SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 21, 1993
SILGAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11200 06-1207662
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4 Landmark Square, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 975-7110
Item 2: Acquisition or Disposition of Assets.
On December 21, 1993 (the "Closing Date"), pursuant to the
Purchase Agreement, dated as of September 3, 1993, between Silgan Containers
Corporation ("Containers"), a Delaware corporation and a wholly-owned
subsidiary of Silgan Corporation ("Silgan"), a Delaware corporation, and Del
Monte Corporation ("DM"), a New York corporation, as amended by the Amendment
to Purchase Agreement, dated as of December 10, 1993, between Containers and
DM (such Purchase Agreement, as so amended, being herein called the "Purchase
Agreement"), Containers acquired from DM substantially all of the fixed
assets and certain working capital of DM's container manufacturing business
in the United States (the "Business"). Pursuant to the Purchase Agreement,
Containers acquired (i) substantially all of the fixed assets of the Business
located in the United States (other than those assets located in California
and Washington) and certain working capital of the Business (such assets and
such working capital being herein called the "DM Assets") and (ii) all of the
issued and outstanding capital stock (the "Shares") of California-Washington
Can Corporation ("C-W Can"), a California corporation and the owner of
substantially all of the fixed assets of the Business located in California
and Washington (the "C-W Assets," together with the DM Assets, the "Acquired
Assets"). The Acquired Assets included (i) real property located in
Rochelle, Illinois, Smithfield, Utah and Toppenish, Washington and (ii)
substantially all of the machinery and equipment used by the Business. The
working capital of the Business acquired by Containers from DM included all
inventories of the Business other than finished steel open top containers and
loose ends located at certain DM canneries. Additionally, pursuant to the
Purchase Agreement, Containers assumed specified limited liabilities of DM
relating to the Business.
On the Closing Date, pursuant to the Purchase Agreement, in
consideration for the DM Assets and the Shares and the assumption by
Containers of certain specified liabilities of the Business, Containers paid
to DM the aggregate purchase price (the "Purchase Price") of $72,800,000.
The Purchase Price is subject to adjustment as provided in the Purchase
Agreement. The Purchase Price was paid in cash and was determined as a
result of an arm's length negotiation between unrelated parties.
The Acquired Assets were used by DM to manufacture metal
containers for DM's cannery operations. Containers intends to continue such
use of the Acquired Assets.
In connection with the Purchase Agreement, DM and Containers
entered into the Supply Agreement dated as of September 3, 1993, as amended
by the Amendment to Supply Agreement, dated as of December 21, 1993, between
DM and Containers (such Supply Agreement, as so amended, being herein called
the "Supply Agreement"). The Supply Agreement became effective on the
Closing Date and continues for a term of ten years. Under the Supply
Agreement, DM has agreed to purchase from Containers, and Containers has
agreed to sell to DM, 100% of DM's annual requirements for metal containers
to be used for the packaging of food and beverages in the United States and
not less than 65% of DM's annual requirements of metal containers for the
packaging of food and beverages at DM's Irapuato, Mexico facility, subject to
certain limited exceptions.
The Supply Agreement provides for certain prices for all
metal containers supplied by Containers to DM thereunder and specifies that
such prices will be increased or decreased based upon specified cost change
formulas.
Under the Supply Agreement, after five years, DM may, under
certain circumstances, receive proposals with terms more favorable than those
under the Supply Agreement from independent commercial can manufacturers for
the supply of containers of a type and quality similar to the metal
containers that Containers furnishes to DM, which proposals shall be for the
remainder of the term of the Supply Agreement and for 100% of the annual
volume of containers at one or more of DM's canneries. Containers has the
right to retain the business subject to the terms and conditions of such
competitive proposal.
On the Closing Date, to finance the acquisition of the DM
Assets and the Shares, (i) Silgan, Containers and Silgan Plastics Corporation
("Plastics," and, together with Silgan and Containers, the "Borrowers"), a
Delaware corporation and wholly-owned subsidiary of Silgan, entered into a
Credit Agreement, dated as of December 21, 1993 (the "Credit Agreement") with
the lenders from time to time party thereto (the "Banks"), Bank of America
National Trust and Savings Association ("Bank of America"), as Co-Agent, and
Bankers Trust Company ("Bankers Trust"), as Agent, and (ii) Silgan Holdings
Inc. ("Holdings"), a Delaware corporation and the parent holding company of
Silgan, issued and sold to Mellon Bank, N.A., as trustee for First Plaza
Group Trust, a group trust established under the laws of the State of New
York ("First Plaza"), 250,000 shares of its Class B Common Stock, par value
$.01 per share (the "Holdings Stock"), for a purchase price of $60.00 per
share and an aggregate purchase price of $15,000,000. Additionally, Silgan,
Containers and Plastics borrowed term and working capital loans under the
Credit Agreement to refinance and repay in full all amounts owing under their
Amended and Restated Credit Agreement, dated as of August 31, 1987, as
amended (the "Amended and Restated Credit Agreement"), among the Borrowers,
various lenders party thereto and Bankers Trust, as Agent.
The sources and uses of funds on the Closing Date for the above-
described transactions were as follows:
Sources Uses
(in millions) (in millions)
Source Amount Use Amount
A Term Loan $60.0 Purchase of DM $72.8
under the Credit Assets and Shares
Agreement
B Term Loan 80.0 Repayment of 41.5
under the Credit term loans under the
Agreement Amended and Restated
Credit Agreement
Working Capital 29.8 Repayment of working 61.2
Loans under the capital loans under
Credit Agreement the Amended and
Restated Credit
Agreement
Sale of Holdings 15.0 Fees and Expenses 9.3
Stock and general corporate
_______ purposes ________
TOTAL $184.8 TOTAL $184.8
Item 5: Other Events.
Description of the Credit Agreement
On December 21, 1993, Silgan, Containers and Plastics
entered into the Credit Agreement with the Banks, Bank of America, as Co-
Agent, and Bankers Trust, as Agent, to refinance in full all amounts owing
under the Amended and Restated Credit Agreement and to finance the
acquisition by Containers of the DM Assets and the Shares. The following is
a summary of the terms of the Credit Agreement.
The Available Credit Facility. Pursuant to the Credit
Agreement, the Banks loaned to Silgan (i) $60,000,000 of term loans (the "A
Term Loans") and (ii) $80,000,000 of term loans (the "B Term Loans", and,
together with the A Term Loans, the "Term Loans"), and agreed to lend to
Containers or Plastics up to an aggregate of $70,000,000 of working capital
loans (the "Working Capital Loans"). As part of the Working Capital Loans,
Bankers Trust agreed to lend to Containers or Plastics up to an aggregate of
$5,000,000 of revolving loans (the "Swingline Loans") and to issue to
Containers or Plastics for the account of Containers or Plastics up to an
aggregate of $15,000,000 of letters of credit, such Swingline Loans and
letters of credit outstanding being deducted from the amount of Working
Capital Loans available to be borrowed by Containers or Plastics.
The aggregate amount of Working Capital Loans which may be
outstanding at any time is subject to a borrowing base limitation of the sum
of (i) 85% of eligible accounts receivable of Containers and its subsidiaries
and Plastics and (ii) 50% of eligible inventory of Containers and its
subsidiaries and Plastics.
Each of the Term Loans and each of the Working Capital
Loans, at the respective Borrower's election, consists of loans designated as
Eurodollar rate loans or as Base Rate loans. Subject to certain conditions,
each of the Term Loans and each of the Working Capital Loans can be converted
from a Base Rate loan into a Eurodollar rate loan and vice versa. The term
"Base Rate" means the highest of (i) 1/2 of 1% in excess of the Adjusted
Certificate of Deposit Rate (as defined in the Credit Agreement), (ii) 1/2 of
1% in excess of the Federal Funds Rate (as defined in the Credit Agreement)
and (iii) Bankers Trust's prime lending rate.
As of the Closing Date, the outstanding principal amounts of
A Term Loans, B Term Loans and the Working Capital Loans under the Credit
Agreement were $60 million, $80 million and $29.8 million, respectively. At
December 31, 1993, the outstanding principal amount of Working Capital Loans
under the Credit Agreement was $2.2 million.
Security and Guarantees. To secure the obligations of the
Borrowers under the Credit Agreement: (i) Silgan pledged to the Banks all of
the capital stock of Containers and Plastics held by Silgan; (ii) Plastics
pledged to the Banks 65% of the capital stock of 827599 Ontario Inc.
("Canadian Holdco") held by Plastics; (iii) Containers pledged to the Banks
all of the capital stock of C-W Can held by Containers; (iv) Silgan,
Containers, Plastics and C-W Can each granted to the Banks security interests
in substantially all of their respective real and personal property; and (v)
Holdings pledged to the Banks all of the capital stock of Silgan held by
Holdings. Such collateral (other than the collateral described in (v)) also
secures on an equal and ratable basis Silgan's Senior Secured Floating Rate
Notes due 1997 (the "Secured Notes"), subject to intercreditor arrangements.
Holdings, each of the Borrowers and C-W Can have guaranteed
on a secured basis all of the obligations of the Borrowers under the Credit
Agreement.
Payment of Loans. Generally, the Working Capital Loans can
be borrowed, repaid and reborrowed from time to time until September 15,
1996, on which date all Working Capital Loans mature and are payable in full.
Amounts repaid under the Term Loans cannot be reborrowed.
The A Term Loans mature on September 15, 1996 and are
payable in installments as follows:
A Term Loan
Installment Repayment Date Principal Amount
September 30, 1994 . . . . . . . . .
$ 5,000,000
December 31, 1994 . . . . . . . . . 15,000,000
September 30, 1995 . . . . . . . . . 5,000,000
December 31, 1995 . . . . . . . . . 15,000,000
September 15, 1996 . . . . . . . . . 20,000,000
The B Term Loans mature and are payable in full on September
15, 1996.
Under the Credit Agreement, Silgan is required to repay the
Terms Loans (pro rata for each tranche of Term Loans) in an amount equal to
75% of Silgan's Excess Cash Flow (as defined in the Credit Agreement) in any
fiscal year during the Credit Agreement (beginning with the 1994 fiscal
year). Additionally, Silgan is required to repay the Term Loans (pro rata
for each tranche of Term Loans) in an amount equal to 80% of the net sale
proceeds from certain assets sales and 100% of the net equity proceeds from
certain sales of equity, all as provided in the Credit Agreement.
Interest and Fees. Interest on the Term Loans and the
Working Capital Loans is payable at certain margins over certain rates as
summarized below.
Interest on Term Loans maintained as Base Rate loans accrues
at floating rates of 1.75% (in the case of A Term Loans) and 2.25% (in the
case of B Term Loans) over the Base Rate. Interest on Term Loans maintained
as Eurodollar rate loans accrues at floating rates of 2.75% (in the case of A
Term Loans) and 3.25% (in the case of B Term Loans) over a formula rate (the
"Eurodollar Rate") determined with reference to the rate offered by Bankers
Trust for dollar deposits in the New York interbank Eurodollar market.
Interest on Working Capital Loans maintained as (i) Base Rate loans accrues
at floating rates of 2% over the Base Rate or (ii) Eurodollar rate loans
accrues at floating rates of 3% over the Eurodollar Rate.
Each of Containers and Plastics has agreed to jointly and
severally pay to the Banks, on a quarterly basis, a commitment commission
calculated as 0.50% per annum on the daily average unused portion of the
Banks' working capital commitment in respect of the Working Capital Loans
until such working capital commitment is terminated. Additionally,
Containers and Plastics are required to pay to Bankers Trust, on a quarterly
basis in arrears, a letter of credit fee of 3.0% per annum and a facing fee
of 1/4 of 1% per annum, each on the average daily stated amount of each
letter of credit issued for the account of Containers or Plastics,
respectively.
Certain Covenants. The Credit Agreement contains numerous
financial and operating covenants, under which Silgan and its subsidiaries
must operate. Failure to comply with any of such covenants permits the Banks
to accelerate, subject to the terms of the Credit Agreement, the maturity of
all amounts outstanding under the Credit Agreement.
The Credit Agreement restricts or limits each of the
Borrowers' and their respective subsidiaries' abilities: (i) to create
certain liens; (ii) to consolidate, merge or sell its assets and to purchase
assets; (iii) to pay dividends on, or repurchase shares of, its capital
stock, except that, among other things: (a) Silgan may pay dividends to
Holdings under certain circumstances; (b) Containers and Plastics may pay
dividends to Silgan as long as they remain wholly owned subsidiaries of
Silgan, Canadian Holdco may pay dividends to Plastics, and Express Plastic
Containers Limited ("Express") may pay dividends to Canadian Holdco; and (c)
Containers and Plastics may repurchase or redeem its respective stock options
(or common stock issuable upon exercise thereof) or SARs issued to its
management under certain circumstances; (iv) to lease real and personal
property; (v) to create additional indebtedness, except for, among other
things: (a) certain indebtedness existing on the date of the Credit Agreement
(including Silgan's indebtedness represented by the Secured Notes, the
11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes") and by
intercompany notes); and (b) indebtedness of Containers to Plastics or
Plastics to Containers; (vi) to make certain advances, investments and loans,
except for, among other things: (a) loans from Silgan to each of Containers
and Plastics represented by intercompany notes; (b) loans from Containers to
Plastics or from Plastics to Containers; and (c) loans from Containers and/or
Plastics to Silgan not exceeding $15 million in aggregate principal amount
outstanding at any time; (vii) to enter into transactions with affiliates;
(viii) to make certain capital expenditures, except for, among other things,
capital expenditures which do not exceed in the aggregate for the Borrowers,
such amounts, during such periods, as set forth below:
Period Amount
Calendar year ended December 31, 1993 . . . $46,500,000
Calendar year ended December 31, 1994 . . . 35,000,000
Calendar year ended December 31, 1995 . . . 30,000,000
Calendar year ended December 31, 1996 . . . 30,000,000
; provided, however, that to the extent capital expenditures made during any
period set forth above are less than the amounts set forth opposite such
period, such amount may be carried forward and utilized to make capital
expenditures in the immediately succeeding calendar year, with any such
amount being deemed utilized first in such succeeding calendar year; (ix) to
make any voluntary payments, prepayments, acquire for value, redeem or
exchange, among other things, any 11-3/4% Notes or Secured Notes, or to make
certain amendments to the 11-3/4% Notes, the Secured Notes, the Borrowers' or
their respective subsidiaries' respective certificates of incorporation and
by-laws, or to certain other agreements; (x) with certain exceptions, to have
any subsidiaries other than Containers and Plastics with respect to Silgan,
C-W Can with respect to Containers, and Canadian Holdco and Express with
respect to Plastics; (xi) with certain exceptions, to permit its respective
subsidiaries to issue capital stock; (xii) to permit its respective
subsidiaries to create limitations on the ability of any such subsidiary to
(a) pay dividends or make other distributions, (b) make loans or advances, or
(c) transfer assets; and (xiii) to engage in any business other than the
packaging business.
The Credit Agreement requires that Silgan own not less than
90% of the outstanding common stock of Containers and Plastics and 100% of
all other outstanding capital stock of Containers and Plastics.
The Credit Agreement requires that the ratio of Consolidated
Current Assets (as defined below) to Consolidated Current Liabilities (as
defined below) of any of the Borrowers may not, at any time, be less than 2:1
and that the ratio of Bank EBITDA (as defined below) to Interest Expense (as
defined below) for any of the Borrowers may not be, for any period of four
consecutive fiscal quarters (or, if shorter, the period beginning on January
1, 1994 and ending on the last day of a fiscal quarter ended after January 1,
1994) (in each case, taken as one accounting period) ended during a period
set forth below, less than the ratio set forth opposite such period below:
Period . . . . . . Ratio
Fiscal quarter ending March 31, 1994 . 2.25:1
Fiscal quarter ending June 30, 1994 . 2.35:1
Fiscal quarter ending September 30, 1994 2.70:1
Fiscal quarter ending December 31, 1994 2.70:1
January 1, 1995 to and including
December 31, 1995 . . . . . . . . . . 3.00:1
January 1, 1996 to and including
September 30, 1996 . . . . . . . . . 3.40:1
In addition, the ratio of Total Indebtedness (as defined below) to
Consolidated Net Worth (as defined below) of any of the Borrowers is not
permitted to exceed on any date set forth below the ratio set forth opposite
such date:
Date Amount
December 31, 1994 . . . . . . . . . . . . 5.00:1
December 31, 1995 . . . . . . . . . . . . 3.25:1
August 31, 1996 . . . . . . . . . . . . . 2.75:1
"Bank EBITDA" means for any period, EBIT, adjusted by adding
thereto the amount of all depreciation and amortization of intangibles
(including covenants not to compete), goodwill and loan fees that were
deducted in arriving at EBIT for such period.
"Consolidated Current Assets" means the current assets of
Silgan and its subsidiaries determined on a consolidated basis, provided that
the unused amounts of commitments for Working Capital Loans shall also be
included as current assets of Silgan in making such determination.
"Consolidated Current Liabilities" means the current
liabilities of Silgan and its subsidiaries determined on a consolidated
basis, provided that the current portion of loans under the Credit Agreement
(including any accrued interest with respect to such current portion), the
current portion of any loans made by Silgan to Containers or Plastics, and
accrued interest on the Secured Notes and the 11-3/4% Notes from the last
regularly scheduled interest payment date shall not be considered current
liabilities for the purposes of making such determination.
"Consolidated Net Worth" means the Net Worth of Silgan and
its subsidiaries determined on a consolidated basis, and "Net Worth" of any
person means the sum of its capital stock, capital in excess of par or stated
value of shares of its capital stock, retained earnings (without giving
effect to any noncash adjustments resulting from changes in value of employee
stock options), and any other account which, in accordance with generally
accepted accounting principles, constitutes stockholders' equity, less
treasury stock.
"EBIT" means for any period, the consolidated net income of
Silgan and its subsidiaries, before interest expense and provision for taxes
and without giving effect to any extraordinary noncash gains or extraordinary
noncash losses and gains from sales of assets (other than sales of inventory
in the ordinary course of business), any noncash adjustments resulting from
changes in value of employee stock options.
"Indebtedness" means, as to any person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of
such person for borrowed money or for the deferred purchase price of property
or services, (ii) the face amount of all letters of credit issued for the
account of such person and all drafts drawn thereunder, (iii) all liabilities
secured by any lien on any property owned by such person, whether or not such
liabilities have been assumed by such person, (iv) the aggregate amount
required to be capitalized under leases under which such person is the lessee
and (v) all contingent obligations of such person.
"Interest Expense" means, for any period, the total
consolidated interest expense of Silgan and its subsidiaries for such period.
"Total Indebtedness" means the aggregate Indebtedness of
Silgan and its subsidiaries determined on a consolidated basis, provided that
there shall be excluded, in making such determination, Indebtedness
consisting of capitalized lease obligations existing as of the effective date
of the Credit Agreement or permitted to be incurred pursuant to the Credit
Agreement.
For purposes of the ratios of Bank EBITDA to Interest
Expense and Total Indebtedness to Consolidated Net Worth, (i) all
computations utilize accounting principles in conformity with those used to
prepare the statements of consolidated and consolidating financial condition
of Holdings and its subsidiaries and Silgan and its subsidiaries at December
31, 1992 and the related consolidated and consolidating statements of income
and cash flow of Holdings and its subsidiaries and Silgan and its
subsidiaries for the fiscal year ended December 31, 1992, as audited by Ernst
& Young, and (ii) no effect is given to certain other matters as provided in
the Credit Agreement.
The ability of Holdings to take certain actions is
restricted or limited pursuant to the terms of the Amended and Restated
Guaranty, dated as of June 30, 1989, and amended and restated as of June 18,
1992, and further amended and restated as of December 21, 1993, made by
Holdings in favor of the Banks, Bank of America, as Co-Agent, and Bankers
Trust, as Agent (the "Holdings Guaranty"). The Holdings Guaranty restricts
or limits Holdings' ability to, among other things: (i) create certain liens,
(ii) incur additional indebtedness, (iii) consolidate, merge or sell its
assets and purchase or lease assets, (iv) pay dividends, (v) make loans or
advances and (vi) engage in any business other than holding Silgan's common
stock and certain other limited matters permitted by the Holding Guaranty.
Events of Default. Events of default under the Credit
Agreement include, with respect to each of the Borrowers, as the case may be,
among others: (i) the failure to pay any principal on the Term Loans or the
Working Capital Loans, the failure to reimburse drawings under any letters of
credit when due or the failure to pay within two business days after the date
such payment is due interest on the Term Loans, the Working Capital Loans or
any unpaid drawings under any letter of credit or any fees or other amounts
owing under the Credit Agreement; (ii) any failure to pay amounts due under
certain other agreements or any defaults that result in or permit the
acceleration of certain other indebtedness; (iii) subject to certain limited
exceptions, the breach of any covenants, representations or warranties
contained in the Credit Agreement or any related document; (iv) certain
events of bankruptcy, insolvency or dissolution; (v) the occurrence of
certain judgments, writs of attachment or similar process against any of the
Borrowers or any of their respective subsidiaries; (vi) the occurrence of
certain ERISA related liabilities; (vii) a default under or invalidity of the
guarantees (including an event of default under the Holdings Guaranty) or of
the security interests granted to the Banks pursuant to the Credit Agreement;
(viii) the failure of Holdings to own 100% of the capital stock of Silgan;
and (ix) a Change of Control (as defined in the Holdings Guaranty, the Note
Purchase Agreement dated as of June 29, 1992 between Silgan and each of the
persons party thereto relating to the Secured Notes, the indenture relating
to the 11-3/4% Notes or the indenture relating to Holdings' 13-1/4% Senior
Discount Debentures due 2002 (the "Debentures")) shall occur; and (x) the
requirement that Silgan repurchase 25% or more of the aggregate principal
amount of the Secured Notes then outstanding or any 11-3/4% Note or that
Holdings repurchase any Debenture, in any case as a result of a Change of
Control (as defined in the agreements and indentures relating thereto).
Upon the occurrence of any event of default under the Credit
Agreement, the Banks are permitted, among other things, to accelerate the
maturity of the Term Loans and the Working Capital Loans and all other
outstanding indebtedness under the Credit Agreement and terminate their
commitment to make any further Working Capital Loans or to issue any letters
of credit.
In connection with the Credit Agreement, the Banks (including
Bankers Trust) received certain fees amounting to $8.1 million.
Sale of Holdings Stock; Beneficial Owners of Holdings' Capital Stock
On December 21, 1993, Holdings sold to First Plaza the Holdings
Stock for a purchase price of $60.00 per share and an aggregate purchase
price of $15,000,000 pursuant to the terms of a stock purchase agreement
dated as of December 21, 1993. The following table sets forth, as of
December 21, 1993 and giving effect to such sale of the Holdings Stock,
certain information with respect to the beneficial ownership by all of the
directors of Holdings and by certain other persons and entities of
outstanding shares of capital stock of Holdings:
<TABLE>
<CAPTION>
Number of Shares of each class of Percentage Ownership of
Holdings Common Stock Owned Holdings Common Stock
Class A Class B Class C Class A Class B Class C Consolidated (1)
<C> <C> <C> <C> <C> <C> <C> <C>
D. Greg Horrigan (2) 208,750 -- -- 50% -- -- 19.24%
R. Philip Silver (2) 208,750 -- -- 50% -- -- 19.24%
James S. Hoch (3) . . -- -- -- -- -- -- --
Robert H. Niehaus(3) -- -- -- -- -- -- --
Harley Rankin, Jr. . -- -- 10,000(4) -- -- 15.63% --
James D. Beam (5) . . -- -- -- -- -- -- --
Gary M. Hughes (5) . -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, -- 417,500 -- -- 62.55% -- 38.48%
L.P.(6) . . . . . . .
Mellon Bank, N.A., as trustee for
First Plaza Group -- 250,000 -- -- 37.45% -- 23.04%
Trust (7) . . . . . .
All officers and directors as a
group . . . . . . . 417,500 -- 14,000(4) 100% -- 38.48%
21.88%(8)
</TABLE>
___________________
(1) This column reflects the percentage ownership of voting common
stock that would exist if Holdings Class A Stock (as defined
under "Description of Holdings Common Stock" below) and Holdings
Class B Stock (as defined under "Description of Holdings Common
Stock" below) were treated as a single class. Holdings Class C
Stock (as defined under "Description of Holdings Common Stock"
below) generally does not have voting rights and is not included
in the percentage ownership reflected in this column. See
"Description of Holdings Common Stock" below.
(2) Director of Holdings and Silgan. Messrs. Horrigan and Silver are
parties to a voting agreement pursuant to which they have agreed
to use their best efforts to vote their shares as a block. The
address for such person is 4 Landmark Square, Stamford, CT 06901.
(3) Director of Holdings and Silgan. The address for such person is
c/o Morgan Stanley & Co. Incorporated, 1251 Avenue of the
Americas, New York, NY 10020.
(4) Reflects shares that may be acquired through the exercise of
vested stock options granted pursuant to Silgan Holdings Inc.
Amended and Restated 1989 Stock Option Plan.
(5) Options to purchase shares of common stock of Containers and
tandem SARs have been granted to such person pursuant to the
Silgan Containers Corporation Amended and Restated 1989 Stock
Option Plan (the "Containers Plan"). Pursuant to the Containers
Plan, such options may be converted into stock options of
Holdings (and the Containers' common stock issuable upon exercise
of such options may be converted into common stock of Holdings)
in the event of a public offering of any of Holdings' common
stock or a sale of Holdings to a third party.
(6) The address for The Morgan Stanley Leveraged Equity Fund II,
L.P., is 1251 Avenue of the Americas, New York, NY 10020.
(7) The address for First Plaza Group Trust is c/o General Motors
Investment Management Corporation, 767 Fifth Avenue, New York, NY
10153.
(8) Bankers Trust New York Corporation beneficially owns 50,000
shares of Holdings Class C Stock.
See "Description of Holdings Common Stock" below for
additional information about the common stock of Holdings, the holders
thereof and certain arrangements among them.
Description of Holdings Common Stock
Prior to the sale of the Holdings Stock to First Plaza,
Holdings amended its existing restated certificate of incorporation and filed
with the Delaware Secretary of State a Restated Certificate of Incorporation
(the "Certificate of Incorporation"), which restated in its entirety
Holdings' existing restated certificate of incorporation. Certain of the
statements contained herein are summaries of the detailed provisions of the
Certificate of Incorporation and are qualified in their entirety by reference
to the Certificate of Incorporation.
Under the Certificate of Incorporation, Holdings has
authority to issue 500,000 shares of Class A Common Stock, par value $.01 per
share (the "Holdings Class A Stock"), 667,500 shares of Class B Common Stock,
par value $.01 per share (the "Holdings Class B Stock"), and 1,000,000 shares
of Class C Common Stock, par value $.01 per share (the "Holdings Class C
Stock"). Except as described below, the rights, privileges and powers of
Holdings Class A Stock and Holdings Class B Stock are identical, with each
share of each class being entitled to one vote on all matters to come before
the stockholders of Holdings.
Until the occurrence of a Change of Control (as defined in
the Certificate of Incorporation and as described below), the affirmative
vote of the holders of not less than a majority of the outstanding shares of
Holdings Class A Stock and Holdings Class B Stock, voting as separate
classes, shall be required for the approval of any matter to come before the
stockholders of Holdings, except that (i) the holders of a majority of the
outstanding shares of Holdings Class A Stock, voting as a separate class,
have the sole right to vote for the election and removal of three directors
(the directors elected by the holders of Holdings Class A Stock being
referred to herein as "Class A Directors"); (ii) the holders of a majority of
the outstanding shares of Holdings Class B Stock, voting as a separate class,
have the sole right to vote for the election and removal of all directors
other than the Class A Directors (the directors elected by the holders of
Holdings Class B Stock being referred to herein as "Class B Directors"); and
(iii) the vote of not less than a majority of the outstanding shares of
Holdings Class B Stock shall be required in certain circumstances set forth
in the Certificate of Incorporation. The holders of Holdings Class C Stock
have no voting rights except as provided by applicable law and except that
such holders are entitled to vote as a separate class on certain amendments
to the Certificate of Incorporation as provided therein. In the event
Holdings sells shares of any class of its common stock to the public, the
distinctions between Holdings Class A Stock and Holdings Class B Stock
terminate, the powers, including voting powers, of Holdings Class A Stock and
Holdings Class B Stock shall be identical upon compliance with certain
provisions contained in the Certificate of Incorporation, and any Regulated
Stockholder (generally defined to mean banks) will be entitled to convert all
shares of Holdings Class C Stock held by such stockholder into the same
number of shares of Holdings Class B Stock (or Holdings Class A Stock to the
extent such Holdings Class C Stock was issued upon conversion of Holdings
Class A Stock).
After a Change of Control, the affirmative vote of the
holders of not less than a majority of the outstanding shares of Holdings
Class A Stock and Holdings Class B Stock, voting together as a single class,
will be required for the approval of any matter to come before the
stockholders of Holdings, except that the provisions described in clauses (i)
and (ii) in the preceding paragraph shall continue to apply from and after a
Change of Control, and except as otherwise provided in the Certificate of
Incorporation with respect to its amendment. Also, after a Change of
Control, the number of Class B Directors will be increased to five.
In the event that a vacancy among the Class A Directors or
the Class B Directors occurs at any time prior to the election of directors
at the next scheduled annual meeting of stockholders, the vacancy shall be
filled, in the case of the Class A Directors, by either (i) the vote of the
holders of a majority of the outstanding shares of Holdings Class A Stock, at
a special meeting of stockholders, or (ii) by written consent of the holders
of a majority of the outstanding shares of Holdings Class A Stock, and, in
the case of the Class B Directors, by either (i) the vote of the holders of a
majority of the outstanding shares of Holdings Class B Stock at a special
meeting or stockholders, or (ii) by written consent of the holders of a
majority of the outstanding shares of the Holdings Class B Stock.
A "Change of Control" is defined in the Certificate of
Incorporation to include the occurrence of any of the following events: (i)
Messrs. Horrigan and Silver shall collectively own, directly or indirectly,
less than one-half of the aggregate number of outstanding shares of Holdings
Class A Stock owned by them directly or indirectly on June 30, 1989 on a
common stock equivalent basis, or (ii) the acceleration of the indebtedness
under the Credit Agreement or the Debentures, as a result of the occurrence
of an event of default thereunder relating to a payment default or a
financial covenant event of default.
Description of the Holdings Organization Agreement
Concurrently with the issuance and sale to First Plaza of
the Holdings Stock, Holdings, The Morgan Stanley Leveraged Equity Fund II,
L.P. ("MSLEF II"), Bankers Trust New York Corporation ("BTNY"), First Plaza
and Messrs. D. Greg Horrigan and R. Philip Silver entered into the Amended
and Restated Organization Agreement dated as of December 21, 1993 (the
"Holdings Organization Agreement") that provides for the termination of the
Organization Agreement dated as of June 30, 1989 by and among Holdings, MSLEF
II, BTNY and Messrs. Horrigan and Silver (except for the indemnification
provisions thereof, which provisions survive) and for the investment by First
Plaza in Holdings and the relationships among the stockholders and between
the stockholders and Holdings. Certain of the statements contained herein
are summaries of the detailed provisions of the Holdings Organization
Agreement and are qualified in their entirety by reference to the Holdings
Organization Agreement.
The Holdings Organization Agreement prohibits the
disposition of Holdings' common stock without the prior written consent of
Messrs. Horrigan and Silver and MSLEF II, except for (i) dispositions to
affiliates (which, in the case of First Plaza, includes any successor or
underlying trust, and which, in the case of MSLEF II, does not include any
person which is not an Investment Entity (as defined below)), (ii)
dispositions to certain family members of Messrs. Horrigan and Silver or
trusts for the benefit of those family members, (iii) certain transfers among
MSLEF II, BTNY, First Plaza and Messrs. Horrigan and Silver that comply with
certain rights of first refusal set forth in the Holdings Organization
Agreement, which rights expire on June 30, 1994, (iv) dispositions to certain
parties at any time on or after June 30, 1994, subject to certain other
rights of first refusal discussed below, (v) the sale by First Plaza to
Holdings of all of the Holdings Stock acquired by First Plaza on December 21,
1993, upon the exercise of Holdings' call option as described below, and (vi)
dispositions in connection with an initial public offering of the common
stock of Holdings, as described below. Any transfer of Holdings' common
stock (other than transfers described in clauses (v) and (vi) of the
preceding sentence) will be void unless the transferee agrees in writing
prior to the proposed transfer to be bound by the terms of the Holdings
Organization Agreement.
At any time on or after June 30, 1994, MSLEF II may effect a
sale of stock to an Investment Entity (generally defined as any person who
(i) is primarily engaged in the business of investing in securities of other
companies and not taking an active role in the management or operations of
such companies and (ii) does not permit the participation or involvement in
any way in the business or affairs of Holdings of a person who is engaged in
a business not described in clause (i)) or, in the event of certain defaults
under the amended and restated management services agreement by and between
S&H, Inc., a company wholly-owned by Messrs. Horrigan and Silver ("S&H"), and
Holdings (described below under "Description of Management Agreements"), to a
third party, in each case, if it first offers such stock to: (a) Holdings,
(b) the Group (defined generally to mean, collectively, Silver and Horrigan
and their respective affiliates and certain related family transferees and
estates, with Silver and his affiliates and certain related family
transferees and estates being deemed to be collectively one member of the
Group, and Horrigan and his affiliates and certain related family transferees
and estates being deemed to be collectively one member of the Group) and (c)
BTNY, in each case on the same terms and conditions as the proposed sale to
an Investment Entity or the proposed third party sale. In addition, in any
such sale by MSLEF II, BTNY and First Plaza must be given the opportunity to
sell the same percentage of its stock to such Investment Entity or third
party. At any time on or after June 30, 1994, each member of the Group may
transfer shares of stock to a third party if such holder first offers such
shares to: (a) the other member of the Group, (b) Holdings, (c) MSLEF II and
(d) BTNY, in each case on the same terms and conditions as the proposed third
party sale. At any time on or after June 30, 1994, BTNY may effect a sale of
stock to a third party if it first offers such shares to: (a) Holdings, (b)
MSLEF II and (c) the Group, in each case on the same terms and conditions as
the proposed third party sale.
At any time on or after June 30, 1994, either MSLEF II or
the Group has the right to require a recapitalization transaction. A
recapitalization transaction is defined as any transaction (such as a merger,
consolidation, exchange of securities or liquidation) involving Holdings
pursuant to which MSLEF II and the Group retain their proportionate ownership
interest in the surviving entity if the following conditions are met: (i)
the value of any securities of the surviving entity acquired or retained by
the party not initiating the recapitalization transaction does not exceed 67%
of the difference between (x) the value of such securities and any cash
received by such party and (y) all taxes payable as a result of the
transaction, (ii) if MSLEF II initiates the recapitalization transaction and
will not own all the voting equity securities of the surviving entity not
owned by the Group, the Group shall have the right to purchase such
securities, (iii) if the Group initiates the recapitalization transaction and
will not own all of the voting equity securities of the surviving entity,
MSLEF II shall have the right to purchase such securities, and (iv) the
majority in principal amount of the indebtedness incurred in connection with
such transaction shall be held for at least one year by persons not
affiliated with either MSLEF II or any member of the Group.
The Holdings Organization Agreement provides that in the
event that either Mr. Silver or Mr. Horrigan (each, a "Manager") dies or
becomes permanently disabled prior to June 30, 1994 (an "Inactive Manager"),
such Inactive Manager or his affiliates shall have the right to sell to
Holdings all Holdings Class A Stock held by the Inactive Manager at the Fair
Market Value (as defined in the Holdings Organization Agreement) of such
stock, provided that such stock must first be offered to the remaining
Manager at the same price. The Holdings Organization Agreement also provides
that if either Mr. Silver or Mr. Horrigan dies, becomes permanently disabled
or is convicted of any felony directly related to the business of Holdings
prior to June 30, 1994, the other Manager and his affiliates shall have the
right to purchase all of such person's Holdings Class A Stock at a price
equal to Fair Market Value in the case of death or disability and the
Adjusted Book Value (as defined in the Holdings Organization Agreement) in
the case of a conviction as stated above, and Holdings shall have the right
to purchase all such stock not purchased by the other Manager.
At any time prior to December 21, 1998, Holdings shall have
the right and option to purchase from First Plaza, and First Plaza shall have
the obligation to sell to Holdings, all (but not less than all) of the
Holdings Stock for a price per share equal to the greater of (i) $120 per
share and (ii) the purchase price necessary to yield on an annual basis a
compound return on investment of forty percent (40%). The number of shares
subject to such call and the call purchase price shall be proportionately
adjusted to take into account any stock dividend, stock split, combination of
shares, subdivision or other recapitalization of the capital stock of
Holdings.
The Holdings Organization Agreement provides that at any
time after June 15, 1996, the holders of a majority of the issued and
outstanding shares of Holdings Class A Stock and Holdings Class B Stock
(considered together as a class) may by written notice to Holdings require
Holdings to pursue the first public offering of Holdings' common stock
pursuant to an effective registration statement (an "IPO") on the terms and
conditions provided in the Holdings Organization Agreement. The investment
banking firm designated by such holders to act as managing underwriter for
the IPO shall be Morgan Stanley & Co. Incorporated ("Morgan Stanley") (or an
affiliate of Morgan Stanley) or another firm designated by MSLEF II
reasonably acceptable to Holdings. In addition to the portion of the IPO
which shall consist of shares of Holdings' common stock to be sold by
Holdings, the IPO may also include a secondary tranche consisting of shares
of Holdings' common stock to be sold by stockholders of Holdings.
Pursuant to the provisions of the Holdings Organization
Agreement, each of MSLEF II, BTNY, First Plaza and Messrs. Silver and
Horrigan agrees to take all action (including voting its shares of Holdings'
common stock) to approve the adoption of the Restated Certificate of
Incorporation of Holdings, as amended, substantially in the form attached as
an exhibit to the Holdings Organization Agreement, the Amended and Restated
By-laws of Holdings, substantially in the form attached as an exhibit to the
Holdings Organization Agreement, and the Amended and Restated Management
Services Agreement, substantially in the form attached as an exhibit to the
Holdings Organization Agreement (the "Post-IPO Management Services
Contract"), in each case to become effective at the time an IPO is completed.
The Post-IPO Management Services Contract provides, among other things, for
the payment to S&H of management fees of $2.0 million annually plus
reimbursement of expenses.
Pursuant to the provisions of the Holdings Organization
Agreement, MSLEF II agrees that it will not vote its shares of Holdings Class
B Stock in favor of any changes in the Certificate of Incorporation or By-
laws of Holdings which would adversely affect the rights of First Plaza,
unless First Plaza has consented in writing to such change. In addition, so
long as First Plaza shall hold not less than 18.73% of the issued and
outstanding shares of Holdings Class B Stock, First Plaza shall have the
right to nominate one of the Class B Directors to be elected at each annual
meeting of stockholders in accordance with the provisions of the Certificate
of Incorporation, and the holders of Holdings Class B Stock parties to the
Holdings Organization Agreement agree to vote their shares of Holdings Class
B Stock in favor of such nominee.
In addition, in the event that First Plaza, MSLEF II or BTNY
shall purchase any shares of Holdings Class A Stock, such purchaser agrees
that it will vote such shares in accordance with the directions of the
"holders of a majority of the shares of Class A Stock held by the Group"
(defined generally to mean the holders of a majority of the aggregate of
417,500 shares of Holdings Class A Stock held by Messrs. Silver and Horrigan
at December 21, 1993, which at the time of any such determination have been
continuously and are held by the Group) until such time as a Change of
Control has occurred. In the event that Messrs. Silver or Horrigan shall
purchase any shares of Holdings Class B Stock, such purchaser agrees that it
will vote such shares in accordance with the directions of MSLEF II, unless
MSLEF II and First Plaza (together with their respective affiliates) shall
hold directly or indirectly less than one-half of the aggregate number of
shares of Holdings Class B Stock held by MSLEF II and First Plaza immediately
following the issuance and sale of the Holdings Stock to First Plaza on
December 21, 1993.
Pursuant to the terms of the Holdings Organization
Agreement, Holdings entered into an amended and restated management services
agreement with S&H, a corporation wholly owned by Messrs. Horrigan and
Silver. See "Description of Management Agreements" below.
The Holdings Organization Agreement terminates upon the
earlier of (i) the mutual agreement of the parties, (ii) such time as it
becomes unlawful, (iii) the completion of an IPO, and (iv) June 30, 1999.
The parties may agree to extend the term of the Holdings Organization
Agreement.
Concurrently with the issuance and sale to First Plaza of
the Holdings Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. Silver
and Horrigan entered into a Stockholders Agreement dated as of December 21,
1993 (the "Stockholders Agreement") that provides for certain prospective
rights and obligations among the stockholders and between the stockholders
and Holdings. Upon termination of the Holdings Organization Agreement as a
result of an IPO, the operative provisions of the Stockholders Agreement
become effective. The Stockholders Agreement provides for certain
registration rights, certain stock transfer restrictions, and certain voting
agreements relating to the election of directors of Holdings and certain
mergers or sales of business or assets involving Holdings.
Description of Management Agreements
Holdings, Silgan, Containers and Plastics each entered into
an amended and restated management services agreement dated as of December
21, 1993 (collectively, the "Management Agreements") with S&H to replace in
its entirety its existing management services agreement, as amended, with
S&H. Pursuant to the Management Agreements, S&H provides Holdings, Silgan,
Containers and Plastics and their respective subsidiaries with general
management and administrative services (the "Services"). The Management
Agreements provide for payments to S&H (i) on a monthly basis, of $5,000 plus
an amount equal to 2.475% of consolidated earnings before depreciation,
interest and taxes of Holdings and its subsidiaries ("Holdings EBDIT"), for
such calendar month until Holdings EBDIT for the calendar year shall have
reached an amount set forth in the Management Agreements for such calendar
year (the "Scheduled Amount") and 1.65% of Holdings EBDIT for such calendar
month to the extent that Holdings EBDIT for the calendar year shall have
exceeded the Scheduled Amount but shall not have been greater than an amount
(the "Maximum Amount") set forth in the Management Agreements (the "Monthly
Management Fee") and (ii) on a quarterly basis, of an amount equal to 2.475%
of Holdings EBDIT for such calendar quarter until Holdings EBDIT for the
calendar year shall have reached the Scheduled Amount and 1.65% of Holdings
EBDIT for such calendar quarter to the extent that Holdings EBDIT for the
calendar year shall have exceeded the Scheduled Amount but shall not have
been greater than the Maximum Amount (the "Quarterly Management Fee"). The
Scheduled Amount was $65.5 million for the calendar year 1993 and increases
by $6.0 million for each year thereafter. The Maximum Amount is $90.197
million for the calendar year 1994, $95.758 million for the calendar year
1995, $98.101 million for the calendar year 1996, $100.504 million for the
calendar year 1997, $102.964 million for the calendar year 1998 and $105.488
million for the calendar year 1999. The Management Agreements provide that
upon receipt by Silgan of a notice from Bankers Trust that certain events of
default under the Credit Agreement have occurred, the Quarterly Management
Fee shall continue to accrue, but shall not be paid to S&H until the
fulfillment of certain conditions, as set forth in the Management Agreements.
The Management Agreements continue in effect until the
earliest of: (i) the completion of an IPO; (ii) June 30, 1999; (iii) at the
option of each of the respective companies, the failure or refusal of S&H to
perform its obligations under the Management Agreements, if such failure
continues unremedied for more than 60 days after written notice of its
existence shall have been given; (iv) at the option of MSLEF II (a) if S&H or
Holdings is declared insolvent or bankrupt or a voluntary bankruptcy petition
is filed by either of them, (b) upon the occurrence of any of the following
events with respect to S&H or Holdings if not cured, dismissed or stayed
within 45 days: the filing of an involuntary petition in bankruptcy, the
appointment of a trustee or receiver or the institution of a proceeding
seeking a reorganization, arrangement, liquidation or dissolution, (c) if S&H
or Holdings voluntarily seeks a reorganization or arrangement or makes an
assignment for the benefit of creditors or (d) upon the death or permanent
disability of both of Messrs. Horrigan and Silver; and (v) the occurrence of
a Change of Control (as defined in the Restated Certificate of Incorporation
of Holdings and as described under "Description of Holdings Common Stock"
above).
In addition to the management fees described above, the
Management Agreements provide for the payment to S&H on the closing date of
the IPO of an amount, if any (the "Additional Amount") equal to the sum of
the present values, calculated for each year or portion thereof, of (i) the
amount of the annual management fee for such year or portion thereof that
otherwise would have been payable to S&H for each such year or portion
thereof for the period beginning as of the time of the IPO and ending on June
30, 1999 (the "Remaining Term") pursuant to the provisions described in the
preceding paragraph but for the occurrence of the IPO, minus (ii) the amount
payable to S&H for the Remaining Term at the rate of $2.0 million per year.
The Management Agreements further provide that the amounts described in
clause (i) of the first sentence of this paragraph will be calculated based
upon S&H's good faith projections of Holdings EBDIT for each such year (or
portion thereof) during the Remaining Term (the "Estimated Fees"), which
projections shall be made on a basis consistent with S&H's past projections.
The difference between the amount of Estimated Fees for any particular year
and $2 million shall be discounted to present value at the time of the IPO
using a discount rate of eight percent (8%) per annum, compounded annually.
Additionally, the Management Agreements provide that
Holdings, Silgan, Containers, Plastics and their respective subsidiaries
shall reimburse S&H, on a monthly basis, for all out-of-pocket expenses paid
by S&H in providing the Services, including fees and expenses to consultants,
subcontractors and other third parties, in connection with such Services.
All fees and expenses paid to S&H under each of the Management Agreements are
credited against amounts paid to S&H under the other Management Agreements.
Under the terms of the Management Agreements, Holdings, Silgan, Containers
and Plastics have agreed, subject to certain exceptions, to indemnify S&H and
its affiliates, officers, directors, employees, subcontractors, consultants
or controlling persons against any losses, damages, costs and expenses they
may sustain arising in connection with the Management Agreements.
The Management Agreements also provide that S&H may select a
consultant, subcontractor or agent to provide the Services. S&H has retained
Morgan Stanley to render financial advisory services to S&H. In connection
with such retention, S&H has agreed to pay Morgan Stanley a fee equal to 9.1%
of the fees paid to S&H under the Management Agreements.
Item 7: Financial Statements and Exhibits.
(a) and (b) Financial Statements of Business Acquired and
Pro Forma Financial Information
It is impracticable at this time to file the financial
statements and pro forma financial information required to be filed pursuant
to Item 7 of Form 8-K. Such financial statements and pro forma financial
information will be filed, as soon as practicable, but not later than 60 days
from the date hereof.
(c) Exhibits
(1) Purchase Agreement, dated as of September 3, 1993,
between Silgan Containers Corporation and Del Monte Corporation (incorporated
by reference to Exhibit 1 to Holdings' Current Report on Form 8-K, dated
January 5, 1994).
(2) Amendment to Purchase Agreement, dated as of December
10, 1993, between Silgan Containers Corporation and Del Monte Corporation
(incorporated by reference to Exhibit 2 to Holdings' Current Report on Form
8-K, dated January 5, 1994).
In accordance with Item 601(b)(2) of Regulation S-K, the
schedules and exhibits referenced in the Purchase Agreement and Amendment to
Purchase Agreement referenced above have not been filed as part of the
exhibits to this Form 8-K. The Registrant agrees to furnish supplementary a
copy of the omitted schedules and exhibits to the Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SILGAN CORPORATION
By:/s/ Harley Rankin, Jr.
Harley Rankin, Jr.
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: January 5, 1994
