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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
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SYRATECH CORPORATION
(Name of the Issuer)
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SYRATECH CORPORATION
LEONARD FLORENCE
THOMAS H. LEE
THL TRANSACTION I CORP.
(Name of Person(s) Filing Statement)
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Syratech Common Stock, par value $0.01 per share
(Title of Class of Securities)
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871824108
(CUSIP Number of Class of Securities)
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Syratech Corporation THL Transaction I Corp.
175 McClellan Highway c/o Thomas H. Lee Company
East Boston, Massachusetts 02128 75 State Street, 26th Floor
Boston, Massachusetts 02109
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
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Copies to:
James L. Purcell, Esq. James Westra, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison Hutchins, Wheeler & Dittmar
1285 Avenue of the Americas 101 Federal Street
New York, New York 10019 Boston Massachusetts 02110
(212) 373-3342 (617) 951-6600
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This Statement is filed in connection with:
a. /x/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting material or information statement
referred to in checking box (a) are preliminary copies: /x/
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CUSIP 871824108 SCHEDULE 13E-3
INTRODUCTION
This statement is being filed by Syratech Corporation ("Syratech" or the
"Company"), Thomas H. Lee, THL Transaction I Corporation ("THL I"), a
corporation that has been organized by Thomas H. Lee Company, and Leonard
Florence in connection with the proposed merger (the "Merger") of THL I with
and into Syratech pursuant to a Restated Agreement and Plan of Merger, dated as
of November 27, 1996, effective as of October 23, 1996 and amended on February
14, 1996 (the "Merger Agreement"). The Merger Agreement provides, among other
things, that each share of Syratech common stock, par value $0.01 per share
("Syratech Common Stock"), (other than (i) shares of Syratech Common Stock held
by Syratech or any wholly owned subsidiary thereof, which will be canceled and
retired and (ii) 35,232 shares of Syratech Common Stock which will be
contributed by Leonard Florence upon the Merger and which will then be
cancelled and retired and (iii) shares of Syratech Common Stock the holders of
which have duly perfected their appraisal rights) will be entitled, at the
election of the stockholder thereof and subject to the terms described herein
and in the Syratech Proxy Statement/Prospectus (as amended, the "Proxy
Statement/ Prospectus") and the Registration Statement on Form S-4 (as amended,
the "Registration Statement") filed by Syratech with the Securities and
Exchange Commission ("SEC") on November 26, 1996, as amended by Amendment No. 2
to the Proxy Statement/Prospectus and the Registration Statement filed with the
SEC on the date hereof, either (a) to receive $32 in cash (except that Leonard
Florence will be entitled to receive only $28.00 in cash) or (b) to retain one
fully paid and nonassessable share of Syratech Common Stock, other than (i)
Leonard Florence who is required by the Merger Agreement to retain 528,472
shares of Syratech Common Stock and (ii) Faye A. Florence, Alan R. Kanter,
Melvin L. Levine and E. Merle Randolph, who are required by the Merger
Agreement to retain an aggregate of 123,766 shares of Syratech Common Stock.
In addition, because no more than an aggregate of 868,250 shares of Syratech
Common Stock may be retained by existing Syratech stockholders (other than any
person listed as an executive officer in Syratech's 1996 Proxy Statement (each
a "Management Stockholder")), the right to retain shares of Syratech Common
Stock may be subject to proration, as set forth in the Merger Agreement and as
described in the Proxy Statement/Prospectus and the Registration Statement.
The following cross reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement/Prospectus of the information required to be included in response to
items of this Statement. The information in the Proxy Statement/Prospectus and
the Registration Statement, including all exhibits thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement/Prospectus and the
Registration Statement. All information in, or incorporated by reference in, the
Proxy Statement/Prospectus, the Registration Statement or this Statement
concerning Syratech or its advisors, or actions or events with respect to any of
them, was provided by Syratech, all information in, or incorporated by reference
in, the Proxy Statement/Prospectus, the Registration Statement or this Statement
concerning Mr. Florence, or actions or events with respect to him, was provided
by Mr. Florence, all information in, or incorporated by reference in, the
Proxy Statement/Prospectus or this Statement concerning THL I or its advisors,
or actions or events with respect to any of them, was provided by THL I and all
information in, or incorporated by reference in, the Proxy Statement/Prospectus
or this Statement concerning Mr. Lee, or actions or events with respect to him,
was provided by Mr. Lee.
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CROSS REFERENCE SHEET
PURSUANT TO INSTRUCTION F
OF SCHEDULE 13E-3
ITEM NUMBER AND LOCATION OR CAPTION IN PROXY
HEADING STATEMENT/PROSPECTUS OR
REGISTRATION STATEMENT
Item 1. Issuer and Class of
Securities subject to the
Transaction
subpart 1(c) "SUMMARY--Price of Syratech Common Stock"
Item 2. Identity and Background
subparts 2(a) - (d) and (g) "SCHEDULE I--Certain Information Regarding
THL Transaction I Corp and Thomas H. Lee
Company"
Item 3. Past Contacts,
Transactions or Negotiations
subpart (a) "THE MERGER--Background of the Merger"
subpart (b) "THE MERGER--Interest of Certain Persons
in the Merger" and "--Employment Agreements"
Item 4. Terms of the Transactions
subpart (a) "THE MERGER--Merger Consideration",
"--Non-Cash Election", "--Non-Cash Election
Procedure", "--Conversion/Retention of
Shares; Procedure for Exchange of
Certificates" and "--Conditions to
Consummation of the Merger" and "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT"
subpart (b) "THE MERGER--Interests of Certain Persons
in the Merger" and "--Employment
Agreements"
Item 5. Plans or Proposals of the
Issuer or Affiliate
subpart (c) "THE MERGER--Employment Agreements" and
"CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Board of Directors and Officers
of the Company Following the Merger"
subpart (d) "SUMMARY--The Merger, Effect of the
Merger", "THE MERGER--NYSE De-listing" and
"--Merger Financings" and "DESCRIPTION OF
SYRATECH CAPITAL STOCK--Syratech Common
Stock Following the Merger"
subpart (f) and (g) "SPECIAL FACTORS/RISK FACTORS--Delisting,
Loss of Liquidity"
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ITEM NUMBER AND LOCATION OR CAPTION IN PROXY
HEADING STATEMENT/PROSPECTUS OR REGISTRATION
STATEMENT
Item 6. Source and Amount of
Funds or Other Consideration
subpart (a) "THE MERGER -- Merger Consideration" and
"-- Merger Financings"
subpart (b) "THE SPECIAL MEETING -- Solicitation of
Proxies" and "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT -- Expenses and Certain
Required Payments"
subpart (c) "THE MERGER -- Merger Financing" and
Exhibit (a).
Item 7. Purpose(s), Alternatives,
Reasons and Effects
subparts (a) - (c) "SPECIAL FACTORS/RISK FACTORS" and
"THE MERGER -- Background of the Merger"
and "-- Recommendation of the Board;
Reasons for the Merger"
subpart (d) "SPECIAL FACTORS/RISK FACTORS -- Control
by the Thomas H. Lee Company",
"-- Delisting; Loss of Liquidity;
Reporting Obligations", "-- Federal
Income Tax Consequences",
"-- Substantial Leverage; Stockholders'
Deficit; Liquidity" and "-- Potential
Dilution of Syratech", "THE MERGER --
Background of the Merger", "-- Reasons
for the Merger; Recommendation of the
Board", "--NYSE De-Listing" and "--
Resale of Syratech Common Stock
Following the Merger" and "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL
INFORMATION"
Item 8. Fairness of the Transaction
subparts (a), (b), (d) and (e) "SPECIAL FACTORS/RISK FACTORS" and
"THE MERGER -- Background of the
Merger", "-- Reasons for Merger:
Recommendation of the Board" and
"-- Opinion of the Financial Advisor"
subpart (c) "SPECIAL FACTORS/RISK FACTORS" and "THE
SPECIAL MEETING -- Record Date; Stock
Entitled to Vote; Quorum"
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
subparts (a) and (b) "SPECIAL FACTORS/RISK FACTORS" and "THE
MERGER -- Background to the Merger",
"-- Opinion of Financial Advisor" and
"-- Information Concerning the
Financial Advisor" and "ANNEX II Opinion
of Merrill Lynch & Co. dated October 23,
1996"
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ITEM NUMBER AND LOCATION OR CAPTION IN PROXY
HEADING STATEMENT/PROSPECTUS OR REGISTRATION
STATEMENT
subpart (c) "SPECIAL FACTORS/RISK FACTORS" and
"ANNEX II Opinion of Merrill Lynch & Co. dated
October 23, 1996"
Item 10. Interest in
Securities of the Issuer
subpart (a) "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
Item 11. Contracts, "ANNEX I Restated Agreement and Plan of Merger"
Arrangements or Understandings and Amendment of Agreement and Plan of Merger
with Respect to Issuer's and "THE MERGER -- Interests of Certain Persons
Securities in the Merger" and "--Employment Agreements"
Item 12. Present Intention
and Recommendation of Certain
Persons with Regard to the
Transaction
subpart (a) "THE SPECIAL MEETING -- Required Votes"
subpart (b) "THE MERGER -- Background of the Merger" and
"--Reasons for the Merger; Recommendation of
the Board"
Item 13. Other Provisions of
the Transaction
subpart (a) "DISSENTING STOCKHOLDERS' RIGHTS" and
"ANNEX III -- Excerpts from Delaware General
Corporation Law Relating to Dissenters' Rights"
Item 14. Financial Information
subpart (a) "SUMMARY -- Selected Consolidated Historical
Financial Data of Syratech Corporation" and
"SYRATECH CORPORATION CONSOLIDATED FINANCIAL
STATEMENTS"
subpart (b) "SUMMARY -- Selected Pro Forma Consolidated
Financial Data of Syratech Corporation" and
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS"
Item 15. Persons and Assets
Employed, Retained or Utilized
subpart (a) "THE SPECIAL MEETING -- Solicitation of Proxies"
and "THE MERGER -- Background of the Merger"
and "--Interests of Certain Persons in the
Merger"
subpart (b) "THE SPECIAL MEETING -- Solicitation of Proxies"
and "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- Expenses and Certain Required
Payments"
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SCHEDULE 13E-3
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity securities which is the subject
of the Rule 13e-3 transaction is Syratech Corporation ("Syratech" or the
"Company"). Syratech's principal executive office is located at 175 McClellan
Highway, East Boston, Massachusetts 02128-9114.
(b) The title of the equity securities which are the subject of the
Rule 13e-3 transaction is Common Stock, par value $0.01 per share ("Common
Stock"), and approximately 8,695,631 shares of such Common Stock were
outstanding on December 31, 1996. Syratech had approximately 1,485 stockholders
of record on December 31, 1996.
(c) The information set forth under "SUMMARY--Price of Syratech Common
Stock" in the Proxy Statement/Prospectus is incorporated herein by reference.
(d) Syratech has never declared or paid any cash dividends on its
Common Stock. The Merger Agreement prohibits Syratech from paying dividends
without THL I's consent. Also, the Company's Loan Agreements restrict the
amount of any payment of cash dividends in any year to 33-1/3% of net income
for the prior year.
(e) Not applicable.
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(f) On December 29, 1995, Syratech effectively purchased 3,064,751
shares of Syratech Common Stock from affiliates of Katy Industries, Inc. for
$52,054,000 or approximately $17 per share.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g). This statement is being filed by Syratech (the issuer
of the class of equity securities which is the subject of the Rule 13e-3
transaction); Leonard Florence, Chairman, President and CEO of Syratech
Corporation, 175 McClellan Highway, East Boston, MA, Company Director; Thomas H.
Lee, President of the Thomas H. Lee Company, 75 State Street, 26th Floor,
Boston, MA, and a Company Director; and THL I of 75 State Street, 26th Floor,
Boston, MA. The information set forth in the Section "Proposal No. 1--ELECTION
OF DIRECTORS" of Syratech's 1996 Proxy Statement, as incorporated by reference
into the Proxy Statement/ Prospectus, and "SCHEDULE I--Certain Information
Regarding THL Transaction I Corp and Thomas H. Lee Company" of the Proxy
Statement/Prospectus are incorporated herein by reference.
(e) and (f). During the last five years, neither the Company nor THL I,
to the best of their knowledge, any of their respective directors or executive
officers nor Leonard Florence nor Thomas H. Lee, (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining any further violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
(g) All of the directors and officers of Syratech and THL I,
respectively, and Thomas H. Lee and Leonard Florence are citizens of the
United States of America.
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ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) The information set forth in the Section "THE MERGER--Background of
the Merger" and "THE MERGER--Interest of Certain Persons in the Merger" and
"--Employment Agreements" of the Proxy Statement/Prospectus is incorporated
herein by reference.
(b) The information set forth in the Sections "THE MERGER--Interests of
Certain Persons in the Merger" and "--Employment Agreements" of the Proxy
Statement/Prospectus is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) and (b). The information set forth in the Sections "THE MERGER
- --Merger Consideration", "--Non-Cash Election", "--Non-Cash Election Procedure",
"--Conversion/Retention of Shares; Procedures for Exchange of Certificates" and
"--Conditions to the Consummation of the Merger" and "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT" of the Proxy Statement/Prospectus is incorporated herein by
reference.
(b) The information set forth in the Sections "THE MERGER--Interests of
Certain Persons in the Merger" and "--Employment Agreements" of the Proxy
Statement/Prospectus is incorporated herein by reference.
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ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a), (b) and (e) Not Applicable.
(c) The information set forth in the Sections "THE MERGER --
Employment Agreements" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT -- Board
of Directors and Officers of the Company Following the Merger" of the Proxy
Statement/Prospectus is incorporated herein by reference.
(d) The information set forth in the Sections "SUMMARY -- The Merger",
"-- Effect of the Merger", "THE MERGER -- NYSE Delisting" and "-- Merger
Financing" and "DESCRIPTION OF SYRATECH CAPITAL STOCK -- Syratech Common Stock
Following the Merger" of the Proxy Statement/Prospectus is incorporated herein
by reference.
(f)-(g) The information set forth in the Section "SPECIAL FACTORS/RISK
FACTORS -- Delisting; Loss of Liquidity" of the Proxy Statement/Prospectus is
incorporated herein by reference.
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ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Sections "THE MERGER--Merger
Consideration" and "--Merger Financings" of the Proxy Statement/Prospectus is
incorporated herein by reference.
(b) The information set forth in the Sections "THE SPECIAL MEETING--
Solicitation of Proxies" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT--
Expenses and Certain Required Payments" of the Proxy Statement/Prospectus is
incorporated herein by reference. The following have also been incurred or are
estimated to be incurred in connection with this transaction:
(i) Filing/Registration Fees*................. $55,531
(ii) HSR Act Fees..............................[ ]
(iii) Legal Fees*...............................[ ]
(iv) Accounting Fees*..........................[ ]
(v) Appraisal Fees*...........................[ ]
(vi) Solicitation Expenses*....................[ ]
(vii) Printing Fees*............................[ ]
* To be paid by the Company.
(c) The information set forth in the Section "THE MERGER--Merger
Financings" of the Proxy Statement/Prospectus and in the Commitment Letter
attached as Exhibit (a) to the filed Schedule 13E-3 are incorporated herein by
reference.
(d) Not Applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the Sections "SPECIAL FACTORS/RISK
FACTORS" and "THE MERGER--Background of the Merger", "--Reasons for the Merger;
Recommendation of the Board" and "--Opinion of Company's Financial
8
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Advisor" and "ANNEX II--Opinion of Merrill Lynch & Co." of the Proxy
Statement/Prospectus is incorporated herein by reference.
(d) The information set forth in the Sections "SPECIAL FACTORS/RISK
FACTORS--Control by the Thomas H. Lee Company", "--Delisting; Loss of
Liquidity", "--Federal Income Tax Consequences", "--Substantial Leverage;
Stockholders' Deficit; Liquidity" and "--Potential Dilution of Syratech
Stockholders," "THE MERGER--Background of the Merger", "--Reasons for the
Merger; Recommendation of the Board", "--NYSE De-Listing" and "--Resale of
Syratech Common Stock Following the Merger" and "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS" of the Proxy Statement/Prospectus is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a), (b), (d) and (e). The information set forth in the Sections
"SPECIAL FACTORS/RISK FACTORS" and "THE MERGER--Background of the Merger",
"--Reasons for Merger; Recommendation of the Board" and "--Opinion of
Financial Advisor" of the Proxy Statement/Prospectus is incorporated herein by
reference.
(c) The information set forth in the Sections "SPECIAL FACTORS/RISK
FACTORS" and "THE SPECIAL MEETING--Record Date; Stock Entitled to Vote; Quorum"
of the Proxy Statement/Prospectus is incorporated herein by reference.
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(f) Not Applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) and (b). The information set forth in the Sections "SPECIAL
FACTORS/RISK FACTORS" and "THE MERGER--Background of the Merger", "--Opinion of
Financial Advisor" and "--Information Concerning the Company's Financial
Advisor" and "ANNEX II Opinion of Merrill Lynch & Co. dated October 23, 1996"
of the Proxy Statement/Prospectus is incorporated herein by reference.
(c) The Opinion of Merrill Lynch & Co., dated October 23, 1996, is
included in the information to be circulated to stockholders and shall also be
made available for inspection and copying at the principal executive offices of
the Company during its regular business hours by any interested equity security
holder of the Company or his representative who has been designated in writing.
At the written request of such a security holder, a copy of that opinion will be
sent, at the security holder's expense, to such security holder or his
representative. The information set forth in "Exhibit (b)(2)" to this Schedule
will be made available for inspection and copying at the principal executive
offices of the Company by any interested equity security holder of the Company
or his representative who has been designated in writing. At the written request
of such a security holder, a copy of that Exhibit will be sent, at the security
holder's expense, to such security holder or his representative.
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ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the Section "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" of the Proxy Statement/Prospectus is
incorporated herein by reference. On March , 1997, neither Thomas H. Lee nor
THL I owned any Syratech Common Stock.
(b) None
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Sections "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT" and "THE MERGER -- Background of the Merger", "-- Interests of
Certain Persons in the Merger" and "-- Employment Agreements" of the Proxy
Statement/Prospectus is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in the Section "THE SPECIAL
MEETING -- Required Votes" of the Proxy Statement/Prospectus is incorporated
herein by reference.
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(b) The information set forth in the Sections "THE MERGER -- Background of
the Merger" and "-- Reasons for the Merger; Recommendation of the Board" of the
Proxy Statement/Prospectus is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Section "DISSENTING STOCKHOLDERS'
RIGHTS" and "ANNEX III -- Excerpts from Delaware General Corporation Law
Relating to Dissenters' Rights" of the Proxy Statement/Prospectus is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION
(a) The information set forth in the Sections "SUMMARY -- Selected
Consolidated Historical Financial Data of Syratech Corporation" and "SYRATECH
CORPORATION CONSOLIDATED FINANCIAL STATEMENTS" of the Proxy Statement/
Prospectus is incorporated herein by reference.
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(b) The information set forth in the Sections "SUMMARY -- Selected Pro
Forma Consolidated Financial Data of Syratech Corporation" and "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" of the Proxy Statement/Prospectus
is incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in Sections "THE SPECIAL
MEETING -- Solicitation of Proxies" and "THE MERGER -- Background of the Merger"
and "-- Interests of Certain Persons in the Merger" of the Proxy Statement/
Prospectus is incorporated herein by reference.
(b) The information set forth in Sections "THE SPECIAL MEETING --
Solicitation of Proxies" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT --
Expenses and Certain Required Payments" of the Proxy Statement/Prospectus is
incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Additional information is set forth in the Proxy Statement/Prospectus
attached as Exhibit (d) to the Schedule 13E-3 and incorporated herein by
reference in its entirety.
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ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<S> <C>
**(a) Commitment letter dated February 14, 1997 addressed to THL I by NationsBank, N.A.
and NationsBanc Capital Markets, Inc.
*(b)(1) Fairness Opinion of Merrill Lynch & Co dated October 23, 1996.
**(b)(2) Materials presented to the Board by Merrill Lynch & Co, as adviser to the Special
Committee.
*(c)(1) Form of Restated Agreement and Plan of Merger dated as of November 27, 1996,
effective as of October 23, 1996 between Syratech and THL I (the "Merger Agreement").
**(c)(2) Amendment to the Merger Agreement.
*(d) Syratech Proxy Statement.
*(e) Excerpts from Delaware General Corporation Law Relating to Dissenters' Rights are
attached to Exhibit (d).
* Previously filed.
** Filed herewith.
</TABLE>
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SIGNATURES
AFTER REASONABLE INQUIRY AND TO THE BEST OF THE UNDERSIGNEDS' KNOWLEDGE
AND BELIEF, THE UNDERSIGNED CERTIFY THAT THE INFORMATION SET FORTH IN THIS
STATEMENT IS TRUE, COMPLETE AND CORRECT.
SYRATECH CORPORATION
/s/ FAYE A. FLORENCE
By: _________________________
Name: Faye A. Florence
Title: Vice President, General
Counsel and Secretary
THL TRANSACTION I CORP.
/s/ SCOTT A. SCHOEN
By: _________________________
Name: Scott A. Schoen
Title: President
/s/ LEONARD FLORENCE
_________________________
Leonard Florence
/s/ THOMAS H. LEE
_________________________
Thomas H. Lee
Dated: February 27, 1997
15
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NationsBank Business Credit
P.O. Box 3406
Atlanta, GA 30302-3406
NATIONSBANK
February 14, 1997
CONFIDENTIAL
------------
Thomas H. Lee Company
75 State Street
Suite 2600
Boston, Massachusetts 02109
Attention: Scott A. Schoen
Re. Revolver Commitment Letter
Dear Mr. Schoen:
You have advised NationsBank, N.A. (South) (NATIONSBANK or the AGENT)
that Thomas H. Lee Company (THL) has formed THL Transaction I Corp.,
a Delaware corporation (THLT), for the purpose of supporting a
recapitalization of Syratech Corporation (Syratech), pursuant to a
merger agreement (the MERGER AGREEMENT) providing for the merger of
Syratech with THLT, with Syratech being the surviving entity (such
surviving entity together with its domestic subsidiaries, collectively,
the BORROWER, and such transaction, the MERGER).
We understand that up to $130 million of secured, working capital
financing (the Financing) is being sought, the proceeds of which will
be used to pay a portion of the Merger consideration and expenses and
to meet the continuing working capital needs of the Borrower, including
permitted acquisitions and capital expenditures. The balance of the
funds required to consummate the Merger and related transactions are to
be provided, to the extent of $155 million, by the Borrower's issuance
in a registered public offering or in a private placement of senior,
unsecured long-term notes (or by consummation of the Bridge Financing
as provided in the commitment letter of even date herewith of
NationsBridge L.L.C., The Chase Manhattan Bank and Chase Securities
Inc.) and, to the extent of $122.5 million, by capital contributions by
the Borrower's shareholders, including up to $18 million of Series A
Preferred stock. The sources and uses of funds to consummate the Merger
(and related transactions) are set forth on ANNEX I to the Summary of
Indicative Terms and Conditions attached hereto as EXHIBIT A (said
Exhibit A, together with its Annexes, the TERM SHEET).
In connection with the foregoing and based on our discussions and on
the financial statements, projections and other information furnished
to us by you, NationsBank is pleased to advise you of its commitment to
provide up to $130 million of the Financing, upon and subject to the
terms and conditions set forth or referred to in this commitment letter
and in the Term Sheet.
[USA LOGO]
Official Sponsor
1994/1996 Member FDIC
<PAGE> 2
February 14, 1997
Page 2
NationsBank intends further to syndicate the Financing. NationsBanc Capital
Markets, Inc. (NCMI) will act as syndication agent (the SYNDICATION AGENT and
together with the Agent, the AGENTS). The Syndication Agent will determine a
syndication strategy and the final structure of the syndication (including the
terms and conditions of the syndication) in the exercise of its reasonable
discretion.
You agree to use all reasonable efforts to assist the Syndication Agent in
forming a syndicate for the Financing and ensure a syndication satisfactory to
us. This assistance will be accomplished by a variety of means, including, but
not limited to, direct contact prior to completion of the syndication between
senior management of THL, THLT, Syratech and prospective lenders, PROVIDED that
you do not and will not be deemed to have agreed to increase any fee or other
amount payable to the lenders (or the Agents) in order to promote the
syndication. It is understood and agreed that the Agents shall be entitled, with
your consent (not to be unreasonably withheld or delayed), to change the
structure or terms of the Financing as they may reasonably request in order to
facilitate the successful syndication of the Financing. You also agree to
provide the Syndication Agent, promptly upon request and in form and substance
satisfactory to us, information deemed necessary by us to successfully complete
the syndication, including, but not limited to, (i) an information memorandum
for delivery to prospective syndicate members and participants, (ii) information
and projections prepared by you relating to the Merger and (iii) updated or
additional projections and other financial and business information reasonably
requested by the Agents. You further agree to refrain from soliciting or
engaging in any additional financings for the Merger (other than in connection
with the placement of senior notes and the Bridge Financing referred to above in
an original principal amount of up to $155 million) for a period beginning on
the date you sign this letter and ending on the date initial advances are made
under the Financing. Finally, you agree to make appropriate officers and/or
representatives of THL, THLT and Syratech available to participate in
information meetings for prospective syndicate members and participants at such
times and places as the Syndication Agent may reasonably request.
Various terms essential to the Financing in addition to those set forth in the
Term Sheet, including other definitive business covenants, remain to be agreed
upon, and we specifically reserve the right to propose additional terms.
Moreover, the Term Sheet does not purport to include all of the conditions,
covenants, representations, warranties, defaults, definitions and other terms
that will be contained in the definitive documents in respect of the Financing,
the Merger or the other related transactions, all of which must be satisfactory
in form and substance to the Agent and its counsel and to you and your counsel
before the lenders will be obligated to make the initial advances under the
Financing.
The Financing is further conditioned upon no material adverse change occurring
(a) in the business, assets, condition (financial or other), or income of THLT
or Syratech and its subsidiaries taken as a whole since the date of the latest
audited financial statements prepared
<PAGE> 3
February 14, 1997
Page 3
for Syratech and its subsidiaries furnished to and accepted by the Agent, nor
(b) in Syratech's ability, on a consolidated basis, to operate in accordance
with the financial projections furnished to us or to comply with the proposed
financial covenants. Our willingness to enter into the Financing is also
conditioned on our review of the results of the completed field examination of
pre-Merger Syratech and its domestic subsidiaries, the existence of no material
misstatements in or omissions from the materials which have previously been or
are hereafter furnished to us by or on behalf of THLT, THL, Syratech, any
Syratech subsidiary or the Borrower for our review and on there not having
occurred since the date hereof, in our reasonable determination, a material
adverse change in the market for syndicated bank credit facilities or a material
disruption of, or a material adverse change in, banking or capital market
conditions, which change or disruption is continuing.
If in the course of documenting the Financing and our continuing analysis of
financial and other information relating to THL, THLT, Syratech, its
subsidiaries or the Borrower, we discover that any of the foregoing conditions
will in our judgment not be met, we reserve the right to terminate any
obligation which we might otherwise have with respect to the Financing. In
addition, the Financing is subject to the condition that no material adverse
change in governmental regulation or policy affecting us or you occurs prior to
closing and no litigation or other action is pending or threatened seeking an
injunction, damages or relief relating to the Financing or the Merger or the
related transactions contemplated in connection with the Merger.
Whether or not the transactions contemplated hereby are consummated, by your
acceptance hereof, you agree to bear any and all reasonable expenses of the
Agents incurred in connection with structuring this commitment, arranging for or
conducting due diligence activities, including meeting with your representatives
and representatives of Syratech Corporation, examining books, records and assets
of Syratech Corporation, obtaining independent appraisals of Syratech
Corporation assets and related matters, including, without being limited to,
reasonable out-of-pocket expenses of the Agents, including all fees and
disbursements of their counsel relating to the preparation of this letter and of
the definitive loan documentation and to the transactions contemplated hereby
and thereby, including the syndication of the Financing. In the event that
NationsBank, NCMI or any of their respective affiliates becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter contemplated by this letter (including specifically, without being
limited to, the Merger), THL agrees to reimburse each of NationsBank, NCMI and
such affiliate(s) for legal and other expenses (including the cost of any
investigation and preparation) as they are incurred by each such entity. THL
also agrees to indemnify and hold harmless NationsBank, NCMI, each Lender, and
each of their affiliates and their respective control persons, directors,
officers, employees and agents (the INDEMNIFIED PARTIES) from and against any
and all losses, claims, damages and liabilities, joint or several, related to or
arising out of any matters contemplated by this letter (including specifically,
without
<PAGE> 4
February 14, 1997
Page 4
being limited to, the Merger) unless and only to the extent that it shall be
finally judicially determined that such losses, claims, damages and liabilities
resulted primarily from the gross negligence or willful misconduct of
NationsBank or NCMI. Upon consummation of the Merger, the funding of the initial
loans under the Financing, and the absolute and unconditional written assumption
by the Borrower of THL's obligations hereunder, THL shall be released from all
further Obligations under this commitment letter in respect of the payment of
fees, reimbursement of expenses and indemnification.
This letter is not assignable by you and shall be of no further effect if we
have not received the enclosed copy hereof executed by you on or prior to 5:00
p.m. (Eastern Time) on February 18, 1997. In addition, if for whatever reason
we have been unable to agree to definitive credit terms and conditions and to
enter into a definitive agreement prior to April 30, 1997, then, except for
your obligations described in the immediately preceding paragraph, neither of
us shall have any further obligation with respect to the Financing. The
provisions of this letter are supplemented as set forth in a separate fee
letter dated January 31, 1997 from us to you (the FEE LETTER) and are subject
to the terms of the Fee Letter.
This letter (together with its Exhibit and Annex(es)) and the Fee Letter
constitute the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior and current understandings and agreements,
whether written or oral, and any modifications or amendments to this letter or
to the Fee Letter must be agreed to in writing by all the parties hereto. This
letter and the Fee Letter may be executed in any number of counterparts, which
together shall constitute one instrument, and shall be governed by and construed
in accordance with the laws (other than the conflicts of laws rules) of the
State of Georgia.
In connection with the transactions contemplated hereby, THL agrees that the
Agents are permitted to access, use or share with any of their bank or non-bank
affiliates, agents or representatives, any information concerning THL, THLT,
Syratech, its subsidiaries or the Borrower, and their respective affiliates that
is or may come into the possession of Agents. The Agents and their respective
affiliates will treat confidential information relating to THL, THLT, Syratech,
its subsidiaries and the Borrower and their respective affiliates with the same
degree of care they accord their own confidential information of similar type.
This letter is delivered to you on the understanding that neither this letter,
the Fee Letter nor any of their terms or substance shall be disclosed, directly
or indirectly, to any other person, except to your employees, agents and
advisors who are directly involved in the consideration of this matter or as may
be compelled to be disclosed in a judicial proceeding or as otherwise required
by law, provided, however, it is understood and agreed that, after acceptance
and execution of this letter, you may disclose the terms of this letter in
connection with the Merger.
<PAGE> 5
February 14, 1997
Page 5
If you are in agreement with the foregoing, please sign and return to
NationsBank the enclosed duplicate of this letter, not later than 5:00 p.m.
(Eastern Time) on February 18, 1997. This letter shall terminate at such time
unless prior thereto we have received signed copies of such letters.
We look forward to working with you on the Financing.
Very truly yours,
NATIONSBANK, N.A. (SOUTH)
By /s/ John C. Glazebrook
-----------------------
John C. Glazebrook
Senior Vice President
NATIONSBANC CAPITAL MARKETS, INC.
By /s/
-----------------------
Name:
Title:
Accepted and agreed this 14th day of February 1997.
THOMAS H. LEE COMPANY
By /s/ Scott A. Schoer
-----------------------
Name:
Title:
<PAGE> 6
Confidential
EXHIBIT A
Syratech Corporation
$130,000,000 Secured Revolving and Credit Facility
Summary of Indicative Terms and Conditions
The commitment of NationsBank to fund the Revolver will be subject to the
negotiation, execution and delivery of definitive documentation including a
definitive credit and security agreement and other loan documents that will
contain terms and conditions as set forth herein and such other conditions
precedent, representations and warranties, covenants, events of default and
other provisions as are customary for financings of this type.
================================================================================
BORROWER: Syratech Corporation, the survivor of the merger of
THLT and pre-merger Syratech Corporation (the
MERGER), and all of its domestic subsidiaries
(collectively, Syratech or Borrower).
FACILITY: A $130,000,000 senior secured revolving credit facility
("REVOLVER"), subject to the Borrowing Base (defined
below).
AGENT: NationsBanc Capital Markets Inc. will act as
syndication agent (the Syndication Agent), and
NationsBank, N.A. (South) (NATIONSBANK) will act as
administrative and collateral agent (the ADMINISTRATIVE
AGENT) for a syndicate of financial institutions (the
LENDERS), identified by the Syndication Agent and
satisfactory to NationsBank, Syratech and Thomas H.
Lee Company (THL) in their reasonable judgment.
MATURITY: Five (5) years from execution and delivery of the credit
agreement (CLOSING).
PURPOSE: The proceeds of loans under the Revolver will be
available, to the extent indicated in Annex I hereto, to
finance the Merger, to refinance outstanding
indebtedness of pre-Merger Syratech, and to pay fees
and expenses incurred in connection with the Merger,
and for the on-going working capital needs of
Borrower.
Page 1
<PAGE> 7
Confidential
INTEREST RATES: Borrower will have the following initial pricing options:
Revolver: Prime Rate plus 0.50%.
LIBOR plus 2.25%.
Prime Rate on any day means the Prime Rate in effect on that
day, as announced by the Administrative Agent.
LIBOR for an interest period means the rate per annum
(rounded upwards, if necessary to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such
rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Rate Loan for any interest Period
therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on the Reuters
Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest
Period; PROVIDED, HOWEVER, that if more than one rate is
specified on the Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates.
Interest on Prime Rate and LIBOR loans will be payable
monthly and at the end of each interest period on LIBOR
loans. Interest periods of 1, 2, 3 and 6 months will be
available at Borrower's option. Interest on all loans will
also be payable upon conversion to another pricing option,
prepayment and maturity.
If any event of default has occurred and continues, the
Required Lenders may elect to charge interest on all
outstanding principal at the otherwise applicable interest
rate plus two percent (2.0%).
All interest and fees will be computed on the basis of
actual days elapsed in a 360-day year.
CASH DOMINION: All proceeds of collateral for the Revolver will be
Page 2
<PAGE> 8
Confidential
deposited to lockboxes or other accounts maintained with the
Administrative Agent.
COLLECTION DAY: All receipts will be applied immediately to reduce the
Revolver balance, subject to a charge equal to one business
day's interest on all receipts other than immediately
available funds.
COMMITMENT FEE: One half of one percent (0.50%) per annum on the unused
portion of the Revolver, payable monthly in arrears and
accruing from Closing.
PERFORMANCEPRICING: Beginning five (5) days after receipt of Borrower's audited
financial statements for the period ending December 31,
1997, interest margins on the Revolver shall be subject to
quarterly adjustment (provided no event of default has
occurred and is continuing), based upon Borrower achieving
performance targets as follows:
Total Debt/ LIBOR Prime Rate
EBITDA Margin (bps) Margin (bps)
------ ------------ ------------
[greater than or
equal to] 3.75 L + 225 P + 50
[greater than or
equal to] 3.25<3.75 L + 200 P + 25
[greater than or
equal to] 2.75<3.25 L + 175 P
<2.75 L + 150 P - 25
EBITDA means income from operations after deducting all
expenses other than interest, taxes, depreciation and
amortization, and after eliminating all extraordinary items,
calculated on a rolling four-quarter basis. Total Debt would
be an average daily debt number over the relevant
four-quarter period.
COST AND YIELD
PROTECTION: The usual for transactions and facilities of this type,
including, without being limited to, in respect of
prepayments, changes in capital adequacy and capital
requirements or their interpretation, illegality,
unavailability, and reserves, without proration or offset.
Page 3
<PAGE> 9
Confidential
LETTERS OF CREDIT: Letters of credit may be issued under the letter of credit
subfacility, which is $30 million, with expiration dates not
later than one year from issuance. On each standby letter of
credit, a letter of credit fee equal to the applicable
spread over LIBOR on the Revolver for the account of the
Lenders and a fronting fee of one-eighth of one percent
(0.125 %) for the account of the issuing bank, each
calculated per annum on the undrawn amount of each
outstanding standby letter of credit, will be payable by
Borrower. These fees will be payable upon issuance. Charges
for documentary letters of credit will be the issuer's
customary charges in effect from time to time, payable by
Borrower for the account of the issuing bank. Amendment,
transfer, negotiation and other fees will also be payable by
Borrower for the account of the issuer as determined in
accordance with the issuing bank's then current policy.
SECURITY: The facility (and any interest rate swap, foreign exchange
or similar agreements with any Lender) will be secured by a
first priority, perfected security interest in all of
Borrower's existing and hereafter acquired accounts
receivable, inventory, chattel paper, documents,
instruments, deposit accounts, a pledge by Syratech
Corporation of 65% of the outstanding capital stock of any
non-U.S. subsidiary of Borrower and of 100% of the
outstanding capital stock of each U.S. subsidiary, and
proceeds of the foregoing, and the Administrative Agent and
the Lenders will be granted a non-exclusive right to use any
general intangibles of Borrower in connection with the
exercise of any rights or remedies under the definitive loan
documentation. The balance of Borrower's assets will be
subject to a negative pledge.
BORROWING BASE: The total amount of loan outstandings and issued letters of
credit under the Revolver at any time may not exceed the
Borrowing Base. The Borrowing Base will be defined as the
sum of (a) 80% of eligible accounts receivable and (b) the
lesser of $65,000,000 and 60% of eligible inventory. The
inventory advance rate will increase to 70% and the
inventory sublimit will increase to $75,000,000, in each
case for the period June 1 through September 30 of each
year. Eligible accounts receivable and eligible inventory
will be
Page 4
<PAGE> 10
Confidential
defined in the definitive loan documents.
NOTICE OF BORROWING: Borrower will give Administrative Agent advance notice of
its intent to borrow as follows:
Prime Rate borrowing - Same day
LIBOR borrowing - 2 business days
MINIMUM BORROWING: Each LIBOR loan will be at least $1,000,000 and a
multiple of $250,000.
EARLY TERMINATION
FEE: An early termination charge of two percent (2.0%) will
apply to any prepayment in full and termination of the
Revolver during the first year of the Revolver, provided,
that the early termination charge will not apply if
prepayment is made from the proceeds of Borrower's
issuance of common stock or the sale of Borrower.
CONDITIONS PRECEDENT
TO FUNDING: Usual and customary for transactions of this nature,
including but not limited to the following:
Lenders shall have received audited financial statements of
pre-Merger Syratech for the fiscal years ending in 1991
through 1996, in form and substance satisfactory to them
and, as to fiscal year 1996, reflecting at least
achievement of all material aspects of pre-Merger
Syratech's business plan for such fiscal year.
The Lenders shall have received a pro forma opening balance
sheet of Borrower, giving effect to the Merger, consistent
with the sources and uses shown in Annex I.
The Lenders shall have received projections of Borrower for
the five years following Closing, including for each year
income statements, balance sheets, and cash flow
statements, together with assumptions, in form and
substance satisfactory to Lenders.
The Lenders shall have received, in form and substance
satisfactory to them, such additional or updated financial
information, including, without being limited to, a
reconciliation of actual financial performance to
Page 5
<PAGE> 11
Confidential
budget or plan, as any Lender, through the Administrative
Agent, may reasonably request.
The Lenders shall have received a written appraisal report
with respect to Borrower's inventory, prepared by a
qualified, independent appraiser acceptable to pre-Merger
Syratech and the Administrative Agent, and in form and
substance satisfactory to the Administrative Agent.
The Lenders' shall have received reports of environmental
consultants with respect to real properties owned or
operated by pre-Merger Syratech, in form and substance
satisfactory to them.
An independent firm acceptable to the Administrative Agent
shall have certified to it and to the Lenders, the financial
condition and solvency of Borrower (including its
subsidiaries), after giving effect to the Merger and the
incurrence of all debt related thereto.
Borrower shall have received gross proceeds from the
issuance of (a) senior unsecured notes in an amount not less
than $155,000,000, maturing not earlier than ten (10) years
after Closing, payable in a single installment at maturity,
and otherwise on terms satisfactory to the Lenders (the
SENIOR NOTES) OR (b) the Bridge Loans (or Bridge Notes) in
an original principal amount of $155,000,000, as described
in the bridge commitment letter dated February 14, 1997
issued by NationsBridge L.L.C., The Chase Manhattan Bank and
Chase Securities Inc. to THL.
The Lenders shall have received evidence that THL and
affiliates of THL and certain affiliates of lenders
participating in the Bridge Financing have contributed
$102,000,000 in cash to Borrower, including up to
$18,000,000 of Series A Preferred stock (the rights,
designations and preferences of which are satisfactory to
the Lenders), less the value of any shares retained by
stockholders of Syratech other than Leonard Florence (the
value of such shares at $32/share, not to exceed
approximately $27,500,000) and that Mr. Florence, along with
shares issued as compensation issued to senior management,
has retained shares of Syratech having a value (at $30/share
and $32/share,
Page 6
<PAGE> 12
Confidential
respectively) equal to approximately $21,500,000 and that
the equity investments are otherwise in form satisfactory to
the Lenders.
The Merger shall be consummated simultaneously with the
Closing, in accordance with the terms and conditions of the
Restated Agreement and Plan of Merger dated as of November
27, 1996, effective as of October 23, 1996, as amended by
Amendment dated February , 1997, and otherwise in
accordance with Annex I and on terms satisfactory to the
Lenders.
The negotiation, execution, and delivery of a credit and
security agreement and other loan documents satisfactory in
form and substance to the Administrative Agent and the
Lenders.
FURTHER CONDITIONS
TO BORROWINGS: After the definitive loan documents are signed, the
obligations of the Lenders to make the first loan will be
subject to receipt of customary documents satisfactory to
the Administrative Agent and Lenders, including, without
being limited to, (a) satisfactory opinions of counsel (that
cover, among other things, authority, legality, validity,
binding effect and enforceability of remedies) and such
corporate resolutions, certificates and other documents as
the Administrative Agent shall reasonably require, (b)
evidence satisfactory to the Administrative Agent that all
governmental, shareholder and third-party approvals and
consents (including Hart-Scott-Rodino clearance and approval
of the Merger by the shareholders of pre-Merger Syratech)
and approvals necessary or, in the opinion of the
Administrative Agent, desirable in connection with the
Merger and the related financings and other transactions
contemplated hereby and expiration of all applicable waiting
periods without any adverse action being taken by any
authority, (c) the absence of any action, suit,
investigation or proceeding pending or threatened in any
court or before any arbitrator or governmental authority
that affects or may affect the ability of pre-Merger
Syratech or any of its subsidiaries to consummate the Merger
or any other transaction contemplated hereby or that could
have a materially adverse effect on Borrower (taken as a
whole), and (d) evidence satisfactory to the Administrative
Agent that
Page 7
<PAGE> 13
Confidential
the Administrative Agent holds a perfected, first priority
security interest in the collateral for the Revolver,
subject to no other liens except permitted liens. The
obligations of the Lenders to make each loan, including the
initial loans, will also be subject to all representations
and warranties remaining true and correct in all material
respects, no material adverse change relating to Borrower
(taken as a whole) having occurred since the date of the
latest audited financial statements delivered to Lenders
before Closing, and no default or event of default existing
or resulting from the loan.
REPRESENTATIONS
AND WARRANTIES: As customary, including, the following applicable to
Borrower: proper corporate status and authority; loan
documents valid, binding and enforceable against Borrower;
loan documents do not violate laws or existing agreements
or require governmental, regulatory or other approvals that
have not been obtained or do not remain in effect; payment
of taxes; no litigation that may have a material adverse
effect on Borrower (taken as a whole); compliance in all
material respects with ERISA, environmental and other laws
and regulation; no adverse agreements, existing defaults or
non-permitted liens; financial statements true and correct.
PRINCIPAL COVENANTS: The principal general covenants expected to be included in
the definitive loan documents will be those customary for
transactions of this nature. Certain restrictions will
apply to changes in the nature of Borrower's business;
sale of all or a substantial part of its assets; mergers,
acquisitions, re-organizations, and re-capitalizations;
liens; corporate guaranties; debt; dividends and other
distributions; investments; and capital expenditures. The
above is not intended to be all-inclusive.
The principal financial covenants expected to be included
in the definitive loan documents will include, but are not
limited to, a maximum Total Funded Debt to EBITDA; an
Interest Coverage Ratio; and a positive Net Worth. The
financial terms and calculations will be in accordance with
generally accepted accounting principles. All covenants
will apply to Borrower on a
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<PAGE> 14
Confidential
consolidated basis.
The financial and collateral reporting requirements set
forth in the definitive loan documents will include, but not
be limited to, annual consolidating and audited consolidated
financial statements of Borrower (including subsidiaries);
monthly unaudited consolidating and consolidated financial
statements of Borrower (including subsidiaries); income
statements, balance sheets, and cash flow projections
prepared annually for the upcoming fiscal period; monthly
accounts receivable agings and inventory summaries of
Borrower (including subsidiaries); and a Borrowing Base
Certificate to be prepared on a weekly basis.
A minimum availability of $45 million will be required for
the months of February and March.
EVENTS OF DEFAULT: Consistent with transactions of this nature, including,
without being limited to, non-payment, any representation or
warranty of Borrower incorrect in any material respect when
made, financial and other covenant defaults, cross-default
to other material agreements and other debt for borrowed
money, bankruptcy/insolvency, failure of security interest
in collateral, judgment/attachment, ERISA, Syratech
Corporation's ceasing to own 100% of the capital stock of
each subsidiary included in Borrower, and upon a "change of
control," to be defined as in the Senior Notes and to
include, among other things, (1) prior to a primary offering
by Syratech of equity securities that produces at least $35
million in net proceeds, THL ceasing to have voting control
and control of the Board of Directors of Syratech or having
sold more than 50% of the shares of capital stock of
Syratech owned by THL immediately after giving effect to the
Merger and related transactions or (2) at any time,
disposition of substantially all of Borrower's assets,
acquisition by any person or group of more than 35% of
Borrower's voting stock, and certain changes in the
composition of Borrower's board of directors.
ASSIGNMENTS AND
PARTICIPATIONS: Any Lender may, with the consent of the Administrative Agent
(which shall not be unreasonably withheld), grant
assignments or participations in all or
PAGE 9
<PAGE> 15
Confidential
any portion of its loans or commitments under the Revolver
(but with no limitations as to minimum amounts held by
Lenders). Assignments will be in minimum amounts of
$5,000,000 (or an assigning Lender's entire remaining
commitment, if less). Eligible assignees will be defined in
the definitive documents; criteria of eligibility will be
relaxed during the pendency of payment and other material
defaults.
FEES, EXPENSES AND
INDEMNIFICATION: Whether or not the transactions contemplated hereby are
consummated, by acceptance of our commitment, THL agrees to
bear any and all expenses of the Syndication Agent and the
Administrative Agent incurred in connection with structuring
the Revolver, arranging for or conducting due diligence
activities, including meeting with representatives of THL
and Syratech Corporation, examining books, records and
assets of Syratech Corporation, obtaining independent
appraisals of Syratech Corporation assets, and related
matters, including, without being limited to, reasonable
out-of-pocket expenses of the Agents, including all fees and
disbursements of their counsel relating to the preparation
of this term sheet, the related commitment letter and of the
definitive loan documentation and to the transactions
contemplated hereby and thereby, including the syndication
of the Revolver. Upon consummation of the Merger, the
funding of the initial loans under the Revolver and the
absolute, unconditional written assumption by the Borrower
of THL's obligations in respect of this Term Sheet, THL
shall be released from all further obligations in respect of
the Revolver in respect of the payment of fees,
reimbursement of expenses and indemnification hereunder.
The Borrower will indemnify and hold harmless NationsBank,
each Lender, and each of their affiliates and their
respective control persons, directors, officers, employees
and agents (the INDEMNIFIED PARTIES) from and against any
and all losses, claims, damages and liabilities, joint or
several, related to or arising out of any matters
contemplated by the loan documentation (including
specifically, without being limited to, the Merger) unless
and only to the extent that it shall be finally judicially
determined that such losses, claims,
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<PAGE> 16
Confidential
damages and liabilities resulted primarily from the gross
negligence or willful misconduct of NationsBank.
REQUIRED LENDERS: Lenders holding more than 50% of outstanding loans or, if
no loans are outstanding, holding more than 50% of
commitments.
DOCUMENTATION: Will be prepared by counsel for the Administrative Agent.
GOVERNING LAW: State of Georgia.
This summary of Terms and Conditions is not intended to be, and should not be
construed as, an attempt to establish all of the terms and conditions relating
to the Facility. It is intended only to be indicative of certain terms and
conditions around which the loan documents will be structured, and not to
preclude negotiations within the general scope of these terms and conditions.
The loan documents containing final terms and conditions will be subject to
approval by Borrower, NationsBank, all Lenders, and THL.
Page 11
<PAGE> 1
Exhibit 99.2
The following material was compiled on a confidential basis for use
solely by the Special Committee of the Board of Directors of Syratech
Corporation (the "Company") in evaluating a potential transaction involving
Thomas H. Lee Company or its affiliates and not with a view to public disclosure
or filing thereof under the Securities Act of 1933 or the Securities Exchange
Act of 1934 (the "Federal Securities Laws"). This material was prepared for a
specific use by specific persons and was not prepared to conform with any
disclosure standards under the Federal Securities Laws. Neither Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") nor any of its officers,
directors, employees, affiliates, advisors, agents or representatives warrants
the accuracy or completeness of any of the material which follows. Nothing
contained in the accompanying material is, or shall be relied upon as, a promise
or representation as to the past, present or future.
It should be understood that any estimates, valuations and/or
projections contained in the accompanying material relating to the Company were
prepared or derived from information supplied by the Company and that Merrill
Lynch has not assumed any responsibility for independent verification of any
such estimates, valuations and/or projections. Accordingly, no representation
or warranty can be or is made by Merrill Lynch as to the accuracy or
achievability of any such estimates, valuations and/or projections.
<PAGE> 2
CONFIDENTIAL
- --------------------------------------------------------------------------------
PRESENTATION TO
THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS OF
SILVER CORPORATION
OCTOBER 21, 1996
<PAGE> 3
PROJECT SILVER
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TABLE OF CONTENTS
1. Summary of Offer
2. Public Market Valuation Considerations
3. SILVER Management Projections
4. SILVER Stock Price Performance
5. SILVER Valuation Analysis
Appendix
A. Public Comparables Analysis
B. Comparable Acquisitions Analysis
C. Discounted Cash Flow Analysis
D. Leveraged Buyout Analysis
E. Strategic Acquiror Pro Forma Analyses
F. SILVER Shareholder Profile
[Merrill Lynch Logo]____________________________________________________________
<PAGE> 4
[Section Break]
<PAGE> 5
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SUMMARY OF OFFER
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<PAGE> 6
PROJECT SILVER
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<TABLE>
Summary of Offer Value
(dollars in millions, except per share)
<S> <C>
T.H. Lee Offer Price Per Share $ 32
Shares Outstanding (a) 8.676
Options Outstanding (a) 0.338
------
OFFER VALUE $288.4
Plus: Average Debt Outstanding (b) 37.6
Less: Average Cash Balance (c) (6.2)
Less: Option Proceeds @
Avg. Exercise Price of $12.38 (d) (4.2)
------
TRANSACTION VALUE $315.6
======
<FN>
- ----------------
(a) As of June 30, 1996. Source: Form S-3 draft dated 9/12/96.
(b) Average 1996 seasonal working capital borrowings, as provided by management.
(c) Average 1996 cash balances, as provided by management.
(d) Mid-point of exercise price range. Source: Form S-3 draft dated 9/12/96.
</TABLE>
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PROJECT SILVER
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<TABLE>
SUMMARY OF OFFER MULTIPLES
(dollars in millions, except per share)
<S> <C>
T.H. Lee Offer Price $32.00
------------------------------------------------------------
Premium to 10/18/96 Price ($26.25) 21.9%
Premium to 10/14/96 Price ($23.625) 35.4%
Premium to 20 Day Average to 9/24/96 36.7%
Offer Price/1996E EPS 17.1x
Offer Price/1997E EPS 11.3x
------------------------------------------------------------
Transaction Value $315.6
------------------------------------------------------------
Transaction Value/1996E EBITDA 9.9x
Transaction Value/1997E EBITDA 7.1x
Transaction Value/1996E EBIT 11.5x
Transaction Value/1997E EBIT 8.1x
Transaction Value/1996E Sales 1.12x
Transaction Value/1997E Sales 0.97x
------------------------------------------------------------
</TABLE>
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<PAGE> 8
PROJECT SILVER
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<TABLE>
Summary of Trading Multiples
<CAPTION>
(millions, except per share)
<S> <C>
SILVER Price Per Share (10/18/96) $26.25
52 Week High $27.63
52 Week Low $19.75
Shares Outstanding (a) 8.676
Market Value $227.7
Plus: Average Debt Outstanding (b) 37.6
Less: Average Cash Balance (c) (6.2)
------
Market Capitalization $259.1 (e)
======
Market Value as Multiple of: (d) Market Capitalization as Multiple of: (d)(e)
-------------------------------- --------------------------------------------
<S> <C> <C> <C>
1996E EPS 14.0x 1996E EBITDA 8.1x
1997E EPS 9.2x 1997E EBITDA 5.9x
1996E EBIT 9.4x
1997E EBIT 6.7x
1996E Sales 0.92x
1997E Sales 0.79x
<FN>
(a) As of June 30, 1996. Source: Form S-3 draft dated 9/12/96.
(b) Average 1996 seasonal working capital borrowings, as provided by management.
(c) Average 1996 cash balances, as provided by management.
(d) Based on projections presented to Merrill Lynch on October 1, 1996.
(e) As of 6/30/96, total debt was $56.4 MM and cash balances were $3.4 MM. Current market capitalization
based on actual net debt is therefore $280.7 MM resulting in a 1996E EBITDA multiple of 8.8x and a
1997E EBITDA multiple of 6.3x.
</TABLE>
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<PAGE> 9
[Section Break]
<PAGE> 10
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PUBLIC MARKET VALUATION CONSIDERATIONS
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<PAGE> 11
PROJECT SILVER
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PUBLIC MARKET VALUATION CONSIDERATIONS
At its current stock price of $26.25, SILVER is undervalued by the market. The
following factors contribute to SILVER's low valuation:
[Bullet] Small public float. Insiders hold 42% and institutions hold 40%.
SILVER SHAREHOLDERS PROFILE
---------------------------
[Pie Chart]
Insiders 42%
Public 18%
Institutions 40%
[Bullet] Average daily volume was only 5,705 shares over the past 20 days.
[Bullet] Lack of research coverage. Last research report by C.L. King dated
July 26, 1996. No major Wall Street firm covers SILVER.
[Bullet] Limited interaction with investment community, therefore limited
opportunity to tell SILVER's "story".
[Bullet] Low growth industry. No true "pure play" comparable among publicly
traded companies.
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PROJECT SILVER
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PUBLIC MARKET VALUATION CONSIDERATIONS (cont'd)
[Bullet] Significant growth opportunities exist that may not be factored
into SILVER's stock price:
[Triangle bullet] integration of recent acquisitions: Rauch, Silvestri,
C.J. Vander, Farberware
[Triangle bullet] expanded distribution
[Triangle bullet] new product introduction
[Triangle bullet] continued investment in technology and productivity
[Triangle bullet] additional acquisitions
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PROJECT SILVER
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P/E TO GROWTH RATE ANALYSIS
[LINE CHART]
1996E P/E
23.0x
---
---
21.0x Rubbermaid
19.0x Newell
---
---
Tupperware ---
17.0x ---
15.0x American Greetings
---
--- ---
CSS Industries --- --- SILVER
---
13.0x --- Ekco
--- --- Stanhome
---
Libbey --- ---
11.0x Lifetime Hoan --- ---
--- Oneida Dept. 56
---
9.0x
7.0x
5.0x
8% 10% 12% 14% 16% 18% 20%
5 YEAR EPS GROWTH RATE(a)
-------------
(a) Source: IBES
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<PAGE> 14
PROJECT SILVER
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P/E TO GROWTH RATE ANALYSIS
[BAR CHART]
<TABLE>
1996 P/E / 5 Year Est. EPS Growth
<S> <C> <C>
2.00x
Rubbermaid 1.73x
1.50x CSS
Industries 1.38x
Newell 1.25x
Tupperware 1.23x
American Greetings 1.15x
Oneida 1.10x
Ekco
Group 1.03x
1.00x
Libbey 0.99x
Lifetime
Hoan 0.96x
Dept. 56 0.90x
Stanhome 0.87x
SILVER 0.72x
0.50x
0.00x
</TABLE>
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<PAGE> 15
SECTION BREAK
<PAGE> 16
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SILVER MANAGEMENT PROJECTIONS
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<PAGE> 17
PROJECT SILVER
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<TABLE>
Summary of SILVER Management Projections(a)
(dollars in millions, except per share)
<CAPTION>
HISTORICAL
FYE DECEMBER 31, PRO FORMA(b) PROJECTED FYE DECEMBER 31,
---------------- FYE ------------------------------------------------ 1996-2001
1994 1995 1996E 1997(c) 1998 1999 2000 2001 CAGR
------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $147.3 $169.5 $282.4 $326.8 $367.7 $408.1 $451.0 $496.1 11.9%
% Growth -- 15.1% 66.6% 15.7% 12.5% 11.0% 10.5% 10.0%
Gross Profit 42.7 49.7 79.4 95.1 106.6 118.8 131.7 145.4 12.9%
Gross Margin 29.0% 29.3% 28.1% 29.1% 29.0% 29.1% 29.2% 29.3%
Selling & Administrative
Expenses 31.6 34.2 54.5 58.8 66.2 73.5 81.2 89.3 10.4%
% of Sales 21.5% 20.2% 19.3% 18.0% 18.0% 18.0% 18.0% 18.0%
EBITDA 14.3 18.7 32.0 44.2 49.2 54.7 60.5 67.2 16.0%
EBITDA Margin 9.7% 11.0% 11.3% 13.5% 13.4% 13.4% 13.4% 13.5%
EBIT 11.1 15.4 27.5 38.8 43.4 48.3 53.5 59.6 16.7%
EBIT Margin 7.5% 9.1% 9.7% 11.9% 11.8% 11.8% 11.9% 12.0%
Net Income $ 7.9 $ 13.2 $ 16.4 $ 25.0 $ 28.0 $ 31.3 $ 35.3 $ 39.9 19.5%
Net Income Margin 5.3% 7.8% 5.8% 7.6% 7.6% 7.7% 7.8% 8.0%
EPS $ 1.69 $ 3.91 $ 1.87 $ 2.84 $ 3.19 $ 3.56 $ 4.01 $ 4.54 19.5%
EPS Growth -- 134.4% -52.3% 52.2% 12.2% 11.8% 12.7% 13.1%
Depreciation & Amortization $ 3.3 $ 3.3 $ 4.5 $ 5.4 $ 5.8 $ 6.4 $ 7.0 $ 7.6
Capital Expenditures(d) (2.6) (2.7) (17.8) (20.8) (5.6) (6.1) (6.7) (7.4)
Change In Working Capital 24.1 (10.1) (38.7) (11.1) (15.6) (14.2) (14.1) (13.9)
------ ------ ------ ------ ------ ------ ------ ------
Net Cash Flow $ 32.6 $ 3.7 $(35.6) $ (1.5) $ 12.6 $ 17.4 $ 21.4 $ 26.3
<FN>
- -----------------
(a) SILVER management projections presented to Merrill Lynch on October 1, 1996.
(b) Pro forma for the acquisition of Rauch, Silvestri, C.J. Vander and Farberware. Excludes gain on Farberware transaction
of $11.9 million and sales of Farberware inventory of $6.0 million, but includes $2.6 million of Farberware licensing
royalties.
(c) Adjusted to exclude $0.25 million of Farberware inventory sales.
(d) 1996 and 1997 Capital Expenditures include the construction of a West Coast distribution facility, expansion of
SILVER's East Boston facility, machinery and equipment for Rauch and C.J. Vander and a building for C.J. Vander.
</TABLE>
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3-1
<PAGE> 18
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SILVER STOCK PRICE PERFORMANCE
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<PAGE> 19
PROJECT SILVER
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Daily Stock Price and Trading Volume from 10/18/95 to 10/18/96
[Graphic including indications of various SILVER acquisitions and other events]
[Graphic]
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4-1
<PAGE> 20
PROJECT SILVER
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Weekly Stock Price and Trading Volume from 12/18/92 to 10/18/96
[Graphic]
[Graphic]
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4-2
<PAGE> 21
PROJECT SILVER
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Analysis of Trading Volume, from 10/18/95 to 10/18/96
[Graphic of ]
[Graphic of ]
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4-3
<PAGE> 22
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SILVER VALUATION ANALYSIS
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<PAGE> 23
PROJECT SILVER
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SILVER Valuation Summary
<TABLE>
[Bar Graph]
<CAPTION> $35
Merrill Lynch Reference Range T.H. Lee Offer Price Current Price
<S> <C> <C>
$30 $32 $26.25
<CAPTION>
-------------------------------------------------------------------------------------------------------
90%-110% 6x-8x Financing
10.5x-12x 1996 P/E to 9x-11x Terminal EBITDA; and 1997E
1997 EPS 5 Yr 1996 EBITDA 11.0%-12.0% Return EPS
of $2.84 Growth Rate of $32MM Discount Rate Constraints Breakeven
-------------------------------------------------------------------------------------------------------
P/E To Strategic
Silver Public Growth Comparable Maximum Acquiror
52 Week Comparables Rate Acquisitions LBO Pro Forma
High/Low Analysis Analysis Analysis DCF Analysis Analysis
-------- ----------- -------- ------------ --- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SILVER Value Per Share $27.63-19.75 $34-$30 $40-$33 $36-$29 $39-$28 $33-$30 $50-$28
</TABLE>
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5-1
<PAGE> 24
PROJECT SILVER
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<TABLE>
ACQUISITION PRICING MATRIX
(dollars in millions, except per share data)
<CAPTION>
OFFER VALUE AS MULTIPLE OF:
----------------------------------------------------------
OFFER OFFER OFFER NET TRANSACTION 1996E 1996E 1997E 1996E 1996E
PRICE PREMIUM VALUE DEBT (a) VALUE NET INCOME EPS EPS CASH FLOW BOOK VALUE
----- ------- ----- -------- ----------- ---------- ----- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$26.250 0.0% 236.6 $27.2 $263.8 13.7x 14.0x 9.2x 10.9x 1.36x
28.000 6.7% 252.4 $27.2 279.6 14.6 15.0 9.9 11.6 1.46
30.000 14.3% 270.4 $27.2 297.6 15.6 16.0 10.6 12.4 1.56
-----------------------------------------------------------------------------------------------------------------------
32.000 21.9% 288.5 $27.2 315.7 16.7 17.1 11.3 13.2 1.66
-----------------------------------------------------------------------------------------------------------------------
34.000 29.5% 306.5 $27.2 333.7 17.7 18.2 12.0 14.1 1.77
36.000 37.1% 324.5 $27.2 351.7 18.8 19.3 12.7 14.9 1.87
38.000 44.8% 342.6 $27.2 369.8 19.8 20.3 13.4 15.7 1.98
40.000 52.4% 360.6 $27.2 387.8 20.8 21.4 14.1 16.5 2.08
42.000 60.0% 378.6 $27.2 405.8 21.9 22.5 14.8 17.4 2.18
44.000 67.6% 396.6 $27.2 423.8 22.9 23.5 15.5 18.2 2.29
<CAPTION>
TRANSACTION VALUE AS MULTIPLE OF:
--------------------------------
1996E 1996E 1996E
SALES EBITDA EBIT
----- ------ -----
<C> <C> <C>
0.93x 8.2x 9.6x
0.99 8.7 10.2
1.05 9.3 10.8
----------------------------
1.12 9.9 11.5
----------------------------
1.18 10.4 12.1
1.25 11.0 12.8
1.31 11.6 13.4
1.37 12.1 14.1
1.44 12.7 14.8
1.50 13.2 15.4
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
SILVER 1996E(b) Data $17.3 $1.87 $2.84 $21.8 $173.4 $282.4 $32.0 $27.5
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Mean Public Comparable Multiples 16.6x 14.2x 12.4x 9.6x 2.01x 1.36x 8.0x 10.8x
Mean Acquisition Comparable Multiples 15.8x -- -- -- 3.36x 1.00x 8.7x 12.3x
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on estimated net debt as of December 31, 1996, calculated as follows:
Average Seasonal Working Capital Borrowings $37.6 million
Less: Average Cash Balances (6.2)
Less: Options Proceeds (4.2)
Net Debt $27.2 million
(b) Pro forma for Rauch, Silvestri, C.J. Vander and Farberware acquisitions
</TABLE>
5-2
<PAGE> 25
PROJECT SILVER
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<TABLE>
Public Comparables Analysis(1)
<CAPTION>
[Bar Graph]
1996 P/E(2)
<S> <C>
T.H. Lee Offer Price 17.1x
<CAPTION>
American CSS Lifetime
Rubbermaid Newell Tupperware SILVER(3) Greetings Industries Ekco Stanhome Libbey Dept. 56 Hoan Oneida
- ---------- ------ ---------- --------- --------- ---------- ---- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
22.4x 18.7x 17.2x 14.0x 13.8x 13.8x 13.4x 12.2x 11.9x 11.7x 11.6x 9.9x
<CAPTION>
[Bar Graph]
1997 P/E(2)
<S> <C>
T.H. Lee Offer Price 11.3x
<CAPTION>
American CSS Lifetime General
Rubbermaid Ekco Newell Tupperware Greetings Industries Libbey Dept. 56 Stanhome Hoan Housewares SILVER(3) Oneida
- ---------- ---- ------ ---------- --------- ---------- ------ ------- -------- -------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.3x 17.0x 16.2x 15.2x 12.3x 11.5x 10.4x 10.3x 10.3x 9.6x 9.3x 9.2x 8.0x
<FN>
- --------------------
(1) Earnings estimates from First Call and calendarized to December year-ends, except for Oneida which is from Zack's and is for a
January year-end.
(2) General Housewares has a projected loss in 1996.
(3) SILVER estimates from the Company, and 1996 is pro forma for the Rauch and Farberware transactions.
</TABLE>
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<PAGE> 26
PROJECT SILVER
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<TABLE>
Public Comparables Analysis
<CAPTION>
[Bar Graph]
1996E EBITDA Multiples
<S> <C>
T.H. Lee Offer Price 9.9x
<CAPTION>
American Lifetime CSS General
Tupperware Newell Rubbermaid SILVER(b) Greetings Dept. 56 Libbey Stanhome Hoan Industries Housewares Ekco
- ---------- ------ ---------- --------- --------- ------- ------ -------- -------- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.3x 9.5x 8.3x 8.1x 7.4x 7.3x 6.6x 6.4x 6.1x 5.7x 4.3x 3.9x
<FN>
- ---------------------
(a) EBITDA estimates are from research reports, and where not provided, depreciation and amortization are LTM; data for Oneida not
available.
(b) Based on SILVER 1996E pro forma EBITDA.
</TABLE>
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<PAGE> 27
PROJECT SILVER
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P/E TO GROWTH RATE ANALYSIS
[LINE CHART]
1996E P/E
23.0x
---
---
21.0x Rubbermaid
19.0x Newell
--- T.H. Lee
Tupperware --- --- Offer Price
17.0x --- 17.1x
15.0x American Greetings
---
--- ---
CSS Industries --- --- SILVER
---
13.0x --- Ekco
--- --- Stanhome
---
Libbey --- ---
11.0x Lifetime Hoan --- ---
--- Oneida Dept. 56
---
9.0x
7.0x
5.0x
8% 10% 12% 14% 16% 18% 20%
5 YEAR EPS GROWTH RATE(a)
-------------
(a) Source: IBES.
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PROJECT SILVER
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P/E TO GROWTH RATE ANALYSIS
<TABLE>
<CAPTION>
1996 P/E
5 YEAR TO 5-YEAR
EST. EPS EST. EPS
1996 P/E GROWTH GROWTH
-------- -------- ------
<S> <C> <C> <C> <C>
LARGE CAPITALIZATION
--------------------
AMERICAN GREETINGS 13.8x 12% 1.15x
NEWELL CO. 18.7 15% 1.25
RUBBERMAID INCORPORATED 22.4 13% 1.73
TUPPERWARE CORP. 17.2 14% 1.23
-------------------------------------------
MEAN 18.1x 14% 1.34x
MEDIAN 18.0 14% 1.24
-------------------------------------------
SMALL CAPITALIZATION
--------------------
CSS INDUSTRIES INC. 13.8x 10% 1.38x
DEPARTMENT 56, INC. 11.7 13% 0.90
EKCO GROUP INC. 13.4 13% 1.03
GENERAL HOUSEWARES(a) NM 13% NM
LIBBEY INC. 11.9 12% 0.99
LIFETIME HOAN CORP. 11.6 12% 0.96
ONEIDA LTD. 9.9 9% 1.10
STANHOME INC. 12.2 14% 0.87
-------------------------------------------
MEAN 12.1x 12% 1.03x
MEDIAN 11.9 13% 0.99
-------------------------------------------
SILVER(b) 14.0x 19% 0.72x
- ----------
<FN>
(a) General Housewares has a projected loss in 1996.
(b) 1996-2001 CAGR.
</TABLE>
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<PAGE> 29
PROJECT SILVER
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P/E TO GROWTH RATE ANALYSIS
<TABLE>
<CAPTION>
<C> <C> <C>
SILVER 5 Year Estimated EPS Growth Rate(a) 19.4%
Comparable P/E to Growth Rate(b) 90% -- 110%
Estimated 1996E P/E 17.5x -- 21.3x
SILVER 1996E EPS(a) $1.87
-----------------------------------------------------------------------
VALUE PER SILVER SHARE $32.65 $39.91
-----------------------------------------------------------------------
- --------
<FN>
(a) Based on management projections.
(b) Based on 1996 P/E to 5 year growth rate ratios of CSS Industries,
Department 56, Ekco Group, Libbey, Lifetime Hoan, Oneida, and Stanhome.
</TABLE>
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<PAGE> 30
PROJECT SILVER
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COMPARABLE ACQUISITIONS ANALYSIS
[BAR CHART]
<TABLE>
<CAPTION>
LTM EBITDA MULTIPLE
<S> <C>
Newell Co./Holson Burnes Group Inc. 11.1x
General Housewares Corp./OXO International LP 9.7x
Newell Co./Intercraft Industries Corp. 9.2x
Ekco Group Inc./Frem Corp. 8.1x
Libbey Inc./Syracuse China Corp. (The Pfaltzgraff Co.) 7.6x
Paper Magic Group/Spearhead Industries Inc. 6.6x
T.H. Lee Offer Price(a) 9.9x
- ---------
<FN>
(a) Based on 1996E EBITDA.
</TABLE>
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<PAGE> 31
PROJECT SILVER
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COMPARABLE ACQUISITIONS ANALYSIS
[BAR CHART]
<TABLE>
<CAPTION>
LTM SALES MULTIPLE
<S> <C>
Glacier Holdings Inc./Stylemaster Inc. 1.71x
SILVER/Rauch Industries Inc. 1.61x
General Housewares Corp./OXO International LP 1.39x
Newell Co./Intercraft Industries Corp. 1.24x
Ekco Group Inc./Frem Corp. 1.14x
Libbey Inc./Syracuse China Corp. (The Pfaltzgraff Co.) 1.10x
General Housewares Corp./Olfa Products Corp.,
Walter Absil Co. Ltd. 0.91x
Brown-Forman Corp./Dansk International Designs Ltd. 0.80x
Paper Magic Group/Spearhead Industries Inc. 0.64x
Newell Co./Holson Burnes Group Inc. 0.60x
Frederick Cooper PLC/Bonny Products Inc.
(American Brands Inc.) 0.46x
James River Corp. of Virginia/Mennen Co-Paper Products Business
(Colgate-Palmolive Co.) 0.40x
T.H. Lee Offer Price(a) 1.12x
- ---------
<FN>
(a) Based on 1996E Sales
</TABLE>
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<PAGE> 32
PROJECT SILVER
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DISCOUNTED CASH FLOW ANALYSIS
[LINE GRAPH]
<TABLE>
<CAPTION>
----------------------
EBITDA MULTIPLE METHOD
----------------------
Value per SILVER Share
<S> <C> <C> <C>
Discount Rate 10.5% 11.5% 12.5%
6x LTM EBITDA $30.33 $27.54
$33.39
8x LTM EBITDA $39.73 $36.13
T.H. Lee Offer Price $32
</TABLE>
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PROJECT SILVER
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MAXIMUM LBO ANALYSIS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
HYPOTHETICAL CONSTRAINTS
-----------------------------------------------------------------------
<S> <C>
[Bullet] 1996 EBITDA/Interest Coverage 1.6x
[Bullet] Minimum 5 Year Return on Equity 20%
[Bullet] Maximum Bank Debt Repayment Period 7 years
[Bullet] Minimum Equity Investment 20%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
RESULTS
-----------------------------------------------------------------------
<S> <C> <C>
[Bullet] Offer Value for Equity $32 per
share
[Bullet] Capital Structure
8.5% Bank Term Loan $ 40MM 13%
7.5% Working Capital Revolver $ 43MM 14%
11.5% Senior Subordinated Notes $100MM 33%
13.0% PIK Preferred $ 50MM 17%
Common Equity $ 67MM 22%
-----------------------------------------------------------------------
</TABLE>
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<PAGE> 34
PROJECT SILVER
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<TABLE>
POTENTIAL STRATEGIC ACQUIROR PRO FORMA ANALYSIS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
1997E EPS (a)
BREAKEVEN PURCHASE PRICE
EST. ------------------------
NET DEBT/ BORROWING CASH STOCK
POTENTIAL ACQUIROR MKT. CAP. 1997E P/E MKT. CAP. RATE PURCHASE POOLING
- ------------------ --------- --------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
American Greetings $2,645.3 12.3x 15.9% 7% $46 $34
CSS Industries, Inc. 267.5 11.5 6.8 9 39 32
Department 56, Inc. 648.2 10.3 16.1 9 39 28
Newell Co. 5,782.5 16.2 16.3 7 46 45
Rubbermaid Inc. 3,820.8 18.3 5.9 7 46 50
Stanhome Inc. 599.9 10.3 17.6 9 39 29
Tupperware Corp. 3,105.8 15.2 6.2 7 46 42
- ------------
<FN>
(a) Assumes no synergies or cost savings.
</TABLE>
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SECTION BREAK
<PAGE> 36
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APPENDIX
- --------------------------------------------------------------------------------
<PAGE> 37
- --------------------------------------------------------------------------------
PUBLIC COMPARABLES ANALYSIS
- --------------------------------------------------------------------------------
<PAGE> 38
PROJECT SILVER
Analysis of Selected Companies
<TABLE>
Comparative Multiples and Imputed Values
----------------------------------------
(dollar amounts in millions except per share data)
<CAPTION>
MARKET MULTIPLE ANALYSIS FOR SELECTED INDUSTRY COMPARABLES
- ------------------------------------------------------------------------------------------------------------------------------------
---MARKET CAP. AS A
---MARKET VALUE AS A MULTIPLE OF:---- MULTIPLE OF:--- 1996 P/E/
LTM 1996 1997 LTM LFQ 1996 5-YR.
PRICE MARKET MARKET NET TO EPS EPS CASH COMMON LTM LTM LTM EBITDA EST. EPS
COMPANIES 18-OCT-96 SHARES VALUE CAP.(a) COMMON EST.(b) EST.(b) FLOW(c) EQUITY EBITDA EBIT SALES EST.(f) GROWTH
- --------------- --------- ------ ------ -------- ------ ------- ------- ------- ------ ------ ----- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMERICAN
GREETINGS-CL A $29.75 74.8 $2,224.1 $2,645.3 15.9x 13.8x 12.3x 12.5x 1.78x 8.5x 11.1x 1.32x 7.4x 1.15x
CSS INDS INC 23.25 10.7 249.3 267.5 26.6 13.8 11.5 33.8 1.66 8.7 11.9 0.90 5.7 1.38
DEPARTMENT 56,
INC.-SER A 25.25 21.5 544.1 648.2 10.2 11.7 10.3 9.3 3.03 6.2 6.7 2.51 7.3 0.90
EKCO GROUP INC. 3.75 18.5 69.4 202.2 20.2 13.4 17.0 2.5 0.53 4.6 8.9 0.75 3.9 1.03
GENERAL
HOUSEWARES 9.75 4.1 39.5 68.0 80.2 NM 9.3 8.2 0.84 7.6 16.2 0.60 4.3 NM
LIBBEY INC. 25.00 15.0 375.8 613.7 11.9 11.9 10.4 7.6 NM 7.0 9.1 1.56 6.6 0.99
LIFETIME HOAN
CORP 9.13 11.3 102.9 114.9 14.5 11.6 9.6 12.9 1.58 8.6 9.4 1.33 6.1 0.96
NEWELL CO. 30.50 158.8 4,842.9 5,782.5 20.9 18.7 16.2 11.1 3.58 10.5 13.2 2.16 9.5 1.25
ONEIDA LTD 14.88 11.1 165.3 285.3 10.0 9.9 8.0 5.2 1.53 5.6 8.0 0.57 #N/A 1.10
RUBBERMAID
INCORPORATED 24.00 149.8 3,594.4 3,820.8 22.2 22.4 18.3 13.7 3.69 10.1 13.8 1.64 8.3 1.73
STANHOME INC. 27.63 17.9 494.4 599.9 12.6 12.2 10.3 10.2 1.92 7.0 7.8 0.72 6.4 0.87
TUPPERWARE
CORP. 46.88 62.1 2,912.9 3,105.8 17.1 17.2 15.2 12.4 11.89* 10.9 13.9 2.24 10.3 1.23
MAXIMUM(d) 26.6 22.4x 18.3x 13.7x 3.69x 10.9x 16.2x 2.51x 10.3x 1.73x
MEAN(d) 16.6 14.2 12.4 9.6 2.01 8.0 10.8 1.36 6.9 1.14
MEDIAN(d) 15.9 13.4 10.9 10.2 1.72 8.1 10.2 1.32 6.6 1.10
MINIMUM(d) 10.0 9.9 8.0 2.5 0.53 4.6 6.7 0.57 3.9 0.87
SILVER(e) $26.25 8.7 $ 227.8 $ 259.0 13.2x 14.0x 9.2x 10.4x 1.31x 8.1x 9.4x 0.92x 8.1x 0.72x
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Market Capitalization = Market Value + Preferred Equity at Liquidation Value (Incl. Redeemable) + Short-Term Debt + Long-Term
Debt + Minority Interest - Cash & Marketable Securities
(b) Earnings Estimates were obtained from First Call and were calendarized to December year-ends, except Oneida which is from Zacks
and is for a January year-end and SILVER which is from the Company
(c) Cash Flow = Income Available to Common + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings Of
Unconsolidated Subsidiaries
(d) Summary Multiples exclude numbers that are Negative, Not Available, Not Meaningful, and (*) figures
(e) Data for SILVER is 1996 estimated pro forma to include the acquisition of Rauch, to exclude Farberware transaction gains of
$11.9 million and sales of Farberware inventory of $6.0 million, but to include licensing royalties of $2.6 million; market
capitalization includes average working capital revolver balance of $37.6 million net of average cash balance of $6.2 million
(f) EBITDA estimates are from research reports, and where not provided, depreciation and amortization are LTM; data for Oneida not
available and data for SILVER is from company projections for the year ended 31-Dec-96
</TABLE>
A-1
<PAGE> 39
PROJECT SILVER
Analysis of Selected Companies
<TABLE>
Comparative Multiples and Imputed Values
----------------------------------------
(dollar amounts in millions except per share data)
<CAPTION>
SUMMARY DATA FOR SELECTED INDUSTRY COMPARABLES
- ------------------------------------------------------------------------------------------------------------------------------------
--52 WEEK LTM 1996 1997 LTM LFQ 1996 5-YR.
RANGE-- NET TO EPS EPS CASH COMMON LTM LTM LTM EBITDA EST. EPS CFY LTM
COMPANIES TICKER HIGH LOW COMMON EST.(a) EST.(a) FLOW(b) EQUITY EBITDA EBIT SALES EST.(d) GROWTH ENDS ENDED
- --------------- ------ ------ ------ ------ ------- ------- ------- ------- ------ ------ -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMERICAN
GREETINGS-CL A AGREA $33.00 $23.50 $140.0 $ 2.15 $2.42 $178.2 $1,251.4 $310.9 $239.3 $2,011.5 $357.9 12% Feb-97 May-96
CSS INDS INC CSS 25.75 20.50 9.4 1.69 2.03 7.4 149.9 30.6 22.4 297.4 47.2 10% Dec-96 Jun-96
DEPARTMENT 56,
INC.-SER A DFS 48.00 19.50 53.2 2.16 2.45 58.5 179.9 103.8 96.9 258.5 89.3 13% Dec-96 Jun-96
EKCO GROUP INC. EKO 6.38 3.75 3.4 0.28 0.22 27.9 130.0 43.7 22.7 270.4 51.5 13% Dec-96 Jun-96
GENERAL
HOUSEWARES GHW 14.13 7.88 0.5 (0.48) 1.05 4.8 47.0 8.9 4.2 113.5 15.7 13% Dec-96 Jun-96
LIBBEY INC. LBY 28.38 19.75 31.5 2.10 2.40 49.4 (36.6) 87.6 67.1 393.0 92.9 12% Dec-96 Jun-96
LIFETIME HOAN
CORP LCUT 11.25 8.00 7.1 0.79 0.95 8.0 65.1 13.3 12.2 86.5 18.8 12% Dec-96 Jun-96
NEWELL CO. NWL 32.50 23.38 232.2 1.63 1.88 435.3 1,354.3 548.8 437.4 2,673.8 607.4 15% Dec-96 Jun-96
ONEIDA LTD OCQ 18.88 14.38 16.5 1.50 1.85 31.9 107.8 51.1 35.5 504.7 #N/A 9% Jan-97 Jul-96
RUBBERMAID
INCORPORATED RBD 30.38 22.13 161.9 1.07 1.31 261.8 973.5 376.8 277.0 2,329.7 458.8 13% Dec-96 Jun-96
STANHOME INC. STH 32.63 25.38 39.3 2.26 2.67 48.2 257.8 85.7 76.8 836.6 94.3 14% Dec-96 Jun-96
TUPPERWARE
CORP. TUP 49.88 38.25 169.9 2.72 3.09 235.4 245.0 284.7 223.6 1,386.2 302.1 14% Dec-96 Jun-96
SILVER(e) $27.63 $19.75 $ 17.3 $1.87 $2.84 $ 21.8 $ 173.4 $ 32.0 $ 27.5 $ 282.4 $ 32.0 19% Dec-96 Dec-96
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Earnings Estimates were obtained from First Call and were calendarized to December year-ends, except Oneida which is from Zacks
and is for a January year-end and SILVER which is from the Company
(b) Cash Flow = Income Available to Common + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings Of
Unconsolidated Subsidiaries
(c) Data for SILVER is 1996 estimated pro forma to include the acquisition of Rauch, to exclude Farberware transaction gains of
$11.9 million and sales of Farberware inventory of $6.0 million, but to include licensing royalties of $2.6 million; market
capitalization includes average working capital revolver balance of $37.6 million net of average cash balance of $6.2 million
(d) EBITDA estimates are from research reports, and where not provided, depreciation and amortization are LTM; data for Oneida not
available and data for SILVER is from company projections for the year ended 31-Dec-96
</TABLE>
A-2
<PAGE> 40
- --------------------------------------------------------------------------------
COMPARABLE ACQUISITIONS ANALYSIS
- --------------------------------------------------------------------------------
<PAGE> 41
PROJECT SILVER
- --------------------------------------------------------------------------------
<TABLE>
ANALYSIS OF SELECTED HOUSEWARES INDUSTRY ACQUISITIONS
(Dollars in Millions, Except Per Share)
<CAPTION>
Announcement
Date Target & Description
- ------------ ----------------------------------------------------------------------------------------------------------
<S> <C>
11-Dec-95 Holson Burnes Group Inc
- Manufactures and markets photo albums and picture frames
7-Dec-95 Rauch Industries Inc
- Manufactures and distributes Christmas decorations, primarily glass and satin Christmas tree ornaments
2-Nov-95 Bonny Products Inc (American Brands Inc)
- Manufactures non-electrical kitchen tools and utensils
11-May-95 Syracuse China Corp (The Pfaltzgraff Co)
- Manufactures ceramic dinnerware, mainly for the foodservice industry
4-Oct-94 Olfa Products Corp, Walter Absil Co Ltd
- Wholesale distributor of cutting tools and accessories for the hobby, craft, hardware and fabric markets
3-Feb-93 Stylemaster Inc
- Manufacturer and marketer of proprietary plastic housewares and supplies, and supplier to Glacier Water
30-Oct-92 OXO International LP
- Marketer of kitchen tools under the Good Grips, Prime and Plus brand names
8-Sep-92 Intercraft Industries Corp
- Manufactures and wholesales picture and mirror frames
20-Jul-92 Mennen Co-Paper Products Business (Colgate-Palmolive Co)
- Manufactures party paper products, tablecloth cutlery and tableware products
13-Nov-91 Frem Corp
- Manufactures and markets injection molded housewares products
10-Jul-91 Spearhead Industries Inc
- Designs, assembles and markets consumer items for Easter and Halloween, and a line of toy products
20-May-91 Dansk International Designs Ltd
- Manufactures tabletop, houseware, and giftware items
<CAPTION>
Offer Value as Multiple of: Transaction Value as Multiple of:
--------------------------- ---------------------------------
Offer Transaction LTM LFQ LTM LTM LTM
Acquiror Value(a) Value(b) Net Income Book Value Sales EBITDA EBIT
- ------------------------------- -------- ----------- ---------- ---------- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Newell Co $ 36.7 $ 82.9 10.8x 1.13x 0.60x 11.1x 18.3x
Syratech Corp 50.3 82.7 NM 1.69 1.61 NM NM
Frederick Cooper PLC 6.0 6.0 5.1 1.22 0.46 N/A N/A
Libbey Inc 40.7 40.6 NM 1.80 1.10 7.6 12.7
General Housewares Corp 13.8 15.1 NM 2.69 0.91 NM NM
Glacier Holdings Inc 2.0 9.6 NM NM 1.71 NM NM
General Housewares Corp 6.3 6.4 20.2 6.16 1.39 9.7 11.0
Newell Co 184.7 184.7 21.5 2.91 1.24 9.2 12.9
James River Corp of Virginia 40.0 40.0 N/A N/A 0.40 N/A N/A
Ekco Group Inc 26.5 32.7 19.1 9.71 1.14 8.1 10.7
Paper Magic Group 13.5 17.5 18.1 2.95 0.64 6.6 8.3
Brown-Forman Corp 66.0 86.0 N/A 3.30 0.80 N/A N/A
-------------------------------------------------------------------
Maximum 21.5x 9.71x 1.71x 11.1x 18.3x
Mean 15.8 3.36 1.00 8.7 12.3
Median 18.6 2.80 1.00 8.6 11.9
Minimum 5.1 1.13 0.40 6.6 8.3
-------------------------------------------------------------------
<FN>
(a) Offer Value = Offer Price per Share x (Shares Outstanding plus Exercisable Options Outstanding)
(b) Transaction Value = Offer Value + Liquidation Value of Preferred Stock + Short Term Debt + Long Term Debt + Minority Interest -
Cash & Equivalents - Exercisable Options Proceeds
</TABLE>
<PAGE> 42
[Section Break]
<PAGE> 43
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
- --------------------------------------------------------------------------------
<PAGE> 44
PROJECT SILVER
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS - EBITDA MULTIPLE METHOD
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
Fiscal Year Ended December 31, Projected Fiscal Year Ended December 31, (a)
----------------------------------- --------------------------------------------
1993 1994 1995 1996E 1997 1998 1999 2000 2001
----------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $122.7 $147.3 $169.5 $282.4 $326.8 $367.7 $408.1 $451.0 $496.1
EBITDA 13.4 14.3 18.7 32.0 44.2 49.2 54.7 60.5 67.2
Less: Depreciation (3.1) (3.3) (3.3) (4.3) (5.2) (5.6) (6.2) (6.8) (7.4)
----------------------------------- ---------------------------------------------
EBITDA 10.3 11.1 15.4 27.7 39.0 43.6 48.5 53.7 59.7
Less: Taxes @ 35.0% (3.6) (3.9) (5.4) (9.7) (13.7) (15.3) (17.0) (18.8) (20.9)
----------------------------------- ---------------------------------------------
Tax-effected EBITDA 6.7 7.2 10.0 18.0 25.4 28.4 31.5 34.9 38.8
Plus: Depreciation 5.2 5.6 6.2 6.8 7.4
Plus: Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Less: Capital Expenditures (20.8) (5.6) (6.1) (6.7) (7.4)
Less: Changes in Working Capital (12.1) (15.8) (14.4) (14.4) (14.1)
---------------------------------------------
Free Cash Flow ($2.3) $12.6 $17.1 $20.6 $24.7
Free Cash Flow Growth Rate -546.1% -647.8% 36.1% 20.1% 20.2%
<CAPTION>
-------------- --------------------------- ---------------------------
A + B = C
-------------- --------------------------- ---------------------------
PV of Terminal Value as a Terminal Value as a
Discounted (b) Multiple of 2001 EBITDA (c) Firm Value % of Firm Value
Cash Flows --------------------------- --------------------------- --------------------------------
Discount Rate (1997-2001) 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
- ------------- -------------- --------------------------- --------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.5% $49.8 $244.7 $285.5 $326.3 $294.5 $335.2 $376.0 83.1% 85.2% 86.8%
11.0% 48.9 239.2 279.1 319.0 288.2 328.0 367.9 83.0% 85.1% 86.7%
11.5% 48.1 233.9 272.9 311.9 282.0 321.0 360.0 82.9% 85.0% 86.6%
12.0% 47.3 228.8 266.9 305.0 276.1 314.2 352.3 82.9% 84.9% 86.6%
12.5% 46.5 223.7 261.0 298.3 270.2 307.5 344.8 82.8% 84.9% 86.5%
--------------------------------
<CAPTION>
-------------- ---------------------------
D = E
-------------- ---------------------------
Total Equity Value Value Per Share (e) Equivalent Perpetual Growth Rate
Net Debt --------------------------- --------------------------- --------------------------------
Discount Rate 12/31/96(d) 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
- ------------- -------------- --------------------------- --------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.5% $31.3 $263.2 $304.0 $344.7 $30.33 $35.03 $39.73 4.1% 5.0% 5.6%
11.0% 31.3 256.9 296.8 336.6 29.61 34.20 38.80 4.6% 5.5% 6.1%
11.5% 31.3 250.7 289.7 328.7 28.90 33.39 37.89 5.1% 5.9% 6.6%
12.0% 31.3 244.8 282.9 321.0 28.21 32.60 37.00 5.5% 6.4% 7.1%
12.5% 31.3 239.0 276.2 313.5 27.54 31.84 36.13 6.0% 6.9% 7.6%
--------------------------- --------------------------------
<FN>
- ------------------------------------------------------
(a) Projections are from SILVER management.
(b) Present values calculated as of 12/31/96.
(c) Discounted 5 years; based on 2001 EBITDA of $67.2 million.
(d) Represents average seasonal working capital revolver balance net of average cash balance for 1996.
(e) Based on 8.7 million shares currently outstanding.
</TABLE>
C-1
<PAGE> 45
<TABLE>
PROJECT SILVER
ANALYSIS OF COST OF CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------
MACROECONOMIC ASSUMPTIONS:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three Month Treasury Bill (at 10/19/96) 5.09% Estimated Future Market Return(b) 14.19%
Thirty Year Government Bond (at 10/19/96) 6.79% Estimated Future Risk Free Rate(c) 5.39%
Historical Spread Between Long Bond & Bill(a) 1.40% Estimated Market Risk Premium 8.80%
Historical Spread Between Long Bond & S&P500(a) 7.40%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------
INDUSTRY BETA ANALYSIS:
- ------------------------------------------------------------------------------------------------------------------------------------
LEVERED BV NET DEBT/ DEBT/ MARGINAL UNLEVERED LEVERED UNLEVERED
COMPARABLE COMPANIES BETA(d) MKT. CAP. EQUITY TAX RATE BETA(e) COST OF CAPITAL COST OF CAPITAL
- -------------------- ------- ----------- ------- -------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
American Greetings 0.80 15.9% 18.9% 39.0% 0.72 12.4% 11.7%
CSS Industries Inc. 0.53 6.8% 7.3% 39.0% 0.51 10.1% 9.9%
Department 56, Inc. 0.70 16.1% 19.1% 39.0% 0.63 11.6% 10.9%
Ekco Group Inc. 1.19 65.7% 191.4% 39.0% 0.55 15.9% 10.2%
General Housewares 0.60 41.9% 72.1% 39.0% 0.42 10.7% 9.1%
Libbey Inc. 0.83 38.8% 63.3% 39.0% 0.60 12.7% 10.7%
Lifetime Hoan Corp. 0.82 10.4% 11.7% 39.0% 0.77 12.6% 12.1%
Newell Co. 0.96 16.3% 19.4% 39.0% 0.86 13.8% 12.9%
Oneida Ltd. 0.83 42.1% 72.6% 39.0% 0.58 12.7% 10.5%
Rubbermaid Inc. 1.27 5.9% 6.3% 39.0% 1.22 16.6% 16.2%
Stanhome Inc. 0.44 17.6% 21.3% 39.0% 0.39 9.3% 8.8%
---- ---- ---- ----
AVERAGE INDUSTRY COST OF CAPITAL 25.2% 39.0% 0.66 11.2%
SILVER COST OF CAPITAL 0.52 12.1% 13.7% 39.0% 0.48 10.0% 9.6%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------
TARGET WACC CALCULATION:
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIMAL OPTIMAL PRE-TAX LEVERED BETA ASSUMING
DEBT/ DEBT/ SPREAD TO 30-YR LONG TERM UNLEVERED BETA OF COST OF TARGET
CAPITALIZATION EQUITY TREASURIES (BP) COST OF DEBT 0.66 LEVERED EQUITY WACC
-------------- ------ --------------- ------------ --------------------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
0.0% 0.0% 100.0 7.8% 0.66 11.2% 11.2%
10.0% 11.1% 125.0 8.0% 0.70 11.6% 10.9%
20.0% 25.0% 150.0 8.3% 0.76 12.1% 10.7%
30.0% 42.9% 175.0 8.5% 0.83 12.7% 10.4%
40.0% 66.7% 200.0 8.8% 0.92 13.5% 10.3%
50.0% 100.0% 300.0 9.8% 1.06 14.7% 10.3%
60.0% 150.0% 400.0 10.8% 1.26 16.5% 10.5%
70.0% 233.3% 500.0 11.8% 1.59 19.4% 10.9%
80.0% 400.0% 600.0 12.8% 2.26 25.3% 11.3%
90.0% 900.0% 700.0 13.8% 4.26 42.9% 11.9%
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------
<FN>
(a) Source: Ibbottson & Sinquefield 1996 Yearbook.
(b) Thirty year government bond yield plus the historical spread between the long bond and the S&P 500.
(c) Thirty year government bond yield less the historical spread between the long bond and the three month bill.
(d) Source: Merrill Lynch Securities Risk Evaluation Book dated September 1996.
(e) Unlevered beta equals Levered Beta/(1 + (Debt/Equity) * (1 - Tax Rate). Assumes beta of debt equals zero.
C-2
</TABLE>
<PAGE> 46
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 47
- --------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS
- --------------------------------------------------------------------------------
<PAGE> 48
PROJECT SILVER
<TABLE>
LBO ANALYSIS - TRANSACTION SUMMARY
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SOURCES: AMOUNT PERCENT INTEREST RATE OWNERSHIP TERM POINTS FEES
- -------- ------ ------- ------------- --------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Cash Balances $ 0.0 0.0% 6.00%
Option Proceeds 4.2 1.4%
Working Capital Revolver (a) 42.7 14.1% 7.50% 0.0% 7 2.5% $3.5
Bank Debt (Term Loan) 40.0 13.2% 8.50% 0.0% 10 2.5% 1.0
Senior Sub. Debentures 100.0 32.9% 11.50% 0.0% 10 3.0% 3.0
PIK Preferred 50.0 16.5% 13.00% 0.0% 7 0.0% 0.0
Seller Rollover Equity 16.7 5.5% 25.0%
T.H. Lee Common Equity 50.0 16.5% 75.0%
------ ------ ------ ----
Total Sources $303.6 100.0% 100.0% $7.5
USES:
- -----
Refinance Debt $ 1.8 ------------------------------------------------------------
Financing Fees 7.5 8.7 total shares outstanding
Transaction Expenses @ 2.0% 5.8 0.3 exerc. options outst. ex. @ $12.38 per share
Purchase of Equity @ $32.00 per share 288.5 ---
Total Uses $303.6 9.0 fully diluted shares outstanding
- -----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------- ------------------------------------------------------
<CAPTION>
GOODWILL CALCULATION: (b) INTEREST COVERAGE SUMMARY:
- ------------------------- --------------------------
1996E 1997 1998
----- ---- ----
<S> <C> <C> <C> <C> <C>
Purchase Price $0.0 EBITDA / Total Interest 1.6x 2.1x 2.3x
Existing Goodwill -- EBITDA-CAPX/Tot. Int. 0.7x 1.1x 2.1x
Non-Financing Transaction Expenses -- EBITDA-Norm. CAPX/Tot. 1.3x 1.9x 2.1x
Less: Book Value Acquired (incl. option proceeds) 0.0 EBIT / Total Interest -- 1.9x 2.0x
Goodwill $0.0 Tot. Funded Debt / EBITDA 5.7x 4.4x 4.0x
Amortization Period 40 Funded Sr. Debt / EBITDA 1.2x 2.2x 2.0x
Annual Goodwill Amortization $0.0 Tot. Cmtd. Debt / EBITDA 8.6x 5.8x 5.4x
- ---------------------------------------------------------- Cmtd. Sr. Debt / EBITDA 4.1x 3.6x 3.4x
- ---------------------------------------------------------- Cumulative Bank Debt Pay -- -16.7% -17.6%
Tender Price / 1996 EPS(c) 17.1x ------------------------------------------------------
Tender Price / 1997 EPS(c) 11.3x
- ----------------------------------------------------------
- ---------------------------------------------------------- ------------------------------------------------------
<CAPTION>
MULTIPLE ANALYSIS: TV 12/31/96 Adj. TV 12/31/96(d) RETURNS SUMMARY:
- ------------------ ----------- ------------------- ----------------
3 YEAR 4 YEAR 5 YEAR
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Transaction Value $284.2 $315.6 EBITDA Multiple:
TV / 1996E EBITDA 8.9x 9.9x ----------------
TV / 1997 EBITDA 6.4x 7.1x 6.0x -16.7% 0.9% 10.2%
TV / 1996E EBIT 10.3x 11.5x 7.0x 11.8% 18.1% 21.3%
TV / 1997 EBIT 7.3x 8.1x 8.0x 30.4% 29.9% 29.5%
- ---------------------------------------------------------- -------------------------------------------------------
<FN>
(a) Assumes $140.0 million of availablity
(b) Assumes recap accounting.
(c) Earnings estimates of $1.87 for 1996 and $2.84 for 1997 are from SILVER management.
(d) Includes average working capital revolver balance of $37.6 million net of average cash balance of $6.2 million for 1996.
</TABLE>
D-1
<PAGE> 49
PROJECT SILVER
<TABLE>
OWNERSHIP ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
PRE-TRANSACTION PRICE PER POST-TRANSACTION EFFECTIVE
NUMBER SHARE GROSS CASH FULLY DILUTED NUMBER NEW EQUITY PRICE PER
OF SHARES % RECEIVED RECEIVED OF SHARES % INVESTMENT NEW SHARE
---------------------- --------------------- --------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Florence 2,875,600 32.9% $32.00 $ 91.4 2,000,000 20.0% $13.3 $6.67
All Other Insiders 785,725 9.1% 32.00 25.1 500,000 5.0% 3.3 6.67
Thomas H. Lee 0 0.0% 32.00 0.0 7,500,000 75.0% 50.0 6.67
Public 5,033,306 58.0% 32.00 161.1 0 0.0% 0.0 --
--------- ----- ------ ------ ---------- ----- ----- -----
Total 8,676,631 100.0% $32.00 $277.7 10,000,000 100.0% $66.7 $6.67
========= ===== ====== ====== ========== ===== ===== =====
<CAPTION>
NET CASH
RECEIVED/
PROMOTE (INVESTED)
--------- ----------
<S> <C> <C>
Leonard Florence 0.0% $ 78.1
All Other Insiders 0.0% 21.8
Thomas H. Lee 0.0% (50.0)
Public -- 161.1
-- ------
Total -- $211.0
=== ======
</TABLE>
D-2
<PAGE> 50
PROJECT SILVER
<TABLE>
CONSOLIDATED INCOME STATEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, PROJECTED FISCAL YEAR ENDED DECEMBER 31, (a)
------------------------------------ ----------------------------------------------
1993 1994 1995 1996E(b) 1997 1998 1999 2000 2001
------------------------------------ ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $122.7 $147.3 $169.5 $282.4 $326.8 $367.7 $408.1 $451.0 $496.1
Cost of Sales 84.6 104.6 119.8 203.0 231.8 261.1 289.4 319.3 350.7
------------------------------------ ----------------------------------------------
Gross Profit $ 38.0 $ 42.7 $ 49.7 $ 79.4 $ 95.1 $106.6 $118.8 $131.7 $145.4
Selling & Administrative 27.7 31.6 34.2 54.4 58.8 62.2 73.5 81.2 89.3
LBO Goodwill Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Income (Expense) 0.0 0.0 0.0 2.6 2.6 3.0 3.0 3.0 3.5
------------------------------------ ----------------------------------------------
EBIT 10.3 11.1 15.4 27.5 38.8 43.4 48.3 53.5 59.6
Interest Income (0.1) (0.1) (4.9) (0.6) (0.1) (0.1) (0.1) (0.1) (0.1)
Working Capital Revolver Interest Expense 0.0 0.0 0.0 0.0 3.8 4.5 4.7 4.6 4.4
Bank Debt (Term Loan) Interest Expense 0.0 0.0 0.0 0.0 3.3 3.1 2.8 2.4 1.8
Seasonal Revolver Interest Expense 0.9 0.6 0.3 2.9 1.5 1.7 1.9 2.1 2.3
Senior Sub. Debentures Interest Expense 0.0 0.0 0.0 0.0 11.5 11.5 11.5 11.5 11.5
Capital Leases Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Financing Fees 0.0 0.0 0.0 0.0 0.5 0.5 0.5 0.5 0.5
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Interest Expense 0.9 0.5 (4.6) 2.3 20.5 21.2 21.2 20.9 20.3
Pretax Income 9.4 10.6 20.0 25.2 18.4 22.3 27.1 32.6 39.3
Taxes 2.4 2.8 6.9 8.9 6.5 7.9 9.6 11.5 13.8
PIK Preferred Dividends 0.0 0.0 0.0 0.0 6.5 7.3 8.3 9.4 10.6
------------------------------------ ----------------------------------------------
Net Income $ 7.1 $ 7.9 $ 13.2 $ 16.4 $ 5.4 $ 7.1 $ 9.2 $ 11.7 $ 14.9
==================================== ==============================================
EBIT 10.3 11.1 15.4 27.5 38.8 43.4 48.3 53.5 59.6
Depreciation 3.1 3.3 3.3 4.3 5.2 5.6 6.2 6.8 7.4
Old Goodwill Amortization 0.0 0.0 0.0 0.1 0.2 0.2 0.2 0.2 0.2
LBO Goodwill Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------------------------------------ ----------------------------------------------
EBITDA 13.4 14.3 18.7 32.0 44.2 49.2 54.7 60.5 67.2
Revenue Growth -- 20.1% 15.1% 66.6% 15.7% 12.5% 11.0% 10.5% 10.0%
Gross Margin 31.0% 29.0% 29.3% 28.1% 29.1% 29.0% 29.1% 29.2% 29.3%
Selling & Administrative (% Sales) 22.6% 21.5% 20.2% 19.3% 18.0% 18.0% 18.0% 18.0% 18.0%
EBITDA Margin 10.9% 9.7% 11.0% 11.3% 13.5% 13.4% 13.4% 13.4% 13.5%
Depreciation (% of Net PP&E) 4.4% 10.7% 11.0% 6.4% 6.2% 6.7% 7.4% 8.1% 8.9%
Tax Rate 25.3% 26.0% 34.2% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
- ------------
<FN>
(a) Projections are from SILVER management.
(b) 1996E excludes gain on Farberware transaction of $11.9 million and sales of Farberware inventory of $6.0 million, but includes
$2.6 million of pro forma Farberware licensing royalties (included in other income).
D-3
</TABLE>
<PAGE> 51
PROJECT SILVER
<TABLE>
INCOME STATEMENTS BY DIVISION
- --------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
Fiscal Year Ended December 31, Projected Fiscal Year Ended December 31, (a)
------------------------------------------ -------------------------------------------------------
1994 1995 1996(b) 1996E 1997 1998 1999 2000 2001
------------------------------------------ -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wallace
Sales $ 29.6 $ 26.9 $ 30.6 $ 30.6 $ 33.0 $ 34.3 $ 35.1 $ 35.9 $ 36.8
Sales Growth - -9.0% 13.4% 13.4% 8.0% 3.9% 2.3% 2.4% 2.3%
Cost of Sales 22.4 17.0 19.6 19.6 20.9 21.8 22.3 22.8 23.3
------------------------------------------ -------------------------------------------------------
Gross Profit $ 7.2 $ 10.0 $ 10.9 $ 10.9 $ 12.1 $ 12.5 $ 12.8 $ 13.1 $ 13.4
Gross Margin 24.5% 37.1% 35.7% 35.7% 36.5% 36.5% 36.5% 36.5% 36.5%
Towle
Sales $ 22.8 $ 20.8 $ 23.5 $ 23.5 $ 25.4 $ 26.4 $ 27.0 $ 27.6 $ 28.3
Sales Growth - -8.9% 13.0% 13.0% 8.0% 4.0% 2.3% 2.4% 2.3%
Cost of Sales 14.1 12.8 13.3 13.3 14.5 15.0 15.4 15.7 16.1
------------------------------------------ -------------------------------------------------------
Gross Profit $ 8.7 $ 8.0 $ 10.2 $ 10.2 $ 10.9 $ 11.4 $ 11.6 $ 11.9 $ 12.2
Gross Margin 38.1% 38.2% 43.4% 43.4% 43.1% 43.1% 43.1% 43.1% 43.1%
Hong Kong
Sales $ 33.0 $ 46.6 $ 57.2 $ 57.2 $ 65.7 $ 76.6 $ 87.9 $ 99.2 $111.5
Sales Growth - 41.0% 22.7% 22.7% 15.0% 16.6% 14.7% 12.9% 12.4%
Cost of Sales 22.9 32.2 39.7 39.7 45.1 53.3 61.1 69.0 77.5
------------------------------------------ -------------------------------------------------------
Gross Profit $ 10.2 $ 14.3 $ 17.5 $ 17.5 $ 20.6 $ 23.4 $ 26.8 $ 30.3 $ 34.0
Gross Margin 30.8% 30.8% 30.5% 30.5% 31.4% 30.5% 30.5% 30.5% 30.5%
LFA
Sales $ 61.4 $ 75.2 $ 87.1 $ 87.1 $100.2 $114.3 $128.9 $144.1 $159.2
Sales Growth - 22.4% 15.8% 15.8% 15.0% 14.1% 12.7% 11.8% 10.5%
Cost of Sales 48.9 57.8 67.1 67.1 76.5 90.3 101.8 113.8 125.8
------------------------------------------ -------------------------------------------------------
Gross Profit $ 12.6 $ 17.4 $ 20.0 $ 20.0 $ 23.7 $ 24.0 $ 27.1 $ 30.3 $ 33.4
Gross Margin 20.5% 23.1% 22.9% 22.9% 23.6% 21.0% 21.0% 21.0% 21.0%
Rauch
Sales - - - $ 60.2 $ 66.6 $ 74.4 $ 81.8 $ 90.0 $ 98.5
Sales Growth - - - - 10.6% 11.7% 9.9% 10.0% 9.5%
Cost of Sales - - - 47.7 51.9 54.2 58.7 63.6 68.8
------------------------------------------ -------------------------------------------------------
Gross Profit - - - $ 12.5 $ 14.6 $ 20.1 $ 23.1 $ 26.4 $ 29.7
Gross Margin - - - 20.7% 22.0% 27.1% 28.2% 29.3% 30.2%
Silvestri
Sales - - - $ 19.3 $ 30.0 $ 35.0 $ 40.1 $ 46.1 $ 52.9
Sales Growth - - - - 55.8% 16.6% 14.7% 14.8% 14.8%
Cost of Sales - - - 12.6 19.2 22.3 25.6 29.4 33.8
------------------------------------------ -------------------------------------------------------
Gross Profit - - - $ 6.6 $ 10.8 $ 12.6 $ 14.5 $ 16.6 $ 19.1
Gross Margin - - - 34.4% 36.1% 36.1% 36.1% 36.1% 36.1%
C.J. Vander
Sales - - - $ 4.7 $ 6.0 $ 6.7 $ 7.4 $ 8.1 $ 8.9
Sales Growth - - - - 28.5% 11.7% 10.0% 10.0% 10.0%
Cost of Sales - - - 2.9 3.7 4.1 4.5 4.9 5.4
------------------------------------------ -------------------------------------------------------
Gross Profit - - - $ 1.8 $ 2.3 $ 2.6 $2.9 $ 3.2 $ 3.5
Gross Margin - - - 38.0% 39.0% 39.0% 39.0% 39.0% 39.0%
Gonsolidated
Sales $146.9 $169.5 $198.3 $282.4 $326.8 $367.7 $408.1 $451.0 $496.1
Sales Growth - 15.4% 17.0% 66.6% 15.7% 12.5% 11.0% 10.5% 10.0%
Cost of Sales 108.2 119.8 139.8 203.0 231.8 261.1 289.4 319.3 350.7
------------------------------------------ -------------------------------------------------------
Gross Profit $ 38.7 $ 49.7 $ 58.5 $ 79.4 $ 95.1 $106.6 $118.8 $131.7 $145.4
Gross Margin 26.3% 29.3% 29.5% 28.1% 29.1% 29.0% 29.1% 29.2% 29.3%
<FN>
- ----------------
(a) Projections are from SILVER management.
(b) Shows only organic growth.
</TABLE>
D-4
<PAGE> 52
PROJECT SILVER
<TABLE>
CONSOLIDATED BALANCE SHEET AND CASH FLOW STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
Fiscal Year Ended December 31, Projected Fiscal Year Ended December 31,(a)
------------------------------------ Pro Forma -------------------------------------------
1993 1994 1995 1996E 12/31/96 1997 1998 1999 2000 2001
------------------------------------ --------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and Equivalents $ 3.8 $ 1.9 $109.1 $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
Net Working Capital 76.9 52.8 62.9 119.1 119.1 131.2 147.0 161.4 175.8 189.9
PP&E 68.7 30.7 29.6 68.1 68.1 83.7 83.7 83.6 83.6 83.6
Other Assets 0.9 0.6 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.2
Net Assets of Discontinued Operations 0.0 85.9 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Financing Fees 0.0 0.0 0.0 0.0 7.5 7.0 6.6 6.1 5.7 5.2
Old Goodwill 0.0 0.0 0.0 0.0 6.0 5.8 5.6 5.4 5.2 5.0
LBO Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------------------------------------ --------- -------------------------------------------
Total Assets $150.3 $171.8 $203.7 $195.6 $203.1 $230.1 $245.1 $258.8 $272.5 $285.9
==================================== ========= ===========================================
Working Capital Revolver $ 9.9 $ 15.4 $ 51.7 $ 1.8 $ 42.7 58.5 62.3 62.2 60.4 56.2
Bank Debt (Term Loan) 0.0 0.0 0.0 0.0 40.0 38.0 35.0 31.0 25.0 17.0
Senior Sub. Debentures 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0
Capital Leases 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Liabilities 9.5 4.3 5.4 20.3 20.3 21.6 21.5 21.8 22.0 22.3
PIK Preferred 0.0 0.0 0.0 0.0 50.0 56.5 63.8 72.1 81.5 92.1
Common Equity 131.0 152.1 146.6 173.4 (49.9) (49.9) (49.9) (49.9) (49.9) (49.9)
Retained Earnings 0.0 0.0 0.0 0.0 0.0 5.4 12.4 21.7 33.4 48.3
------------------------------------ --------- -------------------------------------------
Total Liabilities and Equity $150.3 $171.8 $203.7 $195.6 $203.1 $230.1 $245.1 $258.8 $272.5 $285.9
==================================== ========= ===========================================
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 5.4 $ 7.1 $ 9.2 $ 11.7 $ 14.9
Depreciation 3.1 3.3 3.3 4.3 5.2 5.6 6.2 6.8 7.4
Amortization of Financing Fees 0.5 0.5 0.5 0.5 0.5
Old Goodwill Amortization 0.1 0.2 0.2 0.2 0.2 0.2
LBO Goodwill Amortization 0.0 0.0 0.0 0.0 0.0
Non-Cash Interest/Dividends 6.5 7.3 8.3 9.4 10.6
Change in Working Capital 24.1 (10.1) (56.2) (12.1) (15.8) (14.4) (14.4) (14.1)
Capital Expenditures (2.8) (2.6) (2.7) (17.8) (20.8) (5.6) (6.1) (6.7) (7.4)
Change in Other Assets/Liabilities 1.3 (0.0) 0.3 0.3 0.3
-------------------------------------------
Free Cash Flow (13.8) (0.7) 4.1 7.7 12.3
Required Debt Amortization (2.0) (3.0) (4.0) (6.0) (8.0)
Amortization of Capital Leases 0.0 0.0 0.0 0.0 0.0
-------------------------------------------
Cash Flow Available for Debt Paydown (15.8) (3.7) 0.1 1.7 4.3
Debt Paydown 15.8 3.7 (0.1) (1.7) (4.3)
-------------------------------------------
Increase in Cash Balances 0.0 0.0 0.0 0.0 0.0
Beginning Balance 1.9 1.9 1.9 1.9 1.9
-------------------------------------------
Ending Balance $ 1.9 $ 1.9 $ 1.9 $ 1.9 $ 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
Net Working Capital (% of Sales) 62.6% 35.8% 37.1% 42.2% 40.1% 40.0% 39.6% 39.0% 38.3%
Change in NWC/Change in Sales -- 97.8% -45.4% -49.8% -27.2% -38.7% -35.7% -33.5% -31.4%
CAPX (% of Sales) 23% 1.8% 1.6% 6.3% 6.4% 1.5% 1.5% 1.5% 1.5%
CAPX (% of Net PP&E) 4.0% 8.5% 9.1% 26.1% 24.8% 6.6% 7.3% 8.1% 8.9%
Depreciation (% of Sales) 2.5% 2.2% 1.9% 1.5% 1.6% 1.5% 1.5% 1.5% 1.5%
Depreciation (% of Net PP&E) 4.4% 10.7% 11.0% 6.4% 6.2% 6.7% 7.4% 8.1% 8.9%
Normalized CAPX $ 5.0 $ 5.0 $ 5.0 $ 5.0 $ 5.0 $ 5.0
<FN>
- --------------------
(a) Projections are from SILVER management.
</TABLE>
D-5
<PAGE> 53
PROJECT SILVER
<TABLE>
WORKING CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, PROJECTED FISCAL YEAR ENDED DECEMBER 31,(a)
------------------------------ PRO FORMA ------------------------------------------------------
1994 1995 1996E 12/31/96 1997 1998 1999 2000 2001
------------------------------ --------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Accounts Receivable $28.2 $31.9 $ 73.4 $ 73.4 $ 78.6 $ 88.4 $ 98.1 $108.4 $119.3
Inventory 40.3 41.2 68.2 68.2 73.5 82.7 91.7 101.4 111.5
Prepaids & Other 0.2 1.6 2.0 2.0 1.9 2.1 2.2 2.3 2.5
Deferred Taxes 3.0 5.1 4.0 4.0 4.1 4.1 4.1 4.1 4.1
------------------------------ --------- ------------------------------------------------------
71.7 79.8 147.6 147.6 158.1 177.3 196.2 216.2 237.4
Liabilities
Accounts Payable 7.6 6.4 9.2 9.2 10.3 11.5 12.8 14.2 15.6
Accrued Liabilities 2.7 4.4 10.5 10.5 7.5 8.7 10.1 11.7 13.4
Accrued Compensation 3.2 2.5 3.2 3.2 3.5 3.7 3.9 4.1 4.3
Accrued Advertising 1.6 2.0 3.0 3.0 2.4 2.8 3.2 3.7 4.3
Taxes Payble 3.8 1.5 2.7 2.7 3.2 3.6 4.8 6.8 9.9
------------------------------ --------- ------------------------------------------------------
18.9 16.9 28.5 28.5 26.9 30.3 34.8 40.4 47.5
Net Working Capital 52.8 62.9 119.1 119.1 131.2 147.0 161.4 175.8 189.9
Accounts Receivable (% Sales) 19.2% 18.8% 26.0% 26.0% 24.0% 24.0% 24.0% 24.0% 24.0%
Inventory (% Sales) 27.4% 24.3% 24.1% 24.1% 22.5% 22.5% 22.5% 22.5% 22.5%
Prepaids & Other (% Sales) 0.1% 0.9% 0.7% 0.7% 0.6% 0.6% 0.5% 0.5% 0.5%
Deferred Taxes (% Sales) 2.0% 3.0% 1.4% 1.4% 1.3% 1.1% 1.0% 0.9% 0.8%
Accounts Payable (% Sales) 5.2% 3.8% 3.2% 3.2% 3.1% 3.1% 3.1% 3.1% 3.1%
Accrued Liabilities (% Sales) 1.8% 2.6% 3.7% 3.7% 2.3% 2.4% 2.5% 2.6% 2.7%
Accrued Compensation (% Sales) 2.1% 1.5% 1.1% 1.1% 1.1% 1.0% 0.9% 0.9% 0.9%
Accrued Advertising (% Sales) 1.1% 1.2% 1.1% 1.1% 0.7% 0.8% 0.8% 0.8% 0.9%
Taxes Payable (% Sales) 2.6% 0.9% 1.0% 1.0% 1.0% 1.0% 1.2% 1.5% 2.0%
Net Working Capital (% Sales) 12.8% 9.9% 42.2% 42.2% 40.1% 40.0% 39.6% 39.0% 38.3%
<FN>
- ------------------
(a) Projections are from SILVER management.
</TABLE>
D-6
<PAGE> 54
<TABLE>
PROJECT SILVER
CALCULATION OF WORKING CAPITAL REVOLVER
- -------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
PROJECTED FISCAL YEAR ENDED DECEMBER 31, (a)
---------------------------------------------------
1996E 1997 1998 1999 2000 2001
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable
Qtr 1 $ 28.1 $ 37.6 $ 42.3 $ 47.0 $ 51.9 $ 57.1
Qtr 2 56.4 38.5 43.4 48.1 53.2 58.5
Qtr 3 119.0 106.8 120.2 133.4 147.4 162.2
Qtr 4 73.4 78.6 88.4 98.1 108.4 119.3
Inventory
Qtr 1 $ 68.7 $ 87.0 $ 97.8 $108.6 $120.0 $132.0
Qtr 2 109.1 109.3 123.0 136.5 150.8 165.9
Qtr 3 114.0 101.4 114.1 126.6 139.9 153.9
Qtr 4 68.2 73.5 82.7 91.7 101.4 111.5
Net Working Capital (including cash)
Qtr 1 $ 93.5 $114.1 $128.4 $142.5 $157.4 $173.2
Qtr 2 90.1 111.6 125.6 139.4 154.0 169.4
Qtr 3 119.6 122.5 137.8 153.0 169.0 185.9
Qtr 4 119.3 130.0 146.2 162.3 179.3 197.3
Borrowing Base
(75% of Accounts Receivable + 50% of Inventory
Qtr 1 $ 55.4 $ 71.7 $ 80.6 $ 89.5 $ 98.9 $108.8
Qtr 2 96.9 83.5 94.0 104.3 115.3 126.8
Qtr 3 146.2 130.8 147.2 163.4 180.5 198.6
Qtr 4 89.2 95.7 107.6 119.5 132.0 145.2
Working Capital Revolver Outstanding
Qtr 1 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Qtr 2 56.4 19.5 21.9 24.4 26.9 29.6
Qtr 3 92.2 61.1 68.8 76.3 84.4 92.8
Qtr 4 1.8 2.7 3.0 3.3 3.7 4.0
Interest Expense @ 7.895% 7.500% 7.500% 7.500% 7.500% 7.500%
Qtr 1 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Qtr 2 1.1 0.4 0.4 0.4 0.5 0.5
Qtr 3 1.8 1.1 1.3 1.4 1.5 1.7
Qtr 4 0.0 0.0 0.1 0.1 0.1 0.1
---------------------------------------------------
Total $ 2.9 $ 1.5 $ 1.7 $ 1.9 $ 2.1 $ 2.3
Average Working Capital Revolver Balance $ 37.6 $ 20.8 $ 23.4 $ 26.0 $ 28.7 $ 31.6
Cash Balance
Qtr 1 $ 11.5 $ 1.0
Qtr 2 3.4 1.0
Qtr 3 7.9 1.0
Qtr 4 1.9 1.0
Average Cash Balance $ 6.2
<FN>
- ----------------------
(a) Projections are from SILVER management.
</TABLE>
D-7
<PAGE> 55
PROJECT SILVER
<TABLE>
FINANCIAL RATIOS
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, PROJECTED FISCAL YEAR ENDED DECEMBER 31,(a)
------------------------------------ -----------------------------------------------
1993 1994 1995 1996E 1997 1998 1999 2000 2001
------------------------------------ -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITALIZATION:
- --------------
Senior Debt $ 40.0 $ 40.0 $ 40.0 $ 40.0 $ 96.5 $ 97.3 $ 93.2 $ 85.4 $ 73.2
Other Debt 142.7 142.7 142.7 142.7 100.0 100.0 100.0 100.0 100.0
------------------------------------ -----------------------------------------------
Total Debt 182.7 182.7 182.7 182.7 196.5 197.3 193.2 185.4 173.2
Less: Cash (1.9) (1.9) (1.9) (1.9) (1.9) (1.9) (1.9) (1.9) (1.9)
------------------------------------ -----------------------------------------------
Net Debt 180.8 180.8 180.8 180.8 194.6 195.4 191.2 183.5 171.2
Book Equity + Preferred 0.1 0.1 0.1 0.1 11.9 26.3 43.9 65.0 90.5
Total Capitalization 182.8 182.8 182.8 182.8 208.5 223.6 237.1 250.5 263.6
Working Capital Revolver Committed $ 92.2 $ 92.2 $ 92.2 $ 92.2 $ 61.1 $ 68.8 $ 76.3 $ 84.4 $ 92.8
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGE RATIOS:
- ----------------
Total Interest Expense $ 20.6 20.6 $ 20.6 $ 20.6 $ 20.6 $ 21.3 $ 21.3 $ 21.0 $ 20.4
Net Interest Expense + Pfd. Divs. 27.0 27.0 27.0 27.0 27.0 28.5 29.5 30.3 30.9
EBITDA $ 13.4 $ 14.3 $18.7 $ 32.0 $ 44.2 $ 49.2 $ 54.7 $ 60.5 $ 67.2
vs. Total Interest 0.6x 0.7x 0.9x 1.6x 2.1x 2.3x 2.6x 2.9x 3.3x
vs. Net Interest + Pfd. Divs. 0.5x 0.5x 0.7x 1.2x 1.6x 1.7x 1.9x 2.0x 2.2x
EBITDA - CAPX $ 10.6 $ 11.7 $ 16.0 $ 14.2 $ 23.4 $ 43.7 $ 48.5 $ 53.7 $ 59.8
vs. Total Interest 0.5x 0.6x 0.8x 0.7x 1.1x 2.1x 2.3x 2.6x 2.9x
vs. Net Interest + Pfd. Divs. 0.4x 0.4x 0.6x 0.5x 0.9x 1.5x 1.6x 1.8x 1.9x
EBITDA - Norm. CAPX(b) $ 10.6 $ 11.7 $ 16.0 $ 27.0 $ 39.2 $ 44.2 $ 49.7 $55.5 $ 62.2
vs. Total Interest 0.5x 0.6x 0.8x 1.3x 1.9x 2.1x 2.3x 2.6x 3.0x
vs. Net Interest + Pfd. Divs. 0.4x 0.4x 0.6x 1.0x 1.5x 1.6x 1.7x 1.8x 2.0x
EBIT -- -- -- -- $ 38.8 $ 43.4 $ 48.3 $ 53.5 $ 59.6
vs. Total Interest -- -- -- -- 1.9x 2.0x 2.3x 2.5x 2.9x
vs. Net Interest + Pfd. Divs. -- -- -- -- 1.4x 1.5x 1.6x 1.8x 1.9x
- ------------------------------------------------------------------------------------------------------------------------------------
LEVERAGE RATIOS:
- ----------------
Total Funded Debt/Total Capitalization 100.0% 100.0% 100.0% 100.0% 94.3% 88.2% 81.5% 74.0% 65.7%
Net Funded Debt/Total Capitalization 98.9% 98.9% 98.9% 98.9% 93.3% 87.3% 80.7% 73.3% 64.9%
Total Funded Debt/Equity -- -- -- -- 1645.7% 748.8% 440.1% 285.2% 191.4%
Net Funded Debt/Equity -- -- -- -- 1629.4% 741.4% 435.7% 282.2% 189.3%
Total Funded Debt/EBITDA 13.7x 12.7x 9.8x 5.7x 4.4X 4.0x 3.5x 3.1x 2.6x
Net Funded Debt/EBITDA 13.5x 12.6x 9.7x 5.6x 4.4x 4.0x 3.5x 3.0x 2.5x
Funded Senior Debt/EBITDA 3.0x 2.8x 2.1x 1.2x 2.2x 2.0x 1.7x 1.4x 1.1x
Total Committed Debt/EBITDA 20.6x 19.2x 14.7x 8.6x 5.8x 5.4x 4.9x 4.5x 4.0x
Committed Senior Debt/EBITDA 9.9x 9.2x 7.1x 4.1x 3.6x 3.4x 3.1x 2.8x 2.5x
Cumulative Bank Debt Paydown -- -- -- -- -16.7% -17.6% -12.7% -3.3% 11.5%
<FN>
- ------------------------------------
(a) Projections are from SILVER management.
(b) 1996-2001 adjusted to reflect Normalized CAPX = $5.0 million.
</TABLE>
D-8
<PAGE> 56
PROJECT SILVER
<TABLE>
RETURN ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
PROJECTED FISCAL YEAR ENDED DECEMBER 31, (a)
----------------------------------------------
1996E 1997 1998 1999 2000 2001
------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA $ 32.0 $ 44.2 $ 49.2 $ 54.7 $ 60.5 $ 67.2
Firm Value @ EBITDA Multiple of:
6.0x 192.0 265.4 295.4 327.9 362.8 403.1
7.0x 224.0 309.6 344.7 382.6 423.3 470.3
8.0x 256.0 353.8 393.9 437.2 483.8 537.5
Less: Net Debt (180.8) (194.6) (195.4) (191.2) (183.5) (171.2)
Less: Avg. Wkg. Capital Revolver (37.6) (20.8) (23.4) (26.0) (28.7) (31.6)
Less: PIK Preferred (50.0) (56.5) (63.8) (72.1) (81.5) (92.1)
Equity Value @ EBITDA Multiple of:
6.0x (26.3) (6.6) 12.8 38.5 69.1 108.2
7.0x 5.7 37.7 62.1 93.2 129.6 175.4
8.0x 37.7 81.9 111.3 147.8 190.0 242.6
Initial Equity Investment $ 50.0
Ownership 75.0% 75.0% 75.0% 75.0% 75.0% 75.0%
- ----------------------------------------------------------------------------------------------------------------------
Equity Return @ EBITDA Multiple of:
6.0x #N/A #NUM! -56.2% -16.7% 0.9% 10.2%
7.0x #N/A -43.5% -3.5% 11.8% 18.1% 21.3%
8.0x #N/A 22.9% 29.2% 30.4% 29.9% 29.5%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SENIOR SUB. DEBENTURES RETURNS
Equity Ownership 0.0%
-------
IRR
-------
6.0x #VALUE! (100.0) 11.5 11.5 11.5 11.5 11.5
7.0x #VALUE! (100.0) 11.5 11.5 11.5 11.5 11.5
8.0x #VALUE! (100.0) 11.5 11.5 11.5 11.5 11.5
- ----------------------------------------------------------------------------------------------------------------------
PIK PREFERRED RETURNS
Equity Ownership 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
-------
IRR
-------
6.0x 13.0% (50.0) 0.0 0.0 0.0 0.0 92.1
7.0x 13.0% (50.0) 0.0 0.0 0.0 0.0 92.1
8.0x 13.0% (50.0) 0.0 0.0 0.0 0.0 92.1
-------
- -------------
<FN>
(a) Projections are from SILVER management.
D-9
</TABLE>
<PAGE> 57
- --------------------------------------------------------------------------------
STRATEGIC ACQUIROR PRO FORMA ANALYSES
- --------------------------------------------------------------------------------
<PAGE> 58
<TABLE>
----------
PROJECT SILVER 100% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
AMERICAN GREETINGS ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
American Greetings Stock Price x 19-Oct-96 $29.75
SILVER Stock Price x 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants x $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
American Greetings 1996E P/E Multiple 13.8x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing American Greetings Shares 74.758
Pro Forma American Greetings Shares 74.758
Transaction Expenses $10.0
American Greetings Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
American Greetings Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
AMERICAN SILVER
GREETINGS COMBINED
MAY-96 JUN-96 ADJUSTMENTS MAY-96
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $43.0 $6.2 $0.0 $49.2
Total Debt 464.2 37.6 242.4 744.3
----- ---- -----
Net Debt 421.2 31.4 695.1
Equity 1,251.4 155.5 (155.5) 0.0 1,251.4
Total Capitalization 1,751.6 193.1 1,995.7
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 27.1% 19.5% 37.3%
NET DEBT/TOTAL CAP. 24.6% 16.3% 34.8%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
AMERICAN GREETINGS
Projected American Greetings Standalone EPS $2.15 $2.42 $2.71
Projected American Greetings Standalone Net Income $160.7 $180.9 $202.6
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense@ 7.0% (17.0) (17.0) (17.0)
--------------------------
Total Pre-Tax Acquisition Adjustments ($19.3) ($19.3) ($19.3)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense x 7.0% (10.4) (10.4) (10.4)
--------------------------
Total After-Tax Acquisition Adjustments ($12.7) ($12.7) ($12.7)
PRO FORMA EPS CALCULATION
Projected American Greetings Standalone Net Income $160.7 $180.9 $202.6
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (12.7) (12.7) (12.7)
--------------------------
Pro Forma Combined Net Income $164.3 $192.9 $217.6
Pro Forma Combined Shares Outstanding 74.758 74.758 74.758
Pro Forma EPS $2.20 $2.58 $2.91
Projected American Greetings Standalone EPS $2.15 $2.42 $2.71
- ---------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.05 $0.16 $0.20
% PICK-UP (DILUTION) 2.2% 6.6% 7.4%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($5.8) ($19.6) ($24.6)
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
0% $26.25 2.2% 6.6% 7.4%
10% 28.88 1.2% 5.7% 6.6%
20% 31.50 0.2% 4.8% 5.8%
30% 34.13 (0.8%) 4.0% 5.0%
40% 36.75 (1.8%) 3.1% 4.2%
50% 39.38 (2.8%) 2.2% 3.4%
60% 42.00 (3.8%) 1.3% 2.7%
70% 44.63 (4.8%) 0.4% 1.9%
80% 47.25 (5.8%) (0.5%) 1.1%
90% 49.88 (6.8%) (1.4%) 0.3%
100% 52.50 (7.8%) (2.2%) (0.5%)
- --------------------------------------------------------------------------------
</TABLE>
E-1
<PAGE> 59
PROJECT SILVER 0% CASH
PRO FORMA ACQUISITION ANALYSIS 100% STOCK POOLING
- -------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AMERICAN GREETINGS ACQUIRES SILVER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
KEY ASSUMPTIONS
- -------------------------------------------------------------------------------
<S> <C> <C>
American Greetings Stock Price @ 19-Oct-96 $ 29.75
SILVER Stock Price @ 19-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
American Greetings 1996E P/E Multiple 13.8x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill - Incl. Transaction Exp. $0.0
Goodwill Amortization Period 40
Exchange Ratio 0.882
Existing American Greetings Shares 74.758
Pro Forma American Greetings Shares 82.571
Transaction Expenses $ 10.0
American Greetings Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
American Greetings Ownership of New Entity 90.5%
SILVER Ownership of New Entity 9.5%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -------------------------------------------------------------------------------
AMERICAN
GREETINGS SILVER COMBINED
MAY-96 JUN-96 ADJUSTMENTS MAY-96
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 43.0 $ 6.2 ($10.0) $ 39.2
Total Debt 464.2 37.6 0.0 501.8
-------- ------ --------
Net Debt 421.2 31.4 462.6
Equity 1,251.4 155.5 0.0 (10.0) 1,396.9
Total Capitalization 1,715.6 193.1 1,898.7
- -------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 27.1% 19.5% 26.4%
NET DEBT/TOTAL CAP. 24.6% 16.3% 24.4%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
DILUTION ANALYSIS
- -------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
AMERICAN GREETINGS
Projected American Greetings Standalone EPS $ 2.15 $ 2.42 $ 2.71
Projected American Greetings Standalone Net Income $160.7 $180.9 $202.6
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
------------------------
Total Pre-Tax Acquisition Adjustments $ 0.0 $ 0.0 $ 0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
------------------------
Total After-Tax Acquisition Adjustments $ 0.0 $ 0.0 $ 0.0
PRO FORMA EPS CALCULATION
Projected American Greetings Standalone Net Income $160.7 $180.9 $202.6
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Aqcuisition Adjustments 0.0 0.0 0.0
------------------------
Pro Forma Combined Net Income $177.0 $205.6 $230.3
Pro Forma Combined Shares Outstanding 82.571 82.571 82.571
Pro Forma EPS $ 2.14 $ 2.49 $ 2.79
Projected American Greetings Standalone EPS $ 2.15 $ 2.42 $ 2.71
- -------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $(0.01) $ 0.07 $ 0.08
% PICK-UP (DILUTION) (0.3%) 2.9% 2.9%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN $ 0.9 ($9.4) ($10.7)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 (0.3%) 2.9% 2.9%
10% 28.88 (1.3%) 1.9% 1.9%
20% 31.50 (2.2%) 0.9% 1.0%
30% 34.13 (3.1%) (0.0%) 0.0%
40% 36.75 (4.0%) (0.9%) (0.9%)
50% 39.38 (4.9%) (1.9%) (1.8%)
60% 42.00 (5.8%) (2.8%) (2.7%)
70% 44.63 (6.6%) (3.6%) (3.6%)
80% 47.25 (7.5%) (4.5%) (4.5%)
90% 49.88 (8.3%) (5.3%) (5.3%)
100% 52.50 (9.1%) (6.2%) (6.1%)
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 60
-----------
PROJECT SILVER 100% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CSS INDUSTRIES INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
CSS Industries Inc Stock Price @ 20-Oct-96 $ 23.25
SILVER Stock Price @ 20-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
CSS Industries Inc 1996E P/E Multiple 13.8x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill - Incl. Transaction Exp. $ 93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing CSS Industries Inc Shares 10.722
Pro Forma CSS Industries Inc Shares 10.722
Transaction Expenses $ 10.0
CSS Industries Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
CSS Industries Inc Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- --------------------------------------------------------------------------------
CSS INDUSTRIES
INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 3.4 $ 6.2 $ 0.0 $ 9.6
Total Debt 21.5 37.6 242.4 301.6
------ ------ ------
Net Debt 18.2 31.4 292.0
Equity 149.9 155.5 (155.5) 0.0 149.9
Total Capitalization 171.4 193.1 451.4
- --------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 12.6% 19.5% 66.8%
NET DEBT/NET CAP. 10.6% 16.3% 64.7%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DILUTION ANALYSIS
- --------------------------------------------------------------------------------
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
CSS INDUSTRIES INC
Projected CSS Industries Inc Standalone EPS $ 1.69 $ 2.03 $ 2.23
Projected CSS Industries Inc Standalone Net Income $ 18.1 $ 21.8 $ 23.9
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% (21.8) (21.8) (21.8)
------------------------
Total Pre-Tax Acquisition Adjustments ($24.1) ($24.1) ($24.1)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% (13.3) (13.3) (13.3)
------------------------
Total After-Tax Acquisition Adjustments ($15.6) ($15.6) ($15.6)
PRO FORMA EPS CALCULATION
Projected CSS Industries Inc Standalone Net Income $ 18.1 $ 21.8 $ 23.9
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Aqcuisition Adjustments (15.6) (15.6) (15.6)
-------------------------
Pro Forma Combined Net Income $ 18.7 $ 30.8 $ 36.0
Pro Forma Combined Shares Outstanding 10.722 10.722 10.722
Pro Forma EPS $ 1.75 $ 2.87 $ 3.36
Projected CSS Industries Inc Standalone EPS $ 1.69 $ 2.03 $ 2.23
- --------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $ 0.06 $ 0.84 $ 1.12
% PICK-UP (DILUTION) 3.3% 41.4% 50.3%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($ 1.0) ($ 14.8) ($19.7)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 3.3% 41.4% 50.3%
10% 28.88 (7.2%) 32.7% 42.4%
20% 31.50 (17.6%) 24.0% 34.5%
30% 34.13 (28.0%) 15.3% 26.6%
40% 36.75 (38.5%) 6.6% 18.7%
50% 39.38 (48.9%) (2.1%) 10.8%
60% 42.00 (59.3%) (10.7%) 2.9%
70% 44.63 (69.8%) (19.4%) (5.0%)
80% 47.25 (80.2%) (28.1%) (12.9%)
90% 49.88 (90.7%) (36.8%) (20.8%)
100% 52.50 (101.1%) (45.5%) (28.7%)
- --------------------------------------------------------------------------------
</TABLE>
E-3
<PAGE> 61
<TABLE>
-----------
PROJECT SILVER 0% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 100% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
CSS INDUSTRIES INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
CSS Industries Inc Stock Price @ 20-Oct-96 $23.25
SILVER Stock Price @ 20-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
CSS Industries Inc 1996E P/E Multiple 13.8x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $0.0
Goodwill Amortization Period 40
Exchange Ratio 1.129
Existing CSS Industries Inc Shares 10.722
Pro Forma CSS Industries Inc Shares 20.719
Transaction Expenses $10.0
CSS Industries Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
CSS Industries Inc Ownership of New Entity 51.7%
SILVER Ownership of New Entity 48.3%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
CSS INDUSTRIES INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $3.4 $6.2 ($10.0) ($0.4)
Total Debt 21.5 37.6 0.0 59.1
----- ---- -----
Net Debt 18.2 31.4 59.6
Equity 149.9 155.5 0.0 (10.0) 295.4
Total Capitalization 171.4 193.1 354.5
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 12.6% 19.5% 16.7%
NET DEBT/TOTAL CAP. 10.6% 16.3% 16.8%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
CSS INDUSTRIES INC
Projected CSS Industries Inc Standalone EPS $1.69 $2.03 $2.23
Projected CSS Industries Inc Standalone Net Income $18.1 $21.8 $23.9
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense@ 9.0% 0.0 0.0 0.0
--------------------------
Total Pre-Tax Acquisition Adjustments $0.0 $0.0 $0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% 0.0 0.0 0.0
--------------------------
Total After-Tax Acquisition Adjustments $0.0 $0.0 $0.0
PRO FORMA EPS CALCULATION
Projected CSS Industries Inc Standalone Net Income $18.1 $21.8 $23.9
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
--------------------------
Pro Forma Combined Net Income $34.3 $46.4 $51.6
Pro Forma Combined Shares Outstanding 20.719 20.719 20.719
Pro Forma EPS $1.66 $2.24 $2.49
Projected CSS Industries Inc Standalone EPS $1.69 $2.03 $2.23
- ---------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) ($0.03) $0.21 $0.26
% PICK-UP (DILUTION) (1.9%) 10.3% 11.6%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN $1.1 ($7.1) ($8.8)
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
0% $26.25 (1.9%) 10.3% 11.6%
10% 28.88 (6.5%) 5.2% 6.3%
20% 31.50 (10.7%) 0.5% 1.6%
30% 34.13 (14.5%) (3.8%) (2.8%)
40% 36.75 (18.0%) (7.8%) (6.8%)
50% 39.38 (21.3%) (11.4%) (10.4%)
60% 42.00 (24.2%) (14.8%) (13.8%)
70% 44.63 (27.0%) (17.9%) (17.0%)
80% 47.25 (29.6%) (20.8%) (19.9%)
90% 49.88 (32.0%) (23.5%) (22.6%)
100% 52.50 (34.2%) (26.0%) (25.2%)
- --------------------------------------------------------------------------------
</TABLE>
E-4
<PAGE> 62
-----------
PROJECT SILVER 100% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEPARTMENT 56, INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Department 56, Inc Stock Price @ 19-Oct-96 $ 25.25
SILVER Stock Price @ 19-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
Department 56, Inc 1996E P/E Multiple 11.7x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $ 93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing Department 56, Inc Shares 21.550
Pro Forma Department 56, Inc Shares 21.550
Transaction Expenses $ 10.0
Department 56, Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Department 56, Inc Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- --------------------------------------------------------------------------------
<CAPTION>
DEPARTMENT 56, INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 2.8 $ 6.2 $ 0.0 $ 9.0
Total Debt 106.9 37.6 242.4 386.9
------ ------ ------
Net Debt 104.1 31.4 377.9
Equity 179.9 155.5 (155.5) 0.0 179.9
Total Capitalization 286.8 193.1 566.8
- --------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 37.3% 19.5% 68.3%
NET DEBT/TOTAL CAP. 36.3% 16.3% 66.7%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
DILUTION ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
DEPARTMENT 56, INC
Projected Department 56, Inc Standalone EPS $ 2.16 $ 2.45 $ 2.77
Projected Department 56, Inc Standalone Net Income $ 46.5 $ 52.8 $ 59.7
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($ 2.3) ($ 2.3) ($ 2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% (21.8) (21.8) (21.8)
-------------------------
Total Pre-Tax Acquisition Adjustments $(24.1) $(24.1) $(24.1)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($ 2.3) ($ 2.3) ($ 2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% (13.3) (13.3) (13.3)
-------------------------
Total After-Tax Acquisition Adjustments ($15.6) ($15.6) ($15.6)
PRO FORMA EPS CALCULATION
Projected Department 56, Inc Standalone Net Income $ 46.5 $ 52.8 $ 59.7
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (15.6) (15.6) (15.6)
-------------------------
Pro Forma Combined Net Income $ 47.1 $ 61.8 $ 71.7
Pro Forma Combined Shares Outstanding 21.550 21.550 21.550
Pro Forma EPS $ 2.19 $ 2.87 $ 3.33
Projected Department 56, Inc Standalone EPS $ 2.16 $ 2.45 $ 2.77
- --------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $ 0.03 $ 0.42 $ 0.56
% PICK-UP (DILUTION) 1.3% 17.1% 20.2%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($ 1.0) ($14.8) ($19.7)
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 1.3% 17.1% 20.2%
10% 28.88 (2.8%) 13.5% 17.0%
20% 31.50 (6.9%) 9.9% 13.8%
30% 34.13 (10.9%) 6.3% 10.7%
40% 36.75 (15.0%) 2.7% 7.5%
50% 39.38 (19.0%) (0.8%) 4.3%
60% 42.00 (23.1%) (4.4%) 1.2%
70% 44.63 (27.2%) (8.0%) (2.0%)
80% 47.25 (31.2%) (11.6%) (5.2%)
90% 49.88 (35.3%) (15.2%) (8.3%)
100% 52.50 (39.3%) (18.8%) (11.5%)
- --------------------------------------------------------------------------------
</TABLE>
E-5
<PAGE> 63
-----------
PROJECT SILVER 0% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 100% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEPARTMENT 56, INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Department 56, Inc Stock Price @ 19-Oct-96 $ 25.25
SILVER Stock Price @ 19-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
Department 56, Inc 1996E P/E Multiple 11.7x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $ 0.0
Goodwill Amortization Period 40
Exchange Ratio 1.040
Existing Department 56, Inc Shares 21.550
Pro Forma Department 56, Inc Shares 30.755
Transaction Expenses $ 10.0
Department 56, Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Department 56, Inc Ownership of New Entity 70.1%
SILVER Ownership of New Entity 29.9%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- --------------------------------------------------------------------------------
<CAPTION>
DEPARTMENT 56, INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 2.8 $ 6.2 $(10.0) $ (1.0)
Total Debt 106.9 37.6 0.0 144.5
------ ------ ------
Net Debt 104.1 31.4 145.5
Equity 179.9 155.5 0.0 (10.0) 325.3
Total Capitalization 286.8 193.1 469.9
- --------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 37.3% 19.5% 30.8%
NET DEBT/TOTAL CAP. 36.3% 16.3% 31.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
DILUTION ANALYSIS
- -------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
DEPARTMENT 56, INC
Projected Department 56, Inc Standalone EPS $ 2.16 $ 2.45 $ 2.77
Projected Department 56, Inc Standalone Net Income $ 46.5 $ 52.8 $ 59.7
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% 0.0 0.0 0.0
------------------------
Total Pre-Tax Acquisition Adjustments $ 0.0 $ 0.0 $ 0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% 0.0 0.0 0.0
------------------------
Total After-Tax Acquisition Adjustments $ 0.0 0.0 0.0
PRO FORMA EPS CALCULATION
Projected Department 56, Inc Standalone Net Income $ 46.5 $ 52.8 $ 59.7
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
-------------------------
Pro Forma Combined Net Income $ 62.8 $ 77.4 $ 87.3
Pro Forma Combined Shares Outstanding 30.755 30.755 30.755
Pro Forma EPS $ 2.04 $ 2.52 $ 2.84
Projected Department 56, Inc Standalone EPS $ 2.16 $ 2.45 $ 2.77
- --------------------------------------------------------------------------------
$ PICK-UP (DILUTION) ($0.12) $ 0.07 $ 0.07
% PICK-UP (DILUTION) (5.5%) 2.8% 2.6%
PROJECTED PRO-TAX SYNERGIES REQUIRED
TO BREAK-EVEN $ 6.0 ($ 3.4) ($ 3.6)
- --------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 (5.5%) 2.8% 2.6%
10% 28.88 (8.3%) (0.3%) (0.5%)
20% 31.50 (10.9%) (3.1%) (3.3%)
30% 34.13 (13.4%) (5.8%) (6.0%)
40% 36.75 (15.8%) (8.4%) (8.6%)
50% 39.38 (18.0%) (10.8%) (11.0%)
60% 42.00 (20.1%) (13.1%) (13.3%)
70% 44.63 (22.1%) (15.3%) (15.5%)
80% 47.25 (24.0%) (17.4%) (17.5%)
90% 49.88 (25.8%) (19.3%) (19.5%)
100% 52.50 (27.6%) (21.2%) (21.4%)
- -------------------------------------------------------------------------------
</TABLE>
E-6
<PAGE> 64
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
NEWELL CO ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Newell Co Stock Price @ 19-Oct-96 $30.50
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Newell Co 1996E P/E Multiple 18.7x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing Newell Co Shares 158.784
Pro Forma Newell Co Shares 158.784
Transaction Expenses $10.0
Newell Co Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Newell Co Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
NEWELL CO SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $45.5 $6.2 $0.0 $51.7
Total Debt 985.1 37.6 242.4 1,265.2
----- ---- -----
Net Debt 939.6 31.4 1,213.5
Equity 1,354.3 155.5 (155.5) 0.0 1,354.3
Total Capitalization 2,339.4 193.1 2,619.5
- ----------------------------------------------------------------------------------------------
Total Debt/Total Cap. 42.1% 19.5% 48.3%
Net Debt/Total Cap. 40.2% 16.3% 46.3%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
NEWELL CO
Projected Newell Co Standalone EPS $1.63 $1.88 $2.16
Projected Newell Co Standalone Net Income $258.8 $298.5 $343.3
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (17.0) (17.0) (17.0)
--------------------------
Total Pre-Tax Acquisition Adjustments ($19.3) ($19.3) ($19.3)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (10.4) (10.4) (10.4)
--------------------------
Total After-Tax Acquisition Adjustments ($12.7) ($12.7) ($12.7)
PRO FORMA EPS CALCULATION
Projected Newell Co Standalone Net Income $258.8 $298.5 $343.3
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (12.7) (12.7) (12.7)
--------------------------
Pro Forma Combined Net Income $262.4 $310.5 $358.3
Pro Forma Combined Shares Outstanding 158.784 158.784 158.784
Pro Forma EPS $1.65 $1.96 $2.26
Projected Newell Co Standalone EPS $1.63 $1.88 $2.16
- ---------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.02 $0.08 $0.09
% PICK-UP (DILUTION) 1.4% 4.0% 4.4%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($5.8) ($19.6) ($24.6)
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
0% $26.25 1.4% 4.0% 4.4%
10% 28.88 0.8% 3.5% 3.9%
20% 31.50 0.1% 2.9% 3.4%
30% 34.13 (0.5%) 2.4% 3.0%
40% 36.75 (1.1%) 1.9% 2.5%
50% 39.38 (1.7%) 1.3% 2.0%
60% 42.00 (2.3%) 0.8% 1.6%
70% 44.63 (3.0%) 0.3% 1.1%
80% 47.25 (3.6%) (0.3%) 0.6%
90% 49.88 (4.2%) (0.8%) 0.2%
100% 52.50 (4.8%) (1.4%) (0.3%)
- --------------------------------------------------------------------------------
</TABLE>
E-7
<PAGE> 65
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
- --------------------------------------------------------------------------------
NEWELL CO ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Newell Co Stock Price @ 19-Oct-96 $30.50
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Newell Co 1996E P/E Multiple 18.7x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $0.0
Goodwill Amortization Period 40
Exchange Ratio 0.861
Existing Newell Co Shares 158.784
Pro Forma Newell Co Shares 166.405
Transaction Expenses $10.0
Newell Co Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Newell Co Ownership of New Entity 95.4%
SILVER Ownership of New Entity 4.6%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
NEWELL CO SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $45.5 $6.2 ($10.0) $41.7
Total Debt 985.1 37.6 0.0 1,022.7
----- ---- -------
Net Debt 939.6 31.4 981.0
Equity 1,354.3 155.5 0.0 (10.0) 1,499.8
Total Capitalization 2,339.4 193.1 2,522.5
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 42.1% 19.5% 40.5%
NET DEBT/TOTAL CAP. 40.2% 16.3% 38.9%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
NEWELL CO
Projected Newell Co Standalone EPS $1.63 $1.88 $2.16
Projected Newell Co Standalone Net Income $258.8 $298.5 $343.3
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
--------------------------
Total Pre-Tax Acquisition Adjustments $0.0 $0.0 $0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
--------------------------
Total After-Tax Acquisition Adjustments $0.0 $0.0 $0.0
PRO FORMA EPS CALCULATION
Projected Newell Co Standalone Net Income $258.8 $298.5 $343.3
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
--------------------------
Pro Forma Combined Net Income $275.0 $323.2 $371.0
Pro Forma Combined Shares Outstanding 166.405 166.405 166.405
Pro Forma EPS $1.65 $1.94 $2.23
Projected Newell Co Standalone EPS $1.63 $1.88 $2.16
- ---------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.02 $0.68 $0.07
% PICK-UP (DILUTION) 1.4% 3.3% 3.1%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($6.2) ($16.9) ($18.4)
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 1.4% 3.3% 3.1%
10% 28.88 0.9% 2.8% 2.6%
20% 31.50 0.5% 2.3% 2.2%
30% 34.13 0.0%) 1.9% 1.7%
40% 36.75 (0.5%) 1.4% 1.2%
50% 39.38 (0.9%) 0.9% 0.8%
60% 42.00 (1.4%) 0.5% 0.3%
70% 44.63 (1.8%) 0.0% (0.1%)
80% 47.25 (2.2%) (0.4%) (0.6%)
90% 49.88 (2.7%) (0.9%) (1.0%)
100% 52.50 (3.1%) (1.3%) (1.5%)
- --------------------------------------------------------------------------------
</TABLE>
E-8
<PAGE> 66
-----------
PROJECT SILVER 100% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
- --------------------------------------------------------------------------------
RUBBERMAID INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Rubbermaid Inc Stock Price @ 20-Oct-96 $ 24.00
SILVER Stock Price @ 20-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
Rubbermaid Inc 1996E P/E Multiple 22.4x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $ 93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing Rubbermaid Inc Shares 149.768
Pro Forma Rubbermaid Inc Shares 149.768
Transaction Expenses $ 10.0
Rubbermaid Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Rubbermaid Inc Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- --------------------------------------------------------------------------------
<CAPTION>
RUBBERMAID INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 33.0 $ 6.2 $ 0.0 $ 39.2
Total Debt 259.4 37.6 242.4 539.5
------- ------ -------
Net Debt 226.4 31.4 500.2
Equity 973.5 155.5 (155.5) 0.0 973.5
Total Capitalization 1,232.9 193.1 1,513.0
- -----------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 21.0% 19.5% 35.7%
NET DEBT/TOTAL CAP. 18.4% 16.3% 33.1%
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
DILUTION ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
RUBBERMAID INC
Projected Rubbermaid Inc Standalone EPS $ 1.07 $ 1.31 $ 1.48
Projected Rubbermaid Inc Standalone Net Income $ 160.3 $ 196.2 $ 221.7
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ (2.3) $ (2.3) $ (2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (17.0) (17.0) (17.0)
-------------------------
Total Pre-Tax Acquisition Adjustments ($19.3) ($19.3) ($19.3)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (10.4) (10.4) (10.4)
-------------------------
Total After-Tax Acquisition Adjustments ($12.7) ($12.7) ($12.7)
PRO FORMA EPS CALCULATION
Projected Rubbermaid Inc Standalone Net Income $ 160.3 $ 196.2 $ 221.7
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (12.7) (12.7) (12.7)
-------------------------
Pro Forma Combined Net Income $ 163.8 $ 208.2 $ 236.7
Pro Forma Combined Shares Outstanding 149.768 149.768 149.768
Pro Forma EPS $ 1.09 $ 1.39 $ 1.58
Projected Rubbermaid Inc Standalone EPS $ 1.07 $ 1.31 $ 1.48
- --------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $ 0.02 $ 0.08 $ 0.10
% PICK-UP (DILUTION) 2.2% 6.1% 6.8%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($5.8) ($19.6) ($24.6)
- --------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 2.2% 6.1% 6.8%
10% 28.88 1.2% 5.3% 6.0%
20% 31.50 0.2% 4.5% 5.3%
30% 34.13 (0.8%) 3.6% 4.6%
40% 36.75 (1.8%) 2.8% 3.9%
50% 39.38 (2.8%) 2.0% 3.2%
60% 42.00 (3.8%) 1.2% 2.4%
70% 44.63 (4.8%) 0.4% 1.7%
80% 47.25 (5.8%) (0.4%) 1.0%
90% 49.88 (6.8%) (1.3%) 0.3%
100% 52.50 (7.8%) (2.1%) (0.5%)
- -------------------------------------------------------------------------------
</TABLE>
E-9
<PAGE> 67
-----------
PROJECT SILVER 0% CASH ---------
PRO FORMA ACQUISITION ANALYSIS 100% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<TABLE>
- --------------------------------------------------------------------------------
RUBBERMAID INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Rubbermaid Inc Stock Price @ 20-Oct-96 $ 24.00
SILVER Stock Price @ 20-Oct-96 $ 26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
-------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $ 26.25
-------
Offer Value $ 236.6
Plus: Existing Net Debt $ 31.4
Less: Option & Warrant Proceeds (4.2)
-------
Transaction Value $ 263.8
=======
Rubbermaid Inc 1996E P/E Multiple 22.4x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $ 149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill- Incl. Transaction Exp. $ 0.0
Goodwill Amortization Period 40
Exchange Ratio 1.094
Existing Rubbermaid Inc Shares 149.768
Pro Forma Rubbermaid Inc Shares 159.453
Transaction Expenses $ 10.0
Rubbermaid Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Rubbermaid Inc Ownership of New Entity 93.9%
SILVER Ownership of New Entity 6.1%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- --------------------------------------------------------------------------------
<CAPTION>
RUBBERMAID INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 33.0 $ 6.2 $(10.0) $ 29.2
Total Debt 259.4 37.6 0.0 297.0
------- ------ ------ -------
Net Debt 226.4 31.4 267.8
Equity 973.5 155.5 0.0 (10.0) 1,119.0
Total Capitalization 1,232.9 193.1 1,416.0
- -----------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 21.0% 19.5% 21.0%
NET DEBT/TOTAL CAP. 18.4% 16.3% 18.9%
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
DILUTION ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C>
RUBBERMAID INC
Projected Rubbermaid Inc Standalone EPS $ 1.07 $ 1.31 $ 1.48
Projected Rubbermaid Inc Standalone Net Income $ 160.3 $ 196.2 $ 221.7
SILVER
Projected SILVER EPS $ 1.87 $ 2.84 $ 3.19
Projected SILVER Standalone Net Income $ 16.2 $ 24.6 $ 27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
------------------------
Total Pre-Tax Acquisition Adjustments $ 0.0 $ 0.0 $ 0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $ 0.0 $ 0.0 $ 0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
------------------------
Total After-Tax Acquisition Adjustments $ 0.0 0.0 0.0
PRO FORMA EPS CALCULATION
Projected Rubbermaid Inc Standalone Net Income $ 160.3 $ 196.2 $ 221.7
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
-------------------------
Pro Forma Combined Net Income $ 176.5 $ 220.8 $ 249.4
Pro Forma Combined Shares Outstanding 159.453 159.453 159.453
Pro Forma EPS $ 1.11 $ 1.38 $ 1.56
Projected Rubbermaid Inc Standalone EPS $ 1.07 $ 1.31 $ 1.48
- --------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $ 0.04 $ 0.07 $ 0.08
% PICK-UP (DILUTION) 3.4% 5.7% 5.7%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($9.6) ($19.6) ($21.9)
- --------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 3.4% 5.7% 5.7%
10% 28.88 2.8% 5.1% 5.0%
20% 31.50 2.2% 4.4% 4.4%
30% 34.13 1.6% 3.8% 3.7%
40% 36.75 0.9% 3.2% 3.1%
50% 39.38 0.3%) 2.6% 2.5%
60% 42.00 (0.3%) 1.9% 1.9%
70% 44.63 (0.9%) 1.3% 1.3%
80% 47.25 (1.4%) 0.7% 0.7%
90% 49.88 (2.0%) 0.1% 0.1%
100% 52.50 (2.6%) (0.4%) (0.5%)
- -------------------------------------------------------------------------------
</TABLE>
E-10
<PAGE> 68
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
- --------------------------------------------------------------------------------
STANHOME INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Stanhome Inc Stock Price @ 19-Oct-96 $27.63
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Stanhome Inc 1996E P/E Multiple 12.2x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing Stanhome Inc Shares 17.898
Pro Forma Stanhome Inc Shares 17.898
Transaction Expenses $10.0
Stanhome Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Stanhome Inc Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
STANHOME
INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $20.5 $6.2 $0.0 $26.7
Total Debt 126.0 37.6 242.4 406.0
----- ---- -----
Net Debt 105.5 31.4 379.3
Equity 257.8 155.5 (155.5) 0.0 257.8
Total Capitalization 383.7 193.1 663.8
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 32.8% 19.5% 61.2%
NET DEBT/TOTAL CAP. 27.5% 16.3% 57.1%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
STANHOME INC
Projected Stanhome Inc Standalone EPS $2.26 $2.67 $3.04
Projected Stanhome Inc Standalone Net Income $40.5 $47.8 $54.5
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (21.8) (21.8) (21.8)
--------------------------
Total Pre-Tax Acquisition Adjustments ($24.1) ($24.1) ($24.1)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (13.3) (13.3) (13.3)
--------------------------
Total After-Tax Acquisition Adjustments ($15.6) ($15.6) ($15.6)
PRO FORMA EPS CALCULATION
Projected Stanhome Inc Standalone Net Income $40.5 $47.8 $54.5
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (15.6) (15.6) (15.6)
--------------------------
Pro Forma Combined Net Income $41.0 $56.8 $66.5
Pro Forma Combined Shares Outstanding 17.898 17.898 17.898
Pro Forma EPS $2.29 $3.17 $3.72
Projected Stanhome Inc Standalone EPS $2.26 $2.67 $3.04
- -------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.03 $0.50 $0.67
% PICK-UP (DILUTION) 1.5% 18.8% 22.1%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($1.0) ($14.8) ($19.7)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 1.5% 18.8% 22.1%
10% 28.88 (3.2%) 14.9% 18.6%
20% 31.50 (7.9%) 10.9% 15.2%
30% 34.13 (12.6%) 7.0% 11.7%
40% 36.75 (17.2%) 3.0% 8.2%
50% 39.38 (21.9%) 0.9% 4.8%
60% 42.00 (26.6%) (4.9%) 1.3%
70% 44.63 (31.3%) (8.8%) (2.2%)
80% 47.25 (35.9%) (12.8%) (5.7%)
90% 49.88 (40.6%) (16.8%) (9.1%)
100% 52.50 (45.3%) (20.7%) (12.6%)
- --------------------------------------------------------------------------------
</TABLE>
E-11
<PAGE> 69
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
STANHOME INC ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Stanhome Inc Stock Price @ 19-Oct-96 $27.63
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Stanhome Inc 1996E P/E Multiple 12.2x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up(0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $0.0
Goodwill Amortization Period 40
Exchange Ratio 0.950
Existing Stanhome Inc Shares 17.898
Pro Forma Stanhome Inc Shares 26.312
Transaction Expenses $10.0
Stanhome Inc Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Stanhome Inc Ownership of New Entity 68.0%
SILVER Ownership of New Entity 32.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
STANHOME
INC SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $20.5 $6.2 ($10.0) $16.7
Total Debt 126.0 37.6 0.0 163.6
----- ---- -----
Net Debt 105.5 31.4 146.9
Equity 257.8 155.5 0.0 (10.0) 403.3
Total Capitalization 383.7 193.1 566.8
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 32.8% 19.5% 28.9%
NET DEBT/TOTAL CAP. 27.5% 16.3% 25.9%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
STANHOME INC
Projected Stanhome Inc Standalone EPS $2.26 $2.67 $3.04
Projected Stanhome Inc Standalone Net Income $40.5 $47.8 $54.5
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% 0.0 0.0 0.0
--------------------------
Total Pre-Tax Acquisition Adjustments $0.0 $0.0 $0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 9.0% 0.0 0.0 0.0
--------------------------
Total After-Tax Acquisition Adjustments $0.0 $0.0 $0.0
PRO FORMA EPS CALCULATION
Projected Stanhome Inc Standalone Net Income $40.5 $47.8 $54.5
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
--------------------------
Pro Forma Combined Net Income $56.7 $72.4 $82.2
Pro Forma Combined Shares Outstanding 26.312 26.312 26.312
Pro Forma EPS $2.15 $2.75 $3.12
Projected Stanhome Inc Standalone EPS $2.26 $2.67 $3.04
- -------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) ($0.11) $0.08 $0.08
% PICK-UP (DILUTION) (4.7%) 3.1% 2.6%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN $4.6 ($3.6) ($3.4)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 (4.7%) 3.1% 2.6%
10% 28.88 (7.7%) (0.2%) (0.7%)
20% 31.50 (10.5%) (3.2%) (3.7%)
30% 34.13 (13.2%) (6.1%) (6.5%)
40% 36.75 (15.7%) (8.8%) (9.2%)
50% 39.38 (18.0%) (11.3%) (11.8%)
60% 42.00 (20.3%) (13.8%) (14.2%)
70% 44.63 (22.4%) (16.0%) (16.5%)
80% 47.25 (24.4%) (18.2%) (18.6%)
90% 49.88 (26.3%) (20.3%) (20.7%)
100% 52.50 (28.1%) (22.2%) (22.6%)
- --------------------------------------------------------------------------------
</TABLE>
E-12
<PAGE> 70
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK PURCHASE
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
TUPPERWARE CORP ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Tupperware Corp Stock Price @ 19-Oct-96 $46.88
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total Fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Tupperware Corp 1996E P/E Multiple 17.2x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $93.0
Goodwill Amortization Period 40
Exchange Ratio 0.000
Existing Tupperware Corp Shares 62.142
Pro Forma Tupperware Corp Shares 62.142
Transaction Expenses $10.0
Tupperware Corp Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Tupperware Corp Ownership of New Entity 100.0%
SILVER Ownership of New Entity 0.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
TUPPERWARE CORP SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $94.2 $6.2 $0.0 $100.4
Total Debt 287.1 37.6 242.4 567.1
----- ---- -----
Net Debt 192.9 31.4 466.7
Equity 245.0 155.5 (155.5) 0.0 245.0
Total Capitalization 532.1 193.1 812.1
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 54.0% 19.5% 69.8%
NET DEBT/TOTAL CAP. 36.3% 16.3% 57.5%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
TUPPERWARE CORP
Projected Tupperware Corp Standalone EPS $2.72 $3.09 $3.52
Projected Tupperware Corp Standalone Net Income $169.0 $192.0 $218.9
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (17.0) (17.0) (17.0)
--------------------------
Total Pre-Tax Acquisition Adjustments ($19.3) ($19.3) ($19.3)
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill ($2.3) ($2.3) ($2.3)
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% (10.4) (10.4) (10.4)
--------------------------
Total After-Tax Acquisition Adjustments ($12.7) ($12.7) ($12.7)
PRO FORMA EPS CALCULATION
Projected Tupperware Corp Standalone Net Income $169.0 $192.0 $218.9
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments (12.7) (12.7) (12.7)
--------------------------
Pro Forma Combined Net Income $172.6 $204.0 $233.9
Pro Forma Combined Shares Outstanding 62.142 62.142 62.142
Pro Forma EPS $2.78 $3.28 $3.76
Projected Tupperware Corp Standalone EPS $2.72 $3.09 $3.52
- -------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.06 $0.19 $0.24
% PICK-UP (DILUTION) 2.1% 6.2% 6.9%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($5.8) ($19.6) ($24.6)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 2.1% 6.2% 6.9%
10% 28.88 1.2% 5.4% 6.1%
20% 31.50 0.2% 4.6% 5.4%
30% 34.13 (0.7%) 3.7% 4.7%
40% 36.75 (1.7%) 2.9% 3.9%
50% 39.38 (2.6%) 2.1% 3.2%
60% 42.00 (3.6%) (1.2%) 2.5%
70% 44.63 (4.5%) 0.4% 1.7%
80% 47.25 (5.5%) (0.4%) 1.0%
90% 49.88 (6.4%) (1.3%) 0.3%
100% 52.50 (7.4%) (2.1%) (0.5%)
- --------------------------------------------------------------------------------
</TABLE>
E-13
<PAGE> 71
<TABLE>
-----------
PROJECT SILVER 100% CASH ------------
PRO FORMA ACQUISITION ANALYSIS 0% STOCK POOLING
- --------------------------------------------------------------------------------
(dollars in millions, except per share)
<CAPTION>
- --------------------------------------------------------------------------------
TUPPERWARE CORP ACQUIRES SILVER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Tupperware Corp Stock Price @ 19-Oct-96 $46.88
SILVER Stock Price @ 19-Oct-96 $26.25
SILVER Shares Outstanding 8.676
Options and Warrants @ $12.38 0.338
------
Total fully-Diluted Shares 9.014
Offer Price Per Share $26.25
------
Offer Value $236.6
Plus: Existing Net Debt $31.4
Less: Option & Warrant Proceeds (4.2)
------
Transaction Value $263.8
======
Tupperware Corp 1996E P/E Multiple 17.2x
SILVER 1996E P/E Multiple 14.0x
Offer Price 1996E P/E Multiple 14.0x
Purchase Premium - % 0.0%
Tangible Book Value $149.4
Purchase Premium - $ 87.2
PP&E Write-Up (0.0%) 0.0
PP&E Depreciation Period 15
Deferred Tax Liability 0.0
New Goodwill-Incl. Transaction Exp. $0.0
Goodwill Amortization Period 40
Exchange Ratio 0.560
Existing Tupperware Corp Shares 62.142
Pro Forma Tupperware Corp Shares 67.101
Transaction Expenses $10.0
Tupperware Corp Marginal Tax Rate 39.0%
SILVER Marginal Tax Rate 39.0%
Tupperware Corp Ownership of New Entity 92.6%
SILVER Ownership of New Entity 7.4%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------
BALANCE SHEET IMPACT
- -----------------------------------------------------------------------------------------------
<CAPTION>
TUPPERWARE CORP SILVER COMBINED
JUN-96 JUN-96 ADJUSTMENTS JUN-96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $94.2 $6.2 ($10.0) $90.4
Total Debt 287.1 37.6 0.0 324.7
----- ---- -----
Net Debt 192.9 31.4 234.3
Equity 245.8 155.5 0.0 (10.0) 390.5
Total Capitalization 532.1 193.1 715.2
- ----------------------------------------------------------------------------------------------
TOTAL DEBT/TOTAL CAP. 54.0% 19.5% 45.4%
NET DEBT/TOTAL CAP. 36.3% 16.3% 32.8%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------
DILUTION ANALYSIS
- ---------------------------------------------------------------------------------------
<CAPTION>
1996E 1997E 1998E
----- ----- -----
<S> <C> <C> <C> <C>
TUPPERWARE CORP
Projected Tupperware Corp Standalone EPS $2.72 $3.09 $3.52
Projected Tupperware Corp Standalone Net Income $169.0 $192.0 $218.9
SILVER
Projected SILVER EPS $1.87 $2.84 $3.19
Projected SILVER Standalone Net Income $16.2 $24.6 $27.7
PRE-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
--------------------------
Total Pre-Tax Acquisition Adjustments $0.0 $0.0 $0.0
AFTER-TAX ACQUISITION ADJUSTMENTS
New Goodwill $0.0 $0.0 $0.0
Incremental Depreciation 0.0 0.0 0.0
Synergies 0.0 0.0 0.0
New Interest Expense @ 7.0% 0.0 0.0 0.0
--------------------------
Total After-Tax Acquisition Adjustments $0.0 $0.0 $0.0
PRO FORMA EPS CALCULATION
Projected Tupperware Corp Standalone Net Income $169.0 $192.0 $218.9
Projected SILVER Standalone Net Income 16.2 24.6 27.7
- - After-Tax Acquisition Adjustments 0.0 0.0 0.0
--------------------------
Pro Forma Combined Net Income $185.3 $216.7 $246.6
Pro Forma Combined Shares Outstanding 67.101 67.101 67.101
Pro Forma EPS $2.76 $3.23 $3.67
Projected Tupperware Corp Standalone EPS $2.72 $3.09 $3.52
- -------------------------------------------------------------------------------------
$ PICK-UP (DILUTION) $0.04 $0.14 $0.15
% PICK-UP (DILUTION) 1.5% 4.5% 4.3%
PROJECTED PRE-TAX SYNERGIES REQUIRED
TO BREAK-EVEN ($4.5) ($15.3) ($16.7)
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<CAPTION>
1996 1997 1998
PREMIUM OFFER PRICE DILUTION DILUTION DILUTION
------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
0% $26.25 1.5% 4.5% 4.3%
10% 28.88 0.7% 3.7% 3.5%
20% 31.50 (0.0%) 2.9% 2.8%
30% 34.13 (0.7%) 2.2% 2.0%
40% 36.75 (1.5%) 1.4% 1.3%
50% 39.38 (2.2%) 0.7% 0.5%
60% 42.00 (2.9%) (0.0%) (0.2%)
70% 44.63 (3.6%) (0.7%) (0.9%)
80% 47.25 (4.3%) (1.4%) (1.6%)
90% 49.88 (4.9%) (2.1%) (2.3%)
100% 52.50 (5.6%) (2.8%) (3.0%)
- --------------------------------------------------------------------------------
</TABLE>
E-14
<PAGE> 72
- --------------------------------------------------------------------------------
SILVER SHAREHOLDER PROFILE
- --------------------------------------------------------------------------------
<PAGE> 73
<TABLE>
PROJECT SILVER
SHAREHOLDER PROFILE
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of % of % of
Shares Primary Fully Diluted
Held (mm) Ownership Ownership
<S> <C> <C> <C>
5% Institutional Shareholders (a)
Gabelli Funds, Inc. & Related Entities 0.900 10.4% 10.0%
Neuberger & Berman 0.400 4.6% 4.4%
Fidelity Management and Research Corp. 0.379 4.4% 4.2%
----- ----- -----
TOTAL 5% SHAREHOLDERS 1.679 19.4% 18.6%
Other Insstitutional Holders (b)
LGT Asset Management Inc. 0.412 4.7% 4.6%
Artisan Partners Ltd. 0.391 4.5% 4.3%
Northern Trust Corp. 0.181 2.1% 2.0%
TCW Group Inc. 0.163 1.9% 1.8%
Barclays Bank PLC 0.129 1.5% 1.4%
PaineWebber Group Inc. 0.100 1.2% 1.1%
Breau Capital Management Inc. 0.074 0.9% 0.8%
----- ----- -----
SUBTOTAL - TOP TEN INSTITUTIONAL HOLDERS 3.128 36.1% 34.7%
Other 0.364 4.2% 4.0%
----- ----- -----
TOTAL INSTITUTIONAL HOLDINGS 3.492 40.3% 38.7%
Management and Directors (a)
Leonard Florence - Chairman, President, CEO and Director 2.858 32.9% 31.7%
Melvin L. Levine - VP of Purchasing and Director 0.202 2.3% 2.2%
Alan R. Kanter - VP of Sales 0.182 2.1% 2.0%
Other Insiders 0.401 4.6% 4.5%
----- ----- -----
TOTAL MANAGEMENT AND DIRECTOR HOLDINGS 3.643 42.0% 40.4%
Other/Public 1.541 17.8% 17.1%
----- ----- -----
TOTAL PRIMARY SHARES OUTSTANDING (a) 8.676 100.0% 96.3%
----- =====
Options Outstanding (a) 0.338 3.7%
----- -----
TOTAL FULLY DILUTED SHARES OUTSTANDING 9.014 100.0%
===== =====
<FN>
- -----------------------------------------
(a) Source: Draft of Form S-3 dated September 6, 1996
(b) Source: CDA/Spectrum Report for the quarter ended June 30, 1996
</TABLE>
<PAGE> 1
AMENDMENT TO
RESTATED AGREEMENT AND PLAN OF MERGER
AGREEMENT made effective as of February 14, 1997, by and between THL
Transaction I Corp. ("THL I") and Syratech Corporation (the "Company").
WHEREAS, the undersigned entered into the Restated Agreement and Plan of
Merger dated November 27, 1996, effective as of October 23, 1996 (the
"Agreement");
WHEREAS, on December 31, 1996 the Company, THL I and Leonard Florence
entered into separate agreements with each of Alan Kanter, Melvin L. Levine and
E. Merle Randolph (each an "Executive Party") pursuant to which (i) Mr. Florence
agreed to contribute to the Company (a) on December 31, 1996, 31,812 shares of
Syratech Common Stock, (b) on January 14, 1997, 31,884 shares of Syratech Common
Stock and (c) on January 14, 1998, the largest number of whole shares of
Syratech Common Stock as shall have an aggregate value of approximately $99,991
and (ii) on each of the dates of contribution of such shares of Syratech Common
Stock by Mr. Florence to the Company, such shares were to be canceled and the
Company was to issue to each Executive Party, as compensation, that number of
shares of Syratech Common Stock that would be equal to the Executive Party's pro
rata share of the number of shares of Syratech Common Stock contributed to the
Company on such date by Mr. Florence;
WHEREAS, Section 2.1(c)(ii) of the Agreement provides that Mr. Florence
shall be entitled to retain 714,400 shares of fully paid and nonassessable
shares of Syratech Common Stock following the Merger;
WHEREAS, Section 7.2(e) of the Agreement provides that the Company shall
enter into financing arrangements at the Closing pursuant to commitment letters
attached thereto as Schedule 7.2(e), or such other financing arrangements as the
Company and THL I agree, which arrangements are not materially more onerous; and
WHEREAS, Section 8.3 of the Agreement provides that the Agreement may be
amended by the parties at any time before any required approval of matters
presented in connection with the merger by the stockholders of the Company by an
instrument in writing signed on behalf of each of the parties.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises contained herein, and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the undersigned hereby agree as
follows:
1. Section 2.1(a) shall be deleted in its entirety and shall be replaced
by the following:
"(a) Capital Stock of THL I. The shares of Common Stock of THL I
issued and outstanding immediately prior to the Effective Time shall be
converted into such aggregate number of shares of Company Common Stock as
equals 3,131,780 less the aggregate number of shares of Company Common
Stock (not to exceed 781,250) retained by existing stockholders of the
Company (other than Management Stockholders) pursuant to Section 2.1(c)(ii)
and Section 2.2 and 2.3. The shares of Preferred Stock of THL I issued and
outstanding immediately prior to the Effective Time shall be converted into
the same number of shares of Series A Preferred Stock of the Company.
2. Section 2.1(c)(ii) shall be deleted in its entirety and shall be
replaced by the following:
"(ii) (x) for 528,472 shares of Company Common Stock held by Mr.
Leonard Florence, be entitled to retain the same number of fully paid and
nonassessable shares of Company Common Stock ("Florence Rollover Shares"),
for 35,232 shares of Company Common Stock held by Mr. Florence, such 35,232
shares be contributed to the capital of the Company simultaneously with the
Merger, and for each other share of Company Common Stock held by Mr.
Florence, the right to receive in cash from the Company following the
Merger, $28.00 per share and (y) for an aggregate of 123,766 shares of
Company Common Stock held by other members of Management (a "member of
Management" shall be any person who is listed as an executive officer of
the Company in the Company's 1996 Proxy Statement) of the Company as set
forth in Schedule 2.1 hereto, be entitled to retain the same number of
fully paid and nonassessable
<PAGE> 2
shares of Company Common Stock (such 123,766 shares of Company Common Stock
to be retained by members of Management are referred to herein as the
"Management Rollover Shares"); and"
3. Section 2.2(a) shall be deleted in its entirety and shall be replaced
by the following:
"2.2 Company Common Stock Elections. (a) Each person who, on or
prior to the Election Date referred to in Section 2.2(c) below, is a record
holder of shares of Company Common Stock will be entitled, with respect to
up to 35% of such holder's shares, to make an unconditional election (a
"Non-Cash Election") on or prior to such Election Date to retain Non-Cash
Election Shares, on the basis hereinafter set forth."
4. Section 2.3 shall be deleted in its entirety and shall be replaced by
the following:
"2.3 Proration.
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of shares of Company Common Stock (other than Florence Rollover
Shares and Management Rollover Shares) which shall be entitled to retain Company
Common Stock at the Effective Time of the Merger shall not exceed 868,250.
(b) If the number of Electing Shares exceeds 868,250, then each Electing
Share shall be entitled to retain Non-Cash Election Shares or shall be converted
into the right to receive cash in accordance with the terms of Section 2.1(e) in
the following manner:
(i) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing 868,250 by the total number of Electing Shares.
(ii) The number of Electing Shares covered by each Non-Cash Election
which are entitled to retain Non-Cash Election Shares shall be determined
by multiplying the Non-Cash Proration Factor by the total number of
Electing Shares covered by such Non-Cash Election, rounded down to the
nearest whole number.
(iii) All Electing Shares, other than those shares which are entitled
to retain Non-Cash Election Shares in accordance with Section 2.3(b)(ii),
shall be converted into cash (on a consistent basis among shareholders who
made the election referred to in Section 2.1(c)(i), pro rata to the number
of shares as to which they made such election) as if such shares were not
Electing Shares in accordance with the terms of Section 2.1(c)(iii).
(c) If the number of Electing Shares is less than 868,250 then all Electing
Shares shall be entitled to retain Company Common Stock in accordance with the
terms of Section 2.1(c)(i)."
5. Section 6.3(f)(ii) shall be deleted in its entirety and shall be
replaced with the following:
"(ii) Subject to the Company having received the proceeds of the
financing described in Section 7.2(e) on terms satisfactory to THL I, THL I
at closing will be capitalized with an equity contribution of (a) up to
$18,000,000 of preferred stock and (b) $100,216,960 of common stock, less
the product of (x) $32.00 and (y) the aggregate number of shares retained
by stockholders (not to exceed 781,250) other than Management
Stockholders). THL I will be under no obligation pursuant to the preceding
sentence unless and until the Company receives the proceeds of the
financing described in Section 7.2(e), or such other financings as may be
contemplated by Section 7.2(e), on terms consistent with the commitment
letters referenced in Section 7.2(e). In addition, THL I will be under no
obligation under any circumstances to be capitalized with equity of more
than $18,000,000 preferred stock and $100,216,960 common stock. In no event
shall it be required that THL I be capitalized with such amounts of equity
prior to the Closing."
6. Attached hereto as Schedule 7.2(e) are commitment letters to provide
financing for the Merger (the "Commitment Letters"), which the parties agree are
not materially more onerous than those attached as Schedule 7.2(e) to the
Agreement. The Commitment Letters replace any and all commitment letters to
2
<PAGE> 3
provide financing for the Merger attached as Schedule 7.2(e) to the Agreement.
The Company hereby agrees that, upon consummation of the Merger, it shall assume
any and all obligations of THL I pursuant to the terms of the Commitment
Letters.
7. Exhibit A to the Agreement shall be deleted in its entirety and shall
be replaced by Exhibit A attached hereto.
8. Except as expressly set forth above, the parties ratify and confirm all
other terms of the Agreement, which remain in full force and effect as of the
date hereof.
[Remainder of Page Left Intentionally Blank]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties below have caused this Agreement to be duly
executed by persons duly authorized, all as of the date first written above.
THL TRANSACTION I CORP.
By: /s/ SCOTT A. SCHOEN
------------------------------------
Name: Scott A. Schoen
Title: President
SYRATECH CORPORATION
By: /s/ FAYE A. FLORENCE
------------------------------------
Name: Faye A. Florence
Title: Vice President and General
Counsel
EXECUTED BY THE UNDERSIGNED
SOLELY FOR THE PURPOSES OF REAFFIRMING HIS OBLIGATION UNDER
SECTION 2.1(c)(ii) OF THE AGREEMENT
/s/ LEONARD FLORENCE
- ---------------------------------------------------------
Leonard Florence
4
<PAGE> 5
SCHEDULE 2.1
<TABLE>
<S> <C>
MANAGEMENT ROLLOVER SHARES
Mr. Alan Kanter.............................. 48,232 shares
Mr. Melvin Levine............................ 41,132 shares
Mr. E. Merle Randolph........................ 30,875 shares
Ms. Faye A. Florence......................... 3,527 shares
--------------
TOTAL:............................. 123,766 shares
</TABLE>
