resale, resell such Exchange Notes and otherwise transfer such Exchange Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of the holders' business and such holders are not participating
in, and have no arrangement or understanding with any person to participate in,
a distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Outstanding Notes, where such
Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the Exchange Notes may not be offered or
sold unless they have been registered or qualified for sale in such jurisdiction
or an exemption from registration or qualification is available and complied
with. The Company has agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the
Exchange Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holders of the Exchange Notes request in writing. If a
holder of Outstanding Notes does not exchange such Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer, such Outstanding Notes will
continue to be subject to the restrictions on transfer contained in the legend
thereon. If any holder of such Outstanding Notes is an affiliate of the Company,
is engaged in or intends to engage in or has any arrangement or understanding
with
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<PAGE> 28
any person to participate in the distribution of the Exchange Notes to be
acquired in the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the Commission and (ii) must comply with the registration
requirements of the Securities Act in connection with any resale transaction. In
general, the Outstanding Notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998 unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to The Bank
of New York (the "Exchange Agent") and by public announcement communicated by no
later than 9:00 a.m., New York City time, on the next business day following the
previously scheduled Expiration Date, unless otherwise required by applicable
law or regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Outstanding Notes previously tendered
pursuant to the Exchange Offer will remain subject to the Exchange Offer and may
be accepted for exchange by the Company.
The "Exchange Date" will be the second business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Outstanding Notes if any of the
events set forth below under "--Conditions to the Exchange Offer" shall have
occurred and shall not have been waived by the Company and (ii) amend the terms
of the Exchange Offer in any manner, whether before or after any tender of the
Outstanding Notes. If any such termination or amendment occurs, the Company will
notify the Exchange Agent in writing and will either issue a press release or
give written notice to the holders of the Outstanding Notes as promptly as
practicable. Unless the Company terminates the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for the tendered Outstanding Notes on the Exchange Date. Any
Outstanding Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
expiration or termination of the Exchange Offer. See "--Acceptance of
Outstanding Notes for Exchange; Delivery of Exchange Notes."
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Outstanding Notes
and will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Outstanding Notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender to the Company of Outstanding Notes by a holder thereof pursuant
to any one of the procedures set forth below will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of an Outstanding Note may tender the same by
(i) properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
(a) the certificate or certificates representing the Outstanding Notes being
tendered and any required signature guarantees, to the Exchange Agent at its
address set forth in the Letter of Transmittal on or prior to the Expiration
Date or (b) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the Outstanding Notes being tendered, if such procedure is
available, into the Exchange Agent's Account at DTC (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below, or
(ii) complying with the guaranteed delivery procedures described below.
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<PAGE> 29
If tendered Outstanding Notes are registered in the name of the signer of
the Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Outstanding Notes are to be
reissued) in the name of the registered holder, the signature of such signer
need not be guaranteed. In any other case, the tendered Outstanding Notes must
be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered holder and the
signature on the endorsement or instrument of transfer must be guaranteed by a
commercial bank or trust company located or having an office or correspondent in
the United States or by a member firm of a national securities exchange or the
National Association of Securities Dealers, Inc. or by a member of a signature
medallion program such as "STAMP" (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the Exchange Notes and/or Outstanding Notes
not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Outstanding Notes, the
signature on the Letter of Transmittal must be guaranteed by an Eligible
Institution.
Any beneficial owner whose Outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Outstanding Notes should contact such holder promptly and instruct
such holder to tender Outstanding Notes on such beneficial owner's behalf. If
such beneficial owner wishes to tender such Outstanding Notes itself, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such beneficial
owner's name or follow the procedures described in the immediately preceding
paragraph. The transfer of record ownership may take considerable time.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Outstanding Notes is received by the Exchange Agent, (ii) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by a Book-Entry Confirmation is received by the Exchange Agent or
(iii) a Notice of Guaranteed Delivery or letter or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Exchange Agent. Issuances of Exchange Notes in exchange for Outstanding
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal, the
tendered Outstanding Notes (or Book-Entry Confirmation, if applicable) and any
other required documents.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Outstanding Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or will incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER DOCUMENTS IS AT
THE ELECTION AND RISK OF THE TENDERING HOLDERS, AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED AND CONFIRMED BY THE EXCHANGE AGENT. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED
WITH RETURN RECEIPT REQUESTED BE USED AND THAT THE MAILING BE MADE SUFFICIENTLY
IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. AS AN ALTERNATIVE TO
DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR
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<PAGE> 30
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Book-Entry Transfer. The Exchange Agent will make a request to establish
an account with respect to the Outstanding Notes at the Book-Entry Transfer
Facility for purposes of the Exchange Offer within two business days after the
date of the Prospectus, and any financial institution that is a participant in
the Book-Entry Transfer Facility's systems may make book-entry delivery of
Outstanding Notes by causing the Book-Entry Transfer Facility to transfer such
Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer.
Guarantee Delivery Procedures. If a holder desires to tender Outstanding
Notes pursuant to the Exchange Offer, but time will not permit a Letter of
Transmittal, the Outstanding Notes or other required documents to reach the
Exchange Agent on or before the Expiration Date, or if the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the Exchange Agent has received at its office a letter or facsimile
transmission from an Eligible Institution setting forth the name and address of
the tendering holder, the names in which the Outstanding Notes are registered,
the principal amount of the Outstanding Notes being tendered and, if possible,
the certificate numbers of the Outstanding Notes to be tendered, and stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange trading days after the Expiration Date, the Outstanding
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, together with a properly completed and duly executed Letter of
Transmittal and any other required documents, will be delivered by such Eligible
Institution to the Exchange Agent in accordance with the procedures outlined
above. Unless Outstanding Notes being tendered by the above-described method are
deposited with the Exchange Agent (including through a Book-Entry Confirmation)
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the Company
may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Outstanding Notes for exchange (the "Transferor")
thereby exchanges, assigns and transfers the Outstanding Notes to the Company
and irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Outstanding Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes and to acquire Exchange Notes issuable upon the exchange of
such tendered Outstanding Notes and that, when the same are accepted for
exchange, the Company will acquire good and unencumbered title to the tendered
Outstanding Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Outstanding Notes. The
Transferor further agrees that acceptance of any tendered Outstanding Notes by
the Company and the issuance of Exchange Notes in exchange therefor will
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company will have no further
obligations or liabilities thereunder (except in certain limited circumstances).
All authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor and every obligation of the Transferor will be
binding upon the heirs, legal representatives, successors, assigns, executors,
administrators and trustees in bankruptcy of such Transferor.
By tendering Outstanding Notes and executing the Letter of Transmittal, the
Transferor certifies that (i) it is not an affiliate of the Company or, if the
Transferor is an affiliate of the Company, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, (ii) the Exchange Notes are being acquired in the ordinary course of
business of the person receiving such Exchange
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<PAGE> 31
Notes, whether or not such person is the holder, (iii) the Transferor has not
entered into an arrangement or understanding with any other person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes, (iv) the Transferor is not a broker-dealer who purchased the
Outstanding Notes for resale pursuant to an exemption under the Securities Act,
and (v) the Transferor will be able to trade the Exchange Notes acquired in the
Exchange Offer without restriction under the Securities Act.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Outstanding Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. For a withdrawal to be effective, a
written letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth in the Letter of Transmittal not
later than the close of business on the Expiration Date. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered Outstanding Notes to be withdrawn, the certificate numbers and
principal amount of Outstanding Notes to be withdrawn, that such holder is
withdrawing its election to have such Outstanding Notes exchanged and the name
of the registered holder of such Outstanding Notes, and must be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Outstanding Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Outstanding Notes promptly
following receipt of notice of withdrawal. Properly withdrawn Outstanding Notes
may be retendered by following one of the procedures described above under
"--Procedures for Tendering Outstanding Notes" at any time on or prior to the
Expiration Date. If Outstanding Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Outstanding Notes and otherwise comply with
the procedures of such facility. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Outstanding Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made on the Exchange Date. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Outstanding Notes when, as and if the Company has
given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of
Outstanding Notes for the purposes of receiving Exchange Notes from the Company
and causing the Outstanding Notes to be assigned, transferred and exchanged.
Upon the terms and subject to the conditions of the Exchange Offer, delivery of
Exchange Notes to be issued in exchange for accepted Outstanding Notes will be
made by the Exchange Agent promptly after acceptance of the tendered Outstanding
Notes. Any Outstanding Notes which have been tendered for exchange but which are
not exchanged for any reason will be returned to the holder thereof without cost
to such holder (or, in the case of Outstanding Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described above, such Outstanding Notes
will be credited to an account maintained by such holder with such Book-Entry
Transfer Facility for the Outstanding Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
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<PAGE> 32
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in exchange for any properly tendered Outstanding Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if (i)
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission (a) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(b) assessing or seeking any damages as a result thereof or (c) resulting in a
material delay in the ability of the Company to accept for exchange or exchange
some or all of the Outstanding Notes pursuant to the Exchange Offer; or (ii) the
Exchange Offer shall violate any applicable law or any applicable interpretation
of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in the reasonable discretion of the
Company. The failure by the Company at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right, and each right will be
deemed an ongoing right which may be asserted at any time or from time to time.
In addition, the Company has reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to terminate or amend the
Exchange Offer.
Any determination by the Company concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or qualification of the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. Questions relating to the procedure for tendering, as well as
requests for additional copies of this Prospectus or the Letter of Transmittal
and requests for Notices of Guaranteed Delivery, should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Facsimile Transmission Number: By Hand/Overnight Delivery:
Mail:
The Bank of New York (For Eligible Institutions The Bank of New York
Only)
101 Barclay Street Confirm by Telephone: 101 Barclay Street
(7 East) Corporate Trust
New York, New York 10286 Services Window
Attn: Reorganization Section, For Information Call: Ground Level
Attn: Reorganization Section,
</TABLE>
Delivery of the Letter of Transmittal to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth
above, will not constitute a valid delivery.
The Bank of New York also acts as Trustee under the Indenture.
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<PAGE> 33
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The expenses to be incurred in connection with the
Exchange Offer, including the fees and expenses of the Exchange Agent and
printing, accounting and legal fees, will be paid by the Company and are
estimated to be approximately $0.5 million.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Outstanding Notes in any jurisdiction
in which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction. However, the Company may, at
its discretion, take such action as it may deem necessary to make the Exchange
Offer in any such jurisdiction and extend the Exchange Offer to holders of
Outstanding Notes in such jurisdiction. In any jurisdiction the securities laws
or blue sky laws of which require the Exchange Offer to be made by a licensed
broker or dealer, the Exchange Offer is being made on behalf of the Company by
one or more registered brokers or dealers which are licensed under the laws of
such jurisdiction.
APPRAISAL RIGHTS
Holders of Outstanding Notes will not have dissenters' rights or appraisal
rights in connection with the Exchange Offer.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the
Outstanding Notes as reflected in the Company's accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the exchange of Exchange Notes for Outstanding
Notes. Expenses incurred in connection with the issuance of the Exchange Notes
will be amortized over the term of the Exchange Notes.
TRANSFER TAXES
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith except that holders
who instruct the Company to register Exchange Notes in the name of, or request
Outstanding Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
FEDERAL INCOME TAX CONSEQUENCES
Holders of the Outstanding Notes contemplating acceptance of the Exchange
Offer should consult their own tax advisers with respect to their particular
circumstances and with respect to the effects of state, local or foreign tax
laws to which they may be subject. The following discussion is based upon the
provisions of the Internal Revenue Code of 1986, as amended, regulations,
rulings and judicial decisions, in each case as in effect on the date of this
Prospectus, all of which are subject to change.
The Company believes that the exchange of an Outstanding Note for an
Exchange Note by a Holder pursuant to the Exchange Offer will not constitute a
taxable exchange. Such an exchange will not result in taxable income, gain or
loss being recognized by such Holder or by the Company. Immediately after the
exchange, such Holder will have the same adjusted basis and holding period in
each Exchange Note received
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<PAGE> 34
as such Holder had immediately prior to the exchange in the corresponding
Outstanding Note surrendered. The foregoing analysis is not based upon an
opinion of counsel and Holders of the Outstanding Notes contemplating acceptance
of the Exchange Offer should consult their own tax advisors with respect to the
effects of the Exchange Offer on the tax basis for such Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a consequence of the offer or sale of the Outstanding Notes pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws, holders
of Outstanding Notes who do not exchange Outstanding Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Outstanding Notes as set forth in the legend thereon. In
general, the Outstanding Notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. The Company does not currently anticipate
that it will register the Outstanding Notes under the Securities Act.
Upon consummation of the Exchange Offer, due to the restrictions on
transfer of the Outstanding Notes and the absence of such restrictions
applicable to the Exchange Notes, it is likely that the market, if any, for
Outstanding Notes will be relatively less liquid than the market for Exchange
Notes. Consequently, holders of Outstanding Notes who do not participate in the
Exchange Offer could experience significant diminution in the value of their
Outstanding Notes, compared to the value of the Exchange Notes.
RECENT DEVELOPMENTS
The Anchor Acquisition and the First Mortgage Notes. On February 5, 1997,
pursuant to an Asset Purchase Agreement dated December 18, 1996, as amended (the
"Asset Purchase Agreement"), between Consumers, Owens and Old Anchor (the rights
and obligations of Consumers under the Asset Purchase Agreement having been
assigned to the Company), the Company and Owens purchased substantially all of
the assets of, and assumed certain liabilities, of Old Anchor, for consideration
of $200.5 million in cash in addition to common and convertible preferred stock
of the Company. In addition, the Company contributed $9.1 million in cash and
convertible preferred stock of the Company with a face value of $9.0 million to
three defined benefit plans of Old Anchor, certain of the liabilities in respect
of which were assumed and which plans are now maintained by the Company. The
Company also incurred approximately $9.9 million of fees and expenses in
connection with the Anchor Acquisition. The Company obtained the cash portion of
the purchase price for the Anchor Acquisition, including the defined benefit
plan contributions, from (i) an $85.0 million cash investment by Consumers in
common stock and convertible preferred stock of the Company representing
approximately 59% of the Company's capital stock on a fully diluted basis, (ii)
the $130.0 million Anchor Loan Facility, (iii) $0.1 million of borrowings under
the Company's $110.0 million Revolving Credit Facility, and (iv) $4.4 million
from the sale of certain inventory to Owens. Old Anchor's Antioch and Hayward,
California plants and its interest in Rocky Mountain Bottle Company were
acquired, and the related liabilities assumed, by Owens (the "Owens Purchase").
The Company purchased substantially all of the other assets of Old Anchor,
including 11 operating plants, several idled plants and other related assets.
The Company also assumed certain other liabilities of Old Anchor, including
certain of Old Anchor's liabilities in respect of the Anchor Glass Container
Corporation Service Retirement Plan, the Anchor Glass Container Retirement Plan
for Salaried Employees and the Pension Plan for Hourly Employees of Latchford
Glass Company and Associated Companies (collectively, the "Plans"). The Company
did not assume Old Anchor's liabilities in respect of its bank debt, debt
securities and industrial revenue bonds.
The acquisition price is subject to a final adjustment based on an audited
January 10, 1997 balance sheet. On June 13, 1997, Old Anchor delivered to the
Company the closing balance sheet which indicated that Old Anchor believed that
it was entitled to additional payments from the Company and Owens totaling
approximately $76.3 million. On July 28, 1997, the Company delivered its notice
of disagreement to Old Anchor, which requested a reduction of the purchase price
of approximately $96.8 million. Since that time, the parties have been
negotiating the amount of the adjustment, and have reached a proposed
settlement. The
31
<PAGE> 35
Proposed Settlement requires the payment by the Company to Old Anchor of an
additional $1.0 million in cash and the issuance of 1,225,000 warrants to
purchase additional shares of common stock, together valued at approximately
$7.1 million. In addition, the Company will issue 525,000 warrants to purchase
additional shares of common stock to an affiliate of Consumers valued at
approximately $2.6 million. None of the warrants to be issued will require any
payment upon exercise. The Proposed Settlement is subject to final approval by
the Company, Old Anchor and the bankruptcy court.
On April 17, 1997, Anchor issued the First Mortgage Notes and used a
portion of the net proceeds therefrom to repay all outstanding Indebtedness
under the Anchor Loan Facility and advances outstanding under the Revolving
Credit Facility. The remainder of the net proceeds were used by the Company for
working capital.
The Note Offering. On March 16, 1998, the Company sold the Outstanding
Notes. The net proceeds of the Note Offering (after expenses) were approximately
$47.0 million. The Company intends to use such proceeds for growth capital
expenditures and general corporate purposes. Pending such use, the Company used
the net proceeds to temporarily repay the Revolving Credit Facility.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
32
<PAGE> 36
CAPITALIZATION
The following table sets forth the actual cash position and capitalization
of the Company as of March 31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 1,893
========
Revolving Credit Facility................................... 18,804
Long-term debt (including current maturities):
11 1/4% First Mortgage Notes.............................. 150,000
9 7/8% Senior Notes....................................... 50,000
Other debt.................................................. 3,273
--------
Total debt........................................ 222,077
--------
Series A Preferred Stock, par value $.01 per share;
2,239,320 shares authorized; 2,239,320 shares issued and
outstanding(1)............................................ 55,983
--------
Stockholders equity:
Series B Preferred Stock, par value $.01 per share;
5,000,000 shares authorized; 3,360,000 shares issued
and outstanding........................................ 34
Common Stock, par value $.10 per shares; 50,000,000 shares
authorized:
Class A Common Stock; 19,000,000 shares authorized;
490,898 shares issued and outstanding................ 49
Class B Common Stock; 28,000,000 shares authorized;
902,615 shares issued and outstanding................ 90
Class C Common Stock; 3,000,000 shares authorized; none
issued and outstanding(2)............................ --
Issuable preferred stock(3)................................. 8,020
Warrants(2)................................................. 10,518
Capital in excess of par value.............................. 92,294
Accumulated deficit......................................... (33,689)
Additional minimum pension liability........................ (540)
--------
Total stockholders' equity........................ 76,776
--------
Total capitalization.............................. $354,836
========
</TABLE>
- ---------------
(1) The Series A Preferred Stock is subject to mandatory redemption in 2009.
(2) 2,107,843 shares in aggregate of the Company's Class C Common Stock, par
value $.10 per share (the "Class C Common Stock") are issuable upon the
exercise of certain warrants issued to the initial purchasers in connection
with the Anchor Loan Facility and the offering of the First Mortgage Notes.
(3) Represents additional shares of Series B Preferred Stock issuable to
Consumers U.S. in satisfaction of dividends, accrued as of March 31, 1998,
payable in kind to Consumers U.S. on its shares of Series B Preferred Stock.
33
<PAGE> 37
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following Unaudited Pro Forma Balance Sheet of the Company as at
December 31, 1997 gives effect to the Note Offering and the application of the
net proceeds therefrom as if each such event had occurred on December 31, 1997.
The following Unaudited Pro Forma Statements of Operations of the Company for
the years ended December 31, 1996 and 1997 (the "Pro Forma Statements of
Operations") give effect to the formation of the Company, the Anchor
Acquisition, the offering of the First Mortgage Notes and the Note Offering and
the application of the proceeds therefrom (the "Transactions"), as if each such
Transaction had occurred on January 1, 1996 and 1997, respectively. The
Unaudited Pro Forma Financial Statements should be read in conjunction with
"Management's Discussion and Analysis of Pro Forma Financial Condition and
Results of Operations," the financial statements of the Company, including the
notes thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and with the historical consolidated financial statements
of Old Anchor, including the notes thereto and the related Management's
Discussion and Analysis of Financial Condition and Results of Operations for Old
Anchor," included elsewhere in this Prospectus. The Unaudited Pro Forma
Financial Statements do not purport to be indicative of the results that would
have actually been obtained had such Transactions been completed as of the
assumed dates and for the periods presented, or that may be obtained in the
future. The Anchor Acquisition has been accounted for using the purchase method
of accounting pursuant to which the purchase price is allocated among the
acquired assets and liabilities in accordance with estimates of fair value as of
the date of acquisition. The purchase price is subject to adjustment as provided
in the Asset Purchase Agreement. On June 13, 1997, Old Anchor delivered to the
Company the closing balance sheet which indicated that Old Anchor believed that
it was entitled to additional payments from the Company and Owens totaling
approximately $76.3 million. On July 28, 1997, the Company delivered its notice
of disagreement to Old Anchor, which requested a reduction of the purchase price
of approximately $96.8 million. Since that time, the parties have been
negotiating the amount of the adjustment, and have reached a proposed
settlement. The Proposed Settlement requires the payment by the Company to Old
Anchor of an additional $1.0 million in cash and the issuance of 1,225,000
warrants to purchase additional shares of common stock, together valued at
approximately $7.1 million, recorded as an adjustment to goodwill. In addition,
the Company will issue 525,000 warrants to purchase additional shares of common
stock to an affiliate of Consumers, valued at approximately $2.6 million which
has been recorded as an expense. None of the warrants to be issued will require
any payment upon exercise. The effects of the Proposed Settlement have been
reflected in the Company's historical financial statements as of and for the
year ended December 31, 1997. The Proposed Settlement is subject to final
approval by the Company, Old Anchor and the bankruptcy court.
In addition, for purposes of the Unaudited Pro Forma Financial Statements,
the historical financial information of Old Anchor for the periods presented has
been adjusted to eliminate the effect of certain assets and liabilities of Old
Anchor not acquired or assumed by the Company in the Anchor Acquisition, in
accordance with the terms of the Asset Purchase Agreement.
34
<PAGE> 38
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ANCHOR
RESOLUTION
CORP. PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales.............................................. $ 814,370 $ (91,689)(a) $ 722,681
Cost and expenses:
Cost of products sold................................ 831,612 (85,242)(a) 716,248
(13,920)(b)
(3,141)(c)
(15,994)(d)
2,933(e)
Selling and administrative expenses.................. 39,570 -- 39,570
Restructuring and other charges...................... 49,973 -- 49,973
Impairment of long-lived assets...................... 490,232 (490,232)(b) --
Write-up of assets held for sale..................... (8,967) 5,200(i) (3,767)
--------- --------- ----------
Loss from operations................................... (588,050) 508,707 (79,343)
Other income (expense), net............................ (10,020) 5,553(a) 1,995
6,462(f)
Interest expense....................................... (48,601) 24,234(g) (24,367)
--------- --------- ----------
Loss before reorganization items, income taxes and
extraordinary items.................................. (646,671) 544,956 (101,715)
Reorganization items................................... (5,008) -- (5,008)
Income taxes........................................... (1,825) -- (1,825)
--------- --------- ----------
Loss before extraordinary items........................ $(653,504) $ 544,956 $ (108,548)
========= ========= ==========
Preferred stock dividends.............................. $ (12,483)(h) $ (12,483)
========= ==========
Loss before extraordinary items applicable to common
stock................................................ $(653,504) $ 532,473 $ (121,031)
========= ========= ==========
OTHER FINANCIAL DATA:
Net cash used in operating activities................ $ (28,411) $ 19,940 $ (8,471)
Net cash used in investing activities................ (63,892) (189,804) (253,696)
Net cash provided by financing activities............ 78,886 170,491 249,377
Adjusted EBITDA(k)................................... 34,824 (6,072) 28,752
Depreciation and amortization........................ 101,656 (41,762) 59,894
Capital expenditures................................. 46,254 (946) 45,308
Deficiency of earnings to cover fixed charges........ 651,679 (544,956) 106,723
Ratio of Adjusted EBITDA to interest expense......... 0.72 1.18
</TABLE>
See notes to unaudited pro forma financial statements.
35
<PAGE> 39
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ANCHOR
DECEMBER 31, PRO FORMA PRO
1997 ADJUSTMENTS FORMA
------------ ----------- ---------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................ $ 1,060 $36,532(l) $ 37,592
Accounts receivable...................................... 56,940 -- 56,940
Inventories:
Raw materials and manufacturing supplies............... 23,303 -- 23,303
Finished products...................................... 96,820 -- 96,820
Other currents assets.................................... 8,082 -- 8,082
-------- ------- --------
Total current assets........................... 186,205 36,532 222,737
Property, plant and equipment, net....................... 324,871 -- 324,871
Other assets............................................. 25,975 3,000(l) 28,975
Strategic alliance with customers........................ 34,714 -- 34,714
Goodwill................................................. 55,803 -- 55,803
-------- ------- --------
Total assets................................... $627,568 $39,532 $667,100
======== ======= ========
Liabilities and stockholders' equity:
Current liabilities:
Revolving Credit Facility................................ $ 10,468 (10,468)(l) $ --
Current maturities of long-term debt..................... 567 -- 567
Accounts payable......................................... 63,796 -- 63,796
Accrued expenses......................................... 64,075 -- 64,075
Accrued interest......................................... 4,576 -- 4,576
Accrued compensation and employee benefits............... 25,185 -- 25,185
-------- ------- --------
Total current liabilities...................... 168,667 (10,468) 158,199
Long-term debt........................................... 152,758 -- 152,758
Notes.................................................... -- 50,000(l) 50,000
Pension liabilities...................................... 48,826 -- 48,826
Postretirement liabilities............................... 57,900 -- 57,900
Other long-term liabilities.............................. 57,522 -- 57,522
-------- ------- --------
Total liabilities.............................. 485,673 39,532 525,205
-------- ------- --------
Redeemable preferred stock............................... 55,983 -- 55,983
-------- ------- --------
Stockholders' equity:
Preferred stock........................................ 34 -- 34
Issuable preferred stock............................... 6,240 -- 6,240
Common stock........................................... 139 -- 139
Warrants............................................... 10,518 -- 10,518
Capital in excess of par value......................... 92,294 -- 92,294
Accumulated deficit.................................... (22,773) -- (22,773)
Amount related to minimum pension liability............ (540) -- (540)
-------- ------- --------
85,912 -- 85,912
-------- ------- --------
Total liabilities and stockholders' equity..... $627,568 $39,532 $667,100
======== ======= ========
</TABLE>
See notes to unaudited pro forma financial statements.
36
<PAGE> 40
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ANCHOR ANCHOR
RESOLUTION PERIOD FROM
CORP. ONE FEB. 5, 1997
MONTH ENDED TO PRO FORMA
FEB. 4, 1997 DEC. 31, 1997 ADJUSTMENTS PRO FORMA
------------ --------------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.............................. $ 62,560 $ 569,441 $(8,483)(a) $ 623,518
Costs and expenses:
Cost of products sold................ 70,608 523,709 (8,207)(a) 585,315
(871)(d)
76(e)
Selling and administrative
expenses.......................... 3,745 25,120 -- 28,865
-------- ---------- ------- ----------
Income (loss) from operations.......... (11,793) 20,612 519 9,338
Other income (expense), net............ (595) (2,602) 630(f) 58
2,625(j)
Interest expense....................... (2,437) (18,281) (3,649)(g) (24,367)
-------- ---------- ------- ----------
Loss before reorganization items,
income taxes and extraordinary
item................................. (14,825) (271) 125 (14,971)
Reorganization items................... (827) -- -- (827)
Income taxes........................... -- -- -- --
-------- ---------- ------- ----------
Loss before extraordinary item......... $(15,652) $ (271) $ 125 $ (15,798)
======== ========== ======= ==========
Preferred stock dividends.............. $ (11,302) $(1,181)(h) $ (12,483)
========== ======= ==========
Loss before extraordinary item
applicable to common stock........... $(15,652) $ (11,573) $(1,056) $ (28,281)
======== ========== ======= ==========
OTHER FINANCIAL DATA:
Net cash provided by (used in)
operating activities.............. $(11,427) $ 25,483 $ 65 $ 14,121
Net cash used in investing
activities........................ (7,500) (257,255) 10 (264,745)
Net cash provided by financing
activities........................ 17,478 232,832 (7,605) 242,705
Adjusted EBITDA (k).................. (4,783) 69,764 (675) 64,306
Depreciation and amortization........ 7,605 49,129 (1,824) 54,910
Capital expenditures................. 7,186 41,634 -- 48,820
Deficiency of earnings to cover fixed
charges........................... 15,652 271 (125) 15,798
Ratio of Adjusted EBITDA to interest
expense........................... -- 3.82 2.64
</TABLE>
See notes to unaudited pro forma financial statements.
37
<PAGE> 41
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1997
The Unaudited Pro Forma Financial Statements as of December 31, 1997 and
for the years ended December 31, 1996 and 1997 give effect to the following
unaudited pro forma adjustments:
(a) Reflects the elimination of the operations of Old Anchor plants purchased
by Owens and the elimination of Old Anchor's share of operations of the
Rocky Mountain Bottle Company joint venture for the periods presented.
(b) Reflects the elimination of Old Anchor's historical amortization of goodwill
for the periods presented and the elimination of Old Anchor's historical
impairment of long-lived assets as of December 31, 1996.
(c) Reflects the elimination of the LIFO (last-in, first-out) provision
recorded for the year ended December 31, 1996.
(d) Reflects the reduction of Old Anchor's historical depreciation for the
effects of the purchase price allocation to property, plant and equipment.
(e) Reflects the amortization of goodwill on a straight-line basis over 20
years.
(f) Reflects the elimination of the amortization of deferred financing fees
recorded by Old Anchor.
(g) Pro forma interest expense and amortization of financing costs has been
calculated on pro forma debt levels and applicable interest rates assuming
the Note Offering was consummated as of the beginning of the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Elimination of interest expense..................... $(48,601) $(20,718)
Interest on borrowings under the Notes of $150.0
million at an interest rate of 11.25%............. 16,875 16,875
Interest on borrowings under the Notes at an
interest rate of 9.875%........................... 4,938 4,938
Other interest expense.............................. 250 250
Amortization of financing fees...................... 2,304 2,304
-------- --------
$(24,234) $ 3,649
======== ========
</TABLE>
Any additional interest which has been described under "Description of
Indebtedness--First Mortgage Notes" has not been included in the pro forma
calculation of interest expense as it is not expected to have a continuing
impact on the Company.
On a historical basis, the Company has written off the capitalized deferred
financing fees of the Anchor Loan Facility as of the date that the offering
of the First Mortgage Notes was consummated. This amount, $11.2 million, was
recorded as an extraordinary loss in the second quarter of 1997.
(h) Reflects preferred stock dividends on both the Series A Preferred Stock and
Series B Preferred Stock. In 1997, this includes dividends for the period
from January 1, 1997 through February 4, 1997 whereas 1996 includes the
entire year.
(i) Reflects the elimination of a portion of Old Anchor's historical write-up
of assets held for sale related to plant facilities not acquired in the
Anchor Acquisition for the year ended December 31, 1996.
(j) Reflects the additional 525,000 warrants to be issued as part of the
Proposed Settlement. This charge of $2,625 recorded in 1997 is a one-time
non-recurring charge and therefore is not reflected in the pro forma
statement of operations.
(k) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) is an amount equal to income (loss) before income taxes and
extraordinary items, plus the amounts of restructuring charges,
reorganization items, the impairment of long-lived assets, interest,
depreciation and amortization, other
38
<PAGE> 42
non-cash charges and less the write-up of assets held for sale included in
the determination of income (loss) before income taxes and extraordinary
items. The Company believes that, in addition to cash flow from operations
and net earnings, Adjusted EBITDA is a useful financial performance
measurement for assessing operating performance as it provides investors
with an additional basis to evaluate the ability of the Company to incur and
service debt and to fund capital expenditures. In evaluating Adjusted
EBITDA, the Company believes that investors should consider, among other
things, the amount by which Adjusted EBITDA exceeds interest costs for the
period, how Adjusted EBITDA compares to principal repayments on debt for the
period and how Adjusted EBITDA compares to capital expenditures for the
period. To evaluate Adjusted EBITDA, the components of Adjusted EBITDA, such
as revenues and operating expenses and the variability of such components
over time, should also be considered. Investors should be cautioned that the
Company's method of calculating Adjusted EBITDA may differ from the methods
used by other companies and, as a result, the Adjusted EBITDA measures
disclosed herein may not be comparable to other similarly titled measures
disclosed by other companies.
(l) Reflects the Note Offering and the application of the net proceeds
therefrom. The net proceeds of $47,000 were applied to temporarily pay down
the Revolving Credit Facility by $10,468, with the residual $36,532 added
to cash.
39
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PRO FORMA RESULTS OF OPERATIONS
The discussion set forth below compares the Company's pro forma results of
operations for the year ended December 31, 1996 and its pro forma results of
operations for the year ended December 31, 1997 after giving effect to the
formation of the Company, the Anchor Acquisition, the offering of the First
Mortgage Notes, the Note Offering and the application of the net proceeds
therefrom as if each such event had occurred at the beginning of the periods
presented. A discussion of Old Anchor's historical results of operations for the
year ended December 31, 1996 as compared to Old Anchor's historical results of
operations for the year ended December 31, 1995 is also included elsewhere in
this Prospectus. The information and data included in the following discussion
have been derived from the Unaudited Pro Forma Financial Statements of the
Company, and exclude the Old Anchor plants and joint venture interest acquired
by Owens in connection with the Anchor Acquisition, and give effect to the
replacement of Old Anchor's capital structure with the capital structure of the
Company. The Company is in the process of implementing its business strategy,
including the Plant Closings and the Headquarters Cost Reductions, although the
effects on the Company's results of operations resulting therefrom are not
reflected in the pro forma results of operations discussed below.
The data included in the following table for the years ended December 31,
1996 and 1997 has been derived from the Unaudited Pro Forma Statements of
Operations of the Company. See "Unaudited Pro Forma Financial Statements."
Management believes this data is not necessarily indicative of the results of
operations that would have been achieved by the Company had the Transactions
actually occurred at the beginning of the respective periods. Furthermore,
management believes this data is not necessarily indicative of Anchor's future
results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 % OF SALES 1997 % OF SALES
--------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales....................................... $ 722,681 100.0% $ 623,518 100.0%
Cost of products sold........................... 716,248 99.1 585,315 93.9
Selling and administrative expenses............. 39,570 5.5 28,865 4.6
Restructuring and other charges................. 49,973 6.9 -- --
Income (loss) from operations................... (79,343) (11.0) 9,338 1.5
Interest expense................................ (24,367) (3.4) (24,367) (3.9)
Loss before reorganization items, income taxes
and extraordinary items....................... (101,715) (14.1) (14,971) (2.4)
Loss before extraordinary item.................. (108,548) (15.0) (15,798) (2.5)
</TABLE>
PRO FORMA 1997 COMPARED TO PRO FORMA 1996
The income from operations for the Company's pro forma year ended December
31, 1997 was $9.3 million compared to a loss from operations of $79.3 million
for Old Anchor's pro forma year ended December 31, 1996. The loss before
extraordinary item was $15.8 million for pro forma 1997 compared to $108.5
million for the comparable pro forma period of 1996. Included in the pro forma
1996 results was a first quarter charge of $50.0 million for Old Anchor's 1996
restructuring program. Net sales for the pro forma 1997 period were $623.5
million, a decrease of 13.7% compared with the pro forma 1996 period.
Following the Anchor Acquisition on February 5, 1997, management began an
implementation of a business strategy that it believes can significantly improve
upon Old Anchor's operating results. The objectives of this strategy are to (i)
reduce the cost structure of the Company, (ii) improve production planning and
product mix, (iii) strengthen customer relations and (iv) exploit synergies.
40
<PAGE> 44
Cost reductions are being effected through the closure of certain plants to
remove excess capacity and a targeted expense reduction program to create a
leaner organization through the elimination of excess layers of management
including the consolidation of certain corporate functions. Since the Anchor
Acquisition, the Company has closed its Houston, Texas plant effective February
1997 and its Dayville, Connecticut plant effective April 1997. The Company has
reduced 25% of corporate headquarters positions effective as of March 1997.
With the elimination of excess capacity, management believes it will be
able to improve efficiency and operating results by reallocating production
among the Company's manufacturing facilities according to machine strength and
by instituting longer production runs with fewer mold and color changes.
The Company believes that reestablishing the positive customer
relationships Old Anchor benefitted from in the past is essential to improving
financial performance. Management has already begun to rebuild relationships
with some of Old Anchor's larger volume customers.
LIQUIDITY AND CAPITAL RESOURCES
For a discussion of Liquidity and Capital Resources, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
41
<PAGE> 45
SELECTED FINANCIAL DATA
The following table sets forth certain historical financial information of
the Company. The selected financial data for the period from February 5, 1997 to
December 31, 1997 has been derived from the Company's audited financial
statements included elsewhere in this Prospectus. The following information
should be read in conjunction with the Company's audited financial statements
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ANCHOR
PERIOD FROM
FEBRUARY 5, 1997 TO
DECEMBER 31, 1997(1)
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 569,441
Cost of products sold.................................... 523,709
Selling and administrative expenses...................... 25,120
---------
Income from operations................................... 20,612
Other income (expense), net.............................. (2,602)
Interest expense......................................... (18,281)
---------
Loss before and extraordinary item(2).................... (271)
Extraordinary item(2).................................... (11,200)
---------
Net loss................................................. $ (11,471)
=========
Preferred stock dividends................................ $ (11,302)
=========
Loss before extraordinary items applicable to common
stock.................................................. $ (11,573)
=========
Loss applicable to common stock.......................... $ (22,773)
=========
OTHER FINANCIAL DATA:
Net cash provided by operating activities................ $ 25,483
Net cash used in investing activities.................... (257,255)
Net cash provided by financing activities................ 232,832
Adjusted EBITDA(3)....................................... 69,764
Depreciation and amortization............................ 51,132
Capital expenditures..................................... 41,634
Ratio of earnings to fixed charges(4).................... --
Ratio of Adjusted EBITDA to interest expense............. 3.82
BALANCE SHEET DATA:
Accounts receivable...................................... $ 56,940
Inventories.............................................. 120,123
Total assets............................................. 627,568
Total debt(8)............................................ 163,793
Total stockholders' equity............................... 85,912
</TABLE>
- ---------------
(1) The Anchor Acquisition was consummated on February 5, 1997.
(2) Extraordinary item in the period from February 5, 1997 to December 31, 1997
resulted from the write-off of financing costs related to debt extinguished.
(3) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) ("Adjusted EBITDA") is an amount equal to income (loss) before
income taxes and extraordinary items plus the amounts of
42
<PAGE> 46
interest, depreciation and amortization and other non-cash charges as
calculated below, using income from operations as a starting point:
<TABLE>
<CAPTION>
ANCHOR
PERIOD FROM
FEBRUARY 5, 1997 TO
DECEMBER 31, 1997(1)
--------------------
<S> <C>
Income from operations............................... $ 20,612
Other expense, net................................... (2,602)
Other noncash charges................................ 2,625
Depreciation and amortization........................ 49,129
--------
Adjusted EBITDA...................................... $ 69,764
========
</TABLE>
The Company believes that, in addition to cash flow from operations and net
earnings, Adjusted EBITDA is a useful financial performance measurement for
assessing operating performance as it provides investors with an additional
basis to evaluate the ability of the Company to incur and service debt and
to fund capital expenditures. In evaluating Adjusted EBITDA, the Company
believes that investors should consider, among other things, the amount by
which Adjusted EBITDA exceeds interest costs for the period, how Adjusted
EBITDA compares to principal repayments on debt for the period and how
Adjusted EBITDA compares to capital expenditures for the period. To evaluate
Adjusted EBITDA, the components of Adjusted EBITDA, such as revenues and
operating expenses and the variability of such components over time, should
also be considered. Investors should be cautioned that the Company's method
of calculating Adjusted EBITDA may differ from the methods used by other
companies and, as a result, the Adjusted EBITDA measures disclosed herein
may not be comparable to other similarly titled measures disclosed by other
companies.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and extraordinary items plus fixed
charges. Fixed charges consist of interest and amortization of debt expense
plus a portion of operating lease expense representative of the interest
factor. There was a deficiency of earnings to cover fixed charges in the
period from February 5, 1997 to December 31, 1997 of $0.3 million.
43
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company, was formed in January 1997 to consummate the Anchor
Acquisition. On February 5, 1997, pursuant to an Asset Purchase Agreement, the
Company and Owens acquired substantially all of the assets of, and assumed
certain liabilities, of Old Anchor. In the Anchor Acquisition, the Company
purchased eleven operating glass container manufacturing facilities and other
related assets. Prior to the Anchor Acquisition, the Company had no operations
and therefore the following discussion represents activity from February 5, 1997
through December 31, 1997 (the "1997 Period"). Accordingly, operations for the
Company for the 1997 Period are not directly comparable to operations of Old
Anchor for 1996.
RESULTS OF OPERATIONS
Net Sales. Net sales for the 47 weeks in the 1997 Period for the
continuing plants operated by the Company were approximately $569.4 million, or
approximately $12.1 million per week. Net sales for the same plants for 1996 (52
weeks) under Old Anchor were approximately $722.7 million, or $13.9 million per
week. Net sales per week decreased principally as a result of lower sales of
beer products by the Company.
Cost of Products Sold. The Company's cost of products sold in the 1997
Period was $523.7 million (or 92.0% of net sales), while Old Anchor's cost of
products sold in 1996 was $831.6 million (or 102.1% of net sales) in 1996.
Despite closing four plants in 1995 and 1996, Old Anchor still maintained excess
capacity which reduced its ability to withstand the adverse industry conditions
prevailing in 1996. In an attempt to fill excess capacity, some of Old Anchor's
lost volume was replaced with smaller orders requiring shorter production runs
as well as more frequent retooling and color changes, which led to higher unit
costs and lower margins. Following the Anchor Acquisition, the Company closed
its Houston and Dayville plants and removed from production two furnaces, one at
each of two other plants. By reducing excess capacity and through a better
utilization of the Company's workforce during the 1997 Period, wage increases of
approximately 7% during the 1997 Period had only a limited impact.
Selling and Administrative Expenses. Selling and administrative expenses
for the 1997 Period were approximately $25.1 million (or 4.4% of pro forma net
sales), while Old Anchor's selling and administrative expenses were $39.6
million in 1996 (or 4.8% of pro forma net sales). This slight decline in selling
and administrative expenses as a percentage of net sales reflects lower
personnel and fringe benefit costs primarily as a result of the Headquarters
Cost Reductions which occurred in March 1997.
Net Income (Loss). The Company had a net loss in the 1997 Period of
approximately $11.5 million, including an extraordinary loss of approximately
$11.2 million as a result of the write-off of certain financing fees in
connection with the refinancing of the Anchor Loan Facility. Despite lower net
sales per week in the 1997 Period compared to Old Anchor's net sales per week in
1996, income from operations during the 1997 Period for the continuing plants
was approximately $20.6 million, while Old Anchor has a loss from operations in
1996 from these same plants of $63.2 million, principally as a result of the
return to higher margin business and reduced cost of products sold and selling
and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
In the 1997 Period, operating activities provided $25.5 million in cash,
reflecting the loss before extraordinary item adjusted for changes in working
capital items. Cash consumed in investing activities for the 1997 Period was
$257.3 million, principally reflecting the cash component of the Anchor
Acquisition. Additionally, in February 1997, the Company contributed $9.0
million in cash to the Company's defined benefit pension plans. Capital
expenditures in the 1997 Period were $41.6 million. Cash increased from
financing activities for the 1997 Period by $232.8 million reflecting the
issuance of capital stock and borrowings in connection with the Anchor
Acquisition.
Capital expenditures required for environmental compliance were
approximately $0.8 million for 1997 and are anticipated to be approximately $1.7
million annually in 1998 and 1999. However, there can be no assurance that
future changes in such laws, regulations or interpretations thereof or the
nature of the
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Company's operations will not require the Company to make significant additional
capital expenditures to ensure compliance in the future.
The purchase price of the Anchor Acquisition was approximately $250.0
million and was comprised of: approximately $200.5 million in cash, $47.0
million face amount (1,879,320 shares) of Series A Preferred Stock and $2.5
million of common stock (490,898 shares) of Class A Common Stock. However, the
purchase price paid by the Company is subject to adjustment. On June 13, 1997,
Old Anchor delivered to the Company the unaudited Closing Balance Sheet, which
indicated that Old Anchor believed that it was entitled to additional payments
from the Company and Owens totaling approximately $76.3 million. On July 28,
1997, the Company delivered its notice of disagreement to Old Anchor, which
requested a reduction to the purchase price of approximately $96.8 million.
Since that time, the parties have been negotiating the amount of the adjustment,
and have reached a proposed settlement. The Proposed Settlement requires the
payment by the Company to Old Anchor of an additional $1.0 million in cash and
the issuance of 1,225,000 warrants for the purchase of additional shares of
common stock, together valued at $7.1 million. In addition, the Company will
issue 525,000 warrants to purchase additional shares of common stock to an
affiliate of Consumers, valued at $2.6 million. None of the warrants to be
issued will require any payment upon exercise. The effects of the Proposed
Settlement have been reflected in the Company's historical financial statements
as of and for the year ended December 31, 1997. The Proposed Settlement is
subject to final approval by the Company, Old Anchor and the bankruptcy court.
The Company obtained the cash portion of the purchase price from an $85.0
million cash investment by Consumers in $84.0 million face amount (3,360,000
shares) of Series B Preferred Stock and $1.0 million of Class B Common Stock and
borrowings under the $130.0 million Anchor Loan Facility.
In conjunction with the Anchor Acquisition, the Company entered into a
credit agreement providing for a $110.0 million Revolving Credit Facility. As of
March 20, 1998, advances outstanding under the Revolving Credit Facility were
$5.9 million and the total outstanding letters of credit on this facility were
$11.1 million. These advances were borrowed in connection with the Company's
plans for expansion and as part of its seasonal building of inventory.
On April 17, 1997, the Company completed an offering of the First Mortgage
Notes, issued under an indenture dated as of April 17, 1997 (the "First Mortgage
Notes Indenture"), among the Company, Consumers U.S. and The Bank of New York,
as Trustee. The First Mortgage Notes are senior secured obligations of the
Company, ranking senior in right of payment to all existing and future
subordinate indebtedness of the Company and pari passu with all existing and
future senior indebtedness of the Company. The First Mortgage Notes are
guaranteed by Consumers U.S. Proceeds from the issuance of the First Mortgage
Notes, net of fees, were approximately $144.0 million and were used to repay
$130.0 million outstanding under the Anchor Loan Facility and $8.8 million
outstanding under the Revolving Credit Facility, with the balance used for
general corporate purposes. In connection with the refinancing of the Anchor
Loan Facility with the First Mortgage Notes, the Company issued 702,615 shares
of Class B Common Stock to Consumers and 702,614 warrants to the initial
purchasers. The warrants and common stock are each valued at $5.00 per share.
As a result of its failure to have an exchange offer registration statement
declared effective and to have exchanged all First Mortgage Notes validly
tendered, the Company has paid additional interest on the First Mortgage Notes.
The amount of additional interest that the Company paid has ranged from 0.5% in
1997 to 1.5% in February 1998. This additional interest is expected to be
nonrecurring and not significant to the Company's continuing operations.
In March 1998, the Company issued the Notes. The Notes are senior unsecured
obligations ranking pari passu in right of payment with all existing and future
senior indebtedness of the Company. Proceeds of the offering were used for
growth capital expenditures and general corporate purposes.
The First Mortgage Notes Indenture and the Indenture contain certain
covenants that restrict the Company from taking various actions, including,
subject to specified exceptions, the incurrence of additional indebtedness, the
granting of additional liens, the making of investments, the payment of
dividends and other restricted payments, mergers, acquisitions and other
fundamental corporate changes, capital expenditures, operating lease payments
and transactions with affiliates. The Revolving Credit Facility also contains
certain financial covenants that require the Company to meet and maintain
certain financial tests and minimum ratios,
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including a minimum working capital ratio, a minimum consolidated net worth test
and a minimum interest coverage ratio.
The Company expects significant expenditures in 1998, including interest
expense on the First Mortgage Notes, the Notes and the Revolving Credit
Facility, required pension plan contributions of $17.0 million, payment in
respect of the Company's supply agreement with The Stroh Brewery Company of $7.0
million, capital expenditures of approximately $55.0 million and closing costs
associated with the closed manufacturing facilities of approximately $11.0
million. In addition, the Company is required to make pension plan contributions
for underfundings of $13.9 million in 1999 and $40.5 million to be contributed
over the three years thereafter. Also, as a result of a valuation performed in
connection with the Termination Agreement, by an independent appraiser, of the
Series A Preferred Stock contributed to the plans, which was completed in
November 1997, the Company has made an additional pension contribution of $0.7
million in 1997. Further, as a result of the annual valuation and funding
requirements under applicable law, a similar valuation as of December 31, 1997
is currently in progress. Additionally, peak needs are in spring and fall at
which time working capital borrowings are estimated to be $20.0 million higher
than at other times of the year. The Company's principal sources of liquidity
through 1998 are expected to be funds derived from operations, the Offering,
borrowings under the Revolving Credit Facility and proceeds from asset sales.
IMPACT OF INFLATION
The impact of inflation on the costs of the Company, and the ability to
pass on cost increases in the form of increased sales prices, is dependent upon
market conditions. While the general level of inflation in the domestic economy
has been at relatively low levels, the Company has begun to pass on inflationary
cost increases either as a result of contractual arrangements permitting the
pass on of cost increases or as the result of recent negotiations with various
customers.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and soft
drink industries, in which demand is stronger during the summer months, the
Company's shipment volume is expected to be higher in the second and third
quarters. Consequently, the Company will build inventory during the first
quarter in anticipation of seasonal demands during the second and third
quarters. In addition, the Company will schedule shutdowns of its plants for
furnace rebuilds and machine repairs in the first and fourth quarters of the
year to coincide with scheduled holiday and vacation time under its labor union
contracts. These shutdowns and seasonal sales patterns adversely affect
profitability during the first and fourth quarters. The Company is reviewing
alternatives to reduce downtime during these periods in order to minimize
disruptions to the production process and its negative effect on profitability.
YEAR 2000
The Company's plan is to achieve Year 2000 compliance while integrating the
operations of the Company and Consumers. The Company's information systems cover
a broad spectrum of software applications and hardware custom designed for its
manufacturing processes and are similar to those of Consumers. Consumers, after
an extensive study of its general technology needs, decided to upgrade its
information systems from a platform based on large IBM mainframes to a platform
based on mid-range database servers. This upgrade will resolve any Year 2000
issues. To better integrate its information systems with those of Consumers, the
Company will begin a similar upgrade of its systems in the second quarter of
1998 with a planned implementation date of March 1999, which management believes
provides sufficient time to resolve any unexpected issues. Certain of these
upgrades are included in the capital expenditure budget. The Company is taking
steps to ensure that its critical suppliers will be Year 2000 compliant.
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BUSINESS
COMPANY OVERVIEW
Anchor is the third largest manufacturer of glass containers in the United
States. Anchor produces a diverse line of flint (clear), amber, green and other
colored glass containers of various types, designs and sizes. The Company
manufactures and sells its products to many of the leading producers of beer,
liquor, food, juice, tea, soda and mineral water. The Company focuses on the
production of beer containers as this product category accounted for 36% of the
Company's pro forma 1997 net sales, 14% greater than the net sales of its next
largest category. After giving effect to the Anchor Acquisition, for the period
from February 5, 1997 to December 31, 1997, the Company had net sales of $569.4
million and Adjusted EBITDA of $69.8 million.
Consumers, Canada's only glass container manufacturer, currently owns
approximately 60% of Anchor indirectly on a fully diluted basis. By management's
estimates, Consumers produced in excess of 85% of all glass containers sold in
Canada in 1997, with U.S. glass container manufacturers (including Anchor)
having produced most of the remainder. The Company and Consumers had total
consolidated net sales of over C$1.2 billion in 1997, net of intercompany sales.
See "Prospectus Summary--Corporate Structure."
The Company was formed in January 1997 by Consumers to consummate the
Anchor Acquisition. Prior to the Anchor Acquisition on February 5, 1997, the
Company did not conduct any operations. Consumers U.S. was also formed in
January 1997 by Consumers as a holding company for Anchor. Old Anchor was formed
by members of the management of the Glass Container Division of Anchor Hocking
Corporation (the "Glass Container Division") and persons associated with Wesray
Corporation to carry out the leveraged acquisition in 1983 of the business and
certain of the assets of the Glass Container Division. Old Anchor acquired
Midland Glass Company, Inc. in 1984 and Diamond-Bathurst Inc. in 1987.
In November 1989, Vitro S.A. ("Vitro") acquired substantially all of the
stock of Old Anchor. Simultaneously, Vitro acquired all of the stock of
Latchford Glass Company, which was subsequently merged into Old Anchor. In
September 1996, Old Anchor filed for protection under Chapter 11 of the
Bankruptcy Code.
A new senior management team, including executives from Consumers and its
majority shareholder, G&G, who led the turnarounds at both Consumers and
Glenshaw, is in the process of implementing a series of turnaround initiatives
at Anchor. Anchor's strategy to continue to improve operating performance is to
(i) establish and maintain strong customer relationships, (ii) provide high
quality products and service, (iii) minimize manufacturing, distribution and
overhead costs, and (iv) improve production planning and product mix at the
plant level to increase operating and distribution efficiency. Consistent with
this strategy, management of the Company and of Consumers has closed two Anchor
plants, removed two furnaces from production, one at each of two other Anchor
plants and closed one Consumers plant. Management believes that its strategy to
eliminate excess capacity is consistent with certain recent actions of the
Company's two major competitors. The consolidation in the glass packaging
industry has resulted in the three leading manufacturers producing 94% of 1997
domestic volume by management's estimate.
COMPETITIVE STRENGTHS
Management believes the Company has the following key competitive
strengths:
EXPERIENCED MANAGEMENT TEAM. John J. Ghaznavi, Chairman and Chief
Executive Officer of Anchor, and his team of managers are in the process of
implementing a turnaround program at Anchor that will focus on reducing costs
and optimizing production efficiency at the plant level. Mr. Ghaznavi and this
management team have successfully implemented turnarounds at both Consumers and
Glenshaw.
In 1993, through G&G, Mr. Ghaznavi acquired a controlling interest in
Consumers, which had experienced annual losses since 1987. Following such
acquisition, Mr. Ghaznavi installed experienced management and technical teams
that restructured Consumers' business. By rationalizing operations, improving
productivity, focusing on niche markets and introducing new production
technology, as well as building and capitalizing on strong customer
relationships, Mr. Ghaznavi and his team of managers were able to improve
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Consumers' operating and distribution efficiency. Consumers' sales (excluding
Anchor) increased from C$425.4 million in 1992 to C$509.6 million in 1997 during
a period of general industry decline, while EBITDA (excluding Anchor) increased
from C$37.4 million, or 8.8% of sales, in 1992 to C$82.8 million, or 16.2% of
sales, in 1997.
Mr. Ghaznavi and his team of managers also engineered a turnaround at
Glenshaw, a single-plant U.S. glass container manufacturer that focuses on
low-volume, customized production runs. During the years preceding Mr.
Ghaznavi's acquisition of Glenshaw through G&G in 1988, Glenshaw had experienced
declining sales and operating losses. Since its acquisition by G&G, Glenshaw's
sales have more than doubled and EBITDA has more than tripled.
Mr. Ghaznavi has extensive industry and customer networks. From 1995
through 1997, he served as Chairman of the Board of Trustees of the Glass
Packaging Institute, the leading industry organization that includes as its
members manufacturers representing over 95% of North America's glass container
production and he remains a member of its board. Mr. Ghaznavi intends to build
on these industry and customer networks to establish new customer relationships,
as well as to recapture and strengthen Old Anchor's former customer
relationships.
In June 1997, the Company hired Richard Deneau as President and Chief
Operating Officer, Roger Erb as Senior Vice President of Operations and Gordon
Love as Senior Vice President of Sales and Marketing from Ball-Foster. Mr.
Deneau was Chief Operating Officer of Ball-Foster for 18 months and was
previously associated in senior positions with American National Can Company and
Foster-Forbes, a predecessor of Ball-Foster. Mr. Erb and Mr. Love were also
previously associated with Foster-Forbes. This management team brings in excess
of 65 years of container manufacturing experience to Anchor.
EFFICIENT MANUFACTURING FACILITIES. From 1991 to 1997, Anchor (including
Old Anchor) invested in excess of $267.7 million to maintain and upgrade its
machines and furnaces at the facilities that management has identified as
ongoing plants, resulting in more efficient and modern glass production
facilities. As a result of these expenditures and the reduction of capacity
through plant closings, the Company believes it has the manufacturing facilities
which will allow it to significantly increase efficiency upon improved
allocation of production. In conjunction with the issuance of the First Mortgage
Notes, AAA estimated the market value for real property and the liquidation in
place value of the Company's ongoing plants, machinery and mold facilities to be
$243.0 million. Additionally, AAA estimated the fair market value of these
properties on the premise of continued use to be approximately $312.4 million.
See Summarization Letters of AAA, attached as Annex A to this Prospectus.
ACCESS TO OWENS TECHNOLOGY. Most of Anchor's production facilities utilize
proprietary glass manufacturing technology of Owens, which is generally
considered a technological leader in the manufacture of glass containers. In
February 1997, the Company entered into the Technology Agreement for a term of
up to ten years with Owens to use Owens' proprietary glass manufacturing
technology. Management believes that the Technology Agreement provides important
benefits to Anchor in both marketing and manufacturing its products.
BUSINESS STRATEGY
Management believes it can further improve operating results by continuing
to:
REDUCE COST STRUCTURE. The Company intends to seek additional ways in
which it can further reduce its cost structure. Management has implemented its
cost reduction strategy in the following areas, the benefits of which have
already begun to be recognized by the Company in 1997:
Plant Closings. Following the Anchor Acquisition, the Company closed its
Houston and Dayville plants in order to reduce excess capacity. In September
1997, Hillsboro, a glass container manufacturing plant owned by G&G,
discontinued manufacturing. All of Hillsboro's rights and obligations to fill
orders under a supply contract between Consumers and one of its major customers
have been purchased by Consumers and Anchor. In addition, management will
continue to monitor business conditions and utilization of plant capacity to
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determine the appropriateness of further plant closings. The Plant Closings
eliminate an estimated $24.0 million of annual fixed costs. In connection with
the Anchor Acquisition, Anchor recorded a reserve for expenses estimated to be
incurred in connection with the closing of the Houston and Dayville plants of
approximately $33.0 million to be spent over a three year time frame, $21.6
million of which has already been incurred.
Selling and Administrative Expense Savings. Anchor has implemented a
targeted expense reduction program, the objective of which is to create a leaner
organization through the elimination of excess layers of management and
consolidation of certain functions such as purchasing, sales, engineering and
MIS, with Consumers and Glenshaw. The Company has realized an estimated $7.2
million in annual cost savings through the Headquarters Cost Reductions and has
realized an additional estimated $6.2 million in annual cost savings from
further headquarters employee reductions and related expenses. Management
estimates that one-time severance costs approximate $2.2 million in connection
with these staff reductions, a majority of which has already been incurred.
Further, in connection with a plan to simplify the corporate ownership structure
of Consumers, Anchor and their affiliates, Glenshaw may become a subsidiary of
Anchor.
IMPROVE PRODUCTION PLANNING AND PRODUCT MIX. With the elimination of
excess capacity, management believes it is improving efficiency and operating
results by reallocating production among the Company's manufacturing facilities
according to machine strength and by instituting longer production runs with
fewer mold and color changes. To implement this strategy, individual plant
managers are now responsible for managing each plant's financial performance and
each product sales organization is responsible for managing the product mix and
the financial performance of its product line.
STRENGTHEN CUSTOMER RELATIONS. The Company believes that reestablishing
the positive customer relationships Old Anchor benefitted from in the past is
essential to improving financial performance. Establishing long-term customer
relationships improves efficiency through longer production runs and more
predictable scheduling. Management at Anchor has already begun to rebuild
relationships with some of Old Anchor's larger volume customers, including
Anheuser-Busch, which purchased approximately 4.0 million gross in 1997 and
placed a purchase order for approximately 9.9 million gross in 1998, after
substantially reducing its purchases from Old Anchor. In addition,
Anheuser-Busch has placed an additional order with the Company that will be
produced by an affiliate of G&G for which the Company expects to receive a
commission. See "Certain Transactions." Further, the Company's willingness to
work closely with customers to produce unique package designs is also an
effective marketing tool and is expected to assist in reestablishing customer
relationships.
EXPLOIT SYNERGIES. Management is exploiting synergies that exist between
the Company and its affiliates, including Consumers and Glenshaw:
Purchasing. Management believes that it obtains lower costs on certain of
its raw materials by combining Anchor's purchasing with that of its affiliates,
thereby creating potential for more favorable bulk purchasing rates. Management
has already experienced cost savings as compared to Old Anchor in bulk
purchasing of soda ash, sand and natural gas.
Freight Savings. Certain production has been, and will continue to be,
reallocated among Anchor plants and between Anchor and Consumers to maximize
regional production where possible. This represents an opportunity for Anchor to
reduce shipping distances and thus reduce freight and allowance costs.
Marketing. Management believes that its affiliation with Consumers and
Glenshaw will create a competitive advantage in marketing to the broader United
States and Canadian markets. Consumers will market Anchor's production capacity
to those existing Canadian customers who currently have their U.S. orders filled
through competitors of Anchor.
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PRODUCTS
The table below provides a summary by product group of net sales (in
millions of dollars) and approximate percentage of net sales by product group
for Old Anchor for the years 1995 and 1996 and for the Company for the period
from February 5, 1997 to December 31, 1997:
<TABLE>
<CAPTION>
FEBRUARY 5 TO
DECEMBER 31,
1995 1996 1997
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Beer................................ $377.1 39.4% $304.7 37.4% $202.0 35.5%
Liquor/Wine......................... 202.6 21.2 200.4 24.6 125.8 22.1
Food................................ 172.1 18.0 166.0 20.4 113.5 19.9
Tea................................. 104.7 10.9 61.0 7.5 43.8 7.7
Beverage/Water...................... 60.1 6.3 42.1 5.2 37.3 6.6
Other............................... 40.0 4.2 40.2 4.9 47.0 8.2
------ ------ ------ ------ ------ ------
Total.......................... $956.6 100.0% $814.4 100.0% $569.4 100.0%
====== ====== ====== ====== ====== ======
</TABLE>
There can be no assurance that the information provided in the preceding
table is indicative of the glass container product mix of the Company in 1998 or
in subsequent years. Management's strategy is to focus on shifting its product
mix towards those products management believes likely to both improve operating
results and increase unit volume. In particular, Anchor will focus on the
production of beer bottles, the market for which has grown at a compound annual
growth rate of 6.2% from 1992 to 1997. In addition, management is also
implementing a strategy of cultivating longer term relationships with high
volume customers.
CUSTOMERS
The Company produces glass containers mainly for a broad base of customers
in the food and beverage industries in the United States. The Company's ten
largest continuing customers include well-known brand names such as Stroh's,
Anheuser-Busch, Latrobe (Rolling Rock), The Coca-Cola Trading Company (non-
carbonated), PepsiCo, Inc., Triarc Mistic, Saxco International Inc., Specialty
Products Company (Nabisco), Jim Beam Brands and Hunt-Wesson. The majority of the
Company's glass container designs are produced to customer specifications and
sold on a contract basis.
The Company's two largest customers, Stroh's and Anheuser-Busch, accounted
for approximately 15.6% and 8.8% of its net sales for the period from February
5, 1997 to December 31, 1997, respectively. The loss of either of such customers
could have a material adverse effect on the Company's business, results of
operations and financial condition. The Company's ten largest customers, named
above, accounted for approximately 39.9% of pro forma net sales in 1996, and
45.4% of net sales for the period from February 5, 1997 to December 31, 1997.
Anchor has entered into a contract with Stroh's to become the exclusive
producer of all glass beer containers for Stroh's product in the United States.
In addition, following the Anchor Acquisition, the Company secured a purchase
order with Anheuser-Busch and produced approximately 4.0 million gross during
1997, which represented approximately 12.0% of the Company's 1997 volume under
contract. For 1998, the Company secured another purchase order with
Anheuser-Busch to produce, subject to Anheuser-Busch's requirements,
approximately 9.9 million gross, which represents approximately 25.0% of the
Company's 1998 volume under contract. During 1996, Anheuser-Busch substantially
reduced its purchases from Old Anchor to 6.8 million gross in 1996 and, before
the Anchor Acquisition, had indicated its intention to cease doing business with
Old Anchor after 1996. Management believes that the 1997 and 1998 purchase
orders for Anheuser-Busch represent an initial step in its strategy to
strengthen customer relationships. Anheuser-Busch renegotiates with the Company
each year for the next year's purchase orders. Accordingly, past purchase orders
placed by Anheuser-Busch are not necessarily indicative of future purchase
orders.
MARKETING AND DISTRIBUTION
The Company's products are primarily marketed by an internal sales and
marketing organization that consists of 13 direct sales people and 27 business
managers who are organized into teams with responsibility for
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each specific product line. Old Anchor's sales force was principally compensated
based on increase of sales volume without regard to margin. Management has
implemented a sales compensation program based on improving margin at the plant
level as well as increases in sales volume. Marketing efforts by the Company's
employees will be supplemented by Mr. Ghaznavi and his team of managers who plan
to leverage their relationships in the glass industry to increase sales at the
Company. As a result of the Company's affiliation with Consumers and Glenshaw,
Consumers and Glenshaw sales personnel will also market the capabilities of
Anchor with respect to certain production in exchange for a market-based
commission, thereby resulting in increased sales opportunities at Anchor.
Certain production has been, and will continue to be, reallocated among its
ongoing plants in order to maximize machine capability and geographic proximity
to customers. In addition, Anchor intends to capitalize on its affiliation with
Consumers, with certain U.S. customers formerly served by Consumers having their
production shifted to U.S.-based Anchor facilities closer to such customers and
certain Canadian customers formerly served by Anchor having their production
shifted to Canadian-based Consumers facilities closer to such customers, in each
case in exchange for a market-based commission payable to the entity shifting
its existing production or responsible for the new business. With reduced
shipping distances as a result of this reallocation of production, Anchor
believes it will be able to reduce shipping time to customers, decrease levels
of breakage incurred in shipping product over longer distances and improve
efficiency at its plants resulting in faster and higher quality production and
service for its customers.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and other
beverage industries, in which demand is stronger during the summer months, the
Company's shipment volume is expected to be higher in the second and third
quarters. Consequently, the Company normally builds inventory during the first
quarter in anticipation of seasonal demands during the second and third
quarters. Historically, the Company has scheduled shutdowns of its plants for
furnace rebuilds and machine repairs in the first and fourth quarters of the
year to coincide with scheduled holiday and vacation time under its labor union
contracts. These shutdowns adversely affect profitability during the first and
fourth quarters. The Company is reviewing alternatives to reduce downtime during
these periods in order to minimize disruptions to the production process and its
negative effect on profitability.
FACILITIES
The Company's administrative and executive offices are located in Tampa,
Florida. The Company owns and operates nine glass manufacturing plants (giving
effect to the Plant Closings). The Company also leases a building located in
Streator, Illinois, that is used as a machine shop to rebuild glass-forming
related machinery and one mold shop located in Zanesville, Ohio, as well as
additional warehouses for finished products in various cities throughout the
United States. Substantially all of the Company's owned and leased properties
are pledged as collateral securing the Company's obligations under the First
Mortgage Notes and the First Mortgage Indenture.
As part of its long-term business strategy, the Company closed its Houston
plant effective as of February 1997 and its Dayville plant effective as of April
1997. Two furnaces and five machines have also been removed from service, one
furnace and one machine at the Company's Jacksonville plant and one furnace and
four machines at its Connellsville plant. In addition, management will continue
to monitor business conditions and utilization of plant capacity to determine
the appropriateness of further plant closings.
In conjunction with the Anchor Acquisition and the offering of the First
Mortgage Notes, AAA estimated the market value for real property and the
liquidation in place value of personal property consisting of the Company's
ongoing plants, machinery and mold facilities to be $243.0 million.
Additionally, AAA has estimated the fair market value of these properties on the
premise of continued use to be approximately $312.4 million. See Summarization
Letters of AAA, attached as Annex A to this Prospectus. The following table sets
forth certain information about the facilities owned and being operated by the
Company as of April 1, 1998.
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<PAGE> 55
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF BUILDING AREA
LOCATION(1) FURNACES MACHINES (SQ. FT.)
----------- --------- --------- -------------
<S> <C> <C> <C>
Operating Plants:
Jacksonville, Florida(2)................................ 3 5 624,000
Warner Robins, Georgia.................................. 2 8 864,000
Lawrenceburg, Indiana................................... 1 4 504,000
Winchester, Indiana..................................... 2 6 627,000
Shakopee, Minnesota..................................... 2 6 360,000
Salem, New Jersey(3).................................... 3 6 733,000
Elmira, New York........................................ 2 6 912,000
Henryetta, Oklahoma..................................... 2 6 664,000
Connellsville, Pennsylvania(4).......................... 2 4 624,000
</TABLE>
- ---------------
(1) Keyser, West Virginia, Gas City, Indiana, Cliffwood, New Jersey, Royersford,
Pennsylvania, Chattanooga, Tennessee, Houston, Texas and Dayville,
Connecticut are closed plants that are part of the collateral securing the
First Mortgage Notes and the Company's obligations under the First Mortgage
Notes Indenture, but were not included in AAA's appraisal.
(2) The Company removed one furnace and one machine from production at this
facility in February 1997.
(3) A portion of the site on which this facility is located is leased pursuant
to several long-term leases.
(4) The Company removed one furnace and four machines from production at this
facility in February 1997.
The following table sets forth certain information about the facilities
leased by the Company as of April 1, 1998 (other than the Tampa headquarters):
<TABLE>
<CAPTION>
LEASE
BUILDING AREA EXPIRATION
LOCATION (SQ. FT) DATE
- ----------------------------------------------------------- --------- --------------
<S> <C> <C>
Warehouses:
Dayville, Connecticut.................................... 985,000 August 2018
Jacksonville, Florida.................................... 120,000 August 1998
Adairsville, Georgia..................................... 165,000 June 1999
Winchester, Indiana...................................... 120,000 June 2000
Savage, Minnesota........................................ 102,000 month to month
Salem, New Jersey(1)..................................... land only January 2029
Mt. Pleasant, Pennsylvania............................... 100,000 month to month
Mississauga, Ontario, Canada............................. 48,000 January 2029
Fort Collins, Colorado................................... 120,000 June 1998
Machine Shop:
Streator, Illinois....................................... 130,000 month to month
Mold Shop:
Zanesville, Ohio......................................... 102,000 December 2008
</TABLE>
- ---------------
(1) The building is owned by the Company and has 733,000 square feet.
Headquarters Lease. In connection with the Anchor Acquisition, the Company
assumed and amended Old Anchor's lease of the headquarters facility located in
Tampa, Florida and a related option to purchase. In January 1998, the Company
exercised its option to purchase and assigned the option to a third party
purchaser of the facility. The Company has entered into a lease pursuant to
which the Company will lease a portion of the headquarters facility for an
initial term of ten years.
MANUFACTURING PROCESS
To manufacture glass containers, sand, limestone, soda ash and minor
ingredients, along with crushed recycled glass (also known as "cullet"), are
mixed in specific proportions and automatically fed into furnaces which,
operating at temperatures of up to 2,860 degrees Fahrenheit, melt the raw
material batch and produce
52
<PAGE> 56
molten glass. The molten glass flows from the furnace through feeder orifices,
is cut into gobs and then drops into molds located in automatic "individual
section" glass forming machines ("IS Machines"). In these machines, mechanical
devices and air pressure form the glass into its final shape. The containers are
conveyed through an oven known as an annealing lehr to anneal (or harden) the
glass. Surface coatings are applied to strengthen the glass and lubricate it for
easier handling.
Glass forming machines are generally operated for approximately five to
seven years before they are removed from the plant for rebuilding. When a
machine is removed for rebuilding, a new or rebuilt machine is immediately
installed in its place so as to minimize plant downtime.
IS Machines vary in size, usually having eight, ten or twelve "sections."
Each section in turn may have from two to four bottle-producing "cavities"
consisting of two sets of molds each. The first mold set receives the gob of
glass from the furnace feeder and forms a "parison," which is roughly in the
shape of the container. The parison is then transferred by the machine to the
second (finish) mold set where it is blown into the final container shape using
compressed air. During each machine "cycle," an IS Machine produces one bottle
in each of its cavities. Accordingly, an eight-section double-cavity machine
produces sixteen bottles per machine cycle, while a ten-section triple-cavity
machine produces thirty bottles per machine cycle. Typically, the largest
machines are the most productive as they require less labor and related costs
per unit produced.
Glass forming machines also differ in the "speed," or number of cycles per
unit of time, that they can achieve. Typically, the faster the machine, the more
efficient and productive it is as, among other things, the fixed labor costs per
unit produced are reduced. However, certain products are not necessarily
well-suited for the fastest IS Machines or those with the most bottle-producing
cavities. IS Machines with a high number of bottle producing cavities would not
be capable of producing particular product lines such as large or unusually
shaped liquor bottles.
Finally, IS Machines form containers by one of two processes: (i) the "blow
and blow" process, whereby both the parison and the final container are formed
using compressed air or (ii) the more advanced "press and blow" method, whereby,
a precisely aligned metal plunger is used to press the molten glass into shape
in the first mold set. The "press and blow" method has been used for many years
to form all wide mouth food containers. A significant manufacturing advance has
been the development of high speed IS Machines capable of producing high quality
beer and soft drink containers using the narrow-neck-press-and-blow process. The
narrow-neck-press-and-blow process enables bottles to be made with less glass
and still meet strength requirements, which results in production cost savings.
More importantly, it results in a lighter weight bottle that costs less to
produce in terms of raw materials and energy per unit. These lightweight bottles
are also typically produced at higher machine speeds that increase productivity
and further reduce per unit costs.
SUPPLIERS AND RAW MATERIALS
Sand, soda ash, limestone, cullet and corrugated packaging materials are
the principal materials used by the Company. All of these materials are
available from a number of suppliers and the Company is not dependent upon any
single supplier for any of these materials. Management believes that adequate
quantities of these materials are and will be available from various suppliers.
Material increases in the cost of any of these items could have a significant
impact on the Company's operating results.
All of the Company's glass melting furnaces are equipped to burn natural
gas, which is the primary fuel used at its manufacturing facilities. Backup
systems are in place at most facilities to permit the use of fuel oil or propane
should that become necessary. Electricity is used in certain instances for
supplementary melting. The Company expects to be continually involved in
programs to conserve and reduce its consumption of fuel. Although natural gas
remains generally less expensive than electricity, prices for natural gas have
fluctuated in recent years, with significant increases in 1993, declines in 1994
and moderate increases after some significant fluctuation, in 1995, 1996 and
1997. While certain of these energy sources may become increasingly in short
supply, or subject to governmental allocation or excise taxes, the Company
cannot predict the effects, if any, of such events on its future operations. In
addition, the Company utilizes a natural gas risk management program to hedge
future requirements and to minimize fluctuations in the price of natural gas.
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<PAGE> 57
COMPETITION
The glass container industry is a low growth and mature industry. This low
growth combined with excess capacity in the industry have made pricing an
important competitive factor. In addition to price, Anchor and the other
companies in the glass container manufacturing industry compete on the basis of
quality, reliability of delivery and general customer service. The Company's
principal competitors are Owens and Ball-Foster. These competitors are larger
and have greater financial and other resources than the Company. The glass
container industry in the United States is highly concentrated, with the three
largest producers in 1997, which included Anchor, estimated to have accounted
for 94% of 1997 domestic volume by management's estimate. Owens has a relatively
large research and development staff and has in place numerous technology
licensing agreements with other glass producers, including the Company. See
"--Intellectual Property."
The Company's business consists exclusively of the manufacture and sale of
glass containers. Certain other glass container manufacturers engage in more
diversified business activities than the Company (including the manufacture and
sale of plastic and metal containers). In addition, plastics and other forms of
alternative packaging have made substantial inroads into the container markets
in recent years and will continue to affect demand for glass container products.
According to industry sources, unit sales in the U.S. glass container
manufacturing industry in 1996 were down 2.1% from 1995. The compound annual
decline in unit shipments from 1991 to 1996 was approximately 1.5%. Competitive
pressures from alternative forms of packaging, including plastics, as well as
consolidation in the glass container industry, have resulted in excess capacity
and have led to severe pricing pressures on glass container manufacturers.
Further, management believes that consistent productivity improvements among
glass and glass alternatives can be expected to continue to decrease capacity
utilization rates for the industry or result in additional plant closures. See
"Risk Factors--Competition."
While competitive pressures from plastics are expected to remain intense,
management has identified several product segments where it believes that there
are still growth opportunities. In general, management believes that the beer
segment provides stronger potential for growth than the food segment which has
seen declines of over 7.0% in each of 1995 and 1996. In particular, sales of
glass beer containers, were up approximately 3.7% in 1997 and have experienced
continual growth over the past five years. Management expects that glass beer
containers will continue to grow at a faster rate than beer consumption, as they
regain share from aluminum cans driven in part by the introduction of the long
neck style bottle. Glass beer bottles are also expected to continue to benefit
from consumer preferences for a more sophisticated appearing container.
QUALITY CONTROL
The Company maintains a program of quality control with respect to
suppliers, line performance and packaging integrity for glass containers. The
Company's production lines are equipped with a variety of automatic and
electronic devices that inspect containers for dimensional conformity, flaws in
the glass and various other performance attributes. Additionally, products are
sample inspected and tested by Company employees on the production line for
dimensions and performance and are also inspected and audited after packaging.
Containers which do not meet quality standards are crushed and recycled as
cullet.
The Company monitors and updates its inspection programs to keep pace with
modern technologies and customer demands. The Company maintains its own
laboratory at its corporate headquarters where samples of glass and raw
materials from its plants are routinely chemically and electronically analyzed
to monitor compliance with quality standards. Laboratories are also maintained
at each manufacturing facility to test various physical characteristics of
products.
INTELLECTUAL PROPERTY
Pursuant to the Technology Agreement between Owens and Consumers, the
Company is entitled to use patents, trade secrets and other technical
information of Owens relating to glass manufacturing technology. The agreement,
entered into in February 1997, provides for a term of up to ten years. Owens is
generally considered a technological leader in the manufacture of glass
containers.
54
<PAGE> 58
While the Company holds various patents, trademarks and copyrights of its
own, it believes its business is not dependent upon any one of such patents,
trademarks or copyrights.
EMPLOYEES
As of April 1, 1998, the Company employed approximately 3,050 persons on a
full-time basis. Approximately 550 of these employees are salaried office,
supervisory and sales personnel. The remaining employees are represented
principally by two unions, Glass, Molders, Pottery, Plastics and Allied Workers
(the "GMP"), which represents approximately 90% of the Company's hourly
employees, and the American Flint Glass Workers Union (the "AFGWU"), which
represents approximately 10% of the Company's hourly employees. The Company's
two labor contracts with the GMP and its two labor contracts with the AFGWU have
three year terms expiring on March 31, 1999 and August 31, 1999, respectively.
Old Anchor was granted a deferral of the scheduled 1996 wage increase under its
collective bargaining agreements. The Company granted the 1996 increase
effective as of the date of the Anchor Acquisition, and the 1997 increase
effective as of April 1, 1997. These two increases represent an approximate 7%
increase in wage rates as of April 1, 1997 as compared to 1996 wage rates. The
Company is subject to OSHA and other laws regulating safety and noise exposure
levels in the production area of its plants. See "--Environmental and Other
Government Regulation--Health and Safety Regulation."
Old Anchor has not experienced a work stoppage since an industry-wide
strike in 1968. The Company considers its employee relations to be good.
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION
Environmental Regulation and Compliance. The Company's operations are
subject to increasingly complex and detailed Federal, state and local laws and
regulations including, but not limited to, the Federal Water Pollution Control
Act of 1972, as amended, the U.S. Clean Air Act, as amended, and the Federal
Resource Conservation and Recovery Act, as amended, that are designed to protect
the environment. Among the activities subject to regulation are the disposal of
checker slag (furnace residue usually removed during furnace rebuilds), the
disposal of furnace bricks containing chromium, the disposal of waste, the
discharge of water used to clean machines and cooling water, dust produced by
the batch mixing process, underground storage tanks and, air emissions produced
by furnaces. In addition, the Company is required to obtain and maintain permits
in connection with its operations. Many environmental laws and regulations
provide for substantial fines and criminal sanctions for violations. The Company
believes it is in material compliance with applicable environmental laws and
regulations. It is difficult to predict the future development of such laws and
regulations or their impact on future earnings and operations, but the Company
anticipates that these standards will continue to require increased capital
expenditures. There can be no assurance that material costs or liabilities will
not be incurred.
Certain environmental laws, such as CERCLA and analogous State laws provide
for strict, joint and several liability for investigation and remediation of
releases of hazardous substances into the environment. Such laws may apply to
properties presently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes
attributable to an entity or its predecessors were disposed. There can be no
assurance that the Company or entities for which it may be responsible will not
incur such liability in a manner that could have a material adverse effect on
the financial condition or results of operations of the Company.
The Company is engaged in investigation and remediation projects at plants
currently being operated and at closed facilities. In addition, Old Anchor was
named as a PRP under CERCLA with respect to a number of sites. Of these sites,
the Company has assumed responsibility with respect to four sites that are
currently active. While the Company may be jointly and severally liable for
costs related to these sites, in most cases, it is only one of a number of PRPs
who are also jointly and severally liable. With respect to the four currently
active sites for which the Company has assumed responsibility, the Company
estimates that its share of the aggregate cleanup costs of such sites should not
exceed $2.0 million, and that the likely range after taking into consideration
the contributions anticipated from other potentially responsible parties could
be significantly less.
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<PAGE> 59
However, no assurance can be given that the cleanup costs of such sites will not
exceed $2.0 million or that the Company will have these funds available. The
Company has established reserves of approximately $16.0 million for
environmental costs which it believes are adequate to address the anticipated
costs of remediation of these operated and closed facilities and its liability
as a PRP under CERCLA. The timing and magnitude of such costs cannot always be
determined with certainty due to, among other things, incomplete information
with respect to environmental conditions at certain sites, the absence of
regulatory determinations with respect to environmental requirements at certain
sites, new and amended environmental laws and regulations, and uncertainties
regarding the timing of remedial expenditures.
Capital expenditures required for environmental compliance were
approximately $0.8 million for 1997 and are anticipated to be approximately $1.7
million annually in 1998 and 1999. However, there can be no assurance that
future changes in such laws, regulations or interpretations thereof or the
nature of the Company's operations will not require the Company to make
significant additional capital expenditures to ensure compliance in the future.
ERISA and Pension Deficiencies. The Company maintains three defined
benefit plans and two profit sharing plans that, prior to the Anchor
Acquisition, were maintained by Old Anchor. These plans are covered by ERISA and
are tax qualified under the Code, subject to regulation by the Internal Revenue
Service and the Department of Labor. The three defined benefit plans are also
subject to regulation by the PBGC. The Company's two profit sharing plans
contain cash or deferred arrangements under Section 401(k) of the Code. The
Company's tax-qualified plans must meet stringent requirements both in form and
in operation in order to maintain their tax-qualified status. These requirements
are constantly changing with the enactment of new pension legislation, the
issuance of new Treasury regulations and other guidance from the Internal
Revenue Service. The loss of a plan's qualified status could result in the
assessment of tax on the plan's trust income, disallowance of the Company's tax
deduction for contributions, and immediate income tax liability upon individual
participant's benefits.
The three defined benefit plans are subject to minimum funding requirements
under the Code and Title IV of ERISA. These funding requirements include the
obligation to make quarterly contributions to the plans. Under ERISA, if any
contribution is missed which, when added to any other missed payment, exceeds
the amount of $1.0 million, an automatic lien in favor of the PBGC will arise on
all property of the Company and all members of its controlled group. In
addition, under ERISA, the PBGC can institute proceedings to terminate any
defined benefit plan for a number of reasons, including (i) the failure of the
plan to meet ERISA's minimum funding requirements, (ii) the inability of the
plan to pay benefits when due or (iii) the possible long-run loss of the PBGC
with respect to the plan may reasonably be expected to increase unreasonably if
the plan is not terminated. Upon termination of a plan, a lien arises in favor
of the PBGC for the amount of the underfunding of the plan.
On January 9, 1997, the PBGC notified Old Anchor that it intended to
institute involuntary termination proceedings with respect to the three defined
benefit plans then maintained by Old Anchor that are now maintained by the
Company. However, the PBGC reached an agreement with Vitro (the "Termination
Agreement"), the parent of Old Anchor, in which Vitro agreed to provide a
limited guaranty to the PBGC with respect to the unfunded benefit liabilities of
the Company's defined benefit plans, if the plans, or any one of them, are
terminated before August 1, 2006. As a result of this agreement with Vitro, the
threatened involuntary termination proceeding was never commenced. Under the
terms of the Termination Agreement, the PBGC agreed that it would not implement
proceedings to terminate the Company's defined benefit plans solely as a result
of the Anchor Acquisition or the transactions contemplated by the Asset Purchase
Agreement.
The defined benefit plan covering salaried employees was frozen at the end
of 1994, and, at the end of 1996, was not underfunded under SFAS No. 87.
However, the two defined benefit plans that are maintained for hourly employees
are significantly underfunded and will require substantial cash contributions
over the next few years. At the end of 1997, these two plans in the aggregate
had unfunded benefits under SFAS No. 87 totaling approximately $50.4 million.
Pension contributions made to the three defined benefit plans during 1997,
including the contributions made by the Company upon the closing of the Anchor
Acquisition ($9.1 million in cash and $9.0 million in Series A Preferred Stock,
including $8.1 million in cash and
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<PAGE> 60
$8.0 million in Series A Preferred Stock contributed to the two hourly plans),
were approximately $38.4 million. In addition, the underfunding of the two
hourly plans required the payment of increased premiums to the PBGC under its
pension guaranty program of approximately $1.8 million in 1997.
Pursuant to the Termination Agreement, a valuation of the shares of Series
A Preferred Stock contributed by the Company to the three defined benefit plans
has been performed by an independent appraiser, which was completed in November
1997 and, as a result, the Company has made an additional contribution to the
plans of $0.7 million to bring the value of the contribution to $9.0 million. As
a result of the annual valuation and funding requirements under applicable law,
a similar valuation as of December 31, 1997 is currently in progress.
Management believes that the Company is now in material compliance with all
laws and regulations governing its employee benefit plans. In addition, based
upon the Company's business plan, management believes the Company will have
sufficient cash flow to meet its obligations to make pension contributions and
pay PBGC premiums. However, there can be no assurance that future changes in
such laws or regulations, or interpretations thereof, changes in the Company's
business or in market conditions affecting the value of plan assets will not
require the Company to expend amounts that exceed those that are now
anticipated.
Employee Health and Safety Regulation. The Company's operations are
subject to a variety of worker safety laws. OSHA and analogous laws mandate
general requirements for safe workplaces for all employees. The Company believes
that its operations are in material compliance with applicable employee health
and safety laws.
Deposit and Recycling Legislation. In recent years, legislation has been
introduced at the Federal, state and local levels that would require a deposit
or tax, or impose other restrictions, on the sale or use of certain containers,
particularly beer and carbonated soft drink containers. To date, ten states have
enacted some form of deposit legislation, although no such new legislation has
been enacted since 1986. The enactment of additional laws or comparable
administrative actions that would require a deposit on beer or soft drink
containers, or otherwise restrict their use, could have a material adverse
effect on the Company's business. In jurisdictions where deposit legislation has
been enacted, the consumption of beverages in glass bottles has generally
declined due largely to the preference of retailers for handling returned cans
and plastic bottles. Container deposit legislation continues to be considered
from time to time at various governmental levels.
In lieu of this type of deposit legislation, several states have enacted
various anti-littering recycling laws that do not involve the return of
containers to retailers. The use of recycled glass, and recycling in general,
are not expected to have a material adverse effect on the Company's operations.
LEGAL PROCEEDINGS
The Company is, and from time to time may be, a party to routine legal
proceedings incidental to the operation of its business. The outcome of these
proceedings is not expected to have a material adverse effect on the financial
condition or operating results of the Company, based on the Company's current
understanding of the relevant facts and law.
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<PAGE> 61
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers. The following table sets forth certain
information regarding each of the Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John J. Ghaznavi.......................... 62 Chairman, Chief Executive Officer and Director
Richard M. Deneau......................... 51 President and Chief Operating Officer
M. William Lightner, Jr................... 63 Senior Vice President--Finance, Chief Financial
Officer, Treasurer and Director
David T. Gutowski......................... 50 Senior Vice President--Administration, and Director
C. Kent May............................... 58 Senior Vice President, General Counsel, Secretary and
Director
Paul H. Farrar............................ 63 Director
Roger L. Erb.............................. 55 Senior Vice President--Operations
Gordon S. Love............................ 48 Senior Vice President--Sales and Marketing
Edward M. Jonas........................... 59 Controller
Eugene K. Pool............................ 62 Vice President, Associate General Counsel and
Assistant Secretary
John F. Robichaud......................... 52 Vice President--Order Management and Scheduling
Logistics
George C. Lusby III....................... 54 Industry Vice President--Sales and Marketing
John L. Day............................... 51 Industry Vice President--Sales and Marketing
Gregory C. Sinatro........................ 46 Industry Vice President--Sales and Marketing
</TABLE>
Term of Office. Each director serves until such director's successor is
elected and qualified or until such director's earlier resignation, retirement,
disqualification, removal from office or death. Each officer serves until the
first meeting of the Board of Directors following the next annual meeting of the
stockholders and until such officer's successor is chosen and qualified.
John J. Ghaznavi became Chairman of the Board and Chief Executive Officer
of the Company in January 1997. He has been Chairman and Chief Executive Officer
of each of Consumers, Glenshaw and G&G since 1993, 1988 and 1987, respectively.
Mr. Ghaznavi has served as Chairman of the Board of Trustees of the Glass
Packaging Institute.
Richard M. Deneau assumed his duties as President and Chief Operating
Officer of the Company in July 1997. From January 1996 until June 1997, Mr.
Deneau was Senior Vice President and Chief Operating Officer of Ball-Foster.
From October 1992 to January 1996, he was Senior Vice President in charge of the
domestic beverage can operations of American National Can Company. Prior to
October 1992, Mr. Deneau was Senior Vice President of Sales at American National
Can Company's division and the predecessor of Ball-Foster, Foster Forbes
("Foster-Forbes").
M. William Lightner, Jr. joined the Company in January 1997 as a director
and as Vice President, Treasurer and Chief Financial Officer. He became Vice
President--Finance in March 1997 and Senior Vice President--Finance in June
1997. Since July 1994, Mr. Lightner has been Vice President of Finance and Chief
Financial Officer of Consumers. From 1989 to 1992, Mr. Lightner served as
Chairman of MICA Resources, a privately held aluminum processor and brokerage
company. Mr. Lightner was a partner with Arthur Andersen & Co. from 1969 to
1989.
David T. Gutowski joined the Company in January 1997 as a director and as a
Vice President and became Vice President--Administration in March 1997 and
Senior Vice President--Administration in June 1997. He has been a director of
Consumers since 1993. Mr. Gutowski served as Treasurer and Chief Financial
Officer of G&G since 1988.
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<PAGE> 62
C. Kent May became a director of the Company in January 1997 and became
Vice President, General Counsel and Secretary of the Company in March 1997. He
became Senior Vice President in June 1997. Mr. May has served as a director of
Consumers since 1993 and he was appointed General Counsel of Consumers in March
1997. Mr. May has been an associate, partner or member of the law firm of Eckert
Seamans Cherin & Mellott, LLC since 1964, and served as the managing partner of
such firm from 1991 to 1996.
Paul H. Farrar became a director of the Company in February 1997 and has
served as a director of Consumers since 1994 Mr. Farrar has been Chairman of
Adelaide Capital Corporation, an investment company, since 1994, and he served
as Senior Vice President of Canadian Imperial Bank of Commerce, a Canadian
chartered bank from 1986 to December 1993.
Roger L. Erb became Senior Vice President--Operations of the Company in
October 1997. From September 1995 until June 1997, Mr. Erb was Senior Vice
President of Technical Services at Ball-Foster. Prior thereto, he was employed
at Foster Forbes, serving as Senior Vice President of Technical Services from
June 1994 to September 1995, Senior Vice President of Operations from January
1993 to June 1994, and Vice President of Technical Services prior to 1993.
Gordon S. Love became Senior Vice President--Sales and Marketing of the
Company in July 1997. From October 1996 until June 1997, Mr. Love was Vice
President of Sales for Beer and Liquor at Ball-Foster. From September 1995 until
October 1996, he was Senior Vice President of Beverage Sales at Ball-Foster.
Prior thereto, he was employed at Foster Forbes, serving as Senior Vice
President of Sales and Marketing from July 1993 to September 1995, Vice
President of Sales from October 1992 to July 1993, and Beer Product Manager
prior to October 1992.
Edward M. Jonas joined the Company in February 1997 and became Controller
of the Company in March 1997. Mr. Jonas joined the predecessor to Old Anchor in
1968 and was Comptroller of Old Anchor from 1983 through early 1995.
Eugene K. Pool joined Old Anchor in June 1988 as Senior Counsel. Mr. Pool
was appointed Assistant Secretary of Old Anchor in 1988, Associate General
Counsel of Old Anchor in 1991 and Vice President--Associate General Counsel of
Old Anchor in 1995. In February 1997, Mr. Pool became Assistant Secretary of the
Company and in March 1997, he became Vice President and Associate General
Counsel for the Company.
John F. Robichaud joined the Company in September 1997 as Vice
President--Order Management and Scheduling Logistics. From 1992 until September
1997 he was Director of Logistics for Consumers and from 1986 to 1992 was
Director of Marketing for Consumers.
George C. Lusby III joined the Company in March 1997 as Industry Vice
President of Sales and Marketing. Mr. Lusby has served as Vice President of
Sales and Marketing and as a director of Glenshaw since 1987.
John L. Day became Industry Vice President of Sales and Marketing for the
Company in March 1997. From September 1993 to February 1997, Mr. Day served as
Vice President--Beer Sales of Old Anchor and from August 1990 to September 1993,
he served as Director of Sales of Old Anchor.
Gregory C. Sinatro became Industry Vice President of Sales and Marketing
for the Company in March 1997. From October 1994 to February 1997, Mr. Sinatro
served as Senior Vice President of Food/Consumer Products of Old Anchor and from
January 1989 to September 1994, he served as Vice President--Consumer Products
Division of Old Anchor.
BOARD OF DIRECTORS OF THE COMPANY
Classification of Board. Pursuant to the Amended and Restated Certificate
of Incorporation (the "Restated Charter") of the Company, until February 5,
2000, the holders of the Class A Common Stock are entitled to elect four
directors (the "Class A Directors") and the holders of the Class B Common Stock
are entitled to elect five directors (the "Class B Directors"). The Class A
Directors have not yet been designated. Messrs. Ghaznavi, Lightner, Gutowski,
Farrar and May are Class B Directors. In connection with the Proposed
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<PAGE> 63
Settlement, it is expected that the certificate of incorporation of the Company
will be amended to increase the number of directors to be elected by the holders
of Class B Common Stock.
From and after February 5, 2000, the Board of Directors has discretion to
determine the number of directors (each a "Director") constituting the Board of
Directors, and such number of Directors will be divided into three classes, as
nearly equal in the number of Directors as possible. The term of Directors of
the first, second and third class will expire at the first, second and third
annual meeting after their election, respectively. At each annual meeting, the
number of Directors constituting the class whose term has expired at the time of
such meeting will be elected to hold office until the third succeeding annual
meeting.
Until February 5, 2000, Class A Directors may be removed with or without
cause only by the holders of Class A Common Stock and Class B Directors may be
removed with or without cause only by the holders of Class B Common Stock.
Thereafter, all classes of Common Stock (as defined) of the Company will be
consolidated into one class of Common Stock, and, pursuant to the Bylaws of the
Company (the "Bylaws"), Directors may be removed only with cause by the
affirmative vote of the holders of 75% of the outstanding shares of capital
stock of the Company then entitled to vote at an election of Directors.
The foregoing provisions of the Restated Charter and the Bylaws are subject
to the rights, if any, of any series of preferred stock of the Company to elect
additional Directors under circumstances specified in the certificate of
designation relating to such preferred stock.
Officers of the Company serve at the discretion of the Board of Directors.
Compensation of Directors. Non-employee directors of the Company are
entitled to receive an annual director's fee of $15,000. In addition, fees of
$750 are paid to non-employee directors for each directors' meeting and
committee meeting attended unless more than one meeting is held on the same day,
in which case the fee for attending each subsequent meeting is $500.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Included in the table below, is compensation awarded to, earned by or paid,
during the period from February 5, 1997 to December 31, 1997, to the Company's
Chief Executive Officer and the four most highly compensated executive officers
who were serving as officers at the end of 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
(3)OTHER
(2) ANNUAL (4)ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ----------------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
John J. Ghaznavi
Chairman, Chief Executive 1997 $ -- $ -- $ -- $ --
Officer(1)
Richard M. Deneau
President, Chief Operating 1997 246,703(5) -- -- 23,991
Officer
David T. Gutowski
Senior Vice President -- 1997 171,701 -- -- 42,091
Administration
George C. Lusby
Industry Vice President -- 1997 157,518 -- -- 3,238
Sales and Marketing
C. Kent May
Senior Vice President -- 1997 153,419 -- -- --
General Counsel and
Secretary
</TABLE>
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<PAGE> 64
- ---------------
(1) Mr. Ghaznavi received no compensation from the Company. The Company is a
party to a Management Agreement with G&G, whereby, G&G provides specified
managerial services for the Company and is entitled to receive an annual
management fee of up to $3.0 million.
(2) Salary is shown as earned in the fiscal year, however certain amounts have
been paid in the following year.
(3) No information is provided in the column labeled "Other annual compensation"
since the aggregate amount of perquisites for the period presented is less
than the lesser of $50,000 or 10% of total annual salary and bonus reported
for each of the named officers.
(4) Information provided in the column labeled "All other compensation" includes
moving expenses paid by the Company.
(5) This amount represents Mr. Deneau's salary from the date of the commencement
of his employment with the Company, June 1, 1997, through the end of the
fiscal year.
ANNUAL INCENTIVE PLAN
The Anchor Glass Container Corporation Annual Incentive Plan is designed to
compensate salaried employees of Anchor for performance with respect to planned
business objectives. Participants will be compensated based on the achievement
of predetermined goals of Anchor. Plan participation is limited to salaried
employees within the organization. Eligible participants are designated at the
beginning of each fiscal year as approved by the Compensation Committee. The
Plan begins January 1, 1998.
DIRECTOR AND EMPLOYEE INCENTIVE STOCK OPTION PLAN OF CONSUMERS
The Director and Employee Incentive Stock Option Plan, 1996, as amended, of
Consumers, permits Consumers to grant options to purchase common shares of
Consumers to directors and employees of Consumers and any subsidiary or
affiliate, including Anchor. Options may be granted to purchase an aggregate of
3,300,000 Common Shares of Consumers. Options to purchase 1,216,500 Common
Shares of Consumers, at exercise prices that range from $9.65 to $13.50
(Canadian dollars), were granted to all the salaried employees of Anchor in
1997. Granted options have a term of ten years and vest one third each year over
a three year period.
EMPLOYMENT CONTRACTS
The Company does not, as a general rule, enter into employment agreements
with its executive officers and/or other key employees. See "Risk
Factors--Dependence on Key Personnel and G&G."
EMPLOYEE PLAN
As part of the Anchor Acquisition, the Company assumed Old Anchor's
obligations under the Anchor Glass Container Corporation Executive/Key Employee
Retention Plan which covers approximately 35 employees including Messrs. Pool,
Day and Sinatro. Under this plan, if a participating employee is terminated by
the Company without cause or terminates his or her employment with the Company
for good reason (such as a reduction in base salary, a material change in
position, duties or responsibilities, or a material change in job location), the
Company is obligated to pay a severance benefit to such employee. If all
participating employees were to be terminated by the Company without cause
and/or were to terminate their employment with the Company for good reason, the
aggregate amount of severance benefits payable by the Company under this plan
would be $1.1 million. This plan expires August 5, 1998.
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<PAGE> 65
PRINCIPAL STOCKHOLDERS
PRINCIPAL STOCKHOLDERS OF COMPANY
The following table sets forth information with respect to the beneficial
ownership of the Company's Class A Common Stock and Class B Common Stock (the
"Voting Common Stock") as of December 31, 1997 by (i) each person who is known
by the Company to beneficially own 5% or more of such Voting Common Stock, (ii)
each Director of the Company, (iii) the Company's Chief Executive Officer and
the other Named Executive Officers and (iv) all current Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
CLASS AND AMOUNT
OF BENEFICIAL
OWNERSHIP(1) PERCENTAGE PERCENTAGE
----------------------- (BY CLASS)(1) (ALL CLASSES)(1)
PRIMARY AND ----------------------- -----------------------
NAME(1) ACTUAL FULLY DILUTED PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
------- ------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
John J. Ghaznavi(2).................. -- -- -- -- -- --
M. William Lightner, Jr.(3).......... -- -- -- -- -- --
David T. Gutowski(4)................. -- -- -- -- -- --
Paul H. Farrar(5).................... -- -- -- -- -- --
C. Kent May(6)....................... -- -- -- -- -- --
All Directors and executive officers
as a group (14 persons)............ -- -- -- -- -- --
FIVE PERCENT STOCKHOLDERS:
Smith Barney, as escrow agent for
certain creditors of Old 490,898 8,321,398
Anchor(7).......................... Class A Class A 100.0 84.7 90.2 30.7
Anchor Glass Container Corporation 1,260,787
Service Retirement Plan(8)(9)...... -- Class A 72.0 12.9 47.5 4.6
Anchor Glass Container Corporation
Retirement Plan for Salaried 158,921 Class
Employees(8)(10)................... -- A 24.5 1.6 10.2 0.6
Pension Plan for Hourly Employees of
Latchford Glass Company and 80,292 Class
Associated Companies(8)(11)........ -- A 14.1 0.8 5.5 0.3
902,615 17,309,942
Consumers U.S., Inc.(12)............. Class B Class B 100.0 100.0 97.2 63.8
</TABLE>
- ---------------
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to shares beneficially owned and
all addresses are in care of the Company. All primary share amounts and
percentages reflect beneficial ownership determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
All fully diluted share amounts and percentages reflect beneficial
ownership of Voting Common Stock determined on a fully diluted basis. All
information with respect to beneficial ownership has been furnished by the
respective Director, executive officer or stockholder, as the case may be,
as of December 31, 1997.
(2) Through G&G, Ghaznavi Canada Inc. and other affiliates, Mr. Ghaznavi
beneficially owns 21,619,584 shares of the voting common stock of
Consumers, including 1,588,126 shares issuable upon the exercise of
currently exercisable options.
(3) Mr. Lightner beneficially owns 63,800 shares of the voting common stock of
Consumers, including 60,000 shares issuable upon the exercise of currently
exercisable options, but not including 500 shares owned by Mr. Lightner's
spouse with respect to which Mr. Lightner disclaims beneficial ownership.
(4) Mr. Gutowski beneficially owns 45,600 shares of the voting common stock of
Consumers, including 40,000 shares issuable upon the exercise of currently
exercisable options, but not including 5,700 shares owned by Mr. Gutowski's
children with respect to which Mr. Gutowski disclaims beneficial ownership.
(5) Mr. Farrar beneficially owns 15,000 shares of the voting common stock of
Consumers, including 10,000 shares issuable upon the exercise of currently
exercisable options.
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<PAGE> 66
(6) Mr. May beneficially owns 17,600 shares of the voting common stock of
Consumers, including 10,000 shares issuable upon the exercise of currently
exercisable options.
(7) Includes 7,830,500 shares issuable upon conversion of 1,879,320 shares of
Series A Preferred Stock. The 490,898 shares of Class A Common Stock and
1,879,320 shares of Series A Preferred Stock are held by Smith Barney, Inc.
("Smith Barney"), as escrow agent, pursuant to an escrow agreement between
Old Anchor and Smith Barney. Such shares are to be distributed to the
creditors of Old Anchor or to a court appointed disbursing agent upon the
effective date of a plan of reorganization of Old Anchor approved by the
United States Bankruptcy Court of the District of Delaware. Under the terms
of such escrow agreement, Smith Barney may not exercise any voting rights
with respect to the Class A Common Stock held in escrow except as expressly
instructed in an order of such Bankruptcy Court. The address of Smith
Barney is 388 Greenwich Street, 19th Floor, New York, New York 10013.
(8) This stockholder's shares of Series A Preferred Stock are held in trust by
The Chase Manhattan Bank, as trustee of such benefit plan and the current
address for this stockholder is c/o The Chase Manhattan Bank, 777 Broadway,
New York, New York 10003. However, an "investment manager," as that term is
defined in Section 3(38) of ERISA, will be appointed to control the shares
contributed to the plans. When appointed, such investment manager will have
exclusive control over this stockholder's shares of Series A Preferred
Stock and any shares of Class A Common Stock into which such shares of
Series A Preferred Stock may be converted. Pursuant to an agreement among
the Company, Consumers and the PBGC, a valuation of the shares of Series A
Preferred Stock contributed to the Plans has been performed by an
independent appraiser which was completed in November 1997. The Company is
required to make an additional contribution to the plans of $0.7 million to
bring the value of the contribution to $9.0 million.
(9) All 1,260,787 shares of this stockholder's beneficially owned shares of
Class A Common Stock are issuable upon conversion of 302,589 shares of
Series A Preferred Stock.
(10) All 158,921 shares of this stockholder's beneficially owned shares are
issuable upon conversion of 38,141 shares of Series A Preferred Stock.
(11) All 80,292 shares of this stockholder's beneficially owned shares are
issuable upon conversion of 19,270 shares of Series A Preferred Stock.
(12) Includes 16,407,327 shares issuable upon conversion of 3,609,611 shares of
Series B Preferred Stock (including 249,612 shares of Series B Preferred
Stock, accrued as of December 31, 1997 as a payment in kind dividend). Does
not include, however, shares of Series B Preferred Stock which have accrued
since September 30, 1997 as a payment in kind dividend. On a fully diluted
basis, Consumers U.S. owns approximately 60% of the three classes of common
stock of the Company. Not including the Class C Common Stock (which is
nonvoting), Consumers U.S. owns approximately 63.8% of the voting common
stock of the Company on a fully diluted basis. See "Description of Capital
Stock." All of the shares of Class B Common Stock and Series B Preferred
Stock currently owned or subsequently acquired by Consumers U.S. are
pledged to secure the Consumers U.S. guarantee of the Company's obligations
under the First Mortgage Notes and the First Mortgage Indenture. See
"Description of Indebtedness." Pursuant to the Warrant Agreement, upon the
closing of the offering of the First Mortgage Notes, the Company issued to
Consumers U.S. 702,615 shares of Class B Common Stock (or 2.5% of the
Common Stock outstanding on such date on a fully diluted basis outstanding
or issuable as of such date). The address for Consumers U.S. is 3140
William Flinn Highway, Allison Park, Pennsylvania 15101.
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<PAGE> 67
CERTAIN TRANSACTIONS
The Company is part of a group of glass manufacturing companies (the
"Affiliated Glass Manufacturers") with Consumers and Glenshaw, each of which is
controlled by Mr. Ghaznavi through G&G. The Company intends to engage in a
variety of transactions with Consumers and Glenshaw as a part of its strategy to
achieve synergies among the companies. These expected transactions may include
bulk purchasing of raw and packaging materials, provision of technical and
engineering services, joint utilization of Anchor's mold and repair shops and
the possible consolidation of certain functions such as sales, engineering and
management information services.
The Company has entered into an Intercompany Agreement (the "Intercompany
Agreement") with G&G, Consumers, Consumers U.S., Consumers International Inc.,
Glenshaw, Hillsboro, I.M.T.E.C. Enterprises Inc., a machinery manufacturer
majority-owned by G&G, and certain related companies which establishes standards
for certain intercompany transactions. Pursuant to the Intercompany Agreement,
the Company may, from time to time, fill orders for customers of Affiliated
Glass Manufacturers and Affiliated Glass Manufacturers may, from time to time,
fill orders for customers of the Company. In such case, where the customer is
not a common customer, the company that does the manufacturing will pay a market
commission, set at 5% of the invoiced amount, to the company that referred the
customer. In the event of a transfer of a customer to the Company by an
Affiliated Glass Manufacturer or to an Affiliated Glass Manufacturer by the
Company, the transfer is treated as though the transferee had filled the orders
for the transferred customer.
In connection with any bulk purchasing of raw materials, packaging
materials, machinery, insurance, maintenance services, environmental services
and other items and services used in this business, each of the Affiliated Glass
Manufacturers will share out-of-pocket costs of the purchasing activities
without payment of commissions. Similarly, in connection with the provision of
technical, engineering or mold design services, the company providing the
services will receive reasonable per diem fees and costs for the employees
provided. For services such as the provision of molds, the company providing the
service will receive cost plus a reasonable market mark-up.
Transactions carried out in accordance with the Intercompany Agreement do
not require approval of the board of directors or fairness opinions. Any
amendment to the Intercompany Agreement is subject to the Indenture requirement
that it be in writing, on terms no less favorable to the Company than could have
been obtained in a comparable arms' length transaction between the Company and
third parties and is subject to the approval of the Board of Directors
("Affiliate Transaction Provisions"). The Revolving Credit Agreement, the
Indenture and the First Mortgage Indenture all require that transactions between
the Company and an affiliate be in writing on no less favorable terms to the
Company than would be obtainable in a comparable arms' length transaction
between the Company and a person that is not an affiliate. In addition,
transactions exceeding certain threshold values require the approval of the
Company's board of directors, the approval of the Company's independent
directors or an independent fairness opinion. See "Description of Notes--Certain
Covenants--Limitation on Transactions with Affiliates."
Certain affiliates of the Company are engaged in businesses other than the
manufacture of glass containers, such as manufacturing or rehabilitating
manufacturing equipment, automobile and truck leasing, shipping and real estate
management. These transactions are subject to the Affiliate Transaction
Provisions of the Indenture.
The Company is party to the Management Agreement with G&G. Pursuant to the
Management Agreement, G&G is to provide specified managerial services for the
Company. For these services G&G is entitled to receive an annual management fee
of $3.0 million and to reimbursement of its out-of-pocket costs plus an
administrative charge not to exceed 10% of those costs. The Indenture limits
management fee payments by the Company under the Management Agreement to $1.5
million per year unless the Company meets certain financial tests, in which case
such fees will accrue. In 1997, such tests were met and the fees due under the
Management Agreement were $2.75 million. See "Description of Notes--Certain
Covenants--Limitation on Restricted Payments."
In September 1997, Hillsboro, a glass container manufacturing plant owned
by G&G, discontinued manufacturing. All of Hillsboro's rights and obligations to
fill orders under a supply contract between
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<PAGE> 68
Consumers and one of its major customers have been purchased by Consumers and
Anchor. In addition, in connection with a plan to simplify the corporate
ownership structure of Consumers, Anchor and their affiliates, Glenshaw may
become a subsidiary of Anchor.
The Company from time to time has engaged the law firm of Eckert Seamans
Cherin & Mellott, LLC, to represent it on a variety of matters. C. Kent May, an
executive officer and director of the Company, is a member of such law firm.
DESCRIPTION OF CAPITAL STOCK
Anchor is authorized to issue 50,000,000 shares of Common Stock, having a
par value of $.10 per share (the "Common Stock"), and 20,000,000 shares of
preferred stock, having a par value of $0.01 per share and a liquidation value
of $25.00 per share (the "Preferred Stock").
COMMON STOCK
For the period from February 5, 1997 until February 5, 2000 (the "Initial
Period"), the Common Stock is divided into three classes, Class A and Class B,
which are voting, and Class C, which is nonvoting during the Initial Period.
During the Initial Period, the number of Directors of Anchor is fixed at nine,
with the holders of the Class A Common Stock having the right to elect four
Directors and the holders of the Class B Common Stock having the right to elect
five Directors. In connection with the Proposed Settlement, it is expected that
the certificate of incorporation of the Company will be amended to increase the
number of directors to be elected by the holders of Class B Common Stock. The
holders of the Class C Common Stock are not entitled to participate in the
election of Directors. Except as described in the immediately preceding sentence
with respect to election of Directors, there are no distinctions between the
rights of holders of shares of Class A Common Stock and Class B Common Stock.
The holders of Class C Common Stock have no voting rights during the Initial
Period. At the expiration of the Initial Period, the Class A Common Stock, the
Class B Common Stock and the Class C Common Stock will automatically be
consolidated into a single class of Common Stock with identical rights.
PREFERRED STOCK
Of the 20,000,000 authorized shares of Preferred Stock, (a) 2,239,320
shares have been designated as Series A Preferred Stock, (b) 5,000,000 shares
have been designated as Series B Preferred Stock and (c) 12,760,680 shares are
without designation at this time.
Series A Preferred Stock. The Series A Preferred Stock ranks, as to
dividends and redemption and upon liquidation, prior to all other classes and
series of capital stock of the Company, including the Series B Preferred Stock
and the Common Stock. The holders of the Series A Preferred Stock are entitled
to receive, when and as declared by the Board of Directors of the Company out of
legally available funds, cumulative dividends, payable quarterly in cash, at an
annual rate of 10% of the liquidation value. Holders of the Series A Preferred
Stock are not entitled to vote except (a) as required by law, (b) on certain
matters affecting the rights of the holders of Series A Preferred Stock and (c)
in the event that scheduled cash dividends are unpaid for twelve consecutive
quarters, at which time (i) the number of Directors will be expanded by three
and (ii) the holders of the Series A Preferred Stock will have the right to
elect all three additional Directors until all accrued and unpaid scheduled cash
dividends have been paid.
The Company is required to redeem all outstanding shares of the Series A
Preferred Stock on January 31, 2009, and, on or after February 5, 2000, may, at
its option, redeem outstanding shares of Series A Preferred Stock if the trading
price of the Common Stock equals or exceeds $6.00 per share, in each case at a
price of $25.00 per share of Series A Preferred Stock so redeemed.
Shares of Series A Preferred Stock are convertible into shares of Class A
Common Stock, at the option of the holder, at a ratio determined by dividing the
liquidation value of the Series A Preferred Stock ($25.00) by $6.00. Such ratio
is subject to adjustment from time to time to prevent dilution.
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<PAGE> 69
Pursuant to the Asset Purchase Agreement, prior to the consummation of a
plan of reorganization with respect to Old Anchor, the Company is obligated to
register all of the shares of Class A Common Stock and Series A Preferred Stock
under the Exchange Act and to qualify such shares for listing on a nationally
recognized United States securities exchange or on The Nasdaq Stock Market's
National Market(SM) ("Nasdaq").
Series B Preferred Stock. The Series B Preferred Stock ranks, as to
dividends and redemption and upon liquidation, junior to the Series A Preferred
Stock but senior to all other classes and series of capital stock of Anchor,
including the Common Stock. The holders of Series B Preferred Stock are entitled
to receive cumulative dividends, payable quarterly at an annual rate of 8% of
the liquidation value. During the period from February 5, 1997 through and
including December 31, 1999, the dividend is payable in additional shares of
Series B Preferred Stock. Thereafter, the dividends will be payable in cash when
and as declared by the Board of Directors out of legally available funds.
Holders of Series B Preferred Stock are not entitled to vote except (a) as
required by law, (b) on certain matters affecting the rights of the holders of
Series B Preferred Stock and (c) in the event that scheduled cash dividends are
unpaid for twelve consecutive quarters, at which time (i) the number of
Directors will be expanded by three and (ii) the holders of Series B Preferred
Stock will have the right to elect all three additional Directors until all
accrued and unpaid scheduled cash dividends have been paid.
Shares of Series B Preferred Stock are not subject to mandatory redemption.
On or after February 5, 2000, Anchor may, at its option, redeem outstanding
shares of Series B Preferred Stock if the trading price of the Common Stock
equals or exceeds $5.50 per share, at a price of $25.00 per share of Series B
Preferred Stock so redeemed.
Shares of Series B Preferred Stock are convertible into shares of Class B
Common Stock, at the option of the holder, at a ratio determined by dividing the
liquidation value of the Series B Preferred Stock ($25.00) by $5.50. Such ratio
is subject to adjustment from time to time to prevent dilution.
DESCRIPTION OF INDEBTEDNESS
REVOLVING CREDIT FACILITY
General. In connection with the Anchor Acquisition, the Company entered
into the Revolving Credit Facility. The Revolving Credit Facility enables the
Company to obtain revolving credit loans for working capital purposes and the
issuance of letters of credit for its account in an aggregate amount not to
exceed $110.0 million. Revolving credit loans may be borrowed, repaid and
reborrowed, and letters of credit may be issued, at any time or from time to
time in an aggregate amount not to exceed the lesser of $110.0 million and the
borrowing base then in effect, less (in each case) the aggregate amount of all
undrawn amounts and unreimbursed drawings under letters of credit then
outstanding and the aggregate amount of then outstanding revolving credit loans.
The borrowing base consists of 85% of eligible accounts receivable plus 55% of
eligible inventory.
Revolving credit loans bear interest at a rate based upon either, at the
Company's option, (1) the higher of the prime rate of Bankers Trust Company,
0.5% in excess of the overnight federal funds rate and 0.5% in excess of the
adjusted certificate of deposit rate (as defined in the Revolving Credit
Facility), plus (in each case) a borrowing margin of 0 to 1.0%, depending upon
the aggregate amount of outstandings under the facility and the Company's
leverage ratio, or (ii) the average of the offering rates of banks in the New
York interbank eurodollar market for U.S. dollar deposits plus a borrowing
margin of 1.5 to 2.5%, depending on the aggregate amount of outstandings under
the facility and the Company's leverage ratio.
The Company is also required to pay (x) a fee on the unused portion of each
lender's commitment at a rate of 0.5% thereof per annum, (y) a fee on the
aggregate amount of all letter of credit liabilities during the immediately
preceding quarter at a rate equal to 1.5 to 2.5% thereof per annum, depending on
the aggregate amount of outstandings under the facility and the Company's
leverage ratio and (z) a fee on the daily weighted average face amount of the
letters of credit issued by any lender at a rate of 0.25% thereof.
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The Revolving Credit Facility terminates on February 5, 2002, unless
terminated sooner upon an event of default (as defined in the Revolving Credit
Facility), including a change in control (as defined in the Revolving Credit
Facility), and all revolving credit loans and Letter of Credit Liabilities will
be payable on such termination date or on such earlier date as may be
accelerated by the lenders following the occurrence of any event of default.
Anchor's obligations under the Revolving Credit Facility are secured by a
first priority lien on substantially all of Anchor's inventory and receivables
and related collateral (the "Bank Collateral") and a pari passu lien on other
collateral including intellectual property and contract rights and certain
insurance proceeds (the "Shared Collateral"). In addition, Anchor's obligations
under the Revolving Credit Facility are guaranteed by Consumers U.S.
Certain Covenants. The Revolving Credit Facility contains certain
covenants that restrict the Company from taking various actions, including,
subject to specified exceptions, the incurrence of additional Indebtedness, the
granting of additional liens, the making of investments, the payment of
dividends and other restricted payments, mergers, acquisitions and other
fundamental corporate changes, capital expenditures, operating lease payments
and transactions with affiliates. The Revolving Credit Facility also contains
certain financial covenants that require the Company meet and maintain certain
financial tests and minimum ratios, including a minimum working capital ratio, a
minimum consolidated net worth test and a minimum interest coverage ratio.
Events of Default. The Revolving Credit Facility contains customary events
of default, including nonpayment of principal, interest or fees, violation of
covenants, inaccuracy of representations or warranties in any material respect,
cross acceleration to certain other Indebtedness, bankruptcy, noncompliance with
certain provisions of ERISA, material judgments, failure of the collateral
documents, the guarantee by Consumers U.S., the Technology Agreement of the
Intercompany Agreement to be in full force and effect, the taking of any action
by the creditors of Consumers International to realize or foreclosure upon the
capital stock of Consumers U.S. and change of control. The occurrence of any of
such events could result in acceleration of the Company's obligations under the
Revolving Credit Facility and foreclosure on the Bank Collateral, which could
have material adverse results to the holders of the Notes.
Mandatory Repayments. The Revolving Credit Facility requires mandatory
repayments and/or reductions of the total commitments upon the happening of
certain events, including certain sales or issuances of the Company's equity or
any contribution to its capital, the incurrence of Indebtedness by the Company
(other than as a result of the offer and sale of the Notes), certain asset sales
and a change of control.
FIRST MORTGAGE NOTES
In April 1997, the Company issued $150.0 million aggregate principal amount
of its First Mortgage Notes. The First Mortgage Notes accrue interest at the
rate of 11 1/4% per annum, payable semi-annually in arrears on April 1 and
October 1 of each year. As a result of its failure to have an exchange offer
registration statement declared effective and to have exchanged all First
Mortgage Notes validly tendered, the Company paid additional interest on the
First Mortgage Notes. The amount of such additional interest ranged from 0.5% in
November 1997 to 1.5% in February 1998. This additional interest is expected to
be nonrecurring and not significant to the Company's continuing operations.
The First Mortgage Notes will mature on April 1, 2005. The First Mortgage
Notes are fully and unconditionally guaranteed (each a "Guarantee") on a senior
secured basis by Consumers U.S. and by any future Restricted Subsidiary (as
defined in the First Mortgage Indenture) of the Company, each of which future
Restricted Subsidiaries will become a guarantor in accordance with the terms of
the First Mortgage Indenture.
The First Mortgage Notes are senior obligations of the Company secured by a
first priority lien (subject to certain permitted liens) on substantially all
existing and future property, plant and equipment owned or leased by the Company
other than the Bank Collateral and purchase money assets, and by a pari passu
lien on the Shared Collateral (as defined in the First Mortgage Indenture),
which includes, among other things, intellectual property and contract rights
and certain insurance proceeds, which secures both the Outstanding
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Credit Facility and the First Mortgage Notes. The First Mortgage Notes rank
senior in right of payment to all existing and future subordinated Indebtedness
of the Company and pari passu in right of payment with all other existing and
future senior Indebtedness of the Company, which included all Indebtedness
outstanding under the Revolving Credit Facility and is expected to include all
Indebtedness under the Interim Credit Facility, if any, the New Revolving Credit
Facility, if any, or any other future credit facility, which was, and is
expected to be, secured by a first priority lien on the Bank Collateral and a
pari passu lien on the Shared Collateral. Each Guarantee will rank senior in
right of payment to all existing and future subordinated Indebtedness of the
relevant Guarantor and pari passu in right of payment to all existing and future
senior Indebtedness of such Guarantor and will be secured, in the case of the
Guarantee by Consumers U.S., by a perfected first priority pledge of the capital
stock of the Company owned by Consumers U.S. and, in the case of any Guarantee
by a Restricted Subsidiary, by a first priority lien (subject to permitted
liens) on all existing and future property, plant and equipment owned or leased
by such Restricted Subsidiary other than the Bank Collateral and purchase money
assets. At December 31, 1997, the Company had approximately $163.8 million of
Indebtedness outstanding (excluding unused commitments of approximately $63.0
million under the Revolving Credit Facility).
The First Mortgage Notes are redeemable, in whole or in part, at the option
of the Company on or after April 1, 2001, at the following redemption prices
(expressed as percentages of the principal amount thereof), if redeemed during
the twelve-month period commencing on April 1 of the years set forth below,
plus, in each case, accrued and unpaid interest, if any, thereon to the date of
redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------------
<S> <C>
2001........................................... 105.625%
2002........................................... 103.750%
2003........................................... 101.875%
2004 and thereafter............................ 100.000%
</TABLE>
In addition, at any time or from time to time on or prior to April 1, 2000,
the Company, at its option, may redeem up to 35% of the aggregate principal
amount of the First Mortgage Notes with the net cash proceeds of one or more
equity offerings (as defined in the First Mortgage Notes Indenture), at a
redemption price equal to 111.25% of the aggregate principal amount of the Notes
to be redeemed plus accrued and unpaid interest, if any, to the date of
redemption; provided, however, that after giving effect to any such redemption,
at least 65% of the initial aggregate principal amount of the First Mortgage
Notes originally issued remains outstanding.
Upon a Change of Control (as defined in the First Mortgage Indenture), each
holder of the First Mortgage Notes will have the right to require the Company to
repurchase such holder's First Mortgage Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. Within 90 days after the consummation of any Change of Control
Offer pursuant to which the Company has repurchased at least 90% of the First
Mortgage Notes outstanding immediately prior to such Change of Control Offer,
the Company may, at its option, redeem all of the remaining First Mortgage Notes
at a redemption price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase. In addition,
under certain circumstances, the Company will be required to offer to purchase
the Notes at 100% of the principal amount thereof plus accrued interest, if any,
to the date of repurchase with the net cash proceeds of certain Asset Sales (as
defined in the First Mortgage Indenture).
The First Mortgage Indenture contains certain covenants that limit the
ability of the Company and its Restricted Subsidiaries to, among other things,
incur additional Indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, under certain circumstances, the
Company will be required to offer to purchase the First Mortgage Notes, in whole
or in part, at a purchase price equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase, with the
net cash proceeds of certain Asset Sales.
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The following constitute "Events of Default" under the First Mortgage
Indenture: (i) the failure to pay interest on any Note for a period of 30 days
or more after such interest becomes due and payable; (ii) the failure to pay the
principal of or premium, if any, on any Note, when such principal becomes due
and payable, at maturity, upon repurchase (including, without limitation,
pursuant to a Change of Control or an Asset Sale), upon acceleration, upon
redemption or otherwise; (iii) a default in the observance or performance of any
of the agreements or covenants contained under "Merger, Consolidation and Sale
of Assets" or clause (e) of the "Limitation on Activities of Consumers U.S."
covenant or the granting by the Company, any Restricted Subsidiary or Consumers
U.S. of any Lien to secure Indebtedness in excess of $100,000 (other than a
permitted lien); (iv) a default in the observance or performance of any of the
agreements or covenants contained in the First Mortgage Indenture which default
continues for a period of 30 days after the Company receives written notice
specifying the default from the Trustee or from Holders of at least 25% in
principal amount of the outstanding Notes; (v) a default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or of any specified
Subsidiary of the Company, whether such Indebtedness now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
at final maturity the principal of or premium, if any, on such Indebtedness
after any applicable grace period provided in such Indebtedness on the date of
such default (a "Principal Payment Default"), or (b) results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Principal Payment
Default or the maturity of which has been so accelerated, is of at least $10.0
million in the aggregate; (vi) one or more judgments in an aggregate amount in
excess of $10.0 million (which are not covered by third-party insurance as to
which the insurer is solvent and has not disclaimed coverage) being rendered
against the Company or any specified Subsidiary of the Company and such
judgments remain undischarged, or unstayed or unsatisfied for a period of 60
days after such judgment or judgments become final and non-appealable; or (vii)
certain events of bankruptcy, insolvency, wind-up or reorganization affecting
the Company or any of its specified Subsidiaries or Consumers U.S.; or (viii)
(a) a default in the observance or performance of any covenant or agreement
contained in any Security Document (as defined in the First Mortgage Indenture)
which default continues for 15 days after notice has been given to the Company
by the Trustee or the holders of at least 25% in principal amount of the
outstanding Notes, or (b) for any reason other than the satisfaction in full and
discharge of all obligations secured thereby, any of the Security Documents
cease to be in full force and effect (other than in accordance with their
respective terms), or any of the Security Documents cease to give the Trustee
the Liens, rights, powers and privileges purported to be created thereby, or any
Security Document is declared null and void, or the Company or any of its
Restricted Subsidiaries denies any of its obligations under any Security
Document, in each case with respect to Collateral the aggregate value of which
is in excess of $5.0 million or the Collateral becomes subject to one or more
Liens other than Permitted Liens securing one or more obligations in excess of
$5.0 million in the aggregate; (ix) any Guarantee of a specified Subsidiary or
Consumers U.S. is declared null and void or ceases to be in full force and
effect (except as permitted under the First Mortgage Indenture) or any Guarantor
shall deny or disaffirm its obligations under its Guarantee.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes were issued under an indenture dated as of March 16, 1998 (the
"Indenture") among the Company and The Bank of New York, as Trustee (the
"Trustee"). The following summary of certain provisions of the Indenture and the
Notes does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Indenture, including the
definitions of certain terms therein that are not otherwise defined in this
Prospectus. A copy of the Indenture may be obtained from the Company. As used in
this "Description of the Notes," the term "Company" refers to Anchor Glass
Container Corporation only and excludes its Subsidiaries. The definitions of
certain capitalized terms used in the following summary are set forth under
"--Certain Definitions" below.
The Notes will be senior obligations of the Company, ranking senior in
right of payment to all existing and future subordinate Indebtedness of the
Company and pari passu with all existing and future senior Indebtedness of the
Company. As of the Issue Date, there are no Restricted Subsidiaries.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. All payments made by the
Company under the Indenture will be made in cash in United States dollars. The
Notes may be presented for registration of transfer and exchange at the
principal corporate trust office of the Registrar. The Company may change any
Paying Agent and Registrar without notice to Holders of the Notes, but will
always maintain a Paying Agent in New York, New York. The Company will pay
principal (and premium, if any) on the Notes at the Paying Agent's principal
corporate trust office in New York, New York. At the Company's option, principal
and interest may be paid by wire transfer of Federal funds or interest may be
paid by check delivered to the Paying Agent's principal corporate trust office
or to the registered addresses of the Holders.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $50.0 million and
will mature on March 15, 2008. Interest on the Notes will accrue at a rate of
9 7/8% per annum and will be payable semiannually on each March 15 and September
15, commencing September 15, 1998 to the persons who are registered Holders at
the close of business on the March 1 and September 1 immediately preceding the
applicable interest payment date. Interest on the Notes will accrue from and
including the most recent date on which interest has been paid or, if no
interest has been paid, from and including the date of issuance. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
SINKING FUND
The Notes will not have the benefit of any sinking fund obligations.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Company, in whole and
not in part, at any time, on not less than 30 nor more than 60 days' prior
written notice to each holder of Notes to be redeemed, at a redemption price
equal to the sum of (i) the then outstanding principal amount thereof plus (ii)
accrued and unpaid interest, if any, to the redemption date plus (iii) the
Applicable Make-Whole. The following definitions are used to determine the
Applicable Make-Whole:
"Applicable Make-Whole" with respect to the Notes shall be calculated with
respect to the date of redemption to maturity and shall equal the greater of (i)
1.0% of the then outstanding principal amount of such Notes and (ii) the excess
of (A) the present value of the required interest payments and principal
payments to maturity due on such Notes, computed, on a semi-annual basis, using
a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
then outstanding principal amount of such Notes.
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"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"Treasury Rate," for purposes of the Indenture, is defined as the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15(519) which has become publicly available at
least two business days prior to the date fixed for prepayment (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the remaining Average Life of the
Notes; provided, that if the Average Life of the Notes is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) for the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Average Life of the Notes is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
Within 90 days of the consummation of any Change of Control Offer pursuant
to which the Company has repurchased at least 90% of the Notes outstanding
immediately prior to such Change of Control Offer, the Company may, at its
option, redeem all of the remaining Notes at a redemption price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the date of redemption.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not then listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Company has deposited with the paying agent for the Notes funds in
satisfaction of the applicable redemption price pursuant to the Indenture. Notes
repurchased under the above provisions shall be delivered to the Trustee for
cancellation.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company will be required to offer to repurchase (the "Change of Control Offer")
all of the Notes pursuant to the offer described below, at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
Within 30 days following the date upon which the Change of Control
occurred, unless the Company already mailed a notice of redemption to redeem all
of the Notes pursuant to the provisions of the section entitled "Optional
Redemption," the Company must send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice will state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date") and the procedure which the Holder must follow
to exercise such right. The Change of Control Offer is required to remain open
for at least 20 Business Days and until the close of business on the Change of
Control Payment Date.
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Under the Company's Revolving Credit Facility, a Change of Control under
the Indenture would constitute an event of default permitting holders of any
Indebtedness thereunder to exercise remedies, including the right to seek
immediate payment of amounts then owing under such instrument. See "Description
of Indebtedness."
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the repurchase price for all Notes
that the Company is required to repurchase. In the event that the Company were
required to repurchase outstanding Notes pursuant to a Change of Control Offer,
the Company expects that it would need to seek third-party financing to the
extent it does not have available funds to meet its repurchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing. Any failure of the Company to pay the purchase price with respect to
such Change of Control Offer when due will give the Trustee and the Holders of
the Notes the rights described under "--Events of Default". Neither the Company
nor the Trustee may waive the obligation to make an offer to repurchase the
Notes upon the occurrence of a Change of Control.
The meaning of the phrase "all or substantially all" as used in the
definition of "Change of Control" with respect to a conveyance, transfer or
lease of assets varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under relevant law and is
subject to judicial interpretation. Accordingly, in certain circumstances, there
may be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the assets of the
Company, and therefore it may be unclear whether a Change of Control has
occurred and whether the Notes are subject to a Change of Control Offer.
The provisions of the Indenture relating to a Change of Control in and of
themselves may not afford Holders of the Notes protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect Holders of the
Notes, if such transaction is not the type of transaction included within the
definition of a Change of Control. See "--Certain Definitions" for the
definition of "Change of Control". A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, will result in a Change of Control only if it is the type of
transaction specified by such definition. The existence of the foregoing
provisions relating to a Change of Control may or may not deter a third party
from acquiring the Company in a transaction which constitutes a Change of
Control.
The Company will comply with the requirements of Section 14(e) of the
Exchange Act, if applicable, and any other tender offer rules under the Exchange
Act or other relevant United States Federal and state securities legislation
which may then be applicable in connection with any offer by the Company to
repurchase Notes upon a Change of Control. Notes repurchased pursuant to a
Change of Control Offer shall be delivered to the Trustee for cancellation.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. (a) Neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, Incur any Indebtedness
(including, without limitation, any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, the Company or any Restricted Subsidiary may
Incur Indebtedness (including, without limitation, Acquired Indebtedness), if
(i) no Default or Event of Default shall have occurred and be continuing on the
date of the proposed Incurrence thereof or would result as a consequence of such
proposed Incurrence and (ii) immediately before and immediately after giving
effect to such proposed Incurrence, the Consolidated Interest Coverage Ratio of
the Company and its Restricted Subsidiaries is at least equal to 2.5 to 1.0.
(b) Neither the Company nor any of its Restricted Subsidiaries will,
directly or indirectly, Incur Capitalized Lease Obligations, except pursuant to
clause (vi) of the definition of Permitted Indebtedness.
(c) Neither the Company nor any Restricted Subsidiary may, directly or
indirectly, in any event Incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is expressly
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subordinated to any other Indebtedness of the Company or such Restricted
Subsidiary, as the case may be, unless such Indebtedness is also by its terms
(or by the terms of any agreement governing such Indebtedness) made expressly
subordinate to the Notes to the same extent and in the same manner, and so long
as, such Indebtedness is subordinated pursuant to subordination provisions that
are no more favorable to the holders of any other Indebtedness of the Company or
such Restricted Subsidiary, as the case may be.
Limitation on Restricted Payments. Neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
solely in Qualified Capital Stock of the Company) to holders of the Company's
Capital Stock other than dividends or distributions paid to the Company or any
Restricted Subsidiary, (b) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any warrants, rights or options to
acquire shares of any class of such Capital Stock (other than Capital Stock,
warrants, rights or options held by the Company or any Restricted Subsidiary),
other than through the exchange therefor solely of Qualified Capital Stock of
the Company, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Obligation (other than the purchase, repurchase or other
acquisition of any Subordinated Obligation in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of such purchase, repurchase or other
acquisition, provided that any such purchase, repurchase or other acquisition is
done solely with the proceeds from any Refinancing Indebtedness), (d) make any
Investment (other than Permitted Investments) in any Person or (e) make any
payments to any Affiliate of the Company (other than the Company and its
Restricted Subsidiaries) as compensation for management services, except through
the issuance of Common Stock of the Company that is Qualified Capital Stock
(each of the foregoing prohibited actions set forth in clauses (a), (b), (c),
(d) and (e) being referred to as a "Restricted Payment"), unless such proposed
Restricted Payment is made after the earlier of (x) the date upon which the
independent auditors of the Company have completed and delivered to the Company
a limited review of the Company's financial statement for the third quarter of
1997 in accordance with the procedures specified by the American Institute of
Certified Public Accountants, SAS No. 71, Interim Financial Information and (y)
the date upon which the Company has filed with the Commission its audited
financial statements for the fiscal year ended December 31, 1997 and at the time
of such proposed Restricted Payment or immediately after giving effect thereto
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) the Company could incur at least $1.00 of additional
Indebtedness in accordance with the Consolidated Interest Coverage Ratio test of
paragraph (a) of the "Limitation on Indebtedness" covenant and (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the Fair Market Value of the relevant
Property) does not exceed or would not exceed the sum of: (A) 50% of the
cumulative Consolidated Net Income (or, if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company during the period
(treating such period as a single accounting period) from April 1, 1997 to the
last day of the last full fiscal quarter preceding the date of the proposed
Restricted Payment; (B) 100% of the aggregate Net Equity Proceeds received by
the Company from any Person (other than from a Restricted Subsidiary) from the
issuance and sale subsequent to the Issue Date of Qualified Capital Stock of the
Company (excluding any Qualified Capital Stock of the Company with respect to
which the purchase price thereof has been financed directly or indirectly using
funds (i) borrowed from the Company or from any of its Subsidiaries, unless and
until and to the extent such borrowing is repaid or (ii) contributed, extended,
Guaranteed or advanced by the Company or by any of its Subsidiaries (including,
without limitation, in respect of any employee stock ownership or benefit plan,
unless and until and to the extent such borrowing is repaid) and (C) an amount
equal to the net reduction in any Investment made by the Company and its
Restricted Subsidiaries subsequent to the Issue Date in any Person (including if
such reduction occurs by reason of the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary) resulting from (x) net cash proceeds (or
the Fair Market Value of property other than cash or Cash Equivalents, provided
that such property represents a return of capital in respect of any such
Investment that was made in the form of other property other than cash or Cash
Equivalents) received by the Company or its Restricted Subsidiaries as repayment
of any loan or advance or a return of capital in respect, or as consideration
for the sale, of such Investment (but only to the extent the
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Company elects to exclude such amounts from the calculation of Consolidated Net
Income for the purposes of clause (A) above) or (y) the release or cancellation
of a Guarantee constituting such Investment, in each case, with respect to any
such Investment, not to exceed the amount of such Investment previously made by
the Company or any Restricted Subsidiary, that was treated as a Restricted
Payment pursuant to this paragraph.
Notwithstanding the foregoing, these provisions do not prohibit: (1) the
payment of any dividend or making of any distribution within 60 days after the
date of its declaration if the dividend or distribution would have been
permitted on the date of declaration; (2) the repurchase, redemption, retirement
or acquisition of Capital Stock of the Company or Subordinated Obligations of
the Company, or warrants, rights or options to acquire Capital Stock of the
Company, solely in exchange for shares of Qualified Capital Stock of the
Company; (3) any purchase or redemption of Subordinated Obligations made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Refinancing Indebtedness or Indebtedness of the Company which is permitted to be
Incurred pursuant to the Consolidated Interest Coverage Ratio test of paragraph
(a) of the "Limitation on Indebtedness" covenant; (4) the payment of management
fees to G&G Investments under the Management Agreement of up to $1.5 million in
any calendar year; (5) the repurchase of Capital Stock of the Company from
current or former employees or directors of the Company or any of its
Subsidiaries pursuant to the terms of agreements (including employment
agreements) or plans approved by the Board of Directors under which such persons
purchase or sell or are granted the option to purchase or sell such shares of
Capital Stock to the extent such payments do not exceed $500,000 in any fiscal
year which, to the extent not used in any fiscal year, may be carried forward to
the next succeeding fiscal year, provided that the aggregate amount of all such
payments that may be made pursuant to this clause (5) may not exceed $2.5
million; (6) dividends or other Restricted Payments to make payments permitted
by clauses (vii) and (viii) of paragraph (b) under the "Limitation on
Transaction with Affiliates" covenant; (7) dividends payable on the Series A
Preferred Stock pursuant to the terms thereof in an aggregate amount not to
exceed $3 million; (8) Investments in Unrestricted Subsidiaries, partnerships or
joint ventures involving the Company or its Restricted Subsidiaries, in each
case primarily engaged in a Related Business if the aggregate amount of such
Investments made pursuant to this clause (8) (less an amount equal to the net
reduction in any such Investment (including if such reduction occurs by reason
of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary)
made subsequent to the Issue Date resulting from (x) net cash proceeds (or the
Fair Market Value of tangible property, provided that such tangible property
represents a return of capital in respect of an Investment that was made in the
form of other tangible property and not an Investment that was made in the form
of cash) received by the Company or its Restricted Subsidiaries as repayment of
any loan or advance or a return of capital in respect, or as consideration for
the sale, of such Investment or (y) any release or cancellation of a Guarantee
constituting such Investment (but only to the extent the Company elects to
exclude such amounts from the calculation of Consolidated Net Income for the
purpose of clause (A) of the preceding paragraph), in each case, with regard to
any Investment, not to exceed the amount of such Investment previously made by
the Company or any Restricted Subsidiary pursuant to this clause (8) does not
exceed $10 million; (9) the purchase or redemption of any Indebtedness, to the
extent required by the terms of such Indebtedness following a Change of Control
after the Company shall have complied with the provisions under "--Change of
Control" above, including payment of the applicable Change of Control purchase
price; and (10) Investments in Unrestricted Subsidiaries, partnerships or joint
ventures organized and operating principally in the United States involving the
Company or its Restricted Subsidiaries, in each case primarily engaged in a
Related Business, made in the form of contributions to such Unrestricted
Subsidiaries, partnerships or joint ventures of assets of Discontinued Plants;
provided, however, that, in the case of clauses (2), (3), (4), (5), (6), (7),
(8), (9), and (10) of this paragraph, no Default or Event of Default shall have
occurred or be continuing at the time of such payment or as a result thereof. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date, amounts expended pursuant to clauses (1), (5), (7) and (9) shall, in
each case, be included in such calculation. No payment or other transfer to the
Company or a Restricted Subsidiary shall, in any event, constitute a Restricted
Payment.
Limitation on the Sale of Assets. (a) Neither the Company nor any of its
Restricted Subsidiaries will consummate or permit, directly or indirectly, any
Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the case
may be, receives consideration at the time of each such Asset Sale at least
equal to the Fair Market Value of the Property subject to such Asset Sale, (ii)
(x) at least 75% of the consideration received
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by the Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents, (or, in the case of an Asset Sale of Discontinued Plants, at least
50% of such consideration is in such form); provided that this requirement with
respect to cash or Cash Equivalents shall not apply with respect to Investments
made pursuant to clause (10) of the second paragraph of the "Restricted
Payments" covenant, and provided further that the aggregate Fair Market Value of
the consideration other than in the form of cash or Cash Equivalents that may be
received pursuant to clause (x) shall not exceed $5.0 million in the aggregate
held (including the amount of any such consideration not collected or written
off by the Company or any of its Restricted Subsidiaries but excluding any such
consideration received in consideration for Discontinued Plants) by the Company
and its Restricted Subsidiaries and (y) any such consideration shall not consist
of inventory or accounts receivable or other Bank Collateral, (iii) such Asset
Sale is not made by the Company to any of its Restricted Subsidiaries, and (iv)
no Default or Event of Default shall have occurred and be continuing on the date
of such proposed Asset Sale or would result as a consequence of such Asset Sale.
(b) The Company shall apply or cause such Restricted Subsidiary to apply,
the Net Cash Proceeds of such Asset Sale within 270 days of consummation of such
Asset Sale for the following purposes, individually or in combination:
(1) (i) to purchase or otherwise invest in Related Business
Investments; provided that (x) any Property constituting a Related Business
Investment shall not consist of inventory or accounts receivable and (y)
such purchase or Investment shall be made by the Company or such Restricted
Subsidiary, or (ii) to purchase First Mortgage Notes in open-market
transactions; provided that the Company shall be deemed to have applied
such Net Cash Proceeds pursuant to this clause (ii) in satisfaction of the
requirements of this covenant in an amount equal to the lesser of (x) the
purchase price paid in such open-market transactions and (y) 100% of the
principal amount of the First Mortgage Notes repurchased; provided further
that the aggregate amount of Net Cash Proceeds that may be deemed to be
applied pursuant to this clause (ii) shall not exceed $5.0 million in the
aggregate from the Issue Date; provided further that pending the
application of the Net Cash Proceeds of such Asset Sale in the ordinary
course of business in accordance with this subparagraph, the Company may
apply, or cause such Restricted Subsidiary to apply, such Net Cash Proceeds
temporarily to reduce Indebtedness under its Revolving Credit Facility, if
any, or otherwise invest such Net Cash Proceeds in Cash Equivalents;
(2) with respect to any Net Cash Proceeds remaining after application
pursuant to the preceding paragraph (b)(1) (the "Excess Proceeds Amount"),
the Company shall make an Asset Sale Offer for up to a maximum principal
amount (expressed as an integral multiple of $1,000) of Notes equal to the
Excess Proceeds Amount (less the "Excess Proceeds Amount," if any, required
to be offered to repurchase First Mortgage Notes under Section 4.16(b)(2)
of the Indenture dated as of April 17, 1997 among the Company, the Parent
and The Bank of New York relating to the First Mortgage Notes (the "First
Mortgage Notes Indenture")) at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of purchase in accordance with the procedures set forth in the
Indenture. The Company may defer the Asset Sale Offer until the aggregate
unutilized Excess Proceeds Amount equals or exceeds $10.0 million resulting
from one or more Asset Sales (at which time, the entire unutilized Excess
Proceeds Amount, and not just the amount in excess of $10.0 million, shall
be applied as required pursuant to this paragraph). All amounts remaining
after the consummation of any Asset Sale Offer pursuant to this paragraph
may be used by the Company only to purchase or otherwise invest in Related
Business Investments other than inventory or accounts receivables or other
Bank Collateral, to purchase First Mortgage Notes in open market
transactions up to an aggregate of $5.0 million in the aggregate under this
paragraph (b) or to purchase Notes in open market transactions up to an
aggregate of $5.0 million in the aggregate; provided that for so long as
any First Mortgage Notes are outstanding, the Company shall be required to
purchase First Mortgage Notes before it can purchase Notes in open market
transactions pursuant hereto.
Notice of an Asset Sale Offer will be mailed to the Holders as shown on the
register of Holders not less than 30 days nor more than 60 days before the
payment date for the Asset Sale Offer, with a copy to the Trustee, and shall
comply with the procedures set forth in the Indenture. Upon receiving notice of
the Asset Sale Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 principal
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amount in exchange for cash. To the extent Holders properly tender Notes in an
amount exceeding the Excess Proceeds Amount, Notes of tendering Holders will be
repurchased on a pro rata basis (based on amounts tendered). An Asset Sale Offer
is required to remain open for at least 20 Business Days and until the close of
business on the payment date for the Asset Sale Offer, or such longer period as
may be required by law.
If an offer is made to repurchase the Notes pursuant to an Asset Sale
Offer, the Company will comply with the requirements of Section 14(e) of the
Exchange Act, if applicable, and any other tender offer rules under the Exchange
Act or other relevant United States Federal and state securities legislation
which may then be applicable. Notes repurchased pursuant to the "Limitation on
the Sale of Assets" covenant shall be delivered to the Trustee for cancellation.
Limitation on Dividend and other Payment Restrictions Affecting
Subsidiaries. Neither the Company nor any of its Subsidiaries will, directly or
indirectly, create or otherwise cause or permit or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions to the Company
or to any Restricted Subsidiary (i) on its Capital Stock or (ii) with respect to
any other interest or participation in, or measured by, its profits; (b) make
loans or advances or pay any Indebtedness or other obligation owed to the
Company or to any Restricted Subsidiary; or (c) sell, lease or transfer any of
its Property to the Company or to any Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable law;
(2) the Indenture; (3) customary nonassignment provisions of any contract or any
lease governing a leasehold interest of the Company or any Restricted
Subsidiary; (4) any instrument governing Indebtedness Incurred in accordance
with and pursuant to clause (x) of the definition of Permitted Indebtedness;
provided that, such encumbrance or restriction is not, and will not be,
applicable to any Person, or the Property of any Person, other than the Person,
or the Property of the Person, becoming a Restricted Subsidiary; (5)
restrictions imposed by Liens granted pursuant to clauses (vi), (vii) and (viii)
of the definition of Permitted Liens solely to the extent such Liens encumber
the transfer or other disposition of the assets subject to such Liens; (6) any
restriction or encumbrance contained in contracts for the sale of assets to be
consummated in accordance with the Indenture solely in respect of the assets to
be sold pursuant to such contract; (7) any encumbrance or restriction contained
in Refinancing Indebtedness Incurred to Refinance the Indebtedness issued,
assumed or Incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above or clause (8) or (9) below; provided that the provisions relating to
such encumbrance or restriction contained in any such Refinancing Indebtedness
are no less favorable to the Company or such Restricted Subsidiary or to the
Holders in any material respect in the reasonable and good faith judgment of the
Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4), (5), (8) or (9) as the case may be; (8) any agreement in effect on the
Issue Date including the First Mortgage Notes; and (9) the Revolving Credit
Facility.
Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries. The Company will not permit (i) any Restricted Subsidiary to
issue any Capital Stock other than to the Company or a Restricted Subsidiary; or
(ii) any Person (other than the Company or a Restricted Subsidiary) to, directly
or indirectly, own or control any Capital Stock of any Restricted Subsidiary
(other than directors' qualifying shares); provided, however, that clauses (i)
and (ii) will not prohibit any sale of 100% of the shares of the Capital Stock
of any Restricted Subsidiary owned by the Company or any Restricted Subsidiary
effected in accordance with the "Limitation on the Sale of Assets" covenant or
the "Merger, Consolidation and Sale of Assets" covenant.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, permit or suffer to exist or remain in effect any Liens upon any
Property of the Company or of any of its Restricted Subsidiaries, whether owned
on the Issue Date or acquired after the Issue Date, or on any income or profits
therefrom, or assign or otherwise convey any right to receive income or profits
thereon, without making effective provision for all of the Notes and all other
amounts due under the Indenture to be directly secured equally and ratably with
(or, if the obligation or liability to be secured by such Lien is subordinated
in right of payment to the Notes, prior to) the obligation or liability secured
by such Lien.
The foregoing limitation does not apply to Permitted Liens.
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Merger, Consolidation and Sale of Assets. The Company will not, and will
not permit any Restricted Subsidiary to, in a single transaction or series of
related transactions, consolidate or merge with or into any Person (other than
the consolidation, merger or amalgamation of a Wholly-Owned Subsidiary with
another Wholly-Owned Subsidiary or into the Company), or sell, assign, transfer,
lease, convey or otherwise dispose of (or cause or permit any Subsidiary of the
Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Company's assets (determined on a consolidated basis
for the Company and the Company's Subsidiaries) unless: (i) either (1) the
Company, in the case of a transaction involving the Company, or such Restricted
Subsidiary, in the case of a transaction involving any Restricted Subsidiary,
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company or such Restricted Subsidiary) formed by such consolidation or
into which the Company or such Restricted Subsidiary is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Subsidiaries (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any State thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes and the Indenture on the part of the Company to be performed or
observed, in the case of a transaction involving the Company, or the performance
of every covenant of the Indenture on the part of such Restricted Subsidiary to
be performed or observed, in the case of a transaction involving a Restricted
Subsidiary; (ii) in the case of a transaction involving the Company immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be Incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to Incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test of paragraph (a) of the "Limitation on Indebtedness" covenant; provided,
that, in determining the "Consolidated Interest Coverage Ratio" of the resulting
transferee or Surviving Entity, such ratio shall be calculated as if the
transaction (including the Incurrence of any Indebtedness or Acquired
Indebtedness) took place on the first day of the applicable Four Quarter Period;
(iii) immediately before and immediately after giving effect to such transaction
and the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness Incurred
or anticipated to be Incurred and any Lien granted in connection with or in
respect of the transaction) no Default and no Event of Default shall have
occurred or be continuing; (iv) in the case of a transaction involving the
Company, immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness Incurred or anticipated to
be Incurred in connection with or in respect of such transaction), the Company
or such Surviving Entity, as the case may be, shall have a Consolidated Net
Worth which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction or series of transactions; (v) in the case
of a sale, assignment, transfer, lease, conveyance or other disposition of all
or substantially all of the Company's assets, the Surviving Entity shall have
received the Company's assets as an entirety or virtually as an entirety; and
(vi) the Company or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable provisions
of the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
For purposes of the foregoing, the transfer (by sale, assignment, transfer,
lease, conveyance or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Upon any such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition in accordance with the foregoing, the successor
Person formed by such consolidation or into which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
consolidated or
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made will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such
successor had been named as the Company therein, and thereafter (except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under the Indenture and the Notes.
Limitation on Transactions with Affiliates. (a) Neither the Company nor
any Restricted Subsidiary will, directly or indirectly, conduct any business or
enter into or permit to exist any transaction or series of related transactions
(including, but not limited to, the purchase, sale, conveyance, transfer,
disposition, exchange or lease of Property, the making of any payment, the
making of any Investment, the giving of any Guarantee, the rendering of services
or the paying of any commission) with, or for the benefit of, any of their
Affiliates (each an "Affiliate Transaction"), except under an agreement set
forth in writing which is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could have been
obtained in a comparable transaction on an arms' length basis from a Person not
an Affiliate of the Company or such Restricted Subsidiary and if it involves a
purchase, such purchase is reasonably necessary in light of the operating
requirements of the Company and its Subsidiaries. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or a series of
related Affiliate Transactions) involving aggregate payments or other Property
with a Fair Market Value in excess of (i) $1.0 million, the Company or such
Restricted Subsidiary shall, prior to the consummation thereof, deliver to the
Trustee an Officers' Certificate certifying that such transaction or series of
related transactions complies with the foregoing provisions, (ii) $2.5 million,
the Company or such Restricted Subsidiary shall, prior to the consummation
thereof, deliver to the Trustee the Officers' Certificate specified in clause
(i) above and an approval by the Board of Directors of the Company (including a
majority of the independent directors thereof), such approval to be evidenced by
a Board Resolution stating that such Board of Directors has determined that such
transaction or series of related transactions complies with the foregoing
provisions and (iii) $5.0 million, the Company or such Restricted Subsidiary
shall, prior to the consummation thereof, deliver to the Trustee the Officers'
Certificate specified in clause (i) above, the Board Resolution specified in
clause (ii) above and a favorable opinion as to the fairness of such transaction
or series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor addressed to the Trustee.
(b) The foregoing restriction shall not apply to the following
transactions: (i) any transaction exclusively between the Company and any of its
Wholly-Owned Subsidiaries or exclusively between any Wholly-Owned Subsidiaries,
(ii) reasonable and customary fees paid to members of the Board of Directors of
the Company and of its Subsidiaries, (iii) loans and advances to employees,
officers and directors in the ordinary course of business in an aggregate
principal amount not to exceed $1.0 million at any one time outstanding and
advances to employees for moving, entertainment and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business, (iv)
reasonable and customary fees and compensation paid to, and indemnity provided
on behalf of, officers, directors or employees of the Company or any of its
Subsidiaries, as determined by the Board of Directors of the Company or any such
Restricted Subsidiary or the senior management thereof in good faith, including,
without limitation, issuances of stock, payment of bonuses and other
transactions pursuant to employment or compensation agreements, stock option
agreements, indemnification agreements and other arrangements in effect on the
Issue Date or substantially similar thereto, (v) the payment of the management
fees to G&G Investments under the Management Agreement of up to $3.0 million in
any calendar year, (vi) other Restricted Payments made pursuant to the first
paragraph of the "Restricted Payments" covenant, (vii) payments or other
transactions pursuant to any tax sharing arrangement between the Company and any
other Person with which the Company files a consolidated tax return or with
which the Company is part of a consolidated group for tax purposes but only to
the extent that amounts payable from time to time by the Company under any such
agreement do not exceed the corresponding tax payments that the Company would
have been required to make to any relevant taxing authority had the Company not
joined in such consolidated or combined return, but instead had filed returns
including only the Company and (viii) transactions pursuant to the Intercompany
Agreement. The Company will not amend the Intercompany Agreement unless such
amendment is in writing and the Company determines that it contains terms no
less favorable to the Company than could have been obtained in comparable
transactions on an arm's length basis from a Person not an Affiliate of the
Company, such determination to be evidenced by an Officers' Certificate
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and a Board Resolution stating that a majority of the Board of Directors
(including a majority of the independent directors thereof) have determined that
such amendment complies with the foregoing provisions.
Limitations on Activities of the Parent. If the Parent issues a Guarantee
(other than the Parent's Guarantee of the First Mortgage Notes and its Guarantee
of the Company's Revolving Credit Facility) to any Person other than the Holders
of the Notes (a "Parent Guarantee Event"), at such time as such Parent Guarantee
Event occurs, the Parent shall Guarantee the Notes (the "Senior Note Guarantee")
and such Senior Note Guarantee shall be senior to such other Guarantee issued by
the Parent. In addition, the following limitations shall apply to the Parent
after the occurrence of a Parent Guarantee Event: the Parent will not (a) Incur
any Indebtedness other than a guarantee of the Indebtedness permitted under
clause (ii) of the definition of Permitted Indebtedness, (b) make any
Investments other than in the Company, (c) grant or suffer to exist a Lien in
respect of any Capital Stock of the Company held by it other than the security
interest granted to secure the First Mortgage Notes or sell or transfer any of
such Capital Stock to any Affiliate other than in a transaction pursuant to
clause (e), (d) carry on any business not being carried on prior to the date of
the granting of the Parent Guarantee or (e) merge or consolidate with or into,
or sell substantially all of its assets to, any Person except for a merger or
consolidation in which the Parent is the surviving corporation and following
such merger or consolidation is in compliance with this covenant.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate or redesignate any
Subsidiary to be an Unrestricted Subsidiary if (i) the Subsidiary to be so
designated does not, directly or indirectly, own any Capital Stock or
Indebtedness of, or own or hold any Lien on any property or assets of, the
Company or any other Restricted Subsidiary, (ii) the Subsidiary to be so
designated is not obligated by any Indebtedness or Lien that, if in default,
would result (with the passage of time or notice or otherwise) in a default on
any Indebtedness of the Company or any Restricted Subsidiary, and (iii) either
(a) the Subsidiary to be so designated has total assets of $1,000 or less or (b)
such designation is effective immediately upon such Person becoming a Subsidiary
of the Company or of a Restricted Subsidiary and the amount of the Investment by
the Company or any of its Restricted Subsidiaries in such Subsidiary would be
permitted under "Certain Covenants--Limitation on Restricted Payments." Unless
so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company or any Restricted Subsidiary will be classified as a
Restricted Subsidiary. Except as provided in the first sentence of this
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. Subject to the next paragraph, an Unrestricted Subsidiary may not be
redesignated as a Restricted Subsidiary.
The Company will not, and will not permit any Restricted Subsidiary to,
take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of an Unrestricted Subsidiary or otherwise)
unless after giving effect to such action, transaction or series of
transactions, on a pro forma basis, (i) the Company could Incur at least $1.00
of additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test of paragraph (a) of the "Limitation on Indebtedness" covenant, (ii) such
Restricted Subsidiary could then Incur under "--Limitation on Indebtedness" all
Indebtedness as to which it is obligated at such time, (iii) no Default or Event
of Default would occur or be continuing, and (iv) there exist no Liens with
respect to the property or assets of such Restricted Subsidiary other than
Permitted Liens.
Any such designation by the Board of Directors of the Company will be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of such board giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
provisions.
As of the Issue Date, there are no Restricted Subsidiaries and no
Unrestricted Subsidiaries.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Note for a period of 30 days or
more after such interest becomes due and payable; or
(ii) the failure to (x) pay the principal of or premium, if any, on
any Note, when such principal becomes due and payable, at maturity, upon
repurchase (including, without limitation, pursuant to a Change of Control
Offer or an Asset Sale Offer), upon acceleration, upon redemption or
otherwise or (y) make a Change of Control Offer or an Asset Sale Offer
within the required period; or
(iii) a default in the observance or performance of any of the
agreements or covenants contained under "Merger, Consolidation and Sale of
Assets" or clause (e) of the "Limitation on Activities of Parent" covenant
or the granting by the Company or any Restricted Subsidiary of any Lien to
secure Indebtedness in excess of $100,000 (other than a Permitted Lien) and
after the occurrence of a Parent Guarantee Event, the granting by the
Parent of any Lien to secure Indebtedness in excess of $100,000 (other than
a Permitted Lien);
(iv) a default in the observance or performance of any of the
agreements or covenants contained in the Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default from the Trustee or from Holders of at least 25% in
principal amount of the outstanding Notes; or
(v) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Specified Subsidiary of the
Company,whether such Indebtedness now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay at final
maturity the principal of or premium, if any, on such Indebtedness after
any applicable grace period provided in such Indebtedness on the date of
such default (a "Principal Payment Default"), or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been
a Principal Payment Default or the maturity of which has been so
accelerated, is of at least $10.0 million in the aggregate; or
(vi) one or more judgments in an aggregate amount in excess of $10.0
million (which are not covered by third-party insurance as to which the
insurer is solvent and has not disclaimed coverage) being rendered against
the Company or any Specified Subsidiary of the Company and such judgments
remain undischarged, or unstayed or unsatisfied for a period of 60 days
after such judgment or judgments become final and non-appealable; or
(vii) certain events of bankruptcy, insolvency, wind-up or
reorganization affecting the Company or any of its Specified Subsidiaries
or, after the occurrence of a Parent Guarantee Event, the Parent.
If an Event of Default (other than an Event of Default specified in clause
(vii) above with respect to the Company) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Notes may declare the unpaid principal
of, premium, if any, and accrued and unpaid interest on, all the Notes then
outstanding to be due and payable, by a notice in writing to the Company (and to
the Trustee, if given by Holders) and upon such declaration such principal
amount, premium, if any, and accrued and unpaid interest will become immediately
due and payable. If an Event of Default specified in clause (vii) above occurs
with respect to the Company or, after the occurrence of a Parent Guarantee
Event, the Parent, all unpaid principal of, and premium, if any, and accrued and
unpaid interest on, the Notes then outstanding will automatically become due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of any Default or Event of Default (the term "Default" to include the
events specified above without grace or notice) known to it, give to the Holders
notice of such Default; provided that, except in the case of a Default or an
Event of Default in the
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payment of principal of, or interest on, any Note, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become due
solely by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a Default in the payment of the principal of or interest on any Notes or
a Default in respect of any term or provision of the Notes or the Indenture that
cannot be modified or amended without the consent of all Holders.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the Trust Indenture Act. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon the Company obtaining knowledge of any
Default or Event of Default that has occurred and describe such Default or Event
of Default and the status thereof. In addition, the Company shall provide an
annual Officers' Certificate within 120 days after the end of each fiscal year
as to whether or not they know of any Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders of the Notes to receive payments in
respect of the principal of, premium, if any, and interest on the Notes when
such payments are due, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payments,
(iii) the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture and the Security Documents
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events of the Company) described under "Description of the Notes--Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (a)(1) an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same
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times as would have been the case if such Legal Defeasance had not occurred, or
(2) a ruling to such effect from, or published by, the Internal Revenue Service
and (B) an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the resulting trust will not be an "Investment Company"
within the meaning of the Investment Company Act of 1940 unless such trust is
qualified thereunder or exempt from regulation thereunder; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred, and that the resulting trust will not be an "Investment Company"
within the meaning of the Investment Company Act of 1940 unless such trust is
qualified thereunder or exempt from regulation thereunder; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default with respect to the Indenture
resulting from the Incurrence of Indebtedness, all or a portion of which will be
used to defease the Notes concurrently with such Incurrence) or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent provided
for or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with; (viii) the Company shall have delivered to the Trustee an opinion
of counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company other than the Notes and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the deposit and that no Holder of the Notes is an
insider of the Company, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (ix) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights, or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company thereafter has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof; (ii) the Company has paid or caused to be paid all
other sums then due under the Indenture and under the Notes; and (iii) the
Company has delivered to the Trustee an Officers' Certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
REPORTS TO HOLDERS
The Company will deliver to the Trustee and the Holders within 15 days
after the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of
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Section 13 or 15(d) of the Exchange Act, the Company will file with the
Commission, to the extent permitted, and provide the Trustee and Holders with
such quarterly and annual reports and such information that would be required to
be contained in a filing with the Commission if the Company were required to
file such reports under Sections 13 and 15(d) of the Exchange Act within the
time periods provided therein. In addition, the Company has agreed that, for so
long as any Notes remain outstanding, it will furnish to Holders and securities
analysts and prospective investors, upon their request, the information
specified in Rule 144(A)(d)(4) under the Securities Act. The Company will also
comply with the other provisions of 314(a) of the Trust Indenture Act.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies or making any change to comply
with any requirement under the Trust Indenture Act, so long as such change does
not adversely affect the rights of any of the Holders. Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that, without the consent of each Holder of the Notes affected
thereby, no amendment may, directly or indirectly: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change the time for payment of interest, including defaulted interest, on any
Notes; (iii) reduce the principal of or change the fixed maturity of any Notes,
or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any change
in provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of the Notes to waive Defaults or Events of
Default; (vi) amend, modify or change the obligation of the Company to make or
consummate a Change of Control Offer (including amending, modifying or changing
the definition of Change of Control), or, after the Company's obligation to
purchase the Notes arises thereunder, an Asset Sale Offer or waive any default
in the provisions thereof or modify any of the provisions or definitions with
respect to any Asset Sale Offer; or (vii) adversely affect the ranking of Notes.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" of any Person means Indebtedness of another Person
and any of its Subsidiaries existing at the time such other Person becomes a
Subsidiary (Restricted Subsidiary in the case of the Company) of the referent
Person or at the time it merges or consolidates with the referent Person or any
of the referent Person's Subsidiaries (Restricted Subsidiaries in the case of
the Company) or assumed by the referent Person or any Subsidiary (Restricted
Subsidiary in the case of the Company) of the referent Person in connection with
the acquisition of assets from such other Person and in each case not Incurred
by such other Person or its Subsidiaries in connection with, or in anticipation
or contemplation of, such other Person becoming a Subsidiary (Restricted
Subsidiary in the case of the Company) of the referent Person or such
acquisition, merger or consolidation.
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"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, the referent Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise (and the terms "controlling" and "controlled" have meanings
correlative of the foregoing) or the ownership of more than 10% of the Voting
Stock of such Person; provided that Bankers Trust Company and The
Toronto-Dominion Bank and each of their Affiliates will not be deemed to be
affiliates of the Company and for purposes of payment of employee compensation,
a person shall not be deemed to be an Affiliate of the Company by virtue of his
or her status as an officer or director of the Company absent other elements of
control.
"Affiliate Transaction" has the meaning set forth in "--Certain
Covenants--Limitation on Transactions with Affiliates".
"Anchor Acquisition" means the acquisition on February 5, 1997 by the
Company of certain assets and certain liabilities of Old Anchor pursuant to the
Asset Purchase Agreement dated December 18, 1996 among Consumers Packaging, Old
Anchor, Owens-Brockway Glass Container, Inc. (the rights and obligations of
Consumers Packaging thereunder having been assigned to the Company).
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with the Company or any
Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted
Subsidiary of assets of any Person comprising a division or line of business of
such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other disposition or series of related sales,
issuances, conveyances, transfers, leases, assignments or other dispositions
(including, without limitation, by merger or consolidation, and whether by
operation of law or otherwise) for value by the Company or by any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person (other than by a Restricted Subsidiary to the Company or another
Restricted Subsidiary) of (i) any Capital Stock of a Restricted Subsidiary held
or beneficially owned by the Company or any Restricted Subsidiary, (ii) any
other Property (excluding Capital Stock not covered in (i) or (iii)) of the
Company or of any Restricted Subsidiary or (iii) non-cash consideration received
by the Company or any Restricted Subsidiary pursuant to the "Limitation on the
Sale of Assets" covenant. Notwithstanding the foregoing, Asset Sales shall not
include (a) the creation of any Permitted Lien, (b) any disposition of Bank
Collateral, (c) the sale or other disposition of inventory in the ordinary
course of business, (d) the sale or other disposition of and any item of
machinery, equipment, furniture, apparatus, tools, implements or other similar
Property, the Fair Market Value of which does not exceed $500,000 in a single or
series of related transactions or $2.5 million in the aggregate in any fiscal
year, or (e) the sale of receivables pursuant to a receivables securitization or
similar program.
"Asset Sale Offer" has the meaning set forth in "--Certain
Covenants--Limitation on the Sale of Assets".
"Attributable Indebtedness" means, in respect of a Sale and Leaseback
Transaction at the time of determination thereof the capitalized amount of
Indebtedness in respect of such transaction that would appear on the face of a
balance sheet of the lessee thereunder in accordance with GAAP.
"Authority" means any Federal, state, municipal or local government or
quasi-governmental agency or authority.
"Bank Collateral" means all of the collateral securing the Revolving Credit
Facility.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Saturday, a Sunday or any day
on which banking institutions are not required to open in the City of New York.
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"Capital Stock" means (i) with respect to any person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person, and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease that are required to be
classified and accounted for as a capital lease obligation under GAAP and, for
purposes of this definition, the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date, determined in
accordance with GAAP. Each Capitalized Lease Obligation shall be deemed to be
secured by a Lien on the property subject to the lease.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or Canadian Government or issued
by any agency thereof and backed by the full faith and credit of the United
States or Canada, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having at least the second
highest rating obtainable from either Standard & Poor's Rating Group ("S&P") or
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having at least the second highest rating obtainable from either
S&P's or Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $500,000,000; (v) shares of any money market mutual fund that (a) has
its assets invested continuously in the types of investments referred to in
clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000,
and (c) has at least the second highest rating obtainable from either S&P or
Moody's; and (vi) repurchase agreements with respect to, and which are fully
secured by a perfected security interest in, obligations of a type described in
clause (i) or clause (ii) above and are with any commercial bank described in
clause (iv) above.
"Change of Control" means an event or series of events by which (a) (i) the
Permitted Holders shall cease to be the beneficial owner (including, without
limitation, economic interest and voting power), directly or indirectly, of at
least 40% (or after a Qualified Public Offering, 25%) of the Fully-Diluted
Voting Stock of Consumers Packaging, the Parent or the Company, (ii) the Parent
shall cease to be the owner (including, without limitation, economic interest
and voting power) directly of at least 40% (or after a Qualified Public
Offering, 25%) of the Fully-Diluted Voting Stock of the Company or (iii) any
Person or group (as defined under Rule 13d-3 under the Exchange Act) other than
one or more of the Permitted Holders or, in the case of the Company, Smith
Barney in its capacity as Escrow Agent for the creditors of Old Anchor in
connection with its Chapter 11 proceedings under the United States Bankruptcy
Code so long as it does not in fact exercise control over the Company, becomes
the beneficial owner (as defined under Rule 13d-3 under the Exchange Act),
directly or indirectly, of more of the Fully-Diluted Voting Stock of Consumers
Packaging, the Parent or the Company, as the case may be, than is then
beneficially owned, directly or indirectly, by one or more of the Permitted
Holders; (b) during any period of two consecutive years or in the case this
event occurs within the first two years after Issue Date, such shorter period as
shall have begun on the Issue Date, individuals who at the beginning of such
period constituted the Board of Directors of the Company or Consumer Packaging,
as the case may be, on the Issue Date (together with any new or replacement
directors whose proposal for election by the shareholders of the Company,
Consumer Packaging or the Parent, as the case may be, or by the other directors
was approved by a vote of 66 2/3% of the directors of the Company or Consumers
Packaging or the Parent, as the case may be, then still in office who were
either directors on the Issue Date or whose election or nomination for election
was previously so approved) shall cease for any reason to constitute a majority
of the members of the Board of Directors of the Company or Consumers Packaging
or the Parent, as the case may be, then still in office; provided that if any
Person or group other than the applicable Permitted Holders is able to elect a
majority of the Board of Directors of Consumers Packaging or the Company or the
Parent, as the case may be, pursuant to an agreement with one or more Persons, a
Change of Control shall be deemed to have
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occurred; (c) the Company or Consumers Packaging or the Parent, as the case may
be, consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company, Consumers Packaging or
the Parent, as the case may be (in each case, whether or not in compliance with
the terms of the Indenture), in any such event pursuant to a transaction in
which immediately after the consummation thereof Persons owning a majority of
the Voting Stock of the Company or Consumers Packaging or the Parent, as the
case may be, immediately prior to such consummation shall cease to own a
majority of the Voting Stock of the Company or Consumers Packaging or the
Parent, as the case may be, or the surviving entity if other than the Company or
Consumers Packaging or the Parent, as the case may be; or (d) the Company or
Consumers Packaging conveys, transfers or leases all or substantially all of its
assets.
"Change of Control Offer" has the meaning set forth in "--Change of
Control."
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" of any Person means any forward contract, commodity
swap, commodity option or other similar financial agreement or arrangement
relating to, or the value of which is dependent upon, fluctuations in commodity
prices.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all net income taxes of such Person and
its Subsidiaries (Restricted Subsidiaries in the case of the Company) paid or
accrued in accordance with GAAP for such period (without including or taking
into account income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions of assets outside
the ordinary course of business), Consolidated Interest Expense, amortization
expense and depreciation expense (including depreciation or amortization expense
included in cost of goods sold), and (B) other noncash items (other than noncash
interest) reducing Consolidated Net Income, other than any noncash item which
requires the accrual of or a reserve for cash charges for any future period,
less other noncash items increasing Consolidated Net Income, all as determined
on a consolidated basis for such Person and its Subsidiaries (Restricted
Subsidiaries in the case of the Company) in conformity with GAAP.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all cash dividend payments on any series
of Preferred Stock or Disqualified Capital Stock of such Person and of its
Subsidiaries (Restricted Subsidiaries in the case of the Company) paid, accrued
or scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Coverage Ratio" means, with respect to any Person,
the ratio of Consolidated EBITDA of such Person during the Four Quarter Period
ending on or prior to the date of the transaction or event giving rise to the
need to calculate the Consolidated Interest Coverage Ratio (the "Transaction
Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence or repayment of any Indebtedness of such
Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the
Company) (and the application of the proceeds thereof) giving rise to the need
to make such calculation and any Incurrence of other Indebtedness (and the
application of the proceeds thereof), other than the Incurrence or repayment
(not resulting in a permanent reduction of available borrowings) of Indebtedness
in the ordinary course of business pursuant to working capital facilities
(including the Revolving Credit Facility), at any time subsequent to the first
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such Incurrence or repayment, as the case may be (and the application of the
proceeds thereof),
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occurred on the first day of the Four Quarter Period, (ii) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of such Person or one of
its Subsidiaries (Restricted Subsidiaries in the case of the Company) (including
any Person who becomes a Subsidiary (Restricted Subsidiary in the case of the
Company) as a result of any such Asset Acquisition) Incurring Acquired
Indebtedness at any time subsequent to the first day of the Four Quarter Period
and on or prior to the Transaction Date), as if such Asset Sale or Asset
Acquisition (including the Incurrence of any such Indebtedness or Acquired
Indebtedness and also including or deducting any Consolidated EBITDA associated
with such Asset Acquisition or Asset Sale, respectively) occurred on the first
day of the Four Quarter Period; provided that the Consolidated EBITDA of any
Person acquired shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income". For purposes of this definition, (x)
whenever pro forma effect is to be given to any of the foregoing transactions,
the pro forma calculations will be determined in accordance with Regulation S-X
promulgated by the Commission and (y) the Company's Consolidated EBITDA,
Consolidated Fixed Charges, Consolidated Interest Expense and Consolidated Net
Income for the second, third and fourth quarters of 1996 shall be Pro Forma.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated
Interest Coverage Ratio", (1) interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date (including Indebtedness actually
Incurred on the Transaction Date) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date; (2)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements; and (3)
interest on Indebtedness Incurred in the ordinary course of business pursuant to
working capital facilities (including the Revolving Credit Facility) shall be
determined as if the average amount of borrowings outstanding thereunder during
the Four Quarter Period shall have been outstanding on every day of such Four
Quarter Period and interest had accrued at the rate determined pursuant to the
preceding clauses (1) or (2) (whether or not such Indebtedness shall have been
outstanding on the Transaction Date).
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person and its Subsidiaries (Restricted Subsidiaries in the case
of the Company) for such period, on a consolidated basis, as determined in
accordance with GAAP and including, without duplication, (a) all amortization of
original issue discount; (b) the interest component of Capitalized Lease
Obligations paid or accrued by such Person and its Subsidiaries (Restricted
Subsidiaries in the case of the Company) during such period; (c) net cash costs
under all Interest Swap Obligations (including amortization of fees); (d) all
capitalized interest; (e) to the extent that such Person or any of its
Subsidiaries (Restricted Subsidiaries in the case of the Company) guarantees
interest on any debt of any borrower, interest paid by such borrower during such
period on such debt but only to the extent of the amount of the interest
Guaranteed; (f) all amortization or write off of deferred financing costs of
such Person and its consolidated Subsidiaries (Restricted Subsidiaries in the
case of the Company) during such period (other than the write-off of financing
fees related to the Company's Senior Credit Agreement dated February 5, 1997 and
any premium or penalty paid in connection with redeeming or retiring
Indebtedness of such Person and its consolidated Subsidiaries (Restricted
Subsidiaries in the case of the Company) prior to the Stated Maturity thereof;
and (g) the interest portion of any deferred payment obligations for such
period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Company) for such period on a
consolidated basis, determined in accordance with GAAP; provided that there
shall be excluded therefrom (a) after-tax gains from Asset Sales or abandonments
or reserves relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains or losses, (c) the net income of any Person acquired in a
"pooling of interests" transaction accrued prior to the date it becomes a
Subsidiary (Restricted Subsidiary in the case of the Company) of the referent
Person or is merged or consolidated with the referent Person or any Subsidiary
of the referent Person, (d) the net income (but not loss) of any Subsidiary
(Restricted Subsidiary in the case of the Company) of the referent Person to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, except
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to the extent of dividends or distributions paid in the form of cash or Cash
Equivalents to the referent Person or to a Subsidiary (Restricted Subsidiaries
in the case of the Company) of the referent Person by such Person, (e) the net
income of any Person, other than a Subsidiary (Restricted Subsidiary in the case
of the Company) of the referent Person, except to the extent of dividends or
distributions paid in the form of cash or Cash Equivalents to the referent
Person or to a Subsidiary (Restricted Subsidiaries in the case of the Company)
of the referent Person by such Person, (f) any restoration to income of any
contingency reserve except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), and (h) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earning of the successor corporation prior
to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the total of the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Currency Agreements" means, in respect of a Person, any foreign exchange
currency futures or options, currency swap agreements, forward exchange rate
agreements, exchange rate collar agreements, exchange rate insurance or other
agreements or arrangements, or combination thereof, as to which such Person is a
party or a beneficiary.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Discontinued Plant" means plants of the Company closed prior to the Issue
Date including, without limitation, those located in Dayville, Connecticut and
Houston, Texas, and one plant closed by the Company after the Issue Date which
is specified as such in an Officers' Certificate.
"Discontinued Plant Asset Sale" means an Asset Sale of a Discontinued
Plant.
"Discontinued Plant Closing Costs" means cash expenses incurred by the
Company and its Restricted Subsidiaries as a result of the closing of a
Discontinued Plant no later than 270 days after a Discontinued Plant Asset Sale.
"Disqualified Capital Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to ten
months prior to the date on which the Notes mature; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require the Company to repurchase or
redeem such Capital Stock upon the occurrence of a Change of Control occurring
on or prior to the first anniversary date on which the Notes mature shall not
constitute Disqualified Stock if (i) the change of control provisions applicable
to such Capital Stock are no more favorable to the holders of such Capital Stock
than the provisions applicable to the Notes contained in the covenant described
under "Change of Control" and (ii) such Capital Stock specifically provides that
the Company will not repurchase or redeem any such stock pursuant to such
provisions prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the covenant described under "Change of Control."
"Events of Default" has the meaning set forth in "--Events of Default".
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Excess Proceeds Amount" has the meaning set forth under "Limitation on the
Sale of Assets."
"Fair Market Value" or "Fair Value" means, with respect to any Property,
the price which could be negotiated in an arm's-length transaction, for cash,
between an informed, willing and able seller and an
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informed and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value shall be determined by
the Company acting reasonably and in good faith; provided, however, that if the
value of the aggregate consideration to be received by the Company or any of its
Subsidiaries from any Asset Sale could reasonably be expected to exceed (i) $5.0
million, Fair Market Value shall be determined by the Board of Directors of the
Company as evidenced by a Board Resolution delivered to the Trustee or (ii)
$10.0 million, Fair Market Value shall also be determined by an Independent
Financial Advisor in a written opinion addressed to the Trustee.
"Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing in the United States that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged.
"Four Quarter Period" means, in respect of any Person at any time, the most
recently completed four consecutive full fiscal quarters; provided that, in the
case of the Company, the first fiscal quarter of 1997 shall be the period from
February 5, 1997 through March 31, 1997.
"Fully-Diluted Voting Stock" means, in respect of any Person at any time,
the Voting Stock of such Person assuming that all outstanding options, warrants
or other rights to acquire such Voting Stock have been exercised and all
outstanding securities convertible into or exchangeable for such Voting Stock
have been converted or exchanged at such time, in each case in accordance with
their terms in effect at such time.
"G&G Investments" means G&G Investments, Inc., a Delaware corporation.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Guarantee" means any obligation, contingent or otherwise, of any Person,
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay for (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep-well, to purchase assets, goods, securities or services, to take-or-pay
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term "Guarantee"
will not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided that (A) any Indebtedness of a Person
existing at the time such Person becomes (after the Issue Date) a Restricted
Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the
Company shall be deemed to be Incurred by such Subsidiary at the time it becomes
a Restricted Subsidiary and (B) any amendment, modification or waiver of any
document pursuant to which Indebtedness was previously Incurred shall be deemed
(without duplication), as of the date of and after giving effect to, such
amendment, modification or waiver, to be an Incurrence of additional
Indebtedness unless such amendment, modification or waiver does not (i) increase
the principal or premium thereof or interest rate thereon (including by way of
original issue discount) or (ii) change to an earlier date the Stated Maturity
thereof or the date of any scheduled or required principal payment thereon or
the time or circumstances under which such Indebtedness shall be redeemed;
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time becoming Indebtedness will not be deemed an
Incurrence of such Indebtedness.
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"Indebtedness" means with respect to any Person, without duplication, (i)
the principal of and premium (if any) in respect of indebtedness of such Person
for borrowed money, (ii) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
including, without limitation, Attributable Indebtedness, (iv) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable in the ordinary course of
business that are not overdue by 90 days or more or are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted),
(v) all reimbursement obligations of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) all Indebtedness of
others (including all dividends of other Persons for the payment of which is)
Guaranteed, directly or indirectly, by such Person or that is otherwise its
legal liability or which such Person has agreed to purchase or repurchase or in
respect of which such Person has agreed contingently to supply or advance funds,
(vii) net liabilities of such Person under Interest Swap Obligations, Commodity
Agreements and Currency Agreements, (viii) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on any Property (including, without
limitation, leasehold interests and any other tangible or intangible property)
of such Person, whether or not such Indebtedness is assumed by such Person or is
not otherwise such Person's legal liability; provided that if the obligations so
secured have not been assumed by such Person or are otherwise not such Person's
legal liability, the amount of such Indebtedness for the purposes of this
definition shall be limited to the lesser of the amount of such Indebtedness
secured by such Lien or the Fair Market Value of the Property subject to such
Lien and (ix) all Disqualified Capital Stock issued by such Person, with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends if any. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, provided that the
amount outstanding at any time of any Indebtedness issued with original issue
discount is the full amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP. Notwithstanding the foregoing, (x)
Indebtedness shall not include any endorsements for collection or deposit in the
ordinary course of business or any Indebtedness that has been defeased or
satisfied in accordance with the terms of the documents governing such
Indebtedness and is no longer considered Indebtedness under GAAP and (y) any
realization of a Permitted Lien on Bank Collateral shall not constitute the
Incurrence of Indebtedness.
"Independent" when used with respect to any specified Person means a Person
who (a) is in fact independent, (b) does not have any direct financial interest
or any material indirect financial interest in the Company or any of its
Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries and
(c) is not an officer, employee, promoter, trustee, partner, director or person
performing similar functions for the Company or any of its Subsidiaries.
Whenever it is provided in the Indenture that any Independent Person's opinion
or certificate shall be furnished to the Trustee, such Person shall be appointed
by the Company in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning thereof.
"Independent Financial Advisor" means a Financial Advisor that is
Independent.
"Intercompany Agreement" means the Intercompany Agreement dated as of April
17, 1997, by and between the Company, G&G Investments, Inc., Glenshaw Glass
Company, Hillsboro Glass Company I.M.T.E.C. Enterprises, Inc., Consumers
Packaging Inc., Consumers International Inc., Consumers U.S., Inc., BT
Commercial Corporation, the Trustee and the trustee for the 10 1/4% Senior
Secured Notes due 2005 of Consumers International, as it may be amended from
time to time.
"Intercompany Indebtedness" means any Indebtedness of the Company or any
Restricted Subsidiary which, in the case of the Company, is owing to any
Restricted Subsidiary and which, in the case of any such Restricted Subsidiary,
is owing to the Company or any Restricted Subsidiary; provided, that if as of
any date any Person
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other than the Company or a Restricted Subsidiary owns or holds such
Indebtedness, or holds any Lien in respect thereof, such Indebtedness shall no
longer be Intercompany Indebtedness permitted to be Incurred pursuant to
"--Limitation on Indebtedness".
"Interest Swap Obligations" means the obligations of any Person under any
interest rate swap agreement, interest rate cap, collar or floor agreement or
other similar financial agreement or other interest rate hedge or arrangement
designed to protect the Company or any of its Subsidiaries against or manage
exposure to fluctuations in interest rates.
"Investment" by any Person means any direct or indirect (i) loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other Property (valued at the Fair Market Value thereof as of the date
of transfer) to others or payments for Property or services for the account or
use of others, or otherwise); (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of equity ownership or
Indebtedness issued by any other Person (whether by merger, consolidation,
amalgamation or otherwise (but excluding any merger, consolidation or
amalgamation subject to the "Merger, Consolidation and Sale of Assets" covenant)
and whether or not purchased directly from the issuer of such securities or
evidences of Indebtedness); (iii) Guarantee or assumption of any Indebtedness or
any other obligation of any other Person; (iv) all other items that would be
classified as investments (including, without limitation, purchases of assets
outside the ordinary course of business) on a balance sheet of such Person
prepared in accordance with GAAP, and (v) any payment made by such Person to any
other Person in order to obtain a commitment from such other Person to purchase
products or services from such Person, but excluding the purchase of assets
(which for this purpose shall not include any equity or debt securities) used in
a Related Business and excluding any trade accounts receivable in the ordinary
course of business and notes receivable from employees received solely in
exchange for the issuance by the Company to such employees of Qualified Capital
Stock. The amount of any Investment shall not be adjusted for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge easement, restriction, covenant, right of way, adverse claim affecting
title to real or personal property, or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any option, trust
or other preferential arrangement having the practical effect of any of the
foregoing.
"Management Agreement" means the Management Agreement between G&G
Investments and the Company as in effect on the Issue Date.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"First Mortgage Notes" means the Company's 11 1/4% First Mortgage Notes due
2005.
"Net Cash Proceeds" means, with respect to any Asset Sale, cash proceeds of
such Asset Sale (including Cash Equivalents) net of reasonable transaction costs
of sale including, but not limited to, (i) income taxes reasonably estimated to
be payable as a result of such Asset Sale, (ii) payment of the outstanding
principal amount of, premium or penalty, if any, and interest on, any
Indebtedness that is secured by a Permitted Lien on the property or assets in
question and that is required to be repaid under the terms thereof as a result
of such Asset Sale, (iii) any underwriting, brokerage or other customary selling
commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses and reasonable expenses incurred for
preparing such assets for sale, associated therewith, and (iv) payments of
unassumed liabilities (not constituting Indebtedness) relating to the assets
sold at the time of, or within 30 days after, the date of such sale; provided
that the Net Cash Proceeds in the case of any Discontinued Plant Asset Sale will
be deemed to have been applied in accordance with the "Limitation on Sales of
Assets" covenant if used to pay Discontinued Plant Closing Costs attributable to
such Discontinued Plant subject to a limit of up to $5 million per Discontinued
Plant and up to $20.0 million in the aggregate for all Discontinued Plant Asset
Sales from the Issue Date.
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"Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds received
by the Company, after payment of expenses, commissions and the like (including,
without limitation, brokerage, legal, accounting and investment banking fees and
commissions) incurred in connection therewith, and (b) in the case of any
exchange, exercise, conversion or surrender of any outstanding Indebtedness of
the Company or any Restricted Subsidiary for or into shares of Qualified Capital
Stock of the Company, the amount of such Indebtedness (or, if such Indebtedness
was issued at an amount less than the stated principal amount thereof, the
accrued amount thereof as determined in accordance with GAAP) as reflected in
the consolidated financial statements of the Company prepared in accordance with
GAAP as of the most recent date next preceding the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid in cash by the holder of such Indebtedness to the Company or to any
Restricted Subsidiary upon such exchange, exercise, conversion or surrender and
less any and all payments made to the holders of such Indebtedness, and all
other expenses incurred by the Company in connection therewith), in each case
(a) and (b) to the extent consummated after the Issue Date; provided that the
exchange, exercise, conversion or surrender of any Subordinated Obligations
shall not be or be deemed to be included in Net Equity Proceeds unless such
Subordinated Obligation was issued after the Issue Date.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other amounts
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers of the
Company.
"Old Anchor" means Anchor Resolution Corp., a Delaware corporation
(formerly Anchor Glass Container Corporation).
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee.
"Parent" means Consumers U.S.
"Permitted Holders" means (a) in the case of Consumers Packaging, (i) John
J. Ghaznavi; (ii) the spouse, parents, siblings, descendants (including children
or grandchildren by adoption) of John J. Ghaznavi or of such spouse or siblings;
(iii) in the event of the incompetence or death of any of John J. Ghaznavi or
any of the Persons described in clause (ii), such Person's estate, executor,
administrator, committee or other personal representative in each case who at
any particular date shall beneficially own or have the right to acquire,
directly or indirectly, Voting Stock of Consumers Packaging; (iv) any trusts
created for the sole benefit of John J. Ghaznavi or the Persons described in
clauses (ii) or (iii) or any trust for the benefit of such trust; or (v) any
Person of which John J. Ghaznavi or any of the Persons described in clauses (ii)
or (iii) (x) "beneficially owns" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) on a fully-diluted basis all of the Voting Stock of such Person or
(y) is the sole trustee or general partner, or otherwise has the sole power to
manage the business and affairs, of such Person and (b) in the case of the
Company and the Parent, Consumers Packaging and its Wholly-Owned Subsidiaries.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Indenture, including
Indebtedness in respect of obligations of the Company to the Trustee;
(ii) Indebtedness outstanding from time to time pursuant to the
Revolving Credit Facility in an amount not to exceed the greater of (a)
$125.0 million and (b) the sum of 90% of the gross book value of the
accounts receivable of the Company and its Subsidiaries and 70% of the
gross book value of the inventory of the Company and its Subsidiaries, in
each case calculated in accordance with GAAP;
(iii) Indebtedness outstanding on the Issue Date;
(iv) Commodity Agreements; provided, however, that such Commodity
Agreements are entered into for the purpose of reducing risk in the
ordinary course of the financial management of the Company or any
Restricted Subsidiary and designed to protect the Company or such
Restricted Subsidiary against fluctuations in commodity prices;
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(v) Indebtedness Incurred in connection with (a) Interest Swap
Obligations and Currency Agreements relating to Indebtedness permitted
pursuant to the "Limitation on Indebtedness" covenant that are entered into
for the purpose of reducing risk in the ordinary course of the financial
management of the Company or any Restricted Subsidiary; provided, however,
that the notional amount of each such Interest Swap Obligation and Currency
Agreement does not exceed the principal amount of the Indebtedness to which
the Interest Swap Obligation or the Currency Agreement, as the case may be,
relates, or (b) Currency Agreements that are entered into in the ordinary
course of the financial management of the Company or any of its Restricted
Subsidiaries and designed to protect the Company or such Restricted
Subsidiary against fluctuations in foreign currency exchange rates;
(vi) Indebtedness of the Company or any Restricted Subsidiary
represented by Capitalized Lease Obligations, mortgage financings or other
purchase money obligations or obligations under other financing
transactions relating to capital expenditures, in each case Incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a Related Business not to
exceed (a) in any fiscal year the lesser of (1) $10.0 million and (2) 25%
of the Company's capital expenditures as determined in accordance with GAAP
for the prior fiscal year and (b) $35.0 million in the aggregate
outstanding at any one time;
(vii) additional Indebtedness Incurred by the Company or any
Restricted Subsidiaries not to exceed $10.0 million outstanding at any
time;
(viii) Intercompany Indebtedness;
(ix) Refinancing Indebtedness;
(x) Indebtedness of any Person that becomes a Restricted Subsidiary
after the Issue Date which Indebtedness existed at the time such Person
becomes a Restricted Subsidiary; provided that (a) such Indebtedness was
not Incurred as a result of or in connection with or anticipation of such
Person becoming a Restricted Subsidiary and (b) to the extent the principal
amount of such Indebtedness and any other Indebtedness previously permitted
pursuant to this clause (x) exceeds $5.0 million in the aggregate at the
time such Restricted Subsidiary is acquired by the Company, immediately
before and immediately after giving effect to such Person becoming a
Restricted Subsidiary (as if such existing Indebtedness were Incurred on
the first day of the Four Quarter Period) the Company could Incur at least
$1.00 of additional Indebtedness in accordance with the Consolidated
Interest Coverage Ratio test of paragraph (a) of the "Limitation on
Indebtedness" covenant; and
(xi) reimbursement obligations relating to undrawn standby letters of
credit and obligations in respect of performance bonds and surety bonds, in
each case issued in the ordinary course of business.
"Permitted Investments" means (a) Investments in cash and Cash Equivalents;
(b) loans, Guarantees and reasonable advances to employees of the Company or any
Restricted Subsidiary made in the ordinary course of business of the Company or
such Restricted Subsidiary, as the case may be, in an aggregate principal amount
not exceeding $1.0 million at any time outstanding; (c) Investments by the
Company or by any Restricted Subsidiary in the Company or a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary; (d) Investments by the Company or by any Restricted
Subsidiary in another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or any Restricted Subsidiary in
compliance with the provisions of the "Merger, Consolidation and Sale of Assets"
covenant; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (e) non-cash consideration received in
accordance with the "Limitation on the Sale of Assets" covenant; (f) advances to
suppliers and customers in the ordinary course of business; (g) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers or in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business; (h) guarantees by the Company and its Restricted
Subsidiaries of the obligations of one another under the Revolving Credit
Facility; (i) sales of goods or services on trade credit terms consistent with
the Company's and its Subsidiaries' past practices or otherwise consistent with
trade credit terms in common use in the industry and recorded as
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accounts receivable on the balance sheet of the Person making such sale; and (j)
lease, utility and other similar deposits in the ordinary course of business.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens securing the First Mortgage Notes;
(ii) Liens for taxes or governmental assessments, charges, levies or
claims not yet delinquent or for which a bond has been posted in an amount
equal to the contested amount (including potential interest and penalties
thereon);
(iii) statutory Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business of ownership and operation of the relevant
property relating to obligations either (a) not yet delinquent or (b) being
contested in good faith by appropriate proceedings and as to which
appropriate reserves or other provisions have been made in advance in
accordance with GAAP;
(iv) Liens in connection with workers' compensation, unemployment
insurance and other similar legislation, surety or appeal bonds,
performance bonds or other obligations of a like nature (in each case not
constituting Indebtedness) arising in the ordinary course of business;
(v) zoning restrictions, licenses, easements, servitudes, rights of
way, title defects, covenants running with the land and other similar
charges or encumbrances or restrictions;
(vi) assignments, leases, or subleases at Discontinued Plants not
materially and adversely affecting the value thereof;
(vii) Liens granted by the Company or any Restricted Subsidiary to
secure Indebtedness Incurred pursuant to clause (vi) of the definition of
Permitted Indebtedness, in each case representing all or part of the cost
of purchase, lease, construction or improvement of Property acquired,
constructed or improved after the date hereof owed to a Person not an
Affiliate of the Company; provided, however, that (x) in any such case such
Lien shall extend only to the specific Property of the Company or any
Restricted Subsidiary leased, acquired, constructed or improved with the
proceeds of such Indebtedness and (y) prior to granting any such Lien, the
Company shall provide the Trustee with an Officers' Certificate stating
that the Property subject to such Lien and the remaining assets of the
Company or such Restricted Subsidiary could be operated independently and
such Property could be disposed of independently of the remaining assets of
the Company or such Restricted Subsidiary without interfering with the
continued operation and maintenance of the remaining assets of the Company
or such Restricted Subsidiary, and without impairing the value of the
remaining assets of the Company or such Restricted Subsidiary; provided
further that (A) the aggregate amount of Indebtedness secured by any such
Lien shall not exceed the Fair Market Value (or, if less, the cost) of the
Property so acquired or leased and (B) such Liens shall not encumber any
other Property of the Company or of any Restricted Subsidiary and shall
attach to such Property within 60 days of the acquisition or lease of, or
completion of construction on, such Property;
(viii) Liens on the Bank Collateral;
(ix) Liens existing on the Issue Date; and
(x) Liens on Property of a Person at the time such Person was merged
with the Company or a Restricted Subsidiary, Liens on acquired Property
existing at the time of acquisition thereof and Liens upon any Property of
a Person existing at the time such Person becomes a Restricted Subsidiary;
provided in each case (x) that such Property was not acquired with the
proceeds of any Asset Sale and (y) that such Liens were not created in
contemplation of such merger or acquisition, as the case may be, and such
Liens only extend to such merged or acquired Property.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
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"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Principal Payment Default" has the meaning set forth in clause (v) of
"--Events of Default."
"Pro Forma" shall mean for any period the pro forma Consolidated EBITDA,
Consolidated Fixed Charges, Consolidated Interest Expense or Consolidated Net
Income of the Company after giving effect to the offering of the Notes on the
Issue Date and the application of the net proceeds therefrom and the Anchor
Acquisition as if such transactions had occurred on January 1, 1996 and to any
other transactions or events for which pro forma effect is to be given pursuant
to the definition of Consolidated Interest Coverage Ratio calculated in
accordance with Regulation S-X as promulgated by the Commission applied to the
audited financial statements of Old Anchor for the 1996 fiscal year and, where
necessary, the unaudited financial statements of such company for the second and
third fiscal quarters of 1996; it being understood that prior to giving effect
to any transactions or events for which pro forma effect is to be given pursuant
to the definition of Consolidated Interest Coverage Ratio that Consolidated
EBITDA for the Company for each of the second, third and fourth fiscal quarters
of 1996 shall be $21.6 million, $8.8 million and negative $9.9 million,
respectively.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real or immovable, personal or
moveable or mixed, or tangible or corporeal, or intangible or incorporeal,
including, without limitation, Capital Stock in any other Person.
"Purchase Money Assets" means Property made subject to a Lien in accordance
with clause (vii) of the definition of Permitted Liens.
"Qualified Capital Stock" means (i) any Capital Stock that is not
Disqualified Capital Stock and (ii) each warrant, right or option to acquire
Capital Stock that is not Disqualified Capital Stock other than any such
warrant, right or other option to acquire such Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to ten
months prior to the date on which the Notes mature.
"Qualified Public Offering" means an underwritten public offering of the
Common Stock of the Company pursuant to a Registration Statement filed with the
Commission in accordance with the Securities Act resulting in Net Equity
Proceeds of at least $75.0 million.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or a
Restricted Subsidiary of Indebtedness of the Company or a Restricted Subsidiary
initially Incurred in accordance with the Limitation on Indebtedness covenant,
including the Notes (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii) or (xi) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by such Person
in connection with such Refinancing) or (ii) create Indebtedness with (a) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that if
such Indebtedness being Refinanced is subordinate or junior to the Notes or any
Guarantee, then such Refinancing Indebtedness shall be subordinate to the Notes
or such Guarantee at least to the same extent and in the same manner as the
Indebtedness being Refinanced.
"Related Business" means the businesses carried out by the Company or a
Restricted Subsidiary on the date hereof and any reasonable extensions thereof,
including, without limitation, the manufacture and sale of plastic containers
and plastic and metal closures.
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"Related Business Investment" means any expenditure by the Company or a
Restricted Subsidiary, as the case may be, to acquire assets (which shall not
include any equity or debt security) used in the ordinary course of a Related
Business of the Company or such Restricted Subsidiary, as the case may be.
"Restricted Subsidiary" means, as of the date of determination, any
Subsidiary of the Company, other than an Unrestricted Subsidiary.
"Revolving Credit Agreement" has the meaning set forth in the definition of
"Revolving Credit Facility."
"Revolving Credit Facility" means agreements with one or more Persons or
syndicates of Persons providing for financing for the Company and its
Subsidiaries, and all related security agreements, guarantees, notes and other
agreements relating to same, as the same may be amended, modified or
supplemented from time to time, and any agreement or agreements evidencing the
refinancing, modification, replacement, renewal, restatement, refunding,
deferral, extension, substitution or supplement thereof including, without
limitation, any arrangement involving a Wholly-Owned Subsidiary, the sole
activity of which is the financing of receivables, and including the revolving
credit facility under that certain Credit Agreement dated as of February 5, 1997
(the "Revolving Credit Agreement") among the Company, Bankers Trust Company, as
issuing bank, BT Commercial Corporation, as agent, PNC Bank, as issuing bank and
the financial institutions party thereto in their capacities as lenders
thereunder, and any security documents and guarantees delivered in connection
therewith.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any Property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary.
"Specified Subsidiary" means any Subsidiary of the Company other than (x)
an Unrestricted Subsidiary which is not organized under the laws of the United
States of America, any state thereof or the District of Columbia or under the
laws of Canada or any province thereof or (y) a Subsidiary of the Company which
would not constitute a "significant subsidiary" of the Company as defined in
Rule 1.02 of Regulation S-X promulgated by the Commission, except that for
purposes of this definition, all reference therein to ten (10) percent shall be
deemed to be references to five (5) percent.
"S&P" means Standard & Poor's Corporation and its successors.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement or by
operation of law.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" means the Person (if other than the Company) formed by
any consolidation of the Company with any Person or into which the Company is
merged or the Person which acquires by conveyance, transfer or lease the
properties and assets of the Company and of the Company's Subsidiaries as an
entirety or virtually as an entirety.
"Unrestricted Subsidiary" means (i) each Subsidiary of the Company that the
Company has designated pursuant to the provisions described under "--Restricted
and Unrestricted Subsidiaries" as an Unrestricted
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Subsidiary and that has not been redesignated a Restricted Subsidiary and (ii)
any Subsidiary of an Unrestricted Subsidiary.
"Voting Stock" with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all times
or only so long as no senior class of stock has voting power by reason of any
contingency) to vote in the election of members of the Board of Directors (or
equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-Owned Subsidiary" means, in respect of the Company, a Restricted
Subsidiary, all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary of the
Company.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal U.S. federal income tax
consequences resulting from the purchase, ownership and disposition of Notes by
initial Holders thereof. The discussion is based upon provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), regulations promulgated
thereunder by the U.S. Department of the Treasury, and administrative and
judicial pronouncements with respect thereto, all as in effect or proposed in
the date hereof and all of which are subject to change, possibly with
retroactive effect, or to different interpretations. The discussion does not
purport to deal with all aspects of U.S. federal taxation that may be relevant
to particular investors in light of their specific investment circumstances, nor
does it discuss U.S. federal tax laws applicable to Holders that may be subject
to special tax rules, such as life insurance companies; broker-dealers;
tax-exempt organizations; financial institutions; custodians, nominees or
similar financial intermediaries holding Notes for others; Holders that will
hold a Note as a position in a "straddle," or as part of a "hedging,"
"conversion" or "integrated" transaction for U.S. federal income tax purposes;
Holders subject to the alternative minimum tax; Holders having a "functional
currency" for U.S. federal income tax purposes other than the U.S. dollar; and
Non-U.S. Holders (as defined below) that are entitled to claim the benefits of
tax treaties to which the United States is a party. In addition, the discussion
does not consider the effect of any foreign, state, local or other tax laws that
may be applicable to a particular Holder. This discussion assumes that Holders
will hold the Notes as capital assets within the meaning of Section 1221 of the
Code.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS REGARDING
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING ANY APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN LAWS AND ANY CHANGES OR PROPOSED CHANGES IN APPLICABLE TAX LAWS OR
INTERPRETATIONS THEREOF.
THE NOTES
For U.S. federal income tax purposes, the Company will treat each Note as
indebtedness issued by the Company.
U.S. HOLDERS
For purposes of this summary, a "U.S. Holder" is a Holder of Notes that is
an individual who is a citizen or resident of the United States; a corporation
created or organized under the laws of the United States or any state thereof;
an estate whose income is includible in gross income for U.S. federal income tax
purposes regardless of its source; a trust whose administration is subject to
the primary supervision of a U.S. court and
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with respect to which one or more U.S. persons have the authority to control all
substantial decisions; or a partnership or other business entity created or
organized under the laws of the United States or any state thereof and that is
properly treated as a U.S. person.
Interest
Interest on a Note (including any additional interest payable because of a
failure by the Company to consummate the Exchange Offer or to file or cause to
be declared effective the Shelf Registration Statement) will be includible in
the gross income of a U.S. Holder as ordinary interest income at the time the
interest is received or when it accrues in accordance with the U.S. Holder's
regular method of tax accounting. Such interest will be treated as U.S. source
income for U.S. federal income tax purposes.
It is unlikely that the possibility of an optional redemption or repurchase
of the Notes, or an increase in the interest payable thereon due to the
Company's failure to consummate the Exchange Offer or to file or cause to be
declared effective the Shelf Registration Statement, will cause the Notes to be
treated as "contingent payment debt instruments" for U.S. federal tax purposes,
and the Company does not intend to so treat the Notes. However, in the event the
Notes were to be so treated, any such increase in the interest payable on the
Notes would be taxable to a U.S. Holder as ordinary income on an accrual basis
under a constant yield method, in advance of receipt of any cash payment with
respect thereto.
Disposition of the Notes
A U.S. Holder will recognize taxable gain or loss on the sale, exchange,
redemption, retirement or other disposition of a Note in an amount equal to the
difference between the amount realized from such disposition (other than amounts
attributable to accrued interest which would otherwise be taxable as ordinary
interest income) and the Holder's adjusted tax basis in the Note. Such gain or
loss generally will be capital gain or loss, and will be long-term capital gain
or loss if the U.S. Holder has held the Note for more than one year at the time
of disposition; preferential rates of tax may apply to gains recognized by
individuals upon the disposition of Notes held for more than eighteen months.
The exchange of a Note by a U.S. Holder for an Exchange Note will not
constitute a taxable exchange. A U.S. Holder will have the same tax basis and
holding period in the Exchange Note as it did in the Note.
NON-U.S. HOLDERS
Payments of interest on the Notes to any Holder other than a U.S. Holder (a
"Non-U.S. Holder") will generally not be subject to U.S. federal income or
withholding tax, provided that (1) the Non-U.S. Holder is not (i) a direct or
indirect owner of 10 percent or more of the total voting power of all voting
stock of the Company or (ii) a controlled foreign corporation related to the
Company within the meaning of Section 864(d)(4) of the Code, (2) such interest
is not effectively connected with the conduct by the Non-U.S. Holder of a trade
or business within the United States, and (3) the Company or its paying agent
receives (i) from the Non-U.S. Holder, a properly completed Form W-8 (or
substitute therefor or successor thereto), signed under the penalties of
perjury, which provides the Non-U.S. Holder's name and address and certifies
that the beneficial owner of the Note is a Non-U.S. Holder or (ii) from a
security clearing organization, bank or other financial institution or qualified
intermediary that holds the Notes in the ordinary course of its trade or
business (a "financial institution") on behalf of the Non-U.S. Holder, a
statement certifying under penalties of perjury that it has received such a Form
W-8 (or substitute therefor or successor thereto) from the Non-U.S. Holder, or
that it has received from another financial institution a statement that it has
received a Form W-8 (or substitute therefor or successor thereto) from the
Non-U.S. Holder, and a copy of such Form W-8 of the Non-U.S. Holder is furnished
to the payor.
If the payments of interest by the Company on a Note are effectively
connected with the conduct by a Non-U.S. Holder of a trade or business in the
United States, such payments will be subject to U.S. federal income tax on a net
basis at the rates applicable to U.S. Holders generally (and, with respect to
corporate Non-U.S. Holders, may also be subject to a branch profits tax).
Payments that are subject to U.S. federal income tax
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on a net basis will not be subject to U.S. withholding tax so long as the
Non-U.S. Holder provides the Company or its paying agent with a properly
executed Form 4224 (or substitute therefor or successor thereto).
A Non-U.S. Holder will not be subject to U.S. federal income or withholding
tax with respect to gain recognized on a disposition of the Notes unless (i) the
gain is effectively connected with the conduct by the Non-U.S. Holder of a trade
or business in the United States or (ii) such Non-U.S. Holder is an individual
present in the United States for 183 or more days in the taxable year of the
disposition and certain other requirements are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company will
be required to provide the Internal Revenue Service ("IRS") with certain
information with respect to the Holders of the Notes, including each Holder's
name, address and taxpayer identification number, the aggregate amount of
principal and interest paid to that Holder during the calendar year and the
amount of tax withheld, if any. This reporting obligation does not apply with
respect to certain Holders, including corporations, tax-exempt organizations,
qualified pension and profit sharing trusts and individual retirement accounts.
Certain noncorporate U.S. Holders may be subject to "backup withholding" at
a rate of 31% on payments of principal and interest on, and the proceeds from
the disposition of, a Note. Backup withholding will apply only if the U.S.
Holder (i) fails to furnish its taxpayer identifying number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to
properly report payments of interest and dividends or (iv) under certain
circumstances fails to certify, under penalties of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding. With respect to interest paid after December 31, 1999, a
U.S. Holder will generally be subject to backup withholding unless certain
certification procedures are complied with, directly or through an intermediary.
If a Holder is subject to backup withholding due to such Holder's failure to
furnish a correct taxpayer identification number, the backup withholding will
continue until the Holder furnishes the Company with a correct taxpayer
identification number. In addition to backup withholding, a Holder who does not
provide the Company with the correct taxpayer identification number may be
subject to penalties imposed by the IRS. Backup withholding is not an additional
tax: the amount of any backup withholding will be allowed as a credit against
the Holder's federal income tax liability and may entitle such Holder to a
refund, provided that the required information has been furnished to the IRS.
Information reporting and backup withholding will not apply to payments to
Non-U.S. Holders outside the United States of principal and interest on a Note.
In order to avoid backup withholding on payments of interest and principal made
within the United States, a Non-U.S. Holder of the Notes must generally complete
and provide the payor with a Form W-8 (or substitute therefor or successor
thereto) or other documentary evidence certifying that such Non-U.S. Holder is
an exempt foreign person. Payments of the proceeds from the sale by a Non-U.S.
Holder of a Note made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that if the
broker is a U.S. person, a controlled foreign corporation, a foreign person 50%
or more of whose gross income is effectively connected with a U.S. trade or
business for a specified three-year period, or (with respect to payments made
after December 31, 1999) a foreign partnership with certain connections to the
United States, information reporting will be required unless the broker has in
its records documentary evidence that the Holder is not a U.S. Holder and
certain other conditions are met, or unless such Holder otherwise establishes an
exemption. Payments of the proceeds from the sale by a Non-U.S. Holder of a Note
made to or through the United States office of a broker will be subject to
information reporting and backup withholding unless the Non-U.S. Holder or
beneficial owner certifies its status as such under penalties of perjury or
otherwise establishes an exemption from information reporting and backup
withholding.
EXCHANGE OFFER AND REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into a Registration Rights
Agreement on March 16, 1998 (the "Registration Rights Agreement"), pursuant to
which the Company agreed, for the benefit of the holders, that it will, at its
own cost, (i) within 90 days after the original issue date (the "Issue Date"),
file a registration statement (the "Exchange Offer Registration Statement") with
the Commission with respect to the Exchange Offer for notes of the Company which
will have terms substantially identical in all material respects to the
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Notes (the "Exchange Notes") (except that the Exchange Notes will not contain
terms with respect to transfer restrictions), (ii) use its best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 210 days after the Issue Date and (iii) use its best
efforts to consummate the Exchange Offer within 255 days after the Issue Date.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Notes.
The Company will keep the Exchange Offer open for not less than 20 business days
(or longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Notes. For each of the Notes surrendered
pursuant to the Exchange Offer, the holder who surrendered such Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Note. Interest on each Exchange Note will accrue from the last
interest payment date on which interest was paid on the Note surrendered in
exchange therefor or, if no interest has been paid on such Note, from the Issue
Date. Under existing Commission interpretations, the Exchange Notes would be
freely transferable by holders thereof other than affiliates of the Company
after the Exchange Offer without further registration under the Securities Act
if the holder of the Exchange Notes represents that it is acquiring the Exchange
Notes in the ordinary course of business, that it has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes and that it is not an affiliate of the Company, as such terms are
interpreted by the Commission; provided that broker-dealers ("Participating
Broker-Dealers") receiving Exchange Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of such Exchange Notes.
The Commission has taken the position that the Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of the
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. The Company has agreed for a period of 180 days after consummation of
the Exchange Offer to make available a prospectus meeting requirements of the
Securities Act to Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements for use in connection with any resale
of such Exchange Notes.
Each holder who wishes to exchange its Notes for Exchange Notes in the
Exchange Offer will be required to represent that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
at the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
affiliate of the Company.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
applicable Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 255 days after the Issue
Date, or, under certain circumstances, if the Initial Purchasers shall so
request, the Company will at its cost, (a) as promptly as practicable, file a
shelf registration statement covering resales of the Notes (a "Shelf
Registration Statement"), (b) use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act and (c)
use its best efforts to keep effective such Shelf Registration Statement until
the earlier of two years after the Issue Date and such time as all of the
applicable Notes have been sold thereunder. The Company will, in the event of
the filing of a Shelf Registration Statement, provide to each holder of the
Notes copies of the prospectus which is a part of such Shelf Registration
Statement, notify each such holder when such Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A holder that sells its Notes pursuant to a
Shelf Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
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If the Company fails to comply with the above provisions or if such
registration statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable with
respect to the Notes as follows:
(i) if the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed within 90 days following the Filing Date (as
defined), Additional Interest shall accrue on the Notes over and above the
stated interest at a rate of 0.50% per annum for the first 90 days
commencing on the 91st day after the Issue Date, such Additional Interest
rate increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period;
(ii) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 210 days (240 days
in the case of a Shelf Registration Statement) following the Issue Date,
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days commencing on
the 211th day after the Issue Date (241 days in the case of a Shelf
Registration Statement), such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Company has not exchanged all Notes validly tendered
in accordance with the terms of the Exchange Offer on or prior to 255 days
after the Issue Date, or (B) the Exchange Offer Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, if a Shelf Registration
Statement has been declared effective and a Shelf Registration Statement
ceases to be effective at any time prior to the second anniversary of the
Issue Date (unless all the Notes have been sold thereunder), then
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days commencing on
(x) the 256th day after the Issue Date with respect to the Notes validly
tendered and not exchanged by the Company, in the case of (A) above, or (y)
the day such Shelf Registration Statement ceases to be effective in the
case of (B) above, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; provided, however, that the Additional Interest rate on the Notes
may not exceed in the aggregate 1.5% per annum; and provided further, that
(1) upon the filing of the Exchange Offer Registration Statement or Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Shelf Registration Statement (in the case of (ii)
above), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of clause (iii)(A) above), or upon the effectiveness of the
Shelf Registration Statement, which had ceased to remain effective (in the
case of clause (iii)(B) above), Additional Interest on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
As used herein, "Filing Date" means (A) if no Registration Statement has
been filed by the Company pursuant to this Agreement, the 90th day after the
Issue Date; provided, however, that if notice regarding the obligation to file a
Shelf Registration Statement (a "Shelf Notice") is given within 10 days of the
Filing Date, then the Filing Date with respect to the Shelf Registration
Statement shall be the 15th calendar day after the date of the giving of such
Shelf Notice; or (B) in each other case (which may be applicable notwithstanding
the consummation of the Exchange Offer), the 30th day after the delivery of a
Shelf Notice.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in case, on the same original interest payment dates
as the Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
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BOOK-ENTRY; DELIVERY AND FORM
The Outstanding Notes were issued in the form of one global certificate
(the "Outstanding Global Note") for QIBs. Except as described in the next
paragraph, the Exchange Notes initially will be represented by one or more
permanent global certificate in definitive, fully registered form (the "Exchange
Global Notes"). The Outstanding Global Note was deposited on the date of closing
of the sale of the Outstanding Notes, and the Exchange Global Notes will be
deposited on the Issue Date with, or on behalf of, The Depository Trust Company,
New York, New York ("DTC") and registered in the name of a nominee of DTC. The
Term "Global Notes" means the Outstanding Global Notes or the Exchange Global
Notes as the context may require.
Exchange Notes to be held by "accredited investors" (as such term is
defined in Rule 501 under the Securities Act) (each an "Accredited Investor")
will be issued in registered definitive form without coupons ("Certificated
Securities"). Upon the transfer of Certificated Securities by an Accredited
Investor to a QIB, such Certificated Securities will, unless the Global Notes
have previously been exchanged in whole for Certificated Securities, be
exchanged for an interest in a Global Note.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs may hold their interests in the Global
Notes directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any), interest (including
Additional Interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Notes as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such
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portion of the aggregate principal amount of Notes as to which such participant
or participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Notes for
Certificated Securities, which it will distribute to its participants and which
will be legended as set forth under the heading "Notice to Investors."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
PLAN OF DISTRIBUTION
Except as provided herein, this Prospectus may not be used for an offer to
resell, resale or other retransfer of Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver this
Prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Note received in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer for its own account as a result of market-making activities
or other trading activities. The Company acknowledges and each Holder, other
than a broker-dealer, must acknowledge that it is not engaged in, does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, any distribution of Exchange Notes.
The Company will not receive any proceeds from the exchange of Outstanding
Notes for Exchange Notes or from the resale of Exchange Notes by broker-dealers.
Exchange Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, or at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any person that participates in the
distribution of such Exchange Notes may be deemed an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such broker-dealers may
be deemed to be underwriting compensation under the Securities Act.
By tendering Outstanding Notes and executing the Letter of Transmittal, a
party tendering Outstanding Notes for Exchange certifies that (i) it is not an
affiliate of the Company or, if such tendering party is an affiliate of the
Company, it will comply with the registration and prospectus requirements of the
Securities Act to the extent applicable, (ii) the Exchange Notes are being
acquired in the ordinary course of business of the person
103
<PAGE> 107
receiving such Exchange Notes, whether or not such person is the Holder thereof,
(iii) such tendering party has not entered into any arrangement or understanding
with any person to participate in the distribution (within the meaning of the
Securities Act) of Exchange Notes, (iv) such tendering party is not a
broker-dealer who purchased the Outstanding Notes for resale pursuant to an
exemption under the Securities Act and (v) such tendering party will be able to
trade the Exchange Notes acquired in the Exchange Offer without restriction
under the Securities Act. The Letter of Transmittal also states that by
acknowledging that it will deliver a prospectus, and by delivering such a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
In addition, in connection with any resales of Exchange Notes, any
broker-dealer (a "Participating Broker-Dealer") who acquired the Outstanding
Notes for its own account as a result of market-making activities or other
trading activities must deliver a prospectus meeting the requirements of the
Securities Act. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Outstanding Notes) with this Prospectus. For a period of
180 days after the Exchange Date, the Company and will make this Prospectus, as
it may be amended or supplemented from time to time, available to any
Participating Broker-Dealer for use in connection with any such resale of
Exchange Notes, provided that such Participating Broker-Dealer indicates in the
Letter of Transmittal that it is a broker-dealer. In addition, until ,
1998, (90 days after the date of this Prospectus), all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for Outstanding Notes pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company of the happening of any event which
makes any statement in this Prospectus untrue in any material respect or which
requires the making of any changes in this Prospectus in order to make the
statement therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend the use of this
Prospectus until the Company has amended or supplemented this Prospectus to
correct such misstatement or omission and have furnished copies of the amended
or supplemented Prospectus to such broker-dealer. If the Company gives any such
notice to suspend the use of the Prospectus, it will extend the 180-day period
referred to above by the number of days during the period from and including the
date of the giving of such notice up to and including when broker-dealers shall
have received copies of the supplemented or amended Prospectus necessary to
permit resales of Exchange Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions or concessions of any broker-dealers) and will indemnify
the Holders of the Outstanding Notes (including participating broker-dealers)
participating in the Exchange Offer against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Eckert Seamans Cherin & Mellott, LLC, Pittsburgh, Pennsylvania. Jones, Day,
Reavis & Pogue, New York, New York is acting as special counsel to the Company
in connection with certain legal matters relating to the Exchange Offer and will
give an opinion on certain New York law matters, including the binding effect of
the Exchange Notes. C. Kent May, a member of Eckert Seamans Cherin & Mellott,
LLC, is a director of the Company.
INDEPENDENT ACCOUNTANTS
Old Anchor's consolidated balance sheet as of December 31, 1996 and its
consolidated statements of operations, cash flows and stockholder's equity
(deficiency in assets) for each of the two years in the period ended December
31, 1996 included in this Prospectus were previously audited by Deloitte &
Touche LLP ("Deloitte"), independent accountants to Old Anchor (whose report
disclaimed an opinion on the 1996 consolidated financial statements of Old
Anchor and included explanatory paragraphs referring to the bankruptcy
proceedings of the Company and to the remaining deficiency in assets after the
sale of substantially all of the assets and business of the Company and the
substantial doubt that it raises relative to the ability of the
104
<PAGE> 108
Company to continue as a going concern). Pursuant to the Asset Purchase
Agreement, the purchase price for the Anchor Acquisition is subject to
adjustment based on an audited balance sheet (the "Closing Balance Sheet"). As
discussed under "Recent Developments," the parties are in settlement
negotiations regarding the appropriate adjustment. As Deloitte was engaged to
audit the Closing Balance Sheet (however, an audit opinion has not been issued)
and continues to be the independent accountants to Old Anchor, Old Anchor
informed the Company that it was inappropriate for Deloitte to provide its
consent to the use of its audit report in this Prospectus. Accordingly, Arthur
Andersen LLP audited the financial statements of Old Anchor for these periods.
EXPERTS
The Company's balance sheet as of December 31, 1997 and its statements of
operations, cash flows and stockholders' equity for the period from February 5,
1997 to December 31, 1997 included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto.
Old Anchor's consolidated balance sheet as of February 4, 1997 and December
31, 1996 and its consolidated statements of operations, cash flows and
stockholder's equity (deficiency in assets) for the period from January 1, 1997
to February 4, 1997 and for each of the two years in the period ended December
31, 1996 included in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report included herein (which
report includes an explanatory paragraph referring to the bankruptcy proceedings
of Old Anchor and to the remaining deficiency in assets after the sale of
substantially all of the assets and business of Old Anchor and the substantial
doubt that it raises relative to the ability of Old Anchor to continue as a
going concern).
105
<PAGE> 109
ANCHOR GLASS CONTAINER CORPORATION
FOR THE PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-2
Statement of Operations
Period from February 5, 1997 to December 31, 1997...... F-3
Balance Sheet
December 31, 1997...................................... F-4
Statement of Cash Flows
Period from February 5, 1997 to December 31, 1997...... F-5
Statement of Stockholders' Equity
Period from February 5, 1997 to December 31, 1997...... F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 110
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Anchor Glass Container Corporation:
We have audited the accompanying balance sheet of Anchor Glass Container
Corporation (a Delaware corporation) as of December 31, 1997, and the related
statements of operations, stockholders' equity and cash flows for the period
from February 5, 1997 through December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Anchor Glass Container
Corporation as of December 31, 1997, and the results of its operations and its
cash flows for the period from February 5, 1997 through December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
February 25, 1998 (except with respect to the
financing matter as discussed
in Note 14, as to which the date
is March 11, 1998)
F-2
<PAGE> 111
ANCHOR GLASS CONTAINER CORPORATION
STATEMENT OF OPERATIONS
PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<S> <C>
Net sales................................................... $ 569,441
Costs and expenses:
Cost of products sold..................................... 523,709
Selling and administrative expenses....................... 25,120
----------
Income from operations...................................... 20,612
Other expense, net.......................................... (2,602)
Interest expense............................................ (18,281)
----------
Loss before extraordinary item.............................. (271)
Extraordinary item --
Write-off of deferred financing costs..................... (11,200)
----------
Net loss.................................................... (11,471)
Preferred stock dividends................................... (11,302)
----------
Loss applicable to common stock............................. $ (22,773)
==========
Basic net loss per share applicable to common stock before
extraordinary item........................................ $ (3.62)
==========
Basic net loss per share applicable to common stock......... $ (7.11)
==========
Basic weighted average number of common shares
outstanding............................................... 3,201,148
==========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 112
ANCHOR GLASS CONTAINER CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 1,060
Accounts receivable, less allowance for doubtful accounts of
$2,025.................................................... 56,940
Inventories
Raw materials and manufacturing supplies.................. 23,303
Finished products......................................... 96,820
Other current assets........................................ 8,082
--------
Total current assets.............................. 186,205
--------
Property, plant and equipment:
Land...................................................... 7,769
Buildings................................................. 63,438
Machinery, equipment and molds............................ 297,317
Less accumulated depreciation............................. (43,653)
--------
324,871
Other assets................................................ 25,975
Strategic alliance with customers, net of accumulated
amortization of $811...................................... 34,714
Goodwill, net of accumulated amortization of $2,857......... 55,803
--------
$627,568
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility................................... $ 10,468
Current maturities of long term-debt........................ 567
Accounts payable............................................ 63,796
Accrued expenses............................................ 64,075
Accrued interest............................................ 4,576
Accrued compensation and employee benefits.................. 25,185
--------
Total current liabilities......................... 168,667
--------
Long-term debt.............................................. 152,758
Long-term pension liabilities............................... 48,826
Long-term post retirement liabilities....................... 57,900
Other long-term liabilities................................. 57,522
--------
317,006
Commitments and contingencies
Redeemable preferred stock, Series A, $.01 par value;
authorized 2,239,320 shares; issued and outstanding
2,239,320 shares; $25 liquidation and redemption value.... 55,983
--------
Stockholders' equity:
Preferred stock, Series B, $.01 par value; authorized
5,000,000 shares; issued and outstanding 3,360,000 shares;
$25 liquidation and redemption value...................... 34
Issuable preferred stock, 249,600 shares at $25 per
share.................................................. 6,240
Common stock, $.10 par value; authorized 50,000,000 shares;
Class A, issued and outstanding 490,898 shares............ 49
Class B, issued and outstanding 902,615 shares............ 90
Class C, none issued and outstanding...................... --
Warrants, Class C Common stock, issued and outstanding
2,107,843 warrants........................................ 10,518
Capital in excess of par value.............................. 92,294
Accumulated deficit......................................... (22,773)
Additional minimum pension liability........................ (540)
--------
85,912
--------
$627,568
========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 113
ANCHOR GLASS CONTAINER CORPORATION
STATEMENT OF CASH FLOWS
PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (11,471)
Extraordinary item........................................ 11,200
Adjustments to reconcile loss before extraordinary item to
net cash provided by operating activities:
Depreciation and amortization........................... 51,132
Other................................................... 3,101
Decrease in cash resulting from changes in current assets
and liabilities......................................... (28,479)
---------
25,483
Cash flows from investing activities:
Purchase of assets and assumption of liabilities of Old
Anchor.................................................. (200,470)
Expenditures for property, plant and equipment............ (40,519)
Payment of strategic alliance with customers.............. (6,000)
Acquisition related contribution to defined benefit
pension plans........................................... (9,056)
Other..................................................... (1,210)
---------
(257,255)
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 280,000
Principal payments of long-term debt...................... (130,278)
Proceeds from issuance of preferred stock................. 84,000
Proceeds from issuance of common stock.................... 1,000
Net draws on revolving credit facility.................... 10,468
Other, primarily financing fees........................... (12,358)
---------
232,832
Cash and cash equivalents:
Increase in cash and cash equivalents..................... 1,060
Balance, beginning of period.............................. --
---------
Balance, end of period.................................... $ 1,060
=========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................. $ 11,702
=========
Income tax payments....................................... $ --
=========
Equipment financing......................................... $ 1,115
=========
Increase (decrease) in cash resulting from changes in
current assets and liabilities:
Accounts receivable....................................... $ (9,635)
Inventories............................................... (1,241)
Other current assets...................................... (620)
Accounts payable, accrued expenses and other current
liabilities............................................. (17,495)
Other, net................................................ 512
---------
$ (28,479)
=========
Supplemental noncash activities:
In connection with the Anchor Acquisition, the Company issued $46,983
face amount of Series A Preferred Stock and $2,454 of Class A
Common Stock and incurred $1,500 of fees. In connection with the
Anchor Loan Facility, the Company issued 1,405,229 warrants to the
lenders valued at $7,012.
Anchor Acquisition:
Fair value of assets acquired........................... $ 525,500
Acquisition costs accrued............................... (62,500)
Goodwill................................................ 59,000
Purchase price.......................................... (250,000)
---------
Liabilities assumed..................................... $ 272,000
=========
</TABLE>
In February 1997, the Company contributed $9,000 face amount of Series A
Preferred Stock to the Company's defined benefit pension plans.
In connection with the issuance of the Notes, the Company issued 702,615
shares of Class B Common Stock to Consumers U.S. and 702,614 warrants valued at
$3,506 to the initial purchasers of the First Mortgage Notes. Also, with the
issuance of the First Mortgage Notes, the Company recorded an extraordinary loss
for the write-off of deferred financing fees of the Anchor Loan Facility.
The Company considers short-term investments with original maturities of
ninety days or less at the date of purchase to be classified as cash
equivalents.
See Notes to Financial Statements.
F-5
<PAGE> 114
ANCHOR GLASS CONTAINER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES B CLASS A CLASS B ISSUABLE CAPITAL ACCUMU- MINIMUM
PREFERRED COMMON COMMON PREFERRED IN-EXCESS LATED PENSION
STOCK STOCK STOCK STOCK WARRANTS OF PAR DEFICIT LIABILITY
--------- ------- ------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 5, 1997... $-- $-- $-- $ -- $ -- $ -- $ -- $ --
Issuance of 3,360,000 shares
of Series B Preferred
Stock to Consumers U.S.... 34 -- -- -- -- 83,966 -- --
Issuance of 200,000 shares
of Class B Common Stock to
Consumers U.S............. -- -- 20 -- -- 2,480 -- --
Issuance of 490,898 shares
of Class A Common Stock to
creditors of Old Anchor... -- 49 -- -- -- 2,405 -- --
Issuance of 1,405,229
warrants to purchase Class
C Common Stock in
conjunction with the
financing of Anchor Loan
Facility.................. -- -- -- -- 7,012 -- -- --
Issuance of 702,615 shares
of Class B Common Stock to
Consumers U.S. in
conjunction with the
financing of the Notes.... -- -- 70 -- -- 3,443 -- --
Issuance of 702,614 warrants
to purchase Class C Common
Stock in conjunction with
the financing of the
Notes..................... -- -- -- -- 3,506 -- -- --
Pay-in-kind dividends
payable to Consumers U.S.
on Series B Preferred
Stock..................... -- -- -- 6,240 -- -- (6,240) --
Dividends accrued on Series
A Preferred Stock......... -- -- -- -- -- -- (5,062) --
Net loss.................... -- -- -- -- -- -- (11,471) --
Amount related to minimum
pension liability......... -- -- -- -- -- -- -- (540)
--- --- --- ------ ------- ------- -------- -----
Balance, December 31,
1997...................... $34 $49 $90 $6,240 $10,518 $92,294 $(22,773) $(540)
=== === === ====== ======= ======= ======== =====
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, February 5, 1997... $ --
Issuance of 3,360,000 shares
of Series B Preferred
Stock to Consumers U.S.... 84,000
Issuance of 200,000 shares
of Class B Common Stock to
Consumers U.S............. 2,500
Issuance of 490,898 shares
of Class A Common Stock to
creditors of Old Anchor... 2,454
Issuance of 1,405,229
warrants to purchase Class
C Common Stock in
conjunction with the
financing of Anchor Loan
Facility.................. 7,012
Issuance of 702,615 shares
of Class B Common Stock to
Consumers U.S. in
conjunction with the
financing of the Notes.... 3,513
Issuance of 702,614 warrants
to purchase Class C Common
Stock in conjunction with
the financing of the
Notes..................... 3,506
Pay-in-kind dividends
payable to Consumers U.S.
on Series B Preferred
Stock..................... --
Dividends accrued on Series
A Preferred Stock......... (5,062)
Net loss.................... (11,471)
Amount related to minimum
pension liability......... (540)
--------
Balance, December 31,
1997...................... $ 85,912
========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 115
ANCHOR GLASS CONTAINER CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
NOTE 1 -- PURCHASE OF ASSETS
Anchor Glass Acquisition Corporation (the "Company"), a Delaware
corporation and a majority-owned subsidiary of Consumers Packaging Inc.
("Consumers"), was formed in January 1997 to acquire certain assets and assume
certain liabilities of Anchor Glass Container Corporation ("Old Anchor"), now
Anchor Resolution Corp.
On February 5, 1997, pursuant to an Asset Purchase Agreement dated December
18, 1996, as amended (the "Asset Purchase Agreement"), among Consumers,
Owens-Brockway Glass Container Inc. ("Owens") and Old Anchor, the Company (the
rights and obligations of Consumers having been assigned to the Company) and
Owens acquired substantially all of the assets of, and assumed certain
liabilities, of Old Anchor.
The Company purchased eleven operating glass container manufacturing
facilities and other related assets (the "Anchor Acquisition"). Owens purchased
assets and assumed liabilities of Old Anchor's Antioch and Hayward, California
facilities and purchased certain other existing inventories. Owens also
purchased Old Anchor's investment in Rocky Mountain Bottle Company, a joint
venture with Coors Brewing Company ("Coors"), and assumed Old Anchor's agreement
to manufacture Coors' glass packaging products in the United States.
The total purchase price approximated $378,000, excluding fees of
approximately $1,500 which were paid by Consumers and recorded as capital in
excess of par by the Company. The portion of the purchase price paid in cash by
Owens amounted to approximately $128,000. The remaining purchase price of
approximately $250,000 from the Company was comprised of: approximately $200,500
in cash, $47,000 face amount (1,879,320 shares) of mandatorily redeemable 10%
cumulative convertible preferred stock ("Series A Preferred Stock") and $2,500
of common stock (490,898 shares with an estimated value of $5.00 per share) (the
"Class A Common Stock") of the Company.
The purchase price paid by the Company is subject to adjustment. On June
13, 1997, Old Anchor delivered to the Company the closing balance sheet which
indicated that Old Anchor believed that it was entitled to additional payments
from the Company and Owens totaling approximately $76,300. On July 28, 1997, the
Company delivered its notice of disagreement to Old Anchor, which requested a
reduction of the purchase price of approximately $96,800. Since that time, the
parties have been negotiating the amount of the adjustment, and have reached a
proposed settlement (the "Proposed Settlement"). The Proposed Settlement
requires the payment by the Company to Old Anchor of an additional $1,000 in
cash and the issuance of 1,225,000 warrants for the purchase of additional
shares of common stock, together valued at approximately $7,100, recorded as an
adjustment to goodwill. In addition, the Company will issue 525,000 warrants to
purchase additional shares of common stock to an affiliate of Consumers U.S.
valued at approximately $2,600 which has been recorded as an expense. None of
the warrants to be issued will require any payment upon exercise. The effect of
the Proposed Settlement has been reflected in the financial statements for the
period ended December 31, 1997. The Proposed Settlement is subject to final
approval by the Company, Old Anchor and the bankruptcy court.
The Company obtained the cash portion of the purchase price principally
from an $85,000 cash investment by Consumers in $84,000 face amount (3,360,000
shares) of redeemable 8% cumulative convertible preferred stock (the "Series B
Preferred Stock") and $1,000 of common stock (200,000 shares) (the "Class B
Common Stock") and a $130,000 bank loan.
Upon consummation of the purchase and effective February 6, 1997, the
Company changed its name to Anchor Glass Container Corporation.
F-7
<PAGE> 116
The Anchor Acquisition is accounted for by using the purchase method, with
the purchase price being allocated to the assets acquired and preacquisition
liabilities assumed based on their estimated fair value at the date of
acquisition. These allocations are based on appraisals, evaluations, estimations
and other studies. Certain acquisition costs and fees, including the costs of
closing and consolidating certain facilities have also been recorded by the
Company at the date of acquisition.. The excess of the purchase price over the
fair value of net assets purchased of approximately $58,660 is classified as
Goodwill on the accompanying balance sheet.
The estimated values of assets acquired and liabilities assumed as of
February 5, 1997 after giving effect to the Anchor Acquisition and consideration
paid is as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 46,000
Inventories................................................. 119,000
Property, plant and equipment............................... 327,000
Goodwill.................................................... 59,000
Other assets................................................ 32,000
Current liabilities......................................... (149,000)
Long-term debt.............................................. (2,000)
Other long-term liabilities................................. (182,000)
---------
$ 250,000
=========
</TABLE>
The following unaudited pro forma results of operations for the Company for
the year ended December 31, 1997 assumes the Anchor Acquisition occurred on
January 1, 1997 (dollars in thousands except per share data):
<TABLE>
<S> <C>
Net sales................................................... $623,518
Loss before extraordinary item.............................. (12,502)
Net loss.................................................... (23,702)
Loss before extraordinary item applicable to common stock... (24,985)
Loss applicable to common stock............................. (36,185)
Basic net loss per share before extraordinary item
applicable to common stock................................ (7.13)
Basic net loss per share applicable to common stock......... (10.33)
</TABLE>
These pro forma amounts represent historical operating results with
appropriate adjustments of the Anchor Acquisition which would give effect to
interest expense and the impact of purchase price adjustments to depreciation
and amortization expense. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained had the Anchor
Acquisition been completed as of January 1, 1997, or that may be obtained in the
future.
On January 9, 1997, the Pension Benefit Guaranty Corporation ("PBGC")
notified Old Anchor that it intended to institute involuntary termination
proceedings with respect to the three defined benefit pension plans then
maintained by Old Anchor, and currently maintained by the Company. However, the
PBGC reached an agreement with Vitro, S.A., the parent of Old Anchor, in which
Vitro, S.A. agreed to provide a limited guaranty to the PBGC with respect to the
unfunded benefit liabilities of the Company's defined benefit plans, if the
plans, or any one of them, are terminated before August 1, 2006. Consequently,
the PBGC agreed not to terminate the plans as a result of the Asset Purchase
Agreement and the assumption of the plans by the Company. In conjunction with
the purchase, the Company assumed all liabilities of the plans and funded $9,056
of plan contributions, previously unfunded following Old Anchor's filing of
Chapter 11. Additionally, the Company issued to the plans $9,000 face amount
(360,000 shares) of Series A Preferred Stock.
F-8
<PAGE> 117
NOTE 2 -- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Segment
The Company is engaged in the manufacture and sale of a diverse line of
clear, amber, green and other color glass containers of various types, designs
and sizes to customers principally in the beer, food, iced tea, distilled
spirits and soft drink industries. The Company markets its products throughout
the United States. The Company's international and export sales are
insignificant. Sales to The Stroh Brewery Company represented approximately
15.6% of total net sales for the period ended December 31, 1997. Revenues are
recognized as product is shipped to customers. The loss of a significant
customer, unless replaced, could have a material adverse effect on the Company's
business.
Inventories
Inventories are stated at the lower of cost or market. The cost of
substantially all inventories of raw materials and semi-finished and finished
products is determined on the first-in, first-out method. Manufacturing supplies
and certain other inventories are valued at weighted average costs.
Property, Plant and Equipment
Property, plant and equipment expenditures, including renewals, betterments
and furnace rebuilds which extend useful lives, and expenditures for glass
forming machine molds are capitalized and depreciated using the straight-line
method over the estimated useful lives of the assets for financial statement
purposes while accelerated depreciation methods are principally used for tax
purposes. Generally, annual depreciation rates range from 2.5% for buildings,
6.3% to 20% for machinery and equipment and 40% for molds. Furnace and machine
rebuilds, which are recurring in nature and which extend the lives of the
related assets, are capitalized and depreciated over the period of extension,
generally at rates of 20% to 25%, based on the type and extent of these
rebuilds. Depreciation of leased property recorded as capital assets is computed
on a straight-line basis over the estimated useful lives of the assets.
Maintenance and repairs are charged directly to expense as incurred.
Strategic Alliance with Customers
The Company has entered into long-term agreements with several customers.
Payments made or to be made to these customers are being amortized as a
component of net sales on the statement of operations over the term of the
related supply contract, which range between 11 and 15 years, based upon
shipments.
In September 1997, Hillsboro Glass Company ("Hillsboro"), a
glass-manufacturing plant owned by G&G Investments, Inc. ("G&G") (the majority
owner of Consumers), discontinued manufacturing. All of Hillsboro's rights and
obligations to fill orders under a supply contract between Consumers and one of
its major customers were purchased by Consumers and the Company effective
December 31, 1997. The purchase price of the Company's portion of this contract
approximates $12,500, the majority of which will be paid in 1998.
Goodwill
Goodwill represents the excess of the purchase price over the estimated
fair value of net assets acquired and is amortized on a straight line basis over
a twenty year period. Amortization expense for the period ended December 31,
1997 was $2,857.
Income Taxes
The Company applied Statement of Financial Accounting Standards No.
109 -- Accounting for Income Taxes ("SFAS 109") which establishes financial
accounting and reporting standards for the effects of income taxes which result
from a company's activities during the current and preceding years.
F-9
<PAGE> 118
Retirement Plans
The Company has retirement plans, principally non-contributory, covering
substantially all salaried and hourly employees. The Company's funding policy is
to pay at least the minimum amount required by the Employee Retirement Income
Security Act of 1974 and the Retirement Protection Act of 1994, which requires
the Company to make significant additional contributions into its underfunded
defined benefit plans.
Postretirement Benefits
Statement of Financial Accounting Standards No. 106 -- Employers'
Accounting for Postretirement Benefits Other Than Pensions ("SFAS 106") requires
accrual of postretirement benefits (such as healthcare benefits) during the
period that an employee provides service. This accounting method has no effect
on the Company's cash outlays for these postretirement benefits.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 -- Disclosures about
Fair Value of Financial Instruments requires disclosure of the estimated fair
values of certain financial instruments. The estimated fair value amounts have
been determined using available market information or other appropriate
valuation methodologies that require considerable judgment in interpreting
market data and developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts. As the long-term debt has not been registered or traded in an
established trading market, and the debt was issued during the current period,
the Company has estimated the fair value of the debt to be the carrying value.
The carrying amount of other financial instruments approximate their estimated
fair values.
The fair value information presented herein is based on information
available to management as of December 31, 1997. Although management is not
aware of any factors that would significantly affect the estimated value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, the current estimates
of fair value may differ significantly from the amounts presented herein.
From time to time, the Company may enter into interest rate swap agreements
that effectively hedge interest rate exposure. The net cash amount paid or
received on these agreements are accrued and recognized as an adjustment to
interest expense.
Earnings per Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is effective for all periods ending after
December 15, 1997. SFAS 128 sets forth requirements for computing basic and
diluted earnings per share. Basic income (loss) per common share is computed by
dividing net income (loss) applicable to common shareholders by the
weighted-average number of common shares and contingently issuable shares
outstanding during the period. Warrants outstanding are contingently issuable
shares as they are issuable for no additional consideration and the conditions
necessary for share exercise have been met. There is no diluted earnings per
share presented as the assumed conversion of preferred stock would be
anti-dilutive.
The computation of basic loss per share is as follows (dollars in
thousands, except per share):
<TABLE>
<S> <C>
Basic net loss per share
Net loss applicable to common stockholders................ $ (22,773)
----------
Divided by
Weighted average shares outstanding, plus.............. 1,242,344
Weighted average warrants outstanding.................. 1,958,804
----------
3,201,148
----------
Basic net loss per share.................................. $ (7.11)
==========
</TABLE>
F-10
<PAGE> 119
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
NOTE 3 -- REVOLVING CREDIT FACILITY
In conjunction with the Anchor Acquisition, the Company entered into a
credit agreement dated as of February 5, 1997, with Bankers Trust Company
("BTCo") as issuing bank and BT Commercial Corporation, as agent, to provide a
$110,000 senior secured revolving credit facility (the "Revolving Credit
Facility"). The Revolving Credit Facility enables the Company to obtain
revolving credit loans for working capital purposes and the issuance of letters
of credit for its account in an aggregate amount not to exceed $110,000.
Advances outstanding at any one time can not exceed an amount equal to the
borrowing base as defined in the Revolving Credit Facility.
Revolving credit loans bear interest at a rate based upon, at the Company's
option, (i) the higher of the prime rate of BTCo, 0.5% in excess of the
overnight federal funds rate and 0.5% in excess of the adjusted certificate of
deposit rate, as defined, each plus a defined margin, or (ii) the average of the
offering rates of banks in the New York interbank Eurodollar market, plus a
defined margin. Interest is payable monthly. A commitment fee of 0.5% on the
unused portion of the facility and letter of credit fees, as defined, are
payable quarterly. The Revolving Credit Facility expires February 5, 2002.
At December 31, 1997, advances outstanding under the Revolving Credit
Facility were $10,468 and the borrowing availability was $52,497. The total
outstanding letters of credit on this facility were $12,788. At December 31,
1997, the weighted average interest rate on borrowings outstanding was 8.4%.
The Company's obligations under the Revolving Credit Facility are secured
by a first priority lien on substantially all of the Company's inventories and
accounts receivable and related collateral and a second priority pledge of all
of the Series B Preferred Stock and the Class B Common Stock. In addition, the
Company's obligations under the Revolving Credit Facility are guaranteed by
Consumers U.S., Inc., ("Consumers U.S.") the Company's parent and a wholly-owned
indirect subsidiary of Consumers, and the holder of the outstanding Series B
Preferred Stock and Class B Common Stock.
The Revolving Credit Facility contains certain covenants that restrict the
Company from taking various actions, including, subject to specified exceptions,
the incurrence of additional indebtedness, the granting of additional liens, the
making of investments, the payment of dividends and other restricted payments,
mergers, acquisitions and other fundamental corporate changes, capital
expenditures, operating lease payments and transactions with affiliates. The
Revolving Credit Facility also contains certain financial covenants that require
the Company to meet and maintain certain financial tests and minimum ratios,
including a minimum working capital ratio, a minimum consolidated net worth test
and a minimum interest coverage ratio.
NOTE 4 -- LONG-TERM DEBT
Long-term debt at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
$150,000 First Mortgage Notes, interest at 11.25% due
2005...................................................... $150,000
Other....................................................... 3,325
--------
153,325
Less current maturities..................................... 567
--------
$152,758
========
</TABLE>
F-11
<PAGE> 120
In connection with the Anchor Acquisition, the Company entered into a
Senior Credit Agreement, dated as of February 5, 1997, with BTCo, as agent, to
provide a $130,000 bank loan (the "Anchor Loan Facility"). The Anchor Loan
Facility was repaid in full from the net proceeds of the issuance of the
$150,000 11.25% First Mortgage Notes, due 2005, (the "First Mortgage Notes").
The Anchor Loan Facility bore interest at a rate of 12.50%.
As additional consideration in providing the Anchor Loan Facility, the
Company issued to BT Securities Corporation and TD Securities, 1,405,229
warrants convertible to Class C Common Stock. The warrants are valued at
approximately $7,000. As a result of the refinancing of the Anchor Loan
Facility, deferred financing fees of $11,200 are being written off as an
extraordinary loss in the second quarter of 1997.
Effective April 17, 1997, the Company completed an offering of the First
Mortgage Notes, issued under an indenture dated as of April 17, 1997 (the
"Indenture"), among the Company, Consumers U.S. and The Bank of New York, as
Trustee. The First Mortgage Notes are senior secured obligations of the Company,
ranking senior in right of payment to all existing and future subordinate
indebtedness of the Company and pari passu with all existing and future senior
indebtedness of the Company. The First Mortgage Notes are guaranteed by
Consumers U.S. Proceeds from the issuance of the First Mortgage Notes, net of
fees, were approximately $144,000 and were used to repay $130,000 outstanding
under the Anchor Loan Facility and $8,800 of advances outstanding under the
Revolving Credit Facility, with the balance used for general corporate purposes.
Interest on the First Mortgage Notes accrues at 11.25% per annum and is
payable semiannually on each April 1 and October 1 to registered holders of the
First Mortgage Notes at the close of business on March 15 and September 15
immediately preceding the applicable interest payment date. The Company entered
into a Registration Rights Agreement on April 17, 1997. Pursuant to this
agreement, additional interest in an amount of up to 1.5% per annum accrues on
the First Mortgage Notes under certain conditions. As a result of the Company's
failure to have an exchange offer registration statement declared effective on
or prior to October 14, 1997, additional interest in the amount of 0.5% accrued
from October 14, 1997. Due to the Company's failure to have exchanged all First
Mortgage Notes tendered in accordance with the terms of the exchange offer on or
prior to November 28, 1997, additional interest increased to 1.0%. Additional
interest increased to 1.5% on January 13, 1998 and accrued to February 11, 1998
when it was reduced to 0.5%.
The First Mortgage Notes are redeemable, in whole or in part, at the
Company's option on or after April 1, 2001, at redemption prices defined in the
Indenture. The Indenture provides that upon the occurrence of a change in
control, the Company will be required to offer to repurchase all of the First
Mortgage Notes at a purchase price in cash equal to 101% of the principal amount
plus interest accrued to the date of purchase. Prior to the sale of the First
Mortgage Notes, the Company entered into an interest rate swap agreement to
partially protect the Company from interest rate fluctuations until such time as
the fixed interest rate on the Notes was established. The agreement was
terminated concurrent with the interest rate of the First Mortgage Notes being
set. The realized gain on the agreement, approximately $1,900, has been deferred
and is being amortized over the term of the First Mortgage Notes.
All of the obligations of the Company under the First Mortgage Notes and
the Indenture are secured by a first priority perfected security interest in
substantially all of the existing and future real property, personal property
and other assets of the Company and a first priority perfected security interest
in collateral ranking pari passu with the security interest in favor of the
Revolving Credit Facility.
The Indenture, subject to certain exceptions, restricts the Company from
taking various actions, including, but not limited to, subject to specified
exceptions, the incurrence of additional indebtedness, the granting of
additional liens, the payment of dividends and other restricted payments,
mergers, acquisitions and transactions with affiliates.
All of the Company's debt agreements contain cross-default provisions.
Principal payments required on long-term debt are $567 in 1998, $291 in
1999, $297 in 2000, $303 in 2001 and $300 in 2002. Payments to be made in 2003
and thereafter are $151,567.
F-12
<PAGE> 121
In connection with the issuance of the First Mortgage Notes on April 17,
1997, the Company issued 702,615 shares of Class B Common Stock to Consumers and
702,614 warrants, valued at $5.00 for each share and warrant, to the initial
purchasers.
NOTE 5 -- REDEEMABLE PREFERRED STOCK
The Company has designated 2,239,320 shares as Series A Preferred Stock and
5,000,000 shares as Series B Preferred Stock. The Series A Preferred Stock
ranks, as to dividends and redemption and upon liquidation, prior to all other
classes and series of capital stock of the Company. The holders of Series A
Preferred Stock are entitled to receive, when and as declared by the Board of
Directors of the Company, cumulative dividends, payable quarterly in cash, at an
annual rate of 10%. Holders of Series A Preferred Stock are not entitled to
vote, except as defined in its Certificate of Designation. No dividends have
been declared or paid as of December 31, 1997.
The Company is required to redeem all outstanding shares of the Series A
Preferred Stock on January 31, 2009, and, on or after February 5, 2000, may, at
its option, redeem outstanding shares of Series A Preferred Stock at a price of
$25.00 per share, if the trading price of the common stock equals or exceeds
$6.00 per share. Shares of Series A Preferred Stock are convertible into shares
of Class A Common Stock, at the option of the holder, at a ratio determined by
dividing the liquidation value of the Series A Preferred Stock by $6.00 and such
ratio is subject to adjustment from time to time.
Pursuant to the Asset Purchase Agreement, the Company is obligated to
register all of the shares of the Class A Common Stock and Series A Preferred
Stock under the Securities Exchange Act and to qualify the shares for listing on
a nationally recognized United States securities exchange or on The NASDAQ Stock
Market's National Market.
The Series B Preferred Stock ranks, as to dividends and redemption and upon
liquidation, junior to the Series A Preferred Stock but senior to all other
classes and series of capital stock of the Company. The holders of Series B
Preferred Stock are entitled to receive cumulative dividends, payable quarterly
at an annual rate of 8%. During the period from February 5, 1997 through and
including December 31, 1999, the dividend is payable in additional shares of
Series B Preferred Stock. Thereafter, the dividends will be payable in cash when
and as declared by the Board of Directors. Holders of Series B Preferred Stock
are not entitled to vote, except as defined in its Certificate of Designation.
Shares of Series B Preferred Stock are not subject to mandatory redemption.
On or after February 5, 2000, the Company may, at its option, redeem outstanding
shares of Series B Preferred Stock at a price of $25.00 per share, if the
trading price of the common stock equals or exceeds $5.50 per share. Shares of
Series B Preferred Stock are convertible into shares of Class B Common Stock, at
the option of the holder, at a ratio determined by dividing the liquidation
value of the Series A Preferred Stock by $5.50 and such ratio is subject to
adjustment from time to time.
NOTE 6 -- COMMON STOCK
For the period from February 5, 1997 to February 5, 2000, the common stock
is divided into three classes, Class A and Class B, which are voting, and Class
C, which is non-voting. During this period, the number of Directors of the
Company is fixed at nine, with the holders of the Class A shares having the
right to elect four Directors and the holders of the Class B shares having the
right to elect five Directors. In connection with the settlement of the issues
surrounding the adjustment to the purchase price paid by the Company, it is
expected that the certificate of incorporation of the Company will be amended to
increase the number of directors to be elected by the holders of Class B Common
Stock. Holders of the Class C shares do not participate in the election of
Directors. On February 5, 2000, the three classes of common stock will
automatically be consolidated into one single class of common stock with
identical rights. The Company currently has outstanding warrants exercisable for
2,107,843 shares of Class C Common Stock at an exercise price of $.10 per share,
which has already been deemed paid.
F-13
<PAGE> 122
NOTE 7 -- RELATED PARTY INFORMATION
G&G Investments, Inc.
The Company is party to a management agreement with G&G, in which G&G is to
provide specified managerial services for the Company. For these services, G&G
is entitled to receive an annual management fee of $3,000 and reimbursement of
its out-of-pocket costs. The terms of the Revolving Credit Facility and the
Indenture limit the management fee annual payment to $1,500 unless certain
financial maintenance tests are met. The Company has recorded an expense of
$2,750 for this agreement for the period ended December 31, 1997 of which $975
has been paid.
Other affiliates
Related party transactions with Consumers and its affiliates for the period
from February 5, 1997 to December 31, 1997 are summarized as follows:
<TABLE>
<S> <C>
Purchases of inventory and other............................ $ 5,201
Payable for inventory and other............................. 1,283
Sales of inventory and other................................ 20,314
Receivable from sales of inventory and other................ 5,791
</TABLE>
All transactions with Consumers and its affiliates are conducted on terms
which, in the opinion of management, are no less favorable than with third
parties.
The Company participates in the Director and Employee Incentive Stock
Option Plan, 1996 of Consumers. Options to purchase 1,216,500 shares of
Consumers common stock, at exercise prices that range from $9.65 to $13.50
(Canadian dollars), were granted to all salaried employees of the Company in
1997. The Company has not adopted Statement of Financial Accounting Standards
No. 123 -- Accounting for Stock-Based Compensation ("SFAS 123"). Had the Company
adopted SFAS 123, the 1997 effect on commpensation would be immaterial.
NOTE 8 -- PENSION PLANS
As part of the Anchor Acquisition, the Company assumed the pension plans
previously maintained by Old Anchor. The Company has defined benefit retirement
plans for salaried and hourly-paid employees. Benefits are calculated on a
salary-based formula for salaried plans and on a service-based formula for
hourly plans. Pension costs for the period from February 5, 1997 to December 31,
1997 are summarized below.
<TABLE>
<S> <C>
Service cost-benefits earned during the year................ $ 3,934
Interest cost on projected benefit obligation............... 28,219
Return on plan assets....................................... (29,087)
--------
Total pension cost................................ $ 3,066
========
</TABLE>
The Company has substantial unfunded obligations related to its employee
pension plans. The Retirement Protection Act of 1994 requires the Company to
make significant additional funding contributions into its underfunded defined
benefit retirement plans and will increase the premiums paid to the PBGC.
Excluding payments made as part of the Anchor Acquisition, the Company funded
required contributions of approximately $20,000 in 1997.
As an objection to the sale, the PBGC entered a determination to terminate
Old Anchor's qualified defined benefit pension plans. However, in conjunction
with the sale, the Company assumed all liabilities of the plans and funded
$9,056 of plan contributions, previously unfunded following Old Anchor's filing
of Chapter 11. Additionally, the Company issued $9,000 face amount of Series A
Preferred Stock and Vitro, the parent of Old Anchor, has guaranteed to fund
certain qualified defined benefit plan obligations, should the Company default
F-14
<PAGE> 123
on its obligations. Consequently, the PBGC agreed not to terminate the plans as
a result of the Agreement and the assumption of the plans by the Company.
The Company also sponsors two defined contribution plans covering
substantially all salaried and hourly employees. In 1994, the salaried
retirement and savings programs were changed, resulting in the freezing of
benefits under the defined benefit pension plans for salaried employees and
amending the defined contribution savings plan for salaried employees. Under the
amended savings plan, the Company matches employees' basic contributions to the
plan in an amount equal to 150% of the first 4% of an employee's compensation.
Expenses under the savings programs for the period from February 5, 1997 to
December 31, 1997 were approximately $2,000.
The funded status of the Company's pension plans at December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS
------------- -------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested benefit obligation........................... $314,427 $114,381
======== ========
Accumulated benefit obligation...................... $325,349 $114,381
======== ========
Projected benefit obligation........................ 325,349 114,381
Plan assets at fair value............................. 270,157 131,631
-------- --------
Projected benefit obligation in excess of (less than)
plan assets......................................... 55,192 (17,250)
Amounts not recognized --
Subsequent gains.................................... 4,651 5,693
Additional minimum liability.......................... 540
-------- --------
Accrued (prepaid) pension cost........................ $ 60,383 $(11,557)
======== ========
</TABLE>
Plan assets are held by an independent trustee and consist primarily of
investments in equities, fixed income and government securities. There is
currently no public market for the Series A Preferred Stock and no dividends
have been paid during the current year. The Company has received a valuation of
the contributed Series A Preferred Stock in the fourth quarter of 1997. Based
upon this valuation, the Company will be required to contribute approximately
$745 to bring the total value of the Series A Preferred Stock contribution up to
the $9,000 contributed value.
Significant assumptions used in determining net pension cost and related
pension obligations for the benefit plans for 1997 are as follows:
<TABLE>
<S> <C>
Discount rate............................................... 7.25%
Expected long-term rate of return on plan assets............ 9.0
</TABLE>
NOTE 9 -- POST RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides benefits to substantially all salaried, and certain
hourly employees under several plans. SFAS 106 requires accrual of
postretirement benefits (such as healthcare benefits) during the years an
employee provides services. Currently, the Company funds these healthcare
benefits on a pay-as-you-go basis. The Company also contributes to a
multi-employer trust, and under the requirements of SFAS 106, recognizes as
postretirement benefit cost the required annual contribution. The Company's cash
flows are not affected by implementation of SFAS 106.
F-15
<PAGE> 124
The accumulated postretirement benefit obligation at December 31, 1997 is
as follows:
<TABLE>
<S> <C>
Retirees.................................................... $39,882
Eligible plan participants.................................. 9,186
Other active plan participants.............................. 12,054
-------
61,122
Unrecognized gain........................................... 568
-------
Accrued postretirement benefit costs (including $3,790 in
current liabilities)...................................... $61,690
=======
</TABLE>
Net postretirement benefit costs for the period from February 5, 1997 to
December 31, 1997 consist of the following components:
<TABLE>
<S> <C>
Service cost -- benefits earned during the year............. $ 755
Interest cost on accumulated postretirement benefit
obligation................................................ 3,855
------
$4,610
======
</TABLE>
The assumed healthcare cost trend used in measuring the accumulated
postretirement benefit obligation as of December 31, 1997 was 8.5% declining
gradually to 5.5% by the year 2003, after which it remains constant. A one
percentage point increase in the assumed healthcare cost trend rate for each
year would increase the accumulated postretirement benefit obligation as of
December 31, 1997 by approximately 11% and the net postretirement healthcare
cost for the period ended December 31, 1997 by approximately 12%. The assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% for 1997.
The Company also contributes to a multi-employer trust which provides
certain other postretirement benefits to retired hourly employees. Expenses
under this program for the period from February 5, 1997 to December 31, 1997
were $3,781.
NOTE 10 -- PLANT CLOSING COSTS
In an effort to reduce the Company's cost structure and improve
productivity, the Company closed its Houston, Texas plant effective February
1997 and its Dayville, Connecticut plant effective April 1997 and included the
liabilities assumed as part of the Anchor Acquisition cost. Closure of these
facilities will result in the consolidation of underutilized manufacturing
operations. Substantially all of the hourly and salaried employees at these
plants, approximately 600 in total, have been terminated. Exit charges and the
amounts charged against the liability as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
AMOUNT CHARGED
EXIT CHARGES AGAINST LIABILITY
------------ -----------------
<S> <C> <C>
Severance and employee benefit costs.............. $13,000 $11,700
Plant shutdown costs related to consolidation and
discontinuation of manufacturing facilities..... 20,000 9,100
</TABLE>
NOTE 11 -- INCOME TAXES
The Company applies SFAS 109 under which the liability method is used in
accounting for income taxes. Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Under SFAS 109, if on the basis of
available evidence, it is more likely than not that all or a portion of the
deferred tax asset will not be realized, the asset must be reduced by a
valuation allowance. Since realization is not assured at of December 31, 1997,
management has deemed it appropriate to establish a realization reserve against
the tax asset created during the period.
F-16
<PAGE> 125
The following significant components of the deferred tax assets and
liabilities are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Pension and postretirement liabilities.................... $ 1,200
Accumulated depreciation.................................. 600
Other..................................................... 300
Tax loss carryforwards.................................... 2,900
-------
5,000
Valuation allowance......................................... (1,600)
-------
3,400
-------
Deferred tax liabilities:
Accrued liabilities and reserves.......................... 3,200
Other assets.............................................. 200
-------
3,400
-------
Net deferred tax asset...................................... $ --
=======
</TABLE>
The effective tax rate reconciliation at December 31, 1997 is as follows:
<TABLE>
<S> <C>
Federal rate................................................ (34)%
State rate.................................................. (5)
Permanent differences....................................... 25
---
(14)
Valuation allowance......................................... 14
---
Effective rate.............................................. --%
===
</TABLE>
NOTE 12 -- LEASES
The Company leases distribution and office facilities, machinery,
transportation, data processing and office equipment under non-cancelable leases
which expire at various dates through 2004. These leases generally provide for
fixed rental payments and include renewal and purchase options at amounts which
are generally based on fair market value at expiration of the lease. The Company
has no material capital leases.
Future minimum lease payments under non-cancelable operating leases are as
follows:
<TABLE>
<S> <C>
1998........................................................ $17,300
1999........................................................ 13,600
2000........................................................ 10,400
2001........................................................ 9,200
2002........................................................ 9,200
After 2002.................................................. 20,300
-------
$80,000
=======
</TABLE>
Rental expense for all operating leases for the period from February 5,
1997 to December 31, 1997 was $17,547.
In connection with the Anchor Acquisition, the Company assumed and amended
Old Anchor's lease of the headquarters facility located in Tampa, Florida and a
related option to purchase. The term of the amended lease expired January 2,
1998, unless the Company has exercised its purchase right, and the term then
expired February 1, 1998. In January 1998, the Company exercised the option to
purchase the headquarters facility and assigned such option to a third party
purchaser of the facility. The Company has entered into a ten year lease
pursuant to which the Company will lease a portion of the headquarters facility.
F-17
<PAGE> 126
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Company is a respondent in various environment-related cases. The
measurement of liabilities in these cases and other environmental concerns is
based on available facts of each situation and considers factors such as prior
experience in remediation efforts and presently enacted environmental laws and
regulations. In the opinion of management, based upon information presently
known, the Company has adequately provided for environmental liabilities. The
Company is not otherwise party to, and none of its assets are subject to any
other pending legal proceedings, other than ordinary routine litigation
incidental to its business and against which the Company is adequately insured
and indemnified or which is not material. The Company believes that the ultimate
outcome of these cases will not materially affect future operations.
NOTE 14 -- SUBSEQUENT EVENTS
Following the issuance of the First Mortgage Notes, the Company filed, with
the Securities and Exchange Commission, a Registration Statement on July 16,
1997, (File No. 333-31363) on Form S-4 under the Securities Act of 1933, with
respect to an issue of 11.25% First Mortgage Notes, due 2005, identical in all
material respects to the First Mortgage Notes, except that the new First
Mortgage Notes would not bear legends restricting the transfer thereof. Upon the
effectiveness of the Registration Statement, February 12, 1998, the Company
commenced an offer to the holders of the Notes to exchange their First Mortgage
Notes for a like principal amount of new First Mortgage Notes. The exchange
offer is expected to be completed by March 30, 1998.
In connection with a plan to simplify the corporate ownership structure of
Consumers, the Company and their affiliates, Glenshaw Glass Company, Inc., a
wholly-owned subsidiary of G&G, may become a subsidiary of the Company or
Consumers U.S.
Subsequent to year end, the Company has made definitive arrangements to
issue 9 7/8% senior unsecured notes, due 2008 in the amount of $50,000, the
proceeds of which are to be used to pay down the existing indebtedness under the
Company's revolving credit facility, and to provide for future expansion to meet
customer needs.
F-18
<PAGE> 127
INDEX TO FINANCIAL INFORMATION FOR OLD ANCHOR
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Arthur Andersen LLP, Independent Public
Accountants............................................ H-2
Consolidated Balance Sheets at February 4, 1997 and
December 31, 1996...................................... H-3
Consolidated Statements of Operations for the period from
January 1, 1997 to February 4, 1997 and for the years
Ended December 31, 1996 and 1995....................... H-4
Consolidated Statements of Cash Flows for the period from
January 1, 1997 to February 4, 1997 and for the years
Ended December 31, 1996 and 1995....................... H-5
Consolidated Statements of Stockholder's Equity
(Deficiency in Assets) for the period from January 1,
1997 to February 4, 1997 and for the years Ended
December 31, 1996 and 1995............................. H-6
Notes to Consolidated Financial Statements................ H-7
SELECTED CONSOLIDATED FINANCIAL DATA........................ H-24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. H-27
</TABLE>
H-1
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Anchor Glass Container Corporation:
We have audited the accompanying consolidated balance sheets of Anchor
Resolution Corp. (Debtor-in-Possession) (the Company) as of February 4, 1997 and
December 31, 1996, and the related consolidated statements of operations,
stockholder's equity (deficiency in assets) and cash flows for the period from
January 1, 1997 to February 4, 1997, and the two years ended December 31, 1996
and 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to report on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our report.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anchor
Resolution Corp. as of February 4, 1997, and December 31, 1996, and the results
of its operations and its cash flows for the period from January 1, 1997, to
February 4, 1997, and the two years ended December 31, 1996 and 1995 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
experienced significant losses in the last three fiscal years, and has a net
deficiency in assets of $284,959,000 at February 4, 1997. As described in Notes
2 and 3 to the accompanying consolidated financial statements, in September
1996, the Company filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code. Furthermore, as discussed in Note 2, on February
5, 1997, the Company sold substantially all of its assets and certain
liabilities. The Company's bankruptcy petition and remaining deficiency in
assets after this sale raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
March 27, 1998
H-2
<PAGE> 129
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 4, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 3,449 $ 4,898
Accounts receivable, less allowance for doubtful accounts of
$1,630 and $1,503......................................... 60,978 55,851
Inventories --
Raw materials and manufacturing supplies.................. 29,649 28,528
Semi-finished and finished products....................... 119,082 115,891
Other current assets........................................ 19,184 18,593
-------- --------
Total current assets............................... 232,342 223,761
-------- --------
Property, plant and equipment:
Land and land improvements................................ 10,405 10,405
Buildings................................................. 120,377 120,377
Machinery, equipment and molds............................ 531,827 524,643
Less accumulated depreciation, net........................ (350,967) (344,655)
-------- --------
311,642 310,770
-------- --------
Other assets................................................ 50,943 52,072
Intangible pension asset.................................... 17,140 17,140
Investment in joint venture................................. 39,734 39,725
-------- --------
$651,801 $643,468
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS)
Liabilities not subject to compromise:
Current liabilities:
Debtor-in-Possession Facility............................... $107,939 $ 90,455
Senior Secured Notes........................................ 158,025 158,025
Accounts payable............................................ 32,558 25,727
Accrued expenses............................................ 35,192 32,740
Accrued interest............................................ 914 1,510
Accrued compensation and employee benefits.................. 58,545 60,423
-------- --------
Total current liabilities.......................... 393,173 368,880
-------- --------
Pension liabilities......................................... 44,198 44,179
Other long-term liabilities................................. 120,206 119,722
-------- --------
164,404 163,901
Liabilities subject to compromise........................... 379,183 379,994
-------- --------
Total liabilities.................................. 936,760 912,775
Commitments and contingencies
Stockholder's equity (deficiency in assets):
Common stock -- $.10 par value; authorized 1,000 shares,
issued and outstanding, 1 share........................... -- --
Capital in excess of par value.............................. 576,300 576,300
Accumulated deficit......................................... (838,865) (823,213)
Amount related to minimum pension liability................. (22,394) (22,394)
-------- --------
(284,959) (269,307)
-------- --------
$651,801 $643,468
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
H-3
<PAGE> 130
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM JANUARY 1,
TO FEBRUARY 4, YEARS ENDED DECEMBER 31,
---------------------- -------------------------
1997 1996 1995
---------------------- ----------- ----------
<S> <C> <C> <C>
Net sales......................................... $ 62,560 $ 814,370 $956,639
Costs and expenses:
Cost of products sold........................... 70,608 831,612 906,393
Selling and administrative expenses............. 3,745 39,570 48,998
Restructuring and other charges................. -- 49,973 10,267
Impairment of long-lived assets................. -- 490,232 --
Write-up of assets held for sale................ -- (8,967) --
-------- --------- --------
Loss from operations.............................. (11,793) (588,050) (9,019)
Other income (expense), net....................... (595) (10,020) 171
Interest expense (1997 and 1996 contractual
interest of $5,353 and $57,768, respectively)... (2,437) (48,601) (56,871)
-------- --------- --------
Loss before reorganization items, income taxes and
extraordinary item.............................. (14,825) (646,671) (65,719)
Reorganization items.............................. (827) (5,008) --
-------- --------- --------
Loss before income taxes and extraordinary item... (15,652) (651,679) (65,719)
Income taxes...................................... -- 1,825 250
-------- --------- --------
Loss before extraordinary item.................... (15,652) (653,504) (65,969)
Extraordinary item --
Write-off of deferred financing fees, net of nil
tax.......................................... -- (2,336) --
-------- --------- --------
Net loss.......................................... $(15,652) $(655,840) $(65,969)
======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
H-4
<PAGE> 131
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 1, DECEMBER 31,
TO FEBRUARY 4, ----------------------
1997 1996 1995
--------------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss before extraordinary item............................ $(15,652) $(653,504) $ (65,969)
Adjustments to reconcile loss before extraordinary item to
net cash provided by (used in) operating activities:
Impairment of long-lived assets......................... -- 490,232 --
Write-up of assets held for sale........................ -- (8,967) --
Restructuring and other charges......................... -- 49,973 10,267
Depreciation............................................ 6,312 72,537 76,994
Amortization............................................ 1,293 29,119 22,921
Other................................................... 127 3,131 462
Decrease in cash resulting from changes in assets and
liabilities............................................. (2,696) (19,697) (44,245)
Increase in cash resulting from changes in prepetition
liabilities............................................. (811) 8,765 --
-------- --------- ---------
(11,427) (28,411) 430
Cash flows from investing activities:
Expenditures for property, plant and equipment............ (7,186) (46,254) (70,368)
Proceeds from sales of property, plant and equipment...... -- 14,022 49,490
Investment in joint venture............................... (10) (18,552) (20,631)
Other..................................................... (304) (13,108) (6,991)
-------- --------- ---------
(7,500) (63,892) (48,500)
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. -- 80,000 --
Principal payments on long-term debt...................... (6) (92,191) (365)
Capital contribution from Vitro S.A....................... -- 92,484 50,000
Sale of accounts receivable............................... -- -- 30,000
Net draws on Debtor-In-Possession Facility................ 17,484 90,455 --
Draws on Prepetition Credit Agreement..................... -- -- 87,000
Repayments on Prepetition Credit Agreement................ -- (83,000) (114,000)
Other, primarily financing fees........................... -- (8,862) (437)
-------- --------- ---------
17,478 78,886 52,198
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents.......... (1,449) (13,417) 4,128
Balance, beginning of period.............................. 4,898 18,315 14,187
-------- --------- ---------
Balance, end of period.................................... $ 3,449 $ 4,898 $ 18,315
======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by (used in) operating activities reflects
net cash payments for interest and taxes as follows:
Interest.................................................... $ 3,033 $ 51,412 $ 52,003
======== ========= =========
Income taxes (refunds), net................................. $ -- $ (209) $ (328)
======== ========= =========
In addition, the Company had the following non-cash
activities:
Extraordinary item -- write off of deferred financing
fees.................................................... $ -- $ 2,336 $ --
======== ========= =========
Increase (decrease) in cash resulting from changes in assets
and liabilities:
Accounts receivable....................................... $ (5,127) $ (15,351) $ (6,881)
Inventories............................................... (4,312) 36,154 (5,606)
Other current assets...................................... (591) (1,623) (4,050)
Accounts payable, accrued expenses and other current
liabilities............................................. 7,456 (26,246) (22,462)
Other, net................................................ (122) (12,631) (5,246)
-------- --------- ---------
$ (2,696) $ (19,697) $ (44,245)
======== ========= =========
</TABLE>
The Company considers short-term investments with original maturities of
ninety days or less at the date of purchase to be classified as cash
equivalents.
See Notes to Consolidated Financial Statements.
H-5
<PAGE> 132
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS)
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDER'S
COMMON CAPITAL IN RETAINED MINIMUM EQUITY
STOCK EXCESS OF EARNINGS PENSION (DEFICIENCY
(A) PAR VALUE (DEFICIT) LIABILITY IN ASSETS)
------ ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995........... $ -- $433,816 $(101,404) $ (7,858) $ 324,554
Capital contribution from Vitro,
S.A. ............................ -- 50,000 -- -- 50,000
Amount related to minimum pension
liability........................ -- -- -- (18,982) (18,982)
Net loss........................... -- -- (65,969) -- (65,969)
---- -------- --------- -------- ---------
Balance, December 31, 1995......... -- 483,816 (167,373) (26,840) 289,603
Capital contribution from Vitro,
S.A. ............................ -- 92,484 -- -- 92,484
Amount related to minimum pension
liability........................ -- -- -- 4,446 4,446
Net loss........................... -- -- (655,840) -- (655,840)
---- -------- --------- -------- ---------
Balance, December 31, 1996......... -- 576,300 (823,213) (22,394) (269,307)
Net loss........................... -- -- (15,652) -- (15,652)
---- -------- --------- -------- ---------
Balance, February 4, 1997.......... $ -- $576,300 $(838,865) $(22,394) $(284,959)
==== ======== ========= ======== =========
</TABLE>
- ---------------
(A) One share, $.10 par value outstanding
See Notes to Consolidated Financial Statements.
H-6
<PAGE> 133
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are prepared on a
historical cost basis of accounting and reflect adjustments for the impairment
of goodwill and other long-lived assets. As discussed in Note 3, Anchor
Resolution Corp. (formerly known as Anchor Glass Container Corporation) (the
"Company") is operating as a debtor-in-possession under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"). The accompanying consolidated financial
statements do not purport to reflect or provide for the consequences of the
bankruptcy proceedings. In particular, the consolidated financial statements do
not purport to show (a) as to assets, the remaining assets, their realizable
value on a liquidation basis or their availability to satisfy liabilities; (b)
as to prepetition liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; or (c) as to stockholder's
accounts, the effect of any changes that may be made in the capitalization of
the Company; or (d) as to operations, the effect of any changes that may be made
in the Company's remaining business.
Organization of the Company
At February 4, 1997, the Company is a wholly-owned subsidiary of Container
Holdings Corp. ("Container") which is a direct wholly-owned subsidiary of Vitro,
Sociedad Anonima ("Vitro"), a limited liability corporation incorporated under
the laws of the United Mexican States. On September 13, 1996, the Company filed
a voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") (See Note 3). On February 5, 1997, Consumers
Packaging Inc. ("CPI") and Owens-Brockway Glass Container, Inc. ("OI") acquired
substantially all of the assets and business of the Company in accordance with
the terms of the Agreement (See Note 2). The financial statements for the period
from January 1, 1997 to February 4, 1997 (the "1997 Interim Period") represent
the final period of operations of the Company.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
Business Segment
The Company is engaged in the manufacture and sale of a diverse line of
clear, amber, green and other color glass containers of various types, designs
and sizes to customers principally in the beer, food, iced tea, distilled
spirits, wine and soft drink industries. The Company markets its products
throughout the United States. The Company's international operations and export
sales are insignificant. Sales to Anheuser-Busch represented 6%, 11% and 24% of
total net sales for the 1997 Interim Period and the years ended 1996 and 1995,
respectively. As a result of the current highly competitive environment, the
Company had been informed by Anheuser-Busch that the Company's 1996 and future
volume allocations would be reduced. Additionally, sales to The Stroh Brewery
Company represented 10.0% and 10.8% of total net sales for the 1997 Interim
Period and the year ended 1996.
H-7
<PAGE> 134
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Inventories
Inventories are stated at the lower of cost or market. The cost of
substantially all inventories of raw materials and semi-finished and finished
products is determined on the last-in, first-out ("LIFO") method. At February 4,
1997 and December 31, 1996 the estimated current cost of these inventories
exceeds their stated value determined on the LIFO basis by approximately
$16,740. Manufacturing supplies and certain other inventories are valued at
weighted average actual or standard costs that approximate actual costs.
Property, Plant and Equipment
Property, plant and equipment expenditures, including renewals, betterments
and furnace rebuilds, which extend useful lives, and expenditures for glass
forming machine molds are capitalized and depreciated using the straight-line
method over the estimated useful lives of the assets for financial statement
purposes while accelerated depreciation methods are principally used for tax
purposes. Generally, annual depreciation rates range from 2.5% for buildings,
6.3% to 20% for machinery and equipment and 40% for molds. Furnace and machine
rebuilds, which are recurring in nature and which extend the lives of the
related assets, are recorded as a charge to accumulated depreciation. Annual
depreciation rates for such expenditures range from 20% to 25%, based on the
type and extent of these rebuilds. Depreciation of leased property recorded as
capital assets is computed on a straight-line basis over the estimated useful
lives of the assets. Maintenance and repairs are charged directly to expense as
incurred.
Excess of Cost Over Fair Value of Net Assets Acquired (Goodwill)
As a result of the declining profitability, diminishing cash flows and the
Company's bankruptcy as discussed in Note 3, the recoverable value of the
carrying amount of long-lived assets and intangibles was reviewed for
impairment.
Prior to the sale of substantially all of its assets, the Company used
projected undiscounted earnings before interest, income taxes, depreciation and
amortization but after maintenance capital expenditures as compared to the
unamortized balance of goodwill and other long-lived assets, to measure any
impairment, and as of December 31, 1995, no impairment was calculated. As a
result of the sale of the Company's assets, in late 1996, the Company used
projected proceeds from the sale as a measure of impairment of goodwill.
Based upon this review, the amount of remaining excess of purchase price
over fair value of net assets acquired of $457,232 and other long-lived assets
of $33,000 were written off in the year ended December 31, 1996.
The excess of cost over fair value of net assets acquired had been
amortized on a straight line basis over a 40 year period. Amortization expense,
included as a component of cost of products sold, for the years ended December
31, 1996 and 1995 was $13,920 and $13,925 respectively.
Income Taxes
Statement of Financial Accounting Standards No. 109 -- Accounting for
Income Taxes ("SFAS 109") establishes financial accounting and reporting
standards for the effects of income taxes which result from a company's
activities during the current and preceding years. In general, SFAS 109 requires
that each company within a consolidated group recognize tax expense based on its
own income. The Company and its subsidiaries file a consolidated tax return with
Container and its subsidiaries. To the extent that current operating loss
benefits of the consolidated group or post acquisition loss carryforwards are
allocated to the Company as a reduction of current income taxes payable, such
benefits are reflected as a contribution of
H-8
<PAGE> 135
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
capital. The Company's tax benefits arising prior to acquisition (preacquisition
losses) are reflected as a reduction in goodwill when the losses are utilized.
Post acquisition losses of the Company are used to offset current or future
income tax provisions.
Retirement Plans
The Company has retirement plans, principally non-contributory, covering
substantially all salaried and hourly employees. The Company's funding policy is
to pay at least the minimum amount required by the Employee Retirement Income
Security Act of 1974. As a result of the Bankruptcy Proceedings (See Note 3),
certain plan contributions were not made as of February 4, 1997 (See Note 12).
At February 4, 1997 and December 31, 1996, the Company has recorded an
additional minimum pension liability for underfunded plans representing the
excess of the underfunded liability over previously recorded accrued pension
costs.
Postretirement Benefits
Statement of Financial Accounting Standards No. 106 -- Employers'
Accounting for Postretirement Benefits Other Than Pensions ("SFAS 106") requires
accrual of postretirement benefits (such as healthcare benefits) during the
period that an employee provides service. The transition obligation from the
adoption of SFAS 106 approximated $3,400 and is being amortized on a
straight-line basis over a period of twenty years. This accounting method has no
effect on the Company's cash outlays for these retirement benefits.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 -- Disclosures about
Fair Value of Financial Instruments requires disclosure of the estimated fair
values of certain financial instruments. The estimated fair value amounts have
been determined using available market information or other appropriate
valuation methodologies that require considerable judgment in interpreting
market data and developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts. Based on the uncertainty of the ultimate outcome of the
Bankruptcy Proceedings, discussed in Note 3, the Company is unable to estimate
the fair value of long-term debt at February 4, 1997 and December 31, 1996. The
carrying amount of other financial instruments approximate their estimated fair
values.
The fair value information presented herein is based on information
available to management as of February 4, 1997. Such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and, therefore, the current estimates of fair value may differ
significantly from the amounts presented herein. As a result of the Bankruptcy
Proceedings discussed in Note 3, the ultimate value of these financial
instruments is dependent upon the payment under the Company's future plan of
reorganization.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
H-9
<PAGE> 136
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
NOTE 2 -- SALE OF ASSETS
On February 5, 1997, OI and Anchor Glass Acquisition Corporation ("New
Anchor"), a majority-owned subsidiary of CPI, acquired substantially all of the
assets and business of the Company, pursuant to the Asset Purchase Agreement
dated December 18, 1996, as amended (the "Agreement").
New Anchor purchased eleven operating glass container manufacturing
facilities, five idled glass container manufacturing facilities and other
related assets. OI purchased assets and assumed liabilities of the Company's
Antioch, California and Hayward, California facilities and purchased certain
other existing inventories. OI also purchased the Company's investment in Rocky
Mountain Bottle Company, a joint venture with Coors Brewing Company ("Coors"),
and assumed the Company's agreement to manufacture Coors' glass packaging
products in the United States.
The total purchase price approximated $378,000, excluding fees of
approximately $1,500. The purchase price received from OI amounted to
approximately $128,000 and was received in cash. The remaining purchase price of
approximately $250,000 from New Anchor was comprised of: approximately $200,500
in cash, $47,000 face amount (1,879,320 shares) of mandatorily redeemable 10%
cumulative convertible preferred stock and $2,500 of common stock (490,898
shares with an estimated value of $5.00 per share) of New Anchor.
The purchase price paid by New Anchor in connection with the Anchor
Acquisition is subject to adjustment. On June 13, 1997, the Company delivered to
New Anchor the closing balance sheet which indicated that the Company believed
that it was entitled to additional payments from New Anchor and Owens totaling
approximately $76,300. On July 28, 1997, New Anchor delivered its notice of
disagreement to the Company, which requested a reduction of the purchase price
of approximately $96,800. Since that time, the parties have been negotiating the
amount of the adjustment, and have reached a proposed settlement (the "Proposed
Settlement"). The Proposed Settlement requires the payment by New Anchor to the
Company of an additional $1,000 in cash and the issuance of 1,225,000 warrants
for the purchase of additional shares of common stock. None of the warrants to
be issued will require any payment upon exercise. The Proposed Settlement is
subject to final approval by the Company, New Anchor and the bankruptcy court.
Proceeds from the sale were used to repay the outstanding balance of the
DIP Facility and accrued interest thereon, of approximately $109,000 at February
4, 1997. The remainder of the proceeds will be used against prepetition
liabilities, as ultimately determined under the Company's Plan of Reorganization
(see Note 3).
Upon consummation of the purchase and effective February 6, 1997, New
Anchor changed its name to Anchor Glass Container Corporation and the Company
changed its name to Anchor Resolution Corp.
As an objection to the sale, the Pension Benefit Guaranty Corporation
("PBGC") entered a determination to terminate the Company's qualified defined
benefit pension plans. However, in conjunction with the sale, New Anchor assumed
all liabilities of the plans and funded approximately $9,100 of plan
contributions, previously unfunded following the Company's filing of Chapter 11
(see Note 3). Additionally, New Anchor issued to the plans $9,000 face amount
(360,000 shares) of mandatorily redeemable 10% cumulative preferred stock and
Vitro agreed to provide a limited guaranty to the PBGC with respect to the
unfunded benefit liabilities of the Company's defined benefit plans.
Consequently, the PBGC agreed not to terminate the plans as a result of the
Agreement and the assumption of the plans by New Anchor.
On October 4, 1996, the Company entered into an asset purchase agreement
with Ball-Foster Glass Container Co. L.L.C., ("Ball-Foster"). Pursuant to that
agreement, Ball-Foster was to acquire substantially
H-10
<PAGE> 137
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
all of the assets of the Company for $365 million in cash at closing, subject to
adjustment, as set forth in that agreement. In addition, Ball-Foster was to
assume specified liabilities of the Company. Payment of the purchase price was
guaranteed by Saint-Gobain Corporation, parent company of Ball-Foster.
Also on October 4, 1996, the Company filed a motion with the Bankruptcy
Court seeking an order (i) authorizing the sale to Ball-Foster, subject to
higher and better bids, of substantially all of the Company's assets free and
clear of certain liens, claims and encumbrances and (ii) authorizing assumption
and assignment of certain unexpired leases and executory contracts. The Court
had entered several amended scheduling orders which established a timetable for
the sale process. The amended deadline for submissions of higher and better bids
was December 12, 1996. At that time, the Company received a higher and better
offer from CPI and OI. Ball-Foster received a termination fee of $3,000 from the
proceeds of the transaction.
The following unaudited pro forma condensed balance sheet gives effect to
the sale of assets and business and payoff of the DIP Facility (as defined)
described above as if such transactions occurred on February 4, 1997:
<TABLE>
<S> <C>
Cash........................................................ $ 223,000
Other current assets........................................ 7,500
Investment in Common Stock of Anchor Glass Container
Corporation............................................... 2,500
Investment in Preferred Stock of Anchor Glass Container
Corporation............................................... 47,000
Property, plant and equipment............................... 7,000
Other assets................................................ 10,000
---------
Total assets...................................... $ 297,000
---------
Liabilities not subject to compromise:
Current liabilities......................................... $ 165,000
Other long-term liabilities............................... 16,000
Liabilities subject to compromise......................... 375,000
---------
Total liabilities................................. 556,000
---------
Deficiency in assets.............................. $(259,000)
=========
</TABLE>
The Company's remaining deficiency in assets after this sale raises
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include adjustments that might result
from the outcome of this uncertainty.
NOTE 3 -- BANKRUPTCY PROCEEDINGS
As a result of the continued decline in the Company's results of operations
from the effect of the highly competitive glass container market and the
Company's high debt level, on September 13, 1996 (the "Petition Date"), the
Company filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). On September 30, 1996, Anchor
Recycling Corporation, a wholly-owned subsidiary of the Company, also filed a
voluntary petition to reorganize under Chapter 11 in the same court. The Chapter
11 proceedings are being jointly administered, with the Company managing the
business in the ordinary course as a debtor-in-possession under the supervision
of the Bankruptcy Court. Vitro and the Company concluded that the Chapter 11
filing was necessary in order to preserve the value of its assets and to ensure
that the business has sufficient cash resources to continue operations while it
completed the sale of the business discussed in Note 2.
H-11
<PAGE> 138
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Under Chapter 11 proceedings, litigation and actions by creditors to
collect certain claims existing at the Petition Date are stayed, without
specific Bankruptcy Court authorization to pay such claims. The Company had
received authorization, pursuant to first day orders, to pay certain claims
related to wages, salaries, vacation, sick pay and other claims. As a
debtor-in-possession, the Company has the right, subject to Bankruptcy Court
approval, and certain other limitations, to assume or reject certain executory
contracts, including unexpired leases. Any claim for damages resulting from the
rejection of an executory contract or an unexpired lease is treated as a general
unsecured claim in the Chapter 11 proceedings.
On September 26, 1996 the United States Trustee appointed a single
unsecured creditors' committee (the "Creditors Committee"). The Creditors'
Committee has the right to review and object to certain business transactions
and has participated in the negotiation of the Company's plan of reorganization.
The Creditors Committee has retained the firm of Wachtell, Lipton, Rosen & Katz
as its counsel and Smith Barney Inc. as its financial advisors.
The Company obtained debtor-in-possession ("DIP") financing from Foothill
Capital Corporation, as agent and Congress Financial Corporation, as co-agent,
(the "Lender Group") which provided for a $130,000 DIP Credit Facility (the "DIP
Facility"), and was approved by the Bankruptcy Court on November 15, 1996. The
DIP Facility, which expires September 30, 1997, provides up to $130,000 under a
borrowing base formula, less prepetition advances under the Company's then
existing New Senior Credit Facility (the "Prepetition Credit Facility") with the
Lender Group, on terms substantially the same as the Prepetition Credit
Facility. On February 5, 1997, the DIP Facility was repaid in full with proceeds
from the sale as discussed in Note 2.
The DIP Facility and prepetition secured claims are collateralized by
substantially all of the assets of the Company including accounts receivable,
inventories and property, plant and equipment. The Company has continued to
accrue interest on its prepetition secured debt obligations. Because of the
Chapter 11 filing, there has been no accrual of interest on prepetition
unsecured debt subsequent to the Petition Date.
Of the cash proceeds received from the sale of substantially all the assets
and business of the Company (see Note 2), approximately $109,000 was used to
repay in full the DIP Facility and approximately $11,000 was applied to the
prepayment of real estate taxes, certain costs related to the Company's
partnership with Coors (see Note 8) and the termination fee payable to
Ball-Foster (see Note 2). The balance of the net proceeds of the sale remaining
after application to the costs of the winddown and to other administrative and
priority claims will be distributed to the creditors of the Company, including
the holders of approximately $158,000 principal amount of the Company's Senior
Secured Notes and holders of other secured and unsecured claims, pursuant to a
Plan of Reorganization which is being developed by the Company in conjunction
with the Creditors Committee.
The Company has separately reported, as reorganization items on the
consolidated statement of operations, professional fees and similar types of
expenditures relating directly to the Chapter 11 filing. The Company's policy is
to expense all such expenditures as incurred. These expenses are primarily for
legal, claims and accounting services.
H-12
<PAGE> 139
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
NOTE 4 -- PREPETITION LIABILITIES
Prepetition liabilities subject to compromise include the following:
<TABLE>
<CAPTION>
FEBRUARY 4, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
$100,000 10.25% Senior Notes......................... $100,000 $100,000
$200,000 9.875% Senior Subordinated Debentures....... 200,000 200,000
Other debt........................................... 4,368 4,368
Trade payables....................................... 67,890 68,701
Accrued interest..................................... 6,925 6,925
-------- --------
$379,183 $379,994
======== ========
</TABLE>
Because of the Chapter 11 proceedings, there has been no accrual of
interest on the $100,000 10.25% Senior Notes or the $200,000 9.875% Senior
Subordinated Debentures since September 12, 1996. If accrued, interest expense
would have increased $2,916 and $9,167, respectively, during the 1997 Interim
Period and the year ended December 31, 1996. Additionally, the amounts reflected
as prepetition liabilities do not include amounts related to potential claims,
which are substantially in excess of the recorded liabilities at February 4,
1997.
NOTE 5 -- LONG-TERM DEBT
At February 4, 1997 and December 31, 1996, all debt which, by its terms was
previously classified as long-term at the Petition Date, is classified as
prepetition liabilities in the accompanying balance sheet.
As a result of the Bankruptcy Proceedings (See Note 3), the Company is in
default of various covenants relating to its outstanding prepetition debt.
However, under Chapter 11 proceedings, litigation or actions by creditors
related to these defaults are stayed. In addition, the DIP Facility required
that the Company's collateral value and availability, as defined, could not be
less than a specified amount and the outstanding credit facility balance could
not be more than a specified amount as measured on a rolling four-week period
throughout the term of the DIP Facility. Prior to the repayment of the DIP
Facility, the Company was in full compliance with these covenants.
H-13
<PAGE> 140
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Long-term debt at December 31, 1995, giving affect to the Noteholder
Restructuring Agreement discussed below, consists of the following:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Floating Rate Series A Senior Secured Notes, variable
interest rate, payable monthly............................ $ 38,000
Series B Senior Secured Notes, interest at 9.91%, payable
monthly................................................... 202,000
Floating Rate Series C Senior Secured Notes, variable
interest rate, payable monthly............................ 10,000
$100,000 Senior Notes, Series A, interest at 10.25%, payable
semi-annually............................................. 100,000
$200,000 Senior Subordinated Debentures, interest at 9.875%,
payable semi-annually..................................... 200,000
Other....................................................... 4,450
--------
554,450
Less current maturities..................................... 1,770
--------
$552,680
========
</TABLE>
Effective January 12, 1996, the Company and the holders of the Senior
Secured Notes entered into a Noteholder Restructuring Agreement which provides
for, among other things, consent by the holders to the replacement of the then
current Credit Agreement with a new $130,000 credit facility (subsequently
replaced by the DIP Facility) and waiver by the holders to identified defaults
or events of default existing on the effective date or which may occur during
the waiver period which expired not later than January 31, 1998. The
restructuring period was defined as the period between the effective date and
the termination date, which would have occurred no later than June 30, 1998 (the
"Restructuring Period"). The following events occurred in connection with the
effectiveness of the Noteholder Restructuring Agreement:
- execution of the $130,000 Prepetition Credit Facility
- mandatory prepayment on January 12, 1996 of the aggregate principal
amount of the Senior Secured Notes as follows:
-- Series A $12,160; Series B $64,640 and Series C $3,200;
- payment of a restructuring fee of 1.75% of the principal amount of the
consenting noteholders' Senior Secured Notes outstanding prior to giving
effect to the prepayments above, approximately $4,100, and
- $40,000 capital contribution from Vitro and a commitment from Vitro to
contribute an additional $25,000 on or before January 31, 1997. Capital
contributions in 1996 amounted to $92,484.
Compliance with the financial maintenance tests as defined in the
amendments to the Note Purchase Agreement, including fixed charge coverage, net
worth, current ratio and debt to equity were waived through the period ending
January 31, 1998. However, the Company was required to maintain capital
expenditures and net worth in amounts not less than those defined in the
Noteholder Restructuring Agreement.
During the Restructuring Period, the Series A Notes and Series C Notes bore
a floating rate of interest at the one-month LIBOR rate, as defined, plus 2.0%.
The interest rate was adjusted monthly. Interest on the Series B Notes is fixed
at 9.91% per annum. Interest during the Restructuring Period is payable on the
15th of each month.
H-14
<PAGE> 141
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Effective January 12, 1996, and concurrent with the Noteholder
Restructuring Agreement, the Company entered into a Loan Agreement with Foothill
Capital Corporation, as agent and Congress Financial Corporation, as co-agent,
to provide for the $130,000 Prepetition Credit Facility. $80,000 of proceeds
from the Prepetition Credit Facility were used to prepay at closing a
significant portion of certain payments of the Senior Secured Notes originally
scheduled to be made in July 1996 and July 1997 and the remaining $50,000 was
used to finance working capital and other general corporate purposes. Advances
outstanding at any one time are not to exceed an amount equal to the Borrowing
Base as defined in the Prepetition Credit Facility. Interest, at prime plus
1.125%, as defined, is payable monthly. A commitment fee of .5% of the unused
portion of the Prepetition Credit Facility is payable monthly. The Prepetition
Credit Facility (which was subsequently replaced with the DIP Facility) was
repaid February 5, 1997 with proceeds from the sale discussed in Note 2.
Through February 5, 1997 the Company had borrowings outstanding under the
DIP Facility. At February 4, 1997 and December 31, 1996, advances outstanding
under the DIP Facility were $107,939 and $90,455, respectively. At December 31,
1996, the weighted average interest rate on borrowings outstanding was 9.375%.
In March 1994, Vitro provided a one year, $20,000 letter of credit facility
on behalf of the Company, thereby effectively increasing the Company's letter of
credit availability by $20,000. Outstanding letters of credit under this
facility at December 31, 1996 were $15,000. In February 1997, the Company
received an additional capital contribution of $8,400 in satisfaction of
obligations outstanding under the letter of credit facility, which was
terminated at that time.
The Senior Secured Notes are collateralized by the property, plant and
equipment of the Company with a secondary interest in inventories and accounts
receivable. The DIP Facility is collateralized by inventories and accounts
receivable with a secondary interest in the property, plant and equipment of the
Company. Both the Note Purchase Agreement and the DIP Facility provide for
various covenants that restrict the Company's ability to incur additional
indebtedness, sell or transfer assets, make investments, enter into transactions
with or make distributions to affiliates and pay dividends or make other
distributions in respect of its capital stock, as well as require it to meet
various financial maintenance tests. Effective with the Noteholder Restructuring
Agreement, the holders of the Senior Secured Notes waived compliance with the
financial maintenance covenants through January 31, 1998. However, the Company
must maintain capital expenditures and net worth in amounts not less than those
defined in the Noteholder Restructuring Agreement.
Effective June 18, 1992, the Company issued $100,000 aggregate principal
amount of 10.25% Senior Notes due June 30, 2002 (the "Exchange Notes"). The
Company then completed an exchange offer with the exchange of all Exchange Notes
for a like principal amount of 10.25% Senior Notes due 2002, Series A (the
"Senior Notes"), issued under an Indenture dated as of October 15, 1992 between
the Company and Continental Bank, National Association, as Trustee. The Senior
Notes are unsecured obligations of the Company ranking senior in right of
payment to the Debentures (described below) and pari passu with all other
existing and future senior indebtedness of the Company. Interest is payable
semi-annually in arrears on each June 30 and December 31. Interest has not been
paid or accrued following the Petition Date.
Effective December 2, 1993, the Company completed a public offering of
$200,000 aggregate principal amount of 9.875% Senior Subordinated Debentures due
December 15, 2008 (the "Debentures") under an Indenture dated December 1, 1993
between the Company and Chemical Bank, as Trustee. The Debentures are unsecured
obligations, subordinate in right of payment to all existing and future senior
debt, as defined, of the Company. Interest on the Debentures is payable
semi-annually on June 15 and December 15. Interest has not been paid or accrued
following the Petition Date.
H-15
<PAGE> 142
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
All of the Company's debt agreements contain cross-default provisions.
NOTE 6 -- RESTRUCTURING AND OTHER CHARGES
In January 1996, formal plans were approved to further restructure certain
of the Company's operations to respond to the continued decline in the industry
sales volume combined with the loss of a significant portion of the business of
the Company's largest customer. The Company closed its Cliffwood, New Jersey
plant effective January 1996, and substantially all hourly and salaried
employees of that plant, approximately 350, were terminated. A restructuring
charge of approximately $50,000 was recorded in the 1996. Of this amount,
approximately $24,900 related to the writedown to net realizable value of
certain manufacturing assets.
During 1994, formal plans were approved to significantly reduce the
Company's cost structure and to improve productivity. This restructuring program
relates primarily to consolidation of underutilized manufacturing operations and
provided for the closure of three of the Company's 17 manufacturing plants then
operating. The Company closed its Waukegan, Illinois and Los Angeles, California
plants in the second quarter of 1995 and its Keyser, West Virginia plant in the
third quarter of 1995. In the 1994 fourth quarter, the Company recorded a
restructuring charge of $79,599 and in the 1995 first quarter, an additional
$10,300 charge was recorded to reflect the benefit arrangements for employees
affected by this plan. In total, substantially all hourly and salaried employees
of these plants, approximately 725, were terminated. Of the total $89,800
charge, approximately $50,600 related to the writedown to net realizable value
of certain manufacturing assets.
The Keyser and Cliffwood plants have been recorded at net realizable value
and are held for sale. The Waukegan plant was sold in 1996 and the Los Angeles
plant will be retained by the Company as part of the acquisition discussed in
Note 2 to the consolidated financial statements.
The following represents information regarding amounts charged against the
restructuring liability for the Company's restructuring plans.
<TABLE>
<CAPTION>
AMOUNT
CHARGED
RESTRUCTURING AGAINST
CHARGES LIABILITY
------------- ---------
<S> <C> <C>
1996 RESTRUCTURING PLAN
Severance and employee benefit costs........................ $10,800 $10,800
Plant shutdown costs related to consolidation and
discontinuation of manufacturing activities............... $14,300 $12,600
1994/1995 RESTRUCTURING PLAN
Severance and employee benefit costs........................ $18,300 $18,300
Plant shutdown costs related to consolidation and
discontinuation of manufacturing activities............... $20,900 $18,500
</TABLE>
NOTE 7 -- CAPITAL CONTRIBUTION
As a condition of closing to the Noteholder Restructuring Agreement, as
discussed in Note 5, in January 1996, the Company received a $40,000 cash
capital contribution from Vitro and received a commitment from Vitro to
contribute an additional $25,000 on or before January 31, 1997. During 1996,
Vitro provided capital contributions of $92,484.
H-16
<PAGE> 143
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
NOTE 8 -- INVESTMENT IN JOINT VENTURE
In March 1995, the Company and Coors entered into a long-term partnership
(the "Partnership") to produce glass bottles at the Coors glass manufacturing
facility in Wheat Ridge, Colorado. The Partnership will employ the Company's
technology, along with capital contributions from both companies, to increase
the efficiency, capacity and volume of the Coors facility. Coors has
contributed, as its capital contribution, the facility's machinery, equipment
and certain personal property. The Company's required capital contribution was
approximately $54,000 in cash for capital spending needs over the first three
years of the partnership, of which approximately $36,015 has been contributed
through capital expenditures through December 31, 1996. The Company's investment
in the joint venture is accounted for on the equity method. Capital
contributions are recorded as the investment is funded. The Partnership has an
initial term of ten years, which can be extended for additional terms of two
years each, and the partners will share the cost benefit of achieved operational
efficiencies. In addition, Coors has entered into a separate long-term preferred
supplier agreement with the Company. The preferred supplier agreement has an
initial term of ten years, which can be extended for additional terms of two
years each. This agreement will allow the Company to supply 100% of Coors' glass
container requirements (exceeding the Partnership's production) beginning
January 1, 1996.
As discussed in Note 2, effective February 5, 1997, OI purchased the
Company's investment in the joint venture (including the assumption of related
obligations) and the preferred supplier agreement.
NOTE 9 -- SALE AND LEASEBACK
In July and August 1995, the Company entered into sale and leaseback
transactions of certain manufacturing equipment located at four of the Company's
manufacturing facilities. Under the sale agreements, the Company sold the
equipment at an aggregate net selling price of approximately $48,300. In
addition, the Company entered into agreements to lease back the equipment for a
nine year term at an average annual rental of approximately $7,600. The deferred
gain of approximately $14,200, representing the excess of the selling price over
the net book value of the equipment, is being amortized at approximately $1,600
annually over the nine year operating lease term.
NOTE 10 -- RELATED PARTY INFORMATION
Container
There have been no material transactions between the Company and Container
or its subsidiaries in the 1997 Interim Period and in the years ended 1996 and
1995. During 1996, the Company sold a previously closed manufacturing facility
to Container for proceeds of approximately $750 of cash and a note receivable of
$2,800.
H-17
<PAGE> 144
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Vitro
Related party transactions with Vitro and its consolidated subsidiaries are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Purchases of equipment................................... $ 7,183 $ 6,662
Payable for equipment.................................... 2,078 22
Purchases of inventory................................... 6,978 2,115
Payable for inventory.................................... 1,582 9
Sales of inventory....................................... 23,376 14,534
Receivable from sales of inventory....................... 3,100 2,211
Other receivables........................................ -- 221
Equipment deposits....................................... 2,187 2,187
</TABLE>
The nature and amount of related parties transactions during the 1997
Interim Period were not material.
Sale of Accounts Receivable
In December 1995, approximately $30,700 of eligible trade receivables was
sold to Factoraje Serfin, S.A. de C.V., a wholly-owned subsidiary of Grupo
Financiero Serfin, S.A. de C.V., an associated company in which Vitro owns a
minority interest. This transaction resulted in net proceeds to the Company of
$30,000. These receivables were sold without recourse and the proceeds were used
to fund working capital needs.
NOTE 11 -- INCOME TAXES
The consolidated group of companies, of which the Company is a member,
applies SFAS 109 under which the liability method is used in accounting for
income taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Under SFAS 109, if on the basis of
available evidence, it is more likely than not that all or a portion of the
deferred tax asset will not be realized, the asset must be reduced by a
valuation allowance.
The Company had previously recognized approximately $1,825 as a deferred
tax asset, net of the valuation allowance. As a result of continuing losses,
management has determined it was no longer more likely than not that the value
of the remaining deferred tax asset would be realized. As a result, the Company
recorded an additional valuation allowance of $1,825, which is reflected as a
provision for income taxes in the Consolidated Statement of Operations for the
year ended December 31, 1996. The company recorded a current state income tax
provision of $250 in 1995.
H-18
<PAGE> 145
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
The significant components of the deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
FEBRUARY 4, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Deferred tax assets:
Acquired tax benefits..................................... $ 27,700 $ 27,700
Post acquisition loss carryforwards....................... 112,000 106,000
Pension and postretirement liabilities.................... 55,300 55,300
Accruals and reserves..................................... 50,300 50,300
--------- ---------
245,300 239,300
Valuation allowance....................................... (158,400) (152,400)
--------- ---------
86,900 86,900
--------- ---------
Deferred tax liabilities:
Property, plant and equipment............................. 55,000 55,000
Inventories............................................... 22,300 22,300
Receivables and other assets.............................. 9,600 9,600
--------- ---------
86,900 86,900
--------- ---------
Net deferred tax asset...................................... $ -- $ --
========= =========
</TABLE>
At February 4, 1997, the Company had unused net operating losses and
investment tax credit carryforwards of approximately $340,000 and $5,200,
respectively, expiring at various dates through 2011. Of these amounts, $275,000
and $0, respectively, are not restricted as to use and expire at various dates
through 2011. The balance of the carryforwards amounting to $65,000 and $5,200,
respectively, expire at various dates through 2004, and are restricted to
offsetting future taxable income of the respective companies which generated the
carryforwards.
NOTE 12 -- PENSION PLANS
The Company has defined benefit retirement plans for salaried and
hourly-paid employees. Benefits are calculated on a salary-based formula for
salaried plans and on a service-based formula for hourly plans. Effective
December 31, 1994, the Company changed its defined benefit plans for salaried
employees resulting in the freezing of benefits, as discussed below. Pension
costs incurred in the 1997 Interim Period were $848. Pension costs for the years
ended 1996 and 1995 are summarized below.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Service cost-benefits earned during the year................ $ 5,266 $ 6,731
Interest cost on projected benefit obligation............... 28,646 29,429
Return on plan assets....................................... (28,270) (22,500)
Net amortization and deferral............................... 2,442 2,757
Curtailment (gain) loss..................................... 964 --
-------- --------
Total pension cost................................ $ 9,048 $ 16,367
======== ========
</TABLE>
H-19
<PAGE> 146
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
The Company has substantial unfunded obligations related to its employee
pension plans. The Retirement Protection Act of 1994 requires the Company to
make significant additional funding contributions into its underfunded defined
benefit retirement plans and will increase the premiums paid to the PBGC.
Subsequent to the Petition Date, the Company did not make scheduled
contribution payments to its employee pension plans. Scheduled plan contribution
payments not made in the year ended December 31, 1996, amounted to $16,330. Of
the scheduled January 15, 1997 contribution, $3,599 was not paid.
As an objection to the sale, the PBGC entered a determination to terminate
the Company's qualified defined benefit pension plans. However, in conjunction
with the sale, New Anchor assumed all liabilities of the plans and funded
approximately $9,100 of plan contributions, previously unfunded following the
Company's filing of Chapter 11 (see Note 3). Additionally, New Anchor issued
$9,000 face amount of mandatorily redeemable 10% cumulative convertible
preferred stock and Vitro has guaranteed to fund qualified defined benefit plan
obligations up to $70,000, should New Anchor default on its obligations.
Consequently, the PBGC agreed not to terminate the plans as a result of the
Agreement and the assumption of the plans by New Anchor.
Effective December 31, 1994, the Company changed its salaried retirement
and savings programs, resulting in the freezing of benefits under its three
defined benefit pension plans for salaried employees and amending its defined
contribution savings plan for salaried employees. The freezing of benefits under
the defined benefit pension plans for salaried employees resulted in a
curtailment gain of $3,588. Effective December 31, 1996, the Company merged the
Latchford Glass Company Salaried Employees' Pension Plan into the Anchor Glass
Container Corporation Retirement Plan for Salaried Employees. Also effective
December 31, 1994, the Company merged the Diamond Bathurst Salaried Employees
Retirement Plan into the Anchor Glass Container Corporation Retirement Plan for
Salaried Employees. Under the amended savings plan, the Company will match,
beginning in 1995, employees' basic contributions to the plan in an amount equal
to 150% of the first 4% of an employee's compensation.
The funded status of the Company's pension plans at December 31, 1996, the
latest valuation date, follows:
<TABLE>
<CAPTION>
1996
------------------------------
ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS
------------- -------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested benefit obligation................................. $290,589 $107,015
======== ========
Accumulated benefit obligation............................ $301,349 $107,015
======== ========
Projected benefit obligation................................ 301,349 107,015
Plan assets at fair value................................... 218,013 116,139
-------- --------
Projected benefit obligation in excess of (less than) plan
assets.................................................... 83,336 (9,124)
Amounts not recognized --
Subsequent losses......................................... (22,394) (3,817)
Prior service cost........................................ (17,140) --
Additional minimum liability................................ 39,534 --
-------- --------
Accrued (prepaid) pension cost.............................. $ 83,336 $(12,941)
======== ========
</TABLE>
H-20
<PAGE> 147
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Significant assumptions (weighted average rates) used in determining net
pension cost and related pension obligations for the benefit plans for 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Discount rate............................................... 7.50% 7.50%
Expected long-term rate of return on plan assets............ 9.0 9.0
Rate of increase on compensation level...................... 5.0 5.0
</TABLE>
The Company recognized an additional minimum liability that is equal to the
difference between the accumulated benefit obligation over plan assets in excess
of accrued (prepaid) pension cost. A corresponding amount is recognized as
either an intangible asset or a reduction of equity. Pursuant to this
requirement, the Company recorded, as of February 4, 1997 and December 31, 1996,
an additional liability of $39,534, an intangible pension asset of $17,140, and
an equity reduction of $22,394. Plan assets are held by independent trustees and
consist principally of investments in equities, fixed income and government
securities.
The Company also sponsors two defined contribution plans covering
substantially all salaried and hourly employees. Expenses under these programs
for the 1997 Interim Period and the years ended December 31, 1996 and 1995 were
approximately $237, $2,817 and $3,045 respectively.
NOTE 13 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides benefits to substantially all salaried, and certain
hourly employees under several plans. SFAS 106 requires accrual of
postretirement benefits (such as healthcare benefits) during the years an
employee provides services. Currently, the Company funds these healthcare
benefits on a pay-as-you-go basis. The Company also contributes to a
multi-employer trust, and under the requirements of SFAS 106, recognizes as
postretirement benefit cost the required annual contribution.
SFAS 106 allows recognition of the cumulative effect of this liability in
the year of adoption or the amortization of the net initial transition
obligation over a period of up to twenty years. The Company elected to recognize
the net initial transition obligation of approximately $3,400 on a straight-line
basis over a period of twenty years. The Company's cash flows are not affected
by implementation of SFAS 106.
The accumulated postretirement benefit obligation at December 31, 1996, the
latest valuation date, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Retirees.................................................... $38,403
Eligible plan participants.................................. 8,743
Other active plan participants.............................. 14,273
-------
61,419
Unrecognized gain........................................... 4,698
Unrecognized transition obligation.......................... (2,695)
-------
Accrued postretirement benefit costs........................ $63,422
=======
</TABLE>
H-21
<PAGE> 148
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
Net postretirement benefit costs for the 1997 Interim Period were $643. Net
postretirement benefit costs for the years ended December 31, 1996 and 1995
consist of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Service cost -- benefits earned during the year.......... $1,052 $1,191
Interest cost on accumulated postretirement benefit
obligation............................................. 4,200 4,641
Net amortization and deferral............................ 168 168
------ ------
$5,420 $6,000
====== ======
</TABLE>
The assumed healthcare cost trend used in measuring the accumulated
postretirement benefit obligation as of December 31, 1996 was 9.0% declining
gradually to 5.5% by the year 2003, after which it remains constant. A one
percentage point increase in the assumed healthcare cost trend rate for each
year would increase the accumulated post-retirement benefit obligation as of
December 31, 1996 by approximately 12% and the net postretirement healthcare
cost for the year ended December 31, 1996 by approximately 13%. The assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% for 1996.
The Company also contributes to a multi-employer trust which provides
certain other postretirement benefits to retired hourly employees. Expenses
under this program for the 1997 Interim Period and the years ended December 31,
1996 and 1995, were $360, $4,990 and $5,033 respectively.
NOTE 14 -- LEASES
The Company leases distribution and office facilities, machinery,
transportation, data processing and office equipment under non-cancelable leases
which expire at various dates through 2004. These leases generally provide for
fixed rental payments and include renewal and purchase options at amounts which
are generally based on fair market value at expiration of the lease. The Company
has no material capital leases.
Future minimum lease payments under non-cancelable operating leases are as
follows:
<TABLE>
<S> <C>
1997........................................................ $22,100
1998........................................................ 17,600
1999........................................................ 13,300
2000........................................................ 9,700
2001........................................................ 8,600
After 2001.................................................. 20,300
-------
$91,600
=======
</TABLE>
Rental expense for all operating leases for the 1997 Interim Period and the
years ended December 31, 1996 and 1995 was $3,012, $19,770 and $21,670,
respectively.
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
The Company is a respondent in various environment-related cases. The
measurement of liabilities in these cases and other environmental concerns is
based on available facts of each situation and considers factors such as prior
experience in remediation efforts and presently enacted environmental laws and
regulations. In the opinion of management, based upon information presently
known, the Company has
H-22
<PAGE> 149
ANCHOR RESOLUTION CORP.
(DEBTOR-IN-POSSESSION)
(FORMERLY KNOWN AS ANCHOR GLASS CONTAINER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
adequately provided for environmental liabilities. The Company is not otherwise
party to, and none of its assets are subject to any other pending legal
proceedings, other than ordinary routine litigation incidental to its business
and against which the Company is adequately insured and indemnified or which is
not material. The Company believes that the ultimate outcome of these cases will
not materially affect future operations.
NOTE 16 -- SUBSEQUENT EVENT
Effective January 30, 1998, all of the remaining assets of the Company were
transferred to Anchor Liquidating Trust.
H-23
<PAGE> 150
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain historical financial information of
Old Anchor. The selected financial data for the period from January 1, 1997 to
February 4, 1997 (the "Interim Period 1997") and the four years ended December
31, 1996 has been derived from Old Anchor's consolidated financial statements.
The following information should be read in conjunction with Old Anchor's
consolidated financial statements, including the notes thereto, and the related
Old Anchor Management's Discussion and Analysis of Financial Condition and
Results of Operations for Old Anchor, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL INTERIM
YEARS ENDED DECEMBER 31, PERIOD
------------------------------------------------- ---------
1993 1994 1995 1996(1) 1997
---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $1,126,037 $1,089,317 $ 956,639 $ 814,370 $ 62,560
Cost of products sold........................... 1,028,332 996,780 906,393 831,612 70,608
Selling and administrative expenses............. 51,137 52,371 48,998 39,570 3,745
Restructuring and other charges(1).............. -- 79,481 10,267 49,973 --
Impairment of long-lived assets(2).............. -- -- -- 490,232 --
Write-up of assets held for sale(1)............. -- -- -- (8,967) --
---------- ---------- ---------- ---------- ---------
Income (loss) from operations................... 46,568 (39,315) (9,019) (588,050) (11,793)
Other income (expense), net..................... 500 (2,385) 171 (10,020) (595)
Interest expense(3)............................. (62,535) (56,070) (56,871) (48,601) (2,437)
---------- ---------- ---------- ---------- ---------
Loss before reorganization items, income taxes,
extraordinary items and cumulative effect of
accounting change............................. (15,467) (97,770) (65,719) (646,671) (14,825)
Reorganization items............................ -- -- -- (5,008) (827)
Income taxes(4)................................. (2,400) (250) (250) (1,825) --
Extraordinary items(5).......................... (18,152) -- -- (2,336) --
Cumulative effect of accounting change(4)....... 1,776 -- -- -- --
---------- ---------- ---------- ---------- ---------
Net loss........................................ $ (34,243) $ (98,020) $ (65,969) $ (655,840) $ (15,652)
========== ========== ========== ========== =========
OTHER FINANCIAL DATA:
Net cash provided by (used in) operating
activities.................................... $ 99,279 $ 27,914 $ 430 $ (28,411) $ (11,427)
Net cash used in investing activities........... (118,470) (96,655) (48,500) (63,892) (7,500)
Net cash provided by financing activities....... 3,259 28,467 52,198 78,886 17,478
Adjusted EBITDA(6).............................. 150,617 138,257 101,334 34,824 7,605
Depreciation and amortization................... 103,549 100,476 99,915 101,656 7,605
Capital expenditures............................ 89,901 93,833 70,368 46,254 7,186
Ratio of earnings to fixed charges(7)........... -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Accounts receivable............................. $ 58,128 $ 66,618 $ 40,965 $ 55,851 $ 60,978
Inventories..................................... 173,204 176,769 180,574 144,419 148,731
Total assets.................................... 1,347,201 1,264,488 1,208,348 643,468 651,801
Total debt(8)................................... 555,222 584,671 557,450 552,848 570,335
Total stockholder's equity (deficiency in
assets)....................................... 412,752 324,554 289,603 (269,307) (284,959)
</TABLE>
H-24
<PAGE> 151
- ---------------
(1) Restructuring and other charges reflects Old Anchor's implementation of a
series of restructuring plans in an effort to respond to the continued
decline in the industry sales volume combined with, in 1996, the loss of a
significant portion of the business of Old Anchor's largest customer. The
following represents information regarding the amounts charged against the
restructuring liability for Old Anchor's restructuring plans:
<TABLE>
<CAPTION>
AMOUNT CHARGED
AGAINST LIABILITY
AS OF
RESTRUCTURING DECEMBER 31,
CHARGES 1996
------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1996 RESTRUCTURING PLAN
Plant shutdown costs, including severance costs and pension
curtailment losses....................................... $25,100 $20,100
Writedown of certain manufacturing assets to net realizable
value.................................................... 24,900
1994/1995 RESTRUCTURING PLAN
Plant shutdown costs, including severance costs and pension
curtailment losses....................................... $39,200 $33,700
Writedown of certain manufacturing assets to net realizable
value.................................................... 36,600
Writedown of previously shutdown manufacturing facilities
to net realizable value.................................. 14,000
</TABLE>
During the year ended December 31, 1996, the Company recorded an adjustment
to the carrying value of certain idled facilities held for sale. These
assets were previously written down to an estimated net realizable value.
Upon a current evaluation of quotes and offers on these properties in 1996,
Old Anchor increased their net carrying value by approximately $9.0 million.
The balance of the restructuring liability is anticipated to be expended and
charged against the liability over the next three years.
(2) Impairment of long-lived assets reflects the adjustment for the write-off of
goodwill and other long-lived assets. As a result of the declining
profitability, diminishing cash flow and the bankruptcy proceedings, the
recoverable value of the carrying amount of long-lived assets and
intangibles was reviewed for impairment. Based upon this review, the amount
of remaining excess of the purchase price over the fair value of net assets
acquired at December 31, 1996, of $457.2 million and other long-lived assets
of $33.0 million were written off in the year ended December 31, 1996. The
excess cost over fair value of net assets acquired had been amortized on a
straight line basis over a 40 year period. Amortization expense, included as
a component of cost of products sold, was approximately $13.9 million for
each of the years ended December 31, 1996, 1995 and 1994. See Old Anchor's
Notes to the Consolidated Financial Statements, included elsewhere in this
Prospectus.
(3) Because of the Chapter 11 proceedings, there has been no accrual of interest
on the $100.0 million 10.25% Senior Notes or the $200.0 million 9.875%
Senior Subordinated Debentures since September 12, 1996. If accrued,
interest expense would have increased $9.2 million during the year ended
December 31, 1996.
(4) Income tax provision reflects any additional valuation allowances required
to be recorded under SFAS 109. The adoption of SFAS 109 effective January 1,
1993 resulted in an increase in the cumulative net deferred tax asset by
$1.8 million. Under SFAS 109, deferred income taxes reflect the net tax
effects of temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes, and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. If on the
basis of available evidence, it is more likely than not that all or a
portion of the deferred tax asset will not be realized, the asset must be
reduced by a valuation allowance.
(5) Extraordinary items in the two years ended December 31, 1993 and 1996,
result from the write-off of financing costs related to debt extinguished
during the relevant periods, net of taxes.
(6) Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) ("Adjusted EBITDA") is an amount equal to income (loss) before
income taxes, extraordinary items and cumulative effect of accounting change
plus the amounts of restructuring charges, reorganization items, the
impairment of long-lived assets, interest, depreciation and amortization and
less the amount of the write-up of assets held for sale included in the
determination of income (loss) before income taxes, extraordinary items and
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<PAGE> 152
cumulative effect of accounting change. The Company believes that, in
addition to cash flow from operations and net earnings, Adjusted EBITDA is a
useful financial performance measurement for assessing operating performance
as it provides investors with an additional basis to evaluate the ability of
the Company to incur and service debt and to fund capital expenditures. In
evaluating Adjusted EBITDA, the Company believes that investors should
consider, among other things, the amount by which Adjusted EBITDA exceeds
interest costs for the period, how Adjusted EBITDA compares to principal
repayments on debt for the period and how Adjusted EBITDA compares to
capital expenditures for the period. To evaluate Adjusted EBITDA, the
components of Adjusted EBITDA, such as revenues and operating expenses and
the variability of such components over time, should also be considered.
Investors should be cautioned that the Company's method of calculating
Adjusted EBITDA may differ from the methods used by other companies and, as
a result, the Adjusted EBITDA measures disclosed herein may not be
comparable to other similarly titled measures disclosed by other companies.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and extraordinary items plus fixed
charges. Fixed charges consist of interest and amortization of debt expense
plus a portion of operating lease expense representative of the interest
factor. There was a deficiency of earnings to fixed charges in 1993, 1994,
1995, 1996 and the Interim Period 1997 of $15.5 million, $97.8 million,
$65.7 million, $651.7 million and $15.7 million, respectively.
(8) Total debt as of December 31, 1996 includes $462.3 million of pre-petition
liabilities and $90.5 million outstanding under Old Anchor's
debtor-in-possession credit facility.
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<PAGE> 153
ANCHOR RESOLUTION CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
RESULTS OF OPERATIONS
Introduction
The following table sets forth certain information derived from the
Consolidated Financial Statements of Anchor Resolution Corp., formerly named
Anchor Glass Container Corporation and currently a debtor-in-possession under
Chapter 11 of the Bankruptcy Code ("Old Anchor"), for the two years ended
December 31, 1996. The following discussion should be read in conjunction with
the Consolidated Financial Statements of Old Anchor and notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996
---------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales................................................... $956.6 100.0% $ 814.4 100.0%
Cost of products sold....................................... 906.4 94.8 831.6 102.1
Selling and administrative expenses......................... 49.0 5.1 39.6 4.9
Restructuring and other charges............................. 10.3 1.1 50.0 6.1
Impairment of long-lived assets............................. -- -- 490.2 60.2
Write-up of assets held for sale............................ -- -- (9.0) (1.1)
Loss from operations........................................ (9.1) (1.0) (588.0) (72.2)
Interest expense............................................ 56.8 5.9 48.6 6.0
Loss before reorganization items, income taxes and
extraordinary item........................................ (65.7) (6.9) (646.7) (79.4)
Loss before extraordinary item.............................. (66.0) (6.9) (653.5) (80.2)
Net loss.................................................... (66.0) (6.9) (655.8) (80.5)
</TABLE>
The net loss for the year ended December 31, 1996 was $655.8 million
compared to a net loss of $66.0 million for 1995. Included in the loss for 1996
is the impairment of long-lived assets of $490.2 million. Included in the 1996
and 1995 results were first quarter charges of $50.0 million and $10.3 million,
respectively, for Old Anchor's 1996 and 1995 restructuring programs. Excluding
the effect of these items, net loss would have been $115.6 million compared to
$55.7 million for 1995.
The decline in Old Anchor's operations is a direct result of Old Anchor's
high debt levels and industry-wide volume declines that have led to severe
competitive pricing pressures, negatively impacting operating results. Net sales
for 1996 decreased 14.9% compared to 1995, on a volume decline of approximately
14%, primarily in the beer, iced tea and soft drink markets. As an example, Old
Anchor's 1996 volume allocation from its largest customer in 1995,
Anheuser-Busch, has been significantly reduced. The softness in overall industry
volume shipments has led to severe competitive pricing pressures, negatively
impacting operating margins. In accordance with its restructuring plans, Old
Anchor closed its Cliffwood, New Jersey plant in January 1996, and closed its
Waukegan, Illinois, Los Angeles, California and Keyser, West Virginia plants in
1995.
NET SALES
Net sales for 1996 were $814.4 million, a decrease of 14.9% compared to
$956.6 million for 1995. The decrease in net sales principally reflects the
softening in 1996 of the year-to-year demand for glass containers which has
resulted in increased competition for market share and lower pricing trends. In
addition, as described above, Anheuser-Busch has significantly reduced its
purchases from Old Anchor.
H-27
<PAGE> 154
COST OF PRODUCTS SOLD
Cost of products sold as a percentage of net sales was 102.1% for 1996
compared to 94.8% for 1995. This increase principally reflects the impact of
reduced shipping volumes and lower pricing trends, as described above. Partially
offsetting this increase is the impact of Old Anchor's strategic initiatives and
cost savings derived from Old Anchor's restructuring plans and re-engineering
program.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses declined $9.4 million, or 19.2%, in
1996 compared to 1995. This decrease principally reflects lower personnel and
fringe benefit costs as a result of headcount reductions associated with Old
Anchor's re-engineering and cost reduction programs.
RESTRUCTURING AND OTHER CHARGES
In the 1995 first quarter, a $10.3 million charge was recorded to reflect
the benefit arrangements for employees affected by the Company's restructuring
program. In January 1996, formal plans were approved to further restructure
certain of Old Anchor's operations to respond to the continued decline in the
industry sales volume combined with the loss of a significant portion of the
business of Old Anchor's largest 1995 customer. A restructuring charge of
approximately $50.0 million has been recorded in the 1996 Consolidated Statement
of Operations for the closure of the Cliffwood, New Jersey plant and other
restructuring obligations.
IMPAIRMENT OF LONG-LIVED ASSETS
As a result of declining profitability, diminishing cash flows and the
bankruptcy proceedings, the entire $457.2 million of goodwill and $33.0 million
of other long-lived assets were written off.
WRITE-UP OF ASSETS HELD FOR SALE
In December 1996, Old Anchor wrote up the value of certain assets held for
sale by $9.0 million.
INTEREST EXPENSE
Interest expense was $48.6 million for 1996 compared to $56.8 million for
1995. Because of the Bankruptcy Proceedings, there has been no accrual of
interest on the $100.0 million 10.25% Senior Notes or the $200.0 million 9.875%
Senior Subordinated Debentures since September 12, 1996. If accrued, interest
expense would have increased by $9.1 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the continued decline in Old Anchor's results of operations
from the effect of the highly competitive glass container market, and Old
Anchor's high debt level, on September 13, 1996 (the "Petition Date"), Old
Anchor filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). On September 30,
1996, Anchor Recycling Corporation, a wholly-owned subsidiary of Old Anchor,
also filed a voluntary petition to reorganize under Chapter 11 in the same
court. The Chapter 11 proceedings are being jointly administered, with Old
Anchor managing the business in the ordinary course as a debtor-in-possession
under the supervision of the Bankruptcy Court. Old Anchor concluded that the
Chapter 11 filing was necessary in order to preserve the value of its assets and
to ensure that the business had sufficient cash resources to continue operations
while it completed the sale of the business discussed in Note 2 to the Notes to
the Consolidated Financial Statements, appearing elsewhere herein.
Old Anchor obtained debtor-in-possession ("DIP") financing from Foothill
Capital Corporation, as agent and Congress Financial Corporation, as co-agent
(the "Lender Group") to provide for a $130.0 million DIP Credit Facility (the
"DIP Facility"), which was approved by the Bankruptcy Court on November 15,
1996. The DIP Facility, which would expire September 30, 1997, provided up to
$130.0 million under a borrowing
H-28
<PAGE> 155
base formula, less prepetition advances under Old Anchor's then existing
Prepetition Credit Facility with the Lender Group, on terms substantially the
same as the Prepetition Credit Facility.
Advances outstanding at any one time were not to exceed an amount equal to
the Borrowing Base, consisting of accounts receivable and finished product
inventory, as defined in the Prepetition Credit Facility, and amended by the DIP
Facility. At December 31, 1996, Old Anchor's available borrowing base, as
defined under the DIP Facility was approximately $113.7 million against which
$90.5 was outstanding. Interest, at prime plus 1.125%, as defined, was payable
monthly. A commitment fee of 0.5% of the unused portion of the DIP Facility was
payable monthly.
On February 5, 1997, Anchor Glass Acquisition Corporation ("New Anchor"), a
wholly-owned subsidiary of Consumers Packaging Inc. ("CPI"), and Owens-Brockway
Glass Container Inc. ("OI") acquired substantially all of the assets and
business of Old Anchor in accordance with the terms of the Asset Purchase
Agreement, dated December 18, 1996 (the "Agreement") as discussed in Note 2 to
the Notes to Consolidated Financial Statements. The total purchase price
approximated $387.9 million, excluding fees of approximately $9.9 million. The
purchase price received from OI amounted to approximately $128.4 million and was
received in cash. The remaining purchase price of approximately $250.0 million
from New Anchor was comprised of approximately $200.5 million in cash, $47.0
million face amount (1,879,320 shares) of mandatorily redeemable 10% cumulative
convertible preferred stock and $2.5 million of common stock (490,898 shares
with an estimated value of $5.00 per share) of New Anchor. The purchase price is
subject to adjustment as defined in the Agreement.
Proceeds from the sale were used to repay the outstanding balance of the
DIP Facility and accrued interest thereon, at February 5, 1997, of approximately
$109.0 million. The remainder of the proceeds will be used to satisfy
prepetition liabilities, as to be determined under Old Anchor's Plan of
Reorganization. Old Anchor's principal sources of liquidity through February 5,
1997 were funds derived from operations and borrowings under the DIP Facility.
In 1996, operating activities consumed $28.4 million in cash compared to
$0.4 million of cash provided in 1995. These increases in cash consumed reflect
the increase in losses and the changes in working capital items during the
periods compared.
Capital expenditures in 1996 were $46.3 million compared to $70.4 million
in 1995. In addition, in 1996, Old Anchor invested approximately $18.6 million
in the joint venture with Coors Brewing Company ("Coors"). Old Anchor invested
$20.0 million in the joint venture in 1995. Also in 1995, Old Anchor entered
into sale and leaseback transactions, with respect to certain of its glass
manufacturing equipment, with an aggregate net selling price of approximately
$48.3 million.
Cash flows from financing activities for the years ended December 31, 1996
and 1995 were $78.9 million and $52.2 million, respectively. The 1996 cash flows
from financing activities principally reflects a $92.5 million capital
contribution received from Vitro, Sociedad Anonima and borrowings under the
Prepetition Credit Facility, modified by the DIP Facility. In February 1997, Old
Anchor received an additional capital contribution of $8.4 million in
satisfaction of obligations outstanding under the $20.0 million letter of credit
facility, which was terminated at that time.
As a result of the Bankruptcy Proceedings, Old Anchor is in default of
various covenants relating to Old Anchor's outstanding prepetition debt.
However, under Chapter 11 proceedings, litigation or actions by creditors
related to these defaults are stayed. In addition, the DIP Facility required
that Old Anchor's collateral value and availability, as defined, could not be
less than a specified amount as measured on a rolling four-week period
throughout the term of the DIP Facility. Prior to the repayment of the DIP
Facility, Old Anchor was in full compliance with these covenants.
IMPACT OF INFLATION
The impact of inflation on the costs of Old Anchor, and the ability to pass
on cost increases in the form of increased sales prices, is dependent upon
market conditions. While the general level of inflation in the domestic economy
has been at relatively low levels since Old Anchor's formation in 1983, Old
Anchor has generally
H-29
<PAGE> 156
been unable, since the end of 1991, to fully pass on inflationary cost increases
as a result of competitive pricing pressures. This has negatively impacted Old
Anchor's operating results.
SEASONALITY
Due principally to the seasonal nature of the brewing, iced tea and soft
drink industries, in which demand is stronger during the summer months, Old
Anchor's shipment volume is typically highest in the second and third quarters.
Consequently, Old Anchor historically builds inventory during the first quarter
in anticipation of seasonal demands during the second and third quarters.
However, industry patterns existing over the last 18 months have somewhat
altered the normal seasonal trends. In addition, Old Anchor generally schedules
shutdowns of its plants for furnace rebuilds and machine repairs in the first
and fourth quarters of the year to coincide with scheduled holiday and vacation
time under its labor union contracts. These shutdowns and seasonal sales
patterns adversely affect profitability during the first and fourth quarters.
H-30
<PAGE> 157
ANNEX A
SUMMARIZATION LETTERS OF AAA
SUMMARIZATION LETTER--LIQUIDATION IN PLACE BASIS
In connection with the First Mortgage Notes, AAA was engaged to appraise
certain property exhibited to us as that of Anchor Glass Container Corporation.
Our services were provided in accordance with the Uniform Standards of
Professional Appraisal Practice, (USPAP) as promulgated by The Appraisal
Foundation, an organization founded by Congress in 1986.
We made our investigation to express an opinion, as of December 31, 1996,
of the market value of the real estate and personal property. The real
property's fee simple estate was appraised, while the personal property was
valued on the premise of liquidation-in-place. It was understood that our
opinion would provide a basis for effectuating financing arrangements.
Appraisals are time and use specific so it is entirely inappropriate to use our
appraisal for any purpose other than that specified.
The term market value is equivalent to open market and is defined as the
most reasonable price a property should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from seller to buyer under conditions
whereby: (1) buyer and seller are typically motivated; (2) both parties are well
informed or well advised, and acting in what they consider their best interests;
(3) a reasonable time is allowed for exposure in the open market; (4) payment is
made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and (5) the price represents the normal consideration for
the property sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale. It was assumed the real
estate was held in fee simple, except for the real property located in Salem,
New Jersey which was a leasehold interest, and clear of any liens and
encumbrances.
Fair market value is defined as the estimated amount at which the assets
might be expected to exchange between a willing buyer and a willing seller,
neither being under compulsion, each having reasonable knowledge of all relevant
facts. When fair market value is established on the premise of
liquidation-in-place, it is assumed that the buyer and seller would be
contemplating retention of the personal property at its present location for
continued use of like operations. This value premise represents the estimated
amount a property should realize if sold on a negotiated basis given a
reasonable amount of time in which to find a buyer, the property would not be
operating or producing a product at the time of its sale, but would be capable
of operation and production. TO UNDERSTAND THE APPRAISAL PROCESS AND THE
ASSUMPTIONS IMPLICIT IN THE ABOVE DEFINITIONS, THE READER IS URGED TO STUDY THE
APPRAISAL IN ITS ENTIRETY.
Our investigation included real estate, including land, land improvements,
and buildings; and personal property, comprising machinery and equipment, office
furniture and equipment, licensed vehicles, and construction in progress.
Excluded from the investigation were supplies, materials on hand, inventories,
company records, and any current or intangible assets that might exist.
We personally inspected the designated assets and studied market
conditions. We considered all three traditional approaches to value and applied
the most appropriate techniques, considering the use of the appraisal.
Therefore, we conducted a complete appraisal according to USPAP guidelines as we
understand them. No consideration was given to the impact of any environmental
concerns which are associated with the subject properties. No investigation was
made of the title to or any liabilities against the appraised property.
We appraised real and personal property at the following locations:
Glass Container Plants at Winchester, IN; Connellsville, PA; Salem, NJ;
Jacksonville, FL; Shakopee, MN; Warner Robins, GA; Henryetta, OK; Elmira,
NY; and Lawrenceburg, IN.
The Mold Repair Shop at Zanesville, OH, and the Central Machine Repair Shop
at Streator, IL.
Based on the investigation described, we concluded that as of December 31,
1996, the designated properties' market value on the premises of open market and
liquidation-in-place is reasonably represented by
A-1
<PAGE> 158
the amount of TWO HUNDRED FORTY-TWO MILLION NINE HUNDRED SIXTY-FIVE THOUSAND
DOLLARS ($242,965,000).
The value stated above is based upon the premise and for the purpose stated
and is defined and further detailed in the appraisal reports, exhibits and
general service conditions provided in connection with the Anchor Acquisition
and the offering of the First Mortgage Notes.
SUMMARIZATION LETTER--CONTINUED USE BASIS
In connection with the First Mortgage Notes, AAA was engaged to appraise
certain property exhibited to us as that of Anchor Glass Container Corporation.
Our services were provided in accordance with the Uniform Standards of
Professional Appraisal Practice, (USPAP) as promulgated by The Appraisal
Foundation, an organization founded by Congress in 1986.
We made our investigation to express an opinion, as of December 31, 1996,
of the market value of the real estate and personal property. The fee simple
estate was appraised for the nine real estate locations identified as being
owned, while the subleasehold estate was appraised for the real property
designated as being leased. The personal property was valued on the premise of
continued use. It was understood that our opinion would provide a basis for
allocation of the purchase price of the several classes of assets acquired.
Appraisals are time and use specific so it is entirely inappropriate to use our
appraisal for any purpose other than that specified.
Fair market value is defined as the estimated amount at which the assets
might be expected to exchange between a willing buyer and a willing seller,
neither being under compulsion, each having reasonable knowledge of all relevant
facts. When fair market value is established on the premise of continued use, it
is assumed that the buyer and seller would be contemplating retention of the
property at its present location as part of the current operations. Given the
data available and the trends available, it was concluded that prospective
profits were adequate to justify ownership and an arm's-length exchange. This
value premise represents the estimated amount a property should realize if sold
on a negotiated basis given a reasonable amount of time in which to find a
buyer, and does not represent the amount that might be realized from piecemeal
disposition in the open market or from an alternative use of the property. TO
UNDERSTAND THE APPRAISAL PROCESS AND THE ASSUMPTIONS IMPLICIT IN THE ABOVE
DEFINITIONS, THE READER IS URGED TO STUDY THE APPRAISAL IN ITS ENTIRETY.
Our investigation included real estate, including land, land improvements,
and buildings; and personal property, comprising machinery and equipment, office
furniture and equipment, licensed vehicles, and construction in progress.
Excluded from the investigation were supplies, material on hand, inventories,
company records, and any current or intangible assets that might exist.
We personally inspected the designated assets and studied market
conditions. We considered all three traditional approaches to value and applied
the most appropriate techniques, considering the use of the appraisal.
Therefore, we conducted a complete appraisal according to USPAP guidelines as we
understand them. No consideration was given to the impact of any environmental
concerns which are associated with the subject properties. No investigation was
made of the title to or any liabilities against the appraised property.
We appraised real and personal property at the following locations;
Glass Container Plants at Winchester, IN; Connellsville, PA; Salem, NJ;
Jacksonville, FL; Shakoppe, MN; Warner Robins, GA; Henryetta, OK; Elmira,
NY; and Lawrenceburg, IN.
The Mold Repair Shop at Zanesville, OH, and the Central Machine Repair Shop
at Streator, IL.
Based on the investigation described, we concluded that as of December 31,
1996, the designated properties' market value on the premises of continued use
is reasonably represented by the aggregate amount of THREE HUNDRED TWELVE
MILLION FOUR HUNDRED TWENTY-THREE THOUSAND DOLLARS ($312,423,000).
The value stated above is based upon the premise and for the purpose stated
and is defined and further detailed in the appraisal reports, exhibits and
general service conditions provided in connection with the Anchor Acquisition
and the offering of the First Mortgage Notes.
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<PAGE> 159
======================================================
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations in connection with the offer
contained herein other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or the solicitation of any offer to buy any security other than those to which
it relates, nor does it constitute an offer to sell, or the solicitation of an
offer to buy, to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof nor that the information contained herein is correct as of any time
subsequent to the date hereof.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 1
Risk Factors............................... 16
The Exchange Offer......................... 24
Recent Developments........................ 31
Use of Proceeds............................ 32
Capitalization............................. 33
Unaudited Pro Forma Financial Statements... 34
Management's Discussion and Analysis of Pro
Forma Financial Condition and Results of
Operations............................... 40
Selected Financial Data.................... 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 44
Business................................... 47
Management................................. 58
Principal Stockholders..................... 62
Certain Transactions....................... 64
Description of Capital Stock............... 65
Description of Indebtedness................ 66
Description of the Notes................... 70
Certain U.S. Federal Income Tax
Considerations........................... 97
Exchange Offer and Registration Rights..... 99
Book-Entry; Delivery and Form.............. 102
Plan of Distribution....................... 103
Legal Matters.............................. 104
Experts.................................... 104
Index to Financial Statements.............. F-1
Index to Financial Statements for Old
Anchor................................... H-1
Summarization Letters of AAA............... A-1
</TABLE>
Until , 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
======================================================
======================================================
Anchor Glass Container Corporation
OFFER TO EXCHANGE UP TO
$50,000,000 OF ITS NEW
9 7/8% SENIOR NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED,
FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF ITS OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
(ANCHOR LOGO)
---------------------------
PROSPECTUS
---------------------------
, 1998
======================================================
<PAGE> 160
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CERTIFICATE OF INCORPORATION OF ANCHOR GLASS CONTAINER CORPORATION
Article VIII of the Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") for Anchor Glass Container Corporation (the
"Company") provides for the indemnification of directors and officers of the
Company and any persons serving at the request of the Company as a director,
trustee, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan, to the fullest extent permitted by the General Corporate
Law of the State of Delaware (the "DGCL"). The Certificate of Incorporation also
allows the Company, by action of the Board of Directors, to indemnify other
officers, employees and agents of the Company. These rights to indemnification
(i) are contract rights; (ii) cannot be changed by any amendment to the
Certificate of Incorporation to adversely affect any person being indemnified
with respect to any alleged action or inaction occurring prior to such
amendment; (iii) subject to any rights imposed by law and the By-Laws of the
Company, include the right to have the Company advance expenses incurred in
defending any such action, suit or proceeding prior to the final disposition;
and (iv) are not exclusive of any other right which any person may have or may
acquire under the Certificate of Incorporation, or any statute, by-law or
agreement, or by any vote of the stockholders or disinterested directors of the
Company, or otherwise. In addition to the indemnification provided by Article
VIII, Article IX limits the personal liability of directors for monetary damages
arising out of a breach of fiduciary duty to the fullest extent permitted by the
DGCL.
The Certificate of Incorporation generally prohibits the Company from
indemnifying any person in connection with an action, suit or proceeding (or
portion thereof) initiated by such person unless such action, suit or proceeding
(or portion thereof) was authorized by the Board of Directors. However, this
prohibition does not apply to a counterclaim, cross-claim or third party claim
brought by an indemnitee in any action, suit or proceeding. In addition, persons
claiming a right to indemnification or advancement may bring suit against the
Company if the claim is not paid in full by the Company within sixty days, in
the case of a claim for indemnification, or thirty days, in the case of a claim
for advancement, after receipt of the written claim.
BY-LAWS OF ANCHOR GLASS CONTAINER CORPORATION
The By-laws of the Company contain no provision for indemnification.
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Under the DGCL, directors, officers, employees, and other individuals may
be indemnified against expenses (including attorneys' fees), judgements, fines,
and amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation -- a "derivative action")
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action and Delaware law requires court approval before there can be any
indemnification of expenses where the person seeking indemnification has been
found liable to the corporation.
Delaware corporations may limit the personal liability of their directors
for monetary damages for a breach of fiduciary duty, provided, however, that the
directors can still be held personally liable (i) for a breach of the duty of
loyalty to the corporation and its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL (described below), and (iv) for any
transaction from which the director derived an improper personal benefit.
Section 174 of the DGCL makes directors personally liable for unlawful dividends
or unlawful stock repurchases or
II-1
<PAGE> 161
redemptions in certain circumstances and expressly sets forth a negligence
standard with respect to such liability.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- ------- ----
<C> <S>
2.1* Asset Purchase Agreement dated as of December 18, 1996 (the
"Asset Purchase Agreement") among Anchor Glass Container
Corporation, now known as Anchor Resolution Corp. ("Old
Anchor"), Consumers Packaging Inc. and Owens-Brockway Glass
Container Inc.
2.2* Amendment to Asset Purchase Agreement dated as of February
5, 1997 by and among Old Anchor, Consumers Packaging Inc.
and Owens-Brockway Glass Container Inc.
2.3* Order of United States Bankruptcy Court for the District of
Delaware approving (i) the Asset Purchase Agreement and (ii)
the assumption and assignment of certain related executory
contracts
2.4* Order of United States Bankruptcy Court for the District of
Delaware approving the Amendment to the Asset Purchase
Agreement
2.5* Memorandum of Understanding dated February 5, 1997 among Old
Anchor, Consumers Packaging Inc., and the Company
3.1* Amended and Restated Certificate of Incorporation of the
Company
3.2* Bylaws of the Company
3.3* Certificate of Designation for Series A 10% Cumulative
Convertible Preferred Stock
3.4* Certificate of Designation for Series B 8% Cumulative
Convertible Preferred Stock
4.1** Indenture dated as of March 16, 1998 among the Company and
The Bank of New York, as trustee
4.2** Form of Initial Notes (included in Exhibit 4.1)
4.3** Form of Exchange Notes (included in Exhibit 4.1)
4.4** Registration Rights Agreement dated as of March 16, 1998
among the Company BT Securities Corporation and TD
Securities (USA) Inc.
4.5* Security Agreement dated as of February 5, 1997 among the
Company and Bankers Trust Company, as agent under the
Revolving Credit Agreement
4.6* Assignment of Security Agreement dated as of April 17, 1997
among the Company, Bankers Trust Company, as assignor, and
The Bank of New York, as assignee and as trustee under the
Indenture
4.7* Pledge Agreement dated as of April 17, 1997 among Consumers
U.S., Inc. ("Consumers U.S."), and The Bank of New York, as
trustee under the Indenture
4.8* Intercreditor Agreement dated as of February 5, 1997 among
The Bank of New York, as Note Agent, and BT Commercial
Corporation, as Credit and Shared Collateral Agent
4.9* Amendment No. 1 to the Intercreditor Agreement, dated as of
April 17, 1997 among The Bank of New York, as Note Agent,
and BT Commercial Corporation, as Credit and Shared
Collateral Agent
4.10* Indenture, dated as of April 17, 1998, among the Company,
Consumers U.S., and The Bank of New York.
5.1 Opinion of Eckert Seamans Cherin & Mellott, LLC
5.2 Opinion of Jones, Day, Reavis & Pogue
10.1* Credit Agreement (the "Credit Agreement") dated as of
February 5, 1997 among the Company, Bankers Trust Company,
as Issuing Bank, BT Commercial Corporation, as Agent and Co-
Syndication Agent, PNC Bank, National Association, as
Co-Syndication Agent and Issuing Bank, and the various
financial institutions party thereto
</TABLE>
II-2
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- ------- ----
<C> <S>
10.2* First Amendment to the Credit Agreement dated as of March
11, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, and PNC Bank, National Association
10.3* Second Amendment to the Credit Agreement dated as of April
9, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, and PNC Bank, National Association
10.4* Third Amendment and Waiver to the Credit Agreement dated as
of May 23, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, PNC Bank, National Association and
the various financial institutions party to the Credit
Agreement
10.5* Fourth Amendment to the Credit Agreement dated as of
September 15, 1997 among the Company, Bankers Trust Company,
PNC Bank, National Association and the various financial
institutions party to the Credit Agreement
10.6* Assignment of Security Interest in U.S. Trademarks and
Patents dated February 5, 1997 by the Company to BT
Commercial Corporation, as Collateral Agent under the Credit
Agreement
10.7* Assignment of Security Interest in U.S. Copyrights dated
February 5, 1997 by the Company to BT Commercial
Corporation, as Collateral Agent under the Credit Agreement
10.8* Guaranty dated February 5, 1997, by Consumers U.S. in favor
of BT Commercial Corporation and the other financial
institutions party to the Credit Agreement Plan
10.9* Termination Agreement dated February 3, 1997 by and between
Consumers Packaging Inc., the Company and the Pension
Benefit Guaranty Corporation
10.10* Release Agreement among Old Anchor, the Company, the
Official Committee of Unsecured Creditors of Anchor Glass
Container Corporation (Old Anchor) and Vitro, Sociedad
Anonima
10.11* Agreement (the "Vitro Agreement") dated as of December 18,
1996 between Vitro, Sociedad Anonima, Consumers Packaging
Inc., on behalf of itself, and Consumers Packaging Inc., on
behalf of the Company
10.12* First Amendment to the Vitro Agreement dated as of February
4, 1997 among Vitro, Sociedad Anonima, Consumers Packaging
Inc. and the Company
10.13* Waiver Agreement dated as of February 5, 1997 by and between
Old Anchor and Consumers Packaging Inc.
10.14* Assignment and Assumption Agreement dated as of February 5,
1997 by and between Consumers Packaging Inc. and the Company
10.15* Assignment and Assumption Agreement dated as of February 5,
1997 between Consumers Packaging Inc. and the Company
relating to certain employee benefit plans
10.16* Assignment and Assumption Agreement dated as of February 5,
1997 between Consumers Packaging Inc. and the Company
relating to certain commitment letters
10.17* Bill of Sale, Assignment and Assumption Agreement dated as
of February 5, 1997 by and between Old Anchor and the
Company
10.18* Assignment of Patent Property and Design Property from Old
Anchor to the Company
10.19* Trademark Assignment from Old Anchor to the Company
10.20* Foreign Trademark Assignment from Old Anchor to the Company
10.21* Copyright Assignment from Old Anchor to the Company
10.22* Agreement dated as of February 5, 1997 between The Travelers
Indemnity Company and its Affiliates, including The Aetna
Casualty and Surety Company and their predecessors, and the
Company
10.23* Allocation Agreement dated as of February 5, 1997 between
Consumers Packaging Inc. and Owens-Brockway Glass Container
Inc.
10.24* Supply Agreement dated as of February 5, 1997 by and between
the Company and Owens-Brockway Glass Container Inc.
10.25* Transition Agreement dated as of February 5, 1997 between
Consumers Packaging Inc., the Company and Owens-Brockway
Glass Container Inc.
</TABLE>
II-3
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- ------- ----
<C> <S>
10.26+* Technical Assistance and License Agreement executed December
18, 1996 by Owens-Brockway Glass Container Inc. and
Consumers Packaging Inc.
10.27* Assurance Agreement (the "Assurance Agreement") dated as of
February 5, 1997 among Owens-Brockway Glass Container Inc.,
Consumers Packaging Inc., the Company, BT Commercial
Corporation, Bankers Trust Company and The Bank of New York
10.28* Letter agreement relating to Assurance Agreement dated April
17, 1997 addressed to Owens-Brockway Glass Container Inc.
and signed by Bankers Trust Company and The Bank of New York
10.29* Intercompany Agreement dated as of April 17, 1997 among G&G
Investments, Inc., Glenshaw Glass Company, Inc., Hillsboro
Glass Company, I.M.T.E.C. Enterprises, Inc., Consumers
Packaging Inc., Consumers International Inc., Consumers
U.S., the Company, BT Securities Corporation and The Bank of
New York, as trustee under the Indenture
10.30* Management Agreement dated as of February 5, 1997 by and
between the Company and G&G Investments, Inc.
10.31* Anchor Glass Container Corporation/Key Executive Employee
Retention Plan
10.32* Lease Agreement -- Anchor Place at Fountain Square (the
"Lease Agreement") dated March 31, 1988, by and between Old
Anchor and Fountain Associates I Ltd. relating to the
Company's headquarters in Tampa, Florida
10.33* First Amendment to Lease Agreement effective as of June 16,
1992, by and between Fountain Associates I Ltd. and Old
Anchor
10.34* Second Amendment to Lease Agreement effective as of
September 30, 1993, by and between Fountain Associates I
Ltd. and Old Anchor
10.35* Third Amendment to Lease Agreement effective as of February
22, 1995, by and between Fountain Associates I Ltd. and Old
Anchor
10.36* Agreement dated as of March 31, 1996 by and between Fountain
Associates I Ltd., Citicorp Leasing, Inc. and Old Anchor
10.37* Amended and Restated Agreement effective as of September 12,
1996, by and between Fountain Associates I Ltd., Citicorp
Leasing Inc. and Old Anchor
10.38* Sixth Amendment to Lease and Second Amendment to Option
Agreement dated as of February 5, 1997, by and between
Fountain Associates I Ltd., Citicorp Leasing Inc. and Old
Anchor
10.39* Building Option Agreement dated March 31, 1988, by and
between Fountain Associates I, Ltd. and Old Anchor
10.40* First Amendment to Building Option Agreement effective as of
June 16, 1992, by and between Fountain Associates I, Ltd.
and Old Anchor
10.41+* Supply Agreement effective as of June 17, 1996 between The
Stroh Brewery Company and the Company
10.42* Warrant Agreement dated as of February 5, 1997 between the
Company and Bankers Trust Company
10.43* Form of Warrant issued pursuant to the Warrant Agreement
12.1** Statement re: computation of ratio of earnings to fixed
charges for the period from
February 5, 1997 to December 31, 1997
12.2** Statement re: computation of ratio of earnings to fixed
charges for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996
21.1* List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Eckert Seamans Cherin & Mellott, LLC, included in
Exhibit 5.1
23.3 Consent of Jones, Day, Reavis & Pogue, included in Exhibit
5.2
23.4 Consent of American Appraisal Associates, Inc.
</TABLE>
II-4
<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- ------- ----
<C> <S>
24.1 Power of Attorney of the Company
25.1 Statement on Form T-1 of the eligibility of the Trustee with
respect to the Company
27.1** Financial Data Schedule of Old Anchor
27.2** Financial Data Schedule of the Company
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to DTC Participants
99.4 Form of Letter to Clients and Form of Instruction to
Book-Entry Transfer Participants
</TABLE>
- ---------------
+ Portions hereof have been omitted and filed separately with the Commission
pursuant to a request for confidential treatment in accordance with Rule 406
of Regulation C.
* Incorporated by reference to the Company's Registration Statement on Form
S-4 (Reg. No. 333-31363) originally filed with the Securities and Exchange
Commission on July 16, 1997.
** Incorporated by reference to the Company's March 31, 1998 filing on Form
10-K with the Securities and Exchange Commission.
All other exhibits have been filed herewith.
II-5
<PAGE> 165
(b) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II
ANCHOR RESOLUTION CORP.
PERIOD FROM JANUARY 1, 1997 TO FEBRUARY 4, 1997 AND
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- --------- -------- -------- ---------- --------
ADDITIONS
--------------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
----------- --------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Interim Period 1997
Allowance for doubtful accounts..... $1,503 $ 127 $1,630
Year ended December 31, 1996
Allowance for doubtful accounts..... $1,826 $1,126 $ -- $1,449(A) $1,503
Year ended December 31, 1995
Allowance for doubtful accounts..... $3,447 $ 656 $ -- $2,277(A) $1,826
</TABLE>
- ---------------
(A) Accounts written off
SCHEDULE II
ANCHOR GLASS CONTAINER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM FEBRUARY 5, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- ---------- ----------
ADDITIONS
-------------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE AT
BEGINNING AND TO OTHER END OF
DESCRIPTION OF EXPENSES ACCOUNTS DEDUCTIONS PERIOD
PERIOD
- ------------------------------------------- ------ ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Period from February 5, 1997 to December
31, 1997
Allowance for doubtful accounts.......... $1,630 $375 $360(B) $340(A) $2,025
</TABLE>
- ---------------
(A) Accounts written off
(B) Amount recognized as part of Anchor Acquisition.
II-6
<PAGE> 166
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission (the "Commission") pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-7
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act, Anchor Glass Container
Corporation has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh,
in the Commonwealth of Pennsylvania, on April 21, 1998.
ANCHOR GLASS CONTAINER CORPORATION
By: /s/ M. WILLIAM LIGHTNER, JR.
--------------------------------------
M. William Lightner, Jr.
Senior Vice President -- Finance
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on April 21, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
* Chairman, Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
John J. Ghaznavi
/s/ M. WILLIAM LIGHTNER, JR. Senior Vice President -- Finance, Chief
- ----------------------------------------------------- Financial Officer, Treasurer and Director
M. William Lightner, Jr. (Principal Financial Officer)
* Controller (Principal Accounting Officer)
- -----------------------------------------------------
Edward M. Jonas
* Director
- -----------------------------------------------------
David T. Gutowksi
* Director
- -----------------------------------------------------
C. Kent May
* Director
- -----------------------------------------------------
Paul H. Farrar
</TABLE>
*By:/s/ M. WILLIAM LIGHTNER, JR.
--------------------------------------
M. William Lightner, Jr.
Pursuant to Powers of Attorney
filed herewith or previously with
the Securities and Exchange Commission
II-8
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER ITEM NUMBER
- ------- ---- ------
<C> <S> <C>
2.1* Asset Purchase Agreement dated as of December 18, 1996 (the
"Asset Purchase Agreement") among Anchor Glass Container
Corporation, now known as Anchor Resolution Corp. ("Old
Anchor"), Consumers Packaging Inc. and Owens-Brockway Glass
Container Inc.
2.2* Amendment to Asset Purchase Agreement dated as of February
5, 1997 by and among Old Anchor, Consumers Packaging Inc.
and Owens-Brockway Glass Container Inc.
2.3* Order of United States Bankruptcy Court for the District of
Delaware approving (i) the Asset Purchase Agreement and (ii)
the assumption and assignment of certain related executory
contracts
2.4* Order of United States Bankruptcy Court for the District of
Delaware approving the Amendment to the Asset Purchase
Agreement
2.5* Memorandum of Understanding dated February 5, 1997 among Old
Anchor, Consumers Packaging Inc., and the Company
3.1* Amended and Restated Certificate of Incorporation of the
Company
3.2* Bylaws of the Company
3.3* Certificate of Designation for Series A 10% Cumulative
Convertible Preferred Stock
3.4* Certificate of Designation for Series B 8% Cumulative
Convertible Preferred Stock
4.1** Indenture dated as of March 16, 1998 among the Company and
The Bank of New York, as trustee
4.2** Form of Initial Notes (included in Exhibit 4.1)
4.3** Form of Exchange Notes (included in Exhibit 4.1)
4.4** Registration Rights Agreement dated as of March 16, 1998
among the Company BT Securities Corporation and TD
Securities (USA) Inc.
4.5* Security Agreement dated as of February 5, 1997 among the
Company and Bankers Trust Company, as agent under the
Revolving Credit Agreement
4.6* Assignment of Security Agreement dated as of April 17, 1997
among the Company, Bankers Trust Company, as assignor, and
The Bank of New York, as assignee and as trustee under the
Indenture
4.7* Pledge Agreement dated as of April 17, 1997 among Consumers
U.S., Inc. ("Consumers U.S."), and The Bank of New York, as
trustee under the Indenture
4.8* Intercreditor Agreement dated as of February 5, 1997 among
The Bank of New York, as Note Agent, and BT Commercial
Corporation, as Credit and Shared Collateral Agent
4.9* Amendment No. 1 to the Intercreditor Agreement, dated as of
April 17, 1997 among The Bank of New York, as Note Agent,
and BT Commercial Corporation, as Credit and Shared
Collateral Agent
4.10* Indenture, dated as of April 17, 1998, among the Company,
Consumers U.S., and The Bank of New York.
5.1 Opinion of Eckert Seamans Cherin & Mellott, LLC
5.2 Opinion of Jones, Day, Reavis & Pogue
10.1* Credit Agreement (the "Credit Agreement") dated as of
February 5, 1997 among the Company, Bankers Trust Company,
as Issuing Bank, BT Commercial Corporation, as Agent and
Co-Syndication Agent, PNC Bank, National Association, as
Co-Syndication Agent and Issuing Bank, and the various
financial institutions party thereto
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT PAGE
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10.2* First Amendment to the Credit Agreement dated as of March
11, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, and PNC Bank, National Association
10.3* Second Amendment to the Credit Agreement dated as of April
9, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, and PNC Bank, National Association
10.4* Third Amendment and Waiver to the Credit Agreement dated as
of May 23, 1997 among the Company, Bankers Trust Company, BT
Commercial Corporation, PNC Bank, National Association and
the various financial institutions party to the Credit
Agreement
10.5* Fourth Amendment to the Credit Agreement dated as of
September 15, 1997 among the Company, Bankers Trust Company,
PNC Bank, National Association and the various financial
institutions party to the Credit Agreement
10.6* Assignment of Security Interest in U.S. Trademarks and
Patents dated February 5, 1997 by the Company to BT
Commercial Corporation, as Collateral Agent under the Credit
Agreement
10.7* Assignment of Security Interest in U.S. Copyrights dated
February 5, 1997 by the Company to BT Commercial
Corporation, as Collateral Agent under the Credit Agreement
10.8* Guaranty dated February 5, 1997, by Consumers U.S. in favor
of BT Commercial Corporation and the other financial
institutions party to the Credit Agreement Plan
10.9* Termination Agreement dated February 3, 1997 by and between
Consumers Packaging Inc., the Company and the Pension
Benefit Guaranty Corporation
10.10* Release Agreement among Old Anchor, the Company, the
Official Committee of Unsecured Creditors of Anchor Glass
Container Corporation (Old Anchor) and Vitro, Sociedad
Anonima
10.11* Agreement (the "Vitro Agreement") dated as of December 18,
1996 between Vitro, Sociedad Anonima, Consumers Packaging
Inc., on behalf of itself, and Consumers Packaging Inc., on
behalf of the Company
10.12* First Amendment to the Vitro Agreement dated as of February
4, 1997 among Vitro, Sociedad Anonima, Consumers Packaging
Inc. and the Company
10.13* Waiver Agreement dated as of February 5, 1997 by and between
Old Anchor and Consumers Packaging Inc.
10.14* Assignment and Assumption Agreement dated as of February 5,
1997 by and between Consumers Packaging Inc. and the Company
10.15* Assignment and Assumption Agreement dated as of February 5,
1997 between Consumers Packaging Inc. and the Company
relating to certain employee benefit plans
10.16* Assignment and Assumption Agreement dated as of February 5,
1997 between Consumers Packaging Inc. and the Company
relating to certain commitment letters
10.17* Bill of Sale, Assignment and Assumption Agreement dated as
of February 5, 1997 by and between Old Anchor and the
Company
10.18* Assignment of Patent Property and Design Property from Old
Anchor to the Company
10.19* Trademark Assignment from Old Anchor to the Company
10.20* Foreign Trademark Assignment from Old Anchor to the Company
10.21* Copyright Assignment from Old Anchor to the Company
10.22* Agreement dated as of February 5, 1997 between The Travelers
Indemnity Company and its Affiliates, including The Aetna
Casualty and Surety Company and their predecessors, and the
Company
</TABLE>
<PAGE> 170
<TABLE>
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EXHIBIT PAGE
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10.23* Allocation Agreement dated as of February 5, 1997 between
Consumers Packaging Inc. and Owens-Brockway Glass Container
Inc.
10.24* Supply Agreement dated as of February 5, 1997 by and between
the Company and Owens-Brockway Glass Container Inc.
10.25* Transition Agreement dated as of February 5, 1997 between
Consumers Packaging Inc., the Company and Owens-Brockway
Glass Container Inc.
10.26+* Technical Assistance and License Agreement executed December
18, 1996 by Owens-Brockway Glass Container Inc. and
Consumers Packaging Inc.
10.27* Assurance Agreement (the "Assurance Agreement") dated as of
February 5, 1997 among Owens-Brockway Glass Container Inc.,
Consumers Packaging Inc., the Company, BT Commercial
Corporation, Bankers Trust Company and The Bank of New York
10.28* Letter agreement relating to Assurance Agreement dated April
17, 1997 addressed to Owens-Brockway Glass Container Inc.
and signed by Bankers Trust Company and The Bank of New York
10.29* Intercompany Agreement dated as of April 17, 1997 among G&G
Investments, Inc., Glenshaw Glass Company, Inc., Hillsboro
Glass Company, I.M.T.E.C. Enterprises, Inc., Consumers
Packaging Inc., Consumers International Inc., Consumers
U.S., the Company, BT Securities Corporation and The Bank of
New York, as trustee under the Indenture
10.30* Management Agreement dated as of February 5, 1997 by and
between the Company and G&G Investments, Inc.
10.31* Anchor Glass Container Corporation/Key Executive Employee
Retention Plan
10.32* Lease Agreement -- Anchor Place at Fountain Square (the
"Lease Agreement") dated March 31, 1988, by and between Old
Anchor and Fountain Associates I Ltd. relating to the
Company's headquarters in Tampa, Florida
10.33* First Amendment to Lease Agreement effective as of June 16,
1992, by and between Fountain Associates I Ltd. and Old
Anchor
10.34* Second Amendment to Lease Agreement effective as of
September 30, 1993, by and between Fountain Associates I
Ltd. and Old Anchor
10.35* Third Amendment to Lease Agreement effective as of February
22, 1995, by and between Fountain Associates I Ltd. and Old
Anchor
10.36* Agreement dated as of March 31, 1996 by and between Fountain
Associates I Ltd., Citicorp Leasing, Inc. and Old Anchor
10.37* Amended and Restated Agreement effective as of September 12,
1996, by and between Fountain Associates I Ltd., Citicorp
Leasing Inc. and Old Anchor
10.38* Sixth Amendment to Lease and Second Amendment to Option
Agreement dated as of February 5, 1997, by and between
Fountain Associates I Ltd., Citicorp Leasing Inc. and Old
Anchor
10.39* Building Option Agreement dated March 31, 1988, by and
between Fountain Associates I, Ltd. and Old Anchor
10.40* First Amendment to Building Option Agreement effective as of
June 16, 1992, by and between Fountain Associates I, Ltd.
and Old Anchor
10.41+* Supply Agreement effective as of June 17, 1996 between The
Stroh Brewery Company and the Company
10.42* Warrant Agreement dated as of February 5, 1997 between the
Company and Bankers Trust Company
10.43* Form of Warrant issued pursuant to the Warrant Agreement
12.1** Statement re: computation of ratio of earnings to fixed
charges for the period from
February 5, 1997 to December 31, 1997
</TABLE>
<PAGE> 171
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER ITEM NUMBER
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<C> <S> <C>
12.2** Statement re: computation of ratio of earnings to fixed
charges for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996
21.1* List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Eckert Seamans Cherin & Mellott, LLC, included in
Exhibit 5.1
23.3 Consent of Jones, Day, Reavis & Pogue, included in Exhibit
5.2
23.4 Consent of American Appraisal Associates, Inc.
24.1 Power of Attorney of the Company
25.1 Statement on Form T-1 of the eligibility of the Trustee with
respect to the Company
27.1** Financial Data Schedule of Old Anchor
27.2** Financial Data Schedule of the Company
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to DTC Participants
99.4 Form of Letter to Clients and Form of Instruction to
Book-Entry Transfer Participants
</TABLE>
- ---------------
+ Portions hereof have been omitted and filed separately with the Commission
pursuant to a request for confidential treatment in accordance with Rule 406
of Regulation C.
* Incorporated by reference to the Company's Registration Statement on Form
S-4 (Reg. No. 333-31363) originally filed with the Securities and Exchange
Commission on July 16, 1997.
** Incorporated by reference to the Company's March 31, 1998 filing on Form
10-K with the Securities and Exchange Commission.
All other exhibits have been filed herewith.
<PAGE> 1
[ECKERT SEAMANS CHERIN & MELLOTT, LLC LETTERHEAD]
April 20, 1998
Anchor Glass Container Corporation
One Anchor Plaza
4343 Anchor Plaza Parkway
Tampa, Florida 33634-7513
Re: Anchor Glass Container Corporation
$50,000,000 9 7/8% Senior Notes due 2008
Ladies and Gentlemen:
We have acted as counsel to Anchor Glass Container Corporation, a Delaware
corporation (the "Company") in connection with the proposed issuance and
exchange of up to $50,000,000 aggregate principal amount of the Company's 9 7/8%
Senior Notes due 2008 (the "New Notes") for an equal principal amount of the
Company's 9 7/8% Senior Notes due 2008 outstanding on the date hereof (the "Old
Notes"), to be issued pursuant to the Indenture dated as of March 16, 1998 (the
"Indenture") by and among the Company, as issuer, and The Bank of New York, as
trustee (the "Trustee").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereupon we are of the
opinion that the New Notes have been duly authorized.
The opinions expressed herein are limited to the laws of the State of
Delaware and the federal laws of the United States of America, as currently in
effect.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement on Form S-4 filed by the Company to register the exchange
of the New Notes for the Old Notes under the Securities Act of 1933 and to the
reference to us under the caption "Legal Matters" in the Prospectus constituting
a part of such Registration Statement.
Very truly yours,
/s/ ECKERT SEAMANS CHERIN & MELLOTT,
LLC
---------------------------------------
Eckert Seamans Cherin & Mellott, LLC
<PAGE> 1
[JONES, DAY, REAVIS & POGUE LETTERHEAD]
April 20, 1998
Anchor Glass Container Corporation
One Anchor Plaza
4343 Anchor Plaza Parkway
Tampa, Florida 33634-7513
Re: Anchor Glass Container Corporation
$50,000,000 9 7/8% Senior Notes due 2008
Ladies and Gentlemen:
We are acting as special counsel for Anchor Glass Container Corporation, a
Delaware corporation (the "Company"), in connection with the proposed issuance
and exchange of up to $50,000,000 aggregate principal amount of the Company's
9 7/8% Senior Notes due 2008 (the "New Notes") for an equal principal amount of
the Company's 9 7/8% Senior Notes due 2008 outstanding on the date hereof (the
"Old Notes"), to be issued pursuant to the Indenture dated as of March 16, 1998
(the "Indenture") by and among the Company, as issuer, and The Bank of New York,
as trustee (the "Trustee").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereupon we are of the
opinion that when the New Notes have been duly executed by authorized officers
of the Company and authenticated by the Trustee in accordance with the Indenture
and issued in exchange for the Old Notes in accordance with the Indenture and
the Exchange Offer, the New Notes will be valid and binding obligations of the
Company.
The opinions expressed herein are limited to the laws of the State of New
York and the federal laws of the United States of America, as currently in
effect.
We hereby consent to the filing of this opinion as Exhibit 5.2 to the
Registration Statement on Form S-4 filed by the Company to register the exchange
of the New Notes for the Old Notes under the Securities Act of 1933 and to the
reference to us under the caption "Legal Matters" in the Prospectus constituting
a part of such Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
---------------------------------------
Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
April 21, 1998
<PAGE> 1
[AMERICAN APPRAISAL ASSOCIATES LOGO]
CONSENT OF APPRAISER
We hereby consent to the references made to us and/or our appraisal by Anchor
Glass Container Corporation under the caption(s) "Prospectus Summary,"
"Business - Efficient Manufacturing Facilities," and "Business - Facilities,"
in the Prospectus constituting a part of this Registration Statement on Form
S-4. In addition we consent to the filing of our Summarization Letters therein
as an annex to the Registration Statement. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
AMERICAN APPRAISAL ASSOCIATES, INC.
By /s/ PAULA D. BOST
--------------------------
Paula D. Bost
Assistant Secretary
Milwaukee, Wisconsin
April 21, 1998
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints John J. Ghaznavi, M. William Lightner, Jr., Randi L.
Strudler and Meredith S. Goldberg, or any of them, the true and lawful
attorney-in-fact, with full power of substitution and resubstitution, for him
and in his name, place and stead, to sign on his behalf, as a director or
officer, or both, as the case may be, of Anchor Glass Container Corporation, a
Delaware corporation (the "Corporation"), a Registration Statement on Form S-4,
or any other appropriate form (the "Registration Statement"), for the purpose of
registering, pursuant to the Securities Act of 1933, as amended, the
Corporation's 9 7/8% Senior Notes due 2008 in an aggregate principal amount not
to exceed $50,000,000, and to sign any or all amendments and any or all
post-effective amendments to such Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact, each of
them, with or without the others, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or his or her substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
/s/ JOHN J. GHAZNAVI
---------------------------------------
John J. Ghaznavi
/s/ M. WILLIAM LIGHTNER
---------------------------------------
M. William Lightner
/s/ EDWARD M. JONAS
---------------------------------------
Edward M. Jonas
/s/ DAVID T. GUTOWSKI
---------------------------------------
David T. Gutowski
/s/ C. KENT MAY
---------------------------------------
C. Kent May
/s/ PAUL H. FARRAR
---------------------------------------
Paul H. Farrar
Dated: April 20, 1998
<PAGE> 1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF
REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
ANCHOR GLASS CONTAINER CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 59-3417812
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One Anchor Plaza
4343 Anchor Plaza Parkway
Tampa, Florida 33634-7513
(Address of principal executive offices) (Zip code)
----------------------
9-7/8% Senior Notes due 2008
(Title of the indenture securities)
<PAGE> 2
================================================================================
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF
REGULATION S-T
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 20th day of April, 1998.
THE BANK OF NEW YORK
By: /S/LUCILLE FIRRINCIELI
----------------------------
Name: LUCILLE FIRRINCIELI
Title: VICE PRESIDENT
-4-
<PAGE> 4
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
December 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal Reserve
Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell..... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,019,608
LESS: Allowance for loan and
lease losses ..............627,350
LESS: Allocated transfer risk
reserve..........................0
Loans and leases, net of unearned
income, allowance, and reserve 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
-----------
Total assets ......................... $56,153,587
===========
LIABILITIES
Deposits:
In domestic offices ................ $27,031,362
Noninterest-bearing ......11,899,507
Interest-bearing .........15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing .........590,999
Interest-bearing .........13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase. 2,338,881
Demand notes issued to the U.S.
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
-----------
Total liabilities .................... 51,192,576
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... ( 36,184)
------------
Total equity capital ................. 4,961,011
------------
Total liabilities and equity
capital ............................ $56,153,587
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi
Alan R. Griffith Directors
J. Carter Bacot
<PAGE> 1
LETTER OF TRANSMITTAL
ANCHOR GLASS CONTAINER CORPORATION
OFFER FOR ALL OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
9 7/8% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY
BE EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE
EXPIRATION DATE.
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
The Bank of New York The Bank of New York
101 Barclay Street -- 7E (For Eligible Institutions Only) 101 Barclay Street
New York, New York 10286 Confirm by Telephone: Corporate Trust Services Window
Attn: Ground Level
Floor 7E Attn:
Reorganization Section Floor 7E
Reorganization Section
For Information Call:
</TABLE>
Delivery of this letter of transmittal to an address other than as set
forth above, or transmission of instructions via facsimile other than as set
forth above, does not constitute a valid delivery.
The undersigned acknowledges that he or she has received the Prospectus
dated , 1998 (as amended or supplemented from time to time, the
"Prospectus") of Anchor Glass Container Corporation, a Delaware corporation (the
"Company"), and this Letter of Transmittal (as amended or supplemented from time
to time, the "Letter of Transmittal"), which together constitute the Company's
offer (the "Exchange Offer") to exchange up to $50,000,000 aggregate principal
amount of 9 7/8% Senior Notes due 2008 (the "Exchange Notes") of the Company,
for an equal principal amount of the Company's issued and outstanding 9 7/8%
Senior Notes due 2008 (collectively, the "Outstanding Notes"). The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rate and maturity) to those of the Outstanding Notes, except
that the Exchange Notes will be registered under the Securities Act of 1933, as
amended (the "Securities Act").
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein have the meanings given to
such terms in the Prospectus.
This Letter of Transmittal is to be completed by holders of Outstanding
Notes either if Outstanding Notes are to be forwarded herewith or if tenders of
Outstanding Notes are to be made by book-entry transfer to an account maintained
by The Bank of New York (the "Exchange Agent") at The Depository Trust Company
(the "Book-Entry Transfer Facility" or "DTC") pursuant to the procedures set
forth in the Prospectus under "The Exchange Offer -- Procedures for Tendering
Outstanding Notes." Delivery of this Letter of Transmittal and any other
required documents should be made to the Exchange Agent.
If a Holder desires to tender Outstanding Notes pursuant to the Exchange
Offer but time will not permit this Letter of Transmittal, certificates
representing Outstanding Notes or other required documents to reach the Exchange
Agent on or before the Expiration Date, or the procedure for book-entry transfer
cannot be completed on a timely basis, such Holder may effect a tender of such
Notes in accordance with the guaranteed delivery procedures set forth in the
Prospectus under "Exchange Offer -- Procedures for Tendering Outstanding Notes."
See Instruction 2.
<PAGE> 2
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers and
principal amount of Outstanding Notes should be listed on a separate schedule
affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK)
- -------------------------------------------------------------------------------------------------------------------------------
(2)
AGGREGATE (3)
PRINCIPAL PRINCIPAL AMOUNT
(1) AMOUNT OF OF OUTSTANDING
CERTIFICATE OUTSTANDING NOTES TENDERED
NUMBER(S)* NOTES (IF LESS THAN ALL)**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed if Outstanding Notes are being tendered by
book-entry holders.
(2) Outstanding Notes may be tendered in whole or in part in denominations of
$100,000 and integral multiples of $1,000 in excess thereof, provided that
if any Outstanding Notes are tendered for exchange in part, the untendered
principal amount thereof must be at least $100,000 or any integral
multiple of $1,000 in excess thereof. See instruction 3. Unless this
column is completed, a holder will be deemed to have tendered the full
aggregate principal amount of the
(3) Outstanding Notes represented by the Outstanding Notes indicated in column
2.
================================================================================
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
- --------------------------------------------------------------------------------
Window Ticket Number (if any)
- --------------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
---------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
<PAGE> 3
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OUTSTANDING
NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED THE OUTSTANDING NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES
AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF
ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Outstanding Notes indicated above in exchange for a like aggregate principal
amount of Exchange Notes. Subject to, and effective upon, the acceptance for
exchange of the Outstanding Notes tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Outstanding Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the tendered
Outstanding Notes with the full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), subject to
the right of withdrawal described in the Prospectus, to (i) deliver certificates
for such Outstanding Notes to the Company and deliver all accompanying evidences
of transfer and authenticity to, or upon the order of, the Company and (ii)
present such Outstanding Notes for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Outstanding Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes tendered hereby and that, when the same are accepted for
exchange, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims or proxies. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the Outstanding Notes tendered hereby, and the undersigned will comply with its
obligations under the Registration Rights Agreement. The undersigned has read
and agreed to all of the terms of the Exchange Offer.
The undersigned agrees that acceptance of any tendered Outstanding Notes by
the Company and the issuance of Exchange Notes in exchange therefor will
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company will have no further
obligations or liabilities thereunder (except in limited circumstances).
The name(s) and address(es) of the registered holders of the Outstanding
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Outstanding Notes. The Certificate number(s) and
the Outstanding Notes that the undersigned wishes to tender should be indicated
in the appropriate boxes above.
<PAGE> 4
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on certain interpretive letters by the staff of the Securities and
Exchange Commission (the "SEC") to third parties in unrelated transactions. On
the basis thereof, the Exchange Notes issued in exchange for the Outstanding
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders are not participating
in, and have no arrangement or understanding with any person to participate in,
the distribution of such Exchange Notes. The undersigned acknowledges that any
holder of Outstanding Notes using the Exchange Offer to participate in a
distribution of the Exchange Notes (i) cannot rely on the position of the staff
of the SEC enunciated in its interpretive letter with respect to Exxon Capital
Holdings Corporation (available April 13, 1989) or similar letters and (ii) must
comply with the registration and prospectus requirements of the Securities Act
in connection with a secondary resale transaction. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes. If the undersigned is
a broker-dealer that will receive Exchange Notes for its own account in exchange
for Outstanding Notes that were acquired as a result of market-making activities
or other trading activities, it acknowledges that it will deliver a prospectus
in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned represents that (i) it is not an affiliate of either the
Company or, if the undersigned is an affiliate of the Company, it will comply
with the registration and prospectus requirements of the Securities Act to the
extent applicable, (ii) the Exchange Notes are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the holder, (iii) the undersigned has not entered into an
arrangement or understanding with any other person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes,
(iv) the undersigned is not a broker-dealer who purchased the Notes for resale
pursuant to an exemption under the Securities Act and (v) the undersigned will
be able to trade Exchange Notes acquired in the Exchange Offer without
restriction under the Securities Act.
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus may be used by a Participating Broker-Dealer
(as defined below) in connection with resales of Exchange Notes received in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making activities or other trading activities, for a period ending 90
days after the Expiration Date (subject to extension under certain limited
circumstances described in the Prospectus) or, if earlier, when all such
Exchange Notes have been disposed of by such Participating Broker-Dealer. In
that regard, each broker-dealer who acquired Outstanding Notes for its own
account as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), by tendering such Outstanding Notes and
executing this Letter of Transmittal, agrees that, upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in the Prospectus
untrue in any material respect or which causes the Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference therein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-Dealer
will suspend the sale of Exchange Notes pursuant to the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and have furnished copies of the amended or supplemented Prospectus
to the Participating Broker-Dealer or the Company has given notice that the sale
of the Exchange Notes may be resumed, as the case may be. If the Company gives
such notice to suspend the sale of the Exchange Notes, the 90-day period
referred to above during which Participating Broker-Dealers are entitled to use
the Prospectus in connection with the resale of Exchange Notes shall be extended
by the number of days during the period from and including the date of the
giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Notes or to and including
the date on which the Company has given notice that the sale of Exchange Notes
may be resumed, as the case may be.
The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described under "The Exchange Offer -- Procedures
for Tendering Outstanding Notes" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the Prospectus.
The undersigned recognizes that under certain circumstances set forth in
the Prospectus under "The Exchange Offer -- Conditions to the Exchange Offer"
the Company will not be required to accept for exchange any of the Outstanding
Notes tendered. Outstanding Notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below (or, in the case of
Outstanding Notes tendered by book-entry transfer, credited to an account
maintained by the tendering holder at DTC).
<PAGE> 5
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes
(and, if applicable, any substitute certificates representing Outstanding Notes
not exchanged or not accepted for exchange) be issued in the name(s) of the
undersigned and be delivered to the undersigned at the address, or, in the case
of book-entry transfer of Outstanding Notes, be credited to the account at DTC
shown above in the box entitled "Description of Outstanding Notes."
Holders of the Outstanding Notes whose Outstanding Notes are accepted for
exchange will not receive accrued interest on such Outstanding Notes for any
period from and after the last Interest Payment Date to which interest has been
paid or duly provided for on such Outstanding Notes prior to the original issue
date of the Exchange Notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such Outstanding Notes,
and the undersigned waives the right to receive any interest on such Outstanding
Notes accrued from and after such Interest Payment Date or, if no such interest
has been paid or duly provided for from and after the original issue date of the
Exchange Notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Outstanding Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. This tender
may be withdrawn only in accordance with the procedures set forth in the
Prospectus and in the instructions contained in this Letter of Transmittal.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL AND DELIVERING SUCH NOTES
AND THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------- Date:
- -----------------------------, 1998
X
- --------------------------------------------------------------- Date:
- -----------------------------, 1998
SIGNATURE(S) OF OWNER
The above lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Outstanding Notes, or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Outstanding Notes to which this Letter of Transmittal relate are held of
record by two or more joint holders, then all such holders must sign this. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, then please set forth full title. See Instruction 4.
Name(s):------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
------------------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number:
----------------------------------------------------
Tax Identification or
Social Security Number(s):
----------------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signatures Guaranteed
by an Eligible Institution:
-------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
- --------------------------------------------------------------------------------
(ADDRESS AND TELEPHONE NUMBER)
Dated:
- ----------------------------, 1998
<PAGE> 7
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Outstanding Notes not
exchanged and/or Exchange Notes are to be issued in the name of and sent
to someone other than the person or persons whose signature(s) appear(s)
on this Letter of Transmittal above.
Issue Exchange Notes and/or Outstanding Notes to:
Name(s):
-------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
Telephone Number:
-------------------------------------
Tax Identification or
Social Security Number(s):
-----------------------------
(COMPLETE SUBSTITUTE FORM W-9)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Outstanding Notes not
exchanged and/or Exchange Notes are to be sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter of
Transmittal above or to such person or persons at an address other than
shown in the box above entitled "Description of Outstanding Notes."
Deliver Exchange Notes and/or Outstanding Notes to:
Name(s):
-------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
Telephone Number:
-------------------------------------
Tax Identification or
Social Security Number(s):
-----------------------------
------------------------------------------------------------
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S)
FOR OUTSTANDING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES.
This Letter of Transmittal is to be used to, and must accompany, (i) all
certificates representing Outstanding Notes tendered pursuant to the Exchange
Offer and (ii) all tenders or Outstanding Notes made pursuant to the procedures
for book-entry transfer set forth in the Prospectus under "The Exchange
Offer -- Procedures for Tendering Outstanding Notes." Certificates representing
the Outstanding Notes in proper form for transfer, or a timely confirmation of a
book-entry transfer of such Outstanding Notes into the Exchange Agent's account
at DTC, as well as a properly completed and duly executed copy of this Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, a
Substitute Form W-9 (or facsimile thereof) and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein on or before the Expiration Date.
The method of delivery of this Letter of Transmittal, the Outstanding Notes
and all other required documents is at the election and risk of the tendering
holders, but delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If such delivery is by mail, it is recommended
that registered mail properly insured, with return receipt requested, be used.
In all cases, sufficient time should be allowed to permit timely delivery.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEED DELIVERY PROCEDURES.
If a holder desires to tender Outstanding Notes, but time will not permit a
Letter of Transmittal, certificates representing the Outstanding Notes to be
tendered or other required documents to reach the Exchange Agent on or before
the Expiration Date, or if the procedure for book-entry transfer cannot be
completed on or prior to the Expiration Date, such holder's tender may be
effected if:
a. such tender is made by or through an Eligible Institution (as
defined below);
b. on or before to the Expiration Date, the Exchange Agent has
received a properly completed and duly executed Notice of Guaranteed
Deliver, substantially in the form made available by the Company (or a
facsimile thereof) (receipt confirmed by telephone and an original
delivered by guaranteed overnight courier) from such Eligible Institution
setting forth the name and address of the holder of such Outstanding Notes,
the name(s) in which the Outstanding Notes are registered and the principal
amount of Outstanding Notes tendered and stating that the tender is being
made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, certificates representing the
Outstanding Notes to be tendered, in proper form for transfer, or a
Book-Entry confirmation, as the case may be, together with a duly executed
Letter of Transmittal and any other documents required by this Letter of
Transmittal and the instructions hereto, will be deposited by such Eligible
Institution with the Exchange Agent; and
c. a Letter of Transmittal (or a facsimile thereof) and certificates
representing the Outstanding Notes to be tendered, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
required documents are received by the Exchange Agent within three New York
Stock Exchange trading days after the Expiration Date.
3. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
Tenders of Outstanding Notes will be accepted only in the principal amount
of $100,000 and integral multiples of $1,000 in excess thereof, provided that if
any Outstanding Notes are tendered for exchange in part, the untendered
principal amount thereof must be $100,000 or any integral multiple of $1,000 in
excess thereof. If less than all the Outstanding Notes evidenced by any
Certificate submitted are to be tendered, fill in the principal amount of
Outstanding Notes which are to be tendered in the box entitled "Principal Amount
of Outstanding Notes Tendered (if less than all)." In such case, new
certificate(s) for the remainder of the Outstanding Notes that were evidenced by
your old certificate(s) will only be sent to the holder of the Outstanding Notes
(or, in the case of Outstanding Notes tendered pursuant to book-entry transfer,
will only be credited to the account at DTC maintained by the holder of the
Outstanding Notes) promptly after the Expiration Date. All Outstanding Notes
represented by certificates or subject to a Book-Entry Confirmation delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
<PAGE> 9
Any holder who has tendered Outstanding Notes may withdraw the tender by
delivering written notice of withdrawal (which may be sent by facsimile) to the
Exchange Agent at its address set forth herein prior to the Expiration Date. Any
such notice of withdrawal must specify (i) the person named in the Letter of
Transmittal as having tendered the Outstanding Notes to be withdrawn, (ii) the
certificate numbers of the Outstanding Notes to be withdrawn, (iii) the
principal amount of Outstanding Notes to be withdrawn, (iv) a statement that
such holder is withdrawing its election to have such Outstanding Notes exchanged
and (v) the name of the registered holder of such Outstanding Notes and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) by which such
Outstanding Notes were tendered, or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Outstanding Notes being withdrawn. If Outstanding
Notes have been tendered pursuant to the procedures for book-entry transfer set
forth in the Prospectus under "The Exchange Offer -- Procedures for Tendering
Outstanding Notes," the notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawal of Outstanding Notes, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written or facsimile transmission. Withdrawals of tenders of
Outstanding Notes may not be rescinded. Outstanding Notes properly withdraw will
not be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer -- Procedures for Tendering Outstanding Notes." The Exchange Agent will
return the properly withdrawn Outstanding Notes promptly following receipt of
notice of withdrawal.
All questions as to the validity of notices of withdrawals, including time
of receipt, will be determined by the Company, and such determinations will be
final and binding on all parties. Neither the Company nor the Exchange Agent
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder of the
Outstanding Notes tendered herewith, the signature must correspond exactly with
the name as written on the face of the certificates without any alteration,
enlargement or change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Outstanding Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are names in which tendered Outstanding Notes are
registered.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Outstanding Notes are to be reissued or returned to the registered
holder, then the registered holder need not and should not endorse any tendered
Outstanding Notes nor provide a separate bond power. In any other case, the
registered holder must either properly endorse the Outstanding Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal (in either case, executed exactly as the name of the registered
holder appears on such Outstanding Notes), with the signature on the endorsement
or bond power guaranteed by an Eligible Institution, unless such certificates or
bond powers are signed by an Eligible Institution.
If this Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and submit with this
Letter of Transmittal evidence satisfactory to the Company of their authority to
so act.
<PAGE> 10
The signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Outstanding Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder (which term,
for purposes of this document, shall include any participant in DTC whose name
appears on the register of holders maintained by the Company as owner of the
Outstanding Notes) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a commercial
bank or trust company located or having an office or correspondent in the United
States, or by a member firm of a national securities exchange or the National
Association of Securities Dealers, Inc., or by a member of a signature medallion
program such as "STAMP" (any of the foregoing being referred to herein as an
"Eligible Institution"). If Outstanding Notes are registered in the name of a
person other than the signer of this Letter of Transmittal, the Outstanding
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Outstanding Notes should indicate in the applicable
box the name and address or account at DTC to which Exchange Notes issued
pursuant to the Exchange Offer and/or substitute Outstanding Notes for principal
amounts not tendered or not accepted for exchange are to be issued, sent or
deposited if different from the name and address or account of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. If no such instructions are given, any Exchange Notes will be
issued in the name of, and delivered to, the name and address (or account at
DTC, in the case of any tender by book-entry transfer) of the person signing
this Letter of Transmittal, and any Outstanding Notes not accepted for exchange
will be returned to the name and address (or account at DTC, in the case of any
tender by book-entry transfer) of the person signing this Letter of Transmittal.
6. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9.
Under the federal income tax laws, payments that may be made by the Company
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the Indenture governing the Exchange Notes) will retain
31% of payments made to the tendering holder during the 60-day period following
the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent
or the Company with its TIN within 60-days after the date of the Substitute Form
W-9, the Company (or the Paying Agent) will remit such amounts retained during
the 60-day period to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent or the Company with its TIN within such
60-day period, the Company (or the Paying Agent) will remit such previously
retained amounts to the IRS as backup withholding. In general, if a holder is an
individual, the taxpayer identification number is the Social Security Number of
such individual. If the Exchange Agent or the Company is not provided with the
correct taxpayer identification number, the holder may be subject to a $50
penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Outstanding Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
<PAGE> 11
Failure to complete the Substitute Form W-9 will not, by itself, cause
Outstanding Notes to be deemed invalidly tendered, but may require the Company
(or the Paying Agent) to withhold 31% of the amount of any payments made on
account of the Exchange Notes. Backup withholding is not an additional federal
income tax. Rather, the federal income tax liability of a person subject to
backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
7. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Outstanding Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Outstanding Notes not exchanged are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Outstanding Notes tendered herewith, or
if tendered Outstanding Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the transfer of Outstanding Notes to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter of Transmittal.
8. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
9. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders of Outstanding
Notes or transmittals of this Letter of Transmittal will be accepted. All
tendering holders of Outstanding Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Outstanding Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of defects or irregularities in any tender, nor shall any of them
incur any liability for failure to give any such notice.
10. INADEQUATE SPACE.
If the space provided herein is inadequate, the aggregate principal amount
of Outstanding Notes being tendered and the certificate number or numbers (if
applicable) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
11. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify The Bank of New York at 101 Barclay Street (7
East), New York, New York 10286, telephone (212) 815-2742. The holder will then
be instructed as to the steps that must be taken to replace the certificate.
This Letter of Transmittal and related documents cannot be processed until the
Outstanding Notes have been replaced.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
<PAGE> 12
13. VALIDITY OF TENDERS.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Outstanding Notes will be determined by the
Company, in its sole discretion, which determination will be final and binding.
The Company reserves the right to reject any and all Outstanding Notes not
validly tendered or any Outstanding Notes, the Company's acceptance of which
may, in the opinion of the Company or counsel to the Company, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange offer or
defects or irregularities in tenders of Outstanding Notes as to any
ineligibility of any holder who seeks to tender Outstanding Notes in the
Exchange Offer, whether or not similar conditions or irregularities are waived
in the case of other holders. The interpretation of the terms and conditions of
the Exchange offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Outstanding Notes
must be cured within such time as the Company shall determine. The Company will
use reasonable efforts to give notification of defects or irregularities with
respect to tenders of Outstanding Notes, but neither the Company nor the
Exchange Agent shall incur any liability for failure to give such notification.
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF OUTSTANDING NOTES.
Subject to the terms and conditions of the Exchange Offer, the Company will
accept for exchange all validly tendered Outstanding Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Outstanding Notes when, as and if the
Company has given written and oral notice thereof to the Exchange Agent. If any
tendered Outstanding Notes are not exchanged pursuant to the Exchange Offer for
any reason, such unexchanged Outstanding Notes will be returned, without
expense, to the name and address shown above or, if Outstanding Notes have been
tendered by book-entry transfer, to the account at DTC shown above, or at a
different address or account at DTC as may be indicated under "Special Delivery
Instructions."
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 6)
PAYER'S NAME: ANCHOR GLASS CONTAINER CORPORATION
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Taxpayer Identification Number --------------------------------------
FORM W-9 Enter your taxpayer identification number in Social Security Number
DEPARTMENT OF THE TREASURY the appropriate box. For most individuals, OR
INTERNAL REVENUE SERVICE this is your social security number. If you --------------------------------------
do not have a number, see how to obtain a Employer Identification
"TIN" in the enclosed Guidelines. Number
NOTE: If the account is in more than one
name, see the chart on page 2 of the
enclosed Guidelines to determine what number
to give.
------------------------------------------------------------------------------------
PART II -- For Payees Exempt From Backup Withholding (see enclosed Guidelines)
------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY
IDENTIFICATION NUMBER THAT:
(TIN) AND CERTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified
by the Internal Revenue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends or the
IRS has notified me that I am no longer subject to backup withholding.
SIGNATURE DATE __________
- ------------------------------------------------------------------------------------------------------------------------
CERTIFICATE GUIDELINES -- You must cross out Item (2) of the above certification if you have been notified by the IRS
that you are subject to backup withholding because of underreporting of interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding, you received another
notification from the IRS that you are no longer subject to backup withholding, do not cross out Item (2).
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payor, 31% of all payments made
to me on account of the Exchange Notes shall be retained until I provide a
Taxpayer Identification Number to the payor and that, if I do not provide my
Taxpayer Identification Number within 60 days, such retained amounts shall be
remitted to the Internal Revenue Service as a backup withholding and 31% of all
reportable payments made to me thereafter will be withheld and remitted to the
Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE DATE _________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE NOTES.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR NEW 9 7/8% SENIOR NOTES DUE 2008
OF
ANCHOR GLASS CONTAINER CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used by registered holders of outstanding 9 7/8% Senior Notes due
2008 (the "Outstanding Notes") of Anchor Glass Container Corporation, a Delaware
corporation (the "Company"), who wish to tender their Outstanding Notes for an
equal principal amount of new 9 7/8% Senior Notes of the Company due 2008 (the
"Exchange Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act") if (i) the Outstanding Notes, a duly completed
and executed Letter of Transmittal (as defined in the Prospectus) and all other
required documents cannot be delivered to The Bank of New York (the "Exchange
Agent") on or prior to 5:00 P.M., New York City time, on the Expiration Date (as
defined in the Prospectus referred to below) or (ii) the procedures for delivery
of the Outstanding Notes being tendered by book-entry transfer, together with a
duly completed and executed Letter of Transmittal, cannot be completed on or
prior to 5:00 P.M., New York City time on the Expiration Date. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight delivery), to the Exchange Agent. See
"The Exchange Offer -- Procedures for Tendering Outstanding Notes" in the
Prospectus. The Company has the right to reject a tender of Outstanding Notes
made pursuant to the guaranteed delivery procedures unless the registered holder
using the guaranteed delivery procedure submits either (a) the Outstanding Notes
tendered thereby, in proper form for transfer, or (b) confirmation of book-entry
transfer set forth in the Prospectus, in either case together with one or more
properly completed and duly executed Letter(s) of Transmittal (or facsimile
thereof) and any other required documents by 5:00 P.M., New York City time, on
the third New York Stock Exchange trading day following the Expiration Date.
Capitalized terms not defined herein have the meanings assigned to them in the
Prospectus.
The Exchange Agent for The Exchange Offer Is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail Facsimile Transmissions: By Hand Or Overnight Delivery
The Bank of New York (Eligible Institutions Only) The Bank of New York
101 Barclay Street, 7E Confirm By Telephone: 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attn: For Information Call: Ground Level
Floor 7E New York, New York 10286
Reorganization Section Attn:
Floor 7E
Reorganization Section
</TABLE>
Delivery of this Notice Of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in Prospectus dated , 1998 (as the same may
be amended or supplemented from time to time, the "Prospectus"), and the related
Letter of Transmittal (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, the aggregate principal amount of the
Outstanding Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Procedures
for Tendering Outstanding Notes" and in instruction 2 to the Letter of
Transmittal.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS IT CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF
APPEARS ON THE OUTSTANDING OF OUTSTANDING NOTES AMOUNT REPRESENTED OUTSTANDING NOTES
NOTES (PLEASE PRINT) TENDERED BY OUTSTANDING NOTES* TENDERED
<S> <C> <C> <C>
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- --------------------------- ---------------------------
</TABLE>
- ---------------
* Must be in denominations of a principal amount of $1,000 and any integral
multiple thereof, and not less than $100,000 aggregate principal amount.
If the Outstanding Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number:
================================================================================
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X
- --------------------------------------------------- Date:
- ------------------------------, 1998
X
- --------------------------------------------------- Date:
- ------------------------------, 1998
Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:
--------------------------------
<PAGE> 3
Must be signed by the holder(s) of the Outstanding Notes as their name(s)
appear(s) on certificates of the Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Names(s):
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Address(s):
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
<PAGE> 4
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
learning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either (a) the
Outstanding Notes tendered hereby, in proper from for transfer, or (b)
confirmation of the book-entry transfer of such Outstanding Notes to the
Exchange Agent's account at The Depository Trust Company ("DTC") maintained for
such purpose, pursuant to the procedures for book-entry transfer set forth in
the Prospectus, in either case together with one or more properly completed and
duly executed Letter(s) of Transmittal (or facsimile thereof) and any other
required documents by 5:00 P.M., New York City time, on the third New York Stock
Exchange trading day following the Expiration Date.
The undersigned acknowledged that it must deliver the Letter(s) of
Transmittal and the Outstanding Notes tendered hereby to the Exchange Agent
within the time period set forth above and that failure to do so could result in
a financial loss to the undersigned.
<TABLE>
<S> <C>
Name of Firm: --------------------------------------- -----------------------------------------------------
(AUTHORIZED SIGNATURE)
Address:
--------------------------------------------- Title:
-------------------------------------------------
Name:
- --------------------------------------------- ------------------------------------------------
(ZIP CODE) (PLEASE TYPE OR PRINT)
Area Code and
Telephone Number: --------------------------------- Date:
-------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99.3
OFFER TO EXCHANGE
9 7/8% SENIOR NOTES DUE 2008, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
OF
ANCHOR GLASS CONTAINER CORPORATION
To The Depository Trust Company Participants:
We are enclosing herewith the materials listed below relating to the offer
by Anchor Glass Container Corporation (the "Company") to exchange up to
$50,000,000 aggregate principal amount of its 9 7/8% Senior Notes Due 2008 (the
"Exchange Notes"), pursuant to an offering registered under the Securities Act
of 1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding 9 7/8% Senior Notes Due 2008 (the "Outstanding Notes")
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1998 (the "Prospectus") of the Company, and the related Letter of
Transmittal (the "Letter of Transmittal"), in each case as amended or
supplemented from time to time (which together constitute the "Exchange Offer").
Capitalized terms used but not defined herein have the meaning given to such
terms in the Prospectus.
Enclosed herewith are copies of the following documents;
1. Prospectus dated , 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Book-Entry Transfer Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Outstanding Notes in your name or in the name of your nominee, to
accompany the instruction form referred to above, for obtaining such
client's instruction with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS
EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
To participate in the Exchange Offer, a beneficial holder (a "Holder") of
Outstanding Notes must cause a DTC Participant to tender such Holder's
Outstanding Notes to The Bank of New York's (the "Exchange Agent") account
maintained at The Depository Trust Company ("DTC") for the benefit of the
Exchange Agent through DTC's Automated Tender Offer Program ("ATOP"), including
transmission of a computer-generated message that acknowledges and agrees, on
behalf of the DTC Participant and the beneficial owners of tendered Outstanding
Notes, to be bound by the terms of the Letter of Transmittal. By complying with
DTC's ATOP procedures with respect to the Exchange Offer, the DTC Participant
confirms, on behalf of itself and the beneficial owners of tendered Outstanding
Notes, all provisions of the Letter of Transmittal applicable to it and such
beneficial owners as fully as if it completed, executed and returned the Letter
of Transmittal to the Exchange Agent.
<PAGE> 2
Pursuant to the Letter of Transmittal, each Holder of Outstanding Notes
will represent to the Company that (i) it is not an affiliate of the Company or,
if the Holder is an affiliate of the Company, it will comply with the
registration and prospectus requirements of the Securities Act to the extent
applicable, (ii) the Exchange Notes are being acquired in the ordinary course of
business of the person receiving such Exchange Notes, whether or not such person
is the Holder, (iii) the Holder has not entered into an arrangement or
understanding with any other person to participate in the distribution (within
the meaning of the Securities Act) of the Exchange Notes, (iv) the Holder is not
a broker-dealer who purchased the Notes for resale pursuant to an exemption
under the Securities Act, and (v) the Holder will be able to trade Exchange
Notes acquired in the Exchange Offer without restriction under the Securities
Act. If the tendering Holder is a broker-dealer that will receive Exchange Notes
for its own account pursuant to the Exchange Offer, we will represent on behalf
of such broker-dealer that the Outstanding Notes to be exchanged for the
Exchange Notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledge on behalf of such broker-dealer that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By acknowledging that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, such broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed Instruction to the Book-Entry Transfer Participant from Owner
contains an authorization by the beneficial owners of the Outstanding Notes for
you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Outstanding Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Outstanding Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtain from The Bank of
New York, 101 Barclay Street, (7 East), New York, NY 10286, Attention:
Reorganization Section.
Very truly yours,
Anchor Glass Container Corporation
By:
--------------------------------------
M. William Lightner, Jr.
Senior Vice President -- Finance
Chief Financial Officer and Treasurer
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF ANCHOR GLASS CONTAINER CORPORATION, OR THE BANK OF NEW YORK OR
AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
EXHIBIT 99.4
OFFER TO EXCHANGE
9 7/8% SENIOR NOTES DUE 2008, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
OF
ANCHOR GLASS CONTAINER CORPORATION
To Our Clients:
We are enclosing herewith a Prospectus dated , 1998
(the "Prospectus") of Anchor Glass Container Corporation (the "Company"), and a
Letter of Transmittal (which together constitute the "Exchange Offer") relating
to the offer by the Company to exchange up to $50,000,000 aggregate principal
amount of its 9 7/8% Senior Notes Due 2008 (the "Exchange Notes"), pursuant to
an offering registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
9 7/8% Senior Notes Due 2008 (the "Outstanding Notes") upon the terms and
subject to the conditions set forth in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to such terms in the
Prospectus.
PLEASE NOTE THAT THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
We are the participants in the book-entry transfer facility of Outstanding
Notes held by us for your account. A tender of such Outstanding Notes can be
made only by us as the participant in the book-entry transfer facility and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Outstanding Notes held
by us for your account.
We request instructions as to whether you wish to tender any or all of the
Outstanding Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations contained in the Letter of Transmittal
that are to be made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder (a "Holder") of
Outstanding Notes will represent to the Company that (i) it is not an affiliate
of either the Company or, if the Holder is an affiliate of the Company, it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable, (ii) the Exchange Notes are being acquired in the
ordinary course of business of the person receiving such Exchange Notes, whether
or not such person is the Holder, (iii) the Holder has not entered into an
arrangement or understanding with any other person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes,
(iv) the Holder is not a broker-dealer who purchased the Notes for resale
pursuant to an exemption under the Securities Act, and (v) the Holder will be
able to trade Exchange Notes acquired in the Exchange Offer without restriction
under the Securities Act. If the tendering Holder is a broker-dealer that will
receive Exchange Notes for its own account pursuant to the Exchange Offer, we
will represent on behalf of such broker-dealer that the Outstanding Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledge on behalf
of such broker-dealer that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes. By
acknowledging that it will deliver a prospectus meeting
<PAGE> 2
the requirements of the Securities Act in connection with any resale of such
Exchange Notes, such broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Very truly yours,
<PAGE> 3
INSTRUCTION TO
BOOK-ENTRY TRANSFER PARTICIPANT FROM OWNER
OF
ANCHOR GLASS CONTAINER CORPORATION
9 7/8% SENIOR NOTES DUE 2008
To Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Anchor Glass Container
Corporation (the "Company"), and a related Letter of Transmittal (which together
constitute the "Exchange Offer"). Capitalized terms used but not defined herein
have the meaning given to such terms in the Prospectus.
This will instruct you, the book-entry transfer facility participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Outstanding Notes held by you for the account of the undersigned.
The aggregate face amount of the Outstanding Notes held by you for the
account of the undersigned is (fill in amount):
$ of the 9 7/8% Senior Notes Due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate statement):
A. To TENDER the following Outstanding notes held by
you for the account of the undersigned (insert principal amount of
Outstanding Notes to be tendered):
$ (1) of the 9 7/8% Senior Notes Due 2008, and not
to tender other Outstanding Notes, if any, held by you for the account
of the undersigned;
OR
B. NOT to tender any Outstanding Notes held by you for
the account of the undersigned.
If the undersigned instructs you to tender the Outstanding Notes held by
you for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) it
is not an affiliate of either the Company or, if the undersigned is an affiliate
of the Company, it will comply with the registration and prospectus requirements
of the Securities Act to the extent applicable, (ii) the Exchange Notes are
being acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, (iii) the undersigned
has not entered into an arrangement or understanding with any other person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes, (iv) the undersigned is not a broker-dealer who purchased
the Notes for resale pursuant to an exemption under the Securities Act, and (v)
the undersigned will be able to trade Exchange Notes acquired in the Exchange
Offer without restriction under the Securities Act. If the undersigned is a
broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account pursuant to the Exchange Offer, it represents
that such Outstanding Notes to be exchanged were acquired by it as a result of
market-making activities or other trading activities, and it acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By acknowledging that it will
deliver and by delivering a prospectus
- ---------------
(1) Must be in a minimum aggregate principal amount of $100,000 and in integral
multiples of $1,000 thereof.
<PAGE> 4
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name(s) (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(ZIP CODE)
Telephone Number:
- --------------------------------------------------------------------------------
(AREA CODE)
Taxpayer identification or Social
Security Number:
- ---------------------------------------
Date:
----------------------------------
